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Kevin O’Leary on Steve Jobs

‘He looked at me for 10 seconds. And then he went absolutely nuts’


 
A mad genius

Jessica Darmanin/Maclean's

In the mid-’80s, if you’ll recall, there was a massive rivalry between Bill Gates and Steve Jobs. Gates decided early on that he would license his operating system to every manufacturer who wanted it. In a matter of years he got 97 per cent of the PC market. On the other hand, Jobs said, “I’m never going to license the Mac operating system to anybody. I am going to control the hardware and the software and package it to consumers.” He lost huge. He ended up with two per cent of the market.

At the time, The Learning Company was the largest provider of educational software. I’m the guy that’s providing 80 per cent of the market for reading and math software in schools and for consumers, with brands like Reader Rabbit, Carmen Sandiego and Oregon Trail. It cost about $500,000 a title to develop software for Windows and $500,000 for Mac. It was very easy for me to find my Windows user—97 per cent of people who have a computer can use the software. But my cost of acquiring the Mac customer keeps going up the more share Jobs loses in the market. I’m losing about $50 million a year doing that and my board is squeezing my head saying, “What the hell are we supporting Mac for?”

We were working closely with teams at Apple and I finally said, “I’ve got to go see the big guy. We can’t go on like this.” I planned to ask him for $50 million, but was willing to accept $12 million [to continue making software for Mac]. I got there and sat down at a boardroom table; there were five or six of us on each side. It started with the pleasantries of the product management teams and then probably half an hour into it, Jobs walked in and the whole room shut down. It went silent. Nobody would say anything when Steve was in the room. He was the king.

I opened with some pleasantries. Talked about the weather and he said, “Look, I don’t have time for anything else. What’s on the agenda?”

“I can’t live with this loss of share,” I said. “Your strategy isn’t working.” He’s under tremendous pressure from his board at this time, unbeknownst to me, for the same reason. He said, “What do you want?”

“I want you to give me $50 million to pay to keep my brand in the market supporting your hardware.”

He looked at me for 10 seconds—a very uncomfortable pause. And then he went absolutely nuts. He berated me: “The aura of the Apple brand is worth $50 million to you. You are nothing. Your brand is nothing compared to my brand.” I said, “Excuse me, Steve, I own 80 per cent of the market. I am the educational market. You need me more than I need you.”

But he didn’t stop. He continued to go nuts. “You’re out of your mind,” he said, along with a number of foul words. I was trying to not lose face in front of my people and he was doing the same thing. He was yelling at me all the way to my Hertz rental car.

I had no idea I’d leave with nothing. It made no sense. Jobs didn’t care. He just believed in what he was doing. When I got back to the office I said to my team, “I want you to cut 50 per cent of the Mac titles. Just keep the big ones in case this guy survives.”

Jobs was not easy to work with. But you can’t deny why this strategy was, ultimately, sheer genius on his behalf. Months later he left Apple, which started trying to license the OS. But Jobs kept saying to anybody who would listen that if they could just control the hardware as a bundle, they’d control the margins. Snap forward 20 years. Windows has stopped growing. Microsoft stock has been dead money for 10 years. Apple has gone from $11 to $400. Jobs was right. He has the highest margin ever in the computer business. The same thing you buy in Windows today at $600 is $2,300 for the Apple.

The whole thing started when he proved his model with the iPod. He said, “You can’t use it without my software. You have to buy it as a bundle.” Of course, the strategy was brilliant. But it took him 20 years to prove it out and it was at the end of his life when he was right.

Kevin O’Leary heads the investment firm O’Leary Funds and appears on CBC’s Dragons’ Den. His new book, Cold Hard Truth, was released in September. As told to Maclean’s.


 

Kevin O’Leary on Steve Jobs

  1. This is incorrect, it’s not that Steve Jobs was smart but that computer users today are stupid.

  2. “The same thing you buy in Windows today at $600 is $2,300 for the Apple.”

    Nobody ever said being in a cult was cheap.

  3. Interesting take by Kevin O’Leary.  “Eventually” right is the key point… if anyone pitched a business plan to Kevin today and said it would take 20 to be successful he’d laugh them out of the room.  The fact is Jobs was wrong at the time relative to the then current market reality.  Also correctly stated is that it took the iPod to realize that success… a future technology for a future market that Steve Jobs could not have predicted at the outset of his strategy.  It will be interesting to watch how long Apple can continue to dominate by controlling the hardware and software for it’s devices.

    • Isn’t it time to shut the “bourgeois” up. If I were mr. o’leary I would start thinking about getting out of the country. One of the BRIC countries perhaps?

    • Chris Hedges is right why waste one’s time and energy debating with a person that practises character assassination and condenscension instead of debating the facts in a civilized and dignified way. We can learn from men like Chris Hedges who display limits and dignity while sticking to the real issues.

  4. to quote Karl Marx: “he who owns the means of production controls the world”. This said, in the end we all face death, if not extinction. When someone circumvents this critical juncture he will indeed be a very rich man; in which case your money will then be a valuable commodity

  5. I don’t know too much about IT but i have to question KO’s thinking on this; who had more fun in the 20years it took for Jobs to be proved right? Gates or Jobs? A corollary to that is who was pitching the crappier product – lots of people seem to think Gates, so maybe Jobs was right?

    • “Who had more fun in the 20 years it took for Jobs to be proved right?  Gates or Jobs?”

      Well….Jobs was dying of a terminal illness for more than 6 of those years so that cannot have been pleasant. 
      Meanwhile, Bill Gates and his wife Melinda launched a foundation that sought to cure AIDS, TB, Malaria and Polio as well as erradicate world famine and ensure all children of color in the US receive a decent education.  I don’t know how much “fun” that is but it has to be rewarding work to run a philanthropic venture of that scale…so much so that he left the helm of Microsoft in 2008 to do it.

      • Ask anyone who works for the Bill and Melinda Gates foundation if they are having fun? NOT!

  6. JMHO but one of the big reasons for Apple stock taking off is the fact in April 2006 they developed software that allows owners of Intel-based Macs to install Windows XP on their machines.  That was the beginning of eating into the 97% PC market.  This fact and watching people line up to by iPods was what convinced me to buy shares in May 2006.
     
    As far as the type of person Jobs was, they are talking now about his lack of charity vs Gates, Buffet.
     
    “Writing for the New York Times, Andrew Sorkin was puzzled that he couldn’t find any evidence that Steve Jobs, Apple’s founder, had given away any part of his significant $8.3 billion personal wealth. What he did find is that when Jobs returned to his old company in 1997, he canceled Apple’s philanthropic programs and they have remained dormant ever since.
     
    Sorkin explained: “None of this is meant to judge Mr. Jobs. I have long been a huge admirer of Mr. Jobs … because of the enormous positive impact his products have had by improving the lives of millions of people through technology…. But the lack of public philanthropy by Mr. Jobs … raises some important questions about the way public views business and business people at a time when some ‘millionaires and billionaires’ are criticized for not giving back enough while others like Mr. Jobs are lionized.”
     
    http://thenewamerican.com/economy/commentary-mainmenu-43/8915-steve-jobs-charitable-contributions-he-gave-at-the-office
     

  7. Was this meeting in 1996?  He was gone for 11 years, anything immediately after his return would not be his fault.

    And Windows didn’t really count before he was forced out, since it was 1.0 and released in November 1985.

  8. Anyone can jailbreak an iPOD Touch. Mac hardware is …in the end … PC hardware. Jobs was insane. He’s the 1%. the i1.

  9. So, losing market share so dramatically is a good business strategy? Wow! Looks like only a small number of people think that Mac is worth the $2,300 it costs. The rest of us, an obscenely hefty majority, are happily living with the low costs of Windows. Is it really a good strategy to keep your margins so high up that your market share is miniscule? Whatever happened to advantages of large scale volumes as cornered by Microsoft; they don’t count?

  10. I cannot believe the stock of apple computer was trading at just 5 dollars a share in 1998. Today its trading at almost 400 dollars. What a run this stock has had.

  11. I think this bald headed bastard is full of sh.t, he is nothing just because he has a few million dont mean he has to try steal from others seeking investors. Does he think that Warren Buffet or Gates or Jobs would have given up more than half of their companies when throwing a pitch. He is an Ego asshole not wanting to help others as he had the chance but rather to belittle them in TV just cause he cant get to own majority shares of decent hard working people then kicking them out with out nothing, He should take his bald fat ass back to his home country  

  12. Hope to see him loose it all then start over by trying to get people investing in him and seeing what he do when they want majority of his company or tell him that his idea sucks, he just a damn idiot fat headed rip off artist that always brags about the amount of his wealth as if he the richest man on earth, Give it up asshole stop try take over from others as you did in the past

  13. Wow lots of BS rolling in the reader responses, here. Soooo much last-millennium thinking about Apple.

    @Briansz “A cult”? Look, back in the Dark Days there were ‘the crazy ones” who hung onto the Mac because we really preferred the OS and app design and better stability of Mac OS — even the pre-Mac OS X version — compared to Windows. And as a cult needs a leader, Apple had none because this was before Jobs returned. But Apple’s unleashing of the iPod and all that followed simply brought what “The Crazy Ones” loved about Apple’s abilities to the broader market. With iOS and especially when iTunes was ported to Windows and the store opened, the masses could sample Apple’s ability to create an awesome user experience (and yes, that required proprietary vertical integration) without having to unclasp their lips from Microsoft’s teat. THAT, dubbed the “iPod halo Effect”, opened a lot of people’s eyes on the benefits of Apple’s approach and gave them the experience of Apple’s eye for detail. These are NOT “cult members”; these are many tens of millions of new, mainstream customers who have sampled Apple’s work on iOS devices, saw their computers on those sexy tables at Apple’s (surprisingly successful) Apple Stores and took the plunge. Then notion of Apple’s userbase being populated solely by the old-guard Mac fanatic is a very dated notion. Get over it.

    @Mulakush: $2,300 for a Mac?? Get real. MacBook Air starts at $999, MacBook Pro at $1,249, iMacs at $1,199. You want to buy a poorly built piece of plastic PC crap for $700 then good luck to ya. And what, at this time of writing, is Dell pushing on its homepage? The Dell XPS13 Ultrabook… for $1,000. Cheaper? Not by much at $300 (with equal specs). Better? Problem with that answer is that the Dell is running Windows, which is like computing with a bullseye on your back — and the OS is not tuned to the hardware like OS X can be. And please don’t say “Well I never get viruses” because your individual experience is irrelevant to the facts and overall numbers. As for the huge numbers of Windows users you state, there is one big reason this has become so; Apple screwed up on strategy at a critical time and Bill Gates snookered IBM on DOS licensing. It was NOT due to technical superiority. Like JEEZ, we’re talking a graphical user interface in 1983… versus DOS!

    @iPolitics, Eh? Saying Apple is “just PC hardware” is showing the level of either your bias or ignorance. Either way it doesn’t look good for you.

    @Le_o The ability of a Mac to boot into Windows worked great — as a placebo for nervous Windows users to take the plunge. Macs have always been extremely functional and flexible since WAY back…it’s the perception of the masses that was lacking. I have used Macs since 1995 (started using them during the Dark Days). I have tracked clients, tracked finances, handled Office files, done everything I needed to conduct my business…and I’ll bet that the actual number of new Mac users actually using Windows on them is too small to support your argument. I haven’t had to use this phrase I coined years ago for a long time now but, while the Mac was not the right solution for EVERY situation “it more right for more people than they realized”. 

    @Mike Gleeson So, it’s EVERYBODY ELSE’s fault. Right? Stupid end users? Yeah. All they want is a dependable, easy to use and dare I say enjoyable experience with the technology they have to sit in front of every day of their lives. I suppose you believe that, if you keep feeding a person a turd a day, that they’ll come to appreciate its taste? Such is the Windows experience. And, even if Macs cost a few hundred bucks more than SOME CHEAP PCs…do you always buy the cheapest of EVERYTHING you own, regardless of its importance? Is perhaps your car a 12 year old Pontiac, purchased just because it was cheap and quality be damned? I hope so because you wouldn’t want to appear inconsistent, now. look, computer users are smarter and, unfortunately, more war-torn through their experience with Wintel than you obviously think and they’re looking at Macs as a breath of fresh air and a viable option. The sales figures prove this.

    There…I think I addressed everyone I needed ;)

  14. MAC for APPLE is BETA for SONY.
    Enough said!

  15. I think Steve kicked you out because you went in trying to take advantage of a company that was on the ropes. In 1997-1999 Apple had little extra money to spend, and its not Apple’s business model to pay software developers to port titles over, that’s a MS thing. I know since I worked on the Apple CD-ROM Collection just prior to Kevin’s meeting. Steve probably also knew that 99% of all new media titles were being developed using Mac’s and Director. So your BS that it would cost $500k per title is complete BS. It is a simple export of the content for both Windows and Mac. Yes MS had the largest chunk of the entire PC market but 95% of those PC’s were being purchase for secretaries, or spreadsheet jockeys. I know that Apple had more then 70% of the market of people using their machine for using CD-ROMS and digital media. Kevin you keep spreading around that Jobs wasn’t easy to work with, yet you have never worked with him and met him for 10 minutes and he saw through your BS. In fact I think 90% of your titles were just crap, and a very few were actually not bad, and those came from Softkey purchase of TLC and Broderbund. How did Softkey by TLC for $600 million cash. And didn’t you and your team layoff over 500 Broderbund staff after acquiring them.

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