Steve Jobs and the early years of Apple: lessons from 1976–1984

Executive overview

Apple went from a living room to $1 billion in annual sales in under eight years — faster than any startup had ever reached the Fortune 500. The early Steve Jobs was flawed, uncertain, and not yet a skilled manager, yet the company's first principles proved durable.

Resourcefulness, relentless curiosity, and hiring great people to find more great people drove Apple's early growth. The same instincts that built the company also caused failures — both during the early years and in the NeXT exile that followed.

Great founders operate from owner's instincts that no hired executive can replicate.

The character of young Steve Jobs

• Called collect to suppliers as a teenager rather than accept "I can't afford it" as an answer
• Cold-called Bill Hewlett at age 12; Hewlett answered, spent 30 minutes with him, and gave him a summer job
• Tracked down "Captain Crunch" (a phone phreaker) to extract knowledge Jobs and Wozniak needed
• Believed intensely in his own intuition — a trait that was simultaneously his greatest asset and his biggest liability
• Described by his high school electronics teacher as a loner who "had a different way of looking at things"
• Was visibly uncertain about committing to Apple even as it was gaining traction — friends said "Steve was afraid of Apple"

How Apple actually started

• Jobs and Wozniak initially planned to sell bare printed circuit boards for $50 each, expecting to make perhaps $1,300
• The idea for a fully assembled computer came from a store buyer (Terrell of the Byte Shop), not from Jobs or Wozniak
• Terrell's order of 50 fully assembled machines at $489–$589 each "entirely changed the scale and scope of the enterprise"
• Don Valentine (Sequoia) told Jobs early on: "neither one knew anything about marketing… they weren't thinking anywhere near big enough"
• Apple reached Fortune 500 faster than any startup in the index's history

Hiring: great people find great people

• Jobs rejected filtering job candidates from warranty cards: "Nobody any good sends in their warranty card"
• His method: send the best programmer to universities to find the best students
• Wendell Sander joined after 13 years at Fairchild because "the greatest risk was to stay put and do nothing"
• Apple employed teenagers, kept nocturnal hours, and attended their employees' high school graduations

Resourcefulness and frugality as operating principles

• Jobs collected bottle caps as a student; the need to stretch every dollar shaped Apple's early culture
• At IPO in 1980: $117M in sales, $24M pre-tax income, with a payroll of roughly 1,000 people (half in manufacturing)
• Founders and early CEO retained ~40% of the company largely because they raised and spent outside capital parsimoniously
• Author Michael Moritz's 2015 essay on this period: "the habits adopted during the formative years of a company have such an influence on its eventual operating performance"

Product philosophy and the owner's manual

• Jobs found Apple's prototype customer in the mirror — he built products he would want to own
• Insisted on high-quality owner's manuals when the president just wanted data sheets shipped
• When the manual appeared in 1979, Commodore, Radio Shack, and Atari publicly admitted they needed to match it
• The interior of the computer was designed to be as beautiful as the exterior, even though no user would ever see it
• "How you do one thing is how you do all things"

The Bozo explosion: growth without quality control

• Apple II drove revenues from $7.8M to $117M in three years; staff went from 300 to 1,000 in 12 months
• Speed of growth forced hiring faster than quality could be maintained — dubbed the "Bozo explosion"
• Apple III was "designed by committee" because leadership thought that was how a proper company operated; it flopped
• Jeff Raskin's four-page memo to the board: Jobs "regularly misses appointments… plays favorites… doesn't keep promises… takes credit for optimistic schedules then blames workers when deadlines slip"
• Arrogance set in: Markkula said IBM was "reacting and responding to Apple" and that "short of World War III, nothing is going to knock us off the box"

The founder advantage — and what happens without it

• Moritz's epilogue (written 2009): "It is not an accident that most of the great companies… have, during their heydays, been run or controlled by the people who gave them life"
• After Jobs was pushed out in 1985, Apple's board cycled through directors from riverboat gaming, European packaging, NPR, and Hughes Electronics — none with PC industry experience
• CEO Scully wrote in 1987: "Apple was supposed to become a wonderful consumer products company. This was a lunatic plan."
• Apple stopped leading: it invented color on Apple II, GUI on Mac, desktop publishing, integrated networks — then went silent
• Jobs' NeXT years were "arduous and painful" but probably the best thing that happened to him; he returned in 1997 a fundamentally different manager

The comeback in numbers

• When Jobs returned (fall 1997): $7B in sales, $1B loss
• One year later: $6B in sales, $300M profit
• Over his second decade running Apple: sales rose from $6B to $32.5B; stock multiplied 40-fold at its peak
• Moritz's conclusion: "nothing is more effective than the spirit of a restless company threatened with extinction"