Twelve Years

By the summer of 1993, Steve Jobs had been out of Apple for close to a decade.

His new company, NeXT, was one weekend away from closing its doors. Fortune magazine had recently called him a snake oil salesman. He had personally invested tens of millions of dollars of his own money into a business that had never posted a profit. Five of his six co-founders had left and his investors were no longer answering his calls.

This is the Steve Jobs almost no one remembers.

The story that survives is the return to Apple. The iPod, the iPhone, the mock turtleneck, the black stage, and the one more thing. What sits between the exit from Apple in 1985 and the triumphant return in 1997 is twelve years that you almost never hear about. The most consequential product of Steve Jobs's career was built in those forgotten years.

❦

NeXT's first computer was a perfect cube. Ninety-degree angles. Sanded on a $500,000 mold line. Priced at $9,995 in 1988. It looked like a masterpiece. It sold a few dozen units a month.

Jobs had priced it for a market that did not exist. He was aiming at scientific research labs, university departments, dorm-room students who might one day cure cancer with a Nobel-worthy breakthrough. The market he actually reached was thin, elite, and structurally too small to keep the lights on. By 1993, NeXT was $400 million in debt.

❦

While the hardware was burning, Jobs was quietly building something else. An operating system called NeXTSTEP.

NeXTSTEP was built on a technology called object-oriented programming. An approach that compressed thousands of lines of code into modular, reusable building blocks. Software that used to take a team of engineers weeks to assemble could now be built in days. Financial trading firms noticed first. Then healthcare systems. Then intelligence agencies. The customers who came to NeXT to buy a cube were quietly buying the software underneath.

Jobs did not want to be an enterprise software company. He wanted to make beautiful hardware. He resisted the pivot for years. But he ran out of time to keep fighting it.

❦

In 1994, a Belgian CFO named Dominique Trempont walked Jobs through the numbers. The hardware division had to die. The company would survive only as an enterprise software business, or not at all.

Jobs backed off. He put on an Armani suit and walked the conference room floors of Wall Street banks and healthcare systems, shaking hands and selling enterprise software. In a 1993 interview, he said the future of NeXT was going to be like IBM.

The following year, NeXT posted its first profit in nine years of operation.

The very pivot that Jobs had loathed was what saved the company.

❦

In December 1996, Apple bought NeXT for $429 million.

The reported reason was that Apple needed a new operating system, and NeXTSTEP was the best one available on the market. In hindsight, Apple was buying the future.

NeXTSTEP became the foundation of Mac OS X in 2001. Mac OS X became the foundation of iOS in 2007, and iOS became the foundation of every product Apple has shipped since.

A senior Apple software designer was recently asked how many products at Apple today have their lineage in NeXT. He answered:

All of them.

❦

The lesson from NeXT is not about failure and comeback. It is about what compounds.

It wasn't the cube, the elite research market, or the consumer-facing hardware. What compounded was the operating system built underneath it.

The visible, glamorous product is rarely the durable asset. The durable asset is the operating layer that continues to run smoothly over decades of hardware cycles.

— Luke Nowell