Jason Hartman interviews Apple’s former Sr. Vice President of Operations and author of The Steve Jobs Way, Jay Elliot about the true legacy of Steve Jobs, discussing real-life examples of Jobs’ leadership and triumphs, and how these principles can apply to other’s lives and careers.
Apple icon, Steve Jobs, was deemed the “Boy Genius” that transformed with technology the way we work, play, consume, and communicate. For over 35 years, Jay Elliot has practiced his own leadership in the technology, entertainment and health care industries. In his book The Steve Jobs Way, Jay shares with us his first-hand experiences as Apple’s Sr. Vice President of Operations where he worked side-by-side with Steve Jobs on a daily basis. His experience as an executive at both IBM and Intel helped him to recognize how Steve Jobs’ extraordinary leadership propelled Apple Computer to become the most valued brand on earth.
Steve Jobs charged Jay Elliot with the responsibility for running the operations at Apple. That tenure lasted from 1980 to 1986, during which time he was responsible for all corporate operations, including Human Resources, Facilities, Real Estate, IT, Education and Pacific Rim Sales. He was also responsible for Apple’s Corporate Business Planning and was a member of the Macintosh organization. During these years, Apple sales grew from $150 million to more than $3 billion. Prior to his time at Apple, he served as a Site Director at IBM and headed a 16,000-person software division; overseeing several key projects in the disc drive development business. Mr. Elliot left IBM to join Intel where he also served as a Site Director and was the creator of the Intel Foundation (reporting to CEO, Andy Grove and chairman, Gordon Moore).
After leaving Apple, Mr. Elliot served as the CEO of San Francisco Studios where he produced the Academy Award-nominated documentary, “Berkeley in the Sixties;” as well as the NBC television series, “Midnight Caller” and numerous sports programs for NBC, CBS, and ABC, including the Barcelona Olympic Games. Later, he served as President of Acclaim West, producing programs for Fox, UPN, the Playboy Channel and Telemundo. Before returning to the technology/software industry, he also served as the Chief Executive Officer of New Health Systems, a network technology company connecting physicians and vendors to patients and affiliated hospitals.
Jay Elliot returned to his technology roots when he founded and served as Chairman of Migo Software, Inc., a mobility software company, where he invented its flagship product, Migo. He is currently the Founder and CEO of Nuvel, Inc. based out of Los Gatos, CA. Nuvel offers the emergency smart phone applications vSOS and vSOS Medi-Vac Plus; and is introducing Data Tunnel, allowing accelerated data transfer, and NuVault, a virtual safety deposit box utilizing smart phone bar code readers.
ANNOUNCER: Welcome to Creating Wealth with Jason Hartman! During this program Jason is going to tell you some really exciting things that you probably haven’t thought of before, and a new slant on investing: fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self-made multi-millionaire who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it! And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
JASON HARTMAN: Welcome to the Creating Wealth Show! This is episode #228, and I’m your host, Jason Hartman. Thanks so much for joining me today. We’ve got a very timely and special show for you today. It’s slightly off the real estate investment topic, but I think you’ll find it to be valuable in business and in life. And, before we get to our special guest today, who is the author of The Steve Jobs Way, and another book about Steve Jobs entitled Icon, and so we’ll get to that in a moment here. But I wanted to talk to you about a few other things first. And I think this is very timely, with the passing of Steve, and all the stuff he’s done, and you’re gonna hear some really interesting perspective about someone who worked for him directly at Apple in the early days, from 1980 to 1986. So, pretty amazing story really, and I think you’ll really enjoy this interview as much as I did. So, I’ll have that for you in just a moment here.
But few things first. First of all, I hope you are joining us at the St. Louis tour coming up November 11th. Really looking forward to that. I am using that trip to visit a couple of our cities as well, starting with Kansas City, then going to St. Robert, then St. Louis, to meet with you, hopefully. And then on to Indianapolis after that. So, I’m doing all this is pretty quick succession. But I did book my tour for Monday morning, of the St. Louis Gateway Arch. So, join me for that, too! And we’ll do something really touristy and fun. I actually made a reservation for that, because I did not want to miss it. You know that is 600 feet in the air? I’ve just always wanted to see that, and I’ve never had the chance to. So, besides the real estate investing, just for a little fun, and a little tourism, we can do that Monday morning as well in St. Louis, if you join us for the tour. And you can sign up for that, of course, at www.jasonhartman.com, and I look forward to seeing you there.
A couple of things. Number one, as we have been talking about on the show, the rental market is booming. I mean Booming, with a capital B. And folks, I tell you, it is only going to get better, from so many perspectives. I mean, think about the future that investors have right now. They’ve got foreclosures in their favor. Why is that in their favor? Well, because millions and millions and millions of Americans, whether strategically, or just through unfortunate circumstances, have decided, at one level or another, have decided, or by default, they have really, really damaged their credit. And that means they will be renters for many years to come, probably.
So, that is one big factor. The other huge factor is demographics. And of course we’ve talked about that on previous shows. We’ve got the recycles from homeowners coming into the housing market. That’s a big one, no question about it. But we’ve also got the situation where we’ve got so many Gen Y people moving into the rental market. And I say, actually, we also have, and we have not talked about this before, but a lot of Baby Boomers moving into the rental market. And then we’ve also got the people who’ve just sort of lost faith in the housing market, in the American Dream, as it were, where you simply buy a house and it just goes up in value perpetually, and that kind of stuff. That’s probably not in our future. And there are so many articles in the media about that. This is all really good for us as investors, because we have got tens of millions of new renters coming at us.
You know, I heard a statistic interesting the other day, and it said that 15% of males between the ages of 25 and 34 are living at home with their parents. Think about that! Think about the pent up demand that creates, that is going to be coming at us, at us as investors. Us, people who can provide housing to people, will be very, very popular in the coming years. So, that is really good for us as renters.
Now, another thing that I wanted to mention, in terms of one of our markets that we are doing very well in right now, investors are having very good experiences. Of course, this is not new, in terms of the market, but I do have a few new kind of bullet points to give you about this market. Imagine a place that has had an increase in growth since the 70s, and it has added 1.1 million people just in the eight years from 2000 to 2008. It’s the second largest metro area in the southeastern US, the 9th largest in the country. It’s the top business city and primary transportation hub for the entire southeastern US. It’s the fourth largest concentration in the country of Fortune 500 companies. It’s world headquarters to big-name companies like Home Depot; AT&T; Delta Airlines; TBS, or Turner Broadcasting, Ted Turner; SunTrust Bank; Newell Rubbermaid; Coca Cola. 75% of the Fortune 1000 have business operations in this city.
Its airport has been the world’s busiest airport for the last 13 years. It has a growing biotechnology center. And as of 2010, it is planning to become an IT health capital, by adding hundreds of thousands of new jobs in that sector. Rates first in the US for the least costly large city for businesses. So, it’s very business-friendly. The second as America’s best cities to relocate. Third in the country for job growth, and Forbes Magazine said it was the fourth most affordable US market. It also ranked it—Forbes, again, we’re talking about—as the number one rental market in the country. It has low property taxes. It has low homeowners insurance rates. It has a good inventory of housing, and we certainly have a very good vendor relationship with really two—well, really three vendors there, and we’ve been doing business in this market for a long time. As I mentioned before, it’s a very business-friendly state. Growth prospects are very good for this metro area, with 5.4 million people. Do you know what I’m talking about? Because I’ve mentioned a few of these things before on prior shows. This is none other than Hotlanta: Atlanta, Georgia. So, check out the properties we have there at www.jasonhartman.com. Fantastic properties, fantastic investment opportunities.
Last night I saw a really interesting movie entitled Margin Call. The movie was Margin Call, inspired by a true story, and they’re talking about one of the big Wall Street firms there, and the subtitle, or the tagline, to the Margin Call movie, which I’d highly recommend, because it just shows you what a crooked, greedy, money-grubbing operation Wall Street really is. The tagline for the movie is, be first, be smarter, or cheat. Or cheat. It just shows, this company, this big investment house, and how they just unloaded just zillions and zillions of dollars—of course, that’s figure of speech—of toxic assets onto the market, and basically just destroyed other people, other investors, other businesses, other companies.
A couple interesting scenes in the movie. One is where this young kid who’s only 28 years old, who’s making about ¾ of a million dollars a year, at age 28, and his friend, who’s 23, is making ¼ of a million dollars a year. It showed where he discovered that this company was in a complete mess because it was so leveraged, and it had invested so much in these completely bogus asset classes, these toxic assets. So this kid discovered it by finishing this computer model that another associate did, who was the risk management person, the senior guy, who was fired from the company. And he figured out this model that this company was on the verge of disaster. And in these all night meetings where they’re figuring out how they’re gonna unload all of these toxic assets onto other investors around the world, one of the senior partners in the firm asks him, because he didn’t know him, he goes, hey kid, what’s your background?
How do you know this model is correct? And he basically said that he got a doctorate at MIT, and his doctorate was in, essentially, although he said it a different way, the way, rocket propulsion engines interact and the friction they have against aerodynamic issues, or something like that, I can’t remember how he said it, of course. It was a late movie, last night. I was a little bit tired when I was watching it. But, then the senior partner says to him, so you’re basically a rocket scientist. And he says, yeah. And he says, well, why are you here? And he says, it’s all just numbers. The money’s just so much better on Wall Street.
And you know, that, to me, was a very sad, sad statement. Because it show you what so much of business around the world has become, but really, so much of America. I think America is probably—you know, America, and maybe some of the advanced European countries, are the most guilty of this. We are not putting enough emphasis—not even close to enough emphasis in this country—on sciences, on engineering, on all of the things that made us the world leader in so many areas. That created this industrial revolution, and Silicon Valley, and technology, and all of this stuff. And all of these guys on Wall Street, and they just show this over and over in the movie Margin Call that I saw last night—all these guys on Wall Street, they don’t create any value in the world! All they do is push money around, and push numbers around, and it’s just—it’s a smoke and mirrors game.
It’s an unreal economy. This is not value creation; this is handing things off to another guy, okay? It’s manipulation of markets. And the movie just—through the whole movie, they just illustrate that point beautifully. So, I think the movie really was quite good. It had Kevin Spacey, and Demi Moore. Gosh, what happened to her career! She’s back in this movie, and it was really good. I’d highly recommend that you see the movie Margin Call. I know that so many of you are interested in the story of the financial crisis, and the crookery of Wall Street, and all of that stuff. It’s really quite interesting.
We do have some listener questions piling up. We’ll get to those hopefully on the next episode. But, the Steve Jobs subject is so timely right now, and there’s just so much that has been learned from that guy’s life, and the incredible innovation, and how he fostered it within Apple, and how he fostered all of this innovation, and created all of these great products and so forth, and took Apple back from the brink of disaster. And you’re gonna here that in this interview with Jay Elliot, on The Steve Jobs Way, and also touching on his other book, Icon. But one of the best quotes I saw—we all tend to make excuses from time to time about why things in our life aren’t working out the way we want them to. I know we all go through this, obviously. But the best one that I really saw, after Steve’s passing, was this quote. I saw it on Facebook. It says: “Given up at birth, dropped out of college, fired from Apple, and his second company failed. Major comeback 11 years later, changed how the world communicates forever. What’s your excuse?”
And you know what? That is really pretty inspiring. Or maybe it’s not inspiring, but it just gives us a kick in the rear end that we all need once in a while, to see how no matter where you came from in life, no matter what happened to you, no matter what your past, we cannot live in the past. We’ve gotta live in the present, because the present is how we exert control over our future. And here on the Creating Wealth Show, this is what we’re all about. We’re all about taking small steps today, by getting our investment portfolio together, and creating passive income by putting all of these negative parts of our government, our financial system, and the complete scam that both of those things are, okay, and putting them in our favor, and exploiting those things to our benefit. So, every time you hear about how the government is overspending, how the crooks on Wall Street are screwing the investors, which they seem to do as part of—that’s just their business plan, really. And you hear about all of this stuff, and you realize that you can put time on your side, you can put irresponsible government on your side, because irresponsible government means too much spending, and that means money printing, and that means inflation, and what that means to you, as an investor, is it means, increase in value of your packaged commodities, your packaged commodity investing, and it means destruction of your debt.
Remember my phrase, inflation-induced debt destruction. And all of that debt, or more than all of it, because the debt coverage ratios now, on the investments we have nowadays, are far above one. Meaning that you have positive cash flow after debt. But before debt. You get to outsource the debt to your tenant. I mean, it is the most beautiful, tax-favored asset that you get to control. It is just wonderful. And you know what? As I’ve mentioned on prior shows just recently, I even like lending on it, which I never really liked before. And I like it, because I can do it on a short term basis, and get rates exceeding 10, even 12%. So, a lot of opportunities on either side of the income property real estate investing rental property equation.
But I don’t want to be in speculative things, because remember my rule; if it does not produce income, it does not qualify as an investment. If it doesn’t produce income, it’s not an investment; it is a speculation, which is tantamount to gambling. Now, gamblers win sometimes. Speculators win sometimes. Certainly, I won’t deny that for a moment. But for my money, being the conservative investor that I am, I do not want to gamble. I do not want to speculate. When you’re in something like vacant land, raw land, precious metals, non-dividend paying stocks, you are a gambler, you are a speculator. And you can try and outsmart the system, and sometimes you will, and sometimes you’ll just be lucky. And I would rather be lucky than good any day of the week. But I can’t rely, really, on either of those things. What I can rely on is income. Income is pretty darn reliable.
So, whether that income comes from a short-term high interest rate trust deed investment, where I’m getting 3600% more than the bank pays, or, an income property investment where I’m controlling packaged commodities, buying them far below construction or replacement cost, I’m diversifying geographically, so I’m not just in one area, hedging my bets that way, and I know I’ve got this huge demographic coming at me as an investor. I mean, that is a beautiful thing. And every time I say me, replace that with you. Because when you put yourself in that position, that’s exactly where you’ll be. You will be in the spot where you are really just master of the universe. You’re Captain Kirk on the Enterprise, where you’re sitting in the big chair and you’re controlling things. And rather than giving them up to these people I saw in the movie Margin Call last night who are acting out a bunch of their agendas and their motivations, which are most of the time contrary to ours as investors.
Anyway. That’s pretty much it for the real estate talk on the show today, on this episode. Let’s talk about one of the great innovators of the last century and this century, and that is of course Apple founder Steve Jobs. And we will be right back with that interview with Jay Elliot, his right hand coworker for many years, and long time friend, and we’ll be back with that in just a moment.
ANNOUNCER: Jason provides an extremely unique service: deal evaluator! Are you interested in a property outside of our network? Need a second opinion? No problem! Let our experts evaluate the deal. Find out more about it at www.jasonhartman.com! The price is only $50.
JASON HARTMAN: My pleasure to welcome Jay Elliot to the show. He is the author of something that’s very timely right now, The Steve Jobs Way: iLeadership for a New Generation. And since Steve Jobs’ passing, I’ve learned a lot of things I didn’t know about him, and I’m sure we’ll learn a few more on this interview today. Jay, welcome! How are you?
JAY ELLIOT: Fine, thanks. Thanks for having me. Appreciate it.
JASON HARTMAN: My pleasure. Well, The Steve Jobs Way—we’ve heard a lot about Steve Jobs lately, obviously. Millions and millions of people have, and just this outpouring of news about him, and the significance of his life—it’s really bigger than I thought it was. And I’m a huge Apple fan. I’m sitting here with my iPhone, and two Apple computers on my desk, and I guess I’m a cult member. Switched from PCs, and I’ve really never looked back too much. But, tell us about the book, and your thoughts on all the news recently.
JAY ELLIOT: The book hit the market actually back in April, so that’s when the book got published. I wrote the book because I was interested in documented my—I worked for Steve for 5½ years directly, and I felt that—it was my experience, I had also worked at IBM and Intel, so I had a pretty good insight into corporate operations. And when I met Steve, he was a lot younger than me, and I had to make a decision, are you gonna go to work for him? Because I had never worked for somebody who was that much younger than myself. And so I did it, and it really changed my life, and it changed really the direction of how I perceived the way leadership should be in corporations. And Steve’s success—and it was no secret to me, I knew he was going to be successful. So, I decided that I wanted to document sort of the understanding, the philosophy behind why he was successful, and why Apple was successful. So that really is the purpose of the book.
JASON HARTMAN: Now, you were there—and so, for the listeners, it’s important to understand the context of what you’re saying. Because when you said you always thought Steve would be successful—so, obviously, you were there in the early days. And I guess your tenure was 1980 to 1986?
JAY ELLIOT: Yes, that’s true. So, I started in 1980, I met Steve at a restaurant, at a local restaurant here where I live, by happenstance. And he was very excited about himself and the company, which at that moment I had never heard of Apple. And then I was looking for a new—I had been at IBM, and I went to Intel, I was looking for something new to do, and that worked out great. So I was—I worked directly for Steve in two capacities. One, as I was the head, I was the senior vice president of operations, so, running the corporate operations, working for Steve as Chairman of the Board. And then the way the company was organized, there was a division called the Macintosh division, so I worked directly for Steve, sort of his right hand guy in building the Macintosh.
JASON HARTMAN: Amazing. When you talk about management style, I remember when I was just a kid, seeing videos of Steve Jobs, and I remember Steve Wozniak and his US Festival, and I remember it being so revolutionary that he had these weekend retreats, and I remember seeing the video of that, where everybody was wearing blue jeans. And back in that day, that was sort of unheard of in corporate America, wasn’t it?
JAY ELLIOT: Yeah, and even Silicon Valley, when I first met Steve, he was wearing a white t-shirt and jeans and Birkenstock shoes, and Silicon Valley at that time was dominated pretty much by IBM, HP, Fairchild and Intel, so they were much more button down, more formal kind of corporations. And to see a guy who’s only 25 years old who’s a CEO of a corporation—that really wasn’t the way it was. And obviously even that’s a whole new standard for what Silicon Valley is today. And so, going to work for Apple was interesting, because I’d been used to wearing, you know, either suits and ties and white shirts. And then to go to work for a company where you could wear Levi’s and a t-shirt was a whole different experience.
JASON HARTMAN: So, 1980 at Apple, to 1986—I mean, give us an idea of what the company was like back then. How many employees are we talking about? I mean, we’re out of the garage by 1980, right?
JAY ELLIOT: Yes. At the time that I joined in 1980, the company was doing about $10 million a month in sales. So the Apple II was starting its ramp-up, was starting to do very well. So doing about $10 million in sales. By 1986 when I left, we were doing $3 billion in sales. So you can see the kind of ramp up that was occurring. And at the other time of it, the Apple II was a great little product. It was selling well. and there was a softer product called VisiCalc which was one of the first applications that drove its sales, and also schoolteachers loved it, because they could customize it for their classes. But Steve and I, we took a very famous tour to a place called Xerox Park. And this was a research center here in Palo Alto, California that really was a driver of technology. And Xerox, when we got there, one of the things we saw which was revolutionary, which changed the whole direction, was a thing called a mouse.
And actually, Xerox had built the mouse back in 1978. In fact, most of the modern technology today that we use, came from Xerox. Most of the things like USB drives, and FireWire, and all the current stuff, really was all developed by Xerox in the 70s. And fortunately, Xerox did nothing with it. They were using it sort of in their printer technology, but not in computers. And so when Steve saw the mouse, it really—his eyes lit up, because he knew that the interface to a computer needed to be simple, because people in those days looked at computers to be sort of fearful of them, and did not use them. And what he saw was this release that anybody could use a computer. And you see today, that’s where we are. And it’s—today, anybody from, you know, from 4 years old to 90 years old can use it, because of the interface technology developed by the Mac team.
JASON HARTMAN: So, some people might say, I mean look. Steve Jobs and Bill Gates, they were in the right place at the right time. I mean, how much luck was involved? I mean, I know Steve Jobs definitely was a brilliant man, and I love his products. But at the beginning, back in the old days of Apple, and you know, Microsoft. How much of that was just right place right time?
JAY ELLIOT: Well, I think timing was important. But if you think about it, at that time, IBM was the number two corporation in the world. IBM was huge, it was rated number two in the world. It had incredible research. It had all this stuff—in fact, the reason I left IBM was because I felt they should go into this direction, but they chose to protect their turf, protect their computer rooms, and not really go for making, putting computers in the hands of people. And even when—even on both sides, so here’s these two guys, Steve Wozniak and Steve Jobs, you know, sort of stumble into this market that actually, IBM did not want anybody to develop, because they showed all of a sudden that hey, people want to use these computers and not be connected to a computer room. And Microsoft on the other side was brilliant enough, Bill Gates was, that he understand that he was a driving force for IBM, and what IBM again made a huge mistake is, was allowing clones. All of a sudden the Microsoft software was being run by anybody who had a computer, from Dell to anybody else. So IBM made some massive mistakes. One way you can look at it would be luck. The other side of it is, here’s the major computer corporation in the world that made some massive mistakes, and they paid for it.
JASON HARTMAN: Sure. They definitely did. I think that had to be a huge hit to their ego, in those days. But this philosophy of how Apple was so different in wanting to control the hardware and the software, versus Microsoft, that seems like the more open, or maybe democratic idea of, we’ll make software, and other people can make hardware, and people will have more choice. And that really, I would certainly say, that really won for many, many years, until Steve came back, and then they started making such great hardware products. And kind of like, people came into Apple in the last 10 years, sort of in reverse! They bought their iPod, loved it, maybe they got an iPhone, loved it, and then they finally got a Mac. Strange way to acquire customers, really.
JAY ELLIOT: Steve’s always philosophy, which I agree with, and that was always the debate we had—that you should have the whole products. So, the products should be all in one. It shouldn’t be part of it’s hardware and part of it’s software, you’re dealing with two different companies. And I think a lot of the problems with the Microsoft software has been that the hardware it’s placed on isn’t up to running it. I think that was the big problem with Vista, is a lot of the hardware manufacturers put it on PCs that weren’t really designed powerful enough to run the software. So, secondly, the other part of it is that to make it all compatible, so the other thing about Apple is, all these products that they build today are all compatible with each other. If you buy a Samsung phone, and a Samsung computer, they’re not compatible. One’s running Windows, and one’s running Android. So, I think that the whole secret is to be this product centric, that it all runs together. And then obviously, iTunes became really the glue that ran it all totally together. So I think, that’s sort of what went out. And then obviously, adding the retail strategy to it is amazing, what it’s done for the Apple business. And I think that, to me, is the centerpiece of what the business should be, going forward.
JASON HARTMAN: And—I just have to make a personal user consumer-based comment about that. Is that, of course I have Microsoft Office on my Apple computers. But, it is such a hassle! Every time you get a new Mac, everything just switches over beautifully—except the darn Microsoft products! That’s always the snag.
JAY ELLIOT: Right. And now with the iCloud, it is all synced. So now, if you’re connected to iCloud, you don’t need to worry about backing up, it’s all done for you. And it’s all synced across all your products. Again, it’s a philosophy of—the legacy, I believe, from Steve, is this philosophy that it’s all together as one family of products.
JASON HARTMAN: Yeah, and see, the sort of, the hacker type mentality, those people—and we both have friends that are like that—they don’t like the Apple products, because they say, well, you’re imprisoned in their ecosystem. And I always say to them, yeah, but it’s a really nice prison.
JAY ELLIOT: Exactly, right. But even with that, that’s, you know—they find the, hey if you want to build apps, you can build apps for the iPhone, even now for the Macs, and that’s opened up. Not to open up the kernel or the system, but they’ve opened up if you want to build apps, be our guest. I mean, that’s the other side of change for the Apple philosophy.
JASON HARTMAN: Yeah, it sure is. Well, in your book, The Steve Jobs Way, you talk about Steve and his passion for the product. And I always sort of think that companies have three audiences—three main audiences. They have customers, they have employees, and they have shareholders or stakeholders. We’ll include even vendors in that. They don’t have to be public companies to have those kinds of stakeholders. But it seems like Apple has really pleased all three. Was it really built around the product, or is it around leadership? The title of your book is iLeadership. Where was the Steve Jobs magic?
JAY ELLIOT: It was in the leadership team from the products. So, Steve Jobs’ magic is, I want a product, I want it to be the best in the world. And by doing that, everything else sort of follows along. So, in order to build the greatest products in the world, I have to have a great, talented team. So, and to have a talented team, they need to know that their talent isn’t gonna be wasted. They’re not gonna be like Xerox and build a mouse that’s never gonna be used, the public never sees it. So, the great part of that is recognizing this talent, and making sure that they are understanding that they’re all part of this team. And part of that is to recognize your accomplishments, again to the product. It’s not about, hey you’ve been in the company for four years, I recognize your anniversary.
It’s recognizing the milestones that all these teams accomplish. And building small teams—the other thing we talked about is making a team small. Making a team—horizontal communication is critical. When Steve would get on the stage and say, I’m introducing an iPad, the greatest product in the world, imagine if you worked on that product how you felt about it. And then ultimately, never worried about the money, never worried about the stock price. That all sort of took care of itself, because if you’re building a great product, and you’re getting great sales of it, and the other thing Apple Mouse created was I called it the retail juggernaut, is they don’t leave 30, 35% commission on the table when they sell a product to somebody else. They have huge margins now, and that’s a big plus for what they do.
JASON HARTMAN: Because they’ve got the Apple stores? I mean—
JAY ELLIOT: Exactly.
JASON HARTMAN: Those margins are really that big? So if someone buys a PC on Amazon.com, I mean, they’re really getting 30, 35% margin on that stuff? I can’t believe it.
JAY ELLIOT: Yeah. Amazon is probably more like 12-18%, but if they went to Best Buy and bought it, they’re leaving 30% there in the store. So, those channels have big, big cost. It costs also when you go through those channels, it costs for marketing, it costs for things you do to promote your product in their sites and so forth. That all costs you. You go into an Apple store, you buy the product—first of all, you go to the Apple store, nobody ever talks to you about buying anything. You go in there and they will answer questions for you, but nobody says, what are you gonna buy? You make that choice. It’s a demo center. And the reason you’re drawn there is because you’re so attracted to the product. I also sort of call it like a Trojan Horse center. I have a PC at home, but I have an iPhone, and I go on there and look at, oh, look what I see. I see all this compatibility and how all these things work together. And yet, what do you think I’m gonna buy next as a computer? So it all works together.
JASON HARTMAN: That’s for sure, and that’s a beautiful thing, the way it works together. Getting back to the team concept, in your book, you make this great comparison. It’s a great metaphor. Of pirates, versus the navy. Now, most people would maybe think that the navy, this big, organized institution, is a great and powerful thing. But you don’t think so! And I guess Steve didn’t either, huh?
JAY ELLIOT: No. We were—we didn’t want to have bureaucracy, politics, you know, the power of the position, sort of creep into what I’ll call the startup mentality. We wanted people to feel empowered. We wanted them to feel like they could be open, and not worry about who they’re meeting with, or what the title is, or what the policy is, or what the bureaucracy. So, we tried to find a metaphor that would sort of fit that mold. And so, actually it was a guy named Jay [unintelligible], that was a company that did all the advertising for Apple in the early days. And Steve and him had dinner one night, and Steve came back and said, hey, I think I had the metaphor. We’re gonna use pirates, not the navy. And it made sense, and that really was what we inspired our employees—we even had a skull and crossbones on the flag flying above the building. I mean, that’s unheard of, to go walk by a big corporation, and there, one of the flags flying is a skull and crossbones. I mean—it’s trying to figure a way to keep people focused on the importance of getting the product done right, focused on making the milestones that had been attached to what they’re gonna do, and not get caught up in the process of them and the organization. So that was truly why we did that.
JASON HARTMAN: Well, with that, I’ve gotta ask you—I’m gonna call it the Steve Jobs uniform. I mean, he didn’t always wear that, that developed later. But I was talking to a friend of mine about the 501 Jeans, and the black turtleneck, and I was saying, what’s that all about? And he said, maybe it’s just sort of the Einstein mentality. And I go, well what does that mean? And he says, just don’t waste any energy on your wardrobe. Any mental energy. Just wear the same thing.
JAY ELLIOT: I think the other side is, Steve was—first of all, Steve—there was two parts to Steve. One was his very personal life, and the other was Apple. And I think that Apple—at Apple, they were two separate lives, two separates beans, almost. Because Steve was a very shy person, and his personal life was very private. He never even gave any public appearances. Very few even speeches, and the most famous one was the one at Stanford. But his Apple thing—what he wanted to do, is when he’s standing on stage introducing an iPhone, he wants you to focus on one thing: the iPhone. He’s there, representing in his hand, the greatest product in the world. He doesn’t want to distract from that. So he’s not gonna be there, wearing an Armani suit with a gray tie and whatever. He wanted just to fold into the background, and that all you focus on is the product. And I think that really—in the early days, he mostly wore—it was funny, he wore white t-shirts when I met him, but he did go through a period of time when Apple started growing up, into a more corporate look. But ultimately I think he decided that he needed to fold into the background.
JASON HARTMAN: We’ll be back in just a minute.
ANNOUNCER: What’s great about the shows you’ll find on www.jasonhartman.com is that, if you want to learn about investing in and managing income properties for college students, there’s a show for that! If you want to learn how to get noticed online and in social media, there’s a show for that! If you want to know how to save on life’s largest expense, there’s a show for that! And if you’d like to know about America’s crime of the century, there’s even a show for that. Yep! There’s a show for just about anything. Only from www.jasonhartman.com. Or type in Jason Hartman in the iTunes store.
JASON HARTMAN: Well, so, one of the things that’s interesting is that I’ve heard that—and I believe on the 60 Minutes piece about him recently—that he combined these sort of different parts of life. And one of them that I found really interesting was, when he made his products, and thought of the way product development should occur, he included the humanities. You know, I’m having a little trouble connecting that one. What does that mean? When you look up humanities, they talk about the study of it in college, and the classics and things. But what do they mean by that? Just ease of use, or user interface, or, what are they talking about?
JAY ELLIOT: Yeah, I think we get in particularly technology business, we get caught up in what I’ll call technological engineering. We get caught up in wow, I just made the fastest chip in the world. And this drive does this, or this screen does this. But the humanity means that ultimately, there’s—the judge of how good the product is, is the person who buys it and uses it. And I think that’s where that’s where humanity comes in. What is the purpose of this product? What do you really want to accomplish? What is it doing for me, the user? And I think that’s the insight of the Apple products, is they have set me free. It’s a seamless interaction I have with all this information I’m dealing with through Apple products, and I think that’s where the humanity—think about this. Apple products are used—I just saw the other day where a kid who was only 3 years old, was using an iPad, and loving it. So it goes all the way from a 3-year-old to a 95-year-old. I mean, it covers all of the world. And think about it—not many products do that. That’s the other part of humanity which is important.
JASON HARTMAN: Jay, and I’ll have you know, it actually spans one year younger than that, because I’ve seen 2-year-olds using iPads. So, it’s pretty incredible. I bet you can’t hand them a PC, a Linovo, and have them do that, right?
JAY ELLIOT: Exactly. And the other part of the humanity thing is education. I think Apple has been—one thing Steve was criticized about was, he never appeared to give a lot of money to any foundations. But if you think about it, his passion was education. So he—they gave millions and millions of computers, millions and millions of development time, big discounts to the education systems in the world. And Apple is—I have two sons in high school. When I go walk down the hall, when I walk between the Apple lab and the HP lab, the HP lab is empty, and the Apple lab is totally crowded. And I mean, that’s what I considered part of humanity.
JASON HARTMAN: Yeah, right. And it’s the same way with retail stores. You look at the new Microsoft stores, and there’s hardly anybody there. But, boy, at any Apple store on the planet, and I’ve been to many of then, you don’t know there’s a recession if you walk into an Apple store. That’s for sure.
JAY ELLIOT: No, of course. And look at their financial—I mean, look at the store in Manhattan. It’s gonna do over a half a billion dollars in sales this year, in just one store. It’s phenomenal.
JASON HARTMAN: Do you know what I heard? That that is now the most photographed building in New York City! And it’s mostly underground; I’ve been to that one. And it’s more photographed than, say, the Empire State Building, or Ground Zero, or anything else now.
JAY ELLIOT: Right. And it’s sort of funny, because also the other one, the unbelievable one, is in Shanghai. I mean, it is unbelievable. And way back when, actually, I.M. Pei, who’s one of the world’s famous—
JASON HARTMAN: Architects, sure, yeah.
JAY ELLIOT: —we had actually had him design the first Apple campus. And it was gonna have almost like Disney Land, it was gonna have a tram running around it, and the roofs of the buildings were gonna be glass, so you could actually look in the building when you went by, to see what was happening. But unfortunately, that never got off the ground. Although Steve’s last appearance was to present his new building concept to the city counsel of Cupertino, and so, when he did that I thought wow, he’s finally fulfilled one of his last dreams, which is the Apple campus.
JASON HARTMAN: Fantastic. What was Steve’s secret in hiring? In tapping into the best talent? I mean, you talk about not having bureaucracy, and not having this hierarchical organization, and how people could go directly and talk to people, and you sort of got that formality out of the way, obviously. But, I’ve heard definitely some negative things about Steve; that he was difficult to work with, incredibly demanding, and all those kinds of things. And I’m sure you know about them. What was his secret to tapping into talent, and hiring right, and that kind of thing?
JAY ELLIOT: He really had a way about him, that when you got interviewed by Steve, it was interesting. He would throw out things, and then see how you would react. He’d throw out either concepts, he’d throw out things that potentially could be negative, and then he would sort of judge your reaction to it. And being interviewed by Steve was an interesting thing, because you sort of got in tune with him very quickly about what his vision, and everything. But he also was a master of finding out who you really are underneath all of that, and who—and what he thinks your talent is going to fit into what he needs to get done in his vision of the product. I think that’s really the secret. Even—I always use, a lot of times in interviews, I’ll say to somebody, have you ever been fired. And if I say that to somebody, I don’t care about the answer, I care about the reaction. Because a lot of people don’t want to tell you that. So you just sort of judge by their reaction. And I think Steve was a master of sort of laying out parts of his vision, laying out parts of his ideas about the company, the product, or what he wants you to do, and then see how you react to it. And then after that, he was an incredible sales guy. But I think that’s part of it. Part of looking at talent is trying to see under the covers who you are, and is that gonna fit into what you want to get done; I think that’s really important.
JASON HARTMAN: Who were Steve’s—who did Steve really look up to? Who were his idols and mentors?
JAY ELLIOT: Well, several of them weren’t alive. Henry Ford was clearly one of Steve’s mentors, but he wasn’t alive. Gutenberg, obviously, who invented the press. He looked at people who had done significant things sort of to change the way the world operated, and I think that Dr. Land, the guy that did the Polaroid camera, was one of his big heroes, and in fact, we went and met with him once in Rochester, New York. So it’s people like that that he felt had either taken technology and used it to convert what culture was doing, or society was doing. Thomas Edison was another one. So, there wasn’t many—I think Bob Noyce was one of the, before he died, in Silicon Valley. I always viewed Bob Noyce as being sort of the pre-Steve Jobs. He was—I view Bob as sort of the guy that was a lot like Steve Jobs, but he came on before Steve Jobs.
JASON HARTMAN: And who was Bob Noyce? Sorry.
JAY ELLIOT: Bob Noyce was one of the cofounders of Intel. So Bob Noyce was the co-inventor of the semiconductor. With a guy, the professor from Stanford. So, he really was—he was really the inspiration that created Silicon Valley. And then he helped found Intel. So that’s where he came from.
JASON HARTMAN: A couple rather amazing comments I’ve heard after his passing, and I believe they were from the 60 Minutes interview. One is that he credited a lot of his success to taking LSD. Comment on that? It’s a pretty controversial statement.
JAY ELLIOT: Right. That might have been early on in his life. It certainly wasn’t later in his life. I think he was really into this sort of, being able to see into the future, and being able to look through the mask of what was happening around him, being sort of away from it. I know that he was a practicing Buddhist. He was concerned about diet. He never drank or smoked. And I think he just looked at the purity of—trying to look at the purity of thought. And I mean, a lot of—I saw part of that, also read part of that new book, which I don’t like, by the way, and I don’t give a lot of credit to the author. Because actually I’m in it, and I’m falsely represented in it, so I have a negative opinion of that interview.
JASON HARTMAN: Okay, fair enough. One of the other things, though, that I thought was really telling and difficult, and maybe you can give some insight into this, is that in that interview, they said that Steve always—he was always striving to make the products simple and clean. And he said, it’s hard to make something simple. It’s easy to make it complicated. Which is somewhat counterintuitive, really. But I don’t think it is. But some people might judge it that way. And I guess a lot of his concept of simplicity came from Buddhism, right?
JAY ELLIOT: Exactly. In fact, if you look at Buddhism, one of the most simple products that sort of, everybody applauds, is the egg. You look at an egg, it’s incredibly simple, but it’s very effective. It protects the inside of it very well, has a great design to it, great texture to it, all these sort of—if you think about, wow, that’s a simple product. And I think that was—even in the early days of Macintosh, we always wanted to produce a product that didn’t need an owner’s manual. So that was the ultimate statement of simplicity: no owner’s manual needed. You don’t get an owner’s manual when you buy an egg. It’s pretty simple to use. So, that was sort of the ultimate goal of an Apple product. Which today that’s true, you don’t get an owner’s manual with an Apple product.
JASON HARTMAN: You get a little tiny thing in there, maybe finger tips, with your iPhone. Yeah.
JAY ELLIOT: But the funny thing about it is, you get a lot of insight to your new products from other Apple users. My 15-year-old is my Apple guide. So he tells me how, what I can do to make my product more effective. So what’s really interesting is then you sort of develop this inner cult of people that sort of talk about it together, which is sort of interesting.
JASON HARTMAN: Yeah, I just wanted to, before we go, give you the opportunity to talk about any stages of the company he left, and came back, and of course, Apple was really on the rocks when Steve was gone. If you want to talk about any of that. And then I just want to ask you about the branding, and the sort of, the coolness. I mean, Steve really made computing cool.
JAY ELLIOT: Right. Well, first of all, when Steve [unintelligible] Apple, Apple turned out to be a big problem, obviously, the Sculley era, and Sculley was not the right guy to run Apple. The board of directors threw Steve out, which was a huge mistake. In fact, I went to the board and told them they were making a big mistake, and I got rewarded by being fired myself, later on. But the problem when it happened is that the products were going in the wrong direction. The Mac was clearly a consumer product trying to be put into corporate America, but when Steve left, he learned a big lesson. A couple things. One, he learned that in his heart, he was a consumer guy. He was not a corporate America equipment manufacturer. So, he learned about consumerism, he learned that who he was, and what he was really excited about—that sort of came out in Pixar, when he took over Pixar. The time he took over Pixar, the longest movie they had ever produced was two minutes in length. So, the first thing he said, we need a product. Because he was a product guy. So Toy Story came out of that. So, he learned, after leaving Apple, and then seeing Apple sort of disintegrate, that he learned his lesson about, he’s a consumer guy, he wants to make products for the person, and he also learned that to do that, you gotta have the right company structure, gotta have the right board of directors, and he also learned that he has to be in charge. In order to make that happen, he had to be the CEO. So those are all the lessons he learned by the failure of NeXT, the success of Pixar, and then coming back to Apple he was able to implement that. So I think that was an important year for Apple and for Steve, coming back. And a lot of the concepts that Steve came back with, we’d already been talking about in the late 80s. In ’85 and ’86, we were talking about the consumer product, and putting in the stores, and all that other stuff. We even talked about in ’84, about the concept which eventually became Dell nine years later. So, Steve had a lot of stuff already going in his mind. He just had had bad opportunity. If you think about it, he was worth about $6 billion with his Disney deal. He didn’t need to come back to Apple. But he just saw that as an unfulfilled dream.
JASON HARTMAN: Yeah. It’s really amazing that he lived, really, frankly, a very modest life, and I was surprised to hear that. Like, at his house, did he have a security guard at least? I mean, this is—
JAY ELLIOT: No. In fact, when he bought his first big mansion up in Woodside, it was 15,000 square feet, it had been owned by the creator of Conoco Copper, and I went up to visit him after he was moved in. He was living in the maid’s quarter! Because the maid’s quarter was connected to the kitchen, where he had his cooks. And so, the rest of this house was empty. There was nothing in it. I mean, I’m not sure he ever put anything in it. I mean, he lived very minimally, and you would never know it. And even his home up in Palo Alto is open to anybody. You’d see him drive out every morning, if you wanted to pay attention. The sad part about the ending of his life was that he was under so much scrutiny that paparazzi, they couldn’t wait to take photographs of him hobbling out of his house. That was really too bad.
JASON HARTMAN: That is too bad.
JAY ELLIOT: That was really sad.
JASON HARTMAN: It really is. Well, Jay, just before we go, give out your website, if you would, for the book, and maybe if you want to just talk about what you do, as well. I find that interesting. In terms of your business.
JAY ELLIOT: Yeah. The website is called www.TheSteveJobsWay.com, that’s my website. It’s—my book is in 19 countries and 29 languages, so it’s doing very well in the world.
JASON HARTMAN: Fantastic reviews on Amazon, too.
JAY ELLIOT: Yes, if you go on there, you’ll see reviews. And on there if you go under press, it probably has about 30 or 40 reviews, and they’re from almost every major publication in the world, and all the TV stuff I’ve been on. So, secondly, I’m still—I’m a software guy. So, I’m still in the software business. I have a software company. We produce a way to accelerate information through the Internet. So it’s called WAN acceleration—wide area network acceleration. So we do—the companies like Oracle, or the other company, Riverbed, who was hardware—we do software. So, that’s what we do on our product. Secondly, we build apps. So I have a suite of apps that we call Family Safety, that allows you to have emergency contacts, and so forth. Those are the two things we do in my business.
JASON HARTMAN: Fantastic. Well Jay Elliot, thank you so much for joining us today. The book is The Steve Jobs Way: iLeadership for a New Generation. And very interesting to talk about this. Very timely indeed. And we’re sorry to see Steve pass; what an incredible man. I mean, the Thomas Edison of the last decade, and part of the last century as well.
JAY ELLIOT: Right. Well, thank you very much.
JASON HARTMAN: Thank you.
ANNOUNCER: Have you listened to the Creating Wealth series? I mean from the beginning. If not, you can go ahead and get book one—that’s shows 1-20—in digital download. These are advanced strategies for wealth creation. For more information, go to www.jasonhartman.com.
ANNOUNCER: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice. Opinions of guests are their own, and the host is acting on behalf of Platinum Properties Investor Network, Inc. exclusively.
Transcribed by David
The Jason Hartman Team
Episode: CW 228: 'The Steve Jobs Way' with Jay Elliot Apple’s Former Senior Vice President of Operations
Guest: Jay Elliot
iTunes: Stream Episode