THE REALITY DISTORTION FIELD 7 page

Showdown, Spring 1985

There were many reasons for the rift between Jobs and Sculley in the spring of 1985. Some were

merely business disagreements, such as Sculley’s attempt to maximize profits by keeping the

Macintosh price high when Jobs wanted to make it more affordable. Others were weirdly

psychological and stemmed from the torrid and unlikely infatuation they initially had with each

other. Sculley had painfully craved Jobs’s affection, Jobs had eagerly sought a father figure and

mentor, and when the ardor began to cool there was an emotional backwash. But at its core, the

growing breach had two fundamental causes, one on each side.

For Jobs, the problem was that Sculley never became a product person. He didn’t make the

effort, or show the capacity, to understand the fine points of what they were making. On the

contrary, he found Jobs’s passion for tiny technical tweaks and design details to be obsessive and

counterproductive. He had spent his career selling sodas and snacks whose recipes were largely

irrelevant to him. He wasn’t naturally passionate about products, which was among the most

damning sins that Jobs could imagine. “I tried to educate him about the details of engineering,”

Jobs recalled, “but he had no idea how products are created, and after a while it just turned into

arguments. But I learned that my perspective was right. Products are everything.” He came to see

Sculley as clueless, and his contempt was exacerbated by Sculley’s hunger for his affection and

delusions that they were very similar.

For Sculley, the problem was that Jobs, when he was no longer in courtship or manipulative

mode, was frequently obnoxious, rude, selfish, and nasty to other people. He found Jobs’s boorish

behavior as despicable as Jobs found Sculley’s lack of passion for product details. Sculley was

kind, caring, and polite to a fault. At one point they were planning to meet with Xerox’s vice chair

Bill Glavin, and Sculley begged Jobs to behave. But as soon as they sat down, Jobs told Glavin,

“You guys don’t have any clue what you’re doing,” and the meeting broke up. “I’m sorry, but I

couldn’t help myself,” Jobs told Sculley. It was one of many such cases. As Atari’s Al Alcorn

later observed, “Sculley believed in keeping people happy and worrying about relationships. Steve

didn’t give a shit about that. But he did care about the product in a way that Sculley never could,

and he was able to avoid having too many bozos working at Apple by insulting anyone who wasn’

t an A player.”

The board became increasingly alarmed at the turmoil, and in early 1985 Arthur Rock and some

other disgruntled directors delivered a stern lecture to both. They told Sculley that he was

supposed to be running the company, and he should start doing so with more authority and less

eagerness to be pals with Jobs. They told Jobs that he was supposed to be fixing the mess at the

Macintosh division and not telling other divisions how to do their job. Afterward Jobs retreated to

his office and typed on his Macintosh, “I will not criticize the rest of the organization, I will not

criticize the rest of the organization . . .”

As the Macintosh continued to disappoint—sales in March 1985 were only 10% of the budget

forecast—Jobs holed up in his office fuming or wandered the halls berating everyone else for the

problems. His mood swings became worse, and so did his abuse of those around him. Middlelevel

managers began to rise up against him. The marketing

chief Mike Murray sought a private meeting with Sculley at an industry conference. As they

were going up to Sculley’s hotel room, Jobs spotted them and asked to come along. Murray asked

him not to. He told Sculley that Jobs was wreaking havoc and had to be removed from managing

the Macintosh division. Sculley replied that he was not yet resigned to having a showdown with

Jobs. Murray later sent a memo directly to Jobs criticizing the way he treated colleagues and

denouncing “management by character assassination.”

For a few weeks it seemed as if there might be a solution to the turmoil. Jobs became fascinated

by a flat-screen technology developed by a firm near Palo Alto called Woodside Design, run by an

eccentric engineer named Steve Kitchen. He also was impressed by another startup that made a

touchscreen display that could be controlled by your finger, so you didn’t need a mouse. Together

these might help fulfill Jobs’s vision of creating a “Mac in a book.” On a walk with Kitchen, Jobs

spotted a building in nearby Menlo Park and declared that they should open a skunkworks facility

to work on these ideas. It could be called AppleLabs and Jobs could run it, going back to the joy

of having a small team and developing a great new product.

Sculley was thrilled by the possibility. It would solve most of his management issues, moving

Jobs back to what he did best and getting rid of his disruptive presence in Cupertino. Sculley also

had a candidate to replace Jobs as manager of the Macintosh division: Jean-Louis Gassée, Apple’s

chief in France, who had suffered through Jobs’s visit there. Gassée flew to Cupertino and said he

would take the job if he got a guarantee that he would run the division rather than work under

Jobs. One of the board members, Phil Schlein of Macy’s, tried to convince Jobs that he would be

better off thinking up new products and inspiring a passionate little team.

But after some reflection, Jobs decided that was not the path he wanted. He declined to cede

control to Gassée, who wisely went back to Paris to avoid the power clash that was becoming

inevitable. For the rest of the spring, Jobs vacillated. There were times when he wanted to assert

himself as a corporate manager, even writing a memo urging cost savings by eliminating free

beverages and first-class air travel, and

other times when he agreed with those who were encouraging him to go off and run a new

AppleLabs R&D group.

In March Murray let loose with another memo that he marked “Do not circulate” but gave to

multiple colleagues. “In my three years at Apple, I’ve never observed so much confusion, fear,

and dysfunction as in the past 90 days,” he began. “We are perceived by the rank and file as a boat

without a rudder, drifting away into foggy oblivion.” Murray had been on both sides of the fence;

at times he conspired with Jobs to undermine Sculley, but in this memo he laid the blame on Jobs.

“Whether the cause of or because of the dysfunction, Steve Jobs now controls a seemingly

impenetrable power base.”

At the end of that month, Sculley finally worked up the nerve to tell Jobs that he should give up

running the Macintosh division. He walked over to Jobs’s office one evening and brought the

human resources manager, Jay Elliot, to make the confrontation more formal. “There is no one

who admires your brilliance and vision more than I do,” Sculley began. He had uttered such

flatteries before, but this time it was clear that there would be a brutal “but” punctuating the

thought. And there was. “But this is really not going to work,” he declared. The flatteries

punctured by “buts” continued. “We have developed a great friendship with each other,” he said,

“but I have lost confidence in your ability to run the Macintosh division.” He also berated Jobs for

badmouthing him as a bozo behind his back.

Jobs looked stunned and countered with an odd challenge, that Sculley should help and coach

him more: “You’ve got to spend more time with me.” Then he lashed back. He told Sculley he

knew nothing about computers, was doing a terrible job running the company, and had

disappointed Jobs ever since coming to Apple. Then he began to cry. Sculley sat there biting his

fingernails.

“I’m going to bring this up with the board,” Sculley declared. “I’m going to recommend that

you step down from your operating position of running the Macintosh division. I want you to

know that.” He urged Jobs not to resist and to agree instead to work on developing new

technologies and products.

Jobs jumped from his seat and turned his intense stare on Sculley.

“I don’t believe you’re going to do that,” he said. “If you do that, you’re going to destroy the

company.”

Over the next few weeks Jobs’s behavior fluctuated wildly. At one moment he would be talking

about going off to run AppleLabs, but in the next moment he would be enlisting support to have

Sculley ousted. He would reach out to Sculley, then lash out at him behind his back, sometimes on

the same night. One night at 9 he called Apple’s general counsel Al Eisenstat to say he was losing

confidence in Sculley and needed his help convincing the board to fire him; at 11 the same night,

he phoned Sculley to say, “You’re terrific, and I just want you to know I love working with you.”

At the board meeting on April 11, Sculley officially reported that he wanted to ask Jobs to step

down as the head of the Macintosh division and focus instead on new product development.

Arthur Rock, the most crusty and independent of the board members, then spoke. He was fed up

with both of them: with Sculley for not having the guts to take command over the past year, and

with Jobs for “acting like a petulant brat.” The board needed to get this dispute behind them, and

to do so it should meet privately with each of them.

Sculley left the room so that Jobs could present first. Jobs insisted that Sculley was the problem

because he had no understanding of computers. Rock responded by berating Jobs. In his growling

voice, he said that Jobs had been behaving foolishly for a year and had no right to be managing a

division. Even Jobs’s strongest supporter, Phil Schlein, tried to talk him into stepping aside

gracefully to run a research lab for the company.

When it was Sculley’s turn to meet privately with the board, he gave an ultimatum: “You can

back me, and then I take responsibility for running the company, or we can do nothing, and you’re

going to have to find yourselves a new CEO.” If given the authority, he said, he would not move

abruptly, but would ease Jobs into the new role over the next few months. The board unanimously

sided with Sculley. He was given the authority to remove Jobs whenever he felt the timing was

right. As Jobs waited outside the boardroom, knowing full well that he was losing, he saw Del

Yocam, a longtime colleague, and hugged him.

After the board made its decision, Sculley tried to be conciliatory. Jobs asked that the transition

occur slowly, over the next few months, and Sculley agreed. Later that evening Sculley’s

executive assistant, Nanette Buckhout, called Jobs to see how he was doing. He was still in his

office, shell-shocked. Sculley had already left, and Jobs came over to talk to her. Once again he

began oscillating wildly in his attitude toward Sculley. “Why did John do this to me?” he said.

“He betrayed me.” Then he swung the other way. Perhaps he should take some time away to work

on restoring his relationship with Sculley, he said. “John’s friendship is more important than

anything else, and I think maybe that’s what I should do, concentrate on our friendship.”

Plotting a Coup

Jobs was not good at taking no for an answer. He went to Sculley’s office in early May 1985 and

asked for more time to show that he could manage the Macintosh division. He would prove

himself as an operations guy, he promised. Sculley didn’t back down. Jobs next tried a direct

challenge: He asked Sculley to resign. “I think you really lost your stride,” Jobs told him. “You

were really great the first year, and everything went wonderful. But something happened.”

Sculley, who generally was even-tempered, lashed back, pointing out that Jobs had been unable to

get Macintosh software developed, come up with new models, or win customers. The meeting

degenerated into a shouting match about who was the worse manager. After Jobs stalked out,

Sculley turned away from the glass wall of his office, where others had been looking in on the

meeting, and wept.

Matters began to come to a head on Tuesday, May 14, when the Macintosh team made its

quarterly review presentation to Sculley and other Apple corporate leaders. Jobs still had not

relinquished control of the division, and he was defiant when he arrived in the corporate

boardroom with his team. He and Sculley began by clashing over what the division’s mission was.

Jobs said it was to sell more Macintosh machines. Sculley said it was to serve the interests of the

Apple company as a whole. As usual there was little cooperation among the divisions; for one

thing, the Macintosh team was planning new disk drives that were different from those being

developed by the Apple II division. The debate, according to the minutes, took a full hour.

Jobs then described the projects under way: a more powerful Mac, which would take the place

of the discontinued Lisa; and software called FileServer, which would allow Macintosh users to

share files on a network. Sculley learned for the first time that these projects were going to be late.

He gave a cold critique of Murray’s marketing record, Belleville’s missed engineering deadlines,

and Jobs’s overall management. Despite all this, Jobs ended the meeting with a plea to Sculley, in

front of all the others there, to be given one more chance to prove he could run a division. Sculley

refused.

That night Jobs took his Macintosh team out to dinner at Nina’s Café in Woodside. Jean-Louis

Gassée was in town because Sculley wanted him to prepare to take over the Macintosh division,

and Jobs invited him to join them. Belleville proposed a toast “to those of us who really

understand what the world according to Steve Jobs is all about.” That phrase—“the world

according to Steve”—had been used dismissively by others at Apple who belittled the reality warp

he created. After the others left, Belleville sat with Jobs in his Mercedes and urged him to

organize a battle to the death with Sculley.

Months earlier, Apple had gotten the right to export computers to China, and Jobs had been

invited to sign a deal in the Great Hall of the People over the 1985 Memorial Day weekend. He

had told Sculley, who decided he wanted to go himself, which was just fine with Jobs. Jobs

decided to use Sculley’s absence to execute his coup. Throughout the week leading up to

Memorial Day, he took a lot of people on walks to share his plans. “I’m going to launch a coup

while John is in China,” he told Mike Murray.

Seven Days in May

Thursday, May 23: At his regular Thursday meeting with his top lieutenants in the Macintosh

division, Jobs told his inner circle about his plan to oust Sculley. He also confided in the corporate

human resources director, Jay Elliot, who told him bluntly that the proposed rebellion wouldn’t

work. Elliot had talked to some board members and urged them to stand up for Jobs, but he

discovered that most of the board was with Sculley, as were most members of Apple’s senior staff.

Yet Jobs barreled ahead. He even revealed his plans to Gassée on a walk around the parking lot,

despite the fact that Gassée had come from Paris to take his job. “I made the mistake of telling

Gassée,” Jobs wryly conceded years later.

That evening Apple’s general counsel Al Eisenstat had a small barbecue at his home for

Sculley, Gassée, and their wives. When Gassée told Eisenstat what Jobs was plotting, he

recommended that Gassée inform Sculley. “Steve was trying to raise a cabal and have a coup to

get rid of John,” Gassée recalled. “In the den of Al Eisenstat’s house, I put my index finger lightly

on John’s breastbone and said, ‘If you leave tomorrow for China, you could be ousted. Steve’s

plotting to get rid of you.’”

Friday, May 24: Sculley canceled his trip and decided to confront Jobs at the executive staff

meeting on Friday morning. Jobs arrived late, and he saw that his usual seat next to Sculley, who

sat at the head of the table, was taken. He sat instead at the far end. He was dressed in a welltailored

suit and looked energized. Sculley looked pale. He announced that he was dispensing with

the agenda to confront the issue on everyone’s mind. “It’s come to my attention that you’d like to

throw me out of the company,” he said, looking directly at Jobs. “I’d like to ask you if that’s true.”

Jobs was not expecting this. But he was never shy about indulging in brutal honesty. His eyes

narrowed, and he fixed Sculley with his unblinking stare. “I think you’re bad for Apple, and I

think you’re the wrong person to run the company,” he replied, coldly and slowly. “You really

should leave this company. You don’t know how to operate and never have.” He accused Sculley

of not understanding the product development process, and then he added a self-centered swipe: “I

wanted you here to help me grow, and you’ve been ineffective in helping me.”

As the rest of the room sat frozen, Sculley finally lost his temper. A childhood stutter that had

not afflicted him for twenty years started

to return. “I don’t trust you, and I won’t tolerate a lack of trust,” he stammered. When Jobs

claimed that he would be better than Sculley at running the company, Sculley took a gamble. He

decided to poll the room on that question. “He pulled off this clever maneuver,” Jobs recalled, still

smarting thirty-five years later. “It was at the executive committee meeting, and he said, ‘It’s me

or Steve, who do you vote for?’ He set the whole thing up so that you’d kind of have to be an idiot

to vote for me.”

Suddenly the frozen onlookers began to squirm. Del Yocam had to go first. He said he loved

Jobs, wanted him to continue to play some role in the company, but he worked up the nerve to

conclude, with Jobs staring at him, that he “respected” Sculley and would support him to run the

company. Eisenstat faced Jobs directly and said much the same thing: He liked Jobs but was

supporting Sculley. Regis McKenna, who sat in on senior staff meetings as an outside consultant,

was more direct. He looked at Jobs and told him he was not yet ready to run the company,

something he had told him before. Others sided with Sculley as well. For Bill Campbell, it was

particularly tough. He was fond of Jobs and didn’t particularly like Sculley. His voice quavered a

bit as he told Jobs he had decided to support Sculley, and he urged the two of them to work it out

and find some role for Jobs to play in the company. “You can’t let Steve leave this company,” he

told Sculley.

Jobs looked shattered. “I guess I know where things stand,” he said, and bolted out of the room.

No one followed.

He went back to his office, gathered his longtime loyalists on the Macintosh staff, and started to

cry. He would have to leave Apple, he said. As he started to walk out the door, Debi Coleman

restrained him. She and the others urged him to settle down and not do anything hasty. He should

take the weekend to regroup. Perhaps there was a way to prevent the company from being torn

apart.

Sculley was devastated by his victory. Like a wounded warrior, he retreated to Eisenstat’s

office and asked the corporate counsel to go for a ride. When they got into Eisenstat’s Porsche,

Sculley lamented, “I don’t know whether I can go through with this.” When Eisenstat asked what

he meant, Sculley responded, “I think I’m going to resign.”

“You can’t,” Eisenstat protested. “Apple will fall apart.”

“I’m going to resign,” Sculley declared. “I don’t think I’m right for the company.”

“I think you’re copping out,” Eisenstat replied. “You’ve got to stand up to him.” Then he drove

Sculley home.

Sculley’s wife was surprised to see him back in the middle of the day. “I’ve failed,” he said to

her forlornly. She was a volatile woman who had never liked Jobs or appreciated her husband’s

infatuation with him. So when she heard what had happened, she jumped into her car and sped

over to Jobs’s office. Informed that he had gone to the Good Earth restaurant, she marched over

there and confronted him in the parking lot as he was coming out with loyalists on his Macintosh

team.

“Steve, can I talk to you?” she said. His jaw dropped. “Do you have any idea what a privilege it

has been even to know someone as fine as John Sculley?” she demanded. He averted his gaze.

“Can’t you look me in the eyes when I’m talking to you?” she asked. But when Jobs did so—

giving her his practiced, unblinking stare—she recoiled. “Never mind, don’t look at me,” she said.

“When I look into most people’s eyes, I see a soul. When I look into your eyes, I see a bottomless

pit, an empty hole, a dead zone.” Then she walked away.

Saturday, May 25: Mike Murray drove to Jobs’s house in Woodside to offer some advice: He

should consider accepting the role of being a new product visionary, starting AppleLabs, and

getting away from headquarters. Jobs seemed willing to consider it. But first he would have to

restore peace with Sculley. So he picked up the telephone and surprised Sculley with an olive

branch. Could they meet the following afternoon, Jobs asked, and take a walk together in the hills

above Stanford University. They had walked there in the past, in happier times, and maybe on

such a walk they could work things out.

Jobs did not know that Sculley had told Eisenstat he wanted to quit, but by then it didn’t matter.

Overnight, he had changed his mind and decided to stay. Despite the blowup the day before, he

was still eager for Jobs to like him. So he agreed to meet the next afternoon.

If Jobs was prepping for conciliation, it didn’t show in the choice of movie he wanted to see

with Murray that night. He picked Patton, the epic of the never-surrender general. But he had lent

his copy of

the tape to his father, who had once ferried troops for the general, so he drove to his childhood

home with Murray to retrieve it. His parents weren’t there, and he didn’t have a key. They walked

around the back, checked for unlocked doors or windows, and finally gave up. The video store

didn’t have a copy of Patton in stock, so in the end he had to settle for watching the 1983 film

adaptation of Harold Pinter’s Betrayal.

Sunday, May 26: As planned, Jobs and Sculley met in back of the Stanford campus on Sunday

afternoon and walked for several hours amid the rolling hills and horse pastures. Jobs reiterated

his plea that he should have an operational role at Apple. This time Sculley stood firm. It won’t

work, he kept saying. Sculley urged him to take the role of being a product visionary with a lab of

his own, but Jobs rejected this as making him into a mere “figurehead.” Defying all connection to

reality, he countered with the proposal that Sculley give up control of the entire company to him.

“Why don’t you become chairman and I’ll become president and chief executive officer?” he

suggested. Sculley was struck by how earnest he seemed.

“Steve, that doesn’t make any sense,” Sculley replied. Jobs then proposed that they split the

duties of running the company, with him handling the product side and Sculley handling

marketing and business. But the board had not only emboldened Sculley, it had ordered him to

bring Jobs to heel. “One person has got to run the company,” he replied. “I’ve got the support and

you don’t.”

On his way home, Jobs stopped at Mike Markkula’s house. He wasn’t there, so Jobs left a

message asking him to come to dinner the following evening. He would also invite the core of

loyalists from his Macintosh team. He hoped that they could persuade Markkula of the folly of

siding with Sculley.

Monday, May 27: Memorial Day was sunny and warm. The Macintosh team loyalists—Debi

Coleman, Mike Murray, Susan Barnes, and Bob Belleville—got to Jobs’s Woodside home an hour

before the scheduled dinner so they could plot strategy. Sitting on the patio as the sun set,

Coleman told Jobs that he should accept Sculley’s offer to be a product

visionary and help start up AppleLabs. Of all the inner circle, Coleman was the most willing to be

realistic. In the new organization plan, Sculley had tapped her to run the manufacturing division

because he knew that her loyalty was to Apple and not just to Jobs. Some of the others were more

hawkish. They wanted to urge Markkula to support a reorganization plan that put Jobs in charge.

When Markkula showed up, he agreed to listen with one proviso: Jobs had to keep quiet. “I

seriously wanted to hear the thoughts of the Macintosh team, not watch Jobs enlist them in a

rebellion,” he recalled. As it turned cooler, they went inside the sparsely furnished mansion and

sat by a fireplace. Instead of letting it turn into a gripe session, Markkula made them focus on very

specific management issues, such as what had caused the problem in producing the FileServer

software and why the Macintosh distribution system had not responded well to the change in

demand. When they were finished, Markkula bluntly declined to back Jobs. “I said I wouldn’t

support his plan, and that was the end of that,” Markkula recalled. “Sculley was the boss. They

were mad and emotional and putting together a revolt, but that’s not how you do things.”

Tuesday, May 28: His ire stoked by hearing from Markkula that Jobs had spent the previous

evening trying to subvert him, Sculley walked over to Jobs’s office on Tuesday morning. He had

talked to the board, he said, and he had its support. He wanted Jobs out. Then he drove to

Markkula’s house, where he gave a presentation of his reorganization plans. Markkula asked

detailed questions, and at the end he gave Sculley his blessing. When he got back to his office,

Sculley called the other members of the board, just to make sure he still had their backing. He did.

At that point he called Jobs to make sure he understood. The board had given final approval of

his reorganization plan, which would proceed that week. Gassée would take over control of Jobs’s

beloved Macintosh as well as other products, and there was no other division for Jobs to run.

Sculley was still somewhat conciliatory. He told Jobs that he could stay on with the title of board

chairman and be a

product visionary with no operational duties. But by this point, even the idea of starting a

skunkworks such as AppleLabs was no longer on the table.

It finally sank in. Jobs realized there was no appeal, no way to warp the reality. He broke down

in tears and started making phone calls—to Bill Campbell, Jay Elliot, Mike Murray, and others.

Murray’s wife, Joyce, was on an overseas call when Jobs phoned, and the operator broke in saying

it was an emergency. It better be important, she told the operator. “It is,” she heard Jobs say.

When her husband got on the phone, Jobs was crying. “It’s over,” he said. Then he hung up.

Murray was worried that Jobs was so despondent he might do something rash, so he called

back. There was no answer, so he drove to Woodside. No one came to the door when he knocked,

so he went around back and climbed up some exterior steps and looked in the bedroom. Jobs was

lying there on a mattress in his unfurnished room. He let Murray in and they talked until almost

dawn.

Wednesday, May 29: Jobs finally got hold of a tape of Patton, which he watched Wednesday

evening, but Murray prevented him from getting stoked up for another battle. Instead he urged

Jobs to come in on Friday for Sculley’s announcement of the reorganization plan. There was no

option left other than to play the good soldier rather than the renegade commander.

Date: 2015-12-17; view: 632