Episode 23 NeXT (Live show at the GeekWire Summit)

In episode 23 of the Acquired podcast, hosts Ben Gilbert and David Rosenthal, alongside fellow speakers, delve into the pivotal 1997 acquisition of NeXT by Apple. The discussion highlights NeXT's evolution from a hardware company with its revolutionary but commercially unsuccessful NeXT Computer to a software-focused firm, ultimately leading to the creation of the influential NeXTSTEP operating system. The episode underscores the significance of NeXT's technology and its role in the development of the World Wide Web, as well as the visionary leadership of Steve Jobs. Jobs's return to Apple, catalyzed by the acquisition, is portrayed as a transformative moment, setting the stage for Apple's future successes with products like the iPod, iPhone, and Mac OS X, all of which were built upon the technological foundation laid by NeXT. The conversation also touches on the broader impact of the acquisition on Apple's corporate culture, development practices, and product strategy, solidifying it as one of the most consequential tech acquisitions in history.

• Pilot is a long-time partner and sponsor for the Acquired podcast.
• Pilot provides accounting, tax, and bookkeeping services for startups and growth companies.
• It is the largest startup-focused accounting firm in the US.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs and in fact now is the largest startup focused accounting firm in the US."

This quote emphasizes Pilot's comprehensive services for companies and its status as a leading accounting firm in the startup sector.

• Pilot started as a startup and has grown into a billion-dollar company.
• It is backed by notable investors including Sequoia, Index, Stripe, and Jeff Bezos.

"Which is wild because when we started working with them way back when they were just a startup themselves, and now they're a billion dollar plus company backed by Sequoia, index, Stripe, and even Jeff Bezos himself."

This quote reflects on the significant growth of Pilot from its early days to becoming a major player with high-profile backers.

• Jeff Bezos' axiom encourages startups to focus on core product and customer-related activities.
• Accounting is an essential service that does not directly impact product or customers, thus is a prime candidate for outsourcing.

"Every company needs it. It needs to be done by a professional. You don't want to take any risk of anything going wrong, but at the same time, it has zero impact on your product or customers, things you do uniquely well."

The quote explains the rationale for outsourcing accounting services, as it is necessary but does not enhance the product or customer experience.

• Pilot offers a full suite of financial services, including CFO services and investor reporting.
• They cater to thousands of startups, including notable ones like OpenAI, airtable, and scale.

"Pilot takes care of all that. And they've been doing this now for years across thousands of startups in Silicon Valley and beyond. And there's nobody better who you can trust to both get your finance right and make it easy and painless for you and your company."

This quote highlights Pilot's extensive experience and the trust it has built with startups in managing their finances effectively.

• Pilot offers a promotional discount to Acquired listeners.
• The promotion includes 20% off the first six months of service.

"And thanks to our friends, the pilot co founders, all acquired listeners, if you use that link, you will get 20% off your first six months of service."

The quote promotes a special offer for listeners of the Acquired podcast, incentivizing them to try out Pilot's services.

• Episode 23 of Acquired covers Apple's 1997 acquisition of NeXT.
• The episode is part of a series that originally focused on successful technology acquisitions.

"On today's episode, we will be covering a cornerstone of technology today, Apple's 1997 acquisition of next."

This quote introduces the main topic of the podcast episode, indicating its significance in the technology industry.

• The acquisition of NeXT is a key moment in Apple's history.
• It represents the return of Steve Jobs to Apple and the company's subsequent rise to become the most valuable company in the world.

"So, yeah, I think this is one that we've been talking about doing for a very long time. The original tagline of our show was technology acquisitions. That actually went well and kind of, we've deviated from that a little bit and we've gotten into talking about all sorts of acquisitions, recent ones, ones we think didn't go well. But this one is super, super true to our roots."

The quote contextualizes the episode within the broader theme of the podcast and underscores the importance of the NeXT acquisition to Apple's success.

• In 1984, Apple was a PC company without a presence in the workstation market.
• Workstations were powerful single-user computers used primarily for research and technical work.
• Steve Jobs was tasked with developing Apple's entry into the workstation market.

"Apple's a public company, very valuable, but computing has entered a new wave, and we're in the era of the workstation at this point."

This quote sets the stage for the challenges Apple faced in expanding into the workstation market during the mid-1980s.

• Steve Jobs was sidelined at Apple and eventually resigned to start a new company.
• Jobs took several key employees with him, leading to a lawsuit from Apple.

"Steve isn't doing too good a job, and Scully and the board are starting to lose faith in him."

The quote explains the circumstances leading to Steve Jobs' departure from Apple, highlighting the loss of confidence from Apple's leadership.

• Steve Jobs founded NeXT with a focus on creating powerful, affordable computers for education.
• Jobs invested his own money and paid for high-quality branding and office space.
• NeXT aimed to be a community with transparent salaries and management practices.

"He decides to resign from Apple and start a new company to pursue this vision of finally getting the workstation affordable and merging it with a personal computer."

The quote details Steve Jobs' motivation for leaving Apple and starting NeXT, emphasizing his vision for accessible high-performance computing.

• Ross Perot was a technology entrepreneur with two successful companies acquired by GM and Dell.
• He invested $20 million into NeXT at a valuation of $125 million in 1986.
• NeXT was pre-product at this time, with only a brand book and an expensive logo.

"Ross, actually, some people know this, but not all. He's actually a technology entrepreneur himself. He'd founded two technology companies that were acquired, one by GM and one by Dell eventually. And so he invests $20 million in next at $125,000,000 valuation."

This quote explains Ross Perot's background as a successful entrepreneur and his significant investment in NeXT, showing his confidence in the company despite its early stage.

• NeXT aimed to build a high-quality computer, renting a factory with a capacity of 150,000 machines per year.
• The planned launch price was initially set at $3,000, which was delayed and eventually increased.
• NeXT experienced significant delays and went dark before re-emerging for a product launch in late 1988.

"So they start getting to figure out what they're going to do. And so obviously, the plan is they're just going to build the Big Mac that jobs is working on at Apple."

This quote outlines NeXT's initial strategy to build a computer similar to what Steve Jobs had been working on at Apple, indicating the company's direction and ambition.

• The NeXT introduction event was a gala affair with a violinist playing a duet with the NeXT computer.
• The event echoed future Apple keynotes, with high production value and attention to detail.
• Notably, no one from Apple was invited to the 3,000-person event.

"And it's pretty incredible. So they have a violinist. One of the key features of the next machine, which, by the way, is a 1ft cube of all black magnesium."

The quote describes the NeXT computer's aesthetic and one of its key features demonstrated at the launch event, highlighting the company's focus on design and multimedia capabilities.

• The NeXT computer featured a 25 MHz Motorola 68030 CPU, 8-64 MB of RAM, and a 17-inch megapixel grayscale display.
• It was one of the first networked computers, designed to be built for networking from the ground up.
• The computer had a 256 MB magneto-optical drive, which later proved to be a design flaw and was revised.

"The Internet doesn't exist. In fact, the Internet gets invented on this computer, which we'll come to in a second."

This quote emphasizes the innovative nature of the NeXT computer, which was ahead of its time in terms of networking capabilities, even before the widespread adoption of the Internet.

• NeXT's operating system, NeXTSTEP, was considered years ahead of its time.
• The company pioneered object-oriented programming with Objective-C, which became the foundation for modern software development.
• Notable software innovations from NeXT include the creation of the World Wide Web and influential video games like Doom.

"The software and the operating system that they created next over these couple of years is just incredible."

This quote highlights the significant advancements made by NeXT in software and operating system development, which had a lasting impact on the tech industry.

• NeXT eventually pivoted from hardware to software after realizing the difficulty in selling their expensive computers.
• They sold only 50,000 units and decided to market their operating system, NeXTSTEP, to other manufacturers.
• NeXT's technologies, such as WebObjects, became foundational for e-commerce and are still in use in various forms.

"So next decides, okay, we're going to be a software company."

The quote signifies NeXT's strategic shift to focus on software, acknowledging the challenges faced in the hardware market and capitalizing on their software strengths.

• Apple was struggling to develop a modern operating system and was being outperformed by Windows in the market.
• After failed attempts to innovate internally, Apple looked to acquire a company with a modern operating system.
• In December 1996, Apple acquired NeXT for $429 million and 1.5 million shares of Apple stock went to Steve Jobs.

"Just before Christmas 1996, they buy next Steve Job for $429,000,000 that go to next shareholders, including Ross Perot, and separately, one and a half million shares of Apple stock that go to Steve Jobs."

This quote marks the culmination of NeXT's journey, with Apple's acquisition of the company, bringing Steve Jobs back into the fold and setting the stage for future Apple innovations.

• NeXT raised funds from various sources including Steve Jobs, Ross Perot, and Canon.
• The company was sold for more than the amount raised, but it was not a highly profitable exit.
• Steve Jobs received 1.5 million shares of Apple stock and joined as a consultant to aid in the company's transition.

"So they got sold for more money than they raised, but not that much more money. This was not a home run exit. Nobody was getting rich off NeXT."

The quote indicates that the financial return from the sale of NeXT to Apple was modest and not a significant windfall for investors or stakeholders.

• Steve Jobs' presence at Apple as a consultant was starkly different from then-CEO Gil Amelio's.
• Jobs' ability to captivate audiences and articulate a clear vision for Apple's future was evident in his appearances.
• Following the acquisition, Jobs quickly positioned himself as a leader and was instrumental in Gil Amelio's dismissal.
• Jobs became the interim CEO, a role he held for three years, during which he overhauled Apple's strategy and product line.

"Steve convinces the board of Apple that Gil has no idea what he's doing and he needs to go. And the next week, apple fire the board, fires Gil."

This quote highlights Steve Jobs' influence in reshaping Apple's leadership by convincing the board to dismiss CEO Gil Amelio.

• NeXT's technology significantly influenced Apple's future products, including OS X, iPhone, iPad, and Apple Watch.
• The acquisition allowed Apple to leverage NeXT's cross-platform development environments.
• Steve Jobs showcased NeXT's development tools which became foundational for Apple's software ecosystem.
• The transition from NeXT's technology to Apple's took five years, resulting in the launch of OS X.

"It's amazing how many pieces of NeXT you can find in your iPhone."

The quote emphasizes the extensive influence of NeXT's technology on Apple's product ecosystem, extending to modern devices like the iPhone.

• Statsig is presented as a sponsor for the podcast episode.
• The company provides a feature management and experimentation platform for product teams.
• Statsig's tools allow for the measurement of the impact of new features on core business metrics.
• Notable customers of Statsig include Notion, Brex, OpenAI, Flipkart, Figma, Microsoft, and Cruise Automation.

"Statsig is a feature management and experimentation platform that helps product teams ship faster, automate A/B testing, and see the impact every feature is having on the core business metrics."

This quote describes the function and value proposition of Statsig, highlighting its role in helping product teams make data-driven decisions.

• The acquisition of NeXT by Apple is categorized as a people acquisition, specifically for Steve Jobs.
• The discussion includes the potential alternative acquisition of Be Inc. and its operating system, which did not materialize.
• The acquisition is seen as a strategic move to bring Steve Jobs back to Apple, rather than solely for NeXT's technology.

"Reasons we acquired NeXT. So, I mean, yes, we're still using NeXT technologies today. Yes. They were incredibly forward-thinking, but the company needed Steve back."

The quote reinforces the notion that the primary motivation behind the acquisition was to reinstate Steve Jobs at Apple, rather than just acquiring NeXT's technology.

• The case exemplifies the importance of leadership, with Steve Jobs being a tenfold influential figure.
• Jobs' return to Apple demonstrates the unique impact a founder can have on their company.
• Convincing developers to adopt a new platform is challenging, and Steve Jobs' authentic appeal to Mac developers was crucial for Apple's success.

"It's really hard to win over a developer ecosystem [...] Steve managed to really make the plea in a very authentic way and say, hey, everyone who's a Mac developer, why don't you come?"

This quote underlines the difficulty of attracting developers to a new platform and Steve Jobs' effectiveness in persuading Mac developers to support Apple's new direction.

• Founders play a crucial role in driving the growth of technology platforms.
• Once a platform reaches a tipping point, network effects can sustain its growth.
• These network effects provide significant bargaining power.

"Right. But to me it's like the power of a founder there. And then once you have a tipping point in the network effects that come from building an ecosystem on a platform, that you can kind of just keep rolling with that and the big bargaining chip that affords you."

This quote highlights the influence founders have in creating successful platforms and the momentum gained after reaching critical mass due to network effects.

• Iteration is a key concept in technology, building upon previous advancements.
• The history and technical foundations are crucial for modern tech developments.
• Originality in tech is often about creating products that work well and delight users, rather than being the first to invent a technology.

"There's this concept of iteration. Not just iteration, but you're kind of standing on the shoulders of giants and a lot of the history and facts."

The quote emphasizes the importance of building on past technological achievements to innovate and create new products.

• Technical complexity alone does not guarantee market success.
• Founders need to demonstrate that people want and will use their product.
• Successful products often solve a user's need in a delightful way.

"The question I always ask is, what data do you have? What signal do you have that people want this?"

This quote underlines the critical nature of having evidence that a product meets a market need, which is a key factor in the success of technology startups.

• Translating research into mass-market products is challenging.
• Companies like Microsoft and Apple have struggled and succeeded in different ways to integrate research into products.
• Apple, under Steve Jobs, focused on incorporating technology into products with a clear vision.

"It's a famously difficult task to take hard, complicated problems that are solved in sort of research lab like environments and get those into a mass market product."

The quote discusses the difficulty of converting advanced research into commercially viable products, a task that requires a strategic approach.

• The ability to turn potential technologies into successful products is rare and valuable.
• Steve Jobs excelled at transforming technology into products that met user needs and were easy to use.

"It's so scarce. And I think that's what for all of Steve's foibles and all his craziness, and he was just so good at."

This quote reflects on Steve Jobs' exceptional talent for creating products that resonated with consumers by effectively utilizing technology.

• The acquisition of NeXT by Apple is considered one of the greatest due to its impact on Apple's success.
• The technology from NeXT is fundamental to Apple's current product lineup.
• Apple's revenue since Steve Jobs' return is attributed to the technologies acquired from NeXT.

"Apple does like $250,000,000,000 a year in revenue now and probably would have gone out of business, number one, if this acquisition didn't happen."

This quote evaluates the enormous financial and strategic success of Apple's acquisition of NeXT, emphasizing its importance in Apple's history.

• Gil Amelio's acquisition of NeXT is seen as the greatest, despite not being strategically crafted by him.
• The acquisition led to a significant increase in Apple's revenue, demonstrating its profound impact.

"It's better to be lucky than good. Gil Emilio completed the single greatest acquisition of all time."

The quote suggests that luck can sometimes play a larger role than strategic planning in successful acquisitions, as illustrated by the NeXT acquisition.

• Slack's development process was driven by solving the team's own needs.
• This approach minimizes ego and focuses on practical solutions.
• The company's history with IRC influenced Slack's development.

"They would encounter these problems with chat when it was like, okay, we should build something to make this chat thing a little better."

The quote describes Slack's iterative development process, which was based on addressing immediate challenges faced by the development team.

• DJI runs a robot wars competition to identify and hire top talent.
• Their hiring strategy has led to a strong team working on advanced robotics and machine vision.
• The company's vision extends beyond drones to other robotics applications.

"DJI now has over a thousand phds working on computer vision and machine understanding."

This quote reveals DJI's strategic approach to hiring and its focus on cutting-edge technologies in robotics, which are integral to their product innovation.

• Crusoe provides a clean compute cloud for AI workloads.
• They partner with Nvidia and run on wasted, stranded, or clean energy.
• Crusoe's approach offers cost and performance benefits for AI applications.

"Because Crusoe's cloud is purpose built for AI and run on wasted, stranded, or clean energy, they can provide significantly better performance per dollar than traditional cloud providers."

The quote explains Crusoe's unique selling point, which is providing cost-effective and environmentally friendly AI compute solutions by utilizing otherwise wasted energy sources.