How Apple Got Its Groove Back
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Fortunately, is one of the half a dozen best brands in the whole world. Right up there with Nike, Disney, Coke, Sony. It is one of the greats of the greats. Not just in this country, but all around the globe. This is Steve Jobs in 1997, talking about the company he co-founded more than 20 years earlier. The thing is, Steve Jobs is doing some wish casting here.

Because in 1997, Apple is not a globally admired brand. It's a failing company on the verge of bankruptcy. Jobs has just returned to Apple after more than a decade in exile. He's in a small auditorium talking to a smattering of Apple employees. He needs to convince them and then the rest of the world that Apple has a path back to relevance. He doesn't have a new device to make that a reality yet. So instead, he has to talk about an idea. And that idea is Apple.

The Apple brand has clearly suffered from neglect in the last few years and we need to bring it back. The way to do that is not to talk about speeds and feeds. It's not to talk about why we're better than Windows. One of the greatest jobs of marketing the universe has ever seen is Nike. Remember, Nike sells a commodity. They sell shoes. And yet when you think of Nike, you feel something different than a shoe company. In their ads, as you know, they don't ever talk about the products.

— So Jobs unveils Apple's version of a Nike campaign. He's going to promote a brand instead of a product, a feeling, a mindset. — Here's to the crazy ones, the misfits, the rebels.

This is the now famous ad that flashes briefly on black and white images of world changing icons. Einstein, Picasso, Gandhi, John Lennon, Martin Luther King Jr. They thought differently about the world, the ad tells us, and you will too if you buy stuff from Apple. Because, the ad says at the end, you also think different. They're not fond of rules and they have no respect for the status quo.

There's no way Apple could run this ad today, not just because of the grief it'd get from aligning itself with martyred civil rights leaders. It's because there's no way Apple could plausibly argue that buying something from Apple means you are thinking different.

Now, when you buy from Apple, you're just like everyone else in the coffee shop with your MacBook and AirPods and your Apple Watch and, of course, your iPhone. Everyone has an iPhone. Which is why Apple is the most valuable company in the world, more than Google, Amazon, or Microsoft. Why regulators around the world are openly discussing ways to limit Apple's power. Apple isn't the outsider trying to change the world anymore. It won. It's the establishment. ♪

I'm Peter Kafka, and this is Land of the Giants, the Apple revolution. Today, the story of how Apple became the world's most important computer company by moving away from computers. Apple's been around a long time, about 45 years. It's twice as old as Google, Netflix, and Facebook. Long enough to lead a personal computer revolution. And long enough to watch the spoils of that revolution go to its biggest rival, Microsoft.

That speech from Steve Jobs in 1997, that's Apple's midlife crisis at the company's low point. It would also be the start of how Apple got its groove back, by building devices no one had ever seen before. Devices that would transform Apple from an underdog to the company that dominates the way we think about consumer electronics today. The Apple story started in Northern California in the early 1970s with a bunch of earnest nerds with wild hair who loved computers. Guys who wanted to figure out how to build their own computers.

Got involved with computers when I was like 13 years old and I wanted to have my own computer. But computers in those days were the size of a refrigerator and cost as much as a small house. I heard about this group that met up at the Stanford Linear Accelerator called Homebrew Computer Club. Randy Wiginton grew up in Cupertino, California. He started getting rides to the homebrew meetings from an older guy who lived down the street, Steve Wozniak.

They'd link up with a few dozen other guys, all guys, who were all enthralled with computers. It was a pretty large auditorium, probably held 200, 250, something like that. And it was usually about, I'd say probably about a third full. And it was all very, very nerdy people. A lot of people that were counterculture, you know, people who are really smart, wanted to learn, wanted to help others.

Back then, computers were an abstract concept for most people because most people never got close to one. In pop culture, like the film 2001 A Space Odyssey, they were unseen, all-knowing, and sometimes murderous. Open the pod bay doors, Hal. I'm sorry, Dave. I'm afraid I can't do that.

In real life, they were big, bulky cabinets, intimidating things that almost no one used except in universities or research labs. And the people who did use computers didn't have their own computers at home. And they definitely didn't have personal relationships with their computers. They were so rare they had to be shared. But the homebrew guys thought computers should be something anyone could use and that anyone could build.

One of those guys was Steve Wozniak. Back in the early 70s, Wozniak was an engineer at Hewlett-Packard, one of the original Silicon Valley giants. On the side, he dreamt up a plan to build his own PC. I gave away my schematic so that everybody in our club could build their own computer. Unfortunately, a lot of people aren't skilled at building things and soldering wires. One of the other guys at Homebrew was his friend Steve Jobs, who saw dollar signs.

So Steve Jobs came along then and he saw the interest in my design and he said, why don't we start a company and what we'll do is we'll make a PC board for $20 and sell it for $40 to make life easy for the people who want your computer. They call the computer the Apple one. And it was not just the company's first product. It was also a physical manifesto.

Computers don't have to be these intimidating things locked up on college campuses, things you had to wait in line to use. They could be tools you could own, you could have in your house. And once you've got a computer in your house, who knows what you can do? Here's Jobs in 1980 talking about the appeal of this radical new idea, the personal computer. Our whole company, our whole philosophical base is founded on one principle.

And that one principle is that there's something very special and very historically different that takes place when you have one computer and one person. Very different than if you have 10 people on one computer. Unless you're an Apple historian, there is no way you would recognize the Apple one today. It doesn't bear any resemblance to what you think a computer looks like. Journalist Steve Levy was paying attention to the hacking scene in Silicon Valley early on.

It was a circuit board. You know, it wasn't in a case. It didn't have its own keyboard. You had to get a keyboard and connect it. So it's a box or it's not even a box. It's just circuits. It's something you could put in a box, but the actual product is a circuit board. So it's exposed circuitry, basically. Yeah, yeah, yeah. That's the Apple One. And for a certain kind of computer hobbyist, the Apple One was mind-blowing.

Paul Terrell, the then owner of the ByteShop, said he would like to take 50 of these computers.

and I saw dollar signs in front of my eyes. But he had one catch, which was that he wanted them fully assembled and tested ready to go, which is a new twist. So we spent the next five days on the phone at distributors and convinced the electronics parts distributors around here to give us about $10,000 worth of parts on thin air, just on enthusiasm. So we got the parts and we built 100 computers and we sold 50 of them for cash and 29 days paid off to distributors. And that's how we got started.

The Apple I started Apple, but it was really just a proof of concept that Jobs and Wozniak could build a crude computer that guys in Silicon Valley could tinker with. The sequel made Apple a brand, a brand that wanted to bring computers to normal people, people who couldn't build their own computers. This wasn't a circuit board, it was a fully functional device.

It came in its own box with a keyboard. If you squinted, it was like a beautiful typewriter. The Apple II design was pure genius. I still to this day, that was 40 some years ago. I can't think of a product so packed with innovation, using crazy tricks everywhere to give great features at a low price to the user.

Andy Hertzfeld was a grad student at UC Berkeley when the Apple II debuted in 1977. He fell in love with the machine. He started writing software for it. That software caught Jobs' eye and eventually led to a job offer at Apple. With the Apple II, Hertzfeld knew the circuitry and programming that powered the device were something special. He also understood that Apple had done something amazing with the way the machine looked and felt. It looked and felt like you didn't have to be a computer scientist to use it.

Steve insisted on an injection molded plastic case that was beautifully designed. And that really made the Apple II, you know, change the customer's feeling about the Apple II. It was almost like an art object. The customer, even if they can't sense that outright, they sense it subconsciously. You know, the people who built this really, really cared about making it great. There was another company that helped make the Apple II great.

It was an up and coming business that helped build the operating system that ran the Apple II. The company was called Microsoft. At the time, it didn't seem weird that Microsoft and Apple would collaborate. Microsoft made software that ran on other people's computers. Apple made computers.

The business models were complementary, and the philosophies of the founders were too. Microsoft founders Bill Gates and Paul Allen spoke the same language as Jobs and Woz. They all envisioned a future where everybody had a computer. Steve and Bill are the same age, both born in 1955. They both shared the faith that personal computers would change the world.

The Apple II was not that computer, but it was a breakthrough product that attracted a legion of devoted fans. Computer fans, but not regular people.

Steve Levy again. People bought it and then figured out what to do with it, right? People who had a tinkering gene in them or maybe just wanted to know what was going on with this stuff. So they would say, maybe I'll write a program for biometrics or something like that or to compute earn-run average. They would think of things to do in BASIC to do it.

Those tinkerers were the core buyers for a product that would go on to sell 6 million units. The Apple II powered the company for years, and it launched Apple and Jobs and Wozniak into tech stardom.

Here's Jobs prepping for an appearance on ABC's Nightline in 1981. This is back when going on national TV was a very big deal. Jobs is a confident guy, but even he's a bit overwhelmed by the moment. God, look at that. Look, I'm on television. Hey. Hey. Isn't that amazing? Yeah, it is. TV in New York, too. Yeah. They're watching you right now. Yeah, they got you in New York. God. You need to tell me where the restroom is, too, because I'm deathly ill, actually, and ready to throw up at any moment. Try to cross the hall. Great.

I'm not joking. You know, we had never had that before, where a company with two young co-founders took it from a garage to an IPO within a few years. That was almost unheard of. And the idea that Jobs and Woz were each worth over $100 million, that was crazy. People did not accumulate $100 million within a few years back then. But Jobs didn't just want to be rich and famous. He had even grander ambitions.

He wanted to get PCs in front of everyone, not just people who were into PCs. In order to do that, Jobs thought, he needed to make something that changed computing. And Apple would end up succeeding at that. But the company would find that building a groundbreaking computer wasn't enough to put Apple on top. Not even close. To make an Apple II, or any other computer at the time, do anything, you had to type commands on a keyboard. You couldn't just turn it on and use it.

Jobs imagined a computer that showed you an interface, a metaphor really, that was supposed to remind you of a desk, a workspace, a filing cabinet, a trash can. Simple stuff he'd recognized, not code. These are big ideas. Jobs didn't think of them first. He took them, unabashedly, from Xerox, the copier company.

The company had a lab called Xerox PARC in Silicon Valley. Some people there understood what we were talking about, how these personal computers could be the future. Tech journalist Steven Levy. There was a mode by which some people believe computers would work in the future. Windows on the screen and icons and text and pictures, as opposed to, you know, kind of like alphanumeric characters that popped up on the screen.

So during the 70s, as Xerox PARC is building a legend among people in the engineering world, you'd go in there and you'd see what they did and you would take your breath away. Jobs went to Xerox PARC and he came away with the idea for a new computer that would leapfrog the Apple II. It would make personal computers truly personal and widely used. He called it the Lisa after his daughter, and it launched in 1983. It cost $10,000.

That's the same price as a new car back then. It failed completely. And it's easy to understand why. You can't start a personal computer revolution with a computer that costs as much as a new car. Everyone understands why cars are useful. PCs? No, not yet. Not at that price. So Jobs looks around Apple for something else to occupy his time. There's this other project going on called Macintosh. Jobs looked at that and said, well, actually, I want to take over that project.

And, you know, he wanted to get the best people at Apple. He went to Andy Hertzfeld's desk. He hardly knew Hertzfeld at that point, but he said, you're working for Macintosh. Get your stuff.

Steve came by my cubicle. This was on a Thursday afternoon, late on a Thursday afternoon. I said, okay, I'll start Monday. Just give me half a day to document the work I've been doing so someone else can pick it up. And he goes, no, you know, the Macintosh is the future of Apple. You're going to start on it now. And he grabbed my Apple II off my desk and started walking away with it. What could I do but follow my computer? Yeah.

The Macintosh would use the same core idea as the Lisa, a user interface that relies on graphics, not code. But it would be scaled down and cheaper.

Jobs also knew it wouldn't be enough to build an innovative box. If he wanted people to buy it, he'd need to make sure there was software people could use. The Apple II used some of Microsoft's software, and Jobs reached out to Microsoft this time, too. He didn't want the company to make the Mac's operating system. Apple was building that on its own. But he did want it to make stuff like spreadsheet software, word processing. Microsoft was the first Macintosh developer to

There was a partnership relationship from the very beginning of both companies. We needed to recruit the right partners that had both the technical skill and the vision to want to write software for the Macintosh. So Microsoft was the very first company we recruited. But Hertzfeld thought Microsoft wasn't just going to be a partner. He thought Bill Gates was going to be a competitor, too.

So I picked up on this idea that, hey, maybe Microsoft was, besides writing applications, they were going to make their own version of the Macintosh. Seemed pretty obvious to me. One of the guys on Microsoft's Mac team was asking a lot of questions about the guts of the Mac, stuff he probably didn't need to know to make software for the Mac. Yeah, I told Steve about it. He kind of laughed it off at first. He thought Microsoft didn't have the skill to be able to do that.

Jobs was half right. Microsoft didn't create its own Macintosh. Instead, it created new software that turned other people's computers into sort of Macintoshes. And he used that same idea for a graphics-based interface. Gates, it turned out, had seen what Xerox PARC was doing, too. He unveiled his plan a few months before the Macintosh debuted. In, uh...

November of 1983, they announced their first version of Windows. Steve freaked out. He goes, get Gates down here right now.

And I was thinking, how are you going to do that? But like in a matter of hours, Bill Gates was there. Steve just screamed at him. But to Bill's credit, he just listened to Steve scream and finally responded with a fairly famous response about where Steve said, you're ripping us off. You're ripping us off. And Bill said something, well, that's not how I think about it. It's more like

We both had a rich neighbor named Xerox, and you went in to steal the television set and found out it was already stolen. And they have a long-running sort of frenemy relationship that goes on until Steve Jobs dies. A frenemy is probably a pretty good word to describe it. This was a key moment in a love-hate relationship that would stretch on for decades. But at this moment, they were both trying to reach the same goal, accessible computers for everyone.

And so many people were up for grabs. This was a race to define and dominate a new market, to become the PC brand. Gates was going to do it using his software that ran on other people's machines. And Jobs was merging the software and hardware into one product. And he got to show his off first. Today we celebrate the first glorious anniversary of the information purification movement.

The Macintosh debut ad may be the most famous TV ad ever. Definitely the most famous TV ad to run a single time on national TV during the 1984 Super Bowl. Ridley Scott, the guy who made Alien and Blade Runner, directed it. It's a riff on George Orwell's 1984. And there's a bunch of prisoners or something in this gray dystopia. And they are saved by a lady in orange shorts who throws a hammer into a screen.

On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like 1984. We weren't just designing a computer, we were saving mankind. We were enhancing the future of humanity. And so some of that, you know, you roll your eyes a little bit, but enthusiasm is contagious.

With that commercial, Jobs told the world he was going to unveil something world-changing. One problem: at the time, he hadn't actually finished this world-changing device. He needed Hertzfeld and a small team working around the clock, fueled by the idea they were making something great. It was a monumental effort to finish the Macintosh system software.

All of the software engineers, about a dozen of us, were up like 48 hours with no sleep. We barely succeeded. We were exhausted lying around on the floor, you know, the next day in a happy haze,

You know, hey, we did it. We're finally done. When Steve walks into the software area saying, get up off the floor, you're not done. I want the Macintosh to be the first computer to announce itself. Jobs wanted Hertzfeld and his exhausted team to teach the Mac to talk. This was an engineering push that took them right up to the wire. And when Jobs took the stage at Apple's shareholders meeting to debut the Mac, Hertzfeld wasn't actually sure it was going to work.

Now, we've done a lot of talking about Macintosh recently. But today, for the first time ever, I'd like to let Macintosh speak for itself. Hello, I am Macintosh. It sure is great to get out of that bag. It worked! The Macintosh could speak. Sort of. And it looked almost cuddly, like it was smiling.

And it was sealed up in a case you couldn't open, unlike other computers which were designed so you could poke around the guts of the machine and modify them. The Mac was for people who didn't know or care about the difference between RAM or ROM or any other computing term. Turn it on and go. It had this great intro. People saw it as the revolution that it was. We started selling them to the colleges by tens of thousands.

But by the fall of 1984, the sales started falling off. By Christmas 1984, the sales were very disappointing. They were maybe a tenth of what Apple had predicted. Macintosh was a marvel, but it was an expensive marvel, not $10,000 like Lisa, but $2,500. And that was a lot, the equivalent of $6,000 in today's dollars. You can't make a computer for the everyman and then price it for really rich people.

They thought they'd sell a million right away and the sales were poor. And that was in part why they eventually forced jobs out of Apple. Steve Levy again. Joanna Hoffman, the marketing manager, would keep going to Steve and saying, this isn't working. And he didn't want to hear it. And indeed, they booted him out in 85.

Steve Jobs helped bring computers to the masses, but not enough masses to keep his job at his own company. Jobs was forced out of Apple and it sputtered.

Apple's products were beloved by the people who loved them, but that wasn't most people. Months after Jobs was kicked out of Apple, Microsoft finally started selling Windows. It was software, not hardware, and it ran on computers other people made. And that combination wasn't nearly as elegant and beautiful and easy to use as a Macintosh. But no-name machines running Windows cost a lot less than Macs. So more people used Windows and more developers made software for Windows, and Bill Gates won the PC war.

Gates became the richest man in the world and the most important person in technology. When Jobs returned to Apple, he knew he had to do something different.

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On September 28th, the Global Citizen Festival will gather thousands of people who took action to end extreme poverty. Watch Post Malone, Doja Cat, Lisa, Jelly Roll, and Raul Alejandro as they take the stage with world leaders and activists to defeat poverty, defend the planet, and demand equity. Download the Global Citizen app to watch live. Learn more at globalcitizen.org.com.

Steve Jobs spent 12 years away from Apple. He spent that time building two other companies. Apple spent that time going nowhere. Jobs came back to a company that needed saving.

Apple was about 90 days from bankruptcy and had just a sliver of the PC market, less than 5%. It had been lapped by Microsoft, which used to be a rival but now dominated personal computers, which was a problem because personal computers were basically the only things Apple sold. But Jobs, on stage in front of a giant screen at the 1997 Macworld Expo, that's a convention for Apple's most hardcore fans, tells the crowd he has a plan to save the day.

It surprises them. And I'd like to announce one of our first partnerships today. Apple has decided to make Internet Explorer its default browser on the Macintosh. Microsoft? Apple fans hate Microsoft. It's part of their identity. And the men who run Apple and Microsoft, they don't like each other either. Jobs thinks Gates is a square who makes third-rate products. And Gates thinks Jobs is a glib salesman who puts aesthetics over tech.

Now, Bill Gates, Jobs' former partner and longtime rival, beams in via satellite. He literally looms over Jobs. He's like a supervillain dressed like Mr. Rogers. And so we're pleased to be supporting Apple. We think Apple makes a huge contribution to the computer industry. Gates and Jobs announced the companies aren't just working together. Microsoft is literally bailing Apple out with

with a $150 million investment. Apple needs this cash and this partnership. Microsoft does not. Apple was in very serious trouble. Jobs retold his story years later at the All Things Digital conference in 2007. He was sitting next to Gates. At this point, they were still wary rivals, but they were able to share a spotlight together. What was really clear was that if the game was a zero-sum game where for Apple to win, Microsoft had to lose, then Apple was going to lose.

And it was clear that you didn't have to play that game because Apple wasn't going to beat Microsoft. And so I called Bill up and we tried to patch things up.

With that cash from Microsoft, Jobs got to work on building Apple's next product. He couldn't rest on past accomplishments he had to build quickly. There's a lot of things that happened that I'm sure I could have done better when I was at Apple the first time. And because you can't look back and say, well, gosh, you know, I wish I hadn't gotten fired. I wish I was there. I wish this. I wish that. It doesn't matter. And so let's go invent tomorrow.

Walt Mossberg started writing about PCs with the Wall Street Journal in the early 90s when Jobs was on his long walkabout. I think he came back because, first of all, who wouldn't have a sentimental attachment to the company they founded that was about to go under or be sold, disappear? And secondly, he was a much more mature guy. He knew much more about running a business. And I think he...

felt confident that he could show all the bastards who had thrown him out. Jobs knew that in order to save Apple, in order to grow, Apple had to think differently. It was going to have to make products everyone wanted, not just diehard Apple fans who put Apple stickers on their cars. He needed to make stuff a lot of people wanted to buy. Everything was bad. I mean, the product stank.

That's John Rubenstein, who came into overhaul Apple's engineering division in 1997. There was no real overall arching strategy, and the product roadmap made no sense. When Jobs came back to Apple, Wozniak was long gone. He'd left Apple shortly after Jobs did. But Jobs found a new collaborator. Johnny Ive, an industrial designer born in London and hired while Jobs was away, had been working on Apple products that never really took off.

Jobs and I've clicked. Their first new product came out in 1998, a year after Jobs had come back. It was another take on the Mac, but it was flat out gorgeous and striking, and it didn't look like the Mac or any other computer. The thing that he did to save the company was he decided to build a desktop computer radically different than any desktop computer that then existed.

The iMac was a sleek, round pod with a translucent blue case, and the price made it even more attractive. It was $1,300. That's about the cost of a machine running Windows. People loved it. For a time, iMacs were the best-selling PC in the country, and Apple began to edge back into the mainstream.

But still, the iMac was just a computer. It didn't do anything that older Macs didn't do. It wasn't functionally different than all the computers that ran Windows. It gave Apple instant mojo, but it didn't place Apple above every other computer company.

Jobs' next product, three years later though, it really was different. It wasn't anything like the Mac or anything else Apple or any other computer company had made. It wasn't a computer. And we are introducing a product today that takes us exactly there. And that product is called iPod. I happen to have one right here in my pocket, in fact. There it is, right there. This amazing little device holds a thousand songs.

Steve Jobs didn't invent the idea of a portable device that plays digital music. There were other companies that did it first, and the gadgets they made were terrible. They were clunky and confusing. Using them was like homework, so no one really used them.

Jobs thought Apple could do better, and he thought if he could make a better music player and connect it exclusively to iTunes, it's a media management program that ran on Macs, it could help him sell more Macs. Windows machines were what everyone had at work, but maybe the Mac could be your multimedia machine at home. In other words, the iPod was only supposed to work with the Mac.

And the iPod would be so attractive that people would be buying more Macs because of it. Tony Fidel was brought in as a consultant to work on Apple's music player project, and then he ended up running it. But remember, at this point, the iPod was just a side project. Apple was a computer company, and Fidel was supposed to build something that wasn't a computer. So even before Apple was ready to sell iPods to consumers, it had to sell the iPod internally.

It was so different than anything Apple had created before, and it was going to suck some resources, especially marketing resources. And so we had to prove ourselves because the company's struggling. Apple, depending on the quarter, was barely breakeven. So we and we had a very, very small team, very small budget and very few resources from Apple on high.

When it debuted in 2001, the original iPod was beautiful and easy to use and easy to understand. You load your digital music and then you go. And suddenly everyone had lots of digital music, either because they were downloading it for free from file sharing services like Napster or because they ripped CDs onto their computers. People who had Macs loved iPods. People with Windows were out of luck. You had to have iTunes to run your iPod and iTunes only worked on Mac. Good for Mac sales, not so good for iPod sales.

It was not a hit when it first came out. Everyone kind of forgets that. John Rubenstein teamed up with Phil Schiller, Apple's top marketing executive, to try to convince Jobs that the iPod could do more than sell Macs. Phil and I got in a huge fight with Steve, and finally he got mad at us and basically said, you guys do whatever you want to do. I don't want any part of it. What was the fight? Oh, well, we wanted to basically move iTunes to the PC.

And what was Steve's objection to that? Because it's not a Mac and we don't do PC software. Why is Steve Jobs so opposed to making something for the PC that would benefit his company? I just think he hated Microsoft. I don't know. But in 2003, Jobs gave in and iTunes launched on Microsoft machines. Jobs would later describe this move as, quote, giving a glass of ice water to somebody in hell.

And that somebody in Jobs' thinking is the poor person who has to use a Windows computer. But Jobs wasn't playing Good Samaritan here. This was pure self-interest and a major shift for him. By making the iPods work with Windows, he was expanding his market from a niche to everyone. He was moving Apple beyond the computer business. Well, it changes it from a computer company to a consumer company. I mean, it's a dramatic, dramatic shift, right? And I mean, it helps sell a lot more computers and

But look, Apple's path was to become a consumer company. And I think the iPod is what took it over that bridge.

iPods took over the market for digital music players almost overnight, and Jobs quickly trained consumers to expect and buy new versions of the iPod every year. Smaller ones, bigger ones with video screens, ones with no screens at all. By 2006, iPods accounted for 40% of Apple's revenue. Apple was now the iPod company that also made computers. Here's iPod project lead Tony Fadell again.

You started to see not just musicians using it, but you started seeing people in the fashion world, people in the sports world. When it got out of the tech world,

or the music world that was targeted for, and it really became this cultural thing, and then there was, you know, jokes about it on "Saturday Night Live." Because by Christmas, the iPod Piceno will be obsolete. Wait, that iPod was only out for, like, five seconds. Five seconds too long. It was too big. Ridiculous. Old. Obsolete. But guess what? I'm very proud to introduce, and I'm thrilled about this, the new iPod InVisa.

Okay, wait a minute, Steve Jobs. I don't even think you're really holding anything. I am. Apple had become a cultural force. Its products were must-have for lots of people. They were affordable for lots of people. And Apple had become a tastemaker. Songs that appeared in Apple ads, and there were a lot of Apple ads, could become overnight hits. One, two, three, take my hand and come with me because you look so fine that I really want to make you mine.

Microsoft, by the way, saw the iPod, yawned and did nothing. Why bother making a competing digital music player when everyone was buying Windows? But eventually, five years later, when the iPod had created and dominated a whole new market for consumer tech,

Microsoft came out with its own version. Unlike Windows, it was not a successful Apple clone. It's called a Zune. It's what everybody's listening to on Earth nowadays. The Zune's only relevance today is a punchline in the Marvel Cinematic Universe. The iPod's success remade Apple. In 2007, the company dropped the word computer from its name. It's just Apple Inc. now. It also marked the first time in decades that Apple wasn't the underdog. It wasn't playing catch-up to Microsoft.

But the iPod success also exposed Apple to a new risk, that someone was going to make a much better iPod by merging it with a phone. And Apple didn't make phones. So Jobs, who had to be convinced to move beyond the PC in order to make the iPod a hit, prepared to sacrifice the iPod, too. If the iPod was going to be cannibalized, then Apple should be the one doing all the eating, says Tony Fadell.

Cell phones were starting to break out with 2G and people were getting them. Soccer moms are getting lots of people getting them. So it was starting to be an existential crisis. People only have so much disposable income and they're going to spend it on communications, not necessarily music. Then it was like, oh, we need to really go after the cell phones. Can we build a cell phone?

Because either we're going to disrupt ourselves or we're going to get disrupted. The first iPhone came out in 2007 and they nailed it, as you know.

And Microsoft barely even tried to compete with the iPhone. Steve Ballmer, who replaced Gates' CEO, laughed at it, literally. $500 fully subsidized with a plan? I said, that is the most expensive phone in the world. And it doesn't appeal to business customers because it doesn't have a keyboard, which makes it not a very good email machine. Jobs loved to tell people like Walt Mossberg what he thought of Ballmer. Every time I'd walk in and we'd shake hands, hello, hello,

The very first thing he would say to me is, been to Redmond lately? And I would say, well, I was there a couple of months ago. And he'd say, is Palmer still comfortably in charge? And I would say yes. And Steve Jobs would do this. You can't see this, but here Walt is imitating Jobs pumping his fist. Yes.

Years later, Microsoft realized that it completely missed the mobile phone market and scrambled to catch up by buying Nokia, a fading handset maker. It didn't work. Today, the phone market is completely owned by Apple and Google, which has followed a Windows-like strategy of making software for other people's devices and using an operating system that looks a lot like Apple's.

Apple, meanwhile, has gone on to make a string of devices that have sold really well. The iPad, the Apple Watch, AirPods. Now it's trying to focus on services. But it is still fundamentally the iPhone company. The iPhone is Apple's biggest revenue generator hands down. It's the product that keeps Apple on top of the list of the world's most valuable companies. And Apple spent decades chasing down Microsoft, even took a handout from the company.

But when it looks at the competition today, Apple now sees itself. Andy Hertzfeld again. The iPhone is probably the most successful product in history. So, you know, that's a tall order to surpass it. But they're going to try. I'm sure they're trying. And they don't really have to surpass it. If they could achieve something like the iPhone, that would be tremendous and probably unlikely. So,

If Apple does make another iPhone-level breakthrough, will it be willing to sacrifice the iPhone to make it work? That's a question for the man who's following Steve Jobs, Tim Cook. Next up, a tale of two leaders. You don't get Steve Jobs' passion and perfectionism without this obsessiveness. Tim Cook does not get the credit he deserves for saving Apple.

Land of the Giants, The Apple Revolution is a production of Recode by Vox and the Vox Media Podcast Network. Zach Mack is the show's senior producer. Our producer is Matt Frasica. Jolie Myers is our editor.

Special thanks to Chris Fralick.

I'm Peter Kafka. If you like this episode, leave us a rating and review on Apple Podcasts or anywhere you want to listen to this podcast. And subscribe to hear our next episode when it drops. Quick disclosure, Vox Media creates content for and does business with Apple. None of the people creatively involved with this season of Land of the Giants are involved with those projects.