NeXT (Live show at the GeekWire Summit)

Ben & David broadcast live from the 2016 GeekWire Summit covering one of the all-time greats, Apple’s 1996 acquisition of NeXT. This episode has it all: the Steve Jobs hero story, Apple, I. M. Pei, Ross Perot, Aaron Sorkin, Nobel Laureates and… Gil Amelio? Does NeXT rank atop the best acquisitions ever? Our own heroes cast their votes. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Topics covered include: 1980’s era Apple, entering the age of the “workstation”, with John Sculley as CEO and Steve Jobs leading the newly formed SuperMicro division working on building the “BigMac http://lowendmac.com/2013/apples-bigmac-project-failed-precursor-mac-ii-next-cube/" Jobs’ exile to "Siberia http://lowendmac.com/2013/good-bye-woz-jobs-apple-1985/”, and chance meeting with Nobel Laureate Paul Berg http://www.esquire.com/news-politics/a11185/second-coming-of-steve-jobs-1286/ that sowed the seeds of NeXTJobs’ resignation from Apple on September 13, 1985 to start NeXT, taking with him SuperMicro division employees Joanna Hoffman, Bud Tribble, George Crow, Rich Page, Susan Barnes, Susan Kare, and Dan'l LewinApple’s subsequent lawsuit against Jobs and, Steve’s classic quote in response http://www.newsweek.com/jobs-talks-about-his-rise-and-fall-207016: "It is hard to think that a $2 billion company with 4,300-plus people couldn't compete with six people in blue jeans."NeXT’s “anti lean startup” approach, spending $100k on brand identity and moving into I. M. Pei designed offices http://allaboutstevejobs.com/pics/stevesplaces/next.phpRoss Perot’s $20M investment in NeXT https://www.quora.com/How-much-money-did-Ross-Perot-make-from-his-NeXT-investmentThe first NeXT computer (fun unboxing video https://www.youtube.com/watch?v=EkGFfJKAfoc) product launch, dubbed "The NeXT Introduction https://en.wikipedia.org/wiki/NeXT_Introduction” on October 12, 1988 (one of the three scenes in the Aaron Sorkin Steve Jobs movie http://www.imdb.com/title/tt2080374/)The NeXTSTEP operating system as the first “modern” OS (including Object-oriented programming https://en.wikipedia.org/wiki/Object-oriented_programming), and like the Mac equally descended from Xerox PARC http://www.youtube.com/watch?v=QhhFQ-3w5tE&t=16m25sMajor technologies developed on NeXT computers, including the first web browser https://www.w3.org/People/Berners-Lee/WorldWideWeb.html and Doom https://www.quora.com/Why-was-Doom-developed-on-a-NeXT NeXT’s exit from the hardware business and transition to a software-only model with OPENSTEPApple’s failed internal projects to develop a modern OS http://www.roughlydrafted.com/RD/Q4.06/36A61A87-064B-470D-8870-736DD59CEF48.html, culminating in the acquisition of NeXT in December 1996Steve Jobs’ return to Apple, public lack of faith in the then-current board and management https://www.cnet.com/news/its-official-jobs-sold-apple-stock/, and maneuvering to return to the CEO roleThe transformation of NeXTSTEP/OPENSTEP into OS X, and ultimately iOS, watchOS, tvOS, etc. The Carve Out: Ben: Stewart Butterfield (Cofounder/CEO of Slack) on the The Ezra Klein Show https://www.producthunt.com/podcasts/the-ezra-klein-show-stewart-butterfieldDavid: DJI and the Rise of the Robomasters http://www.theverge.com/2016/9/27/13059144/dji-robomasters-robot-drone-battle-video-frank-wang-interview

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 0:19David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 0:40Ben Gilbert?

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• 1:02David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 1:20Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you.

• 1:48Speaker 02

  I feel very antiquated, my use of text edit now that...

• 1:51David Rosenthal?

  That...

• 1:52Speaker 02

  That's...

• 1:52David Rosenthal?

  Hey, next product.

• 1:54Speaker 02

  It is. It's unbelievable. There's so much still there. Chess for next. Totally. Mail? The screenshot icon finally changed. It was that, like, big camera until... Oh, yeah, yeah. Yosemite, and it finally changed that little thing. That was like the last asset remaining.

• 2:13David Rosenthal?

  Crazy.

• 2:13Speaker 02

  I know.

• 2:31Speaker 02

  Hello GeekWire.

• 2:32David Rosenthal?

  Hey GeekWire.

• 2:36Speaker 02

  Awesome. Well, welcome to episode 23 of Acquired, the podcast about technology acquisitions. I'm Ben Gilbert.

• 2:44David Rosenthal?

  I'm David Rosenthal.

• 2:45Speaker 02

  And we are your hosts. On today's episode, we will be covering a cornerstone of technology today: Apple's 1997 acquisition of Next. 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 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. So excited to be here and talk about it today.

• 3:17David Rosenthal?

  Yeah, this is gonna be a blast. And a big, big thank you to GeekWire and Don and Todd and everybody for hosting us here. This is our first live show, so we're streaming on Facebook. You guys will get to see how the sausage is made. Thanks for sticking with us. And we will post it on iTunes and our website, acquired.fm, once we edit it. With that, we'll dive in. So, next, like Ben was saying, I've been looking forward to doing this one for a long time as both devoted Apple users, both of us. This is really the story of how, you know, what I love about it is it's kind of like, this is the hero

• 4:00David Rosenthal?

  story of Steve Jobs, you know? He had initial success, the initial arc, and then he was off in the wilderness at Next for 10 years, then he comes back to Apple, and here we are today where Apple is the most valuable company in the world. How did this happen?

• 4:17Speaker 02

  And truly, like a drama, right? I mean, you can't script this stuff. They've literally made three movies about it because of how kind of crazy this journey is. So, we want to focus just today on kind of the part picking up at when Steve started Next and how that went integrating that into Apple.

• 4:32David Rosenthal?

  Yep. So, we start our journey in 1984, a very good year. That was the year I was born.

• 4:41David Rosenthal?

  And Steve Jobs is still at Apple for the first time, the company he co-founded with Steve Wozniak. And what's going on at this time is the personal computer has happened, driven by Apple and the Macintosh. 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. And I had to do a bunch of Googling and Wikipeding because I really had no clue what a workstation was. I think there were a bunch of these in college in the computer lab somewhere, and they were made by Sun, and I didn't really know what they did. This is dating us a little bit. Yeah, dating us a little bit. So workstations, it turns out, are really just personal computers on steroids for the time.

• 5:25David Rosenthal?

  Now they're like pitifully, pitifully underpowered. But what kind of defined a workstation was a quote "3M computer", and a 3M computer had one megabyte of memory, mega byte of memory,

• 5:40David Rosenthal?

  had a megapixel display that could display one megapixels worth of content, and it had a mega flops of computing performance. That is floating point operations per second, Ben. And sometimes people added a fourth M to the definition of a workstation, and that was a megapenny, which was how much these things cost, which was about $10,000 a pop. So these are not personal computers. They're mostly used at universities for research, for scientific research, for technical research. Large corporations use them. But these aren't the like the server mainframes of the old day. These are single-use computers that are networks that people can log into them, but one user uses them at a time. Gotcha.

• 6:25David Rosenthal?

  So that's what's going on. And Apple is kind of in a quandary because this is, this is the computing era of the workstation, but Apple has no offering in the workstation. They're a PC company, and just down the street from them, Sun Microsystems, has been started from Stanford, Stanford University Network, hence the Sun Microsystems. And Sun is the darling of technology. They are the fastest-growing company in America in the 1980s. They go from founding to $1 billion of revenue in six years. So Steve's still at Apple. All this is going on. He's no longer the CEO. John Sculley is the CEO.

• 7:03Speaker 02

  And to put this in context around times that computers have been released, this is right after the Macintosh's release, right?

• 7:10David Rosenthal?

  A couple of years after the Macintosh was released. So this is 1984. And Steve gets put in charge of a new division at Apple called the Super Micro Division. And that combines the Macintosh and the Lisa. And his remit is to basically start Apple's entry into this workstation market. And so he's working on a top-secret project codenamed the Big Mac. And the goal, what he's trying to do is to take a workstation-powered computer, a 3M, and get rid of the 4th M and sell it for $500. He wants to put workstation-esque power into personal computers,

• 7:53David Rosenthal?

  make them affordable to everybody, students and individuals. So that's what he's working on. And it's not, unfortunately, going so well. So turns out with the technology of the time, it's really hard to build these workstation computers with off-the-shelf components and cheaper components. And so Steve isn't doing too good a job. And Sculley and the board are starting to lose faith in him. So in May of 1985, Sculley, the CEO, and Arthur Rock, who is a venture capitalist on the board, be wary of venture capitalists.

• 8:30Speaker 02

  Says the VC.

• 8:32David Rosenthal?

  Says the venture capitalist. So they decide that enough is enough. And they're going to remove Steve from being in charge of this new division, the Super Micro Division. And they're basically gonna just have him be a figurehead for the company. So they sideline him. He actually, his office gets moved across the street to essentially an empty building. And he's still at Apple at this point. He's still the chairman of Apple, but he has no day-to-day responsibilities. And so he's, you know, he refers to this as kind of being off of, he calls it being in Siberia. And so for the summer of 1985, he's just hanging out. He has nothing to do. But he's thinking about this problem.

• 9:15David Rosenthal?

  And this goes on for the summer. And an interesting thing happens. So...

• 9:22David Rosenthal?

  Over the summer, while Steve's hanging out, he ends up meeting this guy named Paul Berg. And Paul is a Nobel laureate in chemistry. He's a professor at Stanford in the chemistry department. And he's won the Nobel Prize for chemistry. And he complains to Steve and he says, "Hey, like, we've got these workstations, you know, Sun workstations at Stanford, but they're really, really expensive. And I'm trying to teach all these undergrads about DNA and recombinant DNA. And there's no way, like, they can't get enough time on the workstations to use them to model DNA computationally. And wet labs are like even more expensive than that. They can't work with it."

• 10:01Speaker 02

  Right.

• 10:02David Rosenthal?

  Actually, and so they're, they're having a really hard time learning how to do this. And so this just like doubly strikes the fire in Steve. Like, he can't, he can't handle this. You know, he sees this problem. And so he's, he says, you know, "I, we need to get these powerful computers into the hands of students to be able to learn and build new things. And we need to get the price point down, but we need, we can't compromise on the power."

• 10:25Speaker 02

  Yep.

• 10:25David Rosenthal?

  So by the end of the summer, he's been thinking about this. He decides to resign from Apple and start a new company to pursue this vision of finally getting the workstation affordable into, and merging it with the personal computer.

• 10:39Speaker 02

  Now, of course, Apple's, Apple's business had been selling into education, not necessarily into these, you know, universities that, that needed these for super horsepower reasons, right? Of doing a lot of really complex stuff.

• 10:50David Rosenthal?

  Selling to students, selling to computer labs for undergrads and high school students to use.

• 10:55Speaker 02

  Right.

• 10:55David Rosenthal?

  That was a big part of their business.

• 10:58Speaker 02

  Feels a little competitive.

• 10:59David Rosenthal?

  So here's what happens. September 13th, Jobs resigns. And there've been books written about this and movies, all of which tell slightly different stories. So here's as best we can figure out what happens. Jobs resigns on September 13th. And he tells the board he's going to start a new computer company. And he's going to take several people from the Super Micro Division with him. Those people are Joanna Hoffman, if you saw the, the Michael Fassbender movie. She's, this is Scarlett Johansson, I think, plays her. She's one of the stars of the movie. Bud Tribble, George Crowe, Rich Page, Susan Barnes, Susan Carey, and Dan'l Lewin. So he takes these employees with him. And Apple board says, "Okay."

• 11:44David Rosenthal?

  Two weeks later, they sue Jobs for two things. One, stealing trade secrets from Apple and employees. And two, a breach of fiduciary duty as the chairman and board member of Apple, basically resigning and then going and starting a new computer company.

• 12:01Speaker 02

  So absolutely wasting no time. I mean, for anyone who's been in these environments, a lot of times they drag on and on and on, and years later get a cease and desist or things like that. This is immediate action.

• 12:10David Rosenthal?

  Immediate action. Like, company Steve founded, two weeks later, boom lawsuit that Skully hits him with. And this is one of the things that just totally destroys his relationship with Skully. Because it's unclear that, like, it was not good before then, but like, then he sues him. And so Steve gives this interview in Newsweek, which is awesome. We'll link to this in the show notes. This is right after he leaves Apple. And he says in it, he's asked about this, and he says, "It's hard to think that a $2 billion company with 4,300-plus people couldn't compete with six people in blue jeans."

• 12:45Speaker 02

  Thus is the classic startup story, right?

• 12:47David Rosenthal?

  Classic startup story. So they eventually, they pretty quickly settle the case. And the terms of the settlement, they settle in January 1986, are that NeXT, the new company Steve is starting, cannot compete with Apple. And Apple gets to review any products that NeXT makes and releases before NeXT releases them. And if they determine them to be competitive, then they can sue again. So Steve's OK with this, but he's just had enough. In February, he sells all of his Apple stock except one share, so that he can still go to shareholder meetings. Such a Steve move. So they get underway, and Steve's just had this, you know, wild experience at Apple.

• 13:32David Rosenthal?

  And, you know, much ink has been spilled on this. But he decides he really wants to do things his own way this time. You know, not going to be beholden to an external CEO, not going to be beholden to a board. So what does he do? He spends $100,000 right off the bat. Well, first off, he put $7 million of his own money into the company to get it started.

• 13:53Speaker 02

  Yep.

• 13:53David Rosenthal?

  And he spends $100,000 right off the bat to get a really famous graphic designer and brand consultant.

• 14:00Speaker 02

  Paul Rand.

• 14:01David Rosenthal?

  Paul Rand.

• 14:02Speaker 02

  Yeah.

• 14:02David Rosenthal?

  To come up with the name and the branding and the logo of this company. And Paul delivers a 100-page brochure, naming the company NEXT, all capital except for the lowercase "e," which stands for education.

• 14:16Speaker 02

  Hmm.

• 14:17David Rosenthal?

  And coming up with the logo, which is a...

• 14:20Speaker 02

  At an exact 28-degree angle?

• 14:22David Rosenthal?

  At an exact 28-degree angle. So the NEXT logo is rotated at precisely 28 degrees.

• 14:28Speaker 02

  Now, for a lot of people who have commissioned logo work and kind of brand books before, a lot of times there's an iterative process where you get options and you review and you pick from one of the three, things like that. This was, you know, Paul Rand goes away into a cave, comes back with one fully formed idea and says, "Here you go."

• 14:47David Rosenthal?

  100 pages on this one idea.

• 14:48Speaker 02

  And the 100K was delivered out front.

• 14:50David Rosenthal?

  Yeah. It's insane. But Steve loves it. So the second thing he does, he rents office space. And, you know, they're like a brand-new startup, like you're gonna get a scrappy, like, you know, coworking space. Like, no, not for Steve. He finds the most expensive real estate in Palo Alto, rents a pretty big office with a staircase in it designed by I.M. Pei, the famous architect. And that's their first office. Later on, they moved to Redwood City into a whole complex designed by I.M. Pei. And they're like Ames chairs everywhere and like $10,000 leather sofas and whatnot. So that's what he does on the setting up the company. He also decides that he has some new management theories that he wants to test out.

• 15:34David Rosenthal?

  So the company is not a company. It's a community. And there are members of the community. There aren't employees. This sounds very like Valve, like, you know, before Valve. And so everybody can see each other's salary in the company. There is complete transparency. But that's not that interesting because there are only two salaries in the company. If you joined before 1986, you made $75,000 a year. If you joined after 1986, you made $50,000 a year. That's it, everybody.

• 16:04Speaker 02

  It's really interesting to think about this in the context of Apple's secrecy now. This was Jobs sort of laying out, okay, we're gonna, we're gonna give this a chance. We're gonna let everybody know everything about, you know, other employees within the company, about all the secrets of the company, and we're gonna see if making them kind of community members allows us to not be so tight with our secrecy. And I kinda at the point that that was violated, which of course it's gonna happen when you start to hit scale, that's when he switched modes and said, nope, you know, this, the rest of the time, you know, when I, when we go back to Apple, this is gonna be an entirely top-secret, very controlled, top-down organization.

• 16:39David Rosenthal?

  Yep, and what's, Super, he talks a little bit about this, like, he'd just come from this political ouster at Apple, and he's trying to avoid politics. And that's like the whole genesis of why he does it this way, and obviously it doesn't really work, but interesting that, you know, he does this experiment, and for a long time, and NeXT did eventually change this and had different salaries and everything, but he's super idealistic at the get-go. And so the only question is kinda like, well, what is NeXT actually gonna do? And it's this big secret, like, everybody wants to know, what is NeXT doing? Like, they know they're targeting education, and they wanna make powerful computers, but like, what is it exactly?

• 17:20David Rosenthal?

  And around this time, Ross Perot, of Ross Perot fame, failed presidential candidate, hears about what Steve's up to, and he decides he wants to get involved. And 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, one by Dell eventually. And so he invests $20 million in NeXT at a $125 million valuation. Remember, this is 1986, 87.

• 17:59Speaker 02

  So, you know, thinking about with inflation and the fact that they're pre-product, like, this is a company with 150-

• 18:03David Rosenthal?

  They have a brand book.

• 18:05Speaker 02

  Yes, exactly, exactly, very expensive logo.

• 18:07David Rosenthal?

  They have an expensive logo, and Steve Jobs, nothing else. So $20 million in 1987. So they start getting to figure out like what they're gonna do. And so they're obviously, you know, the plan is they're just gonna build the Big Mac. That Jobs is working on at Apple. So they rent out a big factory in Fremont, California that can produce up to 150,000 machines per year. And they start getting to work. And as they start working on the computer, you know, they're building the hardware, they're building the software. They have to revise the pricing a little bit. So they announce in 1987 that they're gonna launch, and it's gonna launch at a $3,000 price point.

• 18:52David Rosenthal?

  So not $500, but also not $10,000 that, you know, workstations were normally at that time. So somewhat compelling, okay. As usual, they announce the launch, they announce it's gonna happen, I believe they announced it was gonna happen in 1987, it gets delayed. And it gets delayed a long time. So the company basically goes dark. And then late 1988, they emerge again with a big gala event called the Next Introduction.

• 19:21Speaker 02

  Now, it's interesting to kind of look at the hallmarks of Apple and looking back in this sort of DNA of where they came from. During the next days, you know, they're announcing price points, they're missing them. They're announcing ship dates, they're missing them. That's not a thing that modern Apple does. They were very clearly scarred by this and kind of came out of it and said, that's not what we're gonna be.

• 19:42David Rosenthal?

  Yeah, so I mean nowadays, like, Apple announces an event like one week before the actual event. Like, this is, they announced years before they actually launched anything, so.

• 19:51Speaker 02

  But the next gala, I mean, that sure sounds a lot like the modern Apple keynote.

• 19:54David Rosenthal?

  Yes, and this was one of the, you know, when you look at the time, so this is one of the scenes in the Michael Fassbender movie. This is the middle scene, this keynote, when Jobs launches the next computer finally. Everybody's been waiting for this. It's at the Symphony Hall in San Francisco, 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 one foot cube of all black magnesium.

• 20:28Speaker 02

  Of course it is.

• 20:30David Rosenthal?

  Most computers at the time like look super ugly, right? And they're huge and like, this is also huge, but it is solid black magnesium. And they have it on stage and they bring a violinist from the symphony up. And one of the key features, like I was saying, is it has digital signal processing and it can play real audio for one of the first times on a computer.

• 20:52Speaker 02

  Instead of kind of the standard 8-bit. A lot of times you turn on a computer, you'd hear a beep, it would make Nintendo-like noises, very different than today.

• 20:59David Rosenthal?

  Yeah, this is real audio. And so the violinist plays a duet with the NeXT computer onstage. And this was, you know, the whole gala, everybody who attended it got a framed poster commemorating this monumental event, the launch of NeXT computer.

• 21:16Speaker 02

  Talk about a lack of product market fit. For those of us in startups today that are thinking like, what's that killer use case that justifies user actually shelling out for my product?

• 21:26David Rosenthal?

  Duets with violinists.

• 21:27Speaker 02

  Yeah, that's a very expensive tech demo.

• 21:29David Rosenthal?

  Very expensive. And also famously, also chronicled in the movie, nobody from Apple is invited to this. 3,000 people attend the event, not a single person from Apple is allowed in the doors.

• 21:40Speaker 02

  That's just vengeful.

• 21:41David Rosenthal?

  Vengeful. So they announce the actual device, and it's super cool. We'll link to this in the show notes. Somebody a couple of years ago got their hands on one of these things, on the initial NeXT computer, and did an unboxing of it. It's on YouTube, it's amazing.

• 21:59Speaker 02

  All right, put it in the show notes.

• 22:00David Rosenthal?

  It's in the show notes. So what is this thing? They announce the specs. 25 megahertz Motorola 68030 CPU, whatever that means. 25 megahertz was a lot at the time. Has configurable from 8 megabytes up to 64 megabytes of RAM. So like the benchmark for workstations was 1 megabyte of RAM. They have 8 to 64, so. Knock it out of the park on that.

• 22:25Speaker 02

  Yep.

• 22:26David Rosenthal?

  17-inch, megapixel grayscale display, 10 base 2 Ethernet. This is a networked computer.

• 22:32Speaker 02

  And that's key, right? This is something that the Macintosh was not set up to do. I mean, when they conceived of the Mac early on, it was standalone. I mean, the Ethernet wasn't a thing. We were not living in a world with the Internet or even precursors to the Internet yet. And this is a kind of brand-new idea that this computer and this operating system is going to be built to network from the ground up.

• 22:54David Rosenthal?

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

• 22:59Speaker 02

  The World Wide Web.

• 23:00David Rosenthal?

  The World Wide Web, yes. But the World Wide Web did not exist. And one of the features that they're most proud of about this machine is it has a 256 megabyte magnet optical drive, which, instead of a hard drive, they think this is better technology. Except, the problem is, they put that in, so there's no hard drive, there's no floppy drive, it's just this, like, big cassette thing you put in there that's, like, magnetic or somehow. That's the only storage on the computer. So you can't transfer anything off the computer, because the hard drive that the operating system runs on is the thing that you plug in and out of the computer. And Jobs is like, "Well, but you're networked here on the Ethernet, so like, that's how you transfer files."

• 23:43Speaker 02

  Right.

• 23:43David Rosenthal?

  But like, nobody else is on the network, so it's kind of a chicken-and-egg problem.

• 23:49Speaker 02

  Right. It's like, you know where you want to be skating, you know where the puck is going, but there's no ice between you and them.

• 23:53David Rosenthal?

  Yeah. This is like removing the headphone jack in 1988. They realized pretty quickly after launch that that's a bad idea, and they ship a new version with an actual hard drive and a floppy disk drive. So, they fixed that. But more importantly, and here's where we start to get into, like, what is the real value of Next? The software and the operating system that they created Next over these couple of years is just incredible. I mean, there's that moment from when Steve Jobs launches the iPhone in 2007 in the super-famous presentation, and he says, "It's five years ahead of anything the competition is doing on the market." This was at least five years ahead, Next Step.

• 24:36David Rosenthal?

  Next Step is the operating system that Jobs, that Next made for the computer. It's at least five, if not a decade, ahead of anything else anyone's doing.

• 24:45Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 24:59David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 25:13Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 25:23David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 25:41Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise: the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 25:57David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually, and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 26:14Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 26:23David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 26:34Speaker 02

  So it's worth talking about kind of the technology innovations that came out of Next, or at least that Next put into production for the first time. A lot of it dates back to when Steve Jobs was at Apple and got the preview from Xerox PARC of what the research technologies were that they'd been working on. And famously, it's the graphical user interface and the mouse.

• 26:54David Rosenthal?

  This is the, when Steve-- Steve Jobs raids Xerox PARC in Palo Alto and steals the graphical user interface, and that becomes the Mac. That's what Ben's referring to.

• 27:05Speaker 02

  Yeah, and so, you know, the Mac gets that, right? For the first time, there's, you know, Bill Gates famously kind of freaked out at the demo, watching the drawing on screen where the Mac is moving the mouse and it's moving around slowly, and Steve saying, you know, "Yes, we got this from Xerox PARC." What they didn't kind of pull from that was object-oriented programming. So, in traditional programming, like you look at the way that DOS was running, there's routines, and it's moving, it's kind of advancing linearly, there's branching to subroutines, and for the first time with object-oriented programming, you have the ability for software to model real-world objects. And so, you know, this dog has properties, and has methods you can call on those properties,

• 27:49Speaker 02

  like bark, or like back up, or like walk forward. And this was only really embodied in small talk at the time, which was not a very popular language.

• 27:59David Rosenthal?

  Well, and to not dive too deep into the technical details here, but essentially, this is like, all modern software is now written this way.

• 28:08Speaker 02

  Right.

• 28:09David Rosenthal?

  And the idea of creating software or technology using, you know, all linear, non-object-oriented programming, like, you just like, wouldn't do it. That'd be like, trying to like, drive across country in like, you know, a golf cart. Like, you wouldn't do it.

• 28:24Speaker 02

  So, the kind of breakthrough here is, by using Objective-C, which is incredible how long that has actually lived, licensed at Next, and then eventually became kind of the core toolset that's used to now develop Mac applications and iOS applications. You know, Swift is being adopted, but Objective-C is still the bread and butter of Apple's software development. It enabled Next to move much faster than traditional programming methods, and for people to build much more complex programs than they would otherwise.

• 28:57David Rosenthal?

  And Steve has this great quote, so when he finally comes back to Apple after the acquisition a couple of years later, the first time he's on stage, at the first Apple keynote, right after Apple acquires NeXT.

• 29:08Speaker 02

  This is January 97.

• 29:09David Rosenthal?

  January 97, he says, "I want to tell you guys a story." Steve's famous for telling a story, and he says, "You know, when I went," this is a quote from him, "When I went to Xerox PARC in 1979 and saw the original genesis of the graphical user interface there, they actually showed me three things, and I was so blinded by the first that I didn't hang around to find out about the other two, and it took me years to rediscover them. The first, of course, was the graphical user interface, but the other two things, the second was object-oriented programming. They had it all running back in 1979, and the third was networking. They had several hundred ALTOs, ALTO was the computer, the concept computer that Xerox PARC had designed. They had several hundred ALTOs hooked up

• 29:51David Rosenthal?

  to network printing, network file service, email, all in 1979. If I'd only stayed there for another 20 minutes."

• 29:58Speaker 02

  Yeah.

• 29:59David Rosenthal?

  He's making a joke, but what he realizes, and this kind of goes back to what he was trying to do at the Big Mac, it's the combination of those three things. It's the graphical user interface, it's object-oriented programming that allows software developers to develop really powerful, very useful graphical programs for the first time, and then it's networking, and that's what's going to enable this new wave of computing.

• 30:27Speaker 02

  It's probably worth fast-forwarding at this point.

• 30:29David Rosenthal?

  Yeah.

• 30:30Speaker 02

  So NeXT kind of cuts their losses. There comes a point where NeXT says, "You know what? This hardware thing, it's hard. We have extremely expensive computers that aren't selling very well. They only ever sold 50,000 units in total."

• 30:44David Rosenthal?

  And by the way, when the thing finally came out to retail, guess how much it cost?

• 30:48Speaker 02

  Ten grand?

• 30:49David Rosenthal?

  $10,000, which was the price that all workstations cost at the time, so nobody buys these things.

• 30:54Speaker 02

  Yeah. So NeXT decides, "Okay, we're going to be a software company." And what they do is they kind of separate out NeXT Step, which was the operating system, and then they had kind of the mock kernel underneath, which they sort of brought in-house. They separated that out and they said, okay, we're just going to start selling this thing to other computer manufacturers.

• 31:14David Rosenthal?

  Yep.

• 31:14Speaker 02

  Right? We're not going to be the, what we know of Apple today is an entirely vertically-integrated software and hardware company. They're moving away from that. It's just software. And that was kind of in vogue during that time because that's when the Mac was in the era of the clones. I mean, the macOS ran on other people's hardware, which is totally, you know, mind-blowing for those of us today who know, well, what do you mean? iOS only runs on iPhones.

• 31:37David Rosenthal?

  Yep. And, but it's super important and because of the power of this operating system and, you know, we mentioned earlier, but just to give a sense of like, what is the real implication of this power? The World Wide Web is invented on this operating system, on a NeXT computer, actually. So, Tim Berners-Lee at CERN invents the World Wide Web, and it's possible because of objectory and programming and networking, obviously. And also fun, other history of this computer, John Carmack at ID Software, John's now the CTO, I believe, of Oculus. John wrote the video game Doom, video games Doom, Quake, and Wolfenstein 3D.

• 32:19Speaker 02

  On a NeXT.

• 32:19David Rosenthal?

  All on NeXT.

• 32:20Speaker 02

  Wow.

• 32:21David Rosenthal?

  Which is amazing.

• 32:22Speaker 02

  Wow, wow. I didn't know that.

• 32:23David Rosenthal?

  And those were the first, like, 3D games that, you know, ever, you know, equally revolutionized the game industry.

• 32:29Speaker 02

  Yep.

• 32:30David Rosenthal?

  So that's the power that this enables.

• 32:32Speaker 02

  Yeah, and it's interesting, kind of taking a step back and realizing, okay, so, very clear recognition of the technologies that were going to be transformational and really like the foundation of what the future of computing will be, really unable to bring it to market in a meaningful way at NeXT. I mean, all the ideas were right, all the way that they, you know, brought a product to customers, you know, you can chalk it up to timing, you could chalk it up to price, like, just wrong, just poorly executed. And so, they needed an out.

• 33:02David Rosenthal?

  Yep, they need it now, and so they pivoted eventually to just selling software. They stopped selling hardware. They do that in 1993. It's funny, one of the pieces of software they come out with is this thing called Web Objects, which is one of the first internet application servers. And Dell actually builds their ecommerce site on it, so when you bought a Dell...

• 33:21Speaker 02

  Yep.

• 33:22David Rosenthal?

  Dude, you're getting a Dell? Like, that was powered by Next in the...

• 33:24Speaker 02

  Yeah, basically what Web Objects do is they make it so that... You know how you go to a website and it's not always the same as every other time you go to that website? It's got dynamic content on it. Web Objects was like the first ever system to do that.

• 33:35David Rosenthal?

  And this thing is like still in use. So, the iTunes Store, people wonder why iTunes like is so clunky and slow and crappy today. It still runs on Web Objects, which is insane.

• 33:47Speaker 02

  Yeah, for the... Any of the iOS developers and the Mac developers listening, for better or for worse, a lot of these technologies have stayed with us for a very, very long time.

• 33:56David Rosenthal?

  For a very long time. So, finally, you know, meanwhile, while this is going on, Apple is just like, they have lost their way. They are getting creamed in the market. On the PC front, it's this is the era of Windows in the early 90s and to mid 90s, Windows 3.0, then Windows 95.

• 34:17Speaker 02

  Just absolute dominance.

• 34:18David Rosenthal?

  Apple's getting decimated. They have no offering for enterprises in the workstation market, which is cooling down, but like still a huge, huge market.

• 34:25Speaker 02

  And all of NT was doing phenomenally well. Steve Jobs in '97 stands up on stage in January and, you know, praises the incredible advancements brought by Microsoft and NT and says, "Apple, what's Apple been doing? We've fallen behind." And of course, easy for him to blame, well, he's not at the company, but, you know, incredible to be...

• 34:44David Rosenthal?

  But he was totally right.

• 34:45Speaker 02

  Yep.

• 34:46David Rosenthal?

  And so, Apple's casting about, they're trying to create a next-generation operating system. By this point in time, everybody's recognized the power of what we're talking about, and Apple just can't do it. They have two competing projects, three at various points, trying to build a modern operating system. They all fail.

• 35:02Speaker 02

  It's wild to think about. I mean, you can chalk it up to organizational politics, or you can chalk it up to the technology just being incredibly hard, but... They were building an operating system codenamed, I think Copland was the first version, and then it was they were going to have a second release called Gershwin. There was kind of projects going on in parallel for how are we going to build a next generation operating system, and they just couldn't do it. And honestly, it kind of reminds me of the Longhorn days at Microsoft.

• 35:28David Rosenthal?

  Oh, God.

• 35:29Speaker 02

  It turns out, operating systems are hard, and organizations are even harder. And so you look at Apple, and eventually, they kind of said, OK, enough is enough. We're going to look elsewhere to try and buy. And they had a couple of options.

• 35:41David Rosenthal?

  They had a couple of options for a modern operating system they could buy to replace Mac OS X, uh, OS 9.

• 35:49Speaker 02

  It was System 7 at the time. The future operating system was supposed to be Mac OS 8, which ended up just being an incremental bump, and then OS 9, which was another incremental bump.

• 35:58David Rosenthal?

  Yep.

• 35:59Speaker 02

  And then finally, what they were envisioning for years, not even until 2001, was Mac OS 10.

• 36:06David Rosenthal?

  Yeah. And so, so in 90, end of, just before Christmas, 1996, they buy Next. Steve Jobs for $429 million that go to Next shareholders, including Ross Perot. And separately, 1.5 million shares of Apple stock that go to Steve Jobs.

• 36:28Speaker 02

  Yeah, so David, you want to talk about that? As a VC, what's, you know, based on a return on invested capital, how was the Next exit?

• 36:35David Rosenthal?

  Well, over its lifetime, Next raised, so they raised the money from Jobs, they raised the money from Ross Perot. Canon, the large camera printer computer manufacturer, ends up investing another kind of $100 to $130 million in the company as well. So they got sold for more money than they raised, but like, not that much more money. Like, this was not a home run. It's like, nobody was getting rich off, uh, off Next. And Steve gets 1.5 million shares of Apple stock because he's going to come on board at Apple as a consultant. So he's, uh, he's gonna, you know, come and like, help Apple with this transition is the official plan.

• 37:15Speaker 02

  Right.

• 37:16David Rosenthal?

  And so the acquisition closes in February 1997.

• 37:22David Rosenthal?

  And Steve's a consultant and some of these events that we were talking about, he comes onstage and he, you know, clearly like the dichotomy between how Steve talks about the future and his vision and how Gil Emilio, who was the CEO of Apple at the time, who, you know, looked like, he actually was like quite technical and a bit of Fairchild semiconductor and all that, but he looked like he'd never met a developer in his life.

• 37:44Speaker 02

  Yeah, when you watch their keynotes, just kind of going back and watching a lot of these old keynotes over again and in preparing for this podcast, it is incredible to see the dichotomy between Gil standing up there and not really commanding the audience's attention and saying things that...

• 37:58David Rosenthal?

  Like, it's so important for Apple to, you know, court our core audience in developers.

• 38:02Speaker 02

  Right. It's not taking a position on anything. And, you know, we've all seen managers like that or leaders like that that, you know, don't really take a side and you walk out and you're like, "Well, I didn't disagree with any of that, but I wasn't inspired." And then Steve comes onstage for, you know, just a few minutes to say like, "Hey, here's where I think we're going." And it's just captivating.

• 38:21David Rosenthal?

  It's night and day, like huge applause. And so, pretty quickly, acquisition closes in February. Over the July 4th weekend, 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, the board fires Gil. So the company doesn't have a CEO. They start a CEO search. And really, there's only one candidate. September of 1997, Steve Jobs is instated as the interim...

• 38:53Speaker 02

  The I-CEO.

• 38:54David Rosenthal?

  The I-CEO, the interim CEO of Apple. And he remained interim CEO until 2000. So for three years, he was interim CEO.

• 39:03Speaker 02

  Now, while he's interim CEO, the board doesn't exactly stay intact, right?

• 39:08David Rosenthal?

  Yeah. He basically, he takes those three years. And it ultimately takes five years from the time Apple acquires next for OS 10 to come out. So they spend five years building, taking the next operating system and baking it into the full product of the Mac. But during that time, I mean, Steve, like, there's the technical and product challenges of shipping that, but he cleans house and completely revamps Apple.

• 39:38Speaker 02

  Well, there's a good, I was, I looked up the article that came up on CNET, the day that the acquisition was announced, and kind of how people were billing it at the time, and

• 39:49David Rosenthal?

  Kind of awesome that like, when this acquisition happened, CNET like existed, was a website, was a news organization.

• 39:56Speaker 02

  And there's still archives.

• 39:57David Rosenthal?

  And like, the world wide web was invented on Next computers five years early.

• 40:02Speaker 02

  Yeah, I know, I know. So the, the thing that, that they say in the article is, "Next's cross-platform development environments in the enterprise and internet and intranet space allow developers to write once and deploy across a range of internet and client-server platforms." Amelia said that Apple expects to ship products with it, with the Next operating system in 1997. That's the same year that the acquisition closed. So, the way that Amelia was looking at this is, you know, we're gonna get this company, we're gonna start kind of integrating their technologies, we're gonna keep shipping our products.

• 40:33David Rosenthal?

  Yeah, we'll just slap this OS into our hardware, like, no big deal.

• 40:36Speaker 02

  Yeah, and, and, you know, what we know today is like, it didn't ship in 97, or 98, or 98, like, it shipped in 2001, and by that point, Apple had dramatically less products. I mean, this is, this is the time where, you know, there's developers at 1997 Worldwide Developer Conference in July, six months after, after the acquisition closed, saying to Steve, "Hey, so, you know, I worked on OpenDoc for many years, and we've invested a lot in it, what, you know, what about OpenDoc?" And Steve says, "Yeah, yeah, a lot of you worked on things that we had to put a bullet in the head of, and I feel your pain." And continues to go on and then paint the story of like, "Apple has no focus, focus is about

• 41:18Speaker 02

  saying no, we're doing all these different things, it's not iterative improvements that we need to do, it's, it's like dramatic, dramatic changes." So what's really interesting is to look at screenshots from Next, or NextStep, or actually OpenStep, the operating system that they ended up implementing, and you look at OS 10 today, or even steps along the way, it is incredible how many Pieces of Next you can find in or of Next Step you can find in in macOS 10. I mean, you look at at Next and it had a dock. Nothing else had a dock at the time. That was like a new UI paradigm.

• 41:51David Rosenthal?

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

• 41:54Speaker 02

  Right.

• 41:55David Rosenthal?

  In your Apple Watch.

• 41:56Speaker 02

  Right.

• 41:57David Rosenthal?

  It's there.

• 41:58Speaker 02

  In 97, Steve is is demoing the Next Step development tool chain. And he's like, here's Interface Builder and here's all these tools that people still use today to to develop iPhone apps. So the very core fundamentals of of what makes the what made the iPhone possible came from the Next acquisition.

• 42:16David Rosenthal?

  Yep.

• 42:18David Rosenthal?

  So at this point, you know, wrapping up the history and facts, which was very long, but these stories are just, we love stories on this show and like.

• 42:25Speaker 02

  And this is one of the best.

• 42:26David Rosenthal?

  This is one of the greatest of all time. And so we all know what happens. Steve comes back. 2001, they launch OS 10. They launched the iPod. When did they launch the iPod? Was it also 2001, I think, when they launched the iPod?

• 42:42Speaker 02

  Yep.

• 42:42David Rosenthal?

  They launched the iPod, then they launched the iPhone, then they launched the iPad, then they launched the Apple. You know, all this stuff.

• 42:48Speaker 02

  Yep, Apple TV.

• 42:49David Rosenthal?

  And it's all Next.

• 42:51Speaker 02

  The incredible thing is, yeah, that when they first launched the iPhone, they say, and it runs OS 10. That was a big selling point. This is not, you know, a phone like we know phones today with a embedded operating system. This is a computer in your pocket. And to prove it, it's running a variant of the operating system that exists on your computers. And that was like huge and ridiculous. And like, people at BlackBerry didn't believe it. They'd look at the scroll performance and say, you can't do that on a phone. Like, there's, we just don't believe you. And so I think that when you look at the, this was before it was dubbed iOS. Okay, it was a variant of OS 10. And then when they launched, you know, the the iPad, they say, and we're renaming it iOS. It runs on the iPhone and the iPad. Then they launched the Watch, then they launched the TV.

• 43:35Speaker 02

  All these things are are kind of built off that same Darwin kernel and the the the core of what they acquired in the in Next.

• 43:43David Rosenthal?

  Yep. And and there we go. The rest, as they say, is history.

• 43:47Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 44:01David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 44:17Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 44:32David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 44:56Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 45:15David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 45:45Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you.

• 46:10David Rosenthal?

  Let's move on to our next segment of the show, which is acquisition category.

• 46:15Speaker 02

  Yeah.

• 46:16David Rosenthal?

  This will be, this will be a fun one. What do you think?

• 46:18Speaker 02

  Well.

• 46:20David Rosenthal?

  And what we do is we categorize the acquisition into, we've got a couple of categories and we decide which it represents.

• 46:26Speaker 02

  Yeah, so we normally decide if something's a product acquisition, a business line acquisition, a people acquisition, which oftentimes happens in kind of like acquihires, a technology acquisition, is it a core piece of technology that's not productized? Or is it, you know, other? Is it some new thing? And when you look at this, like, Apple had been trying to create a technology that they really couldn't create. It was a next generation operating system with multitasking, with networking, with protected memory, all these different things. But it's not the technology they acquired. You'd be silly to make the case that this was anything but Steve Jobs. I mean, this is like, this is like-

• 47:02David Rosenthal?

  There's a great slide.

• 47:03Speaker 02

  The ultimate people acquisition. Oh yeah, Gil Amelio is listing all the reasons they acquired Next.

• 47:08David Rosenthal?

  Yeah, the CEO at the time, literally at, is it at Macworld, I think?

• 47:12Speaker 02

  Yeah.

• 47:13David Rosenthal?

  Has this slide on stage. He's presenting these slides about, you know, rationale for the next acquisition. And he has like all this stuff that they're getting. Then he flips to the next slide.

• 47:21Speaker 02

  And it just says Steve Jobs. It's like the only thing on the slide.

• 47:24David Rosenthal?

  It's the only thing on the slide.

• 47:25Speaker 02

  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.

• 47:36David Rosenthal?

  Yep. I mean, it's hard to argue with that. Steve is, I'm just surprised, I mean, like, I've read all the books about him. I've watched so many of his keynotes. I've watched all the movies about him. Every time I read it, and this just like going in and doing a lot of this primary source research, this is gonna be my tech theme later, but, but I am just so struck by like his level of thinking, you know? It is so rare that you see, that you find something like that. And when you watch this keynote with Gil onstage and Steve onstage at the same time, and like, I think Gil was, he was a Fairchild semiconductor. He had been, you know, a longtime technology CEO.

• 48:18Speaker 02

  Yeah, he turned around National Semiconductor. He's credited with-

• 48:22David Rosenthal?

  Yeah, he turned around National Semiconductor. You know, he looks like a child compared to this guy. Like, it's like, you know, Steve is just a met among boys, you know, or, you know, a person among small people.

• 48:32Speaker 02

  Yeah, special guy. We miss him.

• 48:35David Rosenthal?

  Totally. Okay.

• 48:36Speaker 02

  So you want to go into what would have happened otherwise?

• 48:38David Rosenthal?

  This is fun. So what would have happened otherwise? I think it'd be fun to talk about the other option that Apple had.

• 48:46Speaker 02

  Yeah, so Jean-Louis Gassé was an Apple employee who kind of opened Europe to Apple. He came in in the early days, knew Steve Jobs well, left Apple to start his own company.

• 48:59David Rosenthal?

  Well, before he left Apple, when Steve got fired and left Apple, Jean took over the Super Micro division. He literally replaced Steve Jobs.

• 49:09Speaker 02

  I didn't know that.

• 49:09David Rosenthal?

  Yeah, he literally replaced. So this is a, he's French, Jean-Louis. Great guy. He has a blog now, which is awesome, Monday Note. And he replaced Steve Jobs, but then he left and started his own company.

• 49:21Speaker 02

  So two people that both kind of walked through that revolving door of that division of Apple, both went and started very, very similar companies.

• 49:28David Rosenthal?

  Yeah.

• 49:28Speaker 02

  And B, which created BOS, was kind of the other candidate they were vetting other than Next. And ultimately, the reason that Apple didn't end up making that acquisition of B, you know, number one, I continue to go back to the fact that they all sort of knew they needed Steve back. But they just couldn't come to the same agreement on price. Jean-Louis wanted 300 million for the company. Apple, I think, was willing to shell out 120, 125, somewhere in there.

• 49:55David Rosenthal?

  Something like that, yeah.

• 49:56Speaker 02

  And they just couldn't get the deal done, as with, you know, many other deals I'm sure a lot of our listeners have been involved with.

• 50:02David Rosenthal?

  Yeah, but kind of amazing that like there were these two operating systems that Apple could have acquired.

• 50:08Speaker 02

  And should have built in-house, right? Like both of those leaders.

• 50:10David Rosenthal?

  Had been at Apple.

• 50:12Speaker 02

  Right, they were chartered with building this and the organizational politics at Apple at the time didn't let it happen.

• 50:16David Rosenthal?

  Didn't let it happen. This is why Steve Jobs hated politics.

• 50:19Speaker 02

  Did you see that Next was planning an IPO?

• 50:22David Rosenthal?

  Yes, that was one of the kind of bargaining chips on the table.

• 50:25Speaker 02

  Yeah, so this company that, you know, finally had actually has a product out there, this operating system that, you know, is not the business that they were hoping to build, but is a decent business, you know, is planning to IPO later in the year. And we don't know if that actually would have happened, but it is interesting that that's an alternate future for.

• 50:47David Rosenthal?

  I think there's, there must have been a little bit of Steve Jobs reality distortion field there too, like how they could have gone public. I mean, they had a, they eventually became profitable as a software only business, but like they were not making a lot of money.

• 51:00Speaker 02

  No.

• 51:01David Rosenthal?

  Um, but Steve Jobs.

• 51:02Speaker 02

  Right.

• 51:03David Rosenthal?

  Anyway, so they ended up getting acquired, obviously by Apple, not, not going public. But that would have been interesting had they.

• 51:09Speaker 02

  Yeah, I'm gonna, I'm gonna paint this picture as, uh, Next had a fighting chance, but probably would not have done very well in the long term. And I don't think Apple would be in business.

• 51:22David Rosenthal?

  Yeah, no, like they were getting creamed. I mean, there was that famous quote, right? Um, who said, was it Michael Dell? Said that like, they should just shut down the company and give the money back to shareholders. They were just getting creamed.

• 51:34Speaker 02

  Yeah.

• 51:35David Rosenthal?

  So, all right, tech themes?

• 51:37Speaker 02

  Tech themes, yeah. So, um, I mean, the, the big one for me is like, you hear this all the time in investor pitches. It's, it's all about the people. Um, I, I think this is one that's just so clearly illustrative of, uh, we often talk about like 10x engineers. Sometimes there's just like 10x leaders and, and people that, um, that are truly inspiring. And then the other part of that is, is, uh, how much of a difference it makes to have the founder of a company, leading that company, that, that they command a different level of respect from employees. And when they say, this is our strategy, people, people believe it and people do crazy things and, and march to those orders. And the other thing that I was kind of thinking about in this is Steve makes a plea to developers

• 52:19Speaker 02

  to, to start building on this new operating system that they're building that will eventually sort of in some forked way become Mac OS X. And you don't like win, as Microsoft can see with Windows Phone recently, or a lot of people trying to start sort of like competing app stores and things like that. It's really hard to win over a developer ecosystem. And it's really hard to say, you know, developers, we're open for business. This is a platform for you. And, and Steve managed to really like make the plea in a very authentic way and say, hey, everyone who's a Mac developer. Why don't you come and you know, you're gonna have to rewrite a lot of stuff because this is very different, but make a bet on us and develop your applications for MacOS X.

• 53:00David Rosenthal?

  We can give you this power, this power in this operating system that you couldn't have otherwise.

• 53:04Speaker 02

  Right, right, but to me, it's like the power, the power of a founder there. And then, once you have like 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.

• 53:21David Rosenthal?

  Yep. That perfectly dovetails with, I have two tech themes for, on the show, we do, this is actually my favorite segment of the show, we talk about having gone through this whole history, like, what are some like eternal truths about just the way like business, technology, startups, you know, have, you know, operate that we can kind of pull out of this.

• 53:43Speaker 02

  Yeah.

• 53:44David Rosenthal?

  And I have two. The first one is just what you were saying, Ben, is that the, or related to what you're saying, in technology, like, there's this concept of like, iteration, not just iteration, but like, you're kind of standing on the shoulders of giants. And this, a lot of the history and facts, like, we talked about a lot of pretty deeply technical stuff, like, object-oriented programming, and networking, and workstations, and like, you think about tech companies today, it's like Snapchat, and like, you know, messaging, and interacting with your friends, and like, spectacles, and like, doing this amazing stuff, and flying drones, and like, but all that's only possible because of these like, building blocks at the operating system level, at the deep geeky stuff that needed to be built and installed first.

• 54:29David Rosenthal?

  So, so that's one. But two, is something I've been thinking a lot about, also related to your first one. Like, what made Steve what he was, right? And in our, we haven't released our last episode yet, but we did, we interviewed Kathleen Phillips, who's the CFO of Zillow, talking about the Truly acquisition. And in a follow-up on that, we talked about Snapchat spectacles, and I referenced this tweet that we both read, that I thought was super cool, that Bill Gurley- Had retweeted and commented on when Snapchat announced Spectacles. And John Collison, who's one of the brothers who's the co-founder of Stripe,

• 55:11David Rosenthal?

  he tweeted, quote, "I'm always impressed by how flamboyantly original Snapchat are. Ghost codes, invisible UI, filters, sunglasses." And Gurley responds and he says, "That's a really great thing to identify and recognize." And I've been thinking about that because I totally agree. But like, what is that originality? And it's not really exactly originality. Like, there were QR codes before Snapchat did them. There were-

• 55:38Speaker 02

  In fact, Snapchat acquired a company to do that.

• 55:39David Rosenthal?

  They acquired a company doing it. There were glasses you wore on your face-

• 55:42Speaker 02

  Right.

• 55:43David Rosenthal?

  And that took video before Snapchat Spectacles. You know, there were Messengers before them. They weren't first, but they were the first thus far, and we'll see how Spectacles perform, the first to make like a real product that just works and is delightful and solves a need for a user. And I think that's what this originality means. And that's what Steve was, right? Like, object-oriented programming, all this stuff existed at Xerox PARC before Next. Object-oriented programming, networking, like, all this stuff was out there. Workstations, blah, blah. But like, it was technology. It wasn't a product.

• 56:19Speaker 02

  Right.

• 56:19David Rosenthal?

  It wasn't something that like, you plugged it in and it just worked and it delighted you and it solved your need. And I think that's like, I don't know, I've just been noodling. Especially like as a VC, like, this is what we look for. So many times we meet founders, we meet companies, and they're doing something cool that's hard technically. And the question is just like, okay, like, the question I always ask is like, what data do you have? What signal do you have that people want this? And so many times you get this like blank stare back, you know?

• 56:51Speaker 02

  Like, well, what do you mean? This was never possible before. It's like, well, that's not what I asked.

• 56:54David Rosenthal?

  That's not what I asked. Like, why are people gonna use this? And I think that's what these, you know, whether it's Evan Spiegel at Snapchat, whether it's Steve Jobs, whether it's Mark Zuckerberg, or, you know, any of these, or Instagram, right? Like, Instagram was not the first app that made your photos look good. Hypstomatic made your photos look good.

• 57:11Speaker 02

  Yep.

• 57:11David Rosenthal?

  But that's not Instagram, you know? Like- It's building this whole solution and having the vision to do that.

• 57:18Speaker 02

  And I think 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. I mean, you look at, let's take two super-famous examples. You know, Microsoft has like hundreds or a thousand of PhDs at Microsoft Research that do incredible work and do pioneering research, and they try their best to partner with product teams, but it's not super often that one of those things gets surfaced in a product in a big way. And you know, the company's growing and it's getting way better at that, but it's like a famously difficult problem to sit in the organization in the right way to make your kind of very forward-looking things that may dangerously obsolete your current thing,

• 58:03Speaker 02

  you know, something that you bring back into product. And in fact, when Apple, my second example is when Steve went back to Apple, they had kind of an advanced technology division. And that was purely for the, it was a research lab, it was people that were kind of playing around with like, what if we could get this into a computer at some point? And dismantled that.

• 58:21David Rosenthal?

  Yeah, Steve killed that. Because that's totally the opposite of what we're talking about.

• 58:25Speaker 02

  Right, you want to get those things into product and kind of reorganized and said, "Look, everybody who's doing that pioneering research, you need to be doing it with the lens of how are we going to build this into this product? And how does it fit into the story of this product that we're trying to ship?"

• 58:37David Rosenthal?

  Yep. And I think that's what's, that is what is so scarce in technology, in startups, and in, you know, in business, like, the ability to take a potentiality, whether it's technology or something else, and turn that into a product that like, just works and that people want. It's so scarce. And I think that's what, you know, for all of Steve's foibles and all his craziness and like, he was just so good at that. And it's impressive.

• 59:10Speaker 02

  Yeah.

• 59:11David Rosenthal?

  Okay. Should we wrap this one up?

• 59:14Speaker 02

  You want to grade it?

• 59:15David Rosenthal?

  That's great. We were going back and forth on text over this last night.

• 59:19Speaker 02

  Yeah, so a couple of episodes ago, we did the Android acquisition by Google. And you look and you can kind of figure out that the main reason for Android to be there is to make it so that when people are searching on mobile, they're not always searching from iPhones and Google doesn't have to pay Apple for all those searches. So that saves them, that gets them like $4 billion a year in revenue they otherwise would have had to give up. Big number, right? Like for, for kind of a small acquisition. So I want to like, talk about the next acquisition and what it did for Apple in the, the context of that being an A+ of kind of like, saving the company $4 billion a year. There was leaked things in the Oracle trial that, that Android as a division has made

• 1:00:03Speaker 02

  about $31 billion since being, since being acquired. When you look at the things that have happened at Apple since the next acquisition, it's, it's like a sci-fi story compared to those numbers. Like if, if that was our bar for A+, Apple does like $250 billion a year in revenue now. And like, probably would have gone out of business, number one, if, if, if this acquisition didn't happen. They're the most valuable company in the world, as, as David said. Not only would they have like, gone out of business and now this reverse course, the, the technology that they acquired in NeXT is core and fundamental to every single product that they ship today.

• 1:00:46Speaker 02

  It's the core of the Mac, the core of all the iOS devices, everything we've been talking about. And I mean, developers who, who are listening to this, like, you use Interface Builder and like, Steve demoed Interface Builder as a feature of the NeXT development platform in 1997. And these, these things continue to ship.

• 1:01:01David Rosenthal?

  Yep.

• 1:01:02Speaker 02

  And it, it is the, we were talking about this before the show, Apple has done approximately a trillion dollars in revenue.

• 1:01:10David Rosenthal?

  Since Steve came back.

• 1:01:12Speaker 02

  Since Steve came back.

• 1:01:13David Rosenthal?

  Give or take, give or take a billion. You know, a trillion. It's like GDP style.

• 1:01:17Speaker 02

  I know. I know. And I wish, I wish we had, you know, we have nothing higher to give than an A+, but this is by far the best acquisition we've ever looked at and I, I think probably ever will look at.

• 1:01:29David Rosenthal?

  Yeah. It is hard to argue with that. I mean, what's, what's funny like... It's so, this is such a like illustrates like it's better to be lucky than good, you know, like Gil Amelio completed the single greatest acquisition of all time. Gil Amelio. Who is Gil Amelio? You know, like

• 1:01:49Speaker 02

  He's the George Lazenby of Apple CEOs.

• 1:01:52David Rosenthal?

  Exactly. Like, um, nothing against Gil Amelio, but like, what's so funny is like, he didn't see any of this. Like, this was not some brilliantly crafted move on his part, like brilliantly crafted on Steve's part. But, um, but yeah, I mean, like, this is just the sheer numbers. You cannot argue, I don't think you can argue that this isn't the greatest acquisition of all time. I mean, it literally created a trillion dollars in revenue. Um, like, that's just goofy.

• 1:02:22Speaker 02

  That's like a fake number.

• 1:02:23David Rosenthal?

  That's a fake number. We were texting last night. I was like, I texted Ben, I was like, it's like, you know, they were, you were like,

• 1:02:29Speaker 02

  You mean, we iMessage last night?

• 1:02:30David Rosenthal?

  Yeah, we iMessage last night. And, uh, you know, it's like, Steve changed the game on the field. And it's like, yeah, like, like they were playing football and like, Apple was like behind by like 30 points in the fourth quarter. And Steve like ran a play that scored a thousand point touchdown. Like, you know, you just can't, uh, you can't figure. So yeah, A plus, like for sure. No doubt.

• 1:02:50Speaker 02

  Yeah.

• 1:02:52David Rosenthal?

  Um, all right. Uh,

• 1:02:54Speaker 02

  You want to talk about carve outs?

• 1:02:54David Rosenthal?

  Yeah, let's do carve outs quickly.

• 1:02:56Speaker 02

  Cool.

• 1:02:57David Rosenthal?

  Go ahead.

• 1:02:57Speaker 02

  Uh, this really made me think it was a great podcast I listened to in the last week. Uh, the Ezra Klein Show is one of my favorite podcasts. Um, he interviews people. He's the, uh, creator and editor in chief at Vox, I believe. And he, um, he has great guests on that range from all different walks of life. And of course, I, uh, I listen to the episodes that are particularly nerdy. And so he had Stuart Butterfield on, who is the creator of Flickr and now Slack. And, uh, Stuart's just a phenomenally interesting character with a philosophy background and raises a lot of really interesting points, um, uh, about Slack, about how they got there, about the founder journey, um, a lot about the similarities and differences of, um, you know, he started two companies that started

• 1:03:40Speaker 02

  as a kind of crazy out there, never ending game and ended up being a super widely, uh, widely used consumer product. And talking about sort of how, how they got there. And one of the interesting points that he brought up was that, um,

• 1:03:54Speaker 02

  When they were building what would eventually become Slack, they used IRC and then built all kinds of tools on top of IRC.

• 1:04:01David Rosenthal?

  I didn't know they used IRC.

• 1:04:03Speaker 02

  Yeah, they actually had all this criticism of like, it's just IRC, like it actually is just IRC. So when they were starting out building that.

• 1:04:11David Rosenthal?

  Snapchat's just QR codes.

• 1:04:14Speaker 02

  I know, right?

• 1:04:15David Rosenthal?

  This is the point.

• 1:04:16Speaker 02

  They had a team of developers and it was three technical co-founders and someone else they hired, and they would encounter these problems with chat when it was like, okay, we should build something to make this chat thing a little better. So they'd pull those developers off of product and they'd spend a couple of cycles and make their thing that would become Slack a little bit better and then they'd go back. And then they'd kind of, it had a lot of bake time. They'd use it for like three or four months and then they'd go in and say, ah, we actually need to make it a little bit better. And they'd go and make it a little bit better. And when you compare that sort of product development where a person is solving their own need very, very directly and an acute pain point with the way that product organizations often work, which is like the PM will propose the product and they'll have the spec and there'll be divergent ideas and people will argue over it, there's a lot more ego in

• 1:05:01Speaker 02

  the room. And what Stuart's thrown out there is, you know, when we're just trying to solve our own problems and like, nobody wins by having our internal tool be better, except that sort of everyone wins, there's a lot less ego in the equation. And it's kind of an interesting way to develop software. And, you know, we're not all going to go and set out to start very expensive, never-ending games to create a different product, but it is like, interesting to think about, how can we, how can we kind of spoof that environment where we're all users of the product, we're all using it to solve our own pain point internally and take the ego out of the equation?

• 1:05:36David Rosenthal?

  That's super cool. I gotta listen to that podcast, the Ezra Klein Show?

• 1:05:40Speaker 02

  Ezra Klein Show with guest Stuart Butterfield.

• 1:05:42David Rosenthal?

  Awesome. Mine for the week is this super fun Verge, an eye-opening Verge article, big investigative piece that they did. Last week or the week before on DJI, the drone company, DJI released or announced their new product, the Mavic Pro. This thing is amazing. It's the size of a water bottle and it's a drone and it flies for 27 minutes. You can fly it four and a half miles away from you with rock solid 1080p video. Whoa. You know, it fits in your pocket. Like, it's amazing. But they went and they were like, you know, did this profile, like, what is DJI? It's this company. It's based in Shenzhen.

• 1:06:21David Rosenthal?

  And who are they? How do they hire? And it turns out that DJI runs this Robot Wars competition. So like, you ever seen like BattleBots? Oh, yeah. They do a university competition in China. That's like the most coolest BattleBots you've ever seen. And they get teams from 200 universities in China to create teams. And this is like, you know, NCAA football of China. And then they come, they work, you know, forever. And then they come and they compete. And the winners, DJI just hires them. And so they get like the smartest people. And this is all about like robotics and machine

• 1:07:04David Rosenthal?

  vision and autonomously operated robots. So like, you can, the rules of the game are that you can't see what's happening on the field. You have to rely on your robot sensors and most of it's autonomously driven. And they fight each other in their goals and stuff. And so as a result, DJI now has like, I don't know, like over a thousand PhDs working on computer vision and machine understanding. And that's all baked into stuff like enabling this drone, you know, the size of a water bottle, that you can do stuff like, you can just tap on yourself on the image and then it'll track you. Like, it knows who you are. It can follow you as you run around and it won't crash into anything. It has sense and

• 1:07:45David Rosenthal?

  avoid, all just done with computer vision. And it was like this glimpse of the future. And then when they interviewed Frank Wang, the CEO of DJI, he's like, yeah, this is about robotics. Like drones, like, sorry, like first product, but we're going to build robots that are going to like, do agriculture and like, serve you in restaurants, like all this stuff. This is like the future of robotics. It felt a little bit like, you know, Steve Jobs Xerox PARC moment. It was, it was pretty cool. Nice. So we'll link to it in the show notes. We will. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:08:22Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:08:33David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:08:53Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:09:05David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:09:16Ben Gilbert?

  Well, thank you so much for joining us today. Thanks especially to the GeekWire folks for having us and for setting this all up. Really appreciate it. And if you're new to the show and would like to subscribe, find us on iTunes or your favorite podcast client, tweet at us at @acquiredfm. And yeah, have a good one.