His handpicked board in fact doted on him. So they decided to give him another huge grant in August 2001, when the stock price was just under $18. The problem was that he worried about his image, especially after the Fortune article. He did not want to accept the new grant unless the board canceled his old options at the same time. But to do so would have adverse accounting implications, because it would be effectively repricing the old options. That would require taking a charge against current earnings. The only way to avoid this “variable accounting” problem was to cancel his old options at least six months after his new options were granted. In addition, Jobs started haggling with the board over how quickly the new options would vest.
It was not until mid-December 2001 that Jobs finally agreed to take the new options and, braving the optics, wait six months before his old ones were canceled. But by then the stock price (adjusting for a split) had gone up $3, to about $21. If the strike price of the new options was set at that new level, each would have thus been $3 less valuable. So Apple’s legal counsel, Nancy Heinen, looked over the recent stock prices and helped to choose an October date, when the stock was $18.30. She also approved a set of minutes that purported to show that the board had approved the grant on that date. The backdating was potentially worth $20 million to Jobs.
Once again Jobs would end up suffering bad publicity without making a penny. Apple’s stock price kept dropping, and by March 2003 even the new options were so low that Jobs traded in all of them for an outright grant of $75 million worth of shares, which amounted to about $8.3 million for each year he had worked since coming back in 1997 through the end of the vesting in 2006.
None of this would have mattered much if the Wall Street Journal had not run a powerful series in 2006 about backdated stock options. Apple wasn’t mentioned, but its board appointed a committee of three members—Al Gore, Eric Schmidt of Google, and Jerry York, formerly of IBM and Chrysler—to investigate its own practices. “We decided at the outset that if Steve was at fault we would let the chips fall where they may,” Gore recalled. The committee uncovered some irregularities with Jobs’s grants and those of other top officers, and it immediately turned the findings over to the SEC. Jobs was aware of the backdating, the report said, but he ended up not benefiting financially. (A board committee at Disney also found that similar backdating had occurred at Pixar when Jobs was in charge.)
The laws governing such backdating practices were murky, especially since no one at Apple ended up benefiting from the dubiously dated grants. The SEC took eight months to do its own investigation, and in April 2007 it announced that it would not bring action against Apple “based in part on its swift, extensive, and extraordinary cooperation in the Commission’s investigation [and its] prompt self-reporting.” Although the SEC found that Jobs had been aware of the backdating, it cleared him of any misconduct because he “was unaware of the accounting implications.”
The SEC did file complaints against Apple’s former chief financial officer Fred Anderson, who was on the board, and general counsel Nancy Heinen. Anderson, a retired Air Force captain with a square jaw and deep integrity, had been a wise and calming influence at Apple, where he was known for his ability to control Jobs’s tantrums. He was cited by the SEC only for “negligence” regarding the paperwork for one set of the grants (not the ones that went to Jobs), and the SEC allowed him to continue to serve on corporate boards. Nevertheless he ended up resigning from the Apple board.
Anderson thought he had been made a scapegoat. When he settled with the SEC, his lawyer issued a statement that cast some of the blame on Jobs. It said that Anderson had “cautioned Mr. Jobs that the executive team grant would have to be priced on the date of the actual board agreement or there could be an accounting charge,” and that Jobs replied “that the board had given its prior approval.”
Heinen, who initially fought the charges against her, ended up settling and paying a $2.2 million fine, without admitting or denying any wrongdoing. Likewise the company itself settled a shareholders’ lawsuit by agreeing to pay $14 million in damages.
“Rarely have so many avoidable problems been created by one man’s obsession with his own image,” Joe Nocera wrote in the New York Times. “Then again, this is Steve Jobs we’re talking about.” Contemptuous of rules and regulations, he created a climate that made it hard for someone like Heinen to buck his wishes. At times, great creativity occurred. But people around him could pay a price. On compensation issues in particular, the difficulty of defying his whims drove some good people to make some bad mistakes.
The compensation issue in some ways echoed Jobs’s parking quirk. He refused such trappings as having a “Reserved for CEO” spot, but he assumed for himself the right to park in the handicapped spaces. He wanted to be seen (both by himself and by others) as someone willing to work for $1 a year, but he also wanted to have huge stock grants bestowed upon him. Jangling inside him were the contradictions of a counterculture rebel turned business entrepreneur, someone who wanted to believe that he had turned on and tuned in without having sold out and cashed in.
CHAPTER THIRTY-FIVE
ROUND ONE
Memento Mori
At fifty (in center), with Eve and Laurene (behind cake), Eddy Cue (by window), John Lasseter (with camera), and Lee Clow (with beard)
Cancer
Jobs would later speculate that his cancer was caused by the grueling year that he spent, starting in 1997, running both Apple and Pixar. As he drove back and forth, he had developed kidney stones and other ailments, and he would come home so exhausted that he could barely speak. “That’s probably when this cancer started growing, because my immune system was pretty weak at that time,” he said.
There is no evidence that exhaustion or a weak immune system causes cancer. However, his kidney problems did indirectly lead to the detection of his cancer. In October 2003 he happened to run into the urologist who had treated him, and she asked him to get a CAT scan of his kidneys and ureter. It had been five years since his last scan. The new scan revealed nothing wrong with his kidneys, but it did show a shadow on his pancreas, so she asked him to schedule a pancreatic study. He didn’t. As usual, he was good at willfully ignoring inputs that he did not want to process. But she persisted. “Steve, this is really important,” she said a few days later. “You need to do this.”
Her tone of voice was urgent enough that he complied. He went in early one morning, and after studying the scan, the doctors met with him to deliver the bad news that it was a tumor. One of them even suggested that he should make sure his affairs were in order, a polite way of saying that he might have only months to live. That evening they performed a biopsy by sticking an endoscope down his throat and into his intestines so they could put a needle into his pancreas and get a few cells from the tumor. Powell remembers her husband’s doctors tearing up with joy. It turned out to be an islet cell or pancreatic neuroendocrine tumor, which is rare but slower growing and thus more likely to be treated successfully. He was lucky that it was detected so early—as the by-product of a routine kidney screening—and thus could be surgically removed before it had definitely spread.
One of his first calls was to Larry Brilliant, whom he first met at the ashram in India. “Do you still believe in God?” Jobs asked him. Brilliant said that he did, and they discussed the many paths to God that had been taught by the Hindu guru Neem Karoli Baba. Then Brilliant asked Jobs what was wrong. “I have cancer,” Jobs replied.
Art Levinson, who was on Apple’s board, was chairing the board meeting of his own company, Genentech, when his cell phone rang and Jobs’s name appeared on the screen. As soon as there was a break, Levinson called him back and heard the news of the tumor. He had a background in cancer biology, and his firm made cancer treatment drugs, so he became an advisor. So did Andy Grove of Intel, who had fought and beaten prostate cancer. Jobs called him that Sunday, and he drove right over to Jobs’s house and stayed for two hours.
To the horror of his fri
ends and wife, Jobs decided not to have surgery to remove the tumor, which was the only accepted medical approach. “I really didn’t want them to open up my body, so I tried to see if a few other things would work,” he told me years later with a hint of regret. Specifically, he kept to a strict vegan diet, with large quantities of fresh carrot and fruit juices. To that regimen he added acupuncture, a variety of herbal remedies, and occasionally a few other treatments he found on the Internet or by consulting people around the country, including a psychic. For a while he was under the sway of a doctor who operated a natural healing clinic in southern California that stressed the use of organic herbs, juice fasts, frequent bowel cleansings, hydrotherapy, and the expression of all negative feelings.
“The big thing was that he really was not ready to open his body,” Powell recalled. “It’s hard to push someone to do that.” She did try, however. “The body exists to serve the spirit,” she argued. His friends repeatedly urged him to have surgery and chemotherapy. “Steve talked to me when he was trying to cure himself by eating horseshit and horseshit roots, and I told him he was crazy,” Grove recalled. Levinson said that he “pleaded every day” with Jobs and found it “enormously frustrating that I just couldn’t connect with him.” The fights almost ruined their friendship. “That’s not how cancer works,” Levinson insisted when Jobs discussed his diet treatments. “You cannot solve this without surgery and blasting it with toxic chemicals.” Even the diet doctor Dean Ornish, a pioneer in alternative and nutritional methods of treating diseases, took a long walk with Jobs and insisted that sometimes traditional methods were the right option. “You really need surgery,” Ornish told him.
Jobs’s obstinacy lasted for nine months after his October 2003 diagnosis. Part of it was the product of the dark side of his reality distortion field. “I think Steve has such a strong desire for the world to be a certain way that he wills it to be that way,” Levinson speculated. “Sometimes it doesn’t work. Reality is unforgiving.” The flip side of his wondrous ability to focus was his fearsome willingness to filter out things he did not wish to deal with. This led to many of his great breakthroughs, but it could also backfire. “He has that ability to ignore stuff he doesn’t want to confront,” Powell explained. “It’s just the way he’s wired.” Whether it involved personal topics relating to his family and marriage, or professional issues relating to engineering or business challenges, or health and cancer issues, Jobs sometimes simply didn’t engage.
In the past he had been rewarded for what his wife called his “magical thinking”—his assumption that he could will things to be as he wanted. But cancer does not work that way. Powell enlisted everyone close to him, including his sister Mona Simpson, to try to bring him around. In July 2004 a CAT scan showed that the tumor had grown and possibly spread. It forced him to face reality.
Jobs underwent surgery on Saturday, July 31, 2004, at Stanford University Medical Center. He did not have a full “Whipple procedure,” which removes a large part of the stomach and intestine as well as the pancreas. The doctors considered it, but decided instead on a less radical approach, a modified Whipple that removed only part of the pancreas.
Jobs sent employees an email the next day, using his PowerBook hooked up to an AirPort Express in his hospital room, announcing his surgery. He assured them that the type of pancreatic cancer he had “represents about 1% of the total cases of pancreatic cancer diagnosed each year, and can be cured by surgical removal if diagnosed in time (mine was).” He said he would not require chemotherapy or radiation treatment, and he planned to return to work in September. “While I’m out, I’ve asked Tim Cook to be responsible for Apple’s day to day operations, so we shouldn’t miss a beat. I’m sure I’ll be calling some of you way too much in August, and I look forward to seeing you in September.”
One side effect of the operation would become a problem for Jobs because of his obsessive diets and the weird routines of purging and fasting that he had practiced since he was a teenager. Because the pancreas provides the enzymes that allow the stomach to digest food and absorb nutrients, removing part of the organ makes it hard to get enough protein. Patients are advised to make sure that they eat frequent meals and maintain a nutritious diet, with a wide variety of meat and fish proteins as well as full-fat milk products. Jobs had never done this, and he never would.
He stayed in the hospital for two weeks and then struggled to regain his strength. “I remember coming back and sitting in that rocking chair,” he told me, pointing to one in his living room. “I didn’t have the energy to walk. It took me a week before I could walk around the block. I pushed myself to walk to the gardens a few blocks away, then further, and within six months I had my energy almost back.”
Unfortunately the cancer had spread. During the operation the doctors found three liver metastases. Had they operated nine months earlier, they might have caught it before it spread, though they would never know for sure. Jobs began chemotherapy treatments, which further complicated his eating challenges.
The Stanford Commencement
Jobs kept his continuing battle with the cancer secret—he told everyone that he had been “cured”—just as he had kept quiet about his diagnosis in October 2003. Such secrecy was not surprising; it was part of his nature. What was more surprising was his decision to speak very personally and publicly about his cancer diagnosis. Although he rarely gave speeches other than his staged product demonstrations, he accepted Stanford’s invitation to give its June 2005 commencement address. He was in a reflective mood after his health scare and turning fifty.
For help with the speech, he called the brilliant scriptwriter Aaron Sorkin (A Few Good Men, The West Wing). Jobs sent him some thoughts. “That was in February, and I heard nothing, so I ping him again in April, and he says, ‘Oh, yeah,’ and I send him a few more thoughts,” Jobs recounted. “I finally get him on the phone, and he keeps saying ‘Yeah,’ but finally it’s the beginning of June, and he never sent me anything.”
Jobs got panicky. He had always written his own presentations, but he had never done a commencement address. One night he sat down and wrote the speech himself, with no help other than bouncing ideas off his wife. As a result, it turned out to be a very intimate and simple talk, with the unadorned and personal feel of a perfect Steve Jobs product.
Alex Haley once said that the best way to begin a speech is “Let me tell you a story.” Nobody is eager for a lecture, but everybody loves a story. And that was the approach Jobs chose. “Today, I want to tell you three stories from my life,” he began. “That’s it. No big deal. Just three stories.”
The first was about dropping out of Reed College. “I could stop taking the required classes that didn’t interest me, and begin dropping in on the ones that looked far more interesting.” The second was about how getting fired from Apple turned out to be good for him. “The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything.” The students were unusually attentive, despite a plane circling overhead with a banner that exhorted “recycle all e-waste,” and it was his third tale that enthralled them. It was about being diagnosed with cancer and the awareness it brought:
Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything—all external expectations, all pride, all fear of embarrassment or failure—these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.
The artful minimalism of the speech gave it simplicity, purity, and charm. Search where you will, from anthologies to YouTube, and you won’t find a better commencement address. Others may have been more important, such as George Marshall’s at Harvard in 1947 announcing a plan to rebuild Europe, but none has had more grace.
A Lion
at Fifty
For his thirtieth and fortieth birthdays, Jobs had celebrated with the stars of Silicon Valley and other assorted celebrities. But when he turned fifty in 2005, after coming back from his cancer surgery, the surprise party that his wife arranged featured mainly his closest friends and professional colleagues. It was at the comfortable San Francisco home of some friends, and the great chef Alice Waters prepared salmon from Scotland along with couscous and a variety of garden-raised vegetables. “It was beautifully warm and intimate, with everyone and the kids all able to sit in one room,” Waters recalled. The entertainment was comedy improvisation done by the cast of Whose Line Is It Anyway? Jobs’s close friend Mike Slade was there, along with colleagues from Apple and Pixar, including Lasseter, Cook, Schiller, Clow, Rubinstein, and Tevanian.
Cook had done a good job running the company during Jobs’s absence. He kept Apple’s temperamental actors performing well, and he avoided stepping into the limelight. Jobs liked strong personalities, up to a point, but he had never truly empowered a deputy or shared the stage. It was hard to be his understudy. You were damned if you shone, and damned if you didn’t. Cook had managed to navigate those shoals. He was calm and decisive when in command, but he didn’t seek any notice or acclaim for himself. “Some people resent the fact that Steve gets credit for everything, but I’ve never given a rat’s ass about that,” said Cook. “Frankly speaking, I’d prefer my name never be in the paper.”
When Jobs returned from his medical leave, Cook resumed his role as the person who kept the moving parts at Apple tightly meshed and remained unfazed by Jobs’s tantrums. “What I learned about Steve was that people mistook some of his comments as ranting or negativism, but it was really just the way he showed passion. So that’s how I processed it, and I never took issues personally.” In many ways he was Jobs’s mirror image: unflappable, steady in his moods, and (as the thesaurus in the NeXT would have noted) saturnine rather than mercurial. “I’m a good negotiator, but he’s probably better than me because he’s a cool customer,” Jobs later said. After adding a bit more praise, he quietly added a reservation, one that was serious but rarely spoken: “But Tim’s not a product person, per se.”