‘It Seems You Have a Different Policy’
Ben Thompson, in a subscriber-only Stratechery update Tuesday:
I got a fun email from former Apple executive, Nest founder, and
one-time Stratechery Interview subject Tony Fadell in response to
yesterday’s Update about Apple suing OpenAI (published with
permission):
Good article as always… This is Apple’s typical tactic to scare
Apple employees — either former or current. I heard this lawsuit
was driven by the Apple board.
Steve threatened to file a lawsuit against Nest for poaching
80-100 Apple employees. He called me, screamed for a while with
lots of accusations. Then I said, “Steve, it’s Apple’s job to
retain its talent, not mine.” He stopped his rant and then we
went on to talk about our families and vacation plans. We kept
hiring…
This sounds about right — and in terms of the Steve Jobs angle,
John Gruber made a compelling case on Dithering that this
lawsuit may very well have been driven by John Ternus channeling
his inner Jobs.
Fadell, of course, is correct that it’s Apple’s job to retain its talent. Recent reporting from Mark Gurman suggests that John Ternus is keenly aware of this, at least as it pertains to Apple’s industrial design team, which has been ground zero for the Apple-to-OpenAI recruitment pipeline. (And the Dithering episode Thompson references is the one we made free-to-listen this week.)
Playing hardball when it comes to poaching is deeply embedded in Apple’s DNA. Steve Jobs hated Apple employees getting poached. In 2005 he sent this email to Adobe CEO Bruce Chizen:
From: Steve Jobs
To: Bruce Chizen
Date: Thursday, May 26, 2005 9:36 AM
Subject: Recruiting
Bruce,
Adobe is recruiting from Apple. They have hired one person already
and are calling lots more. I have a standing policy with our
recruiters that we don’t recruit from Adobe. It seems you have a
different policy. One of us must change our policy. Please let me
know who.
Steve
After one back-and-forth exchange with Jobs, Chizen agreed Adobe would change its policy.
A more contentious example came in August 2007, when Jobs sent an email to Palm CEO Ed Colligan that read:
From: Steve Jobs
To: Ed Colligan
Date: Sunday, August 26, 2007 11:42 am
Subject: Fwd: Your proposal
Ed,
This is not satisfactory to Apple. It is not just a matter of our
employees deciding they want to join Palm. They are being actively
recruited using knowledge supplied by Jon Rubenstein [sic] and Fred
Anderson, with Jon personally participating in the recruiting
process. We must do whatever we can to stop this. I’m sure you
realize the asymmetry in the financial resources of our respective
companies when you say: “We will both just end up paying a lot of
lawyers a lot of money.”
Just for the record, when Siemens sold their handset business to
BenQ they didn’t sell them their essential patents but rather just
gave them a license. The patents they did sell to BenQ are not
that great. We looked at them ourselves when they were for sale. I
guess you guys felt differently and bought them. We are not
concerned about them at all. My advice is to take a look at our
patent portfolio before you make a final decision here.
Steve
That’s a good email. Information dense. My favorite part isn’t the “I’m sure you realize the asymmetry in the financial resources of our respective companies”, although that’s good. It’s the “I guess you guys felt differently and bought them.” Stone cold.
Some backstory on the players:
Colligan, of course, is Mr. “PC guys are not going to just figure this out. They’re not going to just walk in.” He was a business guy who thought product guys didn’t matter in an industry that was about to be taken over by product guys. Sort of like Steve Ballmer, without the charisma, at a much smaller company.
Jon Rubinstein1 was a hardware engineering executive at Apple, overseeing Mac hardware during the comeback years after Steve Jobs returned, then switching to oversee the newly-created iPod division in 2004. (Mac hardware then went under the supervision of a then-little-known operations executive referred to in the announcement as “Timothy Cook”.) Rubinstein left Apple in early 2006, citing exhaustion.2 His departure was announced six months earlier, alongside the promotion of Cook to COO. By 2007 Rubinstein was involved with Palm, by way of Elevation Partners, an investment firm that took a 25 percent stake in Palm. He became CEO of Palm in 2009, tried to turn it around, and then wasted a few years as an executive at HP after HP bought Palm’s carcass thinking it was still alive.
Fred Anderson was Apple’s CFO from March 1996 (almost a year before the NeXT reunification) to June 2004 — the nail-biting, at-times-near-bankruptcy turnaround years. Anderson took the fall, perhaps unfairly, for the stock options backdating scandal under Steve Jobs and, after leaving Apple, paid a $3.5 million fine in a settlement with the SEC. Needless to say, in the summer of 2007, there was bad blood between Anderson and Apple. Anderson, post-Apple, was a co-founder of Elevation Partners and had recruited Rubinstein to join.
Some bad blood. Some former high-level Apple executives putting a team of ex-Apple engineers and designers together to take on the iPhone. History doesn’t repeat, but it often rhymes.
If in addition to thinking that this sounds familiar, you also think these emails sound illegal, you may recall that in 2015, Apple (along with Google, Adobe, Intel, and other companies) paid a collective $415 million penalty to settle a class-action anti-poaching lawsuit. That they settled doesn’t mean they regret playing hardball. Rules are only followed by those who fear the penalties.
Jobs liked to fight, and wasn’t afraid to let his temper show. Tim Cook has a fierce temper and steel nerves, but he arguably only once, ever, showed it in public. I do not think he relishes a fight. He’s a diplomat, not a general. I suspect there’s no undiscovered tranche of Jobs-style stone-cold threatening emails from Cook to competing CEOs.
Steve Jobs’s oft-cited parting advice to Tim Cook was “Don’t ask what I would do. Just do the right thing.” Cook has largely lived by that mantra. But maybe — maybe — by taking that advice to heart, he has at times deliberately steered the company in ways Jobs would not have, just for the sake of steering it in a different way. I think maybe John Ternus is more of a “Hey, what would Steve have done here?” kind of guy.
On the one hand, this lawsuit is a bad look for Apple. It could be perceived that Apple does not think their employees are free to leave and compete against them. On the other hand, Apple could use a booster shot of Steve Jobs’s “us against the world” attitude. It might be wrong to start a war, but it’s never wrong to finish one after being attacked.
What would Steve Jobs do with this OpenAI situation? He’d go to war.3
‘This Is Not Satisfactory to Apple’
The early history of the Macintosh GUI went something like this: When the Macintosh debuted in 1984 it didn’t hit like Apple had hoped it would. (That’s when Steve Jobs was run out of the company.) But by the late 1980s it had caught on, especially in markets like design and desktop publishing. It was the only GUI game in town — command-line DOS PCs were popular, but Windows 1.0 was almost too primitive to believe and Windows 2 wasn’t much better. Apple was certain that the WIMP GUI was the future of computing, and because the Macintosh was the only credible GUI then on the market, Apple owned the future of computing. They were correct about one of those things. Because then came Windows 3, which still sucked — still was ugly, still was terribly designed, still severely limited compared to the Mac in its UI grace and vocabulary of actions — but, it didn’t suck as much. It wasn’t good but it was good enough for the corporate IT market, and the corporate IT market drove the industry at the time.
In the early 1990s John Sculley filed and pushed the infamous “look and feel” lawsuit against Microsoft. One year out from the launch of Windows 95 — which at least looked pretty good4 — Apple’s response was to try to argue in court that they owned the copyright and patent rights to the very concepts of the GUI and the desktop metaphor. The court handed Apple its ass. Apple soon found itself 90 days away from bankruptcy and in desperate need of a new modern operating system, which they themselves had proven incapable of creating. Windows 95 launched with such anticipation that customers lined up overnight outside retail stores to buy it the morning it launched.
That lawsuit was the low point in the entirety of Apple’s history. It was incoherent and, worse, pathetic. Incoherent because Apple was simultaneously arguing in marketing that the Mac remained vastly superior to Windows (“C:\ONGRTLNS.W95”), while arguing in court that Windows was a feature-for-feature clone. It couldn’t be both. I would argue that the former was true — the Mac remained superior in many ways — but actions speak louder than words and Apple’s action was to sue Microsoft and lose. It was pathetic because you know who loses? Losers.
The correct response to the competitive threat of Windows wasn’t to futilely attempt to argue that Windows should not be allowed to exist. It was to make the Macintosh so much better than it already was — to inject so much new innovative insane greatness — that customers would line up overnight to buy Mac software (and watch Apple keynotes). What Microsoft had in 1995 that Apple could not muster was vast customer enthusiasm. That cannot be bought. It cannot be faked. It can only be earned. And you sure as shit cannot stop it with a lawsuit.
Earning that sort of consumer enthusiasm — in spades — is exactly how Steve Jobs pulled Apple out of its nosedive. It took the better part of a decade.
When Apple announced this new lawsuit last week against OpenAI, I wondered, at first, whether it had a whiff of that 1994 look-and-feel loser desperation. Is it Apple’s position that the only way to stop its talent exodus to OpenAI is in court? Upon consideration, I think not. First, it’s not incoherent. There’s no conflict between what Apple is saying about its products or itself as a company that is at odds with this lawsuit. They’re just saying, “Fuck you, you goddamn traitors. You want to fuck with us? We’ll fuck with you.” When you poke a bear — 400 times — you better be ready for the bear to eventually react.
Further, while Apple can only have one CEO at a time, and that CEO remains Tim Cook until September 1, there’s no way that John Ternus doesn’t fully approve of this lawsuit. Cook has gone out of his way to leave Ternus with a clean plate. It would be insane to file this suit six weeks ahead of Ternus taking the helm if Ternus is anything short of fully on board.
I’m not saying it’s a good look for Apple. I’m certainly passing no judgment on the merits of the case, which OpenAI hasn’t yet responded to legally. But it is a very different and much more emotional reaction than we’ve seen under Tim Cook. Those anti-poaching emails Steve Jobs sent to Adobe, Palm, and Google weren’t good looks for Apple either. But that doesn’t mean they were bad for Apple. A bad look can be a good thing. Passion is powerful, and in and of itself, inspiring. This is a passion-fueled lawsuit. I saw some commentators speculate that, already hemorrhaging cash on a daily basis, OpenAI will surely spew some of that in the direction of Cupertino and just settle it. But Apple doesn’t need cash. This is a lawsuit that I believe OpenAI cannot settle, because there is no settlement Apple would accept short of a dissolution of their entire hardware division.
Apple claims in their complaint that the trade-secret chicanery they’ve already documented “is the tip of the iceberg”. If Apple is wrong, and OpenAI has recruited above the board and hired 400 former Apple employees fair and square (or even just mostly fair and mostly square), they have nothing to fear, and John Ternus will look like a petty little jealous bitch, and a feckless one at that. If Apple is right, however, all bets are off. I said earlier that rules are only followed by those who fear the penalties. But some never consider the penalties in the first place because they believe the rules don’t apply to them. Sometimes they find out otherwise.
I’m not saying OpenAI cannot win. I’m saying they can’t get Apple to settle — at least not until Apple is satisfied the whole iceberg has been revealed through discovery. Until then, John Ternus’s offer to Sam Altman is nothing — not even the fee for the gaming license, which he would like Altman to put up.
