March 5 2008: 1:03 PM EST
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The trouble with Steve Jobs

Jobs likes to make his own rules, whether the topic is computers, stock options, or even pancreatic cancer. The same traits that make him a great CEO drive him to put his company, and his investors, at risk.

By Peter Elkind, editor at large

Apple CEO Steve Jobs mingled with the faithful at this year's Macworld Expo.
Jobs' artistic sensibility extends to everything the company does, including its memorable advertising campaigns.
The trouble with Jobs
Stock options or cancer treatments, Apple's CEO makes his own rules which could put his company and investors at risk.
Steve Jobs' journey
See key events for Apple and its CEO, from the company's start in 1976, when the Apple I was introduced, to its ascendance today. View the timeline

(Fortune Magazine) -- In October 2003, as the computer world buzzed about what cool new gadget he would introduce next, Apple CEO Steve Jobs - then presiding over the most dramatic corporate turnaround in the history of Silicon Valley - found himself confronting a life-and-death decision.

During a routine abdominal scan, doctors had discovered a tumor growing in his pancreas. While a diagnosis of pancreatic cancer is often tantamount to a swiftly executed death sentence, a biopsy revealed that Jobs had a rare - and treatable - form of the disease. If the tumor were surgically removed, Jobs' prognosis would be promising: The vast majority of those who underwent the operation survived at least ten years.

Yet to the horror of the tiny circle of intimates in whom he'd confided, Jobs was considering not having the surgery at all. A Buddhist and vegetarian, the Apple (AAPL, Fortune 500) CEO was skeptical of mainstream medicine. Jobs decided to employ alternative methods to treat his pancreatic cancer, hoping to avoid the operation through a special diet - a course of action that hasn't been disclosed until now.

For nine months Jobs pursued this approach, as Apple's board of directors and executive team secretly agonized over the situation - and whether the company needed to disclose anything about its CEO's health to investors. Jobs, after all, was widely viewed as Apple's irreplaceable leader, personally responsible for everything from the creation of the iPod to the selection of the chef in the company cafeteria. News of his illness, especially with an uncertain outcome, would surely send the company's stock reeling. The board decided to say nothing, after seeking advice on its obligations from two outside lawyers, who agreed it could remain silent.

In the end, Jobs had the surgery, on Saturday, July 31, 2004, at Stanford University Medical Center in Palo Alto, near his home. The revelation of his brush with death remained - like everything involving Jobs and Apple - a tightly controlled affair. In fact, nary a word got out until Jobs' tumor had been removed. The next day, in an upbeat e-mail to employees later released to the press, he announced that he had faced a life-threatening illness and was "cured." Jobs assured everyone that he'd be back on the job in September. When trading resumed a day after the announcement, Apple shares fell just 2.4%.

Apple entertained no further questions about Jobs' health, citing the CEO's need for privacy. No one learned just how long Jobs had been sick - or that he had contemplated not having the surgery at all. "It was very traumatic for all of us," recalls one of those in whom Jobs confided, speaking on condition of anonymity because of the topic's sensitivity. "We all really care about Steve, and it was a serious risk for the company as well. It was a very emotional and very difficult time. This was one page in the adventure."


The Steve Jobs adventure: By now it's one of the most remarkable stories in business. When Jobs returned in 1997 to Apple - then facing its own near-death experience - he arrived with a tarnished legend. He was, of course, the charismatic boy wonder who at age 21 had co-founded Apple with Steve Wozniak in his parents' garage back in 1976. He was worth $200 million by 25, made the cover of Time magazine at 26, and was thrown out of the company at age 30, in 1985.

What he's accomplished in the past decade has not just restored Jobs to the Silicon Valley pantheon but elevated him to the status of superstar. On the brink of bankruptcy when he returned, Apple now has a market value of $108 billion - more than Merck, McDonald's, or Goldman Sachs; $1,000 invested in Apple shares on the day Jobs took over is worth about $36,000 today. And it isn't just Apple and its investors that have benefited from Jobs' executive skill. Pixar, where he served simultaneously as CEO, has come to dominate the animation business, churning out megahits like "Finding Nemo" and "The Incredibles" that prompted Disney (DIS, Fortune 500) to buy the company in 2006 for $7.5 billion. (Jobs now owns 7.3% of Disney, worth $4.6 billion, in addition to Apple stock worth $682 million.)

No less an authority than Jack Welch has called Jobs "the most successful CEO today." Jobs, at age 53, has even become a global cultural guru, shaping what entertainment we watch, how we listen to music, and what sort of objects we use to work and play. He has changed the game for entire industries.

Jobs is also among the most controversial figures in business. He oozes smug superiority, lacing his public comments with ridicule of Apple's rivals, which he casts as mediocre, evil, and - worst of all - lacking taste. No CEO is more willful, or more brazen, at making his own rules, in ways both good and bad. And no CEO is more personally identified with - and controlling of - the day-to-day affairs of his business. Even now, Jobs views himself less as a mogul than as an artist, Apple's creator-in-chief. He has listed himself as "co-inventor" on 103 separate Apple patents, everything from the user interface for the iPod to the support system for the glass staircase used in Apple's dazzling retail stores.

Jobs' product introductions are semiannual events, complete with packed houses, breathless blog dispatches, and celebrity appearances - two hours of marketing performance art. Who else could have the nation panting in anticipation of a cellphone? After watching Jobs unveil the iPhone, Alan Kay, a personal computer pioneer who has worked with him, put it this way: "Steve understands desire."

Jobs' personal abuses are also legend: He parks his Mercedes in handicapped spaces, periodically reduces subordinates to tears, and fires employees in angry tantrums. Yet many of his top deputies at Apple have worked with him for years, and even some of those who have departed say that although it's often brutal and Jobs hogs the credit, they've never done better work.

How Jobs pulls all this off - how this bundle of conflicting behaviors can coexist, to spectacular effect, in a single human being - remains a puzzle, even though more than a dozen books have been written about him. Jobs is notoriously secretive and controlling when it comes to his relationship with the press, and he tries to stifle stories that haven't received his blessing with threats and cajolery.

This story is one of them. While Jobs agreed to be interviewed by my colleague Betsy Morris on the subject of Apple's selection as America's Most Admired Company (see What Makes Apple Golden), he refused to comment for this story, which had been in the works for months. Dozens of people who work or have worked with Jobs did agree to extensive interviews, most insisting on not being named (even if praising him) for fear of incurring his anger.

History, of course, is littered with tales of combustible geniuses. What's astounding is how well Jobs has performed atop a large public company - by its nature a collaborative enterprise. Pondering this issue, Stanford management science professor Robert Sutton discussed Jobs in his bestselling 2007 book, "The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't." "As soon as people heard I was writing a book on assholes, they would come up to me and start telling a Steve Jobs story," says Sutton. "The degree to which people in Silicon Valley are afraid of Jobs is unbelievable. He made people feel terrible; he made people cry. But he was almost always right, and even when he was wrong, it was so creative it was still amazing." Says Palo Alto venture capitalist Jean-Louis Gasse, a former Apple executive who once worked with Jobs: "Democracies don't make great products. You need a competent tyrant."

Fair enough. But it is also important to understand the ways in which Jobs' attempts to manipulate his world pose risks for Apple - and thus its investors. They are evident in his difficult partnerships with music and television companies, which chafe at his insistence on setting uniform prices for their songs and videos on iTunes; in the real story of his battle with cancer; and in his deployment of stock options at Apple and Pixar, which exposed both companies to backdating scandals.

Jobs himself judges the world in binary terms. Products, in his view, are "insanely great" or "shit." One is facing death from cancer or "cured." Subordinates are geniuses or "bozos," indispensable or no longer relevant. People in his orbit regularly flip, at a second's notice, from one category to another, in what early Apple colleagues came to call his "hero-shithead roller coaster."

Jobs' own story is far more complex. And in the 26 years that Fortune has been ranking America's Most Admired Companies, never has the corporation at the head of the list so closely resembled a one-man show. Last year Piper Jaffray analyst Gene Munster opined that if Jobs were forced out as a result of the backdating scandal, Apple's shares would drop 20% overnight. At the company's current market cap, that would make him Apple's $22 billion man. "Steve Jobs running the company from jail would be better for the stock price than Steve Jobs not being CEO," muses Sutton.

Jobs is hardly likely to be forced out, as we shall see. On the contrary, he's likely to continue taking Apple - and its customers, competitors, and investors - on a wild ride to places they couldn't have imagined.

It may be instructive, then, to consider what drives the Steve Jobs adventure.

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