Inside Apple: How America's Most Admired--and Secretive--Company Really Works (5 page)

Another highlight of an employee’s first day at Apple is the realization that there’s no one to help you connect your newly issued computer. The assumption is that those smart enough and tech-savvy enough to be hired at Apple can hook themselves up to the network. “Most people are expected to be able to connect to servers,” said an Apple observer. “People say: ‘That shit was hard, but I figured out who to talk to.’ That’s super smart. It’s a clever way to get people to connect with each other.”

Apple does toss one bone to new recruits. An informal “iBuddy” system provides the name of a peer outside the primary team who can serve as a sounding board, someone for the bewildered new employee to ask questions. Many have said they met with their iBuddy once or twice at the beginning of their tenure—before they became too busy to meet again.

Reality sets in at orientation in the form of the security briefing, the one element that no Apple employee forgets. Call it Scared Silent. Borchers, the iPhone marketing executive who had worked at Nike and Nokia before joining Apple, recalled the scene. “Whoever headed up security came in and said, ‘Okay, everybody understands secrecy and security are incredibly importanof bly impt here. Let me just explain why.’ And the rationale is that when Apple launches a product, if it’s been a secret up until the launch, the amount of press and coverage and buzz that you get is hugely valuable to the company. ‘It’s worth millions of
dollars,’ I remember her saying.” So there’s no confusion, the penalty for revealing Apple secrets, intentionally or unintentionally, is clear: swift termination.

The aversion to pre-release publicity is a constant at Apple. Phil Schiller, Apple’s powerful senior vice president of product marketing, has been known to compare an Apple product launch to a blockbuster Hollywood movie debut. There is tremendous emphasis on the product’s first few days, akin to a film’s opening weekend. Releasing details ahead of time would dampen the anticipation. Indeed, Apple “fanboys” camp out in front of Apple stores in anticipation of new Apple product releases in a way that is reminiscent of the lines that once greeted a new installment in the
Lord of the Rings
or
Star Wars
franchises.

This is precisely the effect Schiller desires from the Day One burst of activity. “I still remember him drawing the spike over and over,” said a former Apple executive who worked in Schiller’s organization. The analogy doesn’t translate perfectly, of course. Hollywood plays trailers assiduously in multiple venues in order to stoke demand. Apple’s equivalent is the rumor mill, which anticipates new products, thus providing pre-release publicity free of charge.

Another reason why Apple wants new products to remain in stealth mode until their release dates is so they don’t steal the thunder from existing products. If consumers know exactly what’s coming, they may hold off on a purchase for fear it will be superseded by the next generation. This dulling of demand renders products already on retail shelves or in warehouses awaiting purchase worthless. (Indeed, even imperfect information can dam
age sales: Apple said expectations of a new iPhone in the summer of 2011 hurt sales of the existing iPhone 4.)

Most important, announcing products before they are ready gives the competition time to respond, raises customer expectations, and opens a company up to the carping of critics who are bashing an idea rather than an actual product. Companies who fail to grasp the power of secrecy do so at their peril. Hewlett-Packard committed this product marketing sin in early 2011 by announcing it would have an ill-defined “cloud” offering later in the year. Unfathomably, HP later “pre-announced” the sale of its PC business, inflicting immeasurable damage on a unit that accounted for nearly a third of its sales. (HP’s board fired its CEO, Léo Apotheker, shortly after the announcement about the PC unit.)

Apple secrecy over its product launches is extraordinary largely because so few other companies keep secrets nearly as well. Matt Drance worked at Apple for eight years, first as an engineer, and then as an “evangelist” helping outside developers design products for the Apple platform. He looked on in amazement at the non-Apple approach. “Here’s a shocker,” he wrote on his blog,
Apple Outsider
, after Korean phone maker LG embarrassingly blew an announced product deadline for a new smartphone.

The product you send out the door will probably come later, and with fewer features, than you intended. Time runs out. Unexpected complications arise. Bugs overwhelm the team. Your partner invalidates your plans. Something’s got to givy ds got te.
You need to either take something out, or wait longer. But if you’ve spent months blowing smoke, now
everyone
is waiting longer. The problem with talking smack is you immediately put yourself on the clock. You almost guarantee public disappointment when the product does not ship as (or when) promised. If you just shut your mouth and let the product speak for itself—once you actually
have
a product—then there’s a much better chance for people to be pleasantly surprised. Some companies understand this. Others clearly do not.

Secrecy at Apple is strictly enforced from within. Valley engineers love to swap stories about their work, but Apple engineers have a reputation for keeping to themselves. “I’ve had friends who’ve been reprimanded for talking too much,” reported a former engineer. “It’s best in general not to talk about work.” The mentality makes Apple stand out in the tech world. “Fear is palpable there, including among partners,” said Gina Bianchini, a seasoned Valley entrepreneur and longtime Apple watcher who is CEO of
Mightybell.com
;, an Internet start-up. (The home page of
Mightybell.com
wryly states “Handmade in California,” an homage to the bigger company’s tagline “Designed by Apple in California.”) “No company has that level of fear.” In 2011, she explained Apple’s outsider status with an epiphany from TED, an annual tech-industry thinkfest in Long Beach, California, attended by a who’s who of top executives and investors. “One thing I observed this year at TED: The Apple employee population does not circulate within the Silicon Valley ecosystem. Nobody knows anybody at Apple. The Internet people all know
each other, but Apple lives in its own world. Inside, everyone is so afraid to talk that it’s easier to mix exclusively with each other.”

Another Valley engineer plays in a regular poker game with a team of Apple employees. The understanding is that if Apple comes up at the card table, the subject will be changed. Being fired for blabbing is a well-founded concern. For example, people working on launch events will be given watermarked paper copies of a booklet called
Rules of the Road
that details every milestone leading up to launch day. In the booklet is a legal statement whose message is clear: If this copy ends up in the wrong hands, the responsible party will be fired.

Apple goes to great lengths to maintain discipline. “There were just these things that were kept very, very secret,” said a former senior executive. “There was a project we were working on, where we put in special locks on one of the floors and put up a couple of extra doors to hide away a team that was working on stuff. You had to sign extra-special agreements acknowledging that you were working on a super-secret project and you wouldn’t talk about it to anyone—not your wife, not your kids.”

The stress from such secret keeping becomes too much for some. Jobs made a habit of personally conveying to employees the confidentiality of all-company broadcasts. Recalled one ex-employee: “He’d say, ‘Anything disclosed from this meeting will result not just in termination but in the prosecution to the fullest extent that our lawyers can.’ This made me very uncomfortable. You have to watch everything you do. I’d have nightmares.”

Visitors are allowed at Apple offices, but they are kept under tight wraps. Some report being shocked at the
unwillingness of employees to leave their guests unattended for even a few moments ifonew momen the cafeteria. A tech-industry executive visiting a friend in mid-2011 was asked not to post anything to Twitter about the visit or to “check in” at the popular website Foursquare, which publishes a user’s location. In Apple’s view of the world, simply revealing that someone visited Apple on undisclosed business could lead to divulging something about Apple’s agenda. (One wonders if Apple will discourage the use of its “Find My Friends” feature, added to the iPhone’s software in late 2011, a feature the company described as a “temporary location-sharing” service.)

For the most part, Apple counts on its employees to censor themselves. But in some cases, it pays attention to what employees say when they are out of the office—even when they’ve only walked across the street for a beer. BJ’s Restaurant and Brewhouse is tucked so close to Apple’s Cupertino campus that insiders jokingly refer to it as IL-7, for “Infinite Loop 7,” a building that doesn’t exist. Company lore holds that plainclothes Apple security agents lurk near the bar at BJ’s and that employees have been fired for loose talk there. It doesn’t quite matter if the yarn is true or apocryphal. The fact that employees repeat it serves the purpose.

S
teve Jobs once said that not talking about the inner workings of the company is something he borrowed from Walt Disney. The creator of the original Magic Kingdom felt the magic the public attributed to Disney would be diminished by excessive focus on what went on behind the scenes. What’s more, Disney enforced strict internal
secrecy. When it was planning Walt Disney World in Florida in the 1960s, for example, Disney formed a committee to work on a “Project X.” Internal memos about the plans for the new theme park were numbered so they could be tracked, according to Neal Gabler’s exhaustive biography,
Walt Disney: The Triumph of the American Imagination
.

It’s one thing to pressure employees to keep information from falling into the wrong hands. Apple’s twist is that those wrong hands happen to include one’s own colleagues. It is, in the words of one former employee, “the ultimate need-to-know culture.” Teams are purposely kept apart, sometimes because they are unknowingly competing against one another, but more often because the Apple way is to mind one’s own business. This has a side benefit that is striking in its simplicity: Employees kept from butting into one another’s affairs will have more time to focus on their own work. Below a certain level, it is difficult to play politics at Apple, because the average employee doesn’t have enough information to get into the game. Like a horse fitted with blinders, the Apple employee charges forward to the exclusion of all else.

Apple created an elaborate and unnerving system to enforce internal secrecy. It revolves around the concept of disclosure. To discuss a topic at a meeting, one must be sure everyone in the room is “disclosed” on the topic, meaning they have been made privy to certain secrets. “You can’t talk about any secret until you’re sure everyone is disclosed on it,” said an ex-employee. As a result, Apple employees and their projects are pieces of a puzzle. The snapshot of the completed puzzle is known only at the highest reaches of the organization. It calls to mind the cells a resistance organization plants behind enemy
lines, whose members aren’t given information that could incriminate a comrade. Jon Rubinstein, formerly Apple’s senior hardware executive, once deployed the comparison in a less flattering but equally effective manner. “We have cells, like a terrorist organization,” he told
Businessweek
simssweek

As with any secret society, trustworthiness is not assumed. New additions to a group are kept out of the loop for a period of time, at least until they have earned their manager’s trust. Employees tell stories of working on “core technology” rather than actual products or of not being allowed to sit near the rest of the group for a months-long probation period. Organization charts, typical fare at most big companies, don’t exist at Apple. That is information employees don’t need and outsiders shouldn’t have. (When
Fortune
magazine printed an Apple org chart of its own design in May 2011, visitors to Apple told tales of employees becoming nervous merely being seen with a printed copy of it on their desks.) Employees do have one important source of information, however: the internal Apple Directory. This electronic guide lists each employee’s name, group, manager, location, email, and phone number, and might include a photograph.

Apple employees don’t need an organization chart to know who is powerful, of course. The executive team, a small council of advisers to the CEO, runs the company, assisted by a cadre of fewer than one hundred vice presidents. But rank doesn’t always confer status at Apple. Everyone is aware of an unwritten caste system. The industrial designers are untouchable, as were, until his death, a tiny group of engineers who had worked with Steve Jobs for years, some dating to his first stint at Apple. A small
group of engineers carries the title of DEST, distinguished engineer/scientist, technologist. These are individual contributors with clout in the organization but no management responsibilities. Otherwise, status fluctuates with the prominence of the products on which one works. As the success of the iPhone and iPad grew, the coolest faction of the company was the software engineers working on Apple’s mobile operating system software, known as iOS. Hardware engineers and, grudgingly, product marketers connected with the devices ranked high in the pecking order, followed by people in the iTunes, iCloud, and other online services organizations. Employees associated primarily with the Macintosh, once the cocks of the roost, were considered second-rate in the Apple hierarchy by this time. In terms of corporate coolness, functions such as sales, human resources, and customer service wouldn’t even rate.

With silos being the norm at Apple, the surprise is the silos within silos. “There are no open doors at Apple,” said one former employee. Security badges allow an employee into only certain areas, and it isn’t uncommon for employees to be able to go places their boss cannot. Some areas are even more secretive than others, and this has nothing to do with special projects. An example is the famous industrial design lab where Apple’s designers work. So restrictive is the access to the lab that few Apple employees have ever seen inside its doors.