Extravagant expenditures soon became standard operating procedure at NeXT, especially when it came to the company’s headquarters. The Palo Alto offices featured expensive, custom-designed furnishings, Ansel Adams prints, and a kitchen with granite countertops. And when NeXT moved into bigger offices in Redwood City in 1989, no expense was spared. The lobby featured long, lush leather couches imported from Italy. The crowning touch was a floating staircase designed by world-famous architect I. M. Pei, who designed the glass pyramid entrance to the Louvre that opened that year. The staircase was a ravishing predecessor to the showy stairways that now grace some of Apple’s retail stores.
Steve’s spendthrift ways extended throughout the company. “Our information system,” he told me proudly in 1989, “is designed for a company with $1 billion in annual sales.” (NeXT’s 1989 sales would top out at just a few million dollars, leaving the company at least one hundred times short of that $1 billion mark.) But he justified his spending by explaining that he was creating the infrastructure of a Fortune 500 company from the ground up. Unlike Apple, he told me, “We were able to make the investment up front to do it right the first time. Let’s get the best people we can find, and let’s brainstorm and strategize, but let’s just do it once. And let’s have it be good enough to last for a number of years. It will take a little more startup expense, but it will pay many, many times over in the coming years.”
The centerpiece of Steve’s spending was a state-of-the-art manufacturing facility to churn out NeXT computers—a factory designed to be the envy of the world. The plant, fifteen miles across the bay from Redwood City, in Fremont, was small, but it was a marvel. Steve took me on a tour of the place, just before it went into production in 1989. The factory was nearly empty; Steve explained that the place had been designed to operate with few people. He took great pride in every detail, pointing out the robots and machines that had been repainted in the tones of gray that he had specified. The production area was on a single floor about the size of a large restaurant. With no one around on that quiet day, it seemed like something of a Potemkin factory—an empty shell for show—but Steve claimed it had the capacity to produce up to 600 machines a day, which was the equivalent of, yes, $1 billion worth of hardware in a year.
The place had been laid out by an army of manufacturing system engineers—for a while, there were more PhDs working for NeXT’s manufacturing division than for its software arm. It would be flexible, capable of steadily serving a just-in-time manufacturing scheme. The robots would handle almost everything that required great dexterity, including some of the assembly tasks that Woz and Jobs had performed themselves when making the Apple 1: they placed the chips on the circuit boards, soldered everything into place, and tested and measured to make sure everything was right. A human would step in to do one final check, and would handle the final assembly and pop boards into their appropriate slots inside the magnesium cube.
Steve was right—the place was indeed a paragon. This was at a time when Japanese manufacturers had chased most American companies out of the semiconductor fabrication business and were held up as object lessons for automakers in Detroit. He hoped that his pristine factory would give the world glittery proof that American high-tech manufacturers could still excel. More important, he felt that the seeming perfection of the place and his obsessive focus on its details sent a message to employees: if you aim for perfection in everything you do, you’ll achieve greater results than you could ever imagine.
It was a lovely principle. But it didn’t come close to justifying spending outrageous sums on a state-of-the-art factory to build computers for which there was not yet any demand. Steve could easily have outsourced manufacturing; by the late 1980s the computer industry had grown to include a host of contract manufacturers right there in Silicon Valley that could build a highly demanding product like the NeXT computer. The cost would have been far less. For all its beauty, from the lush landscaping out front to the meticulously crafted wheeled tables on which the computer components rolled through the assembly process, the NeXT factory turned out to be a sinkhole. Forget producing 600 computers a day: the factory never produced more than 600 machines in a single month.
IN THEORY, THERE’S nothing wrong with a state-of-the-art factory, a beautiful office for your employees, or a fancy logo. It’s just that in decision after decision, Steve failed to account for the trade-offs that accompanied his fanciful choices. Steve couldn’t distinguish between the extraneous and the critical. As CEO of a fledgling company, that was his key responsibility. At NeXT, he utterly failed to do this.
Steve decided early on, for instance, that the NeXT computer should have an optical disk drive for storing information, rather than a standard hard drive. The optical disk drive had two great advantages: its disks could hold up to two hundred times as much information as the standard hard drive of the time, and they were removable. Steve heavily promoted the idea that regular folks could essentially carry around their life in data, moving from one computer to another armed with their own personal optical disk. It seemed that he wanted to enable the utopian idea of a mobile population carrying its key information with it. (Today, of course, we can access much more data from our smartphones or tablets, but the data resides in the so-called “cloud.”) However, the optical option had many problems, primarily that its drives retrieved information from the disks very slowly. Steve had chosen a vision—the potential of abundant storage—over the customers’ real need—the convenience of data speedily available. When the NeXT computer did finally hit retail stores in late 1989, competitors like Sun happily cast it as a slowpoke compared with their hard-drive-based machines.
Many of the features of the NeXT computer seemed intended primarily to dazzle. Like a standard-issue PC, the NeXT computer consisted of four devices: a keyboard, a mouse, a cube containing the computer, and the monitor. Its designer was Hartmut Esslinger, the German industrial aesthete who had worked with Steve on the first Mac. Esslinger was another expensive choice, a world-class designer who was just as uncompromising as Steve. He ordered up a true cube, with sharp right angles as opposed to the infinitesimal curves found on the edges of the machines from other manufacturers, including Apple. Those curves on the conventional machines weren’t so much an aesthetic choice; they were a concession to manufacturing realities. Creating a perfect cube with true sharp angles required expensive custom molds, which could only come from a specialty metals shop in Chicago. Esslinger and Jobs also insisted that the case be made from magnesium, which is far more expensive than plastic. Using magnesium was a choice, like Jobs’s selection of cast aluminum for the Apple III’s case eight years earlier, that had a significant downside. Magnesium had certain advantages over plastic, but it was much harder to machine perfectly, leading to more flaws in the manufacturing process.
Designing a computer laden with details like these made building it for $3,000 absolutely impossible. The flourishes just added up too fast. “The business plan,” says Lewin, “called for a cube whose material cost was fifty dollars, without the motherboard. Steve went off on this fantasy of wanting the paint job to be of the same quality as some titanium tone arm he’d seen on a four-thousand-dollar turntable. So he sends three people off to General Motors to learn how to do paint that way—Perot had been on the board there, and GM knew how to paint metal better than anyone in the world. And so we figured out how to do that. But that cube that was supposed to cost fifty dollars all-in? The paint job alone cost fifty dollars. It was really fantasyland.”