George Lucas, who needed to take care of an expensive divorce settlement, had decided the Graphics Group was a luxury he could sell without hurting his movies. But he wanted tens of millions of dollars for the group, and Jobs wasn’t willing to pay more than $5 million. Steve found Lucas to be a tough negotiator. For starters, he didn’t handle the discussions himself; he left it to those under him to talk to Steve and his bankers, adding a layer of delay to the process. And Lucas was courting a range of other potential buyers at the same time, including Siemens, Hallmark, General Motors’ EDS division, and Philips. But as one deal after another fell through, the balance of power tilted toward Steve, who didn’t need the group as much as Lucas needed the money. So he was perfectly willing to play tough himself. “At one point,” says Barnes, who helped with the negotiations, “the delays went on forever and he just went and told one of their executives to ‘fuck off.’ One of the Lucas team said, ‘You can’t say that to one of our EVPs.’ ‘Yes I can,’ he replied. ‘And fuck you, too.’ ”
As he would show again and again through his life, Steve was a ballsy negotiator. His willingness to walk away paid off. Faced with getting nothing, the Lucas team caved. Steve paid $5 million in cash while promising to capitalize the outfit with another $5 million. Steve told BusinessWeek that buying Pixar was an effort to enter an industry (3-D computer graphics) that “has the same flavor as the personal computer industry in 1978.” According to Ed Catmull, the Graphics Group leader who became president of Pixar, “He saw Pixar as the core of NeXT.”
As it turned out, Steve was right about the importance of Pixar’s pioneering technology. Over the next decade the ability to manipulate 3-D images would transform everything from flight planning and oil exploration to medical practice, meteorology, and financial analysis. Unfortunately for Steve, the people doing that work would employ sophisticated workstations manufactured by Sun Microsystems and Silicon Graphics, not by Pixar or NeXT.
And yet Pixar eventually became a revolutionary success. This unlikely side bet turned into the place where Steve would learn more about the consumer technology business than he had at Apple or would at NeXT. At Pixar he would lay the foundation of two of his great strengths: his ability to fight back in times of distress, and his ability to make the most of an innovation that put him ahead of anyone else in that field. In other words, it taught him how to keep his head and fight back when cornered, and how to run like the wind in the open field. And it became the place where he really learned, albeit slowly and reluctantly and against his natural instincts, that sometimes the best management technique is to forgo micromanagement and give good, talented people the room they need to succeed.
What Steve didn’t know in 1986 was that Pixar would give him something much more valuable than a technology to squeeze into NeXT. Although it would take almost a decade, Steve’s Pixar adventure would help him rediscover his self-respect, make him a billionaire, and align him with people who would teach him more about management than anyone he’d ever worked with. Without the lessons he learned at Pixar, there would have been no great second act at Apple.
PIXAR WAS ONE of the most unusual collections of artistically inclined computer scientists ever assembled. The core of the group had first come together at a Long Island institution called the New York Institute of Technology. NYIT’s founder, Alexander Schure, was a peculiar millionaire and an iconoclastic educator. His institution offered an array of courses to both returning veterans and students looking to get out of service in Vietnam. But Schure’s real dream was to create an animation studio to rival Disney, despite the fact that his qualifications to do anything of the kind were questionable at best. His one effort at moviemaking, a self-financed film called Tubby the Tuba, was a fiasco. Still, in the late 1970s Schure was just about the only person who was putting money into the work of computer graphics specialists, so the pioneers in that field started to descend on NYIT. Schure assembled a remarkable team, including Jim Clark, who would later found Silicon Graphics and Netscape Communications; Lance Williams, who went on to become chief scientist at Walt Disney Animation Studios; and Ed Catmull, Ralph Guggenheim, and Alvy Ray Smith, who would all became key figures at Pixar.
Although Schure assembled the team, he didn’t really manage it, which of course was ideal for a group of self-confident academic researchers who needed time and equipment to develop their revolutionary ideas. Working from a large converted garage on a great estate on Long Island’s North Shore—Great Gatsby territory—the team tackled anything involving computers and 3-D graphics, ranging from virtual reality headsets to texture mapping (a critical foundation for getting sophisticated detail into computer-generated graphics) to exploring the possibility of creating anthropomorphized characters out of mundane objects for television commercials. Ralph Guggenheim, who eventually headed up the film division of Pixar, once called it “a great fraternity of geeks.” From day one, they all shared the dream of creating a full-length computer-animated motion picture. So when a George Lucas rep called Guggenheim to see if he’d be interested in helping to form a division of Lucasfilm to help the Star Wars director introduce computer graphics into his movies, the team jumped—all the way to San Rafael, California, a Marin County city across the bay from San Francisco that is best known as the locale of the San Quentin State Prison. The new unit was called the Graphics Group, and its mandate was to invent software tools that would help Lucas create his bold, visually explosive films.
As he had in Long Island, Ed Catmull headed up the team. Catmull was a Utah-raised computer scientist who had once hoped to be an animator himself. But he had made a calculated decision that he wasn’t sufficiently talented at drawing to succeed. Instead, he had become an expert in the new field of computer graphics at the University of Utah in Salt Lake City before joining NYIT.
More important for Steve Jobs, overseeing this motley crew had turned Catmull into an expert, imaginative manager of creative people. For years Catmull found himself occasionally regretting his decision to abandon his dream of being an animator. But as he steered this odd and talented group past one crisis after another, he started treating management itself as a kind of art, and accepted that this was how he could best contribute. Later in his life, he would come to be recognized as one of the most extraordinary managers in the world; in 2014, he published a brilliant business bestseller, Creativity, Inc., about what it takes to lead a company of creative people. In fact, this quiet, bearded man with a measured, professorial demeanor knows more about managing and motivating creative people than anyone I’ve ever met, including Sony’s Akio Morita, Intel’s Andy Grove, Bill Gates, Jeffrey Katzenberg, and Southwest Airlines’ Herb Kelleher, among others. His success would prove a powerful example for Steve.
Like Schure, Lucas mostly left the group alone. In the early 1980s he was at the peak of his career, building out Skywalker Ranch, the nerve center of his film empire, in the remote wine and dairy country north of San Rafael that is known, coincidentally, as Lucas Valley. He was absorbed with making the second and third Star Wars movies and the first couple of Indiana Jones features. Catmull’s group developed hardware and software tools that sped up and reduced the cost of certain kinds of animated special effects. But they remained committed to the idea of using computers to create an animated feature movie. With an eye to that, Catmull wooed John Lasseter, then a young and frustrated Disney animator, to create a series of animated short films that could show the potential of 3-D computer graphics. Knowing that Lucas wanted the team focused on tools, not on creating movies of its own, Catmull disguised Lasseter’s hire so that he appeared on the budget as an “interface designer.” “He knew none of the financial guys would want to embarrass themselves by asking, ‘What’s that?’ ” says Lasseter.