Lawrence Levy

"I asked each member of Pixar’s senior team if I could follow them around for a while, literally shadow them, sit in meetings without participating, and ask them questions about what they did. I also asked for their permission to talk to the various individuals on their teams. Managers generally don’t like other managers snooping around their domains; my newness absolved me from that, at least temporarily. They all went along."

"Early in my career I had learned the wisdom of not griping over the hand I was dealt. I had a mentor who taught me lessons about business and life that served me for many years. He looked at business the way a grand master might look at a chessboard. “There’s nothing you can do about where the pieces are,” he’d say. “It’s only your next move that matters.”"

"“Hi, is this Lawrence?” “Yes, it’s me.” “This is Steve Jobs,” the voice on the other end of the line said. “I saw your picture in a magazine a few years ago and thought we’d work together someday.”"

"Steve and I had gotten into a habit of regularly talking on the phone, usually every day, often several times a day; no hour was off limits. I had a dedicated line for business calls in my house, in the kitchen by the fax machine."

"We still needed a business plan, however, a road map to give Pixar a shot at success no matter how improbable. After examining a seemingly endless number of permutations, the plan we finally developed had four pillars. First, we had to increase Pixar’s share of the profits from our films. There was no scenario in which Pixar could become a viable business under the profit-sharing arrangement in the existing agreement with Disney. We tested many possibilities and concluded that the minimum profit share that Pixar would need to achieve its goals was 50 percent. Therefore, the first pillar of our plan called for increasing Pixar’s share of the profits to at least 50 percent, which was a four-or fivefold increase over what we had now. Next, to have any real shot at increasing our share of film profits, Pixar had to be willing to pay all, or a large part, of the production costs of its films. We had learned how Hollywood ran on essentially two currencies: money and star power. Either one was a ticket to bigger opportunities, bigger profit shares, and more clout. Those who didn’t have either remained at the whim of those who did. If we were ever to renegotiate our agreement with Disney, or work with any other film distributor when that agreement was over, to begin any conversation about a bigger share of the profits we had to be prepared to pay the production costs of our films. I discussed this with Steve one Friday when he was at Pixar. We were in his office, just down the hall from mine. “How much do you think we will need to raise?” Steve asked. “At least seventy-five million dollars,” I said. “Competition for talent, carrying costs, and increasing technical challenges are driving production costs up. It won’t be long before our budgets hit seventy to a hundred million per film.” “Will seventy-five million be enough?” Steve wondered. “It would let us finance half the production costs on two films,” I said. “That should be enough to get us started. That’s no small sum, though. It’ll scare away banks and private investors. We can only raise that much by taking Pixar public.” “Maybe we need more. It would be better to have a cushion of a hundred and fifty or two hundred million. Once we’re raising money, we might as well have a big war chest.” I certainly had no objection to raising more capital for Pixar. But our chances of raising money went down the larger the amount we sought. For an unproven company like Pixar, investors would prefer to see us put smaller amounts of money to good use before they ponied up more. This wasn’t the time to debate that, though. Steve and I agreed on the second pillar of Pixar’s plan: take Pixar public to raise money in order to build the studio and to fund our own films. Increasing our share of film profits and raising money wouldn’t be enough, though. We also had to increase the frequency with which Pixar released films. We were presently making one film at a time, which meant a film release every four to five years. There was no way to make the business work at this rate. Again, we tested different scenarios. The ideal rate of film releases, at least according to the numbers, was a new film every year. That seemed far out of reach from where we stood now, but any meaningful increase in how many films we produced would require a drastic increase in the size of Pixar so we could work on productions in parallel. Therefore, scaling Pixar to make films more often was the third pillar of the plan."

"Culture is the invisible force on which innovation depends. We like to pin the mantle of invention on individuals, not circumstances. We anoint heroes and tell their stories. Yet innovation is a collective undertaking. It is as much the product of circumstance as of genius. There is a spirit to it. Preserving that culture and spirit at Pixar was very, very important. Indeed, I had been brought into Pixar as a change agent. My job was to shake up the company and usher it into an era of commercial success and viability that it had never experienced. How could I know that the changes I was sent to make wouldn’t end up destroying the culture on which Pixar depended to innovate?"

"“If Disney makes a substantial investment in computer animation,” Steve said, “they may have no interest in extending their agreement with us.” “Disney has plenty of resources to do it,” I added. “Plus they also have time on their side. Their deal with us could buoy them for a few years while they build up their own capacity in computer animation. We’re basically giving them the lead time they need.” This was a potentially perfect strategy for Disney. They could use Pixar to tide them over until they no longer needed us, reaping most of the profits along the way. Then they’d have their own computer animation capability ready to go and could easily jettison Pixar. “Another point for the Disney column,” I added, “is that Disney will undoubtedly think it offers Pixar more than any other studio can offer, given its expertise in animated films.” Steve wrote in the Disney column: OTHER PIXAR OPTIONS INFERIOR"

"I felt Steve had been caught in a rare weak moment. This was more than four years ago, though. Steve liked to cite the adage “Fool me once, shame on you; fool me twice, shame on me.” What had occurred four years earlier was not going to happen again."

"The natural tendency in negotiations is to engage in positional bargaining. This means taking a position knowing that it is not a final position, and holding in reserve a backup position. The danger of positional bargaining is that it forces you to think about backup positions, which weakens your conviction in your original position. It’s like negotiating against yourself. Plan A may be your optimal outcome, but inwardly you have already convinced yourself to settle on Plan B. Both Steve and I had a strong distaste for approaching negotiation this way. We preferred to develop our positions without thinking through a backup. Once Steve decided what he wanted in a negotiation, he developed something akin to a religious conviction about it. In his mind, if he didn’t get what he wanted, nothing else would take its place, so he’d walk away. This made Steve an incredibly strong negotiator. He would dig into his positions with a fierce, almost unbreakable grip. The risk, however, was in so overreaching that we would end up with nothing. If we were not going to have a backup plan, we had to be very careful about knowing what we wanted."

"In contract negotiations, as in many other endeavors, the last 20 percent can take 80 percent of the effort. It is in the last 20 percent that the precise details are spelled out. One challenge is the inordinate amount of time spent on drafting contingencies that will likely never occur. For example, if an earthquake strikes Point Richmond and delays Pixar’s completion of a film, should Pixar be in breach of contract for delivering a film late? To what degree should Pixar be expected to protect against the risk of an earthquake? It’s actually not an unreasonable question, especially when making a film on the edge of the infamous San Andreas Fault. Or, if Disney and Pixar share the costs for buying computers to make films under the agreement, can Pixar use those computers for other, non-Disney projects? If so, should it reimburse Disney for that usage? Because it is possible to conjure up a virtually endless list of risks and contingencies, one of the marks of a good negotiator is knowing where to draw the line so that things can move forward. In negotiation, there is a constant tension between momentum and fear. It comes down to an exercise in risk management. One illustration of this idea came early in the draft agreement in a clause called “Treatments.” This provision said, simply, that for each picture under the new agreement Pixar would submit to Disney one or more film ideas in the form of a treatment. But what would constitute a treatment? Could it be one line on an index card: “A father goes on an adventure to find his son; oh, and they’re both fish”? That probably wouldn’t make the cut. So the agreement spells out the details: a written treatment less than three pages that can be the basis for a screenplay. But Pixar often presented its treatments orally, using sketches and short storyboards. What if that was the preferred method? The agreement needed to cover that possibility too. And Disney wanted to make sure that the treatments were for original stories, not sequels or prequels, so all that had to be defined."

"But there were also parts of Steve’s life he didn’t share. Steve had a way of separating the different aspects of his life, he alone holding the keys to every compartment. If you were in one compartment, you had little access to the others. As Steve’s celebrity status skyrocketed and he went on to meet leaders and celebrities from every corner of the world, I felt my own role in his life recede. But so long as his health was good enough, he would often meander over to my house to go for a walk or sit together. And I remained welcome to slip into the kitchen door of his house and walk to his room for a visit until the very end."