Steve

"We walked the Robertson Stephens team through the details of Pixar’s vision, business plan, and risks. We told them we were aiming to change entertainment history in a way few companies had ever had a chance to do, and we described the four pillars it would take to make it work: raise the money to finance our films, expand the studio to handle more productions, make Pixar a worldwide brand, and increase our share of film profits. But there were risks. Big ones. Wall Street would have to understand that. “Thank you,” Brian said sincerely. “This has been immensely helpful. Give us a couple of days. We’ll be back to you.” Later that day I received a call from Todd Carter. He thanked me for the meeting and wanted to explain the process by which they would make their decision. “The decision is made by our Commitment Committee,” he said. “That comprises all our top people and they make the final decision on every deal.” “Any idea how it looks for Pixar?” I asked him. “I wish I could say,” Todd replied. “You’re very aware of the challenges in Pixar’s business model. We’re excited about Pixar, we love the vision, but we have to be certain our investors can tolerate the risks. My personal recommendation is that we go for it, but it isn’t my decision. I think it’ll be close.” There wasn’t much there to make me feel comfortable. I could only sit and wait. It was hard to be patient, though. I hadn’t expressed it to Todd, but by this point I was flat out of options. If Robertson Stephens’s committee voted thumbs down, our chances of an IPO anytime in the near future would truly evaporate. Two days later Brian Bean called. “Our Commitment Committee made its decision,” he started. I held my breath. “We’re in,” Brian told me. “We think our investors will go for this. We know we have to get them on board for the long term, but there’s enough that’s exciting here that we think they will. We’d be honored to be the lead banker for Pixar’s IPO.” I put down the phone with a lump in my throat. Lightning had struck. This was huge. My first call was to Steve."

"“We should go for it,” he said. “Pixar worked years to develop this technology. Why should they use it for free? We should shut down their infringing products.” “We’d be better off charging license fees than trying to shut them down,” I suggested. “Those products are not really threatening Pixar’s business.” “How much can we get from licensing?” Steve wondered. “These are huge companies and our patents are central to their graphics businesses. It’s worth fifty million at least.” “I don’t disagree,” I said. It was true; we might have been able to earn license fees of that magnitude. But my years as a lawyer told me that Microsoft and Silicon Graphics wouldn’t pay those kinds of numbers without a big court battle. That could take years and cost millions. “We’re better off making it easier for them to make a deal than to go to war for every penny that we think we’re entitled to,” I told Steve. “The biggest benefit to Pixar is to make this quick and to gain a cash infusion now, when we need it the most.” Steve didn’t like the idea of going for less than he thought we were entitled to earn. He felt this would be too much of a bargain for Microsoft and Silicon Graphics. Five million, or even $10 million, was nothing to them if they needed these patents. Steve wasn’t wrong; I just didn’t think going for too much was pragmatic. I was nervous about locking Pixar up in a protracted legal battle, even if we liked our chances of winning it. Patent licensing was not a business strategy for Pixar. It was a financing strategy, something we would do once or twice to bring in cash, but no more. It would buy Pixar time, not guarantee long-term success."

"Steve had an almost permanent intensity about him—like he was always in top gear—there was an ease and fluidity to our talks. We could easily pick up a conversation where we had left off. If one of us was busy or tied up with family, we’d just call back a bit later. Whenever we did talk, it was like shifting from zero to a hundred miles per hour in an instant."

"A few days later Steve made me an offer to become Pixar’s executive vice president and chief financial officer, and a member of an Office of the President that he would create with himself as CEO, Ed Catmull as chief technology officer, and me as CFO. I asked Steve if I could have a day to think about it."

"In that meeting we had also received our first lesson on live-action filmmaking. “Think of it as a portfolio business,” Joe had explained. “Each year a studio earmarks funds for a slate of films: low budget, medium budget, and big budget. Then we do the same with marketing, allocating amounts to market each film. We release the slate, hoping that we create enough hits to make up for the ones that don’t perform.” “How many films are in the slate?” Steve asked. “It depends,” Joe said. “There’s no magic number. It could be as few as a half a dozen, as many as fifteen or twenty. It depends on the year, the size of the studio, the sources of financing, and other factors.” “How do you know which might be the big films?” Steve asked. “We don’t know,” Joe confessed. “We like to think we do but we really don’t. It’s hard to predict the films that will break out. Sometimes you know a big star will assure a big opening, but even that doesn’t tell you how the film will ultimately perform.” “So it’s as much a financing strategy as a creative strategy?” I asked. “That’s right,” Joe said. “Of course, we try to make the best films we can creatively, but it’s all about assembling the right slate.” This was all new to us. Disney and the other studios were spreading money across a slate of films, hoping that some would break out and become hits, to make up for the ones that didn’t."

"Steve winced at this. He didn’t like it when I made any suggestion that Pixar might not be ready to go public. He was itching to go public as soon as we could. I had one foot on the brake, though. Pixar was frantically trying to finish Toy Story for its launch in six months. I didn’t want potential investors to see how precarious the project was. Worse, we didn’t have a business plan to confidently share with them, and I knew from my talks with Sam Fischer that Pixar’s share of the home video revenues under the agreement with Disney was very small, even if the market for home videos was big."

"It was on one of these walks that I brought up RenderMan. “So what you’re saying,” Steve said, “is that we’re hooked on the small amount of money RenderMan brings in, but it’s not helping us grow.” “That’s exactly what I’m saying,” I replied. Steve wanted to know more. “If RenderMan is the industry leader,” he asked, “and if studios need it so badly every time they make a film, why don’t we raise the price? Instead of three thousand dollars per copy, we’ll make it six thousand, or ten thousand. If they need it, they’ll pay.” That might be true if the studios needed RenderMan, but the problem was that, at least for most projects, they didn’t. “RenderMan might be the best software of its kind,” I replied, “but there are other options. They are radically inferior, but they are still options. Production budgets for computer-animated special effects are extremely tight. Unless it’s Steven Spielberg making dinosaurs for Jurassic Park, or James Cameron making cyborgs for Terminator, producers will simply live with lower quality.” Steve leaped ahead. “Are you suggesting we stop selling RenderMan?” he asked. “Maybe,” I said tentatively. It was a big decision, and an idea I didn’t want to push too hard right now. “My fear is that it’s a distraction. We use some of our best engineers to support customers. Maybe there are better things they can be doing.” The idea was to keep RenderMan for Pixar’s use and to drop the considerable effort Pixar put into selling RenderMan and supporting its customers. “Whatever we do with RenderMan, it’s not going to be relevant in any sort of growth strategy or public offering.”"

"“I’m not sure if going into live-action film gives us any advantages,” I said. “In animation we put all our eggs in one basket, and we watch it very closely. In live action we spread out the eggs over many baskets, hoping a few of them will hatch. Both businesses are risky. I’m not sure one balances or helps the other.” “It might even be the opposite,” Steve said. “If we have to release a slate of live-action films, what’s to stop the ones that flop from damaging our reputation in animation?” “That’s true,” I agreed. “Walt Disney only went into live-action film after he was established in animation.” “I hate the idea of Pixar releasing products that might not be great,” Steve added emphatically."

"“As you know,” Ed said, “we’re making a feature film due out in November. We’re also selling RenderMan software and making commercials. But we don’t really have a business plan for building the company. We could really use some help sorting that out.” “How does Pixar fund its business now?” I asked. Ed explained how it was very much just month to month. Disney paid for film production costs while sales of RenderMan software and animated commercials brought in some revenues. That wasn’t enough to cover Pixar’s expenses, though. “How do you cover the shortfall?” I asked. “Steve,” Ed explained. “Every month we go to Steve and tell him the amount of the shortfall, and he writes us a check.”"

"“I still have questions about Pixar’s business,” I said. “The products, technology, and team seem amazing. But I’m not certain where the business growth comes from.” “That’s what we have to figure out,” said Steve. “Pixar has this amazing collection of talent, doing work that no one has seen before. Now it’s time to turn that into a business. I think you would be great for this. How about we get together and discuss you coming on board?”"

"I reasoned that around 1991, Steve was ready to let go of Pixar. He had never set out to build an animation company. In 1986, when he took control of Pixar, Steve dreamed of building a technology company, a graphics powerhouse that would stun the world with machines that could do computer imagery like no other. Storytelling was an afterthought, a way to demonstrate the technology. The hopes of that graphics company had rested in part on the Pixar Image Computer, which had failed. By 1991, that division of Pixar had been shut down completely."

"The impact of all these contractual provisions was crushing: until Pixar could release a film outside of the Disney contract, the most we could expect to earn from our first three films would be a few million dollars a year—and even then, only if those films ranked with Disney’s most profitable films ever. No one would invest in a company that had to perform at those levels in order to eke out a small profit. “Sam, did no one at Pixar understand these calculations?” “I’m quite sure Steve did,” Sam told me. “We walked him through all the terms and what they meant.”"

"“Steve is the guy who owns us—but he’s never been one of us,” Pam explained. “We’ve long felt unvalued, unappreciated. People worry that if he gets too close, he’ll ruin Pixar and destroy our culture. And now, you’re the guy he has sent to whip us into shape.”"

"Later that year, in August, I met Steve again. I had just taken Actavis private in a €5.3 billion deal that Deutsche Bank was rolling €4 billion into. This deal could so easily have plunged Germany’s biggest bank into serious financial difficulties. I had built Actavis into one of the world’s biggest generic pharmaceutical companies in a competitive and consolidating industry. As industry consolidation quickened after 2006, I felt we had to decide quickly whether we were going to become predator or prey. Both could have worked, but we decided that because of the state of the lending markets we were going to become predators, leveraging up Actavis and buying other companies. We bid for a Croatian generics company, Pliva, which ended up being bought by a US company, Barr Pharmaceuticals, and went a long way down the line to try to buy the generics division of Germany’s Merck. Bankers fell over themselves to provide debt and convince us to bid and, although we ended up backing away from the price being asked, we had credit lines of €3.4 billion–€4 billion committed on a potential deal. This opened my eyes to the amounts that banks were willing to lend on such deals, so I decided to use that arsenal of debt to buy the 60 per cent of Actavis that I did not already own."

"With ingenuity and perseverance, a banker could accomplish many great and transforming goals in the world of business. But in the wake of Steve’s death, I also learned perspective. What we bankers do is fleeting. The work of one generation can be carelessly undone by the next."

"Steve was in many ways an investment banker’s dream client—he was always looking for the next big deal. Even better, he was hugely imaginative, and when he set his mind to a particular challenge, he was totally—totally!—determined to achieve it. No less a gift was his knack for seeing the “next big thing.”"

"Following Steve’s instructions, Kinney had quietly begun a study of the motion picture and music industry. The aim was to identify a major entertainment target that Kinney could acquire. When the research was completed, Steve convened his team of advisers for a war council. The target, he announced with an air of triumph that struck me as precipitous, was Warner-Seven Arts."

"In the three years since my aborted collaboration with Steve on the Avis deal, I had worked with his corporation, Kinney, as it began cautiously to dabble in the entertainment business. First, I had advised Kinney in its prescient acquisition of the National Periodical Publications, the owner of the comic strip “Superman.” At the time, buying a comic book franchise seemed more a whimsy than a business strategy, but Steve astutely appreciated the true strength of a superhero’s commercial potential. Next, I helped Kinney, in a corollary strategic move, acquire a talent agency, Ted Ashley’s Ashley Famous."

"Yet at his core he loved making deals, often, it seemed to me, simply for the pleasure of making them. His guideline, I decided, was the more complicated the deal, the better. From our initial meeting, I liked Steve enormously. For the next twenty-five years we would be friends and, on occasion, partners working together in enterprises that would change the shape and scope of American business."

"Lunch Time Exclusive to Steve and Jonathan The year 2008, when the Lehman Shock occurred, was a turning point for Tsukigetsu. The impact of the Internet bubble burst in 2001 had not been felt much, but this year, from early spring, the number of customers visibly dwindled. I seriously worried, thinking, “At this rate, the store might not survive.” The decrease in the number of customers was particularly significant during lunch hours. Once I again calculated the revenues and expenditures, I found that keeping the store closed could save on labor and utility costs, thereby minimizing losses. Thus, reluctantly, we decided to temporarily suspend lunch operations. However, our decision led to unexpected events. Immediately after, such a story came to us. “Could you open the store once a week for lunch?” The client was Steve. This is how the private lunch started. Every Wednesday, Steve began to come with Jonathan, the Senior Vice President. In the silent store with no other customers, I was able to see an unexpected side of Steve."

"Steve was sitting at a back table with a woman. The woman, dressed in what looked like a beige suit, was seen only from the back, but Steve’s manner was clear. I remember thinking how handsome Steve was upon first seeing him."

"Steve has a reality distortion field. In his presence, reality is malleable. He can convince anyone of practically anything … It was dangerous to get caught in Steve’s distortion field, but it was what led him to be able to change reality."

"Jeff Bezos illustrates this. His breakthrough obsession and achievement was his peculiar vision for Amazon – the internet’s ‘everything store’ marked by unbeatable prices and customer service. Bezos made his vision a reality in a special, very unusual way. Do you realise how different Amazon is from almost all other companies? Can you imagine the fights there must have been in the boardroom when investors and managers wanted to raise prices so that the share price could be underpinned by real profits? Bezos alone clung to the creed that if you provide extraordinarily low prices and high customer service, your ultimate reward will be massive. Part of Bezos’ achievement comes from being pig-headed and dictatorial – he preaches; he insists that business should be done his way. There is a cult of Jeff at Amazon, just as there was – some would say, there still is – a cult of Steve at Apple. We can understand the Bezos cult from this – in March 2000 Amazon was worth $30 billion. Not bad. But today it hovers around $800 billion – twenty-seven times as much."

"Jony Ive emerged from the hard reset with newfound powers and influence. Jobs had made it crystal clear that ID’s zero tolerance for defects was integral to a new culture that would cascade across product development and then throughout the organization. The new approach hit Apple in waves. “I remember these other groups being like, ‘I’m glad I’m not in your shoes!” ’ Hoenig says. “But sure enough, it just literally rippled through the organization over the course of a year, and every group eventually suffered.” Engineers in other departments gained a respect for Ive because of his diplomatic skill. “What Jony did was—he understood that Steve’s cruelty, his savagery, his impatience would cause people to split and just quit the company,” says a senior person on the project. “That happened a lot. And he would run interference with them. He was a Steve handler as much as he was a visionary, detail obsessed, brilliant designer.”"

"tri-partite leadership is challenging in the best of cases, but it worked at Pixar. As Pixar filmmaker Pete Docter told me: “Here there was a clear definition of power: John on creative, Ed on technical, and Jobs on business and financial. There was an implicit trust of each other, as well as one guy with the final word (Steve)."

"There was a personal side to every relationship with Steve. It was never all business. He derived his authority from his relationships, not his position."

"Steve called one evening when we were deciding what to do. Hillary answered, and when Steve asked how she was, she just broke down and cried. After she explained the problem, Steve immediately said, “I’ll find you the best doctor in the world and bring them here if you need it.”"

"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."

"When I joined Pixar, I was acutely aware of Steve’s reputation for harsh behavior—he was legendary for it—although I had never experienced it in our personal relationship. From the moment we met, our collaboration was always constructive and respectful, even when we didn’t see eye to eye. I could not recall an angry word between us. This did not mean I never witnessed Steve being ill mannered or dismissive of others. He could be unforgiving, with little tolerance for mistakes."

"“But if they say no,” Steve added, “it might poison the relationship, making the next two films harder to make.” “I hope it wouldn’t affect the film productions,” I said. “We have to keep the business and creative relationships separate.” “Let’s look at what we want if we do approach them,” Steve continued."

"Steve was now Disney’s largest stockholder, and the value of his stock in Disney would eventually soar to over $13 billion, making his investment in Pixar by far the largest source of his personal wealth."

"On the best days, Steve would eagerly show me the products he was working on at Apple. I first listened on an iPod, talked on an iPhone, and played on an iPad in Steve’s office at his home. He invited me to all of Apple’s big product announcements where I sat quietly at the Moscone Convention Center in San Francisco as he mesmerized the world year after year. I even saw the stunning designs of a yacht that Steve dreamed about building. Steve’s aesthetic genius extended far beyond the domain of technology."

"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."

"The solution was to find a way to diminish the risk that a small disappointment might cause the stock to plummet. There were two ways to do this. One was to use Pixar’s highly valued stock to purchase other companies. The effect of purchasing other companies would be to diversify from animation so that if animation experienced a downturn, it would not have as devastating an impact on the company. Diversification had been Walt Disney’s strategy all those many years earlier. The other way to diminish the risk was to seek a buyer for Pixar. If a large corporate conglomerate were to buy Pixar, Pixar’s stockholders would exchange their Pixar stock at its present soaring value for the stock of the larger corporation where they would enjoy much greater diversification. Over the years, Steve and I had speculated occasionally on how Pixar might ultimately end up being purchased by Disney, but we had never taken this on as a serious possibility."

"Steve was thrilled about selling NeXT to Apple. NeXT had launched its first computer in 1988 but had failed to compete in the burgeoning market for workstation computers. In 1993 it had shut down its hardware business to focus on selling its operating system and development software. In selling the company to Apple, Steve had found a face-saving parking place for NeXT, and a chance to keep its advanced software technologies alive. It was no wonder he was excited about it. “NeXT’s software will be the core of a new-generation operating system for Apple,” he told me after the sale. “They really need it.” As Steve’s responsibilities at NeXT began to wind down, I wondered if his day-to-day involvement at Pixar might increase from the weekly visits that were now his custom. But nothing changed. Pixar was steadily working on A Bug’s Life and Toy Story 2 and putting the expansion plan into place. Steve seemed happy with the way things were working at Pixar and he showed no inclination to change"

"Steve wrote in the Disney column: ANIMATION MIGHT BE LOSING PRIORITY"

"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."

"“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"

"When you added it up, there were many aspects of Pixar that had a big influence on Steve: becoming a billionaire, experiencing a stellar comeback in the eyes of the public, learning the ins and outs of the entertainment industry, enjoying a transformed relationship with Pixar, and bringing both business and creative imperatives into harmony. Combined with Steve’s aesthetic genius and product vision, these influences made for a very potent force as he jumped into the vortex at Apple. Indeed, Pixar may have been an interlude in Steve’s journey—one that remains the source of most of his wealth—but without Pixar one could make a case that the revolution ushered in by Steve’s second act at Apple might never have occurred."

"Finally, of course, Steve had now regained the mantle of success. He had joined the ranks of billionaires. Nothing that happened at Apple would take that away from him. Even if Apple flamed out, his comeback would still be intact."

"I had left my day-to-day role as Pixar’s CFO in April 1999. I took a sabbatical to pursue a series of personal interests that eventually led me in some new directions. At that time Steve asked me to join Pixar’s board of directors. As a director, it was my job to look out for Pixar strategically, similarly to the way I had always done. Consistent with the USA Today column, and despite Pixar’s unprecedented success, in 2005 I found myself once again worrying. The laws of physics suggest we cannot go in one direction forever. Sooner or later, something will slow us down. Whether it be stocks, housing prices, economies, or entire civilizations, even the biggest booms stall. We build castles, churches, and monuments believing they will last forever; our perception of solidity often belies an underlying movement that is difficult to perceive. Sometimes we can see the wave of change coming. But more often we are swept along in it. In my mind, Pixar was facing such a wave. When a company’s stock price goes up and up on the strength of its business growth, the first sign that its rate of growth is slowing can create enormous downward pressure on its stock price. Pixar’s last two films, The Incredibles, released at the end of 2004, and Finding Nemo, released in the summer of 2003, had been Pixar’s biggest films to date. Finding Nemo had taken in almost $1 billion worldwide. These films had enjoyed heights of success so dizzying that I feared the slightest hint of a slowdown would send Pixar’s stock tumbling. As the USA Today article had described, this had already happened on the news that DVD sales might be slowing down. The stock had recovered, but the evidence was strong that it was in rarefied air, made even thinner by Pixar’s continued dependence on blockbusters. One small slip and the danger of a big fall was high. This would hurt not just Pixar’s stockholders but the company as a whole. Shareholder cries for change can create enormous pressure on a corporation. It was better to be on top of it."

"I felt patience was the key. Disney hadn’t said no. But Steve was not accustomed to being brushed off, and he didn’t like it. The more time went by, the more his frustration grew. Finally, one day in exasperation, he exclaimed to me, “I don’t know if I can work like this!”"

"There was another column, though. The first thing Steve wrote in the Pixar column was: IPO $ TO PAY FOR PRODUCTIONS “We can now pay for our own productions,” Steve said. “Disney doesn’t have to pay for all the costs.” This was why we had done the IPO. If money talked, we now had quite a bit of it. We anticipated that production costs for Pixar’s next film might approach $50 million, and production costs for future films more still. If we offered to put up half of it, this would surely get Disney’s attention. Then I added a second point: TOY STORY SUCCESS Steve wrote it in the Pixar column. “No one expected Toy Story to be so successful,” I said. “Least of all Disney.”"

"Steve wrote in the Pixar column: DREAMWORKS THREAT TO DISNEY Then Steve made another entry in the Pixar column: BETTER DEAL IF WAIT"

"“We have a chance to make this happen,” I said to Hillary one night toward the end of August. “I’ll be out of commission working on this for the next couple of months. But this is our shot.” “Steve’s ready for it too?” Hillary asked. “Yes, he’s on board. Ready to go. Even excited I would say.” “Good luck,” Hillary said. “This is the chance you’ve been hoping for.” We’d need that luck. Actually pulling off an IPO was going to be a lot harder than finding investment banks. We would now begin endless meetings with the bankers as they pored over every single detail of Pixar’s history, financial information, and business plan. There would be teams of lawyers and accountants checking, double-checking, and triple-checking compliance with every nuance and requirement of the securities laws. There would be continuous discussions and debates over how to value Pixar, how to price its stock, and the exact timing for taking it public."

"Next Steve added to the Disney column: PIXAR ONLY ONE HIT “We’ve had only one hit,” Steve said. “Before we prove we can repeat it, Disney might be reluctant to change our deal.” This was the one-hit-wonder problem. One hit did not make for a track record. “Anything else in Disney’s favor?” Steve asked. “We’ve talked about this,” I said, “but maybe Eisner’s interest in animation is waning. He just bet big by buying ABC, which includes ESPN. Animation could be on its way to becoming a sideshow for him.”"

"We could see our symbol PIXR for the first time. We were live. Pixar was a public company. But the trading did not begin at $22. That was the price the first investors paid to Pixar to acquire the stock. It immediately jumped up into the high thirties. Demand was off the charts. We all stared at it, partly beaming, partly in disbelief. Todd Carter broke the silence. He turned to Steve. “Congratulations, Steve,” he said. “You’re a billionaire.” At the end of the first day’s trading, Pixar’s stock was at $39. That gave Pixar a market value of close to $1.5 billion and did indeed make Steve a billionaire. I later heard that while I was glued to the computer screen watching Pixar’s trades, Steve had stepped into a nearby office and made a phone call to his friend Larry Ellison, the founder and CEO of Oracle Corporation. All he apparently said was “Larry, I made it.”"

"The meetings went off without a hitch. Steve did a fantastic job mesmerizing Quattrone and Martin over Pixar’s potential. They could hardly have been more enthusiastic about the vision and strategy. They understood Pixar was not the typical Silicon Valley tech company, and both said they wanted to involve their entertainment specialists in LA. Even the discussion over Pixar’s risks had gone well."

"“Working with Steve can be exasperating,” I complained to Hillary one night. “Some of his ideas are brilliant but others are off the mark. It’s hard to rein him in sometimes.”"

"Joe was immediately warm and friendly. He was a few years our senior, soft-spoken, casually but well dressed, with a warm and gracious smile and graying hair. We began by describing what we were up to at Pixar. After a few minutes, a phone rang in the corner of the room behind Joe’s desk. “Excuse me,” Joe said, “I’m terribly sorry. I need to take that call, but it won’t take long. Please stay and be comfortable here.” Joe spent a few minutes on the phone by the window at the other end of his office. Then he returned to us. “So sorry to have to take that call,” he said. “It was Robert Redford. He’s not easy to reach. There won’t be any more interruptions.” As soon as we left the building, Steve and I tried to keep our cool, but we both had one thing on our minds. “Robert Redford!” Steve exclaimed. “Butch Cassidy! The Sting! I wouldn’t have kept him waiting either. Wow!” “I know,” I said. “That’s about all I could think about the rest of the meeting!” “Me too,” said Steve. We were starstruck! It would be a few years yet before Steve had access to every celebrity in the world, but in this moment, we were more like teenagers glimpsing stars on the red carpet."

"“Will they take third position on the deal?” Steve asked. “I’m pretty sure they will,” I replied. It was fairly typical to have three investment banks involved in an IPO. There was no magic number. Some IPOs used two investment banks; some used four or more. It depended on the size of the offering, access to investors, and the need for specialized industry expertise. The Pixar shares sold in the IPO would be allocated among its investment banks. Giving Cowen third position meant that they would have the smallest allocation, which made sense because they would likely have a smaller roster of clients who invested in IPOs. “If they’ll take third, it’s okay with me,” Steve said. “We’ll still need someone else in second position.” I was more than pleased. I was sure Cowen and Company would go for it. It meant that Hal Vogel would be Pixar’s analyst. Lightning had struck again."

"But I had examined this from every angle I could imagine. Fully committing Pixar to becoming an entertainment company focused on animated feature films was our only shot. Steve, Ed, and I were all on board with it. This was our mountain to climb, no matter how steep or far away the summit. With much weighing on my mind, it was time to begin the ascent."

"As we often did, we wrote down the main points of discussion on a whiteboard. There was one in the front of the room, with a wooden casing around it. We had discussed all of these points before, but it was helpful to see them in one place. Steve took a whiteboard pen and made two columns: Disney and Pixar. Under the Disney column, he would write the points that gave Disney leverage. Under the Pixar column, he would write the points that favored Pixar. Point one for Disney: NO OBLIGATION TO CHANGE CONTRACT “We know there’s nothing that can force Disney to negotiate with us,” Steve said. “They have a three-picture deal and they can stick to that contract simply because they want to.” “They have us tied up for two more films,” I added. “They keep most of the profits, and we can’t talk to any other studios until we’re done. It’s a great deal for them. Why would they change it?” Steve added a second point in the Disney column: CAN INVEST IN COMPUTER ANIMATION THEMSELVES"

"“How do you see the creative decision process moving forward?” I asked. “Our films must come from the heart,” John explained. “It’s not just about entertainment. It’s about telling stories that audiences connect with emotionally. The way to do this is to make our films personal, to make certain they mean something to our directors.” John had such passion in his voice, such sincere conviction, that it was almost impossible not to be moved by it. He literally touched over his heart as he spoke. “We have to trust our story team,” he went on. “They have to believe we trust them.” “So what you’re saying,” Steve said, “is that we should bet on our creative talent, no matter the risk.” “Yes,” John replied. “I know that’s asking a lot, but it is what I think we should do.”"

"Finally, if Pixar was to become a serious entertainment company, we needed people to know about us. Under the terms of the Disney agreement, Disney would have most of the billing, and we feared that few people would understand that Pixar was the creative force behind its films. As it was, the movie posters for Toy Story would say, “Walt Disney Pictures presents Toy Story,” or worse, “Disney’s Toy Story,” with Pixar’s name in small print. This would make it hard for the world to fully associate Pixar with filmmaking. “We have to change how the world perceives Pixar,” Steve said one evening when we were discussing Pixar’s brand. “Even if Disney gets the billing, people need to know that we made these films. We can’t build a company without a brand.”"

"That was certainly a true statement, but it wasn’t the answer I was looking for. Of course we’d be free after the three films, but that was still years away. I wanted to ask Steve why he let Pixar enter such a one-sided contract, why he didn’t tell me it was so constraining, and why he seemed so nonchalant about it. But I didn’t. As we sat there talking, I realized Steve had no interest in looking back. He didn’t defend the contract. He didn’t justify it. He listened carefully to everything I had to say about it, taking it all in. That was pretty much it."

"“You know,” I said, “in all my conversations with Steve these past two months, I’ve never found him defensive. I’ve critiqued and dismantled every aspect of Pixar’s business and he had every reason to justify and defend it. But he didn’t. Not once. It’s as if he’s taking this journey with me, learning it at the same time I am.” “He hasn’t given you a reason to distrust him,” Hillary said. “You two are in this together. You have to work it out together.” That’s how it felt. Whatever mess we were in, we were in it together. What mattered was our next move."

"“Pixar’s an enigma,” I shared with Hillary one night after dinner. “I don’t think I’ve ever seen so much talent under one roof. Their efforts have been nothing short of heroic, but every business it has tried has either failed or has such limited potential it’s hardly worth the effort. It’s just running in place.” “If nothing’s worked, how did it survive this long?” Hillary wondered. “I suppose it comes down to Steve’s stubbornness,” I replied. “I don’t know any other investor who’d have stuck it out this long. But I know even he’s had his doubts. He’s got nearly fifty million in Pixar and very little to show for"

"Steve could easily have told me to ask Microsoft and Silicon Graphics for $25 million each, the amount he wanted. He didn’t. He wanted us to keep talking until we agreed. We ended up deciding to ask for an amount somewhere between what I thought and what Steve wanted."

"This was the first example of a pattern I would experience often with Steve. He would debate with intensity over any issue we were discussing, big or small. Sometimes we agreed; sometimes we didn’t. When we didn’t, I would find myself having to stand resilient, steadily holding to my position, yielding not to his intensity but to the merits of the matter. Time and again, I saw how Steve preferred that we come to a mutual resolution, marching forward together, rather than acting on an outcome that he imposed. Years later Steve told me he felt the business and strategic choices we made at Pixar were neither his nor mine but the product of just this process."

"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."

"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."

"The strategy ended up working. It took three months to conclude the Microsoft license and about a year to conclude the Silicon Graphics license. Microsoft paid $6.5 million and Silicon Graphics a bit more, plus it gave credits for Pixar to acquire the Silicon Graphics computers it needed to make films. Pixar got just the shot of cash it needed, and Steve was happy. It meant that, for the first time, he would not have to pay Pixar’s cash shortfalls out of his own pocket for a while. It wouldn’t last forever, but it gave us room to figure out our long-term strategy."