Tim Cook, the interview: Running Apple ‘is sort of a lonely job’
On a sleek white coffee table in Apple CEO Tim Cook’s fourth-floor office in late July, beneath framed posters of Robert F. Kennedy, the Rev. Martin Luther King Jr. and Jackie Robinson, a rose gold iPhone 6s sits in its original box.
Earlier that morning, Cook had stood in front of employees at Apple headquarters and held up the phone, which a staffer had hand-delivered from a store in Beijing to commemorate a notable occasion: Apple had sold its billionth iPhone. That celebratory milestone — Cook laughs when asked by a reporter if he’ll stop counting, as McDonald’s did with its hamburgers — aptly coincides with another big moment for the technology giant’s chief executive.
A few weeks later, Cook would mark the fifth anniversary of what has been the most closely watched transition of power in corporate history: On Aug. 24, 2011, just six weeks before his death, Apple’s iconic founder, Steve Jobs, permanently handed his chief operating officer the reins. “It’s been a blur in a lot of ways,” says Cook, who had filled in for Jobs during medical leaves. “It feels like it was yesterday in some respects.”
It is fitting that these two milestones arrive so close together. That’s because the iPhone, launched by Jobs, has been the biggest driver of Apple’s massive growth during Cook’s tenure. It led the company to soaring valuations and accounted for nearly two-thirds of Apple’s revenue in the past year. Just the tally on iPhone sales, almost $141 billion over the past four quarters, is more than the annual sales figures of Cisco, Disney and Nike — combined.
But the iPhone has also been a source of recent disappointment, too. In its most recent quarter, iPhone sales fell 23 percent from a year ago, contributing to a 14.6 percent drop in overall revenue. It was Apple’s second straight quarterly drop in sales after 13 years of growth.
Just after Apple disclosed those results, Cook sat down with The Washington Post to discuss his first five years in one of Corporate America’s most glaring spotlights. In two sprawling and highly self-reflective interviews — one in his office and another by phone just before he left for vacation in Yellowstone and Grand Teton National Parks — Cook described why the visibility of the job has been “shocking,” how he’s learned to deal with the scrutiny, and who he’s turned to for advice at pivotal moments (Warren Buffett, on his decision to return cash to shareholders, and Anderson Cooper about publicly disclosing he is gay).
He spoke in candid terms about the mistakes he’s made on the way, such as his first hire to run Apple’s retail stores (“that was clearly a screw-up”). He fiercely defended Apple’s tax policies. He touched on succession planning and the importance of grooming internal candidates. He was at his most spirited when talking about privacy and the long-term future of Apple and the iPhone — calling Apple’s big presence in the smartphone industry “a privilege, not a problem” — and quieted considerably when talking about Jobs’s memory. “I know this sounds probably bizarre at this point,” he said, “but I had convinced myself that he would bounce.”
Cook, 55, chooses his words carefully, taking long pauses and speaking with a slight Alabama drawl. Though he has favorite phrases — many things are “deep,” and Apple’s mission is always its “North Star” — he eschews the jargon many CEOs use. And while he’s quick to trumpet Apple, he is also unassuming, quickly noting, after saying his job can be “lonely,” that “I’m not looking for any sympathy. CEOs don’t need any sympathy.”
That reflects how Cook’s imprint on Apple has often been described — making it more systematic, more transparent, more team-oriented, more humble. He has engaged on social issues more than most CEOs, writing op-eds on legislation that limits gay rights and making the extraordinary decision earlier this year to oppose the FBI’s request to unlock the San Bernardino killer’s phone.
As CEO, he gets high marks for managing the company’s growth, keeping margins high and expanding further into markets such as China (Apple had four retail stores in China five years ago. Today it has 41.) He has pushed into the enterprise market, grown Apple’s product lineup and positioned Apple to make more money off the devices it’s already sold: Its services business, which includes things like iTunes, iCloud and a mobile payments service, is projected to be the size of a Fortune 100 business next year — all on its own. Apple remains the most valuable and most profitable company in the S&P 500 index.
Yet as the company deals with declining sales in its major device categories and in markets like China, critics and some investors have fretted about Apple’s innovation mojo under Cook. The first all-new device during his tenure, the Apple Watch, is not yet a mega hit. The iPhone juggernaut faces a saturated smartphone market, growing competition from low-cost upstarts in China and longer upgrade windows from consumers. Rumored big concepts behind the curtain — such as a reported car project — appear to be years away.
Some analysts say such impatience is shortsighted, and that the long-term potential for things like services, augmented reality and even a possible car could ultimately transform the way Cook’s tenure is viewed. “Investors are so finicky that they lose track of the big picture,” says Gene Munster, an analyst at Piper Jaffray who covers Apple. “I think the wisdom and legacy of Tim Cook is going to be determined by what happens in the next five years.”
In the conversation below, Cook looks back as well as ahead at those next five years — hinting at augmented reality but refusing to comment about a car project, saying Apple believes people love a surprise. It has been edited for length and clarity.
Your first day in this job, you sent a memo to employees that said, “I want you to be confident that Apple is not going to change.” Five years later, it has to have changed. What qualities of Apple are immutable, in your view?
The DNA of the company is really what I was talking about there. The North Star has always been the same, which for us, is about making insanely great products that really change the world in some way — enrich people’s lives. And so our reason for being hasn’t changed.
Other things change. But that’s the thread that ties everyone together.
And what has changed?
The obvious things are we have more employees in the company. The company is four times larger [by revenue since 2010]. We’ve broadened the iPhone lineup. That was a really key decision, and I think a good one. We’ve gone into the Apple Watch business, which has gotten us into wellness and in health. We keep pulling that string to see where that takes us. Lots of core technology work has been done.
Are there ways the culture has evolved?
We have stepped up our social responsibility. We have talked about things and been more transparent about what we’re doing — not on products: We try to be as secretive as we’ve always been on products, although it’s increasingly difficult to do that.
The real test is: Are you creating a ripple that helps other people as well? An example of that is the environmental work. We’ve had environmental work going on at Apple for decades, but we didn’t talk about it, and we didn’t set aspirational kind of objectives. We used the same philosophy we do with our products, which is you unveil them when you’ve finished. But we stepped back and re-evaluated that and said, “You know, if we wait until you do that, we’re not helping anyone else get there, too.”
You’ve said you don’t want to be a traditional CEO. What do you mean by that?
I think of a traditional CEO as being divorced from customers. A lot of consumer company CEOs — they’re not really interacting with consumers.
I also think that the traditional CEO believes his or her job is the profit and loss, is the revenue statement, the income and expense, the balance sheet. Those are important, but I don’t think they’re all that’s important. There’s an incredible responsibility to the employees of the company, to the communities and the countries that the company operates in, to people who assemble its products, to developers, to the whole ecosystem of the company. And so I have a maybe nontraditional view there. I get criticized for it some, I recognize. If you care about long-term shareholder return, all of these other things are really critical.
You’ve got the billionth iPhone on the table here. One thing that has changed is that in 2011 about 44 percent of the company’s sales came from iPhone. Now it’s close to two-thirds. How can Apple move forward when so much of its business is tied up in the iPhone and an industry that’s cooling off?
This is actually a privilege, not a problem. Think about this: What other products do you know where the ratio of people to the product, for a consumer electronics product, will be one-to-one over the long haul? I don’t think there is another one.
The global sales of PCs each year are about 275 million right now. That number’s been declining. The global market for smartphones is 1.4 billion. Over time, I’m convinced every person in the world will have a smartphone. That may take a while, and they won’t all have iPhones. But it is the greatest market on earth from a consumer electronics point of view.
Think about it: Families have a TV. Some families are fortunate enough to have multiple TVs. But if you looked at all the TVs in the world, it’s not one-to-one, and it’s not going to be one-to-one.
Look at the core technologies that make up the smartphone today and look at the ones that will be dominant in smartphones of the future — like AI. AI will make this product even more essential to you. It will become even a better assistant than it is today. So where you probably aren’t leaving home without it today — you’re really going to be connected to it in the future.
That level of performance is going to skyrocket. And there is nothing that’s going to replace it in the short term or in the intermediate term either.
I realize that the people who are focused on this 90-day clock say, “Oh, my God, the smartphone industry only grew by 1 percent or decreased by 6 percent.” You know, the global economy’s not that great right now. But if you’re in it for the long haul, this is the best market on earth.
I see enormous opportunity [in India]. There are still a fair number of people in this country who don’t have smartphones. They’re using flip phones or a feature phone. There are a lot of people switching from Android to iOS, and that’s huge for us because they have a lot more market share than we do, from a unit point of view. Our goal has never been to make the most. It’s always been to make the best.
So to those who ask where’s the next big, world-changing category for Apple — it’s sitting on this $231.5 billion pile of cash — are you saying there’s nothing like the smartphone?
Technology is one of these industries where every week there’s a new shiny object that people are skating to. Netbooks — look back, everybody was writing like netbooks were this unbelievable thing, everyone was asking us, “Why aren’t you making one?” Same thing with the PDA. Remember what happened with the PDA? Up and down. It was like the hula hoop. Technology is full of those.
I’m not saying we’re not going to do anything else. I’m saying this is still an unbelievable product category to be in, and not just for this quarter, year or for years. So I would not want anybody to think this, oh, this “better days are behind us” thing.
Some analysts have said that.
And it doesn’t bother me. Because honestly, they were saying that about Apple in 2001. They were saying it in 2005. They were saying it in 2007 — ‘this stupid iPhone, whoever dreamed up this thing?’ Then they were saying that we peaked in 2010, then it was 2011. We got to $60 billion [in revenue], and they said you can’t grow anymore from this. Well, last year we were $230 billion. And, yes, we’re coming down some this year. Every year isn’t an up, you know. I’ve heard all of it before. And I don’t subscribe to it because it’s traditional thinking in a lot of ways: You can’t get large because you are large.
How do you make the case that Apple is still a long-term growth company?
In today’s products we have services [iCloud, App Store, Apple Pay and the like], which over the last 12 months grew about $4 billion to over $23 billion [in sales]. Next year we’ve said it’s going to be a Fortune 100 company in size.
What else? IPad. The iPad Pro. What we saw in this past quarter is that about half of the people who are buying one are using it at work. We have an enormous opportunity in enterprise. Last year we did $25 billion or so in it around the world. We’re collaborating much better with key partners because it’s important, if you’re making a decision to use our products or anybody’s products in the enterprise, that they work well together. And so we’re working with Cisco because they’re incredible with the network infrastructure. We’re working with IBM, who’s written a number of apps. We’re working with SAP because they own the back of the house, in terms of the processing. They own three-quarters of the world’s transactions, in terms of it running on their products.
And then, of course, the markets. We have done fairly well in China. India is fast growing, but our base there is smaller. One of the big things that has held India back is the cellular infrastructure. They have two major carriers putting in a lot of investment to bring 4G. You can imagine if you didn’t have 4G today. You can’t enjoy video on a 3G. Periodically you can, but not consistently. This is a game changer. In India, there’s no fixed line to home. So they’re a mobile society. China’s very much like that as well.
And so I look at it and say: markets? Enterprise — huge. Geographies? India is one, but there are others. Products? We purposely don’t talk about that one. But you can imagine. Step back and say what’s Apple so great at? Apple is the only company that can take hardware, software and services and integrate those into an experience that’s an “aha” for the customer. You can take that and apply to markets that we’re not in today. There’s not a limitation that we can only do that in the smartphone area or in the tablet or Mac or watch area.
Do you feel any frustration with investor impatience?
We welcome all investors, regardless of whether their horizon is short or long. But we try to be very clear that we are making our decisions based on long term. I think for investors that are focused on the long term, if you look at how we’ve done in the past five years, our total shareholder return is over 100 percent. That’s a pretty good number. And I think most people that have been in the stock for that period of time are probably pretty happy.
You succeeded one of the icons of American business. What does it feel like to step into those shoes?
To me, Steve’s not replaceable. By anyone. [Voice softens] He was an original of a species. I never viewed that was my role. I think it would have been a treacherous thing if I would have tried to do it. When I first took the job as CEO, I actually thought that Steve would be here for a long time. Because he was going to be chairman, work a bit less after he came back up the health curve. So I went into it with one thought, and then weeks later — six weeks later, whatever —
It was very quickly. [The day he died] was sort of the worst day ever. I just — I had really convinced myself. I know this sounds probably bizarre at this point, but I had convinced myself that he would bounce, because he always did.
What did you think you knew about leading Apple that turned out to be wrong?
There’s nothing like sitting in the chair, so to speak. I was reminded that customers have a really deep love for the company. I started just getting an avalanche of customer mail. I don’t mean complaints. Email. Positive. Negative. Points of view. Not the ‘hey, this broke, I’m mad.’ Largely not that kind of stuff. Things much deeper than that. Moved by how they were treated in a store. Lots of people have written me about FaceTime and how they could be near their mother’s or father’s bedside before they died only because of it.
But what about in terms of running the company?
I learned that the scrutiny was much higher than I thought. Media interest and scrutiny — social networking was taking off at that time — and so a lot of the “love,” so to speak, and interest from customers, I think transfers to media interest as well. And so there’s a lot of visibility on the company. We can do very few things without it being reported somewhere.
You and Alan Greenspan or Janet Yellen would probably have a lot to talk about. It seems like every word you say is scrutinized. How do you get used to that?
You don’t. You’re both praised and criticized, and the extremes are wide — very wide. And that can happen all in a day. You build up — my skin got materially thicker after August 2011. And I don’t mean in a bad way. I don’t mean that I’m callous and don’t care. I think I’m a bit better today about compartmentalizing things and not taking everything so personally.
That was just downright shocking to me, honestly. I thought the visibility went with Steve, not the company. And so I thought with a different CEO, with me, that would instantly change. It didn’t.
You’ve been more outspoken on social issues than any other CEO of a company your size. Do you think companies have a responsibility to publicly take on such issues as civil rights and climate change?
I think everybody has to make their own decision about it. Maybe there are compelling reasons why some people want to be silent. I think for us, though — for a company that’s all about empowering people through our products, and being a collection of people whose goal in life is to change the world for the better — it doesn’t sit right with me that you have that kind of focus, but you’re not making sure your carbon footprint isn’t poisoning the place. Or that you’re not evangelizing moving human rights forward. I think every generation has the responsibility to enlarge the meaning of human rights.
I do view that a CEO today of Apple should participate in the national discussion on these type of issues.
Who were you thinking about when you decided to write the op-ed where you publicly came out as gay?
I was thinking about kids. I was getting notes from kids who knew I was gay, or assumed I was, because of something they had read on the Web. And they were kids who were distraught. Some had been pushed out by their families. They thought they couldn’t achieve anything. They couldn’t do anything. They were seeing the national discourse around it and feeling isolated and depressed. And I just thought — I’ve got to do something.
And you speaking out would do what?
I thought it would minimally say you can do pretty good in this world and be gay. That it’s not a limiter. It’s okay to be. That it’s okay to be honest about it. I figured if I could help one person, it would be worth it.
It had been planned for quite a long time. It was not something that was done in a moment, by any means. It was probably a year. Just thinking through what to say, how to say it, where to say it, how to do that in a way that advanced what I was trying to do.
I wanted it to be in a business [publication]. That’s what I know, that’s who I am. There was a lot of work there. I visited people. I talked to Anderson Cooper at length — multiple times. Because I thought that the way that he handled his announcement was really classy. I was getting advice from people who I thought were really great people who had really deeply thought about it.
There are few jobs in corporate America that have the same scope, breadth and size as yours. Geopolitics. National security. Consumer retail. Global supply chains. The entertainment industry. It’s mind-boggling. Where do you turn to for advice?
Whoever I think can help me. When I was going through [the question of] what should we do on returning cash to shareholders, I thought who could really give us great advice here? Who wouldn’t have a bias? So I called up Warren Buffett. I thought he’s the natural person, and so I try to go through that process on everyone. That doesn’t mean I always do what they say. But I think it’s incumbent on a CEO to not just listen to points of view but to actually solicit them. Because I think, if not, you quickly become insular. And you’re sort of living in the echo chamber.
For the hearing [before the U.S. Senate’s Permanent Subcommittee on Investigations about Apple’s tax practices in 2013], I’ve never testified in front of Congress before. So I called up [Goldman Sachs CEO] Lloyd Blankfein, because I looked back to say who’s done this before? I knew Lloyd and thought he’d be honest with me. I called up President Clinton. He knows a lot about the politics. I’d not met him through a political connection. I’d met him through the foundation. I went to Laurene, Steve’s wife. Laurene has the lens of knowing me and deeply understanding Apple.
And so, obviously, I get a lot of advice internal to Apple. But I think it’s important on these things that are also new to the company to solicit some people outside, even if you conclude to not do what they say.
With the fight with the FBI, did you have any idea what you were getting into?
We knew it was going to be very, very difficult. And that the cards were stacked against us. But we spent a lot of time on “what is right here?” People who were really key on this decision are folks like [SVP of software engineering] Craig Federighi. This at its heart is a deep, deep technical question. You first have to understand that to do anything else.
The lightbulb went off, and it became clear what was right when we did the first piece of work: Could we create a tool to unlock the phone? After a few days, we had determined yes, we could. Then the question was, ethically, should we? We thought, you know, that depends on whether we could contain it or not. Other people were involved in this, too — deep security experts and so forth, and it was apparent from those discussions that we couldn’t be assured.
The risk of what happens if it got out, we felt, could be incredibly terrible for public safety.
We knew the positioning on the outside would not be public safety. It would be security vs. privacy — security should win. But we went through the deep, deep, deep discussions on that. It became clear that the trade-off, so to speak, was essentially putting hundreds of millions of people at risk for a phone that may or may not have anything on it, and that likely didn’t, because of other things that we knew about. We thought this actually is a clear decision. A hard one, but a clear one. Then it became more of a matter of how do we explain this. Because this is not easy. You can imagine. You just hear: locked phone. Terrorist. People dead. Why aren’t you unlocking this?