Former Apple Engineer Unveils Jobs' Creative Process

of Steve Jobs ken CoA Cienda. He joins us now in our eleven three oh studios, and he is also the former principal engineer of iPhone software at Apple. So if you have any problems with your iPhone, you know who to ask. Great to have you with us hand. Thanks for coming in. Thanks so much, it's great to be here. Tell us why you decided to write this book, Well, I thought, I think I worked at Apple during an

interesting time in its history. I got the opportunity to work on some products like the iPhone, but I also started at the company back in two thousand one one. Apple was still an underdog and and the iPod hadn't even been released. Yet and and the Mac was still the company's main product, and and it was at a five percent market share in a computer industry dominated by

Microsoft Windows. And so I was I was there. I was a witness to this effort of Steve Jobs to make the company relevant again, not only the market but in people's minds. And and that's with products like the iPhone and and and the iPod before it. Right, that that worked out pretty well. So Ken, here we are. Apple is now worth more than a trillion dollars in market cap. What point in your tenure at Apple did

you realized, Huh, we're working on something that's really big. Well, when the iPhone came out, of course, it built upon the iPod before it, and so Apple had already re established itself as as as a company worth watching. But then with the iPhone, uh, and and and the release of apps, and and the excitement that people had, uh that they could carry around this computer in their pocket, and that he could download all of this software that that opened up all of these these these new software

and hardware networking capabilities to them. Uh, it became clear to us that that this was something special. Just give people a little flavor of how you ended up at Apple because you did not well. You graduated with a degree from in history, and I understand that you're also at one point thinking of a career as a motorcycle repair. So I graduated from college. I had a history degree,

uh and I wanted to do so. Yes, I I went to Yale uh and and but I wanted to do something different from from studying and so I I went to motorcycle mechanics school. I have to say, Uh, this wasn't the most popular decision with my father, but my family got behind me and supported me. And so yeah,

I went out to to fix motorcycles. You know, throughout my throughout my life, throughout my career, I've I've tried to figure out ways that I could reinvent uh and and and integrate new new new efforts, new new directions, new ideas. So ken one thing that I'm struck by as Apple sort of starts a path forward, how much

was Steve Jobs responsible for the dynamism of Apple? And you know, does his his death and you know, kind of the saturation of the Apple products at this point create a cap and how much further it can go and innovate? Well, you see Steve created the culture that we used at Apple to build products. And and to just talk a little bit about that a second, because I think it does inform so much about what what what Apple is and how it how it does its work.

You know, he was a great editor and and and he set these assignments for people like me a programmer, and he would evaluate the work that came back, you know, always with a mind for how these products would fit into people's lives so that it wouldn't wouldn't be just a piece of technology, uh, that it would be something that people would find meaningful and useful for them, you know. And this this continues on his his his legacy is

still very very strong in the company. Well when you say meaningful to them, I mean right now we're broadcasting as these set it hearings go on with Facebook and Twitter, and I just have to wonder, I mean, given the fact that people are raising questions about iPhone or smartphone addictions and that people are using social media that's being corrupted according to some people buy foreign actors and bots

and the like. You know, does that does that vision change or is there something about that that has to change just by nature of where we are right now. Yeah, I think as a society, as a culture, we are learning what to do with these new devices and and and the pervasive part that they play in our lives. Yeah,

where this is still new to us. This technology like the iPhone didn't exist a dozen years ago, and Twitter didn't either, and so we are still trying to figure out how to incorporate these new ideas and these new capabilities into our life. So it's you know, I'm an optimist. I think we're going to figure it out. Well, your book is very optimistic as well, and I gotta say

it is a great read. It's called creative Selection. And I'm wondering if you could just quickly tell the story about a demo that you'd made with a gentleman name Phil Schiller, just had to do with the Corty keyboard that we're If you've got large thumbs, it's your fault. Using and creating the keyboard for the iPhone. Is a

fascinating story about collaboration at Apple. Right. Well, you see, the way that we did work was always based on demos and and and we used this creative selection process to Starwinnian process of evolving the projects and and and the products from these early stage stages where lots of times the software wasn't very good. And so this this demo that you're you're mentioning was was an instance where this early prototype, well, it didn't really work very well

for Phil and like Apple, he said so. And so you know, for me as a as a product developer and designer, you had to have a pretty thick skin. But you had to react to what these people were saying when they tried to software, because that's the experience that people have. They walk into an Apple store and they pick up a device, and they need to decide if they want to buy it or not. And and so it was job the job for someone like me to make sure that the product worked, that that the

experience would be good when people tried the product. Yeah, and not to get too offended when people say, uh, it doesn't work for me. I'm sure it was. Yeah. Yeah. It was then my my role to step in and figure out what what's making people have that reaction and to bridge that gap so that the experiences is a good one rather than uh. Ken Cakscenda, thank you so much for being with us. Ken Kshnda is author and

former principal engineer of iPhone software at Apple. His new book is Creative Selection, Inside Apple's design process during the Golden Age. Steve Jobs chairs of Twitter. They are lower right now by four and a half percent. As comes as the chief executive, Jack Dorsey testifies for the Senate Intelligence Committee. Here to tell us more about these hearings and the companies is Mark Douglas, the chief executive of Steelhouse. All Right, Mark Douglass, what do you take away from

the hearings? Is this just a political theater or are there going to be substantive changes at these social media companies? Um? Hi, good morning, So Um, I would put a little bit between those two. I mean, I don't think there's going to be much that comes from these hearings from a congressional Senate perspective in terms of legislation that's essentially not already enacted by these companies. And there's the they already have controls and plays, they have taken actions and things

like that. But I think the hearings are pretty informative. I think for anyone that chooses to watch them, like with the Zuckerberg testimony, you learn a lot. You learn a lot about how these companies operate, Marco, Who do you think has performed better today, Jack Dorsey or Cheryl Samberg? Um. Cheryl Samberg. Jack sings to me personally, UM, fairly nervous. I think he has never smiled. Demeanor UM, which is kind of um personally to me doesn't read that well.

I think Cheryl, you know her, her experience as an executive and kind of comfort just being in front of a microphone and in a setting, UM seeing she just

kind of comes across much better. Marca, what if you could comment on the world of advertising as it relates to social media and whether publishers, those people who purchase advertising online are they really getting what the social media companies tell them they're getting or they getting many of the fake and illegitimate accounts that have also been the subject of political investigation. Yeah, I mean that's an interesting question.

So the Facebook in particular is widely considered the best performing advertising platform period um and so, and the way that measured is two ways, um. Two people click on the ads and respond to them, and do they purchase goods and services after they see the ads and the goods and services You can't the clicks potentially, UM can be a little you know, maybe a fake box or

something like that can do that. There's not really an incentive to do it, but people um companies run these ads and they get the purchases that they're looking for, they get the consumer response that they're looking for. So I think, in particular on the social media companies, that's considered really safe place to advertise and very very high

performing place for advertising the place of money. So, given your background and your intimate knowledge of how the advertising works and data collection UH plays out, what is the question that you would ask both Cheryl Sandberg and Jack Dorsey and what would you be hoping to hear? Well, I think what most consumers want to hear. So in terms of the question, let's say that question was coming

from a consumer perspective, is my data being solved? I think when I talk to people, they generally understand these platforms are free and in return for them being free, that they're going to receive ads, and those ads are going to be targeted at their interests, words they use in their profiles, things like that, what they you know, where I think most people draw the line is are you selling that data in any way? Are you giving it away? Are you trading it in any way? And

I think that's um ultimately the real question here. UM. I know a lot of centers want to talk about political ads. I think that's another not consumed a question, but a question that Americans have is is you know when when their political ad placed, are they legitimate? Are they real? Um? Those are the two key things. I think, the consumer data, what's happening with my data? And and can I trust that the ads I see, particularly in a political arena, are are legitimate? Thank you so much

for being with us. Mark Douglas, chief executive Officer of Steelhouse talking about what we've been hearing among the Senate Intelligence Committee, where we have both Cheryl Sandberg as well as Jack Dorsey of Facebook and Twitter respectively, testifying in front of Congress. Really interesting that this hearing was supposed to be about interference with US elections. We've heard very good.

In fact, I haven't heard anything specifically about the presidential election or any specifics regarding what the companies have done to ensure that that doesn't happen with the upcoming the term elections. Indeed, and there does seem to be a lot of focus. Potential regulations are oversight of these companies, and perhaps that's what's leading the tech shares to decline

more than other arrival industries. The market for initial public offerings in the United States that have been announced more than twenty seven billion dollars worth of initial public offerings so far this year a hundred companies. Here to help us understand the market is Manuel Enrique's founder and chief executive officer of Hercules Capital. They are based in Palo Alto and Manuel joins us now and well, thank you

very much for being with us. Tell people a little bit about Hercules Capital and the kind of money that you invest and at what stage because you're kind of at the very beginning for a lot of companies, maybe

between one and forty million dollars of investment capital. Correct. Well, we kind of helped bridge the gap for companies looking to expand and grow without having UH to ENCURRG greater solution and you get either grow by using venture capital equity dollars or you can grow by having more conservative

bank capital. We fit in that middle void where we actually help these companies continue to advance or innovations and their disruptive technologies by preserving more capital ownership to the original investors, original seat investors, and the founders by using a vehicle call venture debt, which is what we do. MM. Interesting. This is especially interesting to me because it comes at a time where there's increasing focus on how the number of I p O s has declined significantly in the

United States. SEC Chair Jay Clayton has me that's one of his priorities to basically prompt more companies to go public in the US. What's your take on the I p O market? And you know, do you sort of agree with people who say that people like you who offer this bridge finance saying reduced the need to go public. Well, there's certainly there's there's a lot of factors that question.

I mean, number one, you can go back as far as decimalization, uh causing an impact on that, Sarbans Oxley another issue causing that, and then the public shareholders demanding that business models be more developed and start showing less of a cash burned before they go public, and all of that has actually changed, and in fact, fiscal two thousand and eighteen we're probably seeing one of the most robust IBO market activities we haven't seen in probably over

a decade and UH So far the first two quarters of the year have been very very strong, with very strong performance for companies like for example, to start with, like Roku alone, UH is up since its i p almost almost three and a half times and its valuation.

Docu Signed, one of our own portfolio companies, has been a blockbuster, doing phenomenally well, probably a hundred hundred plus percent since going public, and there's multiple examples of that throughout those recent i p o s. But what makes this I p O market very interesting and very unique. It is not just subject to the technology tape performing well. It's also seeing very good strong performance on biotech. So

it's a wide industry uplift that's going on. As investors continue to clamor for growth, they're seeing that growth coming from biotech and technology companies. Just to give the detail about docu Sign, that company went public in March of the year, a seven hundred and twenty three million dollar i p O. That share is so far performing a hundred and twenty three What can you tell us about investing in the biotechnology industry or medical device business because

those are both areas that you're interested in. Yes, we have um about the one point five billion of assets we have invested, literally half of it is invested in about technology companies from wide array of companies from anywhere from biotech to medical devices to therapeutic diagnostics UM and we're seeing a very great strong performance in that area

as well. And we're very happy with what we're seeing with the results in the biotech companies, despite the fact that you've been seen this kind of storm cloud forming on drug prices that has been looming either from the Clinton administration or sorry when Hillary Clinton was looking at drug price regulation and now the Trump administration is looking

at drug price regulations. Although we've seen a lot of that headwind causing some impact in biotechs, we're seeing so far the industry seems to be brushing that off rightfully, so because they're making such a great medical advancement that's going on there. So I'm just wondering, from your perspective, one's the best time to invest in a company before

they go public at this point or after they go public. Well, that's a great question, because what Hercules offers to the shareholders who in our stock is the ability to actually own some of these high promising pre I p O PREEM and a companies that are now beyond just a concept. So we definitely we generally don't invest in a Series A or Series B we search of development company. We tend to invest after the company has shown demonstrative progress

in its development. So we try to take as much risk out of the investment as we possibly can and therefore allow our shareholders to participate an additional upside. So an interesting way of looking at Hercules is and Hercules almost be seen as kind of et F of the

venture capital industry. We have a wide distribution of different venture capital firms, different uh technology and life sciences companies that we invest in, the different geographies of the United States, and different stages of developments, all aggregated in this one portfolio called Hercules. So you can participate in that by getting a nice dividend yield generally about nine nine percent dividend yield, while also seeing capital appreciation when these companies

go public any evidence of docuside. For example, Manuel Henriquez, thank you so much for being with us. Manuel Henriquez, as founder and chief executive officer of Hercules at Capital in Palo Alto, California. I want to shift our attention though now to retail to shopping and the places where you do that shopping. And joining us now is Tom McGee, President, Chief executive Officer of the International Council of Shopping Centers. He joins us here in our eleven three oh studios

in New York. Tom, thank you so much for being back with us. Really good to have you, especially in light of the retail earnings that we've gotten, which were inconsistent, I should say, where you have some of the longtime laggards, with J C. Penny, Sears, uh L brands really suffering as a result of weaker earnings, while the Amazons of

the world and the Walmart and other big box stores too. Well, I'm just wondering, from your perspective, would it be better for j C. Penny and Sears to go out of business and to let other healthier retailers go in those key spots in some of the malls in order to generate more traffic, or do you think they should hang and for longer. Well, I think that First of all, I think it's a fiercely competitive industry and it always

has been. Uh And if you look at uh the retail names today and compared to twenty years ago, and thirty years ago, you see a lot of change and fluctuation that happens. I think consumers should make that, you know, decision, not me, and I understand that, but I'm just wondering from a health perspective, do you think it's it's better for stores to sort of live their life and then be turned over if they're not being super successful, or is it better for familiar names to kind of hang

on again. I think I think the consumers should decide that. I think from a from a shopping center developers perspective and an owner and manager, they're always looking for the mix and curation of folks that are going to drive foot traffic. And generally what drives foot traffic is those brands that are doing well in the marketplace, that are

offering products or services. And I think that's an important element in you know, retail real estate today, really consumer real estate is that you're moving from really a product centric city and almost an apparel centricity that may have defined retail over the course of the last twenty five years or so, to one that does include that, but it's a composition of a lot more, a lot more services, hospitality.

You see quite frankly, when you see what's really happening in in retail in general is and I've always believed, and I've said this on this show, this whole retail apocalypse is just you know, kind of overblown what really is happening as a retail renaissance, and that there is a lot of redevelopment happening where you're mixing, um relative to what consumer demand is, mixing hospitality and living and retail all in one environment because people like to live, work,

and play in one place, and I think you're seeing those things happen in retail generally here in the United States. And you know, we just recently issued kind of a global perspectives report because we are an international organization, and I think you see those same trends at different stages

taking place across the world as well. All Right, I'm gonna give you a list of brands, and you can raise your hand if you've heard of them, because I confess that I've only recently, you know, tried to keep up to date. Thread Up, ever Lane, All Birds Away, Koto Packs, the Ministry of Supply, Indocino and m jem I Yes, and Casper Sleep. What do they all have in common. These are digitally native brands that have all

opened actual physical stores. From the perspective of the International Council of Shopping Centers, to those kinds of brands demand something different than what a traditional store based operation wants. Are they savvy er in some ways? Do they want something different? What do they what do they want? First of all, I think it's the I think it's the natural evolution that we should expect that to be a

continuing trend. I think the last ten years of really retailers are really invested in their online channel, and you know, not surprisingly so because that was new and emerging. I think what retailers Bobos is one example, right because Walmart bought them, Sure and now and now what you're seeing though is retailers and I really do believe this is the trend of the next ten years. Retailers are going to invest in their physical channel and that synergy that's

going to take place because consumers really don't care. They just want, you know, best price, best service, regardless they're somewhat channel agnostic. I do think what you'll see though, is the stores of the future will increasingly focus upon experience.

I think some of the brands that you're talking about, you know, Casper, the Sleep you know, it's a sleep center, and you know they're gonna focus upon experience as opposed to just a collection of products, and so infer inferred in that is, yes, the experiential aspect of seeing merchandise in a different way, but also just a greater level

of customer service than you've had in the past. You know, the FAO Schwartz is opening up, you know, a new store here in Rocks Center, and all of us that are you know, grew up in the same age group, were excited about that. But you know, when they talked about, you know, the store, they talked a lot about experiential.

They're taking a lot of space, but experiential and that the folks that are going to work there are really going to be in some in some ways in character, and you know you're going to have almost a theatrical experience when you go there. And that's on one end

of the extreme. On the other end of extreme, you have something like a t J Max quite frankly, which is you know, which doesn't really doesn't have much of an online presence, but it isn't experience because it's like a treasure hunt right to go there, And I think retailers are going to focus more upon what's my experiential offering within my store that's going to differentiate me to

our competitors. Since you did just issue a global report, where in the world are you seeing, uh, commercial retail space gain value at the fastest pace right now? Well, obviously the emerging markets, um, you know Asia is is with a growing middle class. Um, you certainly see a lot of investment in retail real estate. I think the Middle East is doing some things that are quite innovative and really I think set an example for some of the things that we are looking to do here in

the United States. Um, if you go to a mall and Dubai for example, I mean we all have heard about the ski and shopping exactly, and they've been doing that. That's a decade ago, and you're you're going to see those types of things. You're already starting to see those types of things within malls and shopping centers here in the United States, and so I think you're I think what you're finding in North America is in some cases

learning from the rest of the world. We have historically been more much more department store centric here than the rest of the world. I think we're evolving to become much more hospitality and service oriented, which I do think and I don't think it can be overseeing the importance of demographics. You have a you know, a baby boomer

generation that's generally empty nesters. Now you have a millennial generation that is not yet in kind of there, you know, having kids, having a home type of a period of their life, and both of those, the largest demographic groups in our country and really in the world, are very much focused upon consuming experiences and services now. Now, maybe the millennials ten years from now will be in a

different stage of life. But when you look at what they want right now and what the baby boomers want, which is the hugest percentage of our population, that's what's driving a lot of the changes in retail. Thanks very much for being with us. Tom McGee is the president and the chief executive of the International Council of Shopping Centers and they are out with their Global Perspectives Report. Thanks for listening to the Bloomberg P and L podcast.

You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramowits one before the podcast. You can always catch us worldwide on Bloomberg Radio