How a Crisis Almost Derailed the Original iPhone

that day. It was actually my parents wedding anniversary, and they have never let me forget that I was considerably older than thirteen. I was in my in my mid thirties, working for the New York Times covering Apple, and we actually fanned out and we're talking to people waiting in line, and I remember being somewhat dubious about this enthusiastic display about what at the time seemed like just another device.

You have no idea, man, I mean, this is something our hours anyone best part It was one in line line, but I was that was sleeping outside of my local teen T store, local Apple store for days. The line starts over there, but it snakes all the way behind me around this Manhattan block some of these. Yesterday when we were here, there about nineteen people waiting in line for this phone. Today, as you can see, hundreds more people cheered and yelled as they walked out of the

store with their new phones for the first time. It was a great, if slightly corny moment in technology history. But I've always wondered what this moment was like for the people on the inside. I ended up I had a personal trip to Chicago, so I decided to to watch the the unveiling of the first customers from the Chicago store. And to this day, I mean, right now, just talking about it, my skin, you know, it's getting goose bumps, and I remember literally tears just coming down,

coming down my eye. Right. Everything that we sacrifice, all those unseen worth it, you know when you started to look at the faces of the customers that were gripping through the box and getting the hands on on the unit for the first time. Now, ten years and billions of dollars in revenue later, Apple is revving up for perhaps its most important new phone since that very first release. Hi. I am Brad Stone and I'm Mark German, and this week on Decrypted will bring you the untold story of

the original iPhones development. We'll take you inside the room when Steve Jobs was making important decisions about the iPhones key features. We'll also talk about how Apple recruited its engineers from all over the world. We'll even reveal a crisis that almost killed the entire project, and these original team members relived those final moments before the iPhone was

announced back in two thousand and seven. We'll give you a peek into what goes on inside Apple when the company is gearing up to launch a new key product. As we approached the unveiling of the next iPhone, there's teams of people at Apple going through all of this. Right now, this year's model, which is going to be a major overhaul, has been much discussed. There's clearly some excitement in the air. Stay with us, so let's start at the very beginning. The year is two thousand and five.

Steve Jobs is at the top of his game. Thank you very much. It's great to be here. So we've got a lot of great stuff for you today, a lot of first two. Apple is nearing a transition from power PC two Intel chips for Smax. That was a huge step forward Apple's on track to announce the ipole Nano, which turned out to be a smash hit. Internally, Apple was already thinking about how to cannibalize the iPod, which

already sold tens of millions of units. Six years after coming back from the brink of disaster, Apple was growing into a technology powerhouse, and part due to Steve Jobs. Then Steve dreamed up a new project. Not only were we uh you know, asked to you know, develop a product of the company had never done before. Uh and and literally pick up skill sets. It didn't necessarily exist within the company, but we had to do it any

very aggressive schedule, very aggressive timeline. That's Jose Kong today, he runs Plause. It's an HR software startup. Back in two thousand five, two of apples most celebrated executives, Steve Jobs and Tony Fidel, asked Jose to recruit the team that would go on to build the iPhone. You know, I remember heading in the first time. Uh. It was shocked because one, you know, whole side of the building in which the IPOT or the Special Projects Group SPG was was house all of a sudden had a wall

with a batch reader. There was the utmost secrecy around the project. It even had a code name Project Purple, and only the team involved knew what the product was. And that's when I knew that it was serious. That's when I knew that it was secretive. UM, I couldn't tell anyone. I remember signing a pretty thick n D a UH that basically stated that if I leaked any knew so any information about this particular project, my boss and my boss's boss reliable and you know, potentially looser jobs.

My name is Andy greg Nun and you and I are in half Moon Bay, California, which is just south of San Francisco by about twenty minutes if you drive real fast. Andy was an up and coming software engineer at Apple when the iPhone project started. I met Andy at a beachside brewery, which he calls his office. He works from a laptop on the bar counter, but he reserved a nice back room for us to chat Apple. Andy has firsthand knowledge of how hard it is to

build a phone. His team was responsible for the phone's functions that specifically related to making calls. Andy had a background developing software, and earlier he actually worked on the iPod. Well. He was at another startup, but taking an iPod and turning it into a phone, that was a really big challenge. Here's Jose I remember, you know, as the recruiter assigned to this project. One of the first requisitions that came through was for an antenna engineer. Uh, I had no idea.

I had never recruited for, you know, anything in that particular space. Today, almost every phone is trying to look like an iPhone, but not. Back then, the BlackBerry ruled the land. Business People were certain that they needed a hardware key word in their phones. You had phones like the Sidekick, um feature phones where keyboards split out. Those were popular at the time. There was a lot more variety in the phone world, and the idea of a piece of glass that you typed on seemed frankly, very

strange to a lot of people. And don't forget at five it was one of the most expensive phones to date, but that clearly didn't matter. Yeah, there was a lot of skepticism, and it also only worked famously on the Singular network, which became a T and T and coverage was terrible, right, you know, you had those famous dropped calls over the first couple of years, and so I think a lot of people, probably particularly the folks up in Waterloo, Canada at BlackBerry, they underestimated what the iPhone

could become. Over the course of the two years, working on the iPhone went in cycles. You know, here's the thing, I think that a lot of people don't really get about development of major projects. Right, there's no one defining moment on on a project like this. But some episodes were intense. We were looking for UH imaging technology, right and at the time Nokia probably had the best team in the world. And UH, Steve had become fixated on a great candidate that we found who he had met,

and he wanted to make an offer to him. But you know, this is being Apple, This being Steve had to be an aggressive opera offering had to be UH and over the top production. And so last minute I was told, hey, you had a head to Helsinki. You have to go meet with this particular candidate so that we can make an offer. And so uh, within you know, literally a few hours on my way to s Foh no luggage, look at my at my itinerary and it was basically get their head, dinner and turn around and

come back. At what point I had the highest level of travel recognition with United, so that that should give you. You You know, there wasn't a flight that I that I wasn't upgrade because I had so many miles that I was using. Thanks to Jose's recruitment drive, the iPhone team was growing. But you know, I remember one time in particular, UM, we were we were doing a quote unquote open house. Basically, Jose had gone to Libertyville, Illinois or Motorola's offices were they booked a hotel room to

do a mass meeting of Motorole's engineers. The plan was to bring motorole as best engineers and bring them over to Apple. I remember getting a call from the legal department at Apple basically say Nope, you have to cancel it. There's no way that you can go. You know you nope, can do it. Uh, it's too aggressive. Um. But at the same time I got a call from you know, the product side of the house saying, no, no, you

have to deal. We need these individual's. Uh. Fearing you know, being fire for not doing my job, I decided the top of the plane and we went. I would fear the repercutions of letting Tony and Steve down more than the repercussions of the legal department coming down on me. Thanks to that open house, Apple ended up bringing over a whole bunch of people from Motorola. They went on

to become key members of the original iPhone team. Now remember, at the time, Project Purple is top secret and Motorola's offices were in Illinois. Jose was convincing people to relocate to California and join Apple, all without telling them even what they'd be working on. As the team was closing in on the final months before the big unveiling at

the Macworld conference, something happened. It quickly escalated to the level of a full blown crisis with this bug where we couldn't reliably keep a phone call going, and to the point where you didn't know when it was gonna stop when before we announced them in the fall of two thousands six, okay, so three months before the phones have some some amount of time right inside Apple, this was a major problem. Who's going to buy a phone

that well, I can't make phone calls. There was a serious risk that if Andy and his team couldn't fix the issue, it could derail the entire project. At this stage, with just three months to go, the product should have ideally been locked and loaded for its splashy January unveiling the chips verified on either side. The chip that made the phone call was fine. There's no reason it should drop.

We had the people you know, from Korea and in Germany and in everywhere else who wrote the code that made the chip single stepping, along with the deepest technical bench we had at Apple. We dragged in people from everywhere. But just imagine for a second, you're dragging in colleagues to fig this issue. But with all the secrecy around Project Purple, they can't know what the product actually is.

And of course Steve Jobs had to get involved. In all the years of experience I had with Steve, sometimes when you screw up, you gotta take the verbal lashing. He'll scream in holler, and they'll make you feel like when you knew you were in trouble, not you personally, would you the royal like the program was in trouble was when he moved well past screaming and yelling, what's past screaming, pensive rocking in his chair, it was you you still like you don't really know what to do anymore?

He knew innately. When we came to him, We're like, this is a show stopper. In the end, this problem was so difficult that it actually didn't even get solved in time, So we ended up shipping with a workaround. Uh, for the very first iPhone. We never figured out, by the way, until it was after the phones were shipped, what the actual core problem was. Luckily, and he found a workaround so Apple could stay on track to un

field the phone at Macworld, which was scheduled for January nine. Seven. Okay, so the iPhone team is entering the final stretch. Two and a half years of working in secret is about to come to an end on January nine. The stress, the pressure, the long work hours is starting to get

to everyone. Steve was expert at finding people who wanted to ship a thing above all else, And that and above all else goes to not eating, not sleeping, you know, not being with your family, you know, not being with your partner, not being like you know, you would do anything to get this thing up. It's a conscious decision I made every day to put all of this ahead of everything else. This was a recurring theme for the

people working on the iPhone. Their personal lives are basically on hold until the news of the phone became public. You know, from my perspective, it was tough. I mean, two thousand and five to two thousand and seven, I hardly saw anyone in my life. You know, I didn't get to see my family very much. I didn't get to see my friends very much. I neglected, you know, my relationships. Uh. To this day, yes, I feel guilty

about missing birthdays uh and special occasions, even weddings. But to be honest with you, you know, the iPhone was so important. We were so emotionally connected to this project that if you had to do it all lover again, I would still do the same thing. The big unveiling at Macworld was scheduled for January nine, two thousand and seven. At this point, there's only a few weeks ago. Steve

and a small trusted team start preparing the keynote. You know, you could cut the tension in the offices with with your fingers, with your hands, as I think it was because it had to be perfect, right, I mean, this is Apple, this is Steve on stage. We can't just you know, unveiled the product. You know, the customers, the media, the market. Everyone expects this to be a massive theatrical you know, unveiling, but for Andy and the team, the

iPhone still wasn't completely finished. We're there late one night. It was you know, Christmas this time, you know, coming up late December, before Christmas and before the announcement. So it's two thousand six, right December. We're hanging out. There's like four of us in the hallway, the way Andy tells it. Another colleague walks up to the group and starts asking the questions about the status of the iPhone.

People are exhausted, overworked in the conversation suddenly gets confrontational, and that quickly escalated into effectively a yelling match between these two people on who had spent less time with their kids, Like who had missed what performance, you know, Christmas thing or whatever, who hadn't seen this, who didn't

buy Christmas presents? But whatever? It was just but it turned into like this, like clearly pent up frustration of just all of it, right, the program, We're not ready, you know, I haven't seen my family, I haven't seen my kids, like just right, and it just all came out and finally this this person was screaming off down the hall and goes into off slams the door so

hard that it breaks the lock. Eventually, the team used a steal bat to break down the door and get their colleague out, who was stuck on the other side. That screaming match happened with maybe a month ago before the iPhones January debut. Andy couldn't have been prepared for

the crisis that still lay ahead. Having worked hard with this small number of individ edibles in a very confined environment where you couldn't even talk to your family or you couldn't talk to other individuals within the company about what you were working on, you know, realizing that the unveiling was was near. Uh, let me tell you for for for for the first phone at least, it was

probably the most exciting time of my career. It was exciting, sure, but Project Purple still had to get through the keynote address at McWorld two thousand seven, when Steve Jobs would walk out on stage and tell the world what Apple has been up to. Remember, Steve had a terrifying reputation in the industry as a perfectionist. Keynote addresses had to be dramatic and absolutely flawless. Apple prepares months ahead of its events, leaving nothing to chance. The company prepares for

anything and everything that could go wrong. But that doesn't mean there haven't been close calls. We're coming up to the announcement day in at Musconi and at the time, all of the keynotes were staged in this one particular room. As he gets closer and closer, as people started to practice with Steve for for for the keynote, tensions just became a lot higher. You know, you knew, you knew

that we were getting closer. Uh by the calendars. All of a sudden, certain members of our organization, which is unavailable. Apple keynotes, which some people call Steve Notes, had become major events in the tech industry. Fans and media would even wait in line overnight just to get a seat inside the event designed to tell you when you can

wait in line for the actual product. All the laptops used, all the cabling, production people were there, but it was like instead like this huge room, it was like a tiny room and everyone just kind of shat you shoulder shoulder with laptops, but it was that exact same equipment configuration. Everything was then report was packaged up, labeled, and then replicated on the giant Mausconi stage. The Mosconi Center is

one of San Francisco's giant conference halls. It's right in the center of the downtown and on any given year, Apple would use Macworld to make a whole range of product announcements. The Macworld stage had been used to unveil some iPods, the first MacBook Pro, and iTunes. The two thousand seven event would also include the Apple TV at a new airport extreme Internet router. But the iPhone was obviously the main event. And yet Andy and the iPhone team,

we're up against one huge issue. They were preparing Steve's iPhone announcement without having the actual iPhones. We we didn't have enough phones because they were building the phones over in China. They were being hand carried in suitcases from from Vascon. If you're working on the hardware side, um, most of the engineers and operations professionals are spending a

lot of time in the factory in China, right. You know, if I had not seeing my family in you know, for a couple of years, this individuals may net had seen their homes for several months at a time. They were under unimaginable pressure to make sure the units coming

out of the Chinese factories were meticulously finished. The units come in from Asia, and the process was, you know, Steve and Johnny would put on like these white gloves and they would take the units out of out of the packaging and all the other stuff, and they would inspect them with jeweller's loops and they would grade them. So that's Steve jobs of course, and Johnny I've back in two thousand seven. Johnny was Apple's chief industrial designer.

He's actually still at Apple today in a bigger role as the company's chief design officer. So each unit got a grade. So it started off the best unit that we could produce at the time would be a double A, and then we go down to an A and then B C D. You know they and they are just in terms of mostly visual quality, like how how is the fit and finish on it, Like does the bezel lineup with the cases there? Sky Mars is there? Whatever

it is? Is everything seated properly and um and so like anything below like A B isn't really suitable to be on stage or the show. Once Steve and Johnny signed off on the hardware, the phones were sent for programming. That meant Apple to lay all the software that would power the phone. Everybody signs off on it, and UM, the team responsible laying down the final software on the show units, UH gets gets the building right, and so

they started. They did a gang programming where they did eight units at a time that we could flash right, and so again, brand new units off of the floor, and they start with the double a's first. They plug all of the double A units in and UH software goes on and as the flashing process finishes up, they'll start rebooting, like just repeatedly rebooting, and then they go dead. Turns out there was a buck. This is a day I've been looking forward to for two and a half years.

Every once in a while, a revolutionary product comes along that changes everything. I'm January nine seven, Steve Jobs got on stage at the Moscony Center and unveiled the iPhone. He would begin the event by announcing the Apple TV the company set up box. Then the big moment happened. We introduced the Macintosh. It didn't just change Apple, it

changed the whole computer industry. In two thousand and one, we introduced the first iPod and it didn't just it didn't just change the way we all listen to music. It changed the entire music industry. For years leading up to two thousand seven, the rumor meal speculated that Apple could be writing its entry into the smartphone world, but nobody had imagined what a departure the iPhone would be from everything else in the market. The iPhone couldn't be

more different than the rocker phone. For example, an Apple Motorola team up that put a version of iTunes on a bulky Motorola phone. It was a huge flop. An iPod a phone, and an Internet communicator, an iPod a phone. Are you getting it? These are not three separate devices. This is one device, and we are calling it iPhone today. Today Apple is going to reinvent the phone. And here it is. And about those perfect iPhones fresh from the factory floor, the ones that crashed in Apple's offices when

they were being meticulously prepped for the keynote day. What was supposed to happen with those units was they were supposed to be these big glass bell jars that were stationed all the way around Mosconi for the people who are the invited press and people who were there to take a look. And and what was supposed to be on them was a little a little video reel that was just playing a video over and over and over again,

that's all. And it was supposed to rotate around, and you could you guys could all get up there with your cameras and get a super close, tight shot showing whatever was on the screen at the time. And there's a few of you'll see it in some of the photos around. There's a few of them where the screens are black. It's because we want we we decided it would be better for them to see a finished, polished product, not showing the demo reel, than a flawed product. Andy

couldn't bring the phones back to life. A few months after the iPhone launched, and he decided to move on to something entirely new. It was another phone, another new operating system. He went to Palm to work with former Apple executive John Rubinstein on the Palm pre Jose stayed with Apple for several years after the iPhone launch, but then left the company in two thousand eleven. After Apple, he went to Nest, the startup founded by Tony Fidel.

We mentioned Tony earlier in this episode. He was one of the top engineers leading the iPhone team. When Andy decided to resign, he had that final conversation with Steve Jobs. He made a comment when when he and I parted ways at the end, he made a comment, He's like, um, I should have fired you that night, like referring to the night that we had put the we'd put the bats off for out And I knew exactly what he

was talking about, and he was livid over that. Once the iPhone was on the market, you and I know most of the story. It wasn't just a success. It didn't just change the phone market. It changed all of computing. It tilted the computing world away from PCs and desktops and towards these slabs of plastic and glass that we now all carry in our pockets. So far, we've been

through over ten generations of the iPhone. Apple sold over one point two billion phones in that time, and the phone has made hundreds of billions of dollars for Apple. And of course many other players have entered the smartphone market. Samsun, Google, HDC, Huawei, show me. These are some of the biggest smartphone brands around, and everyone from Microsoft to Amazon has tried to win

a piece of this lout cretive market for themselves. You know, the smartphone has become more more of a commodity, even though there are so many great um competitors out there with with with with with great solutions themselves. Uh. To me, I'm still blown away at the fact that that team continues to put out products that gathers so much you know, interest, so much attention, so much revenue. But what about the

iPhone eight? I'm excited, you're excited, well, Mark, as you know, I have always been an Android, but you're still excited. I'm of course excited. No, it's always interesting to see what Apple does next, how they package all the leading components into into these devices that people really love. And the new iPhones design is going to be pretty slick, right, Well, you tell me, because you're kind of a soothsayer on this. Why are they Why are they going to release three

different iPhones? Isn't that isn't a little bit unusual for the company? Yeah, that's that might be a little bit much. But what they're doing here is they're going to upgrade the seven plus and the regular seven to a higher end version of that with a faster processor. Then they're gonna have a premium model to come over that that's going to be the third phone. That's the big one. That's the one everyone is, the one that has the so called O L E D screen. That's right. Why

is that a big deal? Because it looks so much better and because the screen technology is so advanced, it allows them to chop off the top and the sides, so you'll be able to get a phone that's about the size of the iPhone seven but with a screen size bigger than the one on the iPhone seven plus, so you're getting more in less space and face recognition. What is what is that? Because that's going to be

on the new iPhone as well? Right, So the phone will be able to look at you, it'll know who you are, and it says, if this is Mark's phone is gonna unlock. I'm saying Mark, because I assume you're not going to get one. Can I say one more thing about the introduction of the iPhone because this is uh, I'm almost embarrassed to say this, but it's a measure

of how underestimated was at the time. In that January event when the iPhone was in views, I actually was covering consumer Electronics for The New York Times at the time. I was at CS in Las Vegas. During the keynote, I just checked my records. It's kind of amazing to me that I was among all those companies and products that didn't end up making an impact, and here in San Francisco where I lived, history was happening. And that's it for this week's episode of Decrypted. Thanks for listening.

We also have a correction to me. In our previous episode, we said that hydrogen typically has one neutron. Mark German correct or incorrect? Well, brad Stone, if you're reading it, I guess that it's incorrect. Yes, good guests. The most common version of hydrogen, in fact, actually has no neutrons, while it's other ICEO hopes deuterium and tritium at one and two neutron's respective. Many of you must be listening to this on an iPhone. Are you excited about the

phone eight? We want to know what you think. Get in touch with us at Decrypted at Bloomberg dot net, or tweet at me. I'm on Twitter at Mark German and I'm at brad Stone if you haven't already subscribed to our show. Wherever you get your podcast, and while you're there, please leave us a rating and review. This goes a long way to get this show in front of more listeners. This episode was produced by Pia Getgary,

Liz Smith and Magnus Henrickson. I'm running a whole series of special stories around the launch of the new iPhone thanks to Robin Agello and Alis for Barford the help. You can read them at Bloomberg dot com slash Technology. Alec McCabe is head of Bloomberg Podcasts. We'll see you all next week.