How Pixar Gave Steve Jobs His Mojo Back

Computers didn't make Steve Jobs a billionaire—toys did.

On Nov. 22, 1995, Toy Story—the world's first fully computer-animated film—opened to critical acclaim and $29 million in box-office receipts. One week later, Pixar, the studio that created the movie and that many had written off just months before, went public. It was the biggest IPO of the year and meant a billion-dollar windfall for Jobs.

More than that, it gave Jobs back his mojo.

A decade earlier, he had been ousted from Apple. Wounded and restless, he paid $5 million to filmmaker George Lucas for the rights to his small but intriguing animation division and put up another $5 million for capital. Jobs took a 70 percent stake. The new company was called Pixar—and it would take another nine years before it came into its own, in the process reconfirming Jobs's genius and turning the prince of Silicon Valley into a Hollywood hero.

While most of Jobs's products and businesses—Apple and the Macintosh; NeXT Inc.; the iPod, iPhone, and iPad—bore their father's DNA, Pixar was always different. Like Jobs himself, Pixar was adopted; he bought the company when it was seven years old, when its own culture had already begun to jell. Over the years, Jobs would infuse Pixar with many qualities, but the company was never quite his, culturally, making his influence there a sort of nature-vs.-nurture case study of what it means to be a Steve Jobs project.

Pixar was born in 1979 as Graphics Group, a division of Lucasfilm, after Lucas sensed the potential of 3-D computer animation and lured several of the new medium's visionaries from the New York Institute of Technology. In Lucas, the group found a colorful but patient sponsor, one who prepared them well for the arrival of Jobs in 1986.

But trouble began immediately. Because the computational horsepower necessary to create a feature-length animated movie was still years away, Pixar needed to find other reasons for existing. Jobs felt the answer lay in hardware manufacturing. That, too, was a fraught business, with high overhead and complex supply chains. And graphical supercomputers were not exactly a mass product. Pixar quickly bled through Jobs's initial financing.

"We started out as a hardware company and, frankly, should have failed!" says Alvy Ray Smith, who, with Edwin Catmull, cofounded Pixar. "But Steve, who'd been kicked out of Apple, could not sustain the embarrassment. Whenever we got into trouble, Steve would write another check and get more equity. Over the next few years he bought the entire company."

Jobs would eventually sink $50 million into Pixar, as his attention was monopolized by his other startup, the foundering NeXT Inc. computer company. It was hard to tell which was the larger boondoggle. Pixar's finances, says Pamela Kerwin, an early employee, began to resemble "an extremely overdrawn checking account."

"At that point, [Jobs] didn't have any support from his Valley peers; they all thought he was crazy," says Kerwin. December, the fiscal year-end for Pixar, was often a bleak month. "He would get emotional. Frankly, anybody would. This word is never used about Steve, but I'm sure he was frightened, like anyone would be."

Too far ahead of its time, the Pixar Image Computer had few customers. To attract more of them, a Pixar employee named John Lasseter created a short film, Luxo Jr., to show off the technology. Astonishingly, it was nominated for a 1987 Academy Award as best animated short film. More acclaim for Lasseter's shorts followed, as did some revenue for commercial work. But Jobs was hemorrhaging cash, and he gutted Pixar with a series of layoffs and retrenchments. The tough love kept the company alive.

Of Jobs's two ventures, NeXT was the favored son. Part of that was because Pixar's core animation geniuses, having more or less invented the field years before Jobs became involved, were determined to remain aloof to his charms. "What frustrated Steve at times was we were not part of the 'cult of Steve.' We valued him as a peer, not as a godhead figure," says Ralph Guggenheim, one of Pixar's earliest employees. "It was reassuring for him, in a way. It gets to be daunting after a while; people stop disagreeing with you."

Pixar's executives took monthly trips to NeXT's offices in Redwood City, Calif., to brief Jobs and soak up his spellbinding strategy riffs—to an extent. "He's such an articulate person that he just grabs people—just by walking into a room. So we adapted to that," says Pixar cofounder Smith. Like Odysseus's sailors plugging their ears with beeswax as they neared the island of the Sirens, the Pixar delegation prepared secret signals to better resist his charms. "If we saw the other person becoming mesmerized, we'd scratch our nose or pull our earlobe. The message was: get back on the agenda!"

Jobs's patience and line of credit were not bottomless, and in the early 1990s he repeatedly shopped Pixar to potential buyers, including his old archrival Microsoft. Then—a breakthrough. Some of Pixar's hardware sales had been to Disney, for automating the creation of two-dimensional animated films, and the studio began to show interest in a full-length feature film. Jobs proved he was more than a checkbook, scoring a three-picture deal, starting with Toy Story.

Parts of Pixar remained beyond his control; one night he called Guggenheim, the producer of Toy Story, at home to argue, unsuccessfully, that the film's soundtrack should be written and performed by Bob Dylan. In January 1995, Jobs joined Lasseter and Guggenheim on a trip to New York for a Toy Story screening. For Jobs, the audience response—the adulation—was electrifying. "He came back from that trip saying, 'We're going to change the way we work here,'?" says Guggenheim. Jobs stepped in as CEO and made plans to take the company public by the end of the year. "I saw the lightbulb go off over his head."

When the film premiered that November, Woody and Buzz Lightyear were a smash. Pixar's next two movies, A Bug's Lifeand Toy Story 2, proved the studio's success was no fluke, and Jobs went back to the negotiating table, extracting lucrative terms from Disney that astonished Hollywood. "He's frightening in the negotiating room. Just insane," says Smith. Pixar was flush. Critical and commercial hits like Finding Nemo, The Incredibles, Wall-E, andUp followed, a run of uninterrupted excellence never rivaled in moviemaking. In 2006, Disney acquired Pixar for $7.4 billion. The transaction made Jobs the corporation's largest shareholder.

Culturally, Pixar and Jobs's other properties could hardly have been more different. Pixar was Hawaiian shirts and hugs; Apple was stark minimalism and screaming at underlings. As a business, though, Pixar was all Jobs. "Steve, especially the more mature Steve, values having put Buzz and Woody and Nemo into American culture as much as the hardware stuff," said Kerwin two weeks before his death. "Nobody would ever call Steve an angel in the usual sense of the word. But somebody willing to go to bat for you—that's what he was for Pixar. A devilish angel."