In an exclusive interview, Apple's CEO talked with Fortune senior editor Betsy Morris in February in Kona, Hawaii, where he was vacationing with his family, about the keys to the company's success, the prospect of Apple without Jobs, and more. Here are excerpts.
On the birth of the iPhone
"We all had cellphones. We just hated them, they were so awful to use. The software was terrible. The hardware wasn't very good. We talked to our friends, and they all hated their cellphones too. Everybody seemed to hate their phones. And we saw that these things really could become much more powerful and interesting to license. It's a huge market. I mean a billion phones get shipped every year, and ...view middle of the document...
We figure out what we want. And I think we're pretty good at having the right discipline to think through whether a lot of other people are going to want it, too. That's what we get paid to do.
"So you can't go out and ask people, you know, what the next big [thing.] There's a great quote by Henry Ford, right? He said, 'If I'd have asked my customers what they wanted, they would have told me "A faster horse." ' "
On choosing strategy
"We do no market research. We don't hire consultants. The only consultants I've ever hired in my 10 years is one firm to analyze Gateway's retail strategy so I would not make some of the same mistakes they made [when launching Apple's retail stores]. But we never hire consultants, per se. We just want to make great products.
"When we created the iTunes Music Store, we did that because we thought it would be great to be able to buy music electronically, not because we had plans to redefine the music industry. I mean, it just seemed like writing on the wall, that eventually all music would be distributed electronically. That seemed obvious because why have the cost? The music industry has huge returns. Why have all this [overhead] when you can just send electrons around easily?"
Last updated March 07 2008: 7:10 PM ET
On Apple's focus
"Apple is a $30 billion company, yet we've got less than 30 major products. I don't know if that's ever been done before. Certainly the great consumer electronics companies of the past had thousands of products. We tend to focus much more. People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully.
"I'm actually as proud of many of the things we haven't done as the things we have done. The clearest example was when we were pressured for years to do a PDA, and I realized one day that 90% of the people who use a PDA only take information out of it on the road. They don't put information into it. Pretty soon cellphones are going to do that, so the PDA market's going to get reduced to a fraction of its current size, and it won't really be sustainable. So we decided not to get into it. If we had gotten into it, we wouldn't have had the resources to do the iPod. We probably wouldn't have seen it coming."
On the benefits of owning an operating system
"That allows us to innovate at a much faster rate than if we had to wait for Microsoft, like Dell and HP and everybody else does. Because Microsoft has their own timetable, for probably good reasons. I mean Vista took what -- seven or eight years? It's hard to get your new feature that you need for your new hardware if it has to wait eight years. So we can set our own priorities and look at things in a more holistic way from the point of view of the customer. It also means that we can take it and we can make a version of it to fit in the iPhone and the iPod. And, you know, we certainly...