Apple has named John Ternus, its head of hardware engineering, as its next CEO. At the same time, Apple is paying Google roughly a billion dollars a year to run Siri’s AI brain because Apple’s own AI hasn’t been good enough.
Apple’s hardware is great, but AI is not. And THAT is where the next decade of computing will be set. Those two things are true at once, and I’ve turned them around this week.
Steve Jobs faced a version of this problem and got it wrong for the better part of a decade before getting it right. This is the story I’ve spent four years reporting. After Apple fired him in 1985, Jobs founded a company called NeXT and ran it for twelve years.
My book about those years, Steve Jobs in exileout on May 19. The ending is famous. Apple bought NeXT for its software, Jobs returned, and the iPhone followed. What gets overlooked are the eight years in between, when Jobs almost lost everything because he couldn’t hear what his customers were saying.
I keep thinking about a scene.
In the early 1990s, NeXT was burning through cash. Computers were beautiful and very expensive. The machine that Jobs had spent five years on — a black magnesium cube with a brittle paint job and a thin optical disc — wasn’t selling. What was moving was the software. The operating system called NeXTSTEP was about five to seven years ahead of anything else on the market. Developers and customers loved it, and a handful of firms were building their businesses on it.
One of those firms was O’Connor & Associates, a high-speed merchandising shop in Chicago. NeXTSTEP allowed them to quickly write proprietary trading software, which gave them an edge on Wall Street. One day an executive from O’Connor showed up unannounced at NeXT’s offices in Redwood City, California, and asked to see Phil Wilson, NeXT’s head of human resources.
He closed the door.
“Phil,” he said, “you have to help me get Steve to understand that the value of NeXT computers to us is not in the hardware, it’s in the software.”
O’Connor had done the math. Without NeXTSTEP, they would lose their commercial advantage, and without the NeXT computer, they would lose NeXTSTEP. They were so addicted to the software that at the end of every quarter they would call NeXT and order the most expensive workstations on the price list, overspec, overpriced, whatever.
“O’Connor basically made the payroll,” Mike Slade, NeXT’s VP of marketing at the time, told me. The firm was supporting the hardware business only to keep the software alive.
Phil Wilson went back to his office and wrote Jobs a long email laying it all out. NeXT should abandon the hardware. Become a software company. Customers were telling them where the value was.
Jobs wrote back, “You’re an HR guy.” Then a subtle threat. If NeXT was to become a software company, he wrote, it would have to downsize, “and we won’t need a guy like you.”
It took two more years and two more rounds of layoffs and near-bankruptcy for Jobs to realize what he needed to hear. On a day employees called “Black Tuesday” in February 1993, Jobs finally shut down the hardware division, laid off most of his employees, and sold what was left to Canon. Three years later, he told Terry Gross Clean air that the door to creating a new hardware company was closed before NeXT ever opened. He just hadn’t seen it at the time.
Here’s what I want to be careful about, because it’s easy to learn the wrong lesson from this. Jobs’ original NeXT vision, hardware and software built together as an integrated platform, was prescient. This vision is literally what saved Apple after he returned in 1997 and was later named CEO. The iPhone is its purest expression, hardware and software tied together, designed as a single object, by a company that owns both groups.
The mistake at NeXT was not betting on hardware-plus-software. It was the insistence on selling that vision on Jobs’ terms, in Jobs’ form factor, at Jobs’ prices, while customers were telling him what they really needed was a part they could afford and use. He wanted to show them his vision for the future, but they wanted a tool that solved their problems now. It took him a decade to see that they were different things.
Now look at Apple in 2026. The device is still the best in the business. The integration – the hardware on the chip in the OS – is something that no competitor can match. That part of the original vision is intact. What is failing, what has been failing for two years now, is AI. Apple Intelligence landed with a thud, and the promised personalized Siri was delayed. The company finally cut a check to Google for a custom paper Gemini model over the gap.
And, at that point, the board appointed a hardware engineer to run the company and promoted another hardware engineer, Johny Srouji, to oversee all equipment.
There is a version of the future where this is the right call. Apple’s silicon team is incredible. Artificial intelligence in devices could turn out to be where the next ten years actually take place, and no one is better positioned for that than the company Ternus will lead the way. Perhaps the Google deal is a bridge — just as Google Maps was in the first iPhone — and Apple is two years away from running the same AI-embedded game it’s been using with chips.
This is the case of the bull. I do not reject it.
The story I keep coming back to is NeXT. A company doubles down on what it knows how to do, while its customers try to tell it that something has changed. The founder, or the board, doesn’t listen to him. The problem is that it would require giving up a version of the company they’ve spent years building.
Tech author and veteran Asia news correspondent Jeffrey CainS ‘ Steve Jobs in exile out May 19 from Portfolio/Penguin. If this part resonated, the book is the complete story. Pre-order here. Subscribe to his Substack newsletter for free Burner files.
