Before “Toy Story” came out in 1995, Pixar had been hemorrhaging money. The studio seemed to be losing its gamble on using computer animation to create nuanced storytelling for the whole family. Suddenly it had a hit that critics loved and audiences rushed to see, making “Toy Story” the top-grossing film of the year. It felt like the culmination of nearly a lifetime of work for

Ed Catmull,
who co-founded Pixar Animation Studios with

Steve Jobs
and Alvy Ray Smith in 1986.

Still, he knew that Silicon Valley was full of cautionary tales about top firms that stumbled in the technological race and then disappeared. “Silicon Graphics, Sun Microsystems—most people don’t even know about them today. But was their failure inevitable? I don’t think it was,” says Catmull, 78, over video from his home in Marin County, where he lives with his wife Susan. He explains that the engineers at these firms often knew the market for their technology was changing, but “the leaders didn’t listen to them.” He wondered if it was possible to protect Pixar from the forces that ruin so many businesses.

“I saw my job at Pixar was actually to look at our process and find out why things worked or didn’t work,” Catmull says. He was determined to build not just a winning company but a “sustainable creative culture” by encouraging communication and removing hierarchies. The management principles he laid out in his bestselling 2014 book “Creativity, Inc.,” co-written with Amy Wallace, helped make Pixar a seemingly irrepressible hit machine. After Disney purchased Pixar for $7.4 billion in 2006, Catmull helped its animation studios get their groove back, overseeing such blockbusters as “Tangled,” “Wreck-It Ralph” and “Frozen.” By the time he retired in 2018, Pixar’s films had won 15 Academy Awards and earned more than $13 billion at the box office.

Today Pixar is in a different place. The Covid-19 pandemic sent three of the studio’s movies—“Soul,” “Luca” and “Turning Red”—straight to the Disney+ streaming service, which has lost nearly $10 billion since launching in 2019. “Lightyear,” the origin story of the space ranger from the Toy Story movies, bombed at the box office in 2022. The latest Pixar film, “Elemental,” an animated rom-com released in June, had one of the worst box-office debuts in the studio’s history.

So it’s an interesting time for Catmull to release a new edition of “Creativity, Inc.”, with around 120 pages of new material. He explains that readers often thanked him for sharing his formula for surefire creative success, when in fact the book’s lessons “aren’t a template, they’re a way of thinking.” He suggests that Pixar’s current struggles drive home how the work of fostering an atmosphere of candor, collaboration and problem-solving is never done.

“People think, OK, we’ve figured out how to do things, let’s just get to that sweet spot. But there is no sweet spot,” Catmull says. “Even when you get to a place where everything seems right, people come in with new ideas, new technology, new expectations. What we need is a mindset that allows us to adapt when nothing is stable.”

Growing up in a Mormon home in Salt Lake City, the oldest of five children, Catmull ”always felt, at a very early age, that I wanted to be the best in the world at something,” he says. He loved to draw and wished he could crawl through his TV screen to join “The Wonderful World of Disney” each Sunday night. He recalls that he saw Albert Einstein and Walt Disney as “the two poles of creativity”: Einstein explained what exists, while Disney mixed art and technology to invent something new.

Since Catmull sensed he lacked the talent to become a Disney animator, he chose to become a scientist instead. He studied physics and computer science at the University of Utah, then stuck around for a doctorate in computer science. He recalls sleeping on the lab floor to maximize computer time: “Computer science was such a brand new field, it was exactly where I wanted to be.” His classmates at Utah included the future founders of Netscape and
Adobe.

Catmull at work at Lucasfilm, cica 1979.

Photo: Ed Catmull

In his 20s, Catmull pioneered techniques for using computers to manipulate images. No one in Hollywood was interested until

George Lucas
used his “Star Wars” lucre to hire Catmull to helm his new computer division in 1979. At Lucasfilm, Catmull saw how hard it was to introduce new technology. His team created a special-effects computer that eased the film-editing process, but the studio’s editors refused to use it. His division also began making its own short films in the 1980s, including some directed by

John Lasseter,

an animator who had lost his job at Disney after pitching a film with a computer-generated background. “John was a born dreamer,” Catmull says of Lasseter, who went on to direct “Toy Story” and “Cars,” among other Pixar hits.

When Lucas put his computer division up for sale in 1986, Steve Jobs emerged as a buyer, and Pixar was born. For the soft-spoken Catmull, Jobs’s domineering nature was initially hard to take. But Catmull, who dedicates his book to his late friend, worries that Jobs’s legacy is misunderstood. “Steve underwent a dramatic transformation,” he insists, explaining that Jobs’s trials at
Apple
and
NeXT
made him more humble and empathetic. “He fired only two people from Pixar’s board of directors, because they never disagreed with him, so he believed they weren’t of any use to the company,” says Catmull. “He wanted people to speak their mind. If he was wrong, he would change.”

From left: John Lasseter, Steve Jobs and Ed Catmull at the Academy Awards, March 2010.

Photo: Bob Riha, Jr./Getty Images

Pixar struggled for years, focusing first on hardware, then on computer animation. Jobs sunk $54 million into the firm and considered selling it more than once. A 1991 deal with Disney to produce “Toy Story” offered a lifeline, and Pixar went public on the back of the film’s success in 1995. Today nearly all animated films, Hollywood special effects and videogames build on Pixar’s innovations in CGI. In 2019 Catmull and

Pat Hanrahan,
a founding Pixar employee, shared a Turing Award—the so-called “Nobel Prize of computing”—for their foundational contributions to 3-D computer graphics.

As the studio grew, it became Catmull’s job to ensure that employees continued to take risks and speak up about their ideas or concerns. He says that Pixar’s films are so costly to make because of their lengthy iterative process. “Early on, all of our movies suck,” he explains. It’s only through “reworking, reworking and reworking again” that characters find their souls.

Catmull is quick to admit that even the most vigilant and nimble leaders can miss big problems. He was blindsided when a rift between the studio’s animators and production managers posed problems for the 1998 film “A Bug’s Life,” and he was surprised when women at the company complained about the dearth of female directors in 2014. “The answer is not to be free of bias but to realize that this is how our brain works, that there are things I can’t see,” he says today. In 2018, Lasseter left Pixar after accusations of workplace sexual misconduct, admitting to “missteps” and apologizing “to anyone who has ever been on the receiving end of an unwanted hug.” “For all our verbiage about candor, some of our people hadn’t felt safe to speak up,” Catmull observes.

Catmull, who retired from Pixar in 2018, says his role at the company was to ‘find out why things worked or didn’t work.’

Photo: Francesca Tamse for The Wall Street Journal

Failure, Catmull says, is a natural byproduct of innovation, and change is the only constant in every industry. He insists that there is still a market for original animated storytelling, even if the business of making and selling these films is in flux. “Machine learning, the changes from streaming—there are a lot of challenges coming right now,” he says. “But you can’t hold off what’s coming any more than

Kodak
can go back to selling film. You just need to try to step into it to see where it goes.”