Would the iPhone have been as big a surprise if all of Apple knew what was going down? Probably not — it probably would have leaked, and leaked profusely.

I'll leave it to others to determine if leaks would have been a bad thing. I mean what we were told from above is: Apple gets a lot of free press from the surprise part of "surprise and delight". When Apple was not the behemoth we know today the free press was probably a powerful thing.

Regardless, as you point out, it's hard to imagine the iPhone would have suffered if more eyeballs and expertise had been able to play with it, weigh in on its shortcomings before it shipped.

I was just a programmer though, not a director. They probably knew what they were doing. I'm just pointing out that there were consequences.

I'll relay this: likely most readers here remember the failed roll-out of Apple Maps. At that point though in the iPhone's lifespan many of those internal at Apple, even those not among the chosen ones, had access to the beta builds. And I will say that there were plenty of people that called out the Maps deficiencies and filed Radars (bug reports) about them before it shipped. Maps shipped anyway. (And when the blowback came Apple apologized and I feel a scapegoat was sought. I'll leave it at that though.)

When Apple products were still in their top-secrecy mode though, many of those engineers not in-the-know had pretty low company morale. You were not "special" if you were out of the loop. Additionally it seemed financial benefits/bonuses flowed primarily to the inner-circle. That, I suppose, was also a Jobs thing.