What's funny is how much friction and persuasion it took to get them to actually do the App Store. Steve was hellbent on WebApps and I hope the history books recognize how much influence jailbreakers had in shifting the discussion to native apps
The first iPhone had 128MB of RAM and ran at 412 MHz, underclocked from 620 MHz (https://en.wikipedia.org/wiki/IPhone_(1st_generation) ), and there was disbelief that what they showed could be built at all at the time with the advertised battery life.
They likely also didn’t want to commit yet to an API for third-party apps, as they didn’t know what was reasonable there.