We can't say we expected Jobs to do a ton of talking about that little "lost" iPhone prototype during his interview at D8, but he was of course asked about it, and he did do some talking about it. While he started out with the expected "there's an ongoing investigation" statement, Jobs soon got on a bit of a roll, saying that "this is a story that's amazing" -- that "it's got theft, it's got buying stolen property, it's got extortion, I'm sure there's some sex in there... the whole thing is very colorful." No discussion of the device itself, of course, but we're sure we'll be hearing more about it soon enough.

Update: Well, it looks like Jobs couldn't quite let the issue rest there. Later on in the interview, Jobs said that he had gotten advice to just let it slide, that "you shouldn't go after a journalist just because they bought stolen property and tried to extort you" -- but he said he couldn't "change our core values and let it slide," that he'd "rather quit."

Check out the complete back and forth after the break.
6:36PM Walt: So you had a prototype of one of your products that wound up at a bar...

6:37PM The audience just freaked out

6:38PM Walt: We don't know the whole story... I wanted to ask you about the duality to this. Some people don't approve of checkbook journalism. If what we know is true, but on the other hand the police go and don't issue a search warrant, and they grab someone's computer -- there's a lot of stuff, at least with my computer I wouldn't want anyone to have, and they grab this journalists assets...

Steve: Well a guy... who can say if he's a journalist.

6:38PM
Wow.

6:39PM Walt: Where do you come down on this?

Steve: There's an ongoing investigation. I can tell you what I do know, though. To make a product you need to test it. You have to carry them outside. One of our employees was carrying one. There's a debate about whether he left it in a bar, or it was stolen out of his bag. The person who found it tried to sell it, they called Engadget, they called Gizmodo.

6:41PM Steve: The person who took the phone plugged it into his roommates computer. And this guy was trying to destroy evidence... and his roommate called the police. So this is a story that's amazing -- it's got theft, it's got buying stolen property, it's got extortion, I'm sure there's some sex in there (huge laughs)... the whole thing is very colorful. The DA is looking into it, and to my knowledge they have someone making sure they only see stuff that relates to this case. I don't know how it will end up.

Later in the interview...

7:25PM Kara: What do you imagine the next 10 years of your life will be about?

7:25PM Super long pause...

7:26PM Steve: You know, when this whole thing with Gizmodo happened, I got advice from people who said 'you gotta just let it slide, you shouldn't go after a journalist just because they bought stolen property and tried to extort you.' And I thought deeply about this, and I concluded the worst thing that could happen is if we change our core values and let it slide. I can't do that. I'd rather quit.

7:27PM Steve: You go back 5 or 10 years, what would you do... we're not going into that... we have the same values that we had back then. The core values are the same. We come into work wanting to do the same thing that we did back then -- build the best products. Nothing makes my day more than getting a random email from someone talking about how cool the iPad is. That's what keeps me going. That's what kept me going back then, and now, and will keep me going in the future.

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Steve Jobs on lost iPhone 4G prototype: it's an 'amazing' story