Saturday, February 20, 2010
PBS: Triumph of The Nerds I
Hi, I'm Bob Cringely - and I'm here to tell you the incredible story of how personal computers took over the world. Why am I telling you this at a basketball game? Well, I like the game - but mainly it's because of that guy down there. His name is Paul Allen and everything you see here belongs to him -- the Portland Trailblazer's basketball team, their arena, even the dancers. Thanks to personal computers, he has $8 billion to spend on such toys. Twenty years ago Allen and his high school friend, Bill Gates, were running a two-man software company called Microsoft. Today Allen is richer than God and Gates is richer than Allen. Twenty years ago, young men like Paul Allen and Bill Gates invented the personal computer and in doing so launched a revolution that's changed the way we live, work and communicate. It's hard to believe that twenty years ago there were no personal computers, now it's the third largest industry in the world, somewhere between energy production and illegal drugs but the most amazing thing of all is that it happened by accident because a bunch of disenfranchised nerds wanted to impress their friends. This is the story of how a handful of guys launched an industrial revolution. How they changed the culture of business, how they made history.
Steve Jobs
Co-founder, Apple Computer
Worth $1 billion
I feel incredibly lucky to be at exactly the right place in Silicon Valley, at exactly the right time historically where this invention has, has taken form.
Steve Wozniak
Co-founder Apple Computer
Worth $200 million
It wasn't like we both thought it was going to go a long ways, it was like, we'll both do it for fun and even though we're goin' to lose some money probably we'll just have been able to say we had a company.
Bill Gates
Co-founder, Microsoft
Worth $13 billion
Now all of us would get together and just hope we were right that the PC would become a big thing.
Steve Ballmer
Vice President Microsoft
Worth $3 billion
You know I stop and say wow the PC really has become part of the very fabric of the way people live and we certainly surged with it. I used to stop and say hmmm pretty incredible ride.
Most of these people come from the place I call home, the Silicon Valley, south of San Francisco, California. Growing-up here near the electronics companies that give the place its name, these founders of the PC revolution were for the most part middle class white kids from good suburban homes. But it's not their homes we're interested in -- it's their garages. This is my garage and this is all my junk. I'm probably one of the few guys in Silicon Valley who actually has room in his garage for a car, most everyone else seems to use theirs to start computer companies and create great fortunes, but I don't have a fortune - I'm a failure, I've written computer programmes that almost ran and I've designed and built hardware devices that frankly didn't work at all but I'm the ideal guy to tell the story of the personal computer business because I'm its premier gossip columnist and everyone tells me all their secrets. And this is my home where I write a gossip column for a computing magazine. Sorry about the mess. Institutions in constant change like the PC industry are driven by rumor and gossip and I thrive on both. My electronic mail address is deluged with inside information about everything from product flaws to who's sleeping with whom. What ties these gossipers together is a desire for truth. These people and their love of technology have fueled the PC revolution. To understand them is to understand that revolution. So let's go find some.
Meet Edwin Chin on a Saturday morning at the Weird Stuff Warehouse. This could be 1976 or 1996 because there is always a new generation of techies like Edwin who hear the calling. Most other kids are watching TV, but not Edwin.
Edwin: You know I've been interested in electronics and technology as a hobby since I started when I was like six or seven you know.
Q: How old are you now, Edwin?
A: Ten, right now.
It's no coincidence that the only woman in the vicinity looks bored, because this is a boy thing -- the obsession of a particular type of boy who would rather struggle with an electronic box than with a world of unpredictable people. We call them engineers, programmers, hackers, and techies, but mainly we call them nerds.
Douglas Adams
Sci-fi author
I think a nerd is a person who uses the telephone to talk to other people about telephones. And a computer nerd therefore is somebody who uses a computer in order to use a computer.
Christine Comaford
CEO Corporate Computing Int.
And people have different degrees of passion and different types of passion. Some people like just live databases, like 5th normal form is just like nirvana, they just quest for it you know, that's like what gets them up in the morning.
Q: What do your friends think of you?
Edwin: Boy, he's a nerd. Yeah, but I don't mind, I'm used to being called a nerd, can't have other people stop your dreams.
And in Silicon Valley the dream is to grow up to become a boy like this.... Graham Spencer is chief programmer for Architext Software -- six guys who graduated from Stanford University and started a company just because they like each other. This is a modern-day startup, but at heart it's no different from PC pioneers like Apple, or Microsoft -- nerds who share a dream. Their hobby is their business and the culture they've created is identical to that of a thousand other technology companies. First, they dumped the idea of nine to five. In this industry, you can work any 80 hours per week you like.
Mark Van Haren
Programmer, Architext
And then I've got my cap which I use to cover my eyes and (Oh yes) sleep in the early morning while everybody is coming in.
Bill Gates
We didn't even obey a 24 hour clock, we'd come in and programme for a couple of days straight. We'd - you know, four or five of us, when it was time to eat we'd all get in our cars, kind of race over to the restaurant and sit and talk about what we were doing, sometimes I'd get excited talking about things, I'd forget to eat, but then you know, we'd just go back and programme some more. It was us and our friends - those were fun days.
Mat Hostetter
Programmer, ARDI
BOB: Let's look in the refrigerator. Woah! We have coke and cold pizza.
MAT: I drink about two litres of coke a day.
BOB: Two litres of coke a day and do you like think of it as brain food?
MAT: It keeps me going you know, that and listening to heavy metal, and get caffeinated and hack.
Steve Wozniak
I'd sit down in my room on the floor with sheets of paper spread all around with my computer design I was working on. And always I noticed that I was up pretty late at night and I had lots of cokes - it's just part of that life.
Doug Muise
Software designer
A combination of stale pizza and body odour and spilt cola kinda ground in to the rug.
Joe Krause
President Architext
I brought some spaghetti to work and then forgot to wash out the container for the last couple of days, maybe six or seven if I had to be honest. Ooh, that smells bad.
Doug Muise
Eating, bathing, having a girlfriend, having an active social life is incidental, it gets in the way of code time. Writing code is the primary force that drives our lives so anything that interrupts that is is wasteful.
What is it about the internal logic of a computer that's so enticing? For one thing, such logic CAN be understood -- as opposed to things that can't be understood at all, like the motivations of young women, say, or of the French. Let me explain....Time for the Cringely crash course in basic computers, Part 1. This is a mainframe computer - all of these cabinets are one machine. In the old days all computers were this size they were tended by engineers in white coats a kind of priesthood who took their jobs very seriously. Now all computers work pretty much the same, whether it's a giant that serves two thousand users like this one, or a little notebook that serves only me. They process numerical data - adding, multiplying, comparing, - the fact is if you can quantify it a computer can handle it. It's the emotional stuff they don't know what to do with. The data must be put into a special binary code consisting only of ones and zeros. And you have to give the computer instructions, also in code, to tell it exactly what to do wth the data and in what order. These instructions are called a program. In the early days, you put in the instructions by flipping switches or loaded them from paper tape. This was called machine language. It made computers a pain to use. Even worse, every type of computer spoke a different machine language. The ENIAC could compute the thirty second trajectory of a shell in twenty seconds. Operators required two days to program it do so. Then a US Navy captain named Grace Hopper solved the problem. She invented a computer language, English words that the computer itself could translate into binary code. Now users could type whole lists of instructions into a computer rather than flipping those damned switches. Like most things having to do with computers,that first language had a silly name - COBOL. It was followed by other languages like FORTRAN and BASIC and they all made computing just a bit more user-friendly. So when some nerd tells you he's been up all night programming or writing software or hacking code, what he really means is he's been typing long lists of instructions into his computer. Mainframe computers were far from personal. They sat in big air-conditioned rooms at insurance companies, phone companies, and the bank, and their main function was to get us confused with some other guy named Cringely, who was a deadbeat and had a criminal record. Eventually computer terminals did begin to appear in some schools, but most of us paid no attention. But there was usually one kid who did pay attention, falling in love with the digital purity of those ones and zeros. He was the nerd.
Steve Wozniak
And I took this book home that described the PDP 8 computer and it just...oh, it was just like a bible to me. I mean, all these things that for some reason I'd fallen in love with, like you might fall in love with a card game called Magic, or you might fall in love with doing crossword puzzles or something else, or playing a musical instrument, I fell in love with these little descriptions of computers on their insides, and it was a little mathematics, I could work out some problems on paper and solve it and see how it's done, and I could come up with my own solutions and feel good inside.
Steve Jobs
So you would keyboard these commands in and then you would wait for a while and then the thing would go dadadadadada and it would tell you something out but even with that it was still remarkable - especially for a ten year old, that you could write a programme in Basic let's say or Fortran and actually this machine would sort of take your idea and it would sort of execute your idea and give you back some results and if they were the results that you predicted your program really worked it was an incredibly thrilling experience.
Nerds wanted their own computers right from the beginning, but it took a technological breakthrough to make that possible. This is it the chip the microprocessor, this is what allows you to have a mainframe computer on your desk. In the 1950s mainframes were as big as this garage and that's because they were filled with thousands of these - vacuum tubes or valves. Eventually the valves were made much smaller and replaced with transistors - still too big however to make a computer that could fit on your desk. What that took was further miniaturisation. Here we have a single piece of silicon etched with thousands of transistors. This microprocessor holds more than a million transistors and that's the secret of the personal computer and that's why they call it silicon valley not computer valley. These are the people who invented the microprocessor -- Intel. Intel was started 28 years ago by a handful of guys after a row with their old boss. Their microprocessors today power 85 percent of the world's computers. Intel not only invented the chip, they are responsible for the laid-back Silicon Valley working style. Everyone was on a first-name basis. There were no reserved parking places, no offices, only cubicles. It's still true today. Here's the chairman's cubicle.
BOB: Knock, knock I knocked at the door but there's no door. Gordon Moore is one of the Intel founders worth $3 billion. With money like that, I'd have a door.
Gordon Moore
Co-founder, Intel
In a business like this the people with the power are the ones that have the understanding of what's going on, not necessarily the ones on top. And it's very important that those people that have the knowledge are the ones that make the decisions. So we set up something where everyone who had the knowledge had an equal say in what was going on.
Intel's microprocessors kept getting more powerful. By 1974 they came out with the 8080, which had enough horsepower to run a whole computer. Only Intel didn't appreciate the brilliance of their own product, seeing it as useful mainly for powering calculators or traffic lights. Intel had all the elements necessary to invent the PC business, but they just didn't get it.
Gordon Moore
Looking back I know of one opportunity where an engineer came to me with an idea for a computer that would be used in the home. Of course it wasn't yet called a personal computer. And while he felt very strongly about it, the only example of what it was good for that he could come up with was the housewife could keep her recipes on it. And I couldn't imagine my wife with her recipes on a computer in the kitchen. It just didn't seem like it had any practical application at all, so Intel didn't pursue that idea.
This is the chip that launched the personal computer revolution. This is the magazine that announced it. In January 1975 featured on the cover was the world's first personal computer the Altair 8800. It was the crazy idea of an ex-airforce officer from Georgia - Ed Roberts.
Ed Roberts
Founder, MITS
If you look at it you know it was kind of grandiose almost megalomaniac kind of scheme you know and right now I couldn't do it because I could see right off there's no way you could do this. There isn't any way you could do this. But at that time you know we just lacked the eh the benefits of age and experience. We didn't know we couldn't do it.
BOB: Jesus Eddy a Silicon Valley garage has nothing on you.
EDDY: Everything you want to know about the microcomputer is probably in here in one form or another.
Here's the garage of Eddy Currie -- Ed Roberts' best friend. Eddy was present at the creation of the personal computer. Eddie also seems to have never met a piece of old computer junk he didn't like.
Eddy Curry
A lot of the audio tapes Ed and I used to send back a forth to one another in order to keep our phone calls down and one of the tapes, one of the tapes I found he got into discussion about the future as he saw it and what his dream was for the Altair. At that time it had not been named it was just called a computer ehm, but it was some very interesting stuff and certainly showed the kind of vision he had.
20 years after Ed Roberts' flash of brilliance, this exhibit is being held to celebrate the anniversary of the Altair. Like every other PC pioneer, Ed built his computer just because he wanted one to play with.
Ed Roberts
There were some of us that lusted after computers really at that time. All the computers in the world tended to be in big centres and you had to get permission to get close to them, and you know, nobody had access to computers. And the idea that you could have your own computer and do whatever you wanted to with it, whenever you wanted to, was fantastic.
And where was this all happening? It was far from Silicon Valley, Intel, or IBM. Out in the desert near the airport in Albuquerque, New Mexico, Ed Roberts ran a calculator company called MITS. Having an ugly building wasn't it's only problem - MITS was going bankrupt. Nobody was buying calculators and Ed needed $65,000 just to stay afloat.
Ed Roberts
And we went to the bank, we had a late night meeting and the issue was whether we closed MITS down or they loaned us an additional sixty-five thousand and I was asked how many machines that I think we would sell in the next year after it was introduced, and I said eight hundred, which was considered a wild-eyed optimist at that. Within a month after it was introduced we were getting two hundred and fifty orders a day.
The Altair wasn't even a computer, it was a computer KIT. Wow this is a pretty well equipped machine. You had to build it yourself and even then it usually didn't work. Still, the demand was amazing.
David Bunnell
Founder PC World and Mac World Magazines
There were actually people that came to MITS, a couple of people with camper trailers and camped out inthe parking lot waiting for their machines. I mean, they were so eager.
Eddy Currie
I mean I think everybody had sort of daydream, Ed Walter Mitteyed about owning a computer. The surprise was that it would be possible for the average college student, for example, who was living on bare subsistence, to actually buy a computer.
David Bunnell
This is what really amazed me was that people were so - there was a sort of pent up demand for having your own computer.
Eddy Currie
And if it could be that cheap what a wonderful thing.
This is an Altair computer - the first personal computer. And not just any Altair - this is Altair serial number 2, the second one made. The first Altair made was sent off to be photographed at a magazine and was lost in the mail. So this is the oldest personal computer in the world. Pretty historic junk but the question is what do you do with it? I mean it has a front panel with switches that you can click back and forth and some lights but in the back there's no place to connect a keyboard, there's no place to connect a monitor, there's no place to connect a printer, in fact there practically nothing at all that you can really do with this thing but back then 1975, the people who had it were thrilled. The nerds formed clubs to talk about their new toy. One of the first was the Homebrew Computer Club, which met on Wednesday evenings in a hall rented from Stanford University in Silicon Valley. Presiding over near-anarchy was Lee Felsenstein who pretended to be in charge.
Lee Felsenstein
And I would start the meeting by making a horrendous loud noise because everyone was talking and I had to get some attention somehow. And I would use it to call upon the person in question. I'd make threatening gestures with it. Most of us were in the electronics industry to a certain extent, there was also a stratem of physicians and there were a lot radio amateurs for instance finding a new technology that wasn't stale. But most of us were at a sort of middle level or downwards. We saw ourselves as crazed ignored geniuses or possibly geniuses but at least we could each hope to get our hands on a computer of our own.
The very uselessness of the Altair is what drove the hobbyists together. Roger Melen and Harry Garland started an early computer company. They came here to meet others and to figure out just what the heck could be done with this new toy -- a solution in search of a problem. There's no keyboard that I can see. The Altair was tedious to use. At first, the only way that data and instructions could be given to the computer was by flipping switches. Take something trivial like 2+2. Each 2 needed eight different switches to be flipped, then a ninth switch was used to load them all. 'And' required another nine switches. The answer 4 was if the third light from the left turned on. Eureka!
Roger Melen
So if you had a program that was a hundred bytes long you had to go this procedure a hundred times to load that in the memory.
HARRY GARLAND: It took a long time.
BOB: I bet it did and what happened if you lost power or if you lost your way in the middle?
HARRY GARLAND: You cried.
The Altair may have been frustrating, but it drove the nerds to experiment, finding real uses for the useless box, turning it from a curiosity to a computer.
Lee Felsenstein
Steve Dumpier set up an Altair, ehm laboriously keyed a program into it. Somebody knocked a plug out of the wall and he had to do that all over again but nobody knew what this was about. After all, was it just going to sit and flash its lights? No.
Roger Melen
You put a little eh transistor radio next to the Altair and he would by manipulating the length of loops in the sofware - could play tunes.
Lee Felsenstein
The radio began playing 'Fool on the Hill'....Da da da, da da da....and the tinny little tunes that you could tell were coming from the noise that the computer was generated being picked up by the radio. Everybody rose and applauded. I proposed that he receive the stripped Philips Screw Award for finding a use for something previously thought useless. But I think everybody was too busy applauding to even hear me.
Roger Melen
It was a very exciting thing, it was probably the first thing the Altair actually did.
Turning the Altair into a useful tool required a programming language so users could type their programs in rather than flipping switches. What it needed was a version of some big computer language like BASIC, only modified for the PC. This was called a BASIC interpreter, but it didn't yet exist because the experts all thought that not even BASIC was basic enough to fit inside the tiny Altair memory. Yet again the experts were wrong. Here comes the guy who solved the problem. Twenty years after finishing the first microcomputer BASIC, Paul Allen is returning to Albuquerque for a celebration of that event -- this time with his $15 million jet and three foot red carpet. At a time when I was killing brain cells, this guy was founding an empire. He has come to eat rubber chicken in honor of the Altair's 20th anniversary.
Speaker
I'd like to introduce to you - Paul Allen.
Allen co-founded Microsoft with his younger buddy from high school -- Bill Gates.
Paul Allen
One day in Boston, I was in Harvard Square I saw a cover of Popular Electronics with this thing that looked like what I had been imagining, and so I grabbed it off the shelf, I looked at it and I bought it and I ran back to Bill's dorm, and I think he was probably playing poker that night and usually losing money at that point. One of the few times when that's been the case.
Bill Gates
Paul showed that to me and then okay, here was a company that would be needing software.
Paul Allen
And he said OK we gotta call these guys up and see if this thing's for real.
Bill Gates
We realised that things were starting to happen, and just because we'd had a vision for a long time of where this chip could go, what it could mean er, that didn't mean the industry was going to wait for us while I stayed and - and finished my Degree at Harvard.
Paul Allen
So called up Ed you know, we told him we've got this Basic and it's you know just for your machine, and it's you know not that far from being done, and we'd like to come out and show it to you.
Bill Gates
So we created this BASIC interpreter. Paul took the paper tape er, and - and flew out. In fact, the night before, he - he got some sleep while I double checked everything to make sure that we had er, had it all right.
Paul Allen
But I had no idea what it was really going to be like to try to run the software. It had never been run on an actual computer before.
David Bunnell
He was very nervous about whether this would actually work. And then he got to the office and we all gathered around him and he put his fingers on the switches and he loaded BASIC with paper tape into the Altair.
Paul Allen
I was just I was so nervous....this is just....it's not going to work and it worked.
David Bunnell
And it came up, and it could do a few little simple things.
Bill Gates
And it was amazing when Paul called me up and said the thing had worked the first time. And of course, it was incredibly fast.
Paul Allen
And it printed out memory size and I think Bill said it printed something. So I said yeah, yeah.
Bill Gates
Oh, that was - that was unbelievable. The fact that it really worked er, was - was - was a breakthrough.
David Bunnell
Maybe there wouldn't be a Microsoft if the screen hadn't come alive, who knows, it might all be quite different.
After the demo succeeded, Bill forgot about finishing university. Afraid of missing his chance to dominate the new industry, he joined Allen in what was then the the center of world microcomputing research -- among the sleezy bars and gas stations of Albuquerque, New Mexico.
David Bunnell
And they lived across the street from MITS in the Sundowner Motel, and the prostitutes and the drug dealers out on the corner, and they were writing BASIC for the Altair computer, and gradually they actually started Microsoft here in Albuquerque.
Paul Allen
We hired some of our high school friends basically to come down and eh stay with us in our apartment, which became very crowded.
Bill Gates
We were pretty young. We started when I was 19 and so we just had a lot of - a lot of energy.
David Bunnell
They worked really hard. They listened to really loud music, I could hardly stand to go to the software room sometimes because the music would be banging off the walls, mostly acid rock.
Paul Allen
You know we'd usually go out, eat pizzas and then go out and watch action movies.
David Bunnell
They would work all night long, and there were days when Bill Gates would be sleeping on the floor in the software lab.
Paul Allen
Sometimes it would be Bill and these two other guys all, you know, sitting on tables around the apartment with stacks and stacks of paper writing, converting the BASIC for the 8080.
Bill Gates
I still know the source code by heart, and that was er, er, a work of love, you know, we just kept tuning and tuning that thing. And - and so that kind of craftsmanship paid off.
BASIC let the Altair be used for both fun stuff and real work. People attached terminals to the computer and began writing games, word processors, and accounting programs. Most of us didn't notice but soon there was thriving industry for enthusiasts. By the end of 1975, dozens of other companies were building microcomputers.
Ed Roberts
We created an industry and I think that goes completely unnoticed. I mean there was nothing - every aspect of the industry when you talk about software, hardware, application stuff, dealerships, you name it, it was all in a mess.
Bill Gates
It was a wild time. It was a very exciting time. And the first user convention - where we got people to come in and tell us what they were doing, what they were excited about, and other companies like Processor Technology or Imsai or Comemco got going as add-on companies. These companies are long-forgotten, but they were the - the humble beginnings of the - of the PC industry.
Left in the hands of those early hobbyists the PC might never have made it to the shopping mall. Reaching the wider market required a different type of vision. Enter the flower children of California, who thought the PC was, well, groovy.
Steve Jobs
Remember that the Sixties happened in the early Seventies, right, so you have to remember that and that's sort of when I came of age. So I saw a lot of this and to me the spark of that was that there was something beyond sort of what you see every day. It's the same thing that causes people to want to be poets instead of bankers. And I think that's a wonderful thing. And I think that that same spirit can be put into products, and those products can be manufactured and given to people and they can sense that spirit.
To help you understand all this, I will now take off my clothes.
Jim Warren
And he says well frame relay is scaleable.
Jim Warren knows better than most what the hippy movement did for the PC. A sixties radical himself, he staged the West Coast Computer Faire -- for a time the biggest computer show in the world. The Faire was where the PC really arrived. It's also where Jim got rich.
BOB: So eh Jim is this where you hold all your meetings?
JIM: Uhm as many as possible - sure why not.
BOB: This is how silicon vallye entrepreneurs conduct business?
JIM: Oh I don't know if it's how entrenpreneurs conduct business.
Believe it or not, Jim once taught mathematics at a Catholic girls school.
JIM: Bubbles Bob?
BOB: Sure.
JIM: OK.
Jim was immediately fascinated by the PC like many Bay Area hippies. The California counter culture was crucial to the PC's development.
Jim Warren
And the whole spirit there was working together, was sharing. You shared your dope, you shared your bed, you shared your life, you shared your hopes. And a whole bunch of us had the same community spirit and that permeated the whole Home Brew Computer Club. As soon as somebody would solve a problem they'd come running down to the Home Brew Computer Club's next meeting and say hey everybody you know that problem that all of us have been trying to figure out how to solve, here's the solution, isn't this wonderful? Aren't I a great guy. And it's my contention that that is a major component of why Silicon Valley was able to develop the technology as rapidly as it did, because we were all sharing - everybody won.
Out of this creative show-and-tell came Apple Computer, the first mass market PC company. The Apple founders, a couple of recent graduates from Homestead High were regulars at Homebrew meetings. Steve Wozniak was the technical wizard and Steve Jobs was the visionary who saw microcomputers as a possible business. But Apple wasn't their first business. Woz & Jobs had once built a device to cheat the phone company - they called it a blue box.
Steve Wozniak
Blue boxes were devices that could put tones into your phone and direct the phone company to switch your calls anywhere in the world for free and it was kind of...kind of weird for people to imagine that how could this worldwide phone system let you put a few little tones into your phone just like punching a touchtone phone, put the right tones in and it would direct your call anywhere in the world for free.
Steve Jobs
And it turned out we were at Stanford Linnear Accelerator Centre one night and way in the bowels of their technical library way down at the last bookshelf in the corner bottom rack we found an AT&T technical journal that laid out the whole thing and that's another moment I'll never forget - we saw this journal we though my God it's all real and so we set out to build a device to make these tones.
Steve Wozniak What we'd do is we'd walk into a dorm with a big tape recorder and we'd set the tape recorder on the floor and play the phone through it, hook up the phone with alligator clips so that everyone in the room could hear the phone conversations. And I was master jokester, and then I would get on the phone and dial some countries to show how easy it was. I would dial The Ritz in London and make a reservation and dial something and dial a joke in Sydney, Australia and everybody was really amazed by these things and so one time I said I could call the Pope. I called into Italy and asked for the number of The Vatican and eventually got the call into The Vatican. And I said this is Henry Kissinger - I didn't even use an accent. This is Henry Kissinger and I'd like to speak to the Pope about the summit trip, he was on a summit trip. And they said oh wait wait a minute we'd have to wake him up. It was like 4:30 in the morning there. And I hung on the line and they said we're waking him up, we're waking him up and finally the Bishop came on who was the highest Bishop up who was going to be the translater for the Pope and he said you're not Henry Kissinger and I went into a little accent and said oh yes I am you can call me back at this call-back number and I gave them a weird number where they'd call it back, I'd call a different number, we'd talk to each other but they don't know my phone number and eh they never called back - but it was a good - I woke him up.
Steve Jobs
What we learned was that we could build something ourselves that could control billions of dollars worth of infrastructure in the world - that was what we learnt was that us two you know, we're not much, we could build a little thing that could control a giant thing and that was an incredible lesson. I don't think there would ever have been an Apple computer had there not been blue boxes.
The first Apple computer was primitive. It was cobbled together by Woz to impress his friends at the Hombrew meetings.
Steve Wozniak
Everybody was interested in computers so I started getting a crowd around me because even although I was too shy to raise my hand and say anything in a club meeting - after the club meetings I would put my computer that I had built and every week it had a little bit more working on it too but I would set it down and let people type on the keyboard and I would explain what's in it. If they would come up to me and ask the question I can answer eh you know nowadays I would have the ability to tell them what it is you know and be a little bit more promotional but back then I could only answer questions that they asked me but a kinda group started gathering around me. And Steve Jobs saw that I had a lot of interest around me at the club and he said let's start selling it and let's make this company. He came up with the name Apple and eh and eh thatÍs how it started.
Apple was at best a funky company...started by a couple of teenage hackers who had previously been working as Alice in Wonderland characters in a local shopping mall and they started it in this garage right here. The first Apple computer was built here, now there are more than ten million in use around the world. And I was there - well for a short time I was an employee of Apple Computer, employee number 12 and one day I helped move materials out of this garage. At the time Steve Jobs said that the company was short of loot so he offered to pay me in company shares, but I held out for the money - my mother still reminds me of that incident. The Apple 1 was even less of a computer than the Altair -- a single circuit board that came with neither a case nor a keyboard. Still, Steve Jobs managed to sell 50 Apple 1's. That experience showed Jobs there was a market for a real computer -- the Apple II.
Steve Jobs
It was very clear to me that while there were a bunch of hardware hobbyists that could assemble their own computers, or at least take our board and add the transformers for the power supply and the case the keyboard and go get, you know, et cetera, go get the rest of the stuff. For every one of those there were a thousand people that couldn't do that, but wanted to mess around with programming - software hobbyists. Just like I had been when I was, you know, ten, discovering that computer. And so my dream for the Apple 2 was to sell the first real packaged computer.
Steve Jobs's dream was impossible. It needed too many chips, making the product too complicated and expensive to build. But Woz didn't know it was impossible.
Steve Wozniak
And then I got in to a way of why have memory for your TV screen and memory for your computer, make them one, and that shrunk the chips down, and I shrunk the chips here, and why not take all these timing circuits and I looked through manuals and found a chip that did it in one chip instead of five, and reduced that, and one thing after another after another happened. I wound up with so few chips, when I was done I said hey, a computer that you could program to generate coloured patterns on a screen, or data or words or play games or anything it was just the computer I wanted, you know, for myself pretty much, but it had turned out so good. He said I think we have a computer we could sell a thousand a month of. How can you sell a thousand a month, you know?
Steve Jobs
But we needed some money for tooling the case, things like that, we needed a few hundred thousand dollars.
Steve Wozniak
That was a lot of money for two people who had nothing in their lives to speak of, didn't have a 400 dollar bank account.
Steve Jobs
So I went looking for some venture capital.
The scruffy 19 year-old seduced the conservative world of venture capitalists. The man Jobs persuaded to part with his cash was Arthur Rock, the inventor of venture capital and the man who had originally funded Intel. At least the Intel boys had graduated from university and owned suits.
Arthur Rock
Venture Capitalist
Well, he wore sandals and he had long, very long hair and a beard and a moustache, but very articulate. He was, I think at one time in his life, and it was probably when I first met him that he ate nothing but fruit.
Bob: So as a mainline venture capitalist, is this...
Arthur: This is not the norm. This is not the norm.
With money in hand and under occasional adult supervision from an ex-Intel manager named Mike Markkula, Woz & Jobs finished the Apple II and ordered a local factory to build 1000 machines. Two years passed between the Altair and the Apple 2. And in that time a lot of things changed. We went from a computer that was designed for hobbyists and engineers and certainly looked like a piece of test equipment to a computer that looked like a piece of consumer electronics and we can thank Steve Jobs for that - his sense of design demanded that this structural foam case be used for the Apple 2 - the first case of its type on a personal computer. And not that there wasn't good engineering inside either. The Apple 2 was a model of efficient engineering - here's the floppy disk drive controller for example. There are eight chips here where previously there would have been thirty-five. This is an amazing bit of engineering that we can attribute to Steve Wozniak who is certainly the Mozart of digital design and all told it turned the Apple 2 into a sensation. The Apple II was launched at Jim Warren's West Coast Computer Faire -- one of the first big microcomputer shows. The 1978 show drew thousands of attendees and dozens of exhibitors -- many of them members of the Homebrew Computer Club, which spawned most of the early microcomputer companies. But there was only one company showing something that looked like a modern personal computer. Right by the entrance, in a prime spot negotiated by Steve Jobs, sat the Apple II. It mesmerized all who saw it. One later became a top Apple programmer.
Andy Hertzfeld
Apple Computer Designer
As a grad student I went to the first West Coast Computer Faire because I was interested in personal computers, and just on a tiny little table, like a picnic table almost - just covered with a tablecloth there was this Apple 2 and I swear, in my memory, it seems to have a halo around it now. It just drew me right to it.
Steve Jobs
My recollection is we stole the show, and a lot of dealers and distributors started lining up and we were off and running.
Bob: How old were you?
Steve: Twenty-one.
Bob: Twenty-one!
Following the West Coast Computer Faire, the next two years were ones of explosive growth for Apple, with thousands of customers literally arriving on the doorstep of the tiny office in Cupertino, California. Sales and profits grew so quickly that Apple had more money than the company could spend. And the company was very young. The founders were in their twenties and some employees were even younger, like 14 year-old Chris Espinosa, who never left. He still works at Apple, almost 20 years later.
Chris Espinosa
Manager, Media Tools, Apple
And there would be public demonstrations of our product every Tuesday and Thursday afternoon at 3 o'clock and that was good because it was after school. So I would get out of my, you know sophomore-junior year of high school, I would ride my little moped down to the Apple offices and at 3 oÍclock I'd give the demonstrations of the Apple 2.
Steve Wozniak
When we were in the office it was hey jokes and we were wiring up people's phones to do weird things, just every one of us I mean there wasn't a person in Apple I don't think for a couple of years that was you know super serious. We were lucky, we had like the hot product of its day.
Chris Espinosa
And some of the people that I did original demos to came up to me years later and said you know I founded a hundred million dollar chain of computer stores based on the demo you showed me one Tuesday afternoon at Apple. It was really fun.
Steve Wozniak
It went so successful that all of a sudden Steve and I wouldn't have to worry about work for the rest of our lives. And then it got even more successful and more successful after that, and eh it was sort of a shock.
The Apple II set a new standard for personal computers and showed there was some real money to be made. Rival companies popped-up all over, but the market was still hobbyists -- guys with big beards who thought a good use for their computer was controlling a model train set. But for microcomputers to be taken seriously, they had to start doing things that needed doing -- functions that were useful, not just for fun.
The enthusiast had its limits. To reach the rest of us the Apple 2 needed what nerds call a killer application. Software that's so useful that people will buy computers just to run it. For the Apple II, this application was called VisiCalc. It came straight from the blackboards of the Harvard Business school. Invented by a graduate student, Dan Bricklin with his programmer friend Bob Frankston, VisiCalc was the first electronic spreadsheet. A spreadsheet is a tool for financial planning, bringing together for the first time the seduction of money with the power of microcomputing. Dan Bricklin's professor at Harvard showed how companies used a grid of numbers on a blackboard to work out profits and expenses.
Dan Bricklin
VisiCalc Inventor
Sixty down here and your profit would be this minus this which gives you forty. And then well let's see what's the sales growth, say there's a ten percent...
The trick to a spreadsheet is that all the values in the table are related to the others. So changes in one year would ripple through the table, affecting prices and profits in subseqent years. Students were asked to calculate how future profits would be affected by various business scenarios. It was called running the numbers and they did it laborously by hand.
Dan Bricklin
Well let's say your initial costs have a hundred fixed costs at the beginning so now you have a minus twenty is how much you make the first year and in the second year you have a hundred but your variable is say let's say twenty-five so now your losing what is it - it's a pain in the neck I wasn't very good at this stuff - eighty what - no no no - fifteen - minus fifteen right and eventually your making money, what year do we make money and how much does the cost of money that's what running numbers was.
Because each value was linked to others, one mistake could mean disaster.
Dan Bricklin
It blows your all number afterwards because you make all your calculations based on the other numbers before them. If I had miscalculated...
Dan, who had worked as a programmer, started daydreaming about how he could use a computer to replace the tedious hand calculations.
Dan Bricklin
I imagined that there was this magic blackboard that did like word processing does word wrapping - if you make a change to a word it automatically pulls everything back, well why no recalculate in the same way? So that if I change my number, you know, I should have used ten per cent instead of twelve per cent, I could just put it in and it would recalculate everything and go through it you know and that would be this idea of an electronic spread sheet.
Following a model that's common today, Dan Bricklin designed the program, but got his friend Bob Frankston to write the actual computer code. After months of programming late at night when computer time was cheaper, the Harvard Business School blackboard came to life.
Dan Bricklin
Now weÍve set this up, OK. Then we type a new value in, then I'm going to take that one hundred, I'm going to change it right and here, it recalculated! Woa! That saved me so much time. People who saw it and went and got it like an accountant, I remember showing it to one around here and he started shaking and said that's what I do all week, I could do it in an hour you know, you know, they would take their credit cards and shove them in your face. I meet these people now they come up to me and say I gotta tell you you know...
BOB: You changed my life.
DAN: You changed my life. You made accounting fun and...
Bob Frankston
VisiCalc Programmer
You have to remember what it was like in those days we did not use the word spreadsheet cause nobody knew what a spreadsheet was. I came up with the name visible calculator or visicalc because we wanted to emphasise that aspect.
VisiCalc hit the market in October, 1979, selling for $100. Marv Goldschmitt sold the first copies from his computer store in Bedford, Massachusetts. After a slow start VisiCalc took off.
Marv Goldschmitt
What it did in our society, it gave people who were obsessed with numbers, whether they were in business or at home, how much am I worth today, what's my stock portfolio worth, how am I doing against budget on this project. It gave them an ability to play with scenarios and change it and say well, what if I do this. So it put people in a sense in control of the thing that lots of people in our society feel is driving them and that's numbers.
The spreadsheet was every businessman's crystal ball. It answered all those 'what if' questions. What if I fire the engineering department? What if I invest $10 million in pantyhose futures? Look! I'll be rich in under a year and have slimmer thighs at the same time! The Computer says so! The effect of the spreadsheet was enormous. Armed with an Apple 2 running Visicalc a twenty-four year old MBA with two pieces of dubious data could convince his corporate managers to allow him to loot the corporate pension fund and do a leverage buy-out. It was the perfect tool for the eighties...the lead decade where money was everything and greed was good. In five years, the PC had gone from a hobbyist's toy to an engine that shaped the times we lived in. Thanks to VisiCalc the Apple II made history.
Steve Wozniak
Everybody you talked to just seemed excited about talking about what we were doing. And there was this huge media explosion, kind of like the Internet is receiving today, of this is the happening thing. You read about it over and over and over, and every time you took an airplane flight you read about it, in every newspaper every week you'd read something about small computers coming, and Apple was one of the highlight companies so we were being portrayed as a leader of a revolution, and we really felt that we were a leader of a revolution. We were going to change life a lot.
Pretty good for a company started in a garage three years before. But not all the PC pioneers made great fortunes. Dan Bricklin decided not to patent his spreadsheet idea. Though more than 100 million spreadsheets have been sold since 1979, Bricklin and Frankston haven't earned VisiCalc royalties in years.
Dan Bricklin
You know, looking back at how successful a lot of other people have been it's kind of sad that we weren't as successful...
Bob Frankston
It would be very nice to be gazillionaires, but you can also understand that part of the reason was that that's not what we're trying to be.
Dan Bricklin
We're kids of the Sixties and what did you want to do? You wanted to make the world better, and you wanted to make your mark on the world and improve things, and we did it. So by the mark of what we would measure ourselves by, we're very successful.
And what about Ed Roberts? Three years and 40,000 computers after assembling that first Altair, the fun was over for Ed. MITS was just another player in what had become a competitive market for personal computers. Roberts sold his company in 1978 and started a new life. He went back to his native Georgia and retrained as a doctor.
Ed Roberts
I hadn't really thought anything at all about it for the last few years until people started taking credit for things that we did at MITS eh that's the only thing I think about. It irritates me when I think about the things that we did at MITS and we took all the heat for that other people have tried to take credit for and that frustrates me.
While Ed Roberts invented the personal computer, it was the founders of Apple who got rich. When Apple went public in spectacular fashion in 1980, Jobs and Woz became multimillionaires. The nerds had inherited the earth.
Steve Jobs
I was worth about over a million dollars when I was twenty-three and over ten million dollars when I was twenty-four, and over a hundred million dollars when I was twenty-five and ehm it wasn't that important ehm because I never did it for the money.
Steve Wozniak
It was just a little hobby company like a lot of people do not thinking anything of it. I mean it wasn't as though we both thought it was going to go a long ways. It was like we'll both do it for fun but back then there was a short window in time where one person who could sit down and do some neat good designs could turn them into a huge thing like the Apple 2.
It's astonishing that at the beginning of 1975 nobody owned a personal computer all there was was a mock-up on a magazine cover yet within five years there had emerged here in Silicon Valley a billion dollar industry. An unhealthy fascination with technology on the part of a few adolescents had awakened the nerd within us all. PC companies were sprouting like mushrooms to meet the enormous demand. Apple had emerged as the top fungus and had taken fifty per cent of the market. To the boys in Cupertino, every day seemed like Christmas...but Scrooge was around the corner. There was a company that everyone associated with the word computer, a company that expected, no demanded to dominate its market - IBM - Big Blue was on the move and Silicon Valley would soon be feeling the reverberations.
Steve Jobs
Co-founder, Apple Computer
Worth $1 billion
I feel incredibly lucky to be at exactly the right place in Silicon Valley, at exactly the right time historically where this invention has, has taken form.
Steve Wozniak
Co-founder Apple Computer
Worth $200 million
It wasn't like we both thought it was going to go a long ways, it was like, we'll both do it for fun and even though we're goin' to lose some money probably we'll just have been able to say we had a company.
Bill Gates
Co-founder, Microsoft
Worth $13 billion
Now all of us would get together and just hope we were right that the PC would become a big thing.
Steve Ballmer
Vice President Microsoft
Worth $3 billion
You know I stop and say wow the PC really has become part of the very fabric of the way people live and we certainly surged with it. I used to stop and say hmmm pretty incredible ride.
Most of these people come from the place I call home, the Silicon Valley, south of San Francisco, California. Growing-up here near the electronics companies that give the place its name, these founders of the PC revolution were for the most part middle class white kids from good suburban homes. But it's not their homes we're interested in -- it's their garages. This is my garage and this is all my junk. I'm probably one of the few guys in Silicon Valley who actually has room in his garage for a car, most everyone else seems to use theirs to start computer companies and create great fortunes, but I don't have a fortune - I'm a failure, I've written computer programmes that almost ran and I've designed and built hardware devices that frankly didn't work at all but I'm the ideal guy to tell the story of the personal computer business because I'm its premier gossip columnist and everyone tells me all their secrets. And this is my home where I write a gossip column for a computing magazine. Sorry about the mess. Institutions in constant change like the PC industry are driven by rumor and gossip and I thrive on both. My electronic mail address is deluged with inside information about everything from product flaws to who's sleeping with whom. What ties these gossipers together is a desire for truth. These people and their love of technology have fueled the PC revolution. To understand them is to understand that revolution. So let's go find some.
Meet Edwin Chin on a Saturday morning at the Weird Stuff Warehouse. This could be 1976 or 1996 because there is always a new generation of techies like Edwin who hear the calling. Most other kids are watching TV, but not Edwin.
Edwin: You know I've been interested in electronics and technology as a hobby since I started when I was like six or seven you know.
Q: How old are you now, Edwin?
A: Ten, right now.
It's no coincidence that the only woman in the vicinity looks bored, because this is a boy thing -- the obsession of a particular type of boy who would rather struggle with an electronic box than with a world of unpredictable people. We call them engineers, programmers, hackers, and techies, but mainly we call them nerds.
Douglas Adams
Sci-fi author
I think a nerd is a person who uses the telephone to talk to other people about telephones. And a computer nerd therefore is somebody who uses a computer in order to use a computer.
Christine Comaford
CEO Corporate Computing Int.
And people have different degrees of passion and different types of passion. Some people like just live databases, like 5th normal form is just like nirvana, they just quest for it you know, that's like what gets them up in the morning.
Q: What do your friends think of you?
Edwin: Boy, he's a nerd. Yeah, but I don't mind, I'm used to being called a nerd, can't have other people stop your dreams.
And in Silicon Valley the dream is to grow up to become a boy like this.... Graham Spencer is chief programmer for Architext Software -- six guys who graduated from Stanford University and started a company just because they like each other. This is a modern-day startup, but at heart it's no different from PC pioneers like Apple, or Microsoft -- nerds who share a dream. Their hobby is their business and the culture they've created is identical to that of a thousand other technology companies. First, they dumped the idea of nine to five. In this industry, you can work any 80 hours per week you like.
Mark Van Haren
Programmer, Architext
And then I've got my cap which I use to cover my eyes and (Oh yes) sleep in the early morning while everybody is coming in.
Bill Gates
We didn't even obey a 24 hour clock, we'd come in and programme for a couple of days straight. We'd - you know, four or five of us, when it was time to eat we'd all get in our cars, kind of race over to the restaurant and sit and talk about what we were doing, sometimes I'd get excited talking about things, I'd forget to eat, but then you know, we'd just go back and programme some more. It was us and our friends - those were fun days.
Mat Hostetter
Programmer, ARDI
BOB: Let's look in the refrigerator. Woah! We have coke and cold pizza.
MAT: I drink about two litres of coke a day.
BOB: Two litres of coke a day and do you like think of it as brain food?
MAT: It keeps me going you know, that and listening to heavy metal, and get caffeinated and hack.
Steve Wozniak
I'd sit down in my room on the floor with sheets of paper spread all around with my computer design I was working on. And always I noticed that I was up pretty late at night and I had lots of cokes - it's just part of that life.
Doug Muise
Software designer
A combination of stale pizza and body odour and spilt cola kinda ground in to the rug.
Joe Krause
President Architext
I brought some spaghetti to work and then forgot to wash out the container for the last couple of days, maybe six or seven if I had to be honest. Ooh, that smells bad.
Doug Muise
Eating, bathing, having a girlfriend, having an active social life is incidental, it gets in the way of code time. Writing code is the primary force that drives our lives so anything that interrupts that is is wasteful.
What is it about the internal logic of a computer that's so enticing? For one thing, such logic CAN be understood -- as opposed to things that can't be understood at all, like the motivations of young women, say, or of the French. Let me explain....Time for the Cringely crash course in basic computers, Part 1. This is a mainframe computer - all of these cabinets are one machine. In the old days all computers were this size they were tended by engineers in white coats a kind of priesthood who took their jobs very seriously. Now all computers work pretty much the same, whether it's a giant that serves two thousand users like this one, or a little notebook that serves only me. They process numerical data - adding, multiplying, comparing, - the fact is if you can quantify it a computer can handle it. It's the emotional stuff they don't know what to do with. The data must be put into a special binary code consisting only of ones and zeros. And you have to give the computer instructions, also in code, to tell it exactly what to do wth the data and in what order. These instructions are called a program. In the early days, you put in the instructions by flipping switches or loaded them from paper tape. This was called machine language. It made computers a pain to use. Even worse, every type of computer spoke a different machine language. The ENIAC could compute the thirty second trajectory of a shell in twenty seconds. Operators required two days to program it do so. Then a US Navy captain named Grace Hopper solved the problem. She invented a computer language, English words that the computer itself could translate into binary code. Now users could type whole lists of instructions into a computer rather than flipping those damned switches. Like most things having to do with computers,that first language had a silly name - COBOL. It was followed by other languages like FORTRAN and BASIC and they all made computing just a bit more user-friendly. So when some nerd tells you he's been up all night programming or writing software or hacking code, what he really means is he's been typing long lists of instructions into his computer. Mainframe computers were far from personal. They sat in big air-conditioned rooms at insurance companies, phone companies, and the bank, and their main function was to get us confused with some other guy named Cringely, who was a deadbeat and had a criminal record. Eventually computer terminals did begin to appear in some schools, but most of us paid no attention. But there was usually one kid who did pay attention, falling in love with the digital purity of those ones and zeros. He was the nerd.
Steve Wozniak
And I took this book home that described the PDP 8 computer and it just...oh, it was just like a bible to me. I mean, all these things that for some reason I'd fallen in love with, like you might fall in love with a card game called Magic, or you might fall in love with doing crossword puzzles or something else, or playing a musical instrument, I fell in love with these little descriptions of computers on their insides, and it was a little mathematics, I could work out some problems on paper and solve it and see how it's done, and I could come up with my own solutions and feel good inside.
Steve Jobs
So you would keyboard these commands in and then you would wait for a while and then the thing would go dadadadadada and it would tell you something out but even with that it was still remarkable - especially for a ten year old, that you could write a programme in Basic let's say or Fortran and actually this machine would sort of take your idea and it would sort of execute your idea and give you back some results and if they were the results that you predicted your program really worked it was an incredibly thrilling experience.
Nerds wanted their own computers right from the beginning, but it took a technological breakthrough to make that possible. This is it the chip the microprocessor, this is what allows you to have a mainframe computer on your desk. In the 1950s mainframes were as big as this garage and that's because they were filled with thousands of these - vacuum tubes or valves. Eventually the valves were made much smaller and replaced with transistors - still too big however to make a computer that could fit on your desk. What that took was further miniaturisation. Here we have a single piece of silicon etched with thousands of transistors. This microprocessor holds more than a million transistors and that's the secret of the personal computer and that's why they call it silicon valley not computer valley. These are the people who invented the microprocessor -- Intel. Intel was started 28 years ago by a handful of guys after a row with their old boss. Their microprocessors today power 85 percent of the world's computers. Intel not only invented the chip, they are responsible for the laid-back Silicon Valley working style. Everyone was on a first-name basis. There were no reserved parking places, no offices, only cubicles. It's still true today. Here's the chairman's cubicle.
BOB: Knock, knock I knocked at the door but there's no door. Gordon Moore is one of the Intel founders worth $3 billion. With money like that, I'd have a door.
Gordon Moore
Co-founder, Intel
In a business like this the people with the power are the ones that have the understanding of what's going on, not necessarily the ones on top. And it's very important that those people that have the knowledge are the ones that make the decisions. So we set up something where everyone who had the knowledge had an equal say in what was going on.
Intel's microprocessors kept getting more powerful. By 1974 they came out with the 8080, which had enough horsepower to run a whole computer. Only Intel didn't appreciate the brilliance of their own product, seeing it as useful mainly for powering calculators or traffic lights. Intel had all the elements necessary to invent the PC business, but they just didn't get it.
Gordon Moore
Looking back I know of one opportunity where an engineer came to me with an idea for a computer that would be used in the home. Of course it wasn't yet called a personal computer. And while he felt very strongly about it, the only example of what it was good for that he could come up with was the housewife could keep her recipes on it. And I couldn't imagine my wife with her recipes on a computer in the kitchen. It just didn't seem like it had any practical application at all, so Intel didn't pursue that idea.
This is the chip that launched the personal computer revolution. This is the magazine that announced it. In January 1975 featured on the cover was the world's first personal computer the Altair 8800. It was the crazy idea of an ex-airforce officer from Georgia - Ed Roberts.
Ed Roberts
Founder, MITS
If you look at it you know it was kind of grandiose almost megalomaniac kind of scheme you know and right now I couldn't do it because I could see right off there's no way you could do this. There isn't any way you could do this. But at that time you know we just lacked the eh the benefits of age and experience. We didn't know we couldn't do it.
BOB: Jesus Eddy a Silicon Valley garage has nothing on you.
EDDY: Everything you want to know about the microcomputer is probably in here in one form or another.
Here's the garage of Eddy Currie -- Ed Roberts' best friend. Eddy was present at the creation of the personal computer. Eddie also seems to have never met a piece of old computer junk he didn't like.
Eddy Curry
A lot of the audio tapes Ed and I used to send back a forth to one another in order to keep our phone calls down and one of the tapes, one of the tapes I found he got into discussion about the future as he saw it and what his dream was for the Altair. At that time it had not been named it was just called a computer ehm, but it was some very interesting stuff and certainly showed the kind of vision he had.
20 years after Ed Roberts' flash of brilliance, this exhibit is being held to celebrate the anniversary of the Altair. Like every other PC pioneer, Ed built his computer just because he wanted one to play with.
Ed Roberts
There were some of us that lusted after computers really at that time. All the computers in the world tended to be in big centres and you had to get permission to get close to them, and you know, nobody had access to computers. And the idea that you could have your own computer and do whatever you wanted to with it, whenever you wanted to, was fantastic.
And where was this all happening? It was far from Silicon Valley, Intel, or IBM. Out in the desert near the airport in Albuquerque, New Mexico, Ed Roberts ran a calculator company called MITS. Having an ugly building wasn't it's only problem - MITS was going bankrupt. Nobody was buying calculators and Ed needed $65,000 just to stay afloat.
Ed Roberts
And we went to the bank, we had a late night meeting and the issue was whether we closed MITS down or they loaned us an additional sixty-five thousand and I was asked how many machines that I think we would sell in the next year after it was introduced, and I said eight hundred, which was considered a wild-eyed optimist at that. Within a month after it was introduced we were getting two hundred and fifty orders a day.
The Altair wasn't even a computer, it was a computer KIT. Wow this is a pretty well equipped machine. You had to build it yourself and even then it usually didn't work. Still, the demand was amazing.
David Bunnell
Founder PC World and Mac World Magazines
There were actually people that came to MITS, a couple of people with camper trailers and camped out inthe parking lot waiting for their machines. I mean, they were so eager.
Eddy Currie
I mean I think everybody had sort of daydream, Ed Walter Mitteyed about owning a computer. The surprise was that it would be possible for the average college student, for example, who was living on bare subsistence, to actually buy a computer.
David Bunnell
This is what really amazed me was that people were so - there was a sort of pent up demand for having your own computer.
Eddy Currie
And if it could be that cheap what a wonderful thing.
This is an Altair computer - the first personal computer. And not just any Altair - this is Altair serial number 2, the second one made. The first Altair made was sent off to be photographed at a magazine and was lost in the mail. So this is the oldest personal computer in the world. Pretty historic junk but the question is what do you do with it? I mean it has a front panel with switches that you can click back and forth and some lights but in the back there's no place to connect a keyboard, there's no place to connect a monitor, there's no place to connect a printer, in fact there practically nothing at all that you can really do with this thing but back then 1975, the people who had it were thrilled. The nerds formed clubs to talk about their new toy. One of the first was the Homebrew Computer Club, which met on Wednesday evenings in a hall rented from Stanford University in Silicon Valley. Presiding over near-anarchy was Lee Felsenstein who pretended to be in charge.
Lee Felsenstein
And I would start the meeting by making a horrendous loud noise because everyone was talking and I had to get some attention somehow. And I would use it to call upon the person in question. I'd make threatening gestures with it. Most of us were in the electronics industry to a certain extent, there was also a stratem of physicians and there were a lot radio amateurs for instance finding a new technology that wasn't stale. But most of us were at a sort of middle level or downwards. We saw ourselves as crazed ignored geniuses or possibly geniuses but at least we could each hope to get our hands on a computer of our own.
The very uselessness of the Altair is what drove the hobbyists together. Roger Melen and Harry Garland started an early computer company. They came here to meet others and to figure out just what the heck could be done with this new toy -- a solution in search of a problem. There's no keyboard that I can see. The Altair was tedious to use. At first, the only way that data and instructions could be given to the computer was by flipping switches. Take something trivial like 2+2. Each 2 needed eight different switches to be flipped, then a ninth switch was used to load them all. 'And' required another nine switches. The answer 4 was if the third light from the left turned on. Eureka!
Roger Melen
So if you had a program that was a hundred bytes long you had to go this procedure a hundred times to load that in the memory.
HARRY GARLAND: It took a long time.
BOB: I bet it did and what happened if you lost power or if you lost your way in the middle?
HARRY GARLAND: You cried.
The Altair may have been frustrating, but it drove the nerds to experiment, finding real uses for the useless box, turning it from a curiosity to a computer.
Lee Felsenstein
Steve Dumpier set up an Altair, ehm laboriously keyed a program into it. Somebody knocked a plug out of the wall and he had to do that all over again but nobody knew what this was about. After all, was it just going to sit and flash its lights? No.
Roger Melen
You put a little eh transistor radio next to the Altair and he would by manipulating the length of loops in the sofware - could play tunes.
Lee Felsenstein
The radio began playing 'Fool on the Hill'....Da da da, da da da....and the tinny little tunes that you could tell were coming from the noise that the computer was generated being picked up by the radio. Everybody rose and applauded. I proposed that he receive the stripped Philips Screw Award for finding a use for something previously thought useless. But I think everybody was too busy applauding to even hear me.
Roger Melen
It was a very exciting thing, it was probably the first thing the Altair actually did.
Turning the Altair into a useful tool required a programming language so users could type their programs in rather than flipping switches. What it needed was a version of some big computer language like BASIC, only modified for the PC. This was called a BASIC interpreter, but it didn't yet exist because the experts all thought that not even BASIC was basic enough to fit inside the tiny Altair memory. Yet again the experts were wrong. Here comes the guy who solved the problem. Twenty years after finishing the first microcomputer BASIC, Paul Allen is returning to Albuquerque for a celebration of that event -- this time with his $15 million jet and three foot red carpet. At a time when I was killing brain cells, this guy was founding an empire. He has come to eat rubber chicken in honor of the Altair's 20th anniversary.
Speaker
I'd like to introduce to you - Paul Allen.
Allen co-founded Microsoft with his younger buddy from high school -- Bill Gates.
Paul Allen
One day in Boston, I was in Harvard Square I saw a cover of Popular Electronics with this thing that looked like what I had been imagining, and so I grabbed it off the shelf, I looked at it and I bought it and I ran back to Bill's dorm, and I think he was probably playing poker that night and usually losing money at that point. One of the few times when that's been the case.
Bill Gates
Paul showed that to me and then okay, here was a company that would be needing software.
Paul Allen
And he said OK we gotta call these guys up and see if this thing's for real.
Bill Gates
We realised that things were starting to happen, and just because we'd had a vision for a long time of where this chip could go, what it could mean er, that didn't mean the industry was going to wait for us while I stayed and - and finished my Degree at Harvard.
Paul Allen
So called up Ed you know, we told him we've got this Basic and it's you know just for your machine, and it's you know not that far from being done, and we'd like to come out and show it to you.
Bill Gates
So we created this BASIC interpreter. Paul took the paper tape er, and - and flew out. In fact, the night before, he - he got some sleep while I double checked everything to make sure that we had er, had it all right.
Paul Allen
But I had no idea what it was really going to be like to try to run the software. It had never been run on an actual computer before.
David Bunnell
He was very nervous about whether this would actually work. And then he got to the office and we all gathered around him and he put his fingers on the switches and he loaded BASIC with paper tape into the Altair.
Paul Allen
I was just I was so nervous....this is just....it's not going to work and it worked.
David Bunnell
And it came up, and it could do a few little simple things.
Bill Gates
And it was amazing when Paul called me up and said the thing had worked the first time. And of course, it was incredibly fast.
Paul Allen
And it printed out memory size and I think Bill said it printed something. So I said yeah, yeah.
Bill Gates
Oh, that was - that was unbelievable. The fact that it really worked er, was - was - was a breakthrough.
David Bunnell
Maybe there wouldn't be a Microsoft if the screen hadn't come alive, who knows, it might all be quite different.
After the demo succeeded, Bill forgot about finishing university. Afraid of missing his chance to dominate the new industry, he joined Allen in what was then the the center of world microcomputing research -- among the sleezy bars and gas stations of Albuquerque, New Mexico.
David Bunnell
And they lived across the street from MITS in the Sundowner Motel, and the prostitutes and the drug dealers out on the corner, and they were writing BASIC for the Altair computer, and gradually they actually started Microsoft here in Albuquerque.
Paul Allen
We hired some of our high school friends basically to come down and eh stay with us in our apartment, which became very crowded.
Bill Gates
We were pretty young. We started when I was 19 and so we just had a lot of - a lot of energy.
David Bunnell
They worked really hard. They listened to really loud music, I could hardly stand to go to the software room sometimes because the music would be banging off the walls, mostly acid rock.
Paul Allen
You know we'd usually go out, eat pizzas and then go out and watch action movies.
David Bunnell
They would work all night long, and there were days when Bill Gates would be sleeping on the floor in the software lab.
Paul Allen
Sometimes it would be Bill and these two other guys all, you know, sitting on tables around the apartment with stacks and stacks of paper writing, converting the BASIC for the 8080.
Bill Gates
I still know the source code by heart, and that was er, er, a work of love, you know, we just kept tuning and tuning that thing. And - and so that kind of craftsmanship paid off.
BASIC let the Altair be used for both fun stuff and real work. People attached terminals to the computer and began writing games, word processors, and accounting programs. Most of us didn't notice but soon there was thriving industry for enthusiasts. By the end of 1975, dozens of other companies were building microcomputers.
Ed Roberts
We created an industry and I think that goes completely unnoticed. I mean there was nothing - every aspect of the industry when you talk about software, hardware, application stuff, dealerships, you name it, it was all in a mess.
Bill Gates
It was a wild time. It was a very exciting time. And the first user convention - where we got people to come in and tell us what they were doing, what they were excited about, and other companies like Processor Technology or Imsai or Comemco got going as add-on companies. These companies are long-forgotten, but they were the - the humble beginnings of the - of the PC industry.
Left in the hands of those early hobbyists the PC might never have made it to the shopping mall. Reaching the wider market required a different type of vision. Enter the flower children of California, who thought the PC was, well, groovy.
Steve Jobs
Remember that the Sixties happened in the early Seventies, right, so you have to remember that and that's sort of when I came of age. So I saw a lot of this and to me the spark of that was that there was something beyond sort of what you see every day. It's the same thing that causes people to want to be poets instead of bankers. And I think that's a wonderful thing. And I think that that same spirit can be put into products, and those products can be manufactured and given to people and they can sense that spirit.
To help you understand all this, I will now take off my clothes.
Jim Warren
And he says well frame relay is scaleable.
Jim Warren knows better than most what the hippy movement did for the PC. A sixties radical himself, he staged the West Coast Computer Faire -- for a time the biggest computer show in the world. The Faire was where the PC really arrived. It's also where Jim got rich.
BOB: So eh Jim is this where you hold all your meetings?
JIM: Uhm as many as possible - sure why not.
BOB: This is how silicon vallye entrepreneurs conduct business?
JIM: Oh I don't know if it's how entrenpreneurs conduct business.
Believe it or not, Jim once taught mathematics at a Catholic girls school.
JIM: Bubbles Bob?
BOB: Sure.
JIM: OK.
Jim was immediately fascinated by the PC like many Bay Area hippies. The California counter culture was crucial to the PC's development.
Jim Warren
And the whole spirit there was working together, was sharing. You shared your dope, you shared your bed, you shared your life, you shared your hopes. And a whole bunch of us had the same community spirit and that permeated the whole Home Brew Computer Club. As soon as somebody would solve a problem they'd come running down to the Home Brew Computer Club's next meeting and say hey everybody you know that problem that all of us have been trying to figure out how to solve, here's the solution, isn't this wonderful? Aren't I a great guy. And it's my contention that that is a major component of why Silicon Valley was able to develop the technology as rapidly as it did, because we were all sharing - everybody won.
Out of this creative show-and-tell came Apple Computer, the first mass market PC company. The Apple founders, a couple of recent graduates from Homestead High were regulars at Homebrew meetings. Steve Wozniak was the technical wizard and Steve Jobs was the visionary who saw microcomputers as a possible business. But Apple wasn't their first business. Woz & Jobs had once built a device to cheat the phone company - they called it a blue box.
Steve Wozniak
Blue boxes were devices that could put tones into your phone and direct the phone company to switch your calls anywhere in the world for free and it was kind of...kind of weird for people to imagine that how could this worldwide phone system let you put a few little tones into your phone just like punching a touchtone phone, put the right tones in and it would direct your call anywhere in the world for free.
Steve Jobs
And it turned out we were at Stanford Linnear Accelerator Centre one night and way in the bowels of their technical library way down at the last bookshelf in the corner bottom rack we found an AT&T technical journal that laid out the whole thing and that's another moment I'll never forget - we saw this journal we though my God it's all real and so we set out to build a device to make these tones.
Steve Wozniak What we'd do is we'd walk into a dorm with a big tape recorder and we'd set the tape recorder on the floor and play the phone through it, hook up the phone with alligator clips so that everyone in the room could hear the phone conversations. And I was master jokester, and then I would get on the phone and dial some countries to show how easy it was. I would dial The Ritz in London and make a reservation and dial something and dial a joke in Sydney, Australia and everybody was really amazed by these things and so one time I said I could call the Pope. I called into Italy and asked for the number of The Vatican and eventually got the call into The Vatican. And I said this is Henry Kissinger - I didn't even use an accent. This is Henry Kissinger and I'd like to speak to the Pope about the summit trip, he was on a summit trip. And they said oh wait wait a minute we'd have to wake him up. It was like 4:30 in the morning there. And I hung on the line and they said we're waking him up, we're waking him up and finally the Bishop came on who was the highest Bishop up who was going to be the translater for the Pope and he said you're not Henry Kissinger and I went into a little accent and said oh yes I am you can call me back at this call-back number and I gave them a weird number where they'd call it back, I'd call a different number, we'd talk to each other but they don't know my phone number and eh they never called back - but it was a good - I woke him up.
Steve Jobs
What we learned was that we could build something ourselves that could control billions of dollars worth of infrastructure in the world - that was what we learnt was that us two you know, we're not much, we could build a little thing that could control a giant thing and that was an incredible lesson. I don't think there would ever have been an Apple computer had there not been blue boxes.
The first Apple computer was primitive. It was cobbled together by Woz to impress his friends at the Hombrew meetings.
Steve Wozniak
Everybody was interested in computers so I started getting a crowd around me because even although I was too shy to raise my hand and say anything in a club meeting - after the club meetings I would put my computer that I had built and every week it had a little bit more working on it too but I would set it down and let people type on the keyboard and I would explain what's in it. If they would come up to me and ask the question I can answer eh you know nowadays I would have the ability to tell them what it is you know and be a little bit more promotional but back then I could only answer questions that they asked me but a kinda group started gathering around me. And Steve Jobs saw that I had a lot of interest around me at the club and he said let's start selling it and let's make this company. He came up with the name Apple and eh and eh thatÍs how it started.
Apple was at best a funky company...started by a couple of teenage hackers who had previously been working as Alice in Wonderland characters in a local shopping mall and they started it in this garage right here. The first Apple computer was built here, now there are more than ten million in use around the world. And I was there - well for a short time I was an employee of Apple Computer, employee number 12 and one day I helped move materials out of this garage. At the time Steve Jobs said that the company was short of loot so he offered to pay me in company shares, but I held out for the money - my mother still reminds me of that incident. The Apple 1 was even less of a computer than the Altair -- a single circuit board that came with neither a case nor a keyboard. Still, Steve Jobs managed to sell 50 Apple 1's. That experience showed Jobs there was a market for a real computer -- the Apple II.
Steve Jobs
It was very clear to me that while there were a bunch of hardware hobbyists that could assemble their own computers, or at least take our board and add the transformers for the power supply and the case the keyboard and go get, you know, et cetera, go get the rest of the stuff. For every one of those there were a thousand people that couldn't do that, but wanted to mess around with programming - software hobbyists. Just like I had been when I was, you know, ten, discovering that computer. And so my dream for the Apple 2 was to sell the first real packaged computer.
Steve Jobs's dream was impossible. It needed too many chips, making the product too complicated and expensive to build. But Woz didn't know it was impossible.
Steve Wozniak
And then I got in to a way of why have memory for your TV screen and memory for your computer, make them one, and that shrunk the chips down, and I shrunk the chips here, and why not take all these timing circuits and I looked through manuals and found a chip that did it in one chip instead of five, and reduced that, and one thing after another after another happened. I wound up with so few chips, when I was done I said hey, a computer that you could program to generate coloured patterns on a screen, or data or words or play games or anything it was just the computer I wanted, you know, for myself pretty much, but it had turned out so good. He said I think we have a computer we could sell a thousand a month of. How can you sell a thousand a month, you know?
Steve Jobs
But we needed some money for tooling the case, things like that, we needed a few hundred thousand dollars.
Steve Wozniak
That was a lot of money for two people who had nothing in their lives to speak of, didn't have a 400 dollar bank account.
Steve Jobs
So I went looking for some venture capital.
The scruffy 19 year-old seduced the conservative world of venture capitalists. The man Jobs persuaded to part with his cash was Arthur Rock, the inventor of venture capital and the man who had originally funded Intel. At least the Intel boys had graduated from university and owned suits.
Arthur Rock
Venture Capitalist
Well, he wore sandals and he had long, very long hair and a beard and a moustache, but very articulate. He was, I think at one time in his life, and it was probably when I first met him that he ate nothing but fruit.
Bob: So as a mainline venture capitalist, is this...
Arthur: This is not the norm. This is not the norm.
With money in hand and under occasional adult supervision from an ex-Intel manager named Mike Markkula, Woz & Jobs finished the Apple II and ordered a local factory to build 1000 machines. Two years passed between the Altair and the Apple 2. And in that time a lot of things changed. We went from a computer that was designed for hobbyists and engineers and certainly looked like a piece of test equipment to a computer that looked like a piece of consumer electronics and we can thank Steve Jobs for that - his sense of design demanded that this structural foam case be used for the Apple 2 - the first case of its type on a personal computer. And not that there wasn't good engineering inside either. The Apple 2 was a model of efficient engineering - here's the floppy disk drive controller for example. There are eight chips here where previously there would have been thirty-five. This is an amazing bit of engineering that we can attribute to Steve Wozniak who is certainly the Mozart of digital design and all told it turned the Apple 2 into a sensation. The Apple II was launched at Jim Warren's West Coast Computer Faire -- one of the first big microcomputer shows. The 1978 show drew thousands of attendees and dozens of exhibitors -- many of them members of the Homebrew Computer Club, which spawned most of the early microcomputer companies. But there was only one company showing something that looked like a modern personal computer. Right by the entrance, in a prime spot negotiated by Steve Jobs, sat the Apple II. It mesmerized all who saw it. One later became a top Apple programmer.
Andy Hertzfeld
Apple Computer Designer
As a grad student I went to the first West Coast Computer Faire because I was interested in personal computers, and just on a tiny little table, like a picnic table almost - just covered with a tablecloth there was this Apple 2 and I swear, in my memory, it seems to have a halo around it now. It just drew me right to it.
Steve Jobs
My recollection is we stole the show, and a lot of dealers and distributors started lining up and we were off and running.
Bob: How old were you?
Steve: Twenty-one.
Bob: Twenty-one!
Following the West Coast Computer Faire, the next two years were ones of explosive growth for Apple, with thousands of customers literally arriving on the doorstep of the tiny office in Cupertino, California. Sales and profits grew so quickly that Apple had more money than the company could spend. And the company was very young. The founders were in their twenties and some employees were even younger, like 14 year-old Chris Espinosa, who never left. He still works at Apple, almost 20 years later.
Chris Espinosa
Manager, Media Tools, Apple
And there would be public demonstrations of our product every Tuesday and Thursday afternoon at 3 o'clock and that was good because it was after school. So I would get out of my, you know sophomore-junior year of high school, I would ride my little moped down to the Apple offices and at 3 oÍclock I'd give the demonstrations of the Apple 2.
Steve Wozniak
When we were in the office it was hey jokes and we were wiring up people's phones to do weird things, just every one of us I mean there wasn't a person in Apple I don't think for a couple of years that was you know super serious. We were lucky, we had like the hot product of its day.
Chris Espinosa
And some of the people that I did original demos to came up to me years later and said you know I founded a hundred million dollar chain of computer stores based on the demo you showed me one Tuesday afternoon at Apple. It was really fun.
Steve Wozniak
It went so successful that all of a sudden Steve and I wouldn't have to worry about work for the rest of our lives. And then it got even more successful and more successful after that, and eh it was sort of a shock.
The Apple II set a new standard for personal computers and showed there was some real money to be made. Rival companies popped-up all over, but the market was still hobbyists -- guys with big beards who thought a good use for their computer was controlling a model train set. But for microcomputers to be taken seriously, they had to start doing things that needed doing -- functions that were useful, not just for fun.
The enthusiast had its limits. To reach the rest of us the Apple 2 needed what nerds call a killer application. Software that's so useful that people will buy computers just to run it. For the Apple II, this application was called VisiCalc. It came straight from the blackboards of the Harvard Business school. Invented by a graduate student, Dan Bricklin with his programmer friend Bob Frankston, VisiCalc was the first electronic spreadsheet. A spreadsheet is a tool for financial planning, bringing together for the first time the seduction of money with the power of microcomputing. Dan Bricklin's professor at Harvard showed how companies used a grid of numbers on a blackboard to work out profits and expenses.
Dan Bricklin
VisiCalc Inventor
Sixty down here and your profit would be this minus this which gives you forty. And then well let's see what's the sales growth, say there's a ten percent...
The trick to a spreadsheet is that all the values in the table are related to the others. So changes in one year would ripple through the table, affecting prices and profits in subseqent years. Students were asked to calculate how future profits would be affected by various business scenarios. It was called running the numbers and they did it laborously by hand.
Dan Bricklin
Well let's say your initial costs have a hundred fixed costs at the beginning so now you have a minus twenty is how much you make the first year and in the second year you have a hundred but your variable is say let's say twenty-five so now your losing what is it - it's a pain in the neck I wasn't very good at this stuff - eighty what - no no no - fifteen - minus fifteen right and eventually your making money, what year do we make money and how much does the cost of money that's what running numbers was.
Because each value was linked to others, one mistake could mean disaster.
Dan Bricklin
It blows your all number afterwards because you make all your calculations based on the other numbers before them. If I had miscalculated...
Dan, who had worked as a programmer, started daydreaming about how he could use a computer to replace the tedious hand calculations.
Dan Bricklin
I imagined that there was this magic blackboard that did like word processing does word wrapping - if you make a change to a word it automatically pulls everything back, well why no recalculate in the same way? So that if I change my number, you know, I should have used ten per cent instead of twelve per cent, I could just put it in and it would recalculate everything and go through it you know and that would be this idea of an electronic spread sheet.
Following a model that's common today, Dan Bricklin designed the program, but got his friend Bob Frankston to write the actual computer code. After months of programming late at night when computer time was cheaper, the Harvard Business School blackboard came to life.
Dan Bricklin
Now weÍve set this up, OK. Then we type a new value in, then I'm going to take that one hundred, I'm going to change it right and here, it recalculated! Woa! That saved me so much time. People who saw it and went and got it like an accountant, I remember showing it to one around here and he started shaking and said that's what I do all week, I could do it in an hour you know, you know, they would take their credit cards and shove them in your face. I meet these people now they come up to me and say I gotta tell you you know...
BOB: You changed my life.
DAN: You changed my life. You made accounting fun and...
Bob Frankston
VisiCalc Programmer
You have to remember what it was like in those days we did not use the word spreadsheet cause nobody knew what a spreadsheet was. I came up with the name visible calculator or visicalc because we wanted to emphasise that aspect.
VisiCalc hit the market in October, 1979, selling for $100. Marv Goldschmitt sold the first copies from his computer store in Bedford, Massachusetts. After a slow start VisiCalc took off.
Marv Goldschmitt
What it did in our society, it gave people who were obsessed with numbers, whether they were in business or at home, how much am I worth today, what's my stock portfolio worth, how am I doing against budget on this project. It gave them an ability to play with scenarios and change it and say well, what if I do this. So it put people in a sense in control of the thing that lots of people in our society feel is driving them and that's numbers.
The spreadsheet was every businessman's crystal ball. It answered all those 'what if' questions. What if I fire the engineering department? What if I invest $10 million in pantyhose futures? Look! I'll be rich in under a year and have slimmer thighs at the same time! The Computer says so! The effect of the spreadsheet was enormous. Armed with an Apple 2 running Visicalc a twenty-four year old MBA with two pieces of dubious data could convince his corporate managers to allow him to loot the corporate pension fund and do a leverage buy-out. It was the perfect tool for the eighties...the lead decade where money was everything and greed was good. In five years, the PC had gone from a hobbyist's toy to an engine that shaped the times we lived in. Thanks to VisiCalc the Apple II made history.
Steve Wozniak
Everybody you talked to just seemed excited about talking about what we were doing. And there was this huge media explosion, kind of like the Internet is receiving today, of this is the happening thing. You read about it over and over and over, and every time you took an airplane flight you read about it, in every newspaper every week you'd read something about small computers coming, and Apple was one of the highlight companies so we were being portrayed as a leader of a revolution, and we really felt that we were a leader of a revolution. We were going to change life a lot.
Pretty good for a company started in a garage three years before. But not all the PC pioneers made great fortunes. Dan Bricklin decided not to patent his spreadsheet idea. Though more than 100 million spreadsheets have been sold since 1979, Bricklin and Frankston haven't earned VisiCalc royalties in years.
Dan Bricklin
You know, looking back at how successful a lot of other people have been it's kind of sad that we weren't as successful...
Bob Frankston
It would be very nice to be gazillionaires, but you can also understand that part of the reason was that that's not what we're trying to be.
Dan Bricklin
We're kids of the Sixties and what did you want to do? You wanted to make the world better, and you wanted to make your mark on the world and improve things, and we did it. So by the mark of what we would measure ourselves by, we're very successful.
And what about Ed Roberts? Three years and 40,000 computers after assembling that first Altair, the fun was over for Ed. MITS was just another player in what had become a competitive market for personal computers. Roberts sold his company in 1978 and started a new life. He went back to his native Georgia and retrained as a doctor.
Ed Roberts
I hadn't really thought anything at all about it for the last few years until people started taking credit for things that we did at MITS eh that's the only thing I think about. It irritates me when I think about the things that we did at MITS and we took all the heat for that other people have tried to take credit for and that frustrates me.
While Ed Roberts invented the personal computer, it was the founders of Apple who got rich. When Apple went public in spectacular fashion in 1980, Jobs and Woz became multimillionaires. The nerds had inherited the earth.
Steve Jobs
I was worth about over a million dollars when I was twenty-three and over ten million dollars when I was twenty-four, and over a hundred million dollars when I was twenty-five and ehm it wasn't that important ehm because I never did it for the money.
Steve Wozniak
It was just a little hobby company like a lot of people do not thinking anything of it. I mean it wasn't as though we both thought it was going to go a long ways. It was like we'll both do it for fun but back then there was a short window in time where one person who could sit down and do some neat good designs could turn them into a huge thing like the Apple 2.
It's astonishing that at the beginning of 1975 nobody owned a personal computer all there was was a mock-up on a magazine cover yet within five years there had emerged here in Silicon Valley a billion dollar industry. An unhealthy fascination with technology on the part of a few adolescents had awakened the nerd within us all. PC companies were sprouting like mushrooms to meet the enormous demand. Apple had emerged as the top fungus and had taken fifty per cent of the market. To the boys in Cupertino, every day seemed like Christmas...but Scrooge was around the corner. There was a company that everyone associated with the word computer, a company that expected, no demanded to dominate its market - IBM - Big Blue was on the move and Silicon Valley would soon be feeling the reverberations.
PBS: Triumph of The Nerds II
Triumph of The Nerds: Riding The Bear
The story so far.... In 1975, Ed Roberts invented the Altair personal computer. It was a pain to use until 19 year-old pre-billionaire Bill Gates wrote the first personal computer language. Still, the public didn't care. Then two young hackers -- Steve Jobs and Steve Wozniak -- built the Apple computer to impress their friends. We were all impressed and Apple was a stunning success. By 1980, the PC market was worth a billion dollars. Now, view on.....
Christine Comaford
We are nerds.
Vern Raburn
Most of the people in the industry were young because the guys who had any real experience were too smart to get involved in all these crazy little machines.
Gordon Eubanks
It really wasn't that we were going to build billion dollar businesses. We were having a good time.
Vern Raburn
I thought this was the most fun you could possibly have with your clothes on.
When the personal computer was invented twenty years it was just that - an invention - it wasn't a business. These were hobbyists who built these machines and wrote this software to have fun but that has really changed and now this is a business this is a big business. It just goes to show you that people can be bought. How the personal computer industry grew from zero to 100 million units is an amazing story. And it wasn't just those early funky companies of nerds and hackers, like Apple, that made it happen. It took the intervention of a company that was trusted by the corporate world. Big business wasn't interested in the personal computer. In the boardrooms of corporate America a computer still meant something the size of a room that cost at least a hundred thousand dollars. Executives would brag that my mainframe is bigger than your mainframe. The idea of a $2,000 computer that sat on your desk in a plastic box was laughable that is until that plastic box had three letters stamped on it - IBM. IBM was, and is, an American business phenomenon. Over 60 years, Tom Watson and his son, Tom Jr., built what their workers called Big Blue into the top computer company in the world. But IBM made mainframe computers for large companies, not personal computers -- at least not yet. For the PC to be taken seriously by big business, the nerds of Silicon Valley had to meet the suits of corporate America. IBM never fired anyone, requiring only that undying loyalty to the company and a strict dress code. IBM hired conservative hard-workers straight from school. Few IBM'ers were at the summer of love. Their turn-ons were giant mainframes and corporate responsibility. They worked nine to five and on Saturdays washed the car. This is intergalactic HQ for IBM - the largest computer company in the world...but in many ways IBM is really more a country than it is a company. It has hundreds of thousands of citizens, it has a bureaucracy, it has an entire culture everything in fact but an army. OK Sam we're ready to visit IBM country, obviously we're dressed for the part. Now when you were in sales training in 1959 for IBM did you sing company songs?
Sam Albert
Former IBM Executive
Absolutely.
BOB: Well just to get us in the mood let's sing one right here.
SAM: You're kidding.
BOB: I have the IBM - the songs of the IBM and we're going to try for number 74, our IBM salesmen sung to the tune of Jingle Bells.
Bob & Sam singing
'IBM, happy men, smiling all the way, oh what fun it is to sell our products our pruducts night and day. IBM Watson men, partners of TJ. In his service to mankind - that's why we are so gay.'
Sam Albert
Now gay didn't mean what it means today then remember that OK?
BOB: Right ok let's go.
SAM: I guess that was OK.
BOB: Perfect.
Sam Albert
When I started at IBM there was a dress code, that was an informal oral code of white shirts. You couldn't wear anything but a white shirt, generally with a starched collar. I remember attending my first class, and a gentleman said to me as we were entering the building, are you an IBMer, and I said yes. He had a three piece suit on, vests were of the vogue, and he said could you just lift your pants leg please. I said what, and before I knew it he had lifted my pants leg and he said you're not wearing any garters. I said what?! He said your socks, they're not pulled tight to the top, you need garters. And sure enough I had to go get garters.
IBM is like Switzerland -- conservative, a little dull, yet prosperous. It has committees to verify each decision. The safety net is so big that it is hard to make a bad decision - or any decision at all. Rich Seidner, computer programmer and wannabe Paul Simon, spent twenty-five years marching in lockstep at IBM. He feels better now.
Rich Seidner
Former IBM Programmer
I mean it's like getting four hundred thousand people to agree what they want to have for lunch. You know, I mean it's just not going to happen - it's going to be lowest common denominator you know, it's going to be you know hot dogs and beans. So ahm so what are you going to do? So IBM had created this process and it absolutely made sure that quality would be preserved throughout the process, that you actually were doing what you set out to do and what you thought the customer wanted. At one point somebody kind of looked at the process to see well, you know, what's it doing and what's the overhead built into it, what they found is that it would take at least nine months to ship an empty box.
By the late seventies, even IBM had begun to notice the explosive growth of personal computer companies like Apple.
Commercial
The Apple 2 - small inexpensive and simple to use the first computer.....
What's more, it was a computer business they didn't control. In 1980, IBM decided they wanted a piece of this action.
Jack Sams
Former IBM Executive
There were suddenly tens of thousands of people buying machines of that class and they loved them. They were very happy with them and they were showing up in the engineering departments of our clients as machines that were brought in because you can't do the job on your mainframe kind of thing.
Commercial
JB wanted to know why I'm doing better than all the other managers...it's no secret...I have an Apple - sure there's a big computer three flights down but it won't test my options, do my charts or edit my reports like my Apple.
Jack Sams
The people who had gotten it were religious fanatics about them. So the concern was we were losing the hearts and minds and give me a machine to win back the hearts and minds.
In business, as in comedy, timing is everything, and time looked like it might be running out for an IBM PC. I'm visiting an IBMer who took up the challenge. In August 1979, as IBM's top management met to discuss their PC crisis, Bill Lowe ran a small lab in Boca Raton Florida.
Bill Lowe
Hello Bob nice to see you.
BOB: Nice to see you again. I tried to match the IBM dress code how did I do?
BILL: That's terrific, that's terrific.
He knew the company was in a quandary. Wait another year and the PC industry would be too big even for IBM to take on. Chairman Frank Carey turned to the department heads and said HELP!!!
Bill Lowe
Head, IBM IBM PC Development Team 1980
He kind of said well, what should we do, and I said well, we think we know what we would like to do if we were going to proceed with our own product and he said no, he said at IBM it would take four years and three hundred people to do anything, I mean it's just a fact of life. And I said no sir, we can provide with product in a year. And he abruptly ended the meeting, he said you're on Lowe, come back in two weeks and tell me what you need.
An IBM product in a year! Ridiculous! Down in the basement Bill still has the plan. To save time, instead of building a computer from scratch, they would buy components off the shelf and assemble them -- what in IBM speak was called 'open architecture.' IBM never did this. Two weeks later Bill proposed his heresy to the Chairman.
Bill Lowe
And frankly this is it. The key decisions were to go with an open architecture, non IBM technology, non IBM software, non IBM sales and non IBM service. And we probably spent a full half of the presentation carrying the corporate management committee into this concept. Because this was a new concept for IBM at that point.
BOB: Was it a hard sell?
BILL: Mr. Carey bought it. And as result of him buying it, we got through it.
With the backing of the chairman, Bill and his team then set out to break all the IBM rules and go for a record.
Bill Lowe
We'll put it in the IBM section.
Once IBM decided to do a personal computer and to do it in a year - they couldn't really design anything, they just had to slap it together, so that's what we'll do. You have a central processing unit and eh let's see you need a monitor or display and a keyboard. OK a PC, except it's not, there's something missing. Time for the Cringely crash course in elementary computing. A PC is a boxful of electronic switches, a piece of hardware. It's useless until you tell it what to do. It requires a program of instructions...that's software. Every PC requires at least two essential bits of software in order to work at all. First it requires a computer language. That's what you type in to give instructions to the computer. To tell it what to do. Remember it was a computer language called BASIC that Paul Allen and Bill Gates adapted to the Altair...the first PC. The other bit of software that's required is called an operating system and that's the internal traffic cop that tells the computer itself how the keyboard is connected to the screen or how to store files on a floppy disk instead of just losing them when you turn off the PC at the end of the day. Operating systems tend to have boring unfriendly names like UNIX and CPM and MS-DOS but though they may be boring it's an operating system that made Bill Gates the richest man in the world. And the story of how that came about is, well, pretty interesting. So the contest begins. Who would IBM buy their software from? Let's meet the two contenders -- the late Gary Kildall, then aged 39, a computer Ph.D., and a 24 year old Harvard drop-out - Bill Gates. By the time IBM came calling in 1980, Bill Gates and his small company Microsoft was the biggest supplier of computer languages in the fledgling PC industry.
Commercial
'Many different computer manufacturers are making the CPM Operating System standard on most models.'
For their operating system, though, the logical guy for the IBMers to see was Gary Kildall. He ran a company modestly called Interglactic Digital Research. Gary had invented the PC's first operating system called CP/M. He had already sold 600,000 of them, so he was the big cheese of operating systems.
Gary Kildall
Founder Digital Research
Speaking in 1983
In the early 70s I had a need for an operating system myself and eh it was a very natural thing to write and it turns out other people had a need for an operating system like that and so eh it was a very natural thing I wrote it for my own use and then started selling it.
Gordon Eubanks
In Gary's mind it was the dominant thing and it would always be the dominant of course Bill did languages and Gary did operating systems and he really honestly believed that would never change.
But what would change the balance of power in this young industry was the characters of the two protagonists.
Jim Warren
Founder West Coast Computer Faire 1978
So I knew Gary back when he was an assistant professor at Monterrey Post Grad School and I was simply a grad student. And went down, sat in his hot tub, smoked dope with him and thoroughly enjoyed it all, and commiserated and talked nerd stuff. He liked playing with gadgets, just like Woz did and does, just like I did and do.
Gordon Eubanks
He wasn't really interested in how you drive the business, he worked on projects, things that interested him.
Jim Warren
He didn't go rushing off to the patent office and patent CPM and patent every line of code he could, he didn't try to just squeeze the last dollar out of it.
Gordon Eubanks
Gary was not a fighter, Gary avoided conflict, Gary hated conflict. Bill I don't think anyone could say backed away from conflict.
Nobody said future billionaires have to be nice guys. Here, at the Microsoft Museum, is a shrine to Bill's legacy. Bill Gates hardly fought his way up from the gutter. Raised in a prosperous Seattle household, his mother a homemaker who did charity work, his father was a successful lawyer. But beneath the affluence and comfort of a perfect American family, a competitive spirit ran deep.
Vern Raburn
President, The Paul Allen Group
I ended up spending Memorial Day Weekend with him out at his grandmother's house on Hood Canal. She turned everything in to a game. It was a very very very competitive environment, and if you spent the weekend there, you were part of the competition, and it didn't matter whether it was hearts or pickleball or swimming to the dock. And you know and there was always a reward for winning and there was always a penalty for losing.
Christine Comaford
CEO Corporate Computing Intl.
One time, it was funny. I went to Bill's house and he really wanted to show me his jigsaw puzzle that he was working on, and he really wanted to talk about how he did this jigsaw puzzle in like four minutes, and like on the box it said, if you're a genius you will do the jigsaw puzzle in like seven. And he was into it. He was like I can do it. And I said don't, you know, I believe you. You don't need to break it up and do it for me. You know.
Bill Gates can be so focused that the small things in life get overlooked.
Jean Richardson
Former VP, Corporate Comms, Microsoft
If he was busy he didn't bathe, he didn't change clothes. We were in New York and the demo that we had crashed the evening before the announcement, and Bill worked all night with some other engineers to fix it. Well it didn't occur to him to take ten minutes for a shower after that, it just didn't occur to him that that was important, and he badly needed a shower that day.
The scene is set in California...laid back Gary Kildall already making the best selling PC operating system CPM. In Seattle Bill Gates maker of BASIC the best selling PC language but always prepared to seize an opportunity. So IBM had to choose one of these guys to write the operating system for its new personal computer. One would hit the jackpot the other would be forgotten...a footnote in the history of the personal computer and it all starts with a telephone call to an eighth floor office in that building the headquarters of Microsoft in 1980.
Jack Sams
At about noon I guess I called Bill Gates on Monday and said I would like to come out and talk with him about his products.
Steve Ballmer
Vice-President Microsoft
Bill said well, how's next week, and they said we're on an airplane, we're leaving in an hour, we'd like to be there tomorrow. Well, hallelujah. Right oh.
Steve Ballmer was a Harvard roommate of Gates. He'd just joined Microsoft and would end up its third billionaire. Back then he was the only guy in the company with business training. Both Ballmer and Gates instantly saw the importance of the IBM visit.
Bill Gates
You know IBM was the dominant force in computing. A lot of these computer fairs discussions would get around to, you know, I.. most people thought the big computer companies wouldn't recognise the small computers, and it might be their downfall. But now to have one of the big computer companies coming in and saying at least the - the people who were visiting with us that they were going to invest in it, that - that was er, amazing.
Steve Ballmer
And Bill said Steve, you'd better come to the meeting, you're the only other guy here who can wear a suit. So we figure the two of us will put on suits, we'll put on suits and we'll go to this meeting.
Jack Sams
We got there at roughly two o'clock and we were waiting in the front, and this young fella came out to take us back to Mr. Gates office. I thought he was the office boy, and of course it was Bill. He was quite decisive, we popped out the non-disclosure agreement - the letter that said he wouldn't tell anybody we were there and that we wouldn't hear any secrets and so forth. He signed it immediately.
Bill Gates
IBM didn't make it easy. You had to sign all these funny agreements that sort of said I...IBM could do whatever they wanted, whenever they wanted, and use your secrets however they - they felt. But so it took a little bit of faith.
Jack Sams was looking for a package from Microsoft containing both the BASIC computer language and an Operating System. But IBM hadn't done their homework.
Steve Ballmer
They thought we had an operating system. Because we had this Soft Card product that had CPM on it, they thought we could licence them CPM for this new personal computer they told us they wanted to do, and we said well, no, we're not in that business.
Jack Sams
When we discovered we didn't have - he didn't have the rights to do that and that it was not...he said but I think it's ready, I think that Gary's got it ready to go. So I said well, there's no time like the present, call up Gary.
Steve Ballmer
And so Bill right there with them in the room called Gary Kildall at Digital Research and said Gary, I'm sending some guys down. They're going to be on the phone. Treat them right, they're important guys.
The men from IBM came to this Victorian House in Pacific Grove California, headquarters of Digital Research, headed by Gary and Dorothy Kildall. Just imagine what its like having IBM come to visit - its like having the Queen drop by for tea, its like having the Pope come by looking for advice, its like a visit from God himself. And what did Gary and Dorothy do? They sent them away.
Jack Sams
Gary had some other plans and so he said well, Dorothy will see you. So we went down the three of us...
Gordon Eubanks
Former Head of Language Division, Digital Research
IBM showed up with an IBM non-disclosure and Dorothy made what I...a decision which I think it's easy in retrospect to say was dumb.
Jack Sams
We popped out our letter that said please don't tell anybody we're here, and we don't want to hear anything confidential. And she read it and said and I can't sign this.
Gordon Eubanks
She did what her job was, she got the lawyer to look at the nondisclosure. The lawyer, Gerry Davis who's still in Monterey threw up on this non-disclosure. It was uncomfortable for IBM, they weren't used to waiting. And it was unfortunate situation - here you are in a tiny Victorian House, its overrun with people, chaotic.
Jack Sams
So we spent the whole day in Pacific Grove debating with them and with our attorneys and her attorneys and everybody else about whether or not she could even talk to us about talking to us, and we left.
This is the moment Digital Research dropped the ball. IBM, distinctly unimpressed with their reception, went back to Microsoft.
BOB: It seems to me that Digital Research really screwed up.
STEVE BALLMER: I think so - I think that's spot on. They made a big mistake. We referred IBM to them and they failed to execute.
Bill Gates isn't the man to give a rival a second chance. He saw the opportunity of a lifetime.
Bill Gates
Digital research didn't seize that, and we knew it was essential, if somebody didn't do it, the project was going to fall apart.
Steve Ballmer
We just got carried away and said look, we can't afford to lose the language business. That was the initial thought - we can't afford to have IBM not go forward. This is the most exciting thing that's going to happen in PCs.
Bill Gates
And we were already out on a limb, because we had licensed them not only Basic, but Fortran, Cobol Assembler er, typing tutor and Venture. And basically every - every product the company had we had committed to do for IBM in a very short time frame.
But there was a problem. IBM needed an operating system fast and Microsoft didn't have one. What they had was a stroke of luck - the ingredient everyone needs to be a billionaire. Unbelievably, the solution was just across town. Paul Allen, Gates's programming partner since high school, had found another operating system.
Paul Allen
There's a local company here in CL called CL Computer Products by a guy named Tim Patterson and he had done an operating system a very rudimentary operating system that was kind of like CPM.
Steve Ballmer
And we just told IBM look, we'll go and get this operating system from this small local company, we'll take care of it, we'll fix it up, and you can still do a PC.
Tim Patterson's operating system, which saved the deal with IBM, was, well, adapted from Gary Kildall's CPM.
Tim Patterson
Programmer
So I took a CPM manual that I'd gotten from the Retail Computer Store five dollars in 1976 or something, and used that as the basis for what would be the application program interface, the API for my operating system. And so using these ideas that came from different places I started in April and it was about half time for four months before I had my first working version.
This is it, the operating system Tim Patterson wrote. He called in QDOS the quick and dirty operating system. Microsoft and IBM called it PC DOS 1.0 and under any name it looks an awful lot like CPM. On this computer here I have running a PC DOS and CPM 86 and frankly itÍs very hard to tell the difference between the two. The command structures are the same, so are the directories, in fact the only obvious external difference is the floppy dirive is labelled A in PC DOS and and C in CPM. Some difference and yet one generated billions in revenue and the other disappeared. As usual in the PC business the prize didn't go to the inventor but to the exploiter of the invention. In this case that wasn't Gary Kildall it wasn't even Tim Paterson.
There was still one problem. Tim Patterson worked for Seattle Computer Products, or SCP. They still owned the rights to QDOS - rights that Microsoft had to have.
Vern Raburn
Former Vice-President Microsoft
But then we went back and said to them look, you know, we want to buy this thing, and SCP was like most little companies, you know. They always needed cash and so that was when they went in to the negotiation.
Paul Allen
And so ended up working out a deal to buy the operating system from him for whatever usage we wanted for fifty thousand dollars.
Hey, let's pause there. To savour an historic moment.
Paul Allen
For whatever usage we wanted for fifty thousand dollars.
It had to be the deal of the century if not the millenium it was certainly the deal that made Bill Gates and Paul Allen multi billionaires and allowed Paul Allen to buy toys like these, his own NBA basketball team and arena. Microsoft bought outright for fifty thousand dollars the operating system they needed and they turned around and licensed it to the world for up to fifty dollars per PC. Think of it - one hundred million personal computers running MS DOS software funnelling billions into Microsoft - a company that back then was fifty kids managed by a twenty-five year old who needed to wash his hair. Nice work if you can get it and Microsoft got it. There are no two places further apart in the USA than south eastern Florida and Washington State where Microsoft is based. This - this is Florida, Boca Raton and this building right here is where the IBM PC was developed. Here the nerds from Seattle joined forces with the suits of corporate and in that first honeymoon year they pulled off a fantastic achievement.
Dan Bricklin
After we got a package in the mail from the people down in Florida...
As August 1981 approached, the deadline for the launch of the IBM Acorn, the PC industry held its breath.
Dan Bricklin
Supposedly, maybe at this very moment eh, IBM is announcing the personal computer. We don't know that yet.
Software writers like Dan Bricklin, the creator of the first spreadsheet VisiCalc waited by the phones for news of the announcement. This is a moment of PC history. IBM secrecy had codenamed the PC 'The Floridian Project.' Everyone in the PC business knew IBM would change their world forever. They also knew that if their software was on the IBM PC, they would make fortunes.
Dan Bricklin
Please note that the attached information is not to be disclosed prior to any public announcement. (It's on the ticker) It's on the ticker OK so now you can tell people.
What we're watching are the first few seconds of a $100 billion industry.
Promo
After years of thinking big today IBM came up with something small. Big Blue is looking for a slice of Apple's market share. Bits and Bytes mean nothing try this one. Now they're going to sell $1,000 computers to millions of customers. I have seen the future said one analyst and it computes.
Commercial
Today an IBM computer has reached a personal......
Nobody was ever fired for buying IBM. Now companies could put PCs with the name they trusted on desks from Wisconsin to Wall Street.
Bob Metcalfe
Founder 3COM
When the IBM PC came and the PC became a serious business tool, a lot of them, the first of them went into those buildings over there and that was the real ehm when the PC industry started taking off, it happened there too.
Commercial
Can learn to use it with ease...
Sparky Sparks
Former IBM Executive
What IBM said was it's okay corporate America for you to now start buying and using PCs. And if it's okay for corporate America, it's got to be okay for everybody.
For all the hype, the IBM PC wasn't much better than what came before. So while the IBM name could create immense demand, it took a killer application to sustain it. The killer app for the IBM PC was yet another spreadsheet. Based on Visicalc, but called Lotus 1-2-3, its creators were the first of many to get rich on IBM's success. Within a year Lotus was worth $150 million bucks. Wham! Bam! Thank you IBM!
Commercial
Time to rock time for code...
IBM had forecast sales of half a million computers by 1984. In those 3 years, they sold 2 million.
Jack Sams
Euphoric I guess is the right word. Everybody was believed that they were not going to... At that point two million or three million, you know, they were now thinking in terms of a hundred million and they were probably off the scale in the other direction.
What did all this mean to Bill Gates, whose operating system, DOS, was at the heart of every IBM PC sold? Initially, not much, because of the deal with IBM. But it did give him a vital bridgehead to other players in the PC marketplace, which meant trouble in the long run for Big Blue.
Bill Gates
The key to our...the structure of our deal was that IBM had no control over...over our licensing to other people. In a lesson on the computer industry in mainframes was that er, over time, people built compatible machines or clones, whatever term you want to use, and so really, the primary upside on the deal we had with IBM, because they had a fixed fee er, we got about $80,000 - we got some other money for some special work we did er, but no royalty from them. And that's the DOS and Basic as well. And so we were hoping a lot of other people would come along and do compatible machines. We were expecting that that would happen because we knew Intel wanted to vend the chip to a lot more than just than just IBM and so it was great when people did start showing up and ehm having an interest in the licence.
IBM now had fifty per cent market share and was defining what a PC meant. There were other PCs that were sorta like the IBM PC, kinda like it. But what the public wanted was IBM PCs. So to be successful other manufacturers would have to build computers exactly like the IBM. They wanted to copy the IBM PC, to clone it. How could they do that legally, well welcome to the world of reverse engineering. This is what reverse engineering can get you if you do it right. It's the modest Aspen, Colorado ski shack of Rod Canion, one of the founders of Compaq, the company set up to compete head-on with the IBM PC. Back in 1982, Rod and three fellow engineers from Texas Instruments sketched out a computer design on a place mat at the House of Pies restaurant in Houston, Texas. They decided to manufacture and market a portable version of the IBM PC using the curious technique of reverse engineering.
Rod Canion
Co-founder Compaq
Reverse engineering is figuring out after something has already been created how it ticks, what makes it work, usually for the purpose of creating something that works the same way or at least does something like the thing you're trying to reverse engineer.
Here's how you clone a PC. IBM had made it easy to copy. The microprocessor was available off the shelf from Intel and the other parts came from many sources. Only one part was IBM's alone, a vital chip that connected the hardware with the software. Called the ROM-BIOS, this was IBM's own design, protected by copyright and Big Blue's army of lawyers. Compaq had to somehow copy the chip without breaking the law.
Rod Canion
First you have to decide how the ROM works, so what we had to do was have an engineer sit down with that code and through trial and error write a specification that said here's how the BIOS ROM needs to work. It couldn't be close it had to be exact so there was a lot of detailed testing that went on.
You test how that all-important chip behaves, and make a list of what it has to do - now it's time to meet my lawyer, Claude.
Claude Stern
Silicon Valley Attorney
BOB: I've examined the internals of the ROM BIOS and written this book of specifications now I need some help because I've done as much as I can do, and you need to explain what's next.
CLAUDE: Well,the first thing I'm going to do is I'm going to go through the book of specifications myself, but the first thing I can tell you Robert is that you're out of it now. You are contaminated, you are dirty. You've seen the product that's the original work of authorship, you've seen the target product, so now from here on in we're going to be working with people who are not dirty. We're going to be working with so called virgins, who are going to be operating in the clean room.
BOB: I certainly don't qualify there.
CLAUDE: I imagine you don't. So what we're going to do is this. We're going to hire a group of engineers who have never seen the IBM ROM BIOS. They have never seen it, they have never operated it, they know nothing about it.
Claude interrogates Mark
CLAUDE: Have you ever before attempted to disassemble decompile or to in any way shape or form reverse engineer any IBM equipment?
MARK: Oh no.
CLAUDE: And have you ever tried to disassemble....
This is the Silicon Valley virginity test. And good virgins are hard to find.
CLAUDE: You understand that in the event that we discover that the information you are providing us is inaccurate you are subject to discipline by the company and that can include but not limited to termination immediately do you understand that?
MARK: Yes I do.
CLAUDE: OK.
After the virgins are deemed intact, they are forbidden contact with the outside world while they build a new chip -- one that behaves exactly like the one in the specifications. In Compaq's case, it took l5 senior programmers several months and cost $1 million to do the reverse engineering. In November 1982, Rod Canion unveiled the result.
Bill Murto
What IÍve brought today is a Compaq portable computer.
When Bill Murto, another Compaq founder got a plug on a cable TV show their selling point was clear 100 percent IBM compatibility.
Bill Murto
It turns out that all major popular software runs on the IBM personal computer or the Compaq portable computer.
Q: That extends through all software written for IBM?
A: Eh Yes.
Q: It all works on the Compaq?
The Compaq was an instant hit. In their first year, on the strength of being exactly like IBM but a little cheaper, they sold 47,000 PCs.
Rod Canion
In our first year of sales we set an American business record. I guess maybe a world business record. Largest first year sales in history. It was a hundred and eleven million dollars.
So Rod Canion ends up in Aspen, famous for having the most expensive real estate in America and I try not to look envious while Rod tells me which executive jet he plans to buy next.
ROD: And finally I picked the Lear 31.
BOB: Oh really?
ROD: Now thart was a fun airplane.
BOB: Oh yeh.
Poor Big Blue! Suddenly everybody was cashing in on IBM's success. The most obvious winner at first was Intel, maker of the PCs microprocessor chip. Intel was selling chips like hotcakes to clonemakers -- and making them smaller, quicker and cheaper. This was unheard of! What kind of an industry had Big Blue gotten themselves into?
Jim Cannavino
Former Head, IBM PC Division
Things get less expensive every year. People aren't used to that in general. I mean, you buy a new car, you buy one now and four years later you go and buy one it costs more than the one you bought before. Here is this magical piece of an industry - you go buy one later it costs less and it does more. What a wonderful thing. But it causes some funny things to occur when you think about an industry. An industry where prices are coming down, where you have to sell it and use it right now, because if you wait later it's worth less.
Where Compaq led, others soon followed. IBM was now facing dozens of rivals - soon to be familiar names began to appear, like AST, Northgate and Dell. It was getting spectacularly easy to build a clone. You could get everything off the shelf, including a guaranteed-virgin ROM BIOS chip. Every Tom, Dick & Bob could now make an IBM compatible PC and take another bite out of Big Blue's business. OK we're at Dominos Computers at Los Altos California, Silicon Valley and this is Yukio and we're going to set up the Bob and Yukio Personal Computer Company making IBM PC clones. You're the expert, I of course brought all the money so what is it that we're going to do.
Yukio
OK first of all we need a motherboard.
BOB: What's a motherboard?
YUKIO: That's where the CPU is set in...that's the central processor unit.
BOB: OK.
YUKIO: In fact I have one right here. OK so this is the video board...
BOB: That drives the monitor.
YUKIO: Right.
BOB: Terror?
BILL LOWE: Oh, of course. I mean we were able to sell a lot of products but it was getting difficult to make money.
YUKIO: And this is the controller card which would control the hard drive and the floppy drive.
BOB: OK.
Rod Canion
And the way we did it was by having low overhead. IBM had low cost of product but a lot of overhead - they were a very big company.
YUKIO: Right this is a high density recorder.
BOB: So this is a hard disk drive.
Rod Canion
And by keeping our overhead low even though our margins were low we were able to make a profit.
YUKIO: OK I have one right here.
BOB: Hey...OK we have a keyboard which plugs in right over here.
YUKIO: Right...
BOB: People build them themselves - how long does it take?
YUKIO: About an hour.
BOB: About an hour.
And where did every two-bit clone-maker buy his operating system? Microsoft, of course. IBM never iniagined Bill Gates would sell DOS to anyone else. Who was there? But by the mid 80's it was boom time for Bill. The teenage entrepreneur had predicted a PC on every desk and in every home, running Microsoft software. It was actually coming true. As Microsoft mushroomed there was no way that Bill Gates could personally dominate thousands of employees but that didn't stop him. He still had a need to be both industry titan and top programmer. So he had to come up with a whole new corporate culture for Microsoft. He had to find a way to satisfy both his adolescent need to dominate and his adult need to inspire. The average Microsoftee is male and about 25. When he's not working, well he's always working. All his friends are Microsoft programmers too. He has no life outside the office but all the sodas are free. From the beginning, Microsoft recruited straight out of college. They chose people who had no experience of life in other companies. In time they'd be called Microserfs.
Charles Simonyi
Chief Programmer, Microsoft
It was easier to to to create a new culture with people who are fresh out of school rather than people who came from, from from eh other companies and and and other cultures. You can rely on it you can predict it you can measure it you can optimise it you can make a machine out of it.
Christine Comaford
I mean everyone like lived together, ate together dated each other you know. Went to the movies together it was just you know very much a it was like a frat or a dorm.
Steve Ballmer
Everybody's just push push push - is it right, is it right, do we have it right keep on it - no that's not right ugh and you're very frank about that - you loved it and it wasn't very formal and hierarchical because you were just so desirous to do the right thing and get it right. Why - it reflects Bill's personality.
Jean Richardson
And so a lot of young, I say people, but mostly it was young men, who just were out of school saw him as this incredible role model or leader, almost a guru I guess. And they could spend hours with him and he valued their contributions and there was just a wonderful camaraderie that seemed to exist between all these young men and Bill, and this strength that he has and his will and his desire to be the best and to be the winner - he is just like a cult leader, really.
As the frenzied 80's came to a close IBM reached a watershed - they had created an open PC architecture that anyone could copy. This was intentional but IBM always thought their inside track would keep them ahead - wrong. IBM's glacial pace and high overhead put them at a disadvantage to the leaner clone makers - everything was turning into a nightmare as IBM lost its dominant market share. So in a big gamble they staked their PC future to a new system a new line of computers with proprietary closed hardware and their very own operating system. It was war.
Presentation
Start planning for operating system 2 today.
IBM planned to steal the market from Gates with a brand new operating system, called - drum roll please - OS/2. IBM would design OS/2. Yet they asked Microsoft to write the code. Why would Microsoft help create what was intended to be the instrument of their own destruction? Because Microsoft knew IBM was was the source of their success and they would tolerate almost anything to stay close to Big Blue.
Steve Ballmer
It was just part of, as we used to call it, the time riding the bear. You just had to try to stay on the bear's back and the bear would twist and turn and try to buck you and throw you, but darn, we were going to ride the bear because the bear was the biggest, the most important you just had to be with the bear, otherwise you would be under the bear in the computer industry, and IBM was the bear, and we were going to ride the back of the bear.
Bill Gates
It's easy for people to forget how pervasive IBM's influence over this industry was. When you talked to people who've come in to the industry recently there's no way you can get that in to their - in to their head, that was the environment.
The relationship between IBM and Microsoft was always a culture clash. IBMers were buttoned-up organization men. Microsoftees were obsessive hackers. With the development of OS/2 the strains really began to show.
Steve Ballmer
In IBM there's a religion in software that says you have to count K-LOCs, and a K-LOC is a thousand line of code. How big a project is it? Oh, it's sort of a 10K-LOC project. This is a 20K-LOCer. And this is 5OK-LOCs. And IBM wanted to sort of make it the religion about how we got paid. How much money we made off OS 2, how much they did. How many K-LOCs did you do? And we kept trying to convince them - hey, if we have - a developer's got a good idea and he can get something done in 4K-LOCs instead of 20K-LOCs, should we make less money? Because he's made something smaller and faster, less KLOC. K-LOCs, K-LOCs, that's the methodology. Ugh anyway, that always makes my back just crinkle up at the thought of the whole thing.
Jim Cannavino
When I took over in '89 there was an enormous amount of resources working on OS 2, both in Microsoft and the IBM company. Bill Gates and I met on that several times. And we pretty quickly came to the conclusion together that that was not going to be a success, the way it was being managed. It was also pretty clear that the negotiating and the contracts had given most of that control to Microsoft.
It was no longer just a question of styles. There was now a clear conflict of business interest. OS/2 was planned to undermine the clone market, where DOS was still Microsoft's major money-maker. Microsoft was DOS. But Microsoft was helping develop the opposition? Bad idea. To keep DOS competitive, Gates had been pouring resources into a new programme called Windows. It was designed to provide a nice user-friendly facade to boring old DOS. Selling it was another job for shy, retiring Steve Ballmer.
Steve Ballmer (Commercial)
How much do you think this advanced operating environment is worth - wait just one minute before you answer - watch as Windows integrates Lotus 1, 2, 3 with Miami Vice. Now we can take this...
Just as Bill Gates saw OS/2 as a threat, IBM regarded Windows as another attempt by Microsoft to hold on to the operating system business.
Bill Gates
We created Windows in parallel. We kept saying to IBM, hey, Windows is the way to go, graphics is the way to go, and we got virtually everyone else, enthused about Windows. So that was a divergence that we kept thinking we could get IBM to - to come around on.
Jim Cannavino
It was clear that IBM had a different vision of its relationship with Microsoft than Microsoft had of its vision with IBM. Was that Microsoft's fault? You know, maybe some, but IBM's not blameless there either. So I don't view any of that as anything but just poor business on IBM's part.
Bill Gates is a very disciplined guy. He puts aside everything he wants to read and twice a year goes away for secluded reading weeks - the decisive moment in the Microsoft/IBM relationship came during just such a retreat. In front of a log fire Bill concluded that it was no longer in Microsoft's long term interests to blindly follow IBM. If Bill had to choose between OS2, IBM's new operating system and Windows, he'd choose Windows.
Steve Ballmer
We said ooh, IBM's probably not going to like this. This is going to threaten OS 2. Now we told them about it, right away we told them about it, but we still did it. They didn't like it, we told em about it, we told em about it, we offered to licence it to em.
Bill Gates
We always thought the best thing to do is to try and combine IBM promoting the software with us doing the engineering. And so it was only when they broke off communication and decided to go their own way that we thought, okay, we're on our own, and that was definitely very, very scary.
Steve Ballmer
We were in a major negotiation in early 1990, right before the Windows launch. We wanted to have IBM on stage with us to launch Windows 3.0, but they wouldn't do the kind of deal that would allow us to profit it would allow them essentially to take over Windows from us, and we walked away from the deal.
Jack Sams, who started IBM's relationship with Microsoft with that first call to Bill Gates in 1980, could only look on as the partnership disintegrated.
Jack Sams
Then they at that point I think they agreed to disagree on the future progress of OS 2 and Windows. And internally we were told thou shalt not ship any more products on Windows. And about that time I got the opportunity to take early retirement so I did.
Bill's decison by the fireplace ended the ten year IBM/Microsoft partnership and turned IBM into an also-ran in the PC business. Did David beat Goliath? The Boca Raton, Florida birthplace of the IBM's PC is deserted - a casualty of diminishing market share. Today, IBM is again what it was before - a profitable, dominant mainframe computer company. For awhile IBM dominated the PC market. They legitimised the PC business, created the standards most of us now use, and introduced the PC to the corporate world. But in the end they lost out. Maybe it was to a faster, more flexible business culture. Or maybe they just threw it away. That's the view of a guy who's been competing with IBM for 20 years, Silicon Valley's most outspoken software billionaire, Larry Ellison.
Larry Ellison
Founder, Oracle
I think IBM made the single worst mistake in the history of enterprise on earth.
Q: Which was?
LARRY: Which was the manufacture - being the first manufacturer and distributor of the Microsoft/Intel PC which they mistakenly called the IBM PC. I mean they were the first manufacturer and distributor of that technology I mean it's just simply astounding that they could ah basically give a third of their market value to Intel and a third of their market value to Microsoft by accident - I mean no-one, no-one I mean those two companies today are worth close to you know approaching a hundred billion dollars I mean not many of us get a chance to make a $100 billion mistake.
As fast as IBM abandons its buildings, Microsoft builds new ones. In 1980 IBM was 3000 times the size of Microsoft. Though still a smaller company, today Wall Street says Microsoft is worth more. Both have faced anti-trust investigations about their monopoly positions. For years IBM defined successful American corporate culture - as a machine of ordered bureaucracy. Here in the corridors of Microsoft it's a different style, it's personal. This company - in its drive, its hunger to succeed - is a reflection of one man, its founder, Bill Gates.
Jean Richardson
Bill wanted to win. Incredible desire to win and to beat other people. At Microsoft we, the whole idea was that we would put people under, you know. Unfortunately that's happened a lot.
Esther Dyson
Computer Industry Analyst
Bill Gates is special. You wouldn't have had a Microsoft with take a random other person like Gary Kildall. On the other hand, Bill Gates was also lucky. But Bill Gates knows that, unlike a lot of other people in the industry, and he's paranoid. Every morning he gets up and he doesn't feel secure, he feels nervous about this. They're trying hard, they're not relaxing, and that's why they're so successful.
Christine Comaford
And I remember, I was talking to Bill once and I asked him what he feared, and he said that he feared growing old because you know, once you're beyond thirty, this was his belief at the time, you know once you're beyond thirty, you know, you don't have as many good ideas anymore. You're not as smart anymore.
Bill Gates
If you just slow down a little bit who knows who it'll be, probably some company that may not even exist yet, but eh someone else can come in and take the lead.
Christine Comaford
And I said well, you know, you're going to age, it's going to happen, it's kind of inevitable, what are you going to do about it? And he said I'm just going to hire the smartest people and I'm going to surround myself with all these smart people, you know. And I thought that was kind of interesting. It was almost - it was like he was like oh, I can't be immortal, but like maybe this is the second best and I can buy that, you know.
Bill Gates
If you miss what's happening then the same kind of thing that happened to IBM or many other companies could happen to Microsoft very easily. So no-one's got a guaranteed position in the high technology business, and the more you think about, you know, how could we move faster, what could we do better, are there good ideas out there that we should be going beyond, it's important. And I wouldn't trade places with anyone, but the reason I like my job so much is that we have to constantly stay on top of those things.
The Windows software system that ended the alliance between Microsoft and IBM pushed Gates past all his rivals. Microsoft had been working on the software for years, but it wasn't until 1990 that they finally came up with a version that not only worked properly, it blew their rivals away and where did the idea for this software come from? Well not from Microsoft, of course. It came from the hippies at Apple. Lights! Camera! Boot up! In 1984, they made a famous TV commercial. Apple had set out to create the first user friendly PC just as IBM and Microsoft were starting to make a machine for businesses. When the TV commercial aired, Apple launched the Macintosh.
Commercial
Glorious anniversary of the information...
The computer and the commercial were aimed directly at IBM - which the kids in Cupertino thought of as Big Brother. But Apple had targeted the wrong people. It wasn't Big Brother they should have been worrying about, it was big Bill Gates.
Commercial
We are one people....
To find out why, join me for the concluding episode of Triumph of the Nerds.
Commercial
...........we shall prevail.
Christine Comaford
We are nerds.
Vern Raburn
Most of the people in the industry were young because the guys who had any real experience were too smart to get involved in all these crazy little machines.
Gordon Eubanks
It really wasn't that we were going to build billion dollar businesses. We were having a good time.
Vern Raburn
I thought this was the most fun you could possibly have with your clothes on.
When the personal computer was invented twenty years it was just that - an invention - it wasn't a business. These were hobbyists who built these machines and wrote this software to have fun but that has really changed and now this is a business this is a big business. It just goes to show you that people can be bought. How the personal computer industry grew from zero to 100 million units is an amazing story. And it wasn't just those early funky companies of nerds and hackers, like Apple, that made it happen. It took the intervention of a company that was trusted by the corporate world. Big business wasn't interested in the personal computer. In the boardrooms of corporate America a computer still meant something the size of a room that cost at least a hundred thousand dollars. Executives would brag that my mainframe is bigger than your mainframe. The idea of a $2,000 computer that sat on your desk in a plastic box was laughable that is until that plastic box had three letters stamped on it - IBM. IBM was, and is, an American business phenomenon. Over 60 years, Tom Watson and his son, Tom Jr., built what their workers called Big Blue into the top computer company in the world. But IBM made mainframe computers for large companies, not personal computers -- at least not yet. For the PC to be taken seriously by big business, the nerds of Silicon Valley had to meet the suits of corporate America. IBM never fired anyone, requiring only that undying loyalty to the company and a strict dress code. IBM hired conservative hard-workers straight from school. Few IBM'ers were at the summer of love. Their turn-ons were giant mainframes and corporate responsibility. They worked nine to five and on Saturdays washed the car. This is intergalactic HQ for IBM - the largest computer company in the world...but in many ways IBM is really more a country than it is a company. It has hundreds of thousands of citizens, it has a bureaucracy, it has an entire culture everything in fact but an army. OK Sam we're ready to visit IBM country, obviously we're dressed for the part. Now when you were in sales training in 1959 for IBM did you sing company songs?
Sam Albert
Former IBM Executive
Absolutely.
BOB: Well just to get us in the mood let's sing one right here.
SAM: You're kidding.
BOB: I have the IBM - the songs of the IBM and we're going to try for number 74, our IBM salesmen sung to the tune of Jingle Bells.
Bob & Sam singing
'IBM, happy men, smiling all the way, oh what fun it is to sell our products our pruducts night and day. IBM Watson men, partners of TJ. In his service to mankind - that's why we are so gay.'
Sam Albert
Now gay didn't mean what it means today then remember that OK?
BOB: Right ok let's go.
SAM: I guess that was OK.
BOB: Perfect.
Sam Albert
When I started at IBM there was a dress code, that was an informal oral code of white shirts. You couldn't wear anything but a white shirt, generally with a starched collar. I remember attending my first class, and a gentleman said to me as we were entering the building, are you an IBMer, and I said yes. He had a three piece suit on, vests were of the vogue, and he said could you just lift your pants leg please. I said what, and before I knew it he had lifted my pants leg and he said you're not wearing any garters. I said what?! He said your socks, they're not pulled tight to the top, you need garters. And sure enough I had to go get garters.
IBM is like Switzerland -- conservative, a little dull, yet prosperous. It has committees to verify each decision. The safety net is so big that it is hard to make a bad decision - or any decision at all. Rich Seidner, computer programmer and wannabe Paul Simon, spent twenty-five years marching in lockstep at IBM. He feels better now.
Rich Seidner
Former IBM Programmer
I mean it's like getting four hundred thousand people to agree what they want to have for lunch. You know, I mean it's just not going to happen - it's going to be lowest common denominator you know, it's going to be you know hot dogs and beans. So ahm so what are you going to do? So IBM had created this process and it absolutely made sure that quality would be preserved throughout the process, that you actually were doing what you set out to do and what you thought the customer wanted. At one point somebody kind of looked at the process to see well, you know, what's it doing and what's the overhead built into it, what they found is that it would take at least nine months to ship an empty box.
By the late seventies, even IBM had begun to notice the explosive growth of personal computer companies like Apple.
Commercial
The Apple 2 - small inexpensive and simple to use the first computer.....
What's more, it was a computer business they didn't control. In 1980, IBM decided they wanted a piece of this action.
Jack Sams
Former IBM Executive
There were suddenly tens of thousands of people buying machines of that class and they loved them. They were very happy with them and they were showing up in the engineering departments of our clients as machines that were brought in because you can't do the job on your mainframe kind of thing.
Commercial
JB wanted to know why I'm doing better than all the other managers...it's no secret...I have an Apple - sure there's a big computer three flights down but it won't test my options, do my charts or edit my reports like my Apple.
Jack Sams
The people who had gotten it were religious fanatics about them. So the concern was we were losing the hearts and minds and give me a machine to win back the hearts and minds.
In business, as in comedy, timing is everything, and time looked like it might be running out for an IBM PC. I'm visiting an IBMer who took up the challenge. In August 1979, as IBM's top management met to discuss their PC crisis, Bill Lowe ran a small lab in Boca Raton Florida.
Bill Lowe
Hello Bob nice to see you.
BOB: Nice to see you again. I tried to match the IBM dress code how did I do?
BILL: That's terrific, that's terrific.
He knew the company was in a quandary. Wait another year and the PC industry would be too big even for IBM to take on. Chairman Frank Carey turned to the department heads and said HELP!!!
Bill Lowe
Head, IBM IBM PC Development Team 1980
He kind of said well, what should we do, and I said well, we think we know what we would like to do if we were going to proceed with our own product and he said no, he said at IBM it would take four years and three hundred people to do anything, I mean it's just a fact of life. And I said no sir, we can provide with product in a year. And he abruptly ended the meeting, he said you're on Lowe, come back in two weeks and tell me what you need.
An IBM product in a year! Ridiculous! Down in the basement Bill still has the plan. To save time, instead of building a computer from scratch, they would buy components off the shelf and assemble them -- what in IBM speak was called 'open architecture.' IBM never did this. Two weeks later Bill proposed his heresy to the Chairman.
Bill Lowe
And frankly this is it. The key decisions were to go with an open architecture, non IBM technology, non IBM software, non IBM sales and non IBM service. And we probably spent a full half of the presentation carrying the corporate management committee into this concept. Because this was a new concept for IBM at that point.
BOB: Was it a hard sell?
BILL: Mr. Carey bought it. And as result of him buying it, we got through it.
With the backing of the chairman, Bill and his team then set out to break all the IBM rules and go for a record.
Bill Lowe
We'll put it in the IBM section.
Once IBM decided to do a personal computer and to do it in a year - they couldn't really design anything, they just had to slap it together, so that's what we'll do. You have a central processing unit and eh let's see you need a monitor or display and a keyboard. OK a PC, except it's not, there's something missing. Time for the Cringely crash course in elementary computing. A PC is a boxful of electronic switches, a piece of hardware. It's useless until you tell it what to do. It requires a program of instructions...that's software. Every PC requires at least two essential bits of software in order to work at all. First it requires a computer language. That's what you type in to give instructions to the computer. To tell it what to do. Remember it was a computer language called BASIC that Paul Allen and Bill Gates adapted to the Altair...the first PC. The other bit of software that's required is called an operating system and that's the internal traffic cop that tells the computer itself how the keyboard is connected to the screen or how to store files on a floppy disk instead of just losing them when you turn off the PC at the end of the day. Operating systems tend to have boring unfriendly names like UNIX and CPM and MS-DOS but though they may be boring it's an operating system that made Bill Gates the richest man in the world. And the story of how that came about is, well, pretty interesting. So the contest begins. Who would IBM buy their software from? Let's meet the two contenders -- the late Gary Kildall, then aged 39, a computer Ph.D., and a 24 year old Harvard drop-out - Bill Gates. By the time IBM came calling in 1980, Bill Gates and his small company Microsoft was the biggest supplier of computer languages in the fledgling PC industry.
Commercial
'Many different computer manufacturers are making the CPM Operating System standard on most models.'
For their operating system, though, the logical guy for the IBMers to see was Gary Kildall. He ran a company modestly called Interglactic Digital Research. Gary had invented the PC's first operating system called CP/M. He had already sold 600,000 of them, so he was the big cheese of operating systems.
Gary Kildall
Founder Digital Research
Speaking in 1983
In the early 70s I had a need for an operating system myself and eh it was a very natural thing to write and it turns out other people had a need for an operating system like that and so eh it was a very natural thing I wrote it for my own use and then started selling it.
Gordon Eubanks
In Gary's mind it was the dominant thing and it would always be the dominant of course Bill did languages and Gary did operating systems and he really honestly believed that would never change.
But what would change the balance of power in this young industry was the characters of the two protagonists.
Jim Warren
Founder West Coast Computer Faire 1978
So I knew Gary back when he was an assistant professor at Monterrey Post Grad School and I was simply a grad student. And went down, sat in his hot tub, smoked dope with him and thoroughly enjoyed it all, and commiserated and talked nerd stuff. He liked playing with gadgets, just like Woz did and does, just like I did and do.
Gordon Eubanks
He wasn't really interested in how you drive the business, he worked on projects, things that interested him.
Jim Warren
He didn't go rushing off to the patent office and patent CPM and patent every line of code he could, he didn't try to just squeeze the last dollar out of it.
Gordon Eubanks
Gary was not a fighter, Gary avoided conflict, Gary hated conflict. Bill I don't think anyone could say backed away from conflict.
Nobody said future billionaires have to be nice guys. Here, at the Microsoft Museum, is a shrine to Bill's legacy. Bill Gates hardly fought his way up from the gutter. Raised in a prosperous Seattle household, his mother a homemaker who did charity work, his father was a successful lawyer. But beneath the affluence and comfort of a perfect American family, a competitive spirit ran deep.
Vern Raburn
President, The Paul Allen Group
I ended up spending Memorial Day Weekend with him out at his grandmother's house on Hood Canal. She turned everything in to a game. It was a very very very competitive environment, and if you spent the weekend there, you were part of the competition, and it didn't matter whether it was hearts or pickleball or swimming to the dock. And you know and there was always a reward for winning and there was always a penalty for losing.
Christine Comaford
CEO Corporate Computing Intl.
One time, it was funny. I went to Bill's house and he really wanted to show me his jigsaw puzzle that he was working on, and he really wanted to talk about how he did this jigsaw puzzle in like four minutes, and like on the box it said, if you're a genius you will do the jigsaw puzzle in like seven. And he was into it. He was like I can do it. And I said don't, you know, I believe you. You don't need to break it up and do it for me. You know.
Bill Gates can be so focused that the small things in life get overlooked.
Jean Richardson
Former VP, Corporate Comms, Microsoft
If he was busy he didn't bathe, he didn't change clothes. We were in New York and the demo that we had crashed the evening before the announcement, and Bill worked all night with some other engineers to fix it. Well it didn't occur to him to take ten minutes for a shower after that, it just didn't occur to him that that was important, and he badly needed a shower that day.
The scene is set in California...laid back Gary Kildall already making the best selling PC operating system CPM. In Seattle Bill Gates maker of BASIC the best selling PC language but always prepared to seize an opportunity. So IBM had to choose one of these guys to write the operating system for its new personal computer. One would hit the jackpot the other would be forgotten...a footnote in the history of the personal computer and it all starts with a telephone call to an eighth floor office in that building the headquarters of Microsoft in 1980.
Jack Sams
At about noon I guess I called Bill Gates on Monday and said I would like to come out and talk with him about his products.
Steve Ballmer
Vice-President Microsoft
Bill said well, how's next week, and they said we're on an airplane, we're leaving in an hour, we'd like to be there tomorrow. Well, hallelujah. Right oh.
Steve Ballmer was a Harvard roommate of Gates. He'd just joined Microsoft and would end up its third billionaire. Back then he was the only guy in the company with business training. Both Ballmer and Gates instantly saw the importance of the IBM visit.
Bill Gates
You know IBM was the dominant force in computing. A lot of these computer fairs discussions would get around to, you know, I.. most people thought the big computer companies wouldn't recognise the small computers, and it might be their downfall. But now to have one of the big computer companies coming in and saying at least the - the people who were visiting with us that they were going to invest in it, that - that was er, amazing.
Steve Ballmer
And Bill said Steve, you'd better come to the meeting, you're the only other guy here who can wear a suit. So we figure the two of us will put on suits, we'll put on suits and we'll go to this meeting.
Jack Sams
We got there at roughly two o'clock and we were waiting in the front, and this young fella came out to take us back to Mr. Gates office. I thought he was the office boy, and of course it was Bill. He was quite decisive, we popped out the non-disclosure agreement - the letter that said he wouldn't tell anybody we were there and that we wouldn't hear any secrets and so forth. He signed it immediately.
Bill Gates
IBM didn't make it easy. You had to sign all these funny agreements that sort of said I...IBM could do whatever they wanted, whenever they wanted, and use your secrets however they - they felt. But so it took a little bit of faith.
Jack Sams was looking for a package from Microsoft containing both the BASIC computer language and an Operating System. But IBM hadn't done their homework.
Steve Ballmer
They thought we had an operating system. Because we had this Soft Card product that had CPM on it, they thought we could licence them CPM for this new personal computer they told us they wanted to do, and we said well, no, we're not in that business.
Jack Sams
When we discovered we didn't have - he didn't have the rights to do that and that it was not...he said but I think it's ready, I think that Gary's got it ready to go. So I said well, there's no time like the present, call up Gary.
Steve Ballmer
And so Bill right there with them in the room called Gary Kildall at Digital Research and said Gary, I'm sending some guys down. They're going to be on the phone. Treat them right, they're important guys.
The men from IBM came to this Victorian House in Pacific Grove California, headquarters of Digital Research, headed by Gary and Dorothy Kildall. Just imagine what its like having IBM come to visit - its like having the Queen drop by for tea, its like having the Pope come by looking for advice, its like a visit from God himself. And what did Gary and Dorothy do? They sent them away.
Jack Sams
Gary had some other plans and so he said well, Dorothy will see you. So we went down the three of us...
Gordon Eubanks
Former Head of Language Division, Digital Research
IBM showed up with an IBM non-disclosure and Dorothy made what I...a decision which I think it's easy in retrospect to say was dumb.
Jack Sams
We popped out our letter that said please don't tell anybody we're here, and we don't want to hear anything confidential. And she read it and said and I can't sign this.
Gordon Eubanks
She did what her job was, she got the lawyer to look at the nondisclosure. The lawyer, Gerry Davis who's still in Monterey threw up on this non-disclosure. It was uncomfortable for IBM, they weren't used to waiting. And it was unfortunate situation - here you are in a tiny Victorian House, its overrun with people, chaotic.
Jack Sams
So we spent the whole day in Pacific Grove debating with them and with our attorneys and her attorneys and everybody else about whether or not she could even talk to us about talking to us, and we left.
This is the moment Digital Research dropped the ball. IBM, distinctly unimpressed with their reception, went back to Microsoft.
BOB: It seems to me that Digital Research really screwed up.
STEVE BALLMER: I think so - I think that's spot on. They made a big mistake. We referred IBM to them and they failed to execute.
Bill Gates isn't the man to give a rival a second chance. He saw the opportunity of a lifetime.
Bill Gates
Digital research didn't seize that, and we knew it was essential, if somebody didn't do it, the project was going to fall apart.
Steve Ballmer
We just got carried away and said look, we can't afford to lose the language business. That was the initial thought - we can't afford to have IBM not go forward. This is the most exciting thing that's going to happen in PCs.
Bill Gates
And we were already out on a limb, because we had licensed them not only Basic, but Fortran, Cobol Assembler er, typing tutor and Venture. And basically every - every product the company had we had committed to do for IBM in a very short time frame.
But there was a problem. IBM needed an operating system fast and Microsoft didn't have one. What they had was a stroke of luck - the ingredient everyone needs to be a billionaire. Unbelievably, the solution was just across town. Paul Allen, Gates's programming partner since high school, had found another operating system.
Paul Allen
There's a local company here in CL called CL Computer Products by a guy named Tim Patterson and he had done an operating system a very rudimentary operating system that was kind of like CPM.
Steve Ballmer
And we just told IBM look, we'll go and get this operating system from this small local company, we'll take care of it, we'll fix it up, and you can still do a PC.
Tim Patterson's operating system, which saved the deal with IBM, was, well, adapted from Gary Kildall's CPM.
Tim Patterson
Programmer
So I took a CPM manual that I'd gotten from the Retail Computer Store five dollars in 1976 or something, and used that as the basis for what would be the application program interface, the API for my operating system. And so using these ideas that came from different places I started in April and it was about half time for four months before I had my first working version.
This is it, the operating system Tim Patterson wrote. He called in QDOS the quick and dirty operating system. Microsoft and IBM called it PC DOS 1.0 and under any name it looks an awful lot like CPM. On this computer here I have running a PC DOS and CPM 86 and frankly itÍs very hard to tell the difference between the two. The command structures are the same, so are the directories, in fact the only obvious external difference is the floppy dirive is labelled A in PC DOS and and C in CPM. Some difference and yet one generated billions in revenue and the other disappeared. As usual in the PC business the prize didn't go to the inventor but to the exploiter of the invention. In this case that wasn't Gary Kildall it wasn't even Tim Paterson.
There was still one problem. Tim Patterson worked for Seattle Computer Products, or SCP. They still owned the rights to QDOS - rights that Microsoft had to have.
Vern Raburn
Former Vice-President Microsoft
But then we went back and said to them look, you know, we want to buy this thing, and SCP was like most little companies, you know. They always needed cash and so that was when they went in to the negotiation.
Paul Allen
And so ended up working out a deal to buy the operating system from him for whatever usage we wanted for fifty thousand dollars.
Hey, let's pause there. To savour an historic moment.
Paul Allen
For whatever usage we wanted for fifty thousand dollars.
It had to be the deal of the century if not the millenium it was certainly the deal that made Bill Gates and Paul Allen multi billionaires and allowed Paul Allen to buy toys like these, his own NBA basketball team and arena. Microsoft bought outright for fifty thousand dollars the operating system they needed and they turned around and licensed it to the world for up to fifty dollars per PC. Think of it - one hundred million personal computers running MS DOS software funnelling billions into Microsoft - a company that back then was fifty kids managed by a twenty-five year old who needed to wash his hair. Nice work if you can get it and Microsoft got it. There are no two places further apart in the USA than south eastern Florida and Washington State where Microsoft is based. This - this is Florida, Boca Raton and this building right here is where the IBM PC was developed. Here the nerds from Seattle joined forces with the suits of corporate and in that first honeymoon year they pulled off a fantastic achievement.
Dan Bricklin
After we got a package in the mail from the people down in Florida...
As August 1981 approached, the deadline for the launch of the IBM Acorn, the PC industry held its breath.
Dan Bricklin
Supposedly, maybe at this very moment eh, IBM is announcing the personal computer. We don't know that yet.
Software writers like Dan Bricklin, the creator of the first spreadsheet VisiCalc waited by the phones for news of the announcement. This is a moment of PC history. IBM secrecy had codenamed the PC 'The Floridian Project.' Everyone in the PC business knew IBM would change their world forever. They also knew that if their software was on the IBM PC, they would make fortunes.
Dan Bricklin
Please note that the attached information is not to be disclosed prior to any public announcement. (It's on the ticker) It's on the ticker OK so now you can tell people.
What we're watching are the first few seconds of a $100 billion industry.
Promo
After years of thinking big today IBM came up with something small. Big Blue is looking for a slice of Apple's market share. Bits and Bytes mean nothing try this one. Now they're going to sell $1,000 computers to millions of customers. I have seen the future said one analyst and it computes.
Commercial
Today an IBM computer has reached a personal......
Nobody was ever fired for buying IBM. Now companies could put PCs with the name they trusted on desks from Wisconsin to Wall Street.
Bob Metcalfe
Founder 3COM
When the IBM PC came and the PC became a serious business tool, a lot of them, the first of them went into those buildings over there and that was the real ehm when the PC industry started taking off, it happened there too.
Commercial
Can learn to use it with ease...
Sparky Sparks
Former IBM Executive
What IBM said was it's okay corporate America for you to now start buying and using PCs. And if it's okay for corporate America, it's got to be okay for everybody.
For all the hype, the IBM PC wasn't much better than what came before. So while the IBM name could create immense demand, it took a killer application to sustain it. The killer app for the IBM PC was yet another spreadsheet. Based on Visicalc, but called Lotus 1-2-3, its creators were the first of many to get rich on IBM's success. Within a year Lotus was worth $150 million bucks. Wham! Bam! Thank you IBM!
Commercial
Time to rock time for code...
IBM had forecast sales of half a million computers by 1984. In those 3 years, they sold 2 million.
Jack Sams
Euphoric I guess is the right word. Everybody was believed that they were not going to... At that point two million or three million, you know, they were now thinking in terms of a hundred million and they were probably off the scale in the other direction.
What did all this mean to Bill Gates, whose operating system, DOS, was at the heart of every IBM PC sold? Initially, not much, because of the deal with IBM. But it did give him a vital bridgehead to other players in the PC marketplace, which meant trouble in the long run for Big Blue.
Bill Gates
The key to our...the structure of our deal was that IBM had no control over...over our licensing to other people. In a lesson on the computer industry in mainframes was that er, over time, people built compatible machines or clones, whatever term you want to use, and so really, the primary upside on the deal we had with IBM, because they had a fixed fee er, we got about $80,000 - we got some other money for some special work we did er, but no royalty from them. And that's the DOS and Basic as well. And so we were hoping a lot of other people would come along and do compatible machines. We were expecting that that would happen because we knew Intel wanted to vend the chip to a lot more than just than just IBM and so it was great when people did start showing up and ehm having an interest in the licence.
IBM now had fifty per cent market share and was defining what a PC meant. There were other PCs that were sorta like the IBM PC, kinda like it. But what the public wanted was IBM PCs. So to be successful other manufacturers would have to build computers exactly like the IBM. They wanted to copy the IBM PC, to clone it. How could they do that legally, well welcome to the world of reverse engineering. This is what reverse engineering can get you if you do it right. It's the modest Aspen, Colorado ski shack of Rod Canion, one of the founders of Compaq, the company set up to compete head-on with the IBM PC. Back in 1982, Rod and three fellow engineers from Texas Instruments sketched out a computer design on a place mat at the House of Pies restaurant in Houston, Texas. They decided to manufacture and market a portable version of the IBM PC using the curious technique of reverse engineering.
Rod Canion
Co-founder Compaq
Reverse engineering is figuring out after something has already been created how it ticks, what makes it work, usually for the purpose of creating something that works the same way or at least does something like the thing you're trying to reverse engineer.
Here's how you clone a PC. IBM had made it easy to copy. The microprocessor was available off the shelf from Intel and the other parts came from many sources. Only one part was IBM's alone, a vital chip that connected the hardware with the software. Called the ROM-BIOS, this was IBM's own design, protected by copyright and Big Blue's army of lawyers. Compaq had to somehow copy the chip without breaking the law.
Rod Canion
First you have to decide how the ROM works, so what we had to do was have an engineer sit down with that code and through trial and error write a specification that said here's how the BIOS ROM needs to work. It couldn't be close it had to be exact so there was a lot of detailed testing that went on.
You test how that all-important chip behaves, and make a list of what it has to do - now it's time to meet my lawyer, Claude.
Claude Stern
Silicon Valley Attorney
BOB: I've examined the internals of the ROM BIOS and written this book of specifications now I need some help because I've done as much as I can do, and you need to explain what's next.
CLAUDE: Well,the first thing I'm going to do is I'm going to go through the book of specifications myself, but the first thing I can tell you Robert is that you're out of it now. You are contaminated, you are dirty. You've seen the product that's the original work of authorship, you've seen the target product, so now from here on in we're going to be working with people who are not dirty. We're going to be working with so called virgins, who are going to be operating in the clean room.
BOB: I certainly don't qualify there.
CLAUDE: I imagine you don't. So what we're going to do is this. We're going to hire a group of engineers who have never seen the IBM ROM BIOS. They have never seen it, they have never operated it, they know nothing about it.
Claude interrogates Mark
CLAUDE: Have you ever before attempted to disassemble decompile or to in any way shape or form reverse engineer any IBM equipment?
MARK: Oh no.
CLAUDE: And have you ever tried to disassemble....
This is the Silicon Valley virginity test. And good virgins are hard to find.
CLAUDE: You understand that in the event that we discover that the information you are providing us is inaccurate you are subject to discipline by the company and that can include but not limited to termination immediately do you understand that?
MARK: Yes I do.
CLAUDE: OK.
After the virgins are deemed intact, they are forbidden contact with the outside world while they build a new chip -- one that behaves exactly like the one in the specifications. In Compaq's case, it took l5 senior programmers several months and cost $1 million to do the reverse engineering. In November 1982, Rod Canion unveiled the result.
Bill Murto
What IÍve brought today is a Compaq portable computer.
When Bill Murto, another Compaq founder got a plug on a cable TV show their selling point was clear 100 percent IBM compatibility.
Bill Murto
It turns out that all major popular software runs on the IBM personal computer or the Compaq portable computer.
Q: That extends through all software written for IBM?
A: Eh Yes.
Q: It all works on the Compaq?
The Compaq was an instant hit. In their first year, on the strength of being exactly like IBM but a little cheaper, they sold 47,000 PCs.
Rod Canion
In our first year of sales we set an American business record. I guess maybe a world business record. Largest first year sales in history. It was a hundred and eleven million dollars.
So Rod Canion ends up in Aspen, famous for having the most expensive real estate in America and I try not to look envious while Rod tells me which executive jet he plans to buy next.
ROD: And finally I picked the Lear 31.
BOB: Oh really?
ROD: Now thart was a fun airplane.
BOB: Oh yeh.
Poor Big Blue! Suddenly everybody was cashing in on IBM's success. The most obvious winner at first was Intel, maker of the PCs microprocessor chip. Intel was selling chips like hotcakes to clonemakers -- and making them smaller, quicker and cheaper. This was unheard of! What kind of an industry had Big Blue gotten themselves into?
Jim Cannavino
Former Head, IBM PC Division
Things get less expensive every year. People aren't used to that in general. I mean, you buy a new car, you buy one now and four years later you go and buy one it costs more than the one you bought before. Here is this magical piece of an industry - you go buy one later it costs less and it does more. What a wonderful thing. But it causes some funny things to occur when you think about an industry. An industry where prices are coming down, where you have to sell it and use it right now, because if you wait later it's worth less.
Where Compaq led, others soon followed. IBM was now facing dozens of rivals - soon to be familiar names began to appear, like AST, Northgate and Dell. It was getting spectacularly easy to build a clone. You could get everything off the shelf, including a guaranteed-virgin ROM BIOS chip. Every Tom, Dick & Bob could now make an IBM compatible PC and take another bite out of Big Blue's business. OK we're at Dominos Computers at Los Altos California, Silicon Valley and this is Yukio and we're going to set up the Bob and Yukio Personal Computer Company making IBM PC clones. You're the expert, I of course brought all the money so what is it that we're going to do.
Yukio
OK first of all we need a motherboard.
BOB: What's a motherboard?
YUKIO: That's where the CPU is set in...that's the central processor unit.
BOB: OK.
YUKIO: In fact I have one right here. OK so this is the video board...
BOB: That drives the monitor.
YUKIO: Right.
BOB: Terror?
BILL LOWE: Oh, of course. I mean we were able to sell a lot of products but it was getting difficult to make money.
YUKIO: And this is the controller card which would control the hard drive and the floppy drive.
BOB: OK.
Rod Canion
And the way we did it was by having low overhead. IBM had low cost of product but a lot of overhead - they were a very big company.
YUKIO: Right this is a high density recorder.
BOB: So this is a hard disk drive.
Rod Canion
And by keeping our overhead low even though our margins were low we were able to make a profit.
YUKIO: OK I have one right here.
BOB: Hey...OK we have a keyboard which plugs in right over here.
YUKIO: Right...
BOB: People build them themselves - how long does it take?
YUKIO: About an hour.
BOB: About an hour.
And where did every two-bit clone-maker buy his operating system? Microsoft, of course. IBM never iniagined Bill Gates would sell DOS to anyone else. Who was there? But by the mid 80's it was boom time for Bill. The teenage entrepreneur had predicted a PC on every desk and in every home, running Microsoft software. It was actually coming true. As Microsoft mushroomed there was no way that Bill Gates could personally dominate thousands of employees but that didn't stop him. He still had a need to be both industry titan and top programmer. So he had to come up with a whole new corporate culture for Microsoft. He had to find a way to satisfy both his adolescent need to dominate and his adult need to inspire. The average Microsoftee is male and about 25. When he's not working, well he's always working. All his friends are Microsoft programmers too. He has no life outside the office but all the sodas are free. From the beginning, Microsoft recruited straight out of college. They chose people who had no experience of life in other companies. In time they'd be called Microserfs.
Charles Simonyi
Chief Programmer, Microsoft
It was easier to to to create a new culture with people who are fresh out of school rather than people who came from, from from eh other companies and and and other cultures. You can rely on it you can predict it you can measure it you can optimise it you can make a machine out of it.
Christine Comaford
I mean everyone like lived together, ate together dated each other you know. Went to the movies together it was just you know very much a it was like a frat or a dorm.
Steve Ballmer
Everybody's just push push push - is it right, is it right, do we have it right keep on it - no that's not right ugh and you're very frank about that - you loved it and it wasn't very formal and hierarchical because you were just so desirous to do the right thing and get it right. Why - it reflects Bill's personality.
Jean Richardson
And so a lot of young, I say people, but mostly it was young men, who just were out of school saw him as this incredible role model or leader, almost a guru I guess. And they could spend hours with him and he valued their contributions and there was just a wonderful camaraderie that seemed to exist between all these young men and Bill, and this strength that he has and his will and his desire to be the best and to be the winner - he is just like a cult leader, really.
As the frenzied 80's came to a close IBM reached a watershed - they had created an open PC architecture that anyone could copy. This was intentional but IBM always thought their inside track would keep them ahead - wrong. IBM's glacial pace and high overhead put them at a disadvantage to the leaner clone makers - everything was turning into a nightmare as IBM lost its dominant market share. So in a big gamble they staked their PC future to a new system a new line of computers with proprietary closed hardware and their very own operating system. It was war.
Presentation
Start planning for operating system 2 today.
IBM planned to steal the market from Gates with a brand new operating system, called - drum roll please - OS/2. IBM would design OS/2. Yet they asked Microsoft to write the code. Why would Microsoft help create what was intended to be the instrument of their own destruction? Because Microsoft knew IBM was was the source of their success and they would tolerate almost anything to stay close to Big Blue.
Steve Ballmer
It was just part of, as we used to call it, the time riding the bear. You just had to try to stay on the bear's back and the bear would twist and turn and try to buck you and throw you, but darn, we were going to ride the bear because the bear was the biggest, the most important you just had to be with the bear, otherwise you would be under the bear in the computer industry, and IBM was the bear, and we were going to ride the back of the bear.
Bill Gates
It's easy for people to forget how pervasive IBM's influence over this industry was. When you talked to people who've come in to the industry recently there's no way you can get that in to their - in to their head, that was the environment.
The relationship between IBM and Microsoft was always a culture clash. IBMers were buttoned-up organization men. Microsoftees were obsessive hackers. With the development of OS/2 the strains really began to show.
Steve Ballmer
In IBM there's a religion in software that says you have to count K-LOCs, and a K-LOC is a thousand line of code. How big a project is it? Oh, it's sort of a 10K-LOC project. This is a 20K-LOCer. And this is 5OK-LOCs. And IBM wanted to sort of make it the religion about how we got paid. How much money we made off OS 2, how much they did. How many K-LOCs did you do? And we kept trying to convince them - hey, if we have - a developer's got a good idea and he can get something done in 4K-LOCs instead of 20K-LOCs, should we make less money? Because he's made something smaller and faster, less KLOC. K-LOCs, K-LOCs, that's the methodology. Ugh anyway, that always makes my back just crinkle up at the thought of the whole thing.
Jim Cannavino
When I took over in '89 there was an enormous amount of resources working on OS 2, both in Microsoft and the IBM company. Bill Gates and I met on that several times. And we pretty quickly came to the conclusion together that that was not going to be a success, the way it was being managed. It was also pretty clear that the negotiating and the contracts had given most of that control to Microsoft.
It was no longer just a question of styles. There was now a clear conflict of business interest. OS/2 was planned to undermine the clone market, where DOS was still Microsoft's major money-maker. Microsoft was DOS. But Microsoft was helping develop the opposition? Bad idea. To keep DOS competitive, Gates had been pouring resources into a new programme called Windows. It was designed to provide a nice user-friendly facade to boring old DOS. Selling it was another job for shy, retiring Steve Ballmer.
Steve Ballmer (Commercial)
How much do you think this advanced operating environment is worth - wait just one minute before you answer - watch as Windows integrates Lotus 1, 2, 3 with Miami Vice. Now we can take this...
Just as Bill Gates saw OS/2 as a threat, IBM regarded Windows as another attempt by Microsoft to hold on to the operating system business.
Bill Gates
We created Windows in parallel. We kept saying to IBM, hey, Windows is the way to go, graphics is the way to go, and we got virtually everyone else, enthused about Windows. So that was a divergence that we kept thinking we could get IBM to - to come around on.
Jim Cannavino
It was clear that IBM had a different vision of its relationship with Microsoft than Microsoft had of its vision with IBM. Was that Microsoft's fault? You know, maybe some, but IBM's not blameless there either. So I don't view any of that as anything but just poor business on IBM's part.
Bill Gates is a very disciplined guy. He puts aside everything he wants to read and twice a year goes away for secluded reading weeks - the decisive moment in the Microsoft/IBM relationship came during just such a retreat. In front of a log fire Bill concluded that it was no longer in Microsoft's long term interests to blindly follow IBM. If Bill had to choose between OS2, IBM's new operating system and Windows, he'd choose Windows.
Steve Ballmer
We said ooh, IBM's probably not going to like this. This is going to threaten OS 2. Now we told them about it, right away we told them about it, but we still did it. They didn't like it, we told em about it, we told em about it, we offered to licence it to em.
Bill Gates
We always thought the best thing to do is to try and combine IBM promoting the software with us doing the engineering. And so it was only when they broke off communication and decided to go their own way that we thought, okay, we're on our own, and that was definitely very, very scary.
Steve Ballmer
We were in a major negotiation in early 1990, right before the Windows launch. We wanted to have IBM on stage with us to launch Windows 3.0, but they wouldn't do the kind of deal that would allow us to profit it would allow them essentially to take over Windows from us, and we walked away from the deal.
Jack Sams, who started IBM's relationship with Microsoft with that first call to Bill Gates in 1980, could only look on as the partnership disintegrated.
Jack Sams
Then they at that point I think they agreed to disagree on the future progress of OS 2 and Windows. And internally we were told thou shalt not ship any more products on Windows. And about that time I got the opportunity to take early retirement so I did.
Bill's decison by the fireplace ended the ten year IBM/Microsoft partnership and turned IBM into an also-ran in the PC business. Did David beat Goliath? The Boca Raton, Florida birthplace of the IBM's PC is deserted - a casualty of diminishing market share. Today, IBM is again what it was before - a profitable, dominant mainframe computer company. For awhile IBM dominated the PC market. They legitimised the PC business, created the standards most of us now use, and introduced the PC to the corporate world. But in the end they lost out. Maybe it was to a faster, more flexible business culture. Or maybe they just threw it away. That's the view of a guy who's been competing with IBM for 20 years, Silicon Valley's most outspoken software billionaire, Larry Ellison.
Larry Ellison
Founder, Oracle
I think IBM made the single worst mistake in the history of enterprise on earth.
Q: Which was?
LARRY: Which was the manufacture - being the first manufacturer and distributor of the Microsoft/Intel PC which they mistakenly called the IBM PC. I mean they were the first manufacturer and distributor of that technology I mean it's just simply astounding that they could ah basically give a third of their market value to Intel and a third of their market value to Microsoft by accident - I mean no-one, no-one I mean those two companies today are worth close to you know approaching a hundred billion dollars I mean not many of us get a chance to make a $100 billion mistake.
As fast as IBM abandons its buildings, Microsoft builds new ones. In 1980 IBM was 3000 times the size of Microsoft. Though still a smaller company, today Wall Street says Microsoft is worth more. Both have faced anti-trust investigations about their monopoly positions. For years IBM defined successful American corporate culture - as a machine of ordered bureaucracy. Here in the corridors of Microsoft it's a different style, it's personal. This company - in its drive, its hunger to succeed - is a reflection of one man, its founder, Bill Gates.
Jean Richardson
Bill wanted to win. Incredible desire to win and to beat other people. At Microsoft we, the whole idea was that we would put people under, you know. Unfortunately that's happened a lot.
Esther Dyson
Computer Industry Analyst
Bill Gates is special. You wouldn't have had a Microsoft with take a random other person like Gary Kildall. On the other hand, Bill Gates was also lucky. But Bill Gates knows that, unlike a lot of other people in the industry, and he's paranoid. Every morning he gets up and he doesn't feel secure, he feels nervous about this. They're trying hard, they're not relaxing, and that's why they're so successful.
Christine Comaford
And I remember, I was talking to Bill once and I asked him what he feared, and he said that he feared growing old because you know, once you're beyond thirty, this was his belief at the time, you know once you're beyond thirty, you know, you don't have as many good ideas anymore. You're not as smart anymore.
Bill Gates
If you just slow down a little bit who knows who it'll be, probably some company that may not even exist yet, but eh someone else can come in and take the lead.
Christine Comaford
And I said well, you know, you're going to age, it's going to happen, it's kind of inevitable, what are you going to do about it? And he said I'm just going to hire the smartest people and I'm going to surround myself with all these smart people, you know. And I thought that was kind of interesting. It was almost - it was like he was like oh, I can't be immortal, but like maybe this is the second best and I can buy that, you know.
Bill Gates
If you miss what's happening then the same kind of thing that happened to IBM or many other companies could happen to Microsoft very easily. So no-one's got a guaranteed position in the high technology business, and the more you think about, you know, how could we move faster, what could we do better, are there good ideas out there that we should be going beyond, it's important. And I wouldn't trade places with anyone, but the reason I like my job so much is that we have to constantly stay on top of those things.
The Windows software system that ended the alliance between Microsoft and IBM pushed Gates past all his rivals. Microsoft had been working on the software for years, but it wasn't until 1990 that they finally came up with a version that not only worked properly, it blew their rivals away and where did the idea for this software come from? Well not from Microsoft, of course. It came from the hippies at Apple. Lights! Camera! Boot up! In 1984, they made a famous TV commercial. Apple had set out to create the first user friendly PC just as IBM and Microsoft were starting to make a machine for businesses. When the TV commercial aired, Apple launched the Macintosh.
Commercial
Glorious anniversary of the information...
The computer and the commercial were aimed directly at IBM - which the kids in Cupertino thought of as Big Brother. But Apple had targeted the wrong people. It wasn't Big Brother they should have been worrying about, it was big Bill Gates.
Commercial
We are one people....
To find out why, join me for the concluding episode of Triumph of the Nerds.
Commercial
...........we shall prevail.
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