One of the most enduring—and fractious—partnerships between Seattle and the Bay Area was, of course, that between Microsoft and Apple, and Bill Gates and Steve Jobs. As their companies and personal fortunes soared, the two mop-haired boy wonders became entrepreneurial celebrities like none seen since the era of Henry Ford, and their intense rivalry became fodder for countless magazine articles, books, and movies-of-the-week. Steve Jobs was a master storyteller, enrapturing customers and investors alike with his grand ideas and gloriously sophisticated computers. Bill Gates was the nerd’s nerd, who didn’t care what the computers looked like, or what sound bites you used to talk about them, as long as decent-enough software was inside.
With all that transpired later between the two boy wonders of tech, it is easy to forget that—even as Microsoft was agreeing to provide software for an IBM personal computer that would go head-to-head with Apple’s products—these men and their companies had a close, mutually beneficial relationship for the first critical years of the personal-computer revolution. Apple had been an important Microsoft customer ever since Woz hadn’t gotten around to finishing writing his own software for the II in 1977. Gates readily provided testimonials about the technical superiority of Apple’s machines. The two companies produced different things, and they needed each other’s products to grow.
Seattle was 800 miles up the road from the Valley, but it was compatible in history, in spirit, in the personal and professional connections flowing between north and south. It too was a former gold rush town turned Cold War region, transformed by the defense boom and advantaged by the postwar migratory rush westward. It too was home to a major research university and lots of knowledge-economy jobs, its tech scene a strange mix of straight-arrow aerospace types and Vietnam-era lefties, a place of early adopters and ambitious technophiles.
Yet Seattle wasn’t an isolated Galapagos. During those formative postwar decades it was Boeing’s company town, busy and connected. Even after its early-’70s bust, it didn’t develop the Valley’s teeming petri dish of VCs and lawyers and PR flacks. It didn’t need them. Only a two-hour hop on a Boeing 737 would take a person like Charles Simonyi or Dave Marquardt from one place to the other, able to make a day trip to close a deal or broker a new partnership. Little surprise that Microsoft would become only the first of several market-upending technology companies to come out of the Emerald City in the decades to come.
Silicon Valley and Seattle might have felt like they were rivals, but they were actually two parts of a larger whole. The growth of one enabled the growth of the other. Of course, it wasn’t too long before the Valley people were worrying whether that software outfit in Seattle might topple them all.
THE PC
To the disbelief of those familiar with Big Blue’s glacial product development cycles, the IBM PC made its debut on August 12, 1981, a little more than a year after this Manhattan Project began. The microcomputer market changed forever. Across Silicon Valley, panicked executives piled into early-morning strategy meetings to figure how they were going to respond to the day’s news. Some looked on the bright side. “The presence of IBM will take away the sting of saying that personal computers are just a fad,” remarked an HP executive. Most quaked as they realized how IBM’s deep pockets could shake up their young industry. With an enormous marketing budget and plans to sell everywhere from Computerland to Sears, “they’ll sell these things by the thousands and thousands,” predicted one analyst.11
Of all the machines out there, the IBM was most directly an assault on Apple, which held 23 percent of the market. Jobs and Co. already were struggling to make a hit out of the expensive and still-buggy Apple III, and IBM’s new entry—at a similar price point and offering comparable features—wasn’t going to make things any easier. But if Apple was nervous, its spin didn’t show it. Instead, the company’s marketers doubled down on their story. The personal computer was changing everything, and Apple was a transformative company with a revolutionary product. A late-coming machine out of stodgy old IBM wouldn’t be much of a threat. In fact, asserted Mike Markkula, “their presence would stimulate demand for a product that Apple originated.”12
To put an exclamation point on this messaging, the Apple marketing team placed another full-page ad in The Wall Street Journal in the wake of IBM’s product announcement. It was classic Apple, all intensely competitive iron fist wrapped in a Garamond-font velvet glove. “Welcome, IBM,” it read. “Seriously.” Following that blaring headline came copy saturated with prim disdain. “Welcome to the most exciting and important marketplace since the computer revolution began 35 years ago,” it read. “We look forward to responsible competition in the massive effort to distribute this American technology to the world. And we appreciate the magnitude of your commitment.”13
Apple’s cocky confidence came in part from its company DNA; the bureaucratic and rigid IBM, with its distinctly unfriendly big computers, was the antithesis of everything Apple’s executive team believed their company stood for. But it also reflected the fact that Steve Jobs was hard at work on another product—one that he believed would be as much of a market disruptor as the Apple II had been four years earlier. It was called the Macintosh.
The Mac’s origin story—and how Jobs swooped in to make the project his own after his insufferable behavior got him kicked off his original pet project, the elegant and expensive Lisa—is another oft-told tale, and deservedly so. The project was unlike anything the computer industry had seen before, and its roaring debut remains a landmark in product marketing and advertising. The Mac took the sophistication of the Lisa and the Apple III and combined it with the Volkswagen-like utility of the Apple II. It boasted the user-friendliness of the Alto and its commercial offspring, the Xerox Star workstation, without the eye-popping price. Several PARC engineers had moved over to Apple to work on the Mac team, bringing their knowledge of the GUI that Xerox had created but failed to successfully commercialize.14
The Mac team had started as a tiny skunkworks project within the company and ultimately grew to a team of 100. Like most everyone else at Apple, nearly everyone was under thirty, and had put everything to one side to put in eighty-hour weeks on the project. But the sense of mission was strong. The people of Apple in those glorious early 1980s, already blessed by great stock-option fortune, believed they worked in a truly special place. “Apple is human-oriented,” said Jo Kellner, who staffed Apple’s on-site customer support center. “We’re free to be individuals. And that freedom breeds creativity.” Coming to work was a pleasure, said programmer Rilla Reynolds, because “almost everyone here is playing.” “There’s a spirit at Apple,” chimed in product manager Pat Marriott. “I think it grows out of the conviction that we are doing the right things, making a quality product—making a dent in the universe.”15
The Macintosh operation took these kinds of sentiments into overdrive. Apple spent a staggering $21 million on R&D in 1981, most of it for the Mac, and built a state-of-the-art automated factory to build the new machines. “Steve was so insistent on perfection,” remembered Floyd Kvamme, who had moved over from the chip world to become Apple’s marketing chief. “There was no way that computer could live up to what was in his head.” Although the company was awash in money, a maverick attitude prevailed. At one off-site, Jobs set the tone by reminding the group that one of the key “Sayings of Chairman Jobs” was: “It’s better to be a pirate than join the navy.” Thus inspired, members of the team sewed together a custom-made skull-and-crossbones flag—with an eyepatch featuring Apple’s familiar rainbow-colored logo—and hoisted it proudly above its building on the company’s growing campus in Cupertino.16
PIRATES VERSUS BATTLESHIPS
As Apple’s pirate flag waved bravely, battleship IBM was eating the market. Although the design-obsessed Jobs was dismissive of the homely and squat PC, some of the more pragmatic heads inside Apple understood the magnitude of the marketing threat. Big Blue had been in American off
ices for more than eight decades. Apple was struggling to get into the office-machine business; IBM was the office machine business, and they knew how to give enterprise customers what they wanted and needed. It wasn’t just a matter of brand loyalty to a particular device. It was a matter of an entire ecosystem around how large companies had gotten accustomed to buying and using computers.17
If electronic data processing became a religion in the 1960s, then Management Information Systems (MIS) managers were its high priests. The job category didn’t even exist prior to the coming of all those electronic brains at the start of the 1950s, but two decades later corporate information-technology executives had become immensely powerful. They bought the computers, ran the computers, and controlled the information. The MIS manager’s mantra: standardization. There was no way to manage giant business computer systems if the different parts couldn’t talk to one another. That was the genius of the System/360, the market-dominating machine IBM released in the mid-1960s and the apex of the full-stack approach: a collection of computers and peripherals that meshed together seamlessly, supported by compatible software, with good support and training, able to scale up or down as the MIS manager needed it.
As minicomputers and, later, personal computers surged into the American office in the 1970s, the MIS manager lost some of his iron grip. Devices with their own keyboards, operated by the user rather than by a punch-card-wielding intermediary, proliferated by the tens of thousands. When it came to microcomputers, the encroachment initially was minimal, advanced by Ben Rosen types who sidestepped corporate IT offices and simply bought their own personal computers to use at work. But the breakthrough of VisiCalc had been followed in short order by other office software applications. The spread of transistorized word processors like those produced by Wang further fueled corporate interest in desktop computing, and a recognition that a keyboard could be more than a typewriter and secretary.
Yet mainframes—many of them made by IBM—remained the thrumming heart of corporate computing environments. To make personal computers actually useful in processing core office tasks, they needed to link into the big computers that were already there. The Silicon Valley companies that had only recently emerged from their garages now had a daunting challenge before them. IBM may have been late to the personal-computer market, but its people understood office machines—and the psychology of those who made corporate purchasing decisions—better than anyone.18
The market onslaught by IBM was immediate, and devastating. Business customers had at first feared sinking several thousands of dollars into a personal computer, but IBM’s familiar logo prompted many to take the plunge. For those less persuaded by those three blue letters (especially the baby boomers who started humming the soundtrack to 2001: A Space Odyssey and thinking of HAL’s blinking red eye every time they saw them), the company launched a full-bore ad campaign.
Beginning in the fall of 1981 and continuing for six more years, American popular magazines and television airwaves were saturated with IBM ads that featured an actor dressed like Charlie Chaplin, extracting himself from comic dilemmas with the help of an IBM PC and peripherals. All white space and clean typeface in print, all genial familiarity on television, the look and feel of the ads was strikingly similar to those early pitches from Apple. Here was another friendly little device to make your life better. The message bore the ghost of Tom Watson placing those perky young women in IBM’s windows more than three decades earlier: the PC was so easy to use, even the Little Tramp could do it.
Between 1982 and 1983, the personal-computer market more than doubled, with over 11 million units shipped in 1983 alone. IBM owned 26 percent of it. Apple had fallen behind, to 21 percent, despite a relaunch of a new-and-improved Apple III and the debut of the Lisa. While the IBM PC sales chugged away, the Apple III went begging for customers and the Lisa floundered amid scathing reviews. “If an executive has loads of time, doesn’t need to use the computer much, but wants some sort of machine to sit in his office,” sighed a reviewer at Fortune, “Lisa is probably the best bet.”19
Even though the computer-market pie was so much larger, the new pecking order wasn’t what Apple had expected. Instead of adding new staff, 1983 brought layoffs. Jobs recruited a new president from the outside, Pepsi executive John Sculley. The hire brought consumer marketing expertise to the operation and would perhaps, as Time characterized it, “induce a streak of humility in an organization where confidence bordered on arrogance.” Sculley brought other non-technical East Coast types along with him, including a bearishly friendly former college football coach named Bill Campbell, who’d most recently worked at Kodak. Microcomputer purists looked at the suits and ties on the new arrivals with bafflement. What could sugar-water and camera salesmen do for a company that was supposed to change the world? IBM “definitely won round one,” Jobs acknowledged testily that October. When asked how he felt about it, Jobs replied: “I’m ticked.”20
The air had been sucked out of the pirate-ship sails. Personal computing was a revolution; how could the revolutionaries possibly agree to use a machine built by the old guard? How could they fight back? Was Apple going to go the way of the UNIVAC? Other personal-computing start-ups started dropping like flies. Adam Osborne packed up his very heavy laptop and declared bankruptcy in October 1983, ducking reporters like a guilty defendant as he scurried into his office the day the news broke. Lore Harp’s and Carole Ely’s Vector Graphic was blindsided by IBM’s onslaught and plagued with management woes. In a matter of months, their pioneering Southern California company plummeted from market rock star to struggling turnaround operation. It wasn’t just the little guys: Texas Instruments announced it was giving up on the home computer market after taking a more than $220 million bath in the first nine months of 1983. Even worse—new competitors emerged, bringing expertise and cash reserves to the party.21
Hewlett Packard was Exhibit A in that regard. The company that began with audio oscillators and radar jammers already had made successful leaps into new markets before, first with minicomputers in 1966 (it became #2 in the market) and then with hand-held calculators in 1972 (it became the entire market). By late 1983, it had a staggering $700 million cash on hand, and it was ready to conquer anew. When it came to building a personal computer, “we can afford to experiment until we get it right—with no danger of heading for the poorhouse,” said John Young, who had taken over from Hewlett and Packard in 1978. And HP saw which way the winds were blowing. “If personal computers are not HP’s primary business,” by the end of the 1980s, said HP computer-group chief Paul Ely, “then we won’t be a successful computer company.”22
It still was a big jump. HP had always sold products to scientists and engineers; this would be its first pass at selling to business customers. Mirroring the way Apple and Microsoft structured their work around intensely competitive product development teams, Young set a massive reorganization in motion at HP—one with lasting effects on company culture. The HP Way endured on paper, but its flat organizational structure and “management by wandering” gave way to a much more centralized system. Young was determined to be a leader, not an imitator, and the HP personal computers featured something no other competitor had: touch screens. Going after consumer markets for the very first time, the company launched television ads that fall. “Even though Hewlett-Packard’s technology has produced a number of firsts,” said one, “some of you don’t even know who we are. Maybe now you will.” With such humble messaging, it seemed that Silicon Valley’s original start-up hadn’t picked up the new generation’s storytelling talents.23
Companies that had never been in the computer business got in the game. The U.S. Government had just forced AT&T to break up its telecommunications monopoly, but the phone company still had more than $34 billion of assets to play with. Ma Bell went big, announcing its own lines of both minicomputers and desktops in early 1984. “Count Us In,” its ad tagline proclaimed. While AT&T’s computers were t
oo expensive to truly give IBM a run for its money, the entry of a communications company into the arena brought new ways to get computers to talk to one another. AT&T proceeded to do what it had so vigorously blocked competitors from doing ever since the days of Bunker-Ramo: it built local area network (or LAN) systems that could hook up machines up to a third of a mile apart.
All the frenetic competition left Valley techies burned out and worried about what might happen next, their personal lives limping along in a world of eighty-hour weeks and round-the-clock obsession with technology. The industry’s gender gap remained staggering, looming largest after working hours. One woman who worked at Stanford recounted a particularly disastrous double date with two male engineers: “It was like the two of us [women] did not exist. Men used to get to know each other through football. Here that’s been translated into computers.” Divorce rates spiked higher than the rest of California, which already had a higher rate than the rest of the nation. “Wives are often very frustrated,” said one Silicon Valley psychologist. “They feel like their husband is married to a chip.”24
A local family therapist saw so much angst coming through her offices that she published a self-help book titled The Silicon Syndrome, brimming with tips for women married to antisocial computer nerds. “A dynamic new book for wives, mothers, daughters, lovers, colleagues and secretaries of the engineer/scientist,” cheerfully burbled the cover. “If you long to better understand how to communicate and interact with your scientist/engineer partner, boss or mate this book is for you!” Silicon Valley’s problems weren’t with its intense and overwhelmingly male tech culture, assessments like these implied. It was with the women who couldn’t figure out how to live with it.25
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