"Remember: The race goes not to the strong, nor swift, nor more intelligent but to the less stupid"

Chapter 2

First Movers, First Mistakes: IBM, Digital Research, Apple and Microsoft

The Book

A great deal of mythology surrounds the introduction of this now legendary system. The prevailing belief among many is that microcomputing before IBM's arrival was a rough-and-tumble frontier, full of ornery software and colorful hombres tough enough to buy and tame herds of uncooperative boxes of lowing, obstreperous silicon. But as has so often been the case with historical events, truth and legend are often at odds.

The truth is that the microcomputer industry just before IBM's appearance resembled not so much a rude cow town but rather a spanking-new steam train, trimmed in polished brass and covered in fresh paint. Most of the passengers boarded the train at Start-up Junction and are looking forward to the ride to Prosperity, the town just up the line. On board and seated in a fancy Pullman car are a diverse set of well-to-do-looking characters, all gussied up in fancy store-bought clothes they've purchased from the proceeds of successful IPOs and healthy sales. These are the hardware dudes, who include Apple, Commodore, and Radio Shack, as well as a score of manufacturers of 8-bit computers running the widely used CP/M operating system. They're a happy-looking lot-they're shipping units to businesses as fast as they can manufacture them.

The home market is equally energetic, though not nearly as profitable, with every general store in town packed at Christmas and every other holiday with parents and their eager-eyed offspring snapping up every VIC-20, Commodore 64, Atari 800, Texas Instruments 94, and Timex Sinclair they can lay their hands on. (In 1982, Macy's,1 at the time a power in consumer electronics, ran out of every home-oriented microcomputer at its flagship Herald Square store in New York City a week before Christmas.)

Riding in the car just in front of the hardware merchants are the software peddlers, and they look almost as content. They're selling copies of VisiCalc, WordStar, and PFS File as fast as they can stuff them into cardboard boxes. In many cases cardboard isn't required; demand is so high that customers are willing to take their software home in plastic baggies. Boom times indeed!

Fabulous Fruit

Of all the characters waiting expectantly for the train to pull out of the station, Apple was probably the best positioned of the early denizens of Microcomputerville to become the town's mayor. Apple's mainstay system, the Apple II, and its immediate successor, the Apple II+, were triumphs of industrial design and utility. Sleek and low slung, the units provided an attractive contrast to the stark industrial designs common to business machines. The Apple was reasonably priced (a fully configured system with a whopping 64KB of RAM, color monitor, and dual floppies cost only about $4,000.00). Its integrated color graphics gave it crossover appeal to the home market, and the system was supported by a wide selection of business and entertainment software. A small company called Corvus had even developed a system for networking Apples together. All in all, it was a compelling, up-to-date package and buyers loved their Apples.

Yes, the system did have its idiosyncrasies. You had to buy a hardware upgrade to type in lowercase. Connecting your floppy drive to your Apple incorrectly caused the hapless disk unit to seemingly explode as an internal capacitor2 blew with a loud pop and a rush of blue smoke out the drive door, but people were willing to overlook these little peccadilloes.

Just as important as its hardware design was the fact that Apple was the first system to run the first spreadsheet, VisiCalc, microcomputing's first killer application. A killer application is defined as a product so compelling you'll buy the necessary hardware just to run that articular piece of software. VisiCalc qualified for this rare and honored appellation-once an accountant or CFO saw rows of numbers rippling across a spreadsheet grid as she automatically updated, that person was hooked for life: She had to have the product.

Management information systems (MIS, later to be called information technology or IT) departments may not have cared for the loss of centralized control that these little boxes represented, but it's a well-known axiom of corporate life that "You don't say no to the CFO." And once the CFO's secretary (now called an administrative assistant) tried out a word-processing program,that was it. Apples, along with any other computer that ran VisiCalc, or some of its early competitors, quickly proliferated across a business frontier that was grateful to get them.

Also contributing to the Apple II's success was its relatively flexible and extensible hardware and software architecture. Unlike most of its competitors, Apple's system was "open." Popping off the cover of an Apple II revealed slots, connectors into which it was possible to plug in a host of different accessories and upgrades, including memory extenders, accelerator cards, copy boards (hardware devices you used to help make bitmapped images of software for, er, "archival" purposes), extended graphics cards, CP/M boards that allowed you to run CP/M software on your Apple II, and so on. An extensive industry focused on providing third-party accessories and upgrades quickly coalesced around the Apple II, helping drive sales even further.

In fact, from Apple's point of view, the system was entirely too open. By 1980, a burgeoning clone and "gray" market was developing around Apple's flagship as units with names like the Pineapple and the Orange started being shipped into the United States in growing quantities from Taiwan and other points east. Domestically, Apple even had its own Compaq, a New Jersey company called Franklin Computers, which offered a well-made Apple clone that even let you type in lowercase letters right out of the box.

Apple's reaction to this turn of events foreshadowed its future behavior with respect to the Macintosh market. It summoned an army of attorneys who were given the mission of shutting the clone market down. The lawyers accomplished this by convincing the courts that it was illegal for companies to simply copy the Apple basic input/output system (BIOS), the built-in set of software instructions that enabled the system to communicate with its internal peripherals.

Once this principle was established, the clone market quickly withered because the machines were built by simply replicating the Apple's hardware chassis and equipping it with ROM chips that contained the now "pirated" BIOS code. (Most people obtained the Apple operating system, Apple DOS, by simply copying the floppy on which it came, though Franklin had gone to the trouble of creating its own version of the Apple operating system.) The Taiwanese all sailed back to their island to concentrate on building IBM clones, and the last time Franklin Computer made any noise was at the industry's 1983 COMDEX trade show in Las Vegas. It hired the Beach Boys to regale attendees at a party that turned out to be a musical swan song to the company's imminent wipeout....

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