That’s What I Did on Mondays

 MIKE MARKKULA

It was December 1972, a few months after Sandy Kurtzig had launched ASK and Bob Taylor’s group at PARC had begun their work on the Alto. Mike Markkula, now finishing his second year at Intel, was at home for the holiday break, doing what he did every year between Christmas and New Year’s: he was calculating his net worth and planning for the coming year. He had gotten into the habit as a student when, at twenty, he had prepared a detailed financial plan with the goal of reaching financial independence within fifteen years. From college, through his jobs at Hughes and Fairchild, to this ranch house on Sunderland Drive in Cupertino, he had sat with his bank statements and bills every December, adding machine close at hand. The task had been simple until a year ago, at which point he’d had the pleasant additional work of factoring in the generous stock option grant he had negotiated at his hire at Intel. Now, with the calendar turning to 1973, he looked up and thought, “I never need to work for anyone else again.” He and his wife, Linda, could stay in this nice house, send their daughter to the excellent schools nearby, and live off his stock and the savings he had set aside with every paycheck. He had reached his goal four years early.

The realization that he could stop working had been pleasant—wonderful, really—but nothing to act on. He was only thirty-one. Only half of his stock options had vested. Every year he stayed at Intel meant another quarter of his grant vested. Already this year the share price had hit $55 for shares Markkula had bought at $6.22 each. He had every reason to expect that their value would continue to go up.¹

Moreover, he had no desire to leave Intel. “Most of the folks at Intel were completely consumed developing the products,” he explains, which meant that his charge, in consultation with his boss Bob Graham, was “to take care of all the rest of it.”² Because the company had been so small when he joined, Markkula was responsible for not only product marketing but also areas that a more mature operation already would have segmented off into different jobs: forecasting, planning, shipping, and customer service. Those business fundamentals were not sexy, but done poorly, they could kill a company. And Markkula found the meticulous, important work as engaging as any he had done before. He wrote data sheets, the baseline documents that provide specifications and performance parameters. He combed through trade journals and reports to track Intel’s competitors. He talked with the engineering team until he understood the products so well that he felt he could answer almost any question about them.

A few months after he joined, Intel introduced its 4004 microprocessor, the so-called computer on a chip. “I was so excited about the microprocessor I could hardly see straight,” Markkula says.³ A programmable, general-purpose logic device, the microprocessor was revolutionary. Before, designers at customer firms had built their systems by choosing and connecting individual microchips, each with a different dedicated function, on a board. Changing the system required changing the physical arrangement of the chips, or hardware. Intel’s new microprocessor systems required something very different—changes made not by moving physical objects but by reprogramming the instructions stored in program memory.⁴ The microprocessor, in other words, brought software to the semiconductor industry. In doing so, it placed new demands on customers, most of whom were experienced hardware designers but unfamiliar with using computer programs to solve their systems problems.

In 1971, Intel hired Regis McKenna, formerly of National Semiconductor and now the principal in an eponymous marketing and publicity firm he had launched with $500, to develop advertising and publicity campaigns highlighting what a microprocessor could do. McKenna had grown up with six brothers, which meant that he was easy to get along with but also knew how to defend his ideas. He was an expert in explaining technology to the media and the general public.

Markkula, meanwhile, needed to teach circuit designers how a microprocessor worked. He hired an engineer from Fairchild, Hank Smith, to write the technical documentation for the chip. This task was monumental—the manual alone ran well over a hundred pages at a time when other Intel chips were boxed with only a ten-page data sheet. But Intel initially shipped more manuals for the 4004 than actual processors. As the head of microprocessor marketing would later put it, “There were just lots of people who wanted to read about microprocessors, independent of whether they were buying any.”⁵ Intel first sold the microprocessor, now best known for use as the heart of a computer, as a control device. Early uses included a library bar code system, liquid chlorine control monitoring, a dialysis machine, an elevator control system, sawmills, and farm irrigation systems.⁶

Like Kurtzig, who was witnessing and participating in the birth of the independent software industry, Markkula was gathering the skills and connections he would use to help launch the personal computer revolution. His familiarity with the microprocessor, as well as his relationships with Regis McKenna and Hank Smith, would prove essential for launching Apple.

Looking back, however, Markkula calls something more mundane than personal connections or helping to market one of the twentieth century’s greatest inventions “the most important thing I did at Intel.” He wrote a computer program that handled all of Intel’s order processing. If a company does not have accurate, real-time knowledge of the products that have been ordered, who ordered them, the promised delivery dates, and the ability of the manufacturing operation to meet that schedule, the results can be devastating. The company will miss deliveries. It will not have good data on which to base future forecasts. It will either build products no one wants or fail to build products that are in high demand.

When Markkula arrived at Intel, he went down to the small shipping area and asked the clerk for a report on the backlog (the number of products ordered but not yet shipped). He was expecting her to pull out a computer printout. Instead, she said, “Wait a minute. I have to add it up”—and grabbed a handwritten accounting ledger and a pencil to do the math.

Markkula resolved to computerize Intel’s order processing. He had been using computers since college. His first program, written in FORTRAN on punch cards, was a betting scheme to maximize the amount of money he could win and minimize the amount he could lose in any craps game.^III Computers had helped him design his circuits at Hughes. At Fairchild, he and his office mate Mike Scott had calculated their forecasts using a Teletype Model 33 connected to a PDP-10 computer owned by Tymshare, the company for which Sandy Kurtzig wrote a generic manufacturing program.

At Intel, Markkula rented a Model 33 Teletype, installed it in the customer service area, and spent the next several weeks writing a program using BASIC and Tymshare’s database, Retrieve. The work could be tricky, the technology balky. He was happy that the Tymshare offices were on his drive home, since he occasionally needed help with solving a programming problem or restarting the processing after his application crashed.

Markkula watched and learned as Intel accelerated. In his first year, the number of customers nearly doubled (from fewer than five hundred to nine hundred), overseas sales quadrupled, and the company went public at $23.50 per share in October 1971. Intel moved to an expansive new campus on what had been a twenty-six-acre pear orchard in Santa Clara. For a few months, employees picked pears off the orchard’s remaining trees—until the trees were plowed under for a second building.⁷

Because Markkula oversaw forecasting, he occasionally presented to Intel’s senior executives and the board, which included some of the most successful and powerful men in Silicon Valley. Markkula met Robert Noyce, Gordon Moore, and Arthur Rock that way. Rock was the legendary venture capitalist behind Fairchild and Intel, as well as the SDS computer company sold to Xerox. He would later help fund Apple and serve as a director, but at Intel he shared with Markkula his secret for staying awake during the boring parts of board meetings (parts, he had to admit, that occasionally included Markkula’s areas of responsibility): swallow a few caffeine pills.

In the four years that Markkula would spend there, Intel introduced fifteen memory components, seventeen logic circuits, and eleven memory systems.⁸ The number of employees rose from three hundred to more than two thousand. And profits soared—from $2 million in 1972 to $9.2 million in 1973 to $19.8 million a year later. Markkula was learning how a startup becomes a giant.

Markkula’s satisfaction with his job was all the more impressive given that he was working at a significant disadvantage. Andy Grove, the third-most-powerful person at Intel and the founders’ heir apparent, did not like Markkula. In general, Grove did not value marketing in Intel’s earliest years. He liked to say that engineering developed products, manufacturing built them, and sales sold them—so what did marketing do? ⁹ It did not help that Markkula was a protégé of Intel’s first marketing vice president, Bob Graham. In July 1971, barely six months after Markkula hired on, Intel fired Graham after a him-or-me ultimatum from Grove.

Markkula was convinced “Andy was not only anti-marketing, he was anti-Markkula.”¹⁰ Outside observers, including Arthur Rock, agree with that assessment.¹¹ Grove would later change his mind about Markkula, telling Rock, “I must have missed something in Mike” and investing in Apple while it was still privately held.^II In 2015, Grove said, “There would be no Apple without Markkula.”¹² But at Intel, Grove felt differently about Markkula, summarizing his opinion with a dismissive “He was very nice to me, but I had no use for him.”¹³

This assessment undoubtedly affected the trajectory of Markkula’s career. In sharp contrast to his rapid rise at Fairchild, at Intel he advanced only incrementally. Hired as North American marketing manager, he later also managed product marketing in Europe and Japan. Ann Bowers, the head of human resources at Intel, says that he was “a junior marketing guy” throughout his tenure at the company.¹⁴

But Markkula was content. “I loved Intel,” he says, describing his job as a “fun combination of my technical ability, along with some business planning and marketing sense.”¹⁵ Meanwhile, three-for-two stock splits in 1973 and again in 1974 meant that he now held options on more than twice the number of shares in his original grant. He could have comfortably retired, but he loved the work.

Then came 1974. Intel began the year as one of the most profitable public companies in the country—Forbes praised it as a “debt-free money machine”—and ended it by laying off 30 percent of its 2,500 employees, most of them in production. The entire semiconductor industry suffered as computer and television companies around the world canceled orders in the wake of the OPEC oil embargo and resulting oil price shock.^I Nearly 20 percent of the semiconductor industry’s production workers in Silicon Valley lost their jobs in the fourth quarter of 1974 as shipments dropped by 25 percent in a few months.¹⁶ Protesters outside the annual Western Electronics Manufacturing Association meeting carried signs reading “Fairchild Workers Unite!” “Indigestion to Noyce from Intel Workers!” and “70,000 Electronics Workers Say No Vacations Without Pay!”¹⁷

Markkula was initially unaffected by the turmoil. But early in 1975, Intel restructured its marketing group as part of a companywide reorganization away from functional lines (such as marketing and engineering) to divisional ones (such as components and systems). Markkula’s boss, Ed Gelbach, who had replaced Graham, was promoted to general manager of the components division, with responsibility for all Intel products aside from the microprocessor and a digital watch subsidiary.

Gelbach’s move meant that Intel needed a new vice president of sales and marketing. Markkula wanted the job. He was among the longest-tenured employees in the marketing area. He was also an expert in marketing memory chips, Intel’s core business. He was a logical candidate.

But he did not get the promotion. Instead, in the first quarter of 1975, Intel brought in an experienced marketer who had worked with Gelbach at Texas Instruments, Jack Carsten.¹⁸ After a few weeks working with Carsten, Markkula decided that he did not want to continue.¹⁹

Carsten’s arrival at Intel coincided with the vesting of the last of Markkula’s large original option grant—wiping out in a few months both incentives (pleasure and money) that had kept Markkula pulling his silver Corvette into the company parking lot every morning. Thanks to Intel’s skyrocketing value and multiple stock splits, Markkula’s original stock option grant alone was worth $2.25 million ($10 million in 2016 dollars), sixteen times what he had paid for it. He had also bought every share available to him at a discount under Intel’s generous employee stock purchase plan.²⁰

He knew what he wanted to do next. Ever since he had realized that he could retire, he had planned how he would spend his free time once he had more of it. Confident that “reaching goals is what life is all about,” he did not dream idly.²¹ He strategized—on a three-by-five-inch note card he kept tucked in his date book. He had been playing guitar since his teens, but only by ear or using tablature; he resolved to learn to read music. He loved woodworking; he would build real furniture that the family could use. He was a good athlete; he would become an even better tennis player and skier. He wanted to do something to “give back” to the community; he had yet to determine how, but he would do it.

For two years, he had been pulling out the note card to jot down a goal as it occurred to him. Even if he wrote small on the front and back, the card could hold only about fifty goals, which meant prioritizing and erasing old resolutions when he thought of new ones. He appreciated the discipline imposed by the card’s physical limits. “If it can’t fit on the card, then I’m never going to get there,” he explained years later. “If it’s that important, cross something else off.”²²

For two years, the card had been a pleasant diversion. But by early 1975—after he had been passed over for the job he wanted, begun working for someone he did not find compatible, and watched the last of his original options vest—the card had become something different: the road map for his future.

Once he and his wife, Linda, agreed that he should leave Intel, Markkula did not let anyone convince him to stay. He did not ask for a transfer to a new job within the company. He did not look for a new employer. He told anyone who asked that he was retiring from paid work—for good. “Well, I guess it’s time to start on that list,” he told himself. He was thirty-three years old.

He began working through the plan on his note card. He went to the music shop near his house and found a teacher. He devised a set of overlapping paper wheels that showed all possible positions for a given chord on a guitar’s fret board.²³ He volunteered to teach fourth-grade math at the local elementary school. He joined the Cupertino Planning Commission.²⁴ Setting up a woodworking studio in his garage, he built deck furniture and planters that his family would use for years. He converted a tiny bedroom into an office, installed a teletype machine that connected to a PDP-10 computer owned by Tymshare, and wrote a program to balance the family checkbook. He crossed one goal after another off his list. He and Linda soon fell into an easy, comfortable rhythm, eating lunch and playing tennis together. For the first time, he was home during the day to spend time with their daughter, and soon, their infant son.

He found it all so satisfying that he did not miss his paying job—with one exception. He missed what he called “bright, fiery-eyed, fire-in-the-belly people wanting to accomplish things.”²⁵ He remedied this in the best way he knew: he added another item to the note card. “I decided that every Monday I would be a consultant,” he explains. “You could call me up, and I would do the best I could and critique your ideas. No charge. But don’t call me on Tuesday because I’ll be playing tennis or skiing or building furniture in my garage.”²⁶

Soon after telling several friends in the semiconductor and venture capital industries that he would be happy to talk to any aspiring entrepreneurs, he began getting calls and making appointments. Every Monday, smartly dressed men, usually in their thirties or early forties, came to meet Markkula in his converted-bedroom office. He estimates that he heard about two dozen pitches for companies: semiconductor operations, equipment suppliers, a soap business. A few entrepreneurs asked him to join their founding teams; a few more wanted him to write their business plans. He always declined. “It’s a lot of work,” he explains. Instead, he would “tell them how to do it.” He offered advice on how to conduct market surveys and calculate distribution costs, how to think through the pros and cons of sales teams versus distributor networks, how to plan for the economies of scale that could come from rapid growth.²⁷

In early fall 1976, some eighteen months into his retirement, Markkula received a call from Don Valentine, the venture capitalist who had worked with Atari. Markkula and Valentine had known each other as colleagues at Fairchild and later as competitors when Markkula was at Intel and Valentine at National Semiconductor.

“Don called me up and said, ‘There’s two guys over in Los Altos that could really use your help, and you ought to go see ’em,’ ” Markkula recalls. The young men, both named Steve, had started a partnership called Apple Computer.

“And I said, ‘Okay.’ ’Cause that’s what I did on Mondays.”²⁸

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I. It was the same downturn that had freed up the small company that normally made plastic tooling for microchips to instead manufacture the plastic case for Home Pong.

II. Grove bought 14,000 shares of Apple in a 1979 private investment round.

III. To this day, Markkula uses the lessons from his FORTRAN betting scheme when he plays. He says he has “been way ahead for a lifetime.”