That Flips My Switch

 MIKE MARKKULA

One Saturday in the fall of 1976, Mike Markkula broke his Mondays-only rule for seeing entrepreneurs and drove four miles from his home in the rolling hills west of Highway 280 to a modest ranch house at 2066 Crist Drive in Los Altos. The home belonged to Paul and Clara Jobs, the parents of one of the young men who Don Valentine said were starting a computer company out of the family garage. Markkula did not have particularly high expectations for the meeting.

The garage door was already raised when Markkula arrived. Inside, “the boys,” as Markkula would henceforth call Steve Jobs and Steve Wozniak, did not look like any of the entrepreneurs who had come to him for advice during his Monday office hours at his house. Shaggy-haired and scraggly bearded, twenty-one-year-old Jobs and twenty-six-year-old Wozniak were at least a decade younger. They were dressed in Levi’s and casual shirts—as if they planned to repair a car, not meet with a millionaire business consultant. Jobs and Wozniak seemed like such unlikely entrepreneurs, and their garage operation seemed so sketchy, that one person who spoke with Jobs shortly before Markkula summed up his encounter in four words: “Sounds flaky. Watch out.”¹

At thirty-four, Markkula was only eight years older than Wozniak and thirteen years older than Jobs. But Markkula had little sympathy for the hippie counterculture that the young men’s appearance suggested they embraced. A few years earlier, Intel cofounder Gordon Moore had said that the engineers at big technology companies “are really the revolutionaries in the world today—not the kids with the long hair and beards.”² Markkula agreed. Early in 2016, he asserted, “I have never protested anything in my life.”³ But, he says of that day in the garage four decades ago, “What was there far overshadowed how they might be dressed.”⁴

Jobs and Wozniak had transformed the garage into a makeshift manufacturing line for the final assembly of the circuit boards for a computer they were calling the Apple I.^IX Thus far they had sold 100 boards at $500 each to the Byte Shop, a tiny new store in a strip mall in Mountain View. The Byte Shop would add a keyboard and screen and resell the computer to customers, mostly young white guys whom one early visitor described as “a handful of geeks having technical conversations with each other.”⁵

Markkula, stepping carefully among the boxes of parts on the garage’s cement floor, had no interest in the Apple I.^VIII The machine required that its users possess not only a monitor, keyboard, and tape drive from which to reload every bit of software every time the machine turned on, but also to have familiarity with hexadecimal code and a soldering iron. Step 2 in the manual for the Apple I was “Type- 0 : A9 b 0 b AA b 20 b EF b EF b FF b E8 b 8A b 4C b 2 b 0 (RET).”⁶

Markkula was curious, however, about Jobs and Wozniak and their plans for the company. Jobs, tall and lean, said that he and Wozniak had launched their partnership, Apple Computer, on April Fool’s Day, 1976.^VII Now Jobs was committed full-time to the business. Wozniak, stocky with thick glasses, had designed the Apple I. He moonlighted for Apple while working full-time as an engineer at Hewlett-Packard. Jobs read books on Eastern philosophy and vegetarianism. Wozniak had spent high school with a pinup on his bedroom wall—of a computer.⁷ It was a Data General Nova minicomputer and, at nearly $20,000,⁸ no more attainable for Wozniak than Farrah Fawcett-Majors, the actress whose dazzling smile and red swimsuit graced many more high school boys’ bedrooms in the 1970s.^VI

Jobs and Wozniak had graduated from Cupertino’s Homestead High School five years apart, and both had left college without a degree. Both had worked at Atari, Jobs for Al Alcorn, who had hired him as a technician. Wozniak, who after playing Pong in a bowling alley had built his own PG-rated knockoff (miss a shot, and a four-letter word appeared on the screen), had also designed a version of Breakout for Atari, working with Jobs straight through the night for four consecutive nights. They had both ended up with mononucleosis, and Wozniak says Jobs never paid him the full amount they had agreed on. The Apple II used a version of the same MOS 6502 microprocessor that Atari had built into its Stella system.

It was also Atari, indirectly, that brought Apple to Markkula’s attention. Jobs had asked both Alcorn and Bushnell if they personally, or Atari as a company, would like to invest in Apple; both men, to their later regret, declined. Alcorn accepted an Apple computer, rather than stock, as payment for consulting he would later do for Apple. He did not think the stock would be worth anything. Either Alcorn or Bushnell pointed Jobs to Don Valentine, one of Atari’s original backers. Valentine, who also heard about Jobs and Wozniak from the public relations and marketing expert Regis McKenna, was not interested in investing, but he told Markkula about the company.^V

When Markkula asked the garage entrepreneurs what else Apple Computer was working on, Wozniak, who was impressed by Markkula’s youth, Intel pedigree, and manner—“He didn’t talk like a guy who was hiding things and ripping you off”⁹—said that he had designed a new computer. He pointed to a table nearly buried beneath circuit boards, wires, tools, and parts. A keyboard and television were also discernible. As Markkula moved closer, Wozniak sat down and began typing. The screen lit up, and soon a pattern of squares appeared. The image was in color. “Watch,” Wozniak said. Now a version of Atari’s Pong game appeared on the screen. Wozniak demonstrated a few programs that he had written in a version of BASIC that he had built into the computer’s memory.¹⁰ Wozniak also showed Markkula how he had designed the computer to be flexible and expandable by including slots for users to plug in peripherals such as printers and cassette players to store data.¹¹

Markkula, with his Model 33 Teletype in his home office and his familiarity with several programming languages, considered himself a fairly advanced lay user of computers. But this display astonished him. Small computers like Wozniak’s typically could do one thing: display green capital letters on a black background. But here were multiple colors. Graphics. Sound. Games. A built-in programming language. Markkula found it hard to believe that he was seeing these in a computer in some guy’s Los Altos garage. Such advanced features were the stuff of machines costing tens of thousands of dollars, built by teams of engineers at some of the world’s most famous companies.^IV

Markkula’s amazement only grew when Wozniak cleared the table to reveal the computer’s circuit board. The board was the typical bright green, with a nest of wires nearly burying the plastic packages that held chips. But Markkula saw more. This was, after all, the man who had not been able to stop himself from critiquing a customer’s circuit design, even though it had lost him a sale; a man who still today, after decades away from engineering work, expresses his highest level of enthusiasm with the phrase “That flips my switch.”¹² Markkula knew elegant circuit engineering when he saw it. “It was spectacularly good. It was so clever and so correct,” he recalls, growing excited about Wozniak’s design even forty years later. “There wasn’t a wasted bit anywhere, and he used a 6502 [microprocessor] because that was the cheapest. . . . I mean, it was ingenious what he had done.”¹³ Wozniak’s anticipation of users’ needs, even going so far as to think through the power supply for the peripheral devices, also impressed him.

“It was so far along, so far ahead of its time—and exactly what I would have come up with if I was going to do it myself,” Markkula says of Wozniak’s computer.¹⁴

Wozniak, thrilled by Markkula’s excitement, recalls, “He talked about introducing the computer to regular people in regular homes, doing things at home like keep track of your favorite recipes or balancing your checkbook.”¹⁵ Markkula did not know exactly how people would use Wozniak’s computer, but he was eager to find out. “I had been waiting for somebody to do a small computer for a long time,” he explains.

Wozniak’s glorious design—a computer boiled down to a single circuit board with an inexpensive microprocessor, designed to connect to an ordinary television set and with a built-in programming language—meant that the time for a small, affordable computer might have arrived.

Steve Wozniak and Steve Jobs were not the only people in Silicon Valley building a personal computer. The Homebrew Computer Club, founded in March 1975, was attracting hundreds of people to evening meetings in a twenty-two-room Victorian mansion in Menlo Park that served as a counterculture-influenced children’s day school and had recently gained fame as “Pine Woods Orphanage” after Disney had shot several scenes for Escape to Witch Mountain on-site.¹⁶ Many Homebrew members wanted to build their own computers, and all of them wanted to learn about the machines. The Homebrew aficionados, mostly men and mostly young, called themselves hobbyists: for them, building a computer fell into the same class of activity as building a model airplane. The fun was as much in the process as in the end product.

In 1975, a small Albuquerque, New Mexico–based company called MITS began selling a build-your-own-computer kit that ran on an Intel 8080 microprocessor. Although quite rudimentary—the computers were programmed by flipping switches, and their output was not text on a screen or printer but a series of flashing lights—the MITS Altair offered the processing power of a $20,000 minicomputer at a cost of only $395 (unassembled). MITS never claimed that the Altair was a personal computer; the company called the machine a “minicomputer kit.” As one historian describes it, “The Altair 8800 often did not work when the enthusiast had constructed it; and even if it did work, it did not do anything very useful.”¹⁷ At the second meeting of the Homebrew Computer Club, someone programed an Altair to play the Beatles’ “Fool on the Hill” through a transistor radio’s speakers.¹⁸ That sort of playful innovation was typical.

The Homebrew spirit ran mostly in an idealistic, antiestablishment direction. One of the club’s founders, Fred Moore, had served a two-year prison sentence for violating the Selective Service law.¹⁹ Lee Felsenstein, who opened every meeting by welcoming people to “the Homebrew Computer Club, which does not exist,” had worked for the radical Berkeley Barb, which had advocated the building of People’s Park.²⁰ “Everyone in the Homebrew Computer Club envisioned computers as a benefit to humanity—a tool that would lead to social justice,” explains Wozniak, a regular attendee.

“There was a strong feeling that we were subversives. We were subverting the way the giant corporations had run things,” recalls another early Homebrew participant. “I was amazed that we could continue to meet without people arriving with bayonets to arrest the lot of us.”²¹

Although many members claimed to distrust business, the Homebrew Computer Club, along with similar clubs popping up around the country, was a cauldron of entrepreneurship. Jobs and Wozniak had shown off the Apple I at a Homebrew meeting, and Wozniak demonstrated the Apple II, the machine that had so impressed Markkula, at Homebrew meetings throughout the computer’s development. In January 1976, twenty-one-year-old Bill Gates published his “Open Letter to Hobbyists” in the Homebrew newsletter, excoriating people who were copying software rather than buying it. Members of hobby computing clubs such as Homebrew and the Southern California Computer Society launched roughly a dozen companies, most of which did not look too different from Apple’s early incarnation: a technical expert and a would-be business type selling a few computers or peripherals out of their garages or bedrooms.^III After meetings, the Homebrew hobbyist-entrepreneurs would adjourn to the Oasis bar on El Camino Real. Seated around deeply carved wooden tables lit by the neon glow of beer advertisements on the walls, the young innovators would help one another with design problems. The race to solutions was intense, the glory of having the first or best idea outweighing any potential concerns about helping a competitor.

Homebrew-style hobbyist-entrepreneurs typically had technical skills, ambition, and drive—but no money, little concern for how less technically proficient people might use the machines, and no idea how to build a business. Meanwhile, a different set of people interested in building small computers had a nearly opposite set of skills and shortcomings. In 1975 and 1976, at one major firm after another, in companies that made semiconductors and companies that made minicomputers, a few employees were trying to convince someone in the operation to build an inexpensive computer for consumers. They found the task almost impossible.^II Wozniak had offered the Apple I design to Hewlett-Packard—twice.²² HP had declined because the machine was not designed to serve its core market, scientists and engineers who needed reliable and preassembled off-the-shelf equipment. HP also worried about quality control. The Apple I connected to a customer-provided television set, and HP worried that the display might work better or worse on certain models.

At Intel, several marketing executives, including Markkula’s former boss Ed Gelbach and Bill Davidow, who would go on to become a prominent venture capitalist, tried to convince senior management to sell Intel’s microprocessor development systems as personal computers.^I Cofounder and president Gordon Moore killed the idea.

At National Semiconductor, Gene Carter, who had shared the closet-sized office with Mike Markkula when they were at Fairchild, tried to persuade National to build small computers. Working with an engineer who would go on to do essential work on the Tandy/Radio Shack TRS-80, Carter had put together a business plan recommending that National create a separate division to design, manufacture, and sell a small computer. The company decided that, at the time, there was no market.²³

Semiconductor companies such as Intel and National worried that if they began selling personal computers, a product that used their microprocessors, they would at best compete with their own customers and at worst lose money. Intel had already tried selling digital watches built around its chips, and National had done the same with calculators; both efforts had been expensive failures. “The technology is going to move faster than we can be sensible in applying it,” one National executive admitted when asked about moving into consumer markets.²⁴ Large computer companies such as Hewlett-Packard and DEC, meanwhile, were caught in what Harvard Business School professor Clayton Christensen has called the “innovator’s dilemma”: they had committed resources to an existing market (minicomputers) and could not see, or did not want to see, an emerging market for smaller, cheaper, less powerful machines that could one day destroy the established market. Xerox, where Bob Taylor’s group and the systems science lab had designed the accessible, user-friendly Alto, was similarly stymied.

In essence, companies with money and experience did not want to pursue the personal computer business, and the hobbyists who did want to pursue it lacked capital, business knowledge, or both. The retired Mike Markkula, who consulted only on Mondays, had the distance, the experience, and the capital to bridge the divide.

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I. Development systems, designed to make it easy for customers to debug software written for the microprocessor, could be programmed to simulate any number of environments, from controlling a lathe to running a cash register.

II. Among established computer makers, only Commodore made an early move into personal computing, and this only after Wozniak and Jobs showed the Apple II to a Commodore employee, Chuck Peddle. Peddle had also sold Wozniak the MOS Technology 6502 microprocessor when Peddle was working for MOS Technology.

III. Among the best known of those companies: IMSAI, Cromemco, Processor Technology Corporation, North Star Computers, and Southwest Technical Products Corporation. Hobbyist-entrepreneurs launched some two hundred companies between 1975 and 1977.

IV By this time, Cromemco, another startup born of the Homebrew Computer Club (the name came from Crothers Memorial Hall at Stanford, where the founders had lived), had introduced its dazzler graphics card for the Altair, but there was no comparison.

V. The scenario that seems most likely is that Alcorn told Jobs about Valentine, and then Valentine’s name came up again when Jobs visited Regis McKenna to ask for help with marketing materials. Valentine says that it was McKenna who told him about Apple.

VI. More than 5 million copies of the Farrah Fawcett poster sold in 1976 and 1977 alone. When the swimsuit was donated to the Smithsonian Institution in 2011, a curator called the poster “the best-selling poster of all time.”

VII. This was the same day, coincidentally, that Bob Swanson and Herb Boyer first pitched Kleiner & Perkins.

VIII. Markkula was not impressed with the Apple I, but Apple already had its fans. The earliest fan letter, dated April 14, 1976, is a photo of a television connected to an Apple I. The capital green letters read THIS IS A PHOTOGRAPHIC RECORD OF A STATEMENT IN ENGLISH THE UNDERSIGNED HAD PREVIOUSLY COMPOSED IN ‘BASIC’ COMPUTER LANGUAGE FOR THE APPLE I, AN EXCEPTIONALLY NICE COMPUTER DESIGNED BY STEPHEN WOZNIAK IN ASSOCIATIONS WITH STEVEN JOBS, THE BRAINS BEHIND THE APPLE COMPUTER COMPANY, PALO ALTO, CALIFORNIA LET US HEAR IT FOR THEM !!!

IX. Jobs and Wozniak paid Cramer Electronics, a chip distributor, to supply chips to a company in Santa Clara that would assemble the circuit boards for the computer. Jobs, his friend Dan Kottke, and his sister Patty would plug more chips into the board, after which Wozniak would test and troubleshoot each board.