Young Maniacs

 MIKE MARKKULA

From the moment Mike Markkula funded Apple and demanded the highest-quality marketing, publicity, and advertising campaigns, he had worked to make the young firm appear credible and professional, a stylishly creative company that built tools, not toys. “People DO judge a book by its cover, a company by its representatives, and a product’s quality by the quality of its collateral materials,” he wrote in December 1979. “Our image is the combined result of everything the customer sees, hears, or feels from Apple.”^IV To bolster Apple’s image, Markkula also brokered alliances and branding agreements with major companies. The telecom giant ITT distributed computers in Europe. Bell and Howell, a company that supplied media equipment to schools, marketed a classroom version of the Apple II that was black with a tamper-resistant cover.

The influence of Markkula’s attention to appearances, an attention shared by Jobs and Regis McKenna, was evident in abundance on December 12, 1980, when Apple Computer had its initial public offering. The board of directors was extravagantly well credentialed for such a young firm, including the CEO of Venrock, the Rockefeller family’s venture capital firm; the CEO of retail giant Macy’s; and the venture capitalist behind Fairchild Semiconductor, Scientific Data Systems, and Intel.^III The offering’s investment bankers—Hambrecht & Quist and Morgan Stanley—were among the most respected in the world, “the best names we could get,” in the words of board member Arthur Rock, who noted that Morgan Stanley usually did not deign to take upstart tech firms public.¹ The size of the offering was enormous ($101.2 million raised versus the $35 million raised by Genentech two months earlier), and the list of underwriters included some of the top names in finance at the time, including Bear Stearns; Blyth Eastman Paine Webber; Alex. Brown & Sons; Drexel Burnham Lambert; Goldman Sachs; E. F. Hutton, Kidder Peabody, and Lehman Brothers Kuhn Loeb. Thirty years later, Apple would be the biggest company, by market capitalization, in the world, and several of its underwriters would be bankrupt or sold.

One name that did not appear on the investor list was Sequoia Capital, Don Valentine’s venture capital partnership. The partnership had sold all of its 140,008 shares in Apple in the second round of private investment in 1979, the same round in which Xerox had bought 100,000 shares. “It’s not a decision I’m happy with,” Valentine said years later, explaining that he was in Africa when Sequoia had decided to sell.² It proved to be a costly vacation. The stock, which sold for $1.47 million in the summer of 1979, would have been worth nearly seventeen times that ($24.64 million) at the IPO sixteen months later.

The influence of semiconductor industry veterans such as Valentine on the young Apple is striking. In the three years that Apple Computer was privately held, the following key executive roles were filled by people who had worked in the semiconductor industry: board chair, president, CFO, and the vice presidents of manufacturing, sales, marketing, human resources, and communications. Of key executives, only Apple’s chief counsel and two senior technical leads had not come from the semiconductor industry. Moreover, three of Apple’s most important early investors—Valentine, Rock, and Venrock—came to Apple via Markkula’s semiconductor industry ties. Regis McKenna, who played a vital role in positioning Apple for the public, was also a semiconductor veteran.

The pace of Apple’s growth was stunning. The company had gone from $774,000 in sales in 1977, its first fiscal year, to ten times that in its second, to $40 million in 1979, to $117 million in 1980. Profits had zoomed from $42,000 to $11.7 million. From three employees at the end of 1976 (Jobs, Wozniak, and Markkula), Apple had grown to roughly 1,000. Through Gene Carter’s redesigned distribution model, Apple had sold 131,000 Apple II systems via some 1,800 retail computer stores.³ A month before the IPO, Apple had introduced the Apple III, a higher-end machine with an internal floppy drive, more sophisticated components, and more memory. Two new machines, the Lisa (which Tesler, formerly of PARC, was helping to develop) and the Macintosh, were also in development, though secret. Both computers would be released with a graphical user interface, a mouse, menus, icons, and other features inspired by the PARC Alto. Soon it would become apparent that Apple had too many different computers under development, but in 1980, the variety was cause for celebration.

Hundreds of software programs had been written for the Apple II. Although games comprised the most popular category, the single most important program was VisiCalc, the first easy-to-use spreadsheet program.⁴ Available exclusively on the Apple II for a year, VisiCalc was of such value to Apple that the IPO prospectus devoted a full paragraph to the unnamed “financial modeling system.” (One wag called the Apple II a “VisiCalc accessory.”⁵) With VisiCalc, a user could change a single number, and the spreadsheet would automatically rerun calculations that depended on it with the new value. Before, changing a number had meant recalculating every value. Gene Carter recalls that to have enough room for all of the cross-outs and recalculations, he would unroll butcher paper on his floor and hand-draw boxes large enough to hold all the changes.⁶ Markkula, the planner, loved VisiCalc, which he called “the what-if program” for its ability to show him what would happen if he changed one variable in his model.⁷

VisiCalc’s exclusive deal with Apple, like so many decisions that benefited the company in its early years, can be traced to the combined efforts of Markkula, Jobs, and Wozniak. The program’s creators chose to write for the Apple II in part because Jobs had impressed the founder of VisiCalc’s parent company (who had bought a discounted Apple II from him) and in part because the machine was likely to have a floppy drive—which existed thanks to Markkula’s insistence that Wozniak build one.⁸

Apple had several competitors by the time of the public offering. The Tandy/Radio Shack TRS-80 had a larger market share than the Apple II, and Commodore’s PET was a close third. In its prospectus, Apple anticipated the imminent arrival of other competitors, including IBM, with far greater financial resources. But Apple was the exciting, sexy new firm in an exploding market, and anticipation had run high in the weeks leading up to the public offering. Reporters praised “the finest management team of any company of its size” and gushed that “Apple has achieved more since 1977 than most companies have managed in the last century.”⁹ As investors’ enthusiasm for Apple veered toward frenzy, the state of Massachusetts barred the sale of shares within its borders, deeming the offering too risky.¹⁰ Would-be investors in Illinois were also out of luck, thanks to strict state laws on new issues.

The public offering on December 12 sold out within minutes, raising $90 million for the company and marking one of the most successful IPOs in US history up to that time.¹¹ The markets closed with Apple selling at $28.50. Markkula, who owned 14 percent of the company (second only to Jobs, who owned 15 percent) had stock worth more than $200 million ($540 million in 2016 dollars). In other words, every dollar that Markkula had invested four years earlier was now worth almost $2,200. Wozniak had about half the amount of his cofounders. His former wife owned more than 1 million shares originally granted to him. Moreover, he had given or sold stock to employees whom he thought deserved more.

By any measure, it was an astonishing rise from the garage. At the western-themed closing party a week after the IPO, Markkula wore a suit, a snakeskin-print tie, and a giant suede cowboy hat. Throughout dinner, one person after another stood to give a speech or receive a gag gift: Markkula and Jobs; the executive team; attorney Larry Sonsini, who had shepherded the offering. A group of bankers from Morgan Stanley challenged Apple to field a team against them in the next year’s Bay to Breakers foot race across San Francisco.¹² Two employees of Hambrecht & Quist, Catherine de Cuir Schaefer and Garrett C. D’Aloia, donned T-shirts decorated with a giant rainbow-striped Apple logo and sang “You Picked a Fine Time to Bring a New Deal” to the tune of Kenny Rogers’s hit song about Lucille. The pair also wrote new lyrics to “Somewhere Over the Rainbow” from The Wizard of Oz:

Somewhere Over-the-Counter

Not too high

There’s a stock that I heard of

Waiting for me to buy

Somewhere Over-the-Counter

When I’m blue

I’ll have bought in at one

And I’ll sell at ten to you.

A few months earlier, Apple had hired financial planning and accounting experts to help employees plan for the wealth that would be theirs after the IPO.¹³ But the party was pure celebration for the industry builders whom Jobs sometimes called “young maniacs.”¹⁴ The festival of jokes, silly hats, sillier gifts, and grinning attorneys, bankers, and Apple employees seemed as though it would never end. Then the troubles hit.

In February, two and a half months after the IPO, Wozniak, a licensed pilot, crashed his Beechcraft Bonanza while taking off from a small airport.¹⁵ He was badly injured. For about five weeks, he suffered from amnesia that prevented him from forming any new long-term memories. He had grown increasingly unhappy at Apple and suspected that his colleagues there would not miss him. With more than a hundred engineers at the company, Wozniak says, he did not feel needed.¹⁶ After he recovered, he left Apple to enroll under the name Rocky Clark at the University of California, Berkeley, intending to finish his degree. Rocky was the first name of his dog, Rocky Raccoon, and Clark his wife, Candi’s, last name.¹⁷ Wozniak returned to Apple about a year later.

Meanwhile, the recently introduced Apple III was suffering from manufacturing and technical problems so severe that allegedly 20 percent of the computers did not work when they arrived at the dealerships. More failures hit when users took the machines home.¹⁸ Apple pulled the Apple III from the shelves. The stumble irritated and embarrassed Markkula, who placed such high value on first impressions. “We learned how not to do it,” he admitted at the time.¹⁹

Apple was hiring so quickly that almost half of its employees nine months after the IPO had not been there when the company went public. This trend alarmed Ann Bowers, the vice president of human relations, formerly of Intel, who circulated an urgent memo to the executive staff. She pointed out that although head count had doubled, productivity, as measured by sales per employee, had plummeted by 40 percent. “Sometimes we appear to be throwing bodies at the problem,” she wrote. “Do people know what to do? Are they spending time on the right things?” She warned that Apple would suffer if it continued to grow this way.²⁰

By 1981, Apple was manufacturing or developing four different computers: the Apple II, the Apple III, the Lisa, and the Macintosh. Each computer had its own staff and culture. Divisions of other sorts had arisen, as well. Employees who had had stock before the IPO were generally much wealthier than the newer hires, though recently recruited executives received large options packages—which proved another source of tension. Jobs, who had lobbied Scott for control of the Lisa project and been denied, was now pushing for control of the Macintosh, which was intended to be an inexpensive, user-friendly machine.

Employees had begun to complain about the new formal policies around engineering change orders, hiring, and decision making. Burnout was also a problem. “It was 12 hours a day and weekends,” one person recalled. “I knew if I took a drink at a water fountain I would miss a beat and slip a schedule.”²¹

Outside the company, the gee-whiz stories about Apple and its computers continued. A reporter wrote about how Industrial Light & Magic, a division of Lucasfilm, was using an Apple II to develop special effects. Steve Jobs, who would later buy the computer division of Industrial Light & Magic called Pixar, clipped the article and sent it to Apple’s head of communications. Several papers carried the story of the minister who conducted marriage ceremonies via an Apple II. “Hello, my name is Reverend Apple. I am the world’s first ordained computer,” the screen read before displaying passages from Kahlil Gibran’s The Prophet and asking bride and groom to input a Y as their “I do.” Even the article about a pimp using an Apple II to store client names had a “What will they think of next?” tone.²²

But now, for the first time in Apple’s young life, the company received negative press, as well. Reporters probed the stumbles with the Apple III and raised questions about morale and the company’s ability to develop new products. Forbes headlined one article “Apple Loses Its Polish.”²³ The Wall Street Journal story “Apple Computer Takes a Bruising” quoted Markkula’s insistence that “the polish isn’t gone; it’s getting brighter.”²⁴

According to the four-years-and-out plan that Markkula and his wife, Linda, had agreed to when he had joined, 1981 was to be the year Markkula retired from Apple. But troubles continued to mount, pulling him even further into the company.

On March 16, a month after Wozniak’s plane crash, Markkula did something he later described as “one of the hardest things in my life.” He asked his friend Mike Scott, Apple’s president, to resign and take a nonoperating role as vice chairman of the board. It was a clear demotion. Three weeks before Markkula asked for the resignation, Scott had fired forty employees on a single day that even official Apple publications called “Black Wednesday.”²⁵ Markkula says that the firings were justified and “not a reason” that he asked for Scott’s resignation. Nor, he says, was the failed launch of the Apple III. To this day, Markkula declines to specify why he asked Scott to leave.²⁶

Ever since the IPO, Scott had worried that Apple was coddling its employees. Anyone who had worked at the company for at least sixty days and demonstrated basic competence using a software program received a computer to take home.²⁷ On business trips, people flew first class or rented luxury cars.²⁸ The company had debuted the “Apple Collection, a catalog of clothing and lifestyle items bearing the Apple logo” for employee purchase. At one off-site, the executive staff had debated for a half hour whether the company should offer free decaf coffee to its employees, alongside regular. Markkula thought this type of conversation was important and showed that Apple cared about its employees. (There was concern at the time that caffeine might be harmful.) Scott thought the discussion was a waste of time.

Scott lasted a few months in his new role as vice chairman, but in July 1981, he left Apple for good. In his resignation letter, he deplored Apple’s “excessive emphasis on titles and high salaries and not enough frugality.” He wrote, “I quit, not resign to join a new company or retire for personal reasons.” He added, “This is not done for those who fear my opinions and style, but for the loyal ones who may be given false hope.”²⁹

With that missive, Apple’s first president, who still owned about 6 percent of the company, left. In a rare interview around the time of his resignation, Scott, photographed at home with two of his cats on the floor of his airy, high-ceilinged living room, told a reporter that he planned to “start two or three electronics companies,” finance a few others, and buy real estate.³⁰ In recent years he has traveled the world, funded an effort to launch a rocket from water, and backed research to build what he describes as the “tricorder” from Star Trek: a device that can be pointed at a rock and instantly provide information about it.³¹

Scott was never the public face of Apple, even when he was president. But he was the mastermind behind Apple’s flexible, scalable manufacturing operation that made it possible for the company to grow as quickly as it did. He did everything from writing manuals to creating the behind-the-scenes systems that supported Apple’s growth. “Scotty was the daily rhythm of the company, the heart regularly pumping in the body,” says Trip Hawkins.³² Wozniak says, “The world never knew how important Mike Scott was.”³³

Scott had not groomed a successor. Jobs, at twenty-six, was too inexperienced to take on the presidency of a company that had $80 million in sales in the previous quarter alone. Apple’s frenetic growth and increasingly aggressive competitors, along with rumors that the computing giant IBM would soon introduce a personal computer, also meant this was not the time to bring in an outsider. “We need someone who knows the organization,” human relations head Ann Bowers told Markkula.³⁴ She wanted him to replace Scott as Apple’s president. She knew that he was loyal to Apple and its employees, and she also knew that Markkula had more than $100 million of his personal wealth in Apple stock.³⁵

Markkula had never wanted to be Apple’s president. He did not want extensive day-to-day management responsibilities, and this man, who so valued his privacy that he used a pseudonym to write software, did not relish the prospect of serving as Apple’s public face with stock analysts and the press. But there was no one else to do the job.

In the middle of the board meeting to name Scott’s successor, a secretary knocked and asked Markkula to step outside. His mother-in-law was on the phone. His father-in-law, Markkula’s best friend, had died of a heart attack. Markkula’s wife, Linda, did not yet know; his mother-in-law could not reach her.

Markkula hurried back into the conference room. “I’m sorry, guys, you’re going to have to decide without me,” he said. “If you want me to run the company, that’s fine, but I’ve got a personal event that I just have to deal with.” He drove from house to house, asking Linda’s friends if they had seen her. Several hours later, he called his office and learned that the board had named him Apple’s president.

Markkula calls the loss of his happy, athletic father-in-law and friend “a huge trauma for me in the middle of all this other stuff that was going on.” He handled the funeral arrangements and comforted his wife while dealing with his own grief and assuming the presidency of one of the fastest-growing companies in American history. Alone, he says, “I would spend time thinking, ‘How am I going to get through this?’ . . . It was really hard. After it was all over, I looked back on it, and I said, ‘I’m a lot tougher than I thought I was.’ ”³⁶

Jobs, who was named Apple’s chairman after Scott’s departure, told a reporter that “Mike Markkula became president because his management style is more suited to the running of a multidimensional, multidivisional, multinational corporation.”³⁷ Markkula told the San Jose Mercury, “Within a couple of years, I would hope that I would not be in the same position.”³⁸ He explained to the board that he would do the job “until we find somebody better.” Whether that was six months, or a year, or several years away, he could not predict. But he hoped it would happen quickly. Being president “was not what I wanted to do with my life,” he says.³⁹

With Scott and Wozniak gone, Markkula and Jobs had each lost the man he had brought with him to launch Apple. But Markkula and Jobs worked well together. Trip Hawkins says that Markkula “absorbed stress like a sponge,” a characteristic that made Apple’s new president a stabilizing force for the chairman’s more passionate temperament.⁴⁰ Markkula valued Jobs’s ability to anticipate what a customer might want next, an ability that stood out even in a company filled with bright, creative people. Markkula also believed that with enough maturity and experience, Jobs could become a powerful leader. For his part, Jobs took Markkula as a model of business acumen, selling the same number of shares as Markkula every time the opportunity arose in the company’s early rounds of private offerings.⁴¹ He also credited Markkula as the source of his own belief that customers derive their sense of a company from every detail, no matter how small, that they associate with it.⁴² He later said of Markkula, “His values were much aligned with mine. He emphasized that you should never start a company with the goal of getting rich. Your goal should be making something you believe in and making a company that will last.”⁴³ The venture capitalist Don Valentine, one of Apple’s first board members, calls Markkula “Steve’s personal trainer.”⁴⁴

Apple’s official publications began showcasing Markkula and Jobs as a team. Both men now signed the quarterly reports, though only Scott had done so before. The 1982 annual report includes a full-page shot of Markkula and Jobs, striding side by side into the light. Jobs, in a tie and dapper mustache, is gesturing and looking at Markkula, who, hands in his pockets, listens intently. Beneath their photo is a promise: “Bringing technology to individuals through personal computers is, we believe, the extraordinary business of this decade.”⁴⁵

Markkula and Jobs split responsibilities. Markkula rejiggered the company, bringing in four new vice presidents in three months.⁴⁶ Always the planner, he also introduced a companywide meeting during which he reviewed Apple’s plans and priorities for the next year with employees. “I wanted people to know how they fit in and where we were pointing the money guns,” he says. “I wanted people to care about what their peers were doing, because the whole thing has to come together for it to succeed.”⁴⁷

Markkula, believing that “too much supervision is one of the most common management mistakes,” took a hands-off approach. “He would camp in his office a lot, scheming away very thoughtfully,” says Hawkins. “There was not a lot of management-by-walking-around.”⁴⁸ Markkula liked to say that he wanted to hear people arguing in the halls. They argued, too, in his meetings. When two of his deputies could not agree on how many Apple IIs to build for the Christmas season, Markkula told them that if they couldn’t choose a number, he would have to do it, “and you don’t want me to decide [because] I don’t know half as much as you know.”⁴⁹ That was about as much of a threat as he ever made. He let people at Apple make their own decisions and mistakes.

Jobs, meanwhile, tried to see around corners. With Markkula’s blessing—“My strategy from Day One with Steve was to keep him so busy that he would stay out of trouble,” Markkula says—Jobs took over the Macintosh group, to the applause of some and consternation of others. When Jobs hung a pirate flag over the building where the Macintosh was being developed, many people at Apple interpreted it as a defiant move. Markkula felt differently: “I wanted [Jobs] to use as much of the Lisa technology as made sense. And for them to think they were pirating it away was just fine with me.”⁵⁰ The Lisa team included the Macintosh group on its user interface memos.⁵¹

Regis McKenna, who continued to work closely with Apple on advertising and public relations, believed that the best way to make a complex technical company approachable was to associate it with an appealing person. “What really differentiates a business is people,” he once said. “The idea of infusing personalities into this started back very, very, very early.”⁵² McKenna had already made Intel’s Robert Noyce—father of the microchip, humble millionaire, midwestern preacher’s boy made good—the public face of Intel and the microchip industry. At Apple, the obvious choice for the role was young, handsome, passionate Steve Jobs. McKenna dubbed Jobs Apple’s “media man.”

Though Markkula spoke occasionally to the media and financial analysts about day-to-day operations, Jobs became the company’s—and the industry’s—young philosopher-king. In private conversation, Markkula could spin inspiring dreams in a manner one admirer describes as “charming and intimate and warm . . . let me sit on the side of the bed and tell you how great it’s going to be.”⁵³ But Jobs possessed a spellbinding charisma whether he was in large groups or small, with friends, strangers, or reporters. He gave Apple’s products an aura of inevitability and transformative power. To buy an Apple computer, he made clear, was to become part of something extraordinary, a company that, like its young chairman, exemplified the hope for tomorrow.

Jobs gave an extended interview that McKenna turned into a series of three full-page advertisements in the Wall Street Journal.⁵⁴ The advertisements featured four different shots of Jobs’s face and quoted his big ideas, such as “A personal computer is more than just a small ‘big’ computer.” In the ads, Jobs also recounted his favorite stories: the Apple II that had saved the business of a sewing machine repairman in England, the medical center that was using the machines to process ambulance reports, the teachers who had found that the computer’s graphics “make it fun to learn.” He further explained, “When we invented the personal computer, we created a man-machine partnership.”⁵⁵ The presumably unintentional echo of Licklider’s paper on “Man-Computer Symbiosis,” which had so inspired Bob Taylor in 1963, staked a claim about the invention of the personal computer that would have infuriated Taylor and many others at Xerox PARC.

Jobs told a meeting of Apple users in Boston, “Civilization seems to have taken a notch forward every time some source of free energy became available. Petrochemicals were a source; the plow was a source.^II People either leveraged mechanical energy, or they found a free source of intellectual energy, like language or mathematics. But there’s never been much of an artifact that allowed the free use of intellectual energy. The Apple II saves two hours a day for me. That’s free intellectual energy.”⁵⁶ Jobs told the Los Angeles Times that “Personal computers will promote much more of a sense of individualism, which is not the same as isolation. It will help someone who is torn between loving his or her work and loving the family.”⁵⁷

At times, the chairman of Apple’s board sounded like the twenty-six-year-old he was. “When we first started Apple, I was very apprehensive about getting into business,” he admitted.⁵⁸ But after five years, he had changed his mind: “I think business is probably the best kept secret in the world. It’s viewed on the outside mostly negatively, but it really is a wonderful thing.” What he liked most, it seemed, was the excitement of defining a new market: “It’s like the razor’s edge.”⁵⁹

In 1981, Apple spent $10 million on advertising.⁶⁰ In addition to print advertisements, the company ran a series of prime-time television spots. The commercials starred popular talk show host Dick Cavett, who in chatting about the easy-to-use Apple II became the tech industry’s “first celebrity spokesman,” according to McKenna, who had convinced the star to do the job.^I By the middle of the year, Apple had sold 150,000 computers, and 80 percent of people surveyed could identify Apple’s brand and business.⁶¹

But there was no respite for Markkula. On August 12, 1981, five months after he became Apple’s president, IBM introduced its personal computer at a press conference in the ballroom of New York’s Waldorf Astoria hotel. The IBM machines, with 16-bit Intel microprocessors, were faster, had more memory, and were touted as capable of handling more complex tasks than Apple’s computers. IBM had developed its personal computer in a single year at a secret skunk works in Boca Raton, Florida.

Apple responded to the IBM PC’s introduction with a full-page ad in the Wall Street Journal that declared in huge, bold-face type, “Welcome, IBM. Seriously.” The audacity of the headline was echoed in smaller print below: “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.” A year later, Alan Kay, the mustachioed organ player at PARC who would soon join Apple as an Apple Fellow, said, “Apple welcoming IBM to the market is like a caveman welcoming a saber-toothed tiger into his cave.”⁶²

Markkula, who had been anticipating IBM’s entry, could only hope that Apple had staked out enough territory to stave off the attack.⁶³ Today he recalls IBM’s introduction of the PC as “bittersweet”—sweet because it validated the market and bitter because Apple now had a formidable competitor. At the time, IBM’s entry appeared not to faze him. “Apple Computer president Armas Clifford Markkula Jr. took a drag on his Winston cigarette and made a boast that grossly belied his soft voice and easy manner,” a reporter noted five days after IBM’s announcement. “Outside of a third world war, I can’t see anything knocking us out of the box as one of the premiere makers of personal computers,” Markkula said. “We not only can withstand IBM’s new personal computer, we’ll come out on top.”⁶⁴

Today, Apple is known for its self-representation as the iconoclastic outsider company. This reputation exists in large measure thanks to Apple’s iconic 1984 advertisement for the Macintosh that compared IBM to George Orwell’s Big Brother and Apple to a courageous female rebel (as well as later advertising campaigns, such as 1997’s “Think Different”). But in 1981, Apple, led by Markkula, was the establishment company in the personal computer industry. Markkula’s plan from the start had been to be first to market so that Apple could set the standard. In 1981, at least when it came to the personal computer, IBM was the disruptor. “IBM knows as well as anyone the power of an established base,” Markkula told the Wall Street Journal in 1981. “Now the shoe’s on the other foot.”⁶⁵ He compared IBM to a new hamburger stand and Apple to McDonald’s.⁶⁶ IBM ran advertisements featuring women, warm-fuzzy promises (“One nice thing about having your own IBM Personal Computer is that it’s yours”), and Charlie Chaplin’s Little Tramp from Modern Times, the movie about one small man’s fight against big business and bureaucratic technological efficiency.⁶⁷

The IBM PC proved so popular that within days of its launch, the company quadrupled production.⁶⁸ By the end of 1982, one IBM PC sold every minute of the workday, and the 150,000 machines that IBM manufactured that year came a close second to Apple’s production of 225,000.⁶⁹ One year later, IBM’s share of the personal computer market surpassed Apple’s, and by 1985, the personal computer division of IBM was so successful that had it been a stand-alone company, it would have been the world’s third largest computer company, behind Digital Equipment Corporation and IBM itself.⁷⁰

Within a year of the PC’s introduction, software developers around the world had written 753 programs for the machine.⁷¹ VisiCalc’s parent company wrote a version of the program for the IBM PC. Microsoft can trace much of its success to IBM’s decision to adopt a Microsoft operating system for the PC. The flood of new software titles initiated a virtuous cycle for IBM: more software meant more sales, which in turn meant that more people wanted to write software for the fast-selling machine.

Since Microsoft licensed the PC’s operating system to other computer manufacturers (who could also buy the same Intel microprocessors and other chips used in the IBM machines), Apple faced even more competition from IBM-compatible computers made by different companies. As Markkula later put it, IBM’s entry “was good in that it legitimized the market for personal computers, but it was not so good in that we didn’t have just one competitor, we had twenty.”⁷² At the end of 1980, roughly two dozen firms sold personal computers. By the end of 1981, the year of the IBM PC’s introduction, forty-four did.⁷³ One month after IBM’s PC launch, analysts lowered their earnings estimates for Apple’s fourth quarter, and Apple’s share price fell by 13 percent.⁷⁴

The market that IBM and Apple were seeking to dominate was growing quickly, but it was still small. Roughly 100,000 homes in the United States had a computer in 1981, and offices and businesses housed another 275,000 personal computers.⁷⁵ That same year, there were 81 million televisions in the country.⁷⁶ For most people, computers were still foreign and vaguely menacing. “Today’s computers are easygoing companions that want only to serve, educate and entertain us,” a writer for the luxury magazine Town & Country promised at the end of 1981, but, he admitted, “most of us are still frightened of computers or react to them with outright hostility—they’re the totally unreasonable monstrosities that continue to send us the same incorrect bill.”⁷⁷

If 1980, the year of Apple’s IPO, had been a time of unprecedented growth and celebration, 1981 tested both Markkula and Apple. “Our progress did not eclipse problems, internal or external,” Markkula wrote in the 1981 annual report. With a local reporter, he was more direct: “From the outside it looks like we walk on water, but on the inside we know we don’t.”⁷⁸

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I. The commercials had a deliciously self-mocking tone, and one had a decidedly feminist feel: when Cavett explains the Apple II’s versatility and memory capacity to a woman in terms of recipe storage, she smiles and nods before mentioning that she also uses the machine at the steel mill she runs and to track her investments in gold futures.

II. More than a year earlier, the analyst Ben Rosen, then with Morgan Stanley, had made similar comments about electronics providing free energy and free intelligence.

III. Hank Smith, the original Venrock partner on the Apple board, was replaced by CEO Peter Crisp shortly before the IPO (“They wanted the managing partner on the board,” Crisp says). In a 2008 interview with the National Venture Capital Association, Crisp also recalled that the night before Apple went public, David Rockefeller invited several people from Apple, including Jobs and Wozniak, for cocktails at Rockefeller’s Manhattan town house. The next day, Crisp saw Rockefeller and thanked him for hosting the event. “It was really a pleasure. I enjoyed meeting them,” Rockefeller said. “But next time, ask them not to leave decals on the mirrors.” At some point during the party, someone had stuck a rainbow-striped Apple logo on a lavatory mirror.

IV. Markkula wrote in “The Apple Marketing Philosophy: Empathy, Focus, Impute” (December 1979) that he wanted Apple marketing to run on three underlying principles: (1) Empathy: “If we have empathy for our customers and dealers, we will truly understand their needs better than any other company.” (2) Focus: “In order to do a good job of those things that we decide to do, we must eliminate all of the unimportant opportunities, select from the remainder only those that we have the resources to do well, and concentrate our efforts on them.” (3) Impute: “We may have the best product, the highest quality, the most useful software, etc; if we present them in a slipshod manner, they will be perceived as slipshod[.] If we present them in a creative, professional manner, we will impute the desired qualities.”