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The Computer Wars

Apple has never suffered (and could not have survived) huge, sustained losses like IBM’s; its business history has been one of dramatic ups and downs. The Macintosh has slowly gained market share and respectability, and it clearly will survive as a long-term alternative to PC-compatible machines. But Apple gambled last year with a huge marketing and publicity campaign on behalf of its “Personal Digital Assistant,” called “Newton.” The Newton was supposed to be able to read each user’s handwriting, use artificial intelligence to figure out schedules, and in other ways to make itself indispensable to business users. In practice it did none of these things satisfactorily, and John Sculley, the Apple chairman who had most effusively touted the Newton, resigned soon after its release. (A new model of the Newton, which is supposed to be far more practical, will be released in March.)

Steven Jobs had a central part in Apple’s initial business decisions, and in the early 1980s, when he was not yet thirty years old (he was born in 1955), he prepared the company for a major leap whose effects are still felt today. Most computer companies of the day were trying to make slightly faster, or slightly cheaper, or (in the case of the original Compaq) slightly smaller versions of the IBM PC. Apple, with significant urging by Jobs, tried instead to create an entirely different kind of personal computer.

The first, flawed version of what Jobs had in mind was a machine called the “Lisa,” which Jobs began working on even before the IBM PC was unveiled. Its purpose was to be vastly easier to use than normal computers—less austere and arcane-seeming, “user friendly” before that term became a cliché. Instead of typing in commands from a keyboard—“DIR C:” or “CD D:DOS”—the person using the Lisa moved a small hand-held mouse to control a pointer on the screen, and clicked the mouse to indicate his intentions. The Lisa, which cost about three times as much as a comparably powered IBM PC, was a business flop, but by 1984 Apple was ready to unveil a much better version of the same idea.

This machine was the Macintosh—“the computer for the rest of us,” according to Apple’s ads. It was small and rounded, while IBM-type machines were big and boxy. The members of its design team were featured in advertisements, whereas the IBM machines seemed themselves to have sprung from machines. Learning to use it was supposed to be much faster than learning the arcane commands for operating an IBM-style PC.

The introduction of the Macintosh ten years ago marked the high point of Jobs’s career. He was the chairman of Apple at the time, holding stock valued at well above $100 million, and was one of only three people under age thirty on Forbes’s first list of the four hundred richest Americans. (The other two were oil heiresses.) During the broadcast of the Superbowl game in 1984, Apple announced the Macintosh’s arrival with the most famous advertisement in the history of the high-tech industry. Into a dismal workhouse full of inmates with shaven heads, being harangued by the magnified face of Big Brother on an oversized screen, runs a brave young woman athlete who hurls a sledge-hammer at the screen, shattering the image of Big Brother. The symbolism may seem overblown now, but at the time it represented the way Jobs felt about himself, Apple, and the Macintosh. IBM then seemed to be an unstoppable force, and Jobs saw himself and his computer as instruments of liberation and democracy.

The Macintosh endures, but within a year of its introduction Jobs was on his way out of Apple. As the company expanded, Jobs’s disorganized, back-pocket approach to management became a serious problem. In mid-1985 Jobs lost a crucial power struggle against John Sculley, who had come into the company from PepsiCo to apply standard corporate practices to Apple. By the end of the year Jobs had left Apple.

What he has done since then is the subject of Randall Stross’s wonderful book, which combines clear mastery of the relevant technology with great story-telling skill. Stross says that despite being pushed aside at Apple, Jobs had lost little of his self-confidence or his belief that he could again reshape the computer business, as he had helped do with the original Apple and the Macintosh. At the same time, Jobs burned with a sense of injustice that made his desire for another big success all the more intense. The years after he left Apple were exactly the years in which Bill Gates, of Microsoft, replaced Jobs as the young symbol of the computer business and grew far richer than Jobs had ever been. (Depending on the price of Microsoft stock, Gates’s net worth has ranged between $6 and $8 billion in the last two years.) Stross is especially effective in contrasting Jobs and Gates, and in explaining why Jobs considered himself the more ambitious, serious, daring figure.

Gates’s business success has been similar to that of railroad or utility titans early in the century. His company, Microsoft, got its crucial break in 1980, with the contract to provide the “operating system” for the IBM personal computer. At the time, Microsoft’s main business was selling programming languages, like BASIC and Pascal, for computers. According to the best overall history of the personal computer industry, Gates, by Stephen Manes and Paul Andrews (recently released in an updated paper-back edition), not even Bill Gates realized how lucrative and important the contract to provide the operating system for the IBM PC would turn out to be.

The operating system allows the machine to accept information from the keyboard, display it on the screen, store it on disk, send instructions to the central processing chip for execution, and so on. By the mid-1980s Microsoft’s operating systems were becoming the dominant ones for PC-compatible machines. Since then the company has in effect collected royalty payments every time an IBM-compatible personal computer is sold. Nearly all of these machines are equipped with Microsoft’s Disk Operating System, “MS-DOS,” and most now come with a copy of its “Windows” graphical environment. The resulting steady flow of income has provided the money with which Microsoft can steadily expand the other programs it offers. Gates, Stross says,

stood by what he called an evolutionary approach, improving existing software incrementally…. When Microsoft introduced a new kind of software program, more often than not, it would be deeply flawed. But successive versions would eliminate the problems, and by dint of steady investment and persistence the program would mature into a well-received product that computer owners could use on the personal computers they already owned. Jobs’s style was antithetical:… Jobs’s customers had to buy new computers and new software and invest considerable time learning how to use both…. Jobs blazes the trail, and Gates comes behind, incorporating Jobs’s revolutionary leap in a more modest fashion, but one which appeals to the millions of computer users who are reluctant to jettison past investments.

The “revolutionary” step Jobs envisioned when he left Apple was a machine he called the NeXT computer, with software known as NeXTSTEP. (The computer business is full of strange orthography; programs have names like dBaseII or AmiPro 3.0 or InfoSelect. By these standards, “NeXT” looks like a normal name. Stross says that the word “next” was a self-indulgent reference, by Jobs, to the next phase of his career.) The machine and its programs would be completely new, designed from scratch to be simpler to use than existing computers.

In one sense Jobs succeeded. In the fall of 1988 he introduced the “NeXT Cube,” a small, elegant box with black-matte finish that contained the working hardware of the computer. It was connected to a monitor almost twice as large as normal computer screens, also with a black-matte finish and with an extremely high-resolution display. The new NeXTSTEP software appeared soon thereafter. Since no existing word processor, spreadsheet, or other program would run on Jobs’s new machine, he had developed a system that would greatly simplify the task of writing programs for the NeXT. This NeXTSTEP software was “object oriented,” which meant that programmers could combine predefined modules to build a new word-processing or data-base program, rather than having to write code for the entire program. (The object-oriented approach is roughly comparable to assembling a stereo system from components, selecting an amplifier, a CD player, speakers, and so on, and plugging them together in the way you want, rather than having to find a complete system that exactly suits your tastes.)

In a technical sense, Jobs met his objective, but in the real marketplace the NeXT completely failed. Through the end of 1992 NeXT sold a total of 50,000 computers—or, as Stross points out, as many as Apple sells every six days. Early in 1993 the company left the computer-making business altogether, with cumulative losses of some $40 million. It exists now solely to sell its NeXTSTEP software to companies producing programs for IBM-style machines.

What went wrong? Stross spends most of the book answering that question. One principal explanation is that the fundamentals of the market had changed since Jobs introduced the Macintosh. When the Macintosh appeared, fewer than one million Americans owned personal computers (plus a handful outside the United States). By the time of the NeXT, more than 50 million PCs had been sold worldwide, representing a vast investment in the existing standards that Jobs hoped to overturn.

Stross writes that Jobs also misremembered the business history of the Macintosh and therefore made a major mistake with the NeXT. The real business history of the Macintosh, as Stross tells it, involved a struggle to overcome IBM’s three-year lead in selling machines and establishing a standard for personal computers. The Macintosh was completely incompatible with existing computers; no program written for IBM-style computers or for earlier Apples would run on it. To sell the Macintosh, Apple had to convince consumers to abandon their previous investment in machinery and software.

Apple’s management decided that its best hope lay in selling the Macintosh to college students. Few of them already owned computers, so they would not worry about their lost investment in IBM-style machines. The hip image Apple cultivated for the Macintosh would presumably attract young users. And if Apple could convince colleges to adopt the Macintosh as a standard, encouraging or even requiring students to purchase it, the company might quickly attain high-volume sales.

This is exactly what happened. Through painstaking effort and shrewd salesmanship, Apple managed to get a consortium of major universities to embrace the Macintosh, offering it at a discount to students as the “official” university computer. Stross says that the Macintosh might not have succeeded without this coup—and that the university sales strategy could never have succeeded if Apple had not ruthlessly held the price of the Macintosh down. (Typically it sold to students for between $1,000 and $1,500.)

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