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They created the prototype over a weekend on an Apple II they borrowed from someone who would, in effect, become a third collaborator, Dan Fylstra. A recent graduate of Harvard Business School, Fylstra had launched a software publishing company, which focused on games such as chess, that he ran out of his Cambridge apartment. In order for a software industry to develop separately from the hardware industry, it was necessary to have publishers who knew how to promote and distribute products.

Because both Bricklin and Frankston had good business sense and a feel for consumer desires, they focused on making VisiCalc a product, not just a program. They used friends and professors as focus groups to make sure the interface was intuitive and easy to use. “The goal was to give the user a conceptual model that was unsurprising,” Frankston explained. “It was called the principle of least surprise. We were illusionists synthesizing an experience.”87

Among those who helped turn VisiCalc into a business phenomenon was Ben Rosen, then an analyst with Morgan Stanley who later turned his influential newsletter and conferences into a business of his own and then started a venture capital firm in Manhattan. In May 1979 Fylstra demonstrated an early version of VisiCalc at Rosen’s Personal Computer Forum in his hometown of New Orleans. In his newsletter, Rosen enthused, “VisiCalc comes alive visually. . . . In minutes, people who have never used a computer are writing and using programs.” He ended with a prediction that came true: “VisiCalc could someday become the software tail that wags (and sells) the personal computer dog.”

VisiCalc catapulted the Apple II to triumph, because for a year there were no versions for other personal computers. “That’s what really drove the Apple II to the success it achieved,” Jobs later said.88 It was quickly followed by word-processing software, such as Apple Writer and EasyWriter. Thus did VisiCalc not only stimulate the market for personal computers, but it helped to create an entire new profit-driven industry, that of publishing proprietary application software.

THE IBM OPERATING SYSTEM

During the 1970s IBM dominated the mainframe market with its 360 series. But it was beaten by DEC and Wang in the market for refrigerator-size minicomputers, and it looked like it might be left behind in personal computers as well. “IBM bringing out a personal computer would be like teaching an elephant to tap dance,” one expert declared.89

The company’s top management seemed to agree. So they considered instead just licensing the Atari 800 home computer and slapping IBM’s name on it. But when that option was debated at a July 1980 meeting, IBM’s CEO Frank Carey dismissed it. Surely the world’s greatest computer company could create a personal computer of its own, he said. Doing anything new at the company, he complained, seemed to require three hundred people working three years.

That is when Bill Lowe, who was the director of IBM’s development lab in Boca Raton, Florida, piped up. “No, sir, you’re wrong,” he stated. “We can get a project out in a year.”90 His cockiness got him assigned the task of overseeing the project, code-named Acorn, to create an IBM personal computer.

Lowe’s new team was led by Don Estridge, who chose Jack Sams, a gentle southerner who was a twenty-year veteran of IBM, to be in charge of piecing together the software. Given the one-year deadline, Sams knew that he would have to license software from outside vendors rather than have it written in-house. So on July 21, 1980, he placed a call to Bill Gates and asked to see him right away. When Gates invited him to fly to Seattle the following week, Sams replied that he was already heading for the airport and wanted to see Gates the next day. Sensing a big fish hungry to be hooked, Gates was thrilled.

A few weeks earlier, Gates had recruited his Harvard dorm mate Steve Ballmer to Microsoft as the business manager, and he asked Ballmer to join him at the IBM meeting. “You’re the only other guy here who can wear a suit,” Gates pointed out.91 When Sams arrived, Gates was also wearing a suit, but he did not quite fill it. “This young fellow came out to take us back, and I thought he was the office boy,” recalled Sams, who was dressed in the IBM standard blue suit and white shirt. But he and the rest of his team were soon dazzled by Gates’s brilliance.

At first the IBM folks wanted to talk about licensing Microsoft BASIC, but Gates turned the conversation into an intense discussion about where technology was heading. By the end of a few hours, they were talking about licensing all of the programming languages Microsoft had or could produce, including Fortran and COBOL in addition to BASIC. “We told IBM, ‘Okay, you can have everything we make,’ even though we hadn’t even made it yet,” Gates recalled.92

The IBM team returned a few weeks later. There was one essential piece of software, in addition to these programming languages, that IBM was missing. It needed an operating system, the software program that would serve as the foundation for all of the other programs. An operating system handles the basic instructions that other software uses, including such chores as deciding where data should be stored, how memory and processing resources should be allocated, and how applications software interacts with the computer’s hardware.

Microsoft did not yet make an operating system. It was instead working with one called CP/M (for Control Program for Microcomputers) that was owned by Gary Kildall, a childhood friend of Gates who had recently moved to Monterey, California. So with Sams sitting in his office, Gates picked up the phone and called Kildall. “I’m sending some guys down,” he said, describing what the IBM executives were seeking. “Treat them right, they’re important guys.”93

Kildall didn’t. Gates later referred to it as “the day Gary decided to go flying.” Instead of meeting the IBM visitors, Kildall chose to pilot his private plane, as he loved to do, and keep a previously scheduled appointment in San Francisco. He left it to his wife to meet with the four dark-suited men of the IBM team in the quirky Victorian house that served as Kildall’s company headquarters. When they presented her with a long nondisclosure agreement, she refused to sign it. After much haggling, the IBM folks walked out in disgust. “We popped out our letter that said please don’t tell anybody we’re here, and we don’t want to hear anything confidential, and she read it and said I can’t sign this,” Sams recalled. “We spent the whole day in Pacific Grove debating with them and with our attorneys and her attorneys and everybody else about whether or not she could even talk to us about talking to us, and then we left.” Kildall’s little company had just blown its chance to become the dominant player in computer software.94

Sams flew back to Seattle to see Gates and asked him to figure out another way to conjure up an operating system. Fortunately, Paul Allen knew someone in Seattle who could help: Tim Paterson, who worked for a small firm called Seattle Computer Products. A few months earlier Paterson had become frustrated that Kildall’s CP/M was not available for Intel’s newest microprocessors, so he adapted it into an operating system that he dubbed QDOS, for Quick and Dirty Operating System.95

By then Gates had come to the realization that one operating system, most likely the one chosen by IBM, would end up being the standard operating system that most personal computers would use. He also figured out that whoever owned that operating system would be in the catbird seat. So instead of sending the IBM folks to see Paterson, Gates and his team said that they would handle things on their own. Ballmer later recalled, “We just told IBM, ‘Look, we’ll go and get this operating system from this small local company, we’ll take care of it, we’ll fix it up.’?”

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