The Commodore Deal Falls Through

been hearing all sorts of things about computers during the past ten years through the media. Supposedly, computers have been controlling various aspects of their lives. yet, in spite of that, most adults have no idea what a computer really is or what it can or can't do Now, for the first time, people can actually buy a computer for the price of a good stereo, interact with it and find out all about it We started a little personal computer manufacturing company in a garage in Los Altos in nineteen seventy six. Now we're the largest personal computer company in the world. We make what we think of as the Rolls Royce of personal computers. It's a domesticated computer ost Pe expect blinking lights, but what they find is that it looks like a portable typewriter, which connected to a suitable readout screen, is able to display in color. There's a feedback it gives to people who use it, and the enthusiasm of the users is tremendous We're always asked what it can do and it can do a lot of things. But in my opinion, the real thing it is doing right now is to teach people how to program the computer These are the words of a twenty two year old Steve Jobs quoted in the november fourteenth, nineteen seventy seven issue of the New Yorker. Welcome to Design in California, where we are telling the best stories from across fifty years of Apple history. My name is Mike Hurley and I am joined byy Jason Snell, Hello Jason Snell Hello, Mike Hurlely. It's good to be back. So many decades, so many eras, so many different stories to tell. Really excited to be. telling those stories with you. Jason, what is this computer that Steve Jobs is talking about here in the New Yorker He is talking about the Apple two computer, Mike. Okay. the Apple two Steve Wzniak's second computer design at least under the Agis of Apple computer Now We are here continuing a story that we started on the fiftieth anniversary of Apple, which is to tell some of the story of the very earliest days P history and very early history. We're talking nineteen seventy six when they signed those papers through basically early nineteen seventy seven, extending essentially to where young Steve Jobs shows up randomly in an article in the New Yorker Last time we talked about how Apple came to be how it all happened because a twenty six year old Steve Wasniak designed his own personal computer circuit board And a twenty one year old Steve Jobs had the idea to produce a bunch of them and sell them to a local compputer store now When we last left you, Apple had registered as a partnership, It had gotten some help in doing Net thirty accounting from their suppliers because they didn't have the money otherwise to buy the supplies, to assemble the computers to fulfill that first set of Apple ones to their first customer, which was a computer store called the Bite shop Once they did that, they had money left over from their profits to make some more Apple ones and start to sell those That's where we left it eventually A would need to become a real business. Eventually they would need to ship a real product, not a sort of pre assembled circu bo product was this new computer Steve Wasniak had been working on. that would ultimately be known as the Apple two And we will get to that computer in this series And we will get to the start of a real business of Apple compomputer. but first, We need to take a few steps back Because I need to take you back to the late summer of nineteen seventy six where the Apple O is finally out there. and it's kind of a failure It's not a technical failure necessarily Everybody agrees it was a brilliant feat of engineering on the part of Steve Wzniak The issue was that noobbody was really buying them The truth is that even though the Apple one was a major step forward in terms of the hobbyist computer world You didn't have to buy the chips and install them yourselves, right? That was part of what they were doing It was still a do it yourselffers' device What Steve Jobs deellivered in our last go round with this to the bite shop. And what Apple advertised in some computer magazines and took to the Hbrew compomuter club You still needed to attach a keyboard and a display And talking about screwing it into a block of wood. you had to put it in a case. It was not a consumer product. It was just Better hobbyious product And it was a better sort of hobbyist product, but what it was not was a computer for the masses. This is not what they were doing. and as a result, the volumes of what Apple was selling were, you know, not even close to some early PC's like the Alire, which was again, a lot less friendly, but that didn't end up mattering Apple was a very, very niche player. So do we have a sense for The computers that were delivered to the bite shop Were they sold Do we get a sense that these were successful enough for them? I do. I think that the bike shop was catering to a hobbyist market. who appreciated the fact that they were completely assembled, even though there is that famous line about how the guy from the bike shop wanted it with keyboards and displays, which they're like, arere you kidding? That's not, you know, that's not something we're going to be doing. But that's also a clue, like I have to Imagine that that was also in Steve Jobs' mind that, oh, what people really want and what we really should get them is a whole product. Yeah. And this is the moment, right? This is the moment that Apple One is kind of like losing steam or has lost steam. Apple was created to make the Apple O. It really, that was it. So Does Apple go down one path and become a forgotten hobby project launched by a couple of kids from the valley who should have known better Or does it turn into a real business? This is the moment where they have to figure that out When I haveve been thinking about this and like reflecting on our last episode And even you saying right now this idea that the Apple one is kind of a failure I guess the assumption is at this point that nobody would have assumed that Apple would have been able to be a company to be taken seriously at this point. because I would guess There are many small teams in the valleet trying to do something in this space at this time And that while the Apple one is interesting It isn't an obvious path that we get to where we are today. Yes, including one of the prime movers in the Homebrew Computer Club, who will be hearing from soon who has started his own computer company. So there are a lot of computer companies out there. This is not there is nothing The most notable thing about Apple in this point is that they would become Apple that we know. This is going to come back again and again, Mike in this series, which is It's a couple of kids and their friends making technology things in one of the kids parents' garage. It's not impressive. We are only talking about this because of who they became. right, not because what they were doing at this exact point was really that notable Yeah, well, it it's very formative for where they go. Yeah. and they are doing things technically that are going to be the reason they lift off. R. Okay. But they're not quite there yet. The combination, the alchemy between Steve Jobs and Steve Wzniak is going to launch them on that path But at this moment I guess what I could say is There's a path here where Apple just ends right now. That's like, well, we had fun, didn't we? We sold those things and made a little bit of money But that's not what happens. So part of this is the creative drive of Steve Wosniak offtten think so linearly about this which it's like, well, they made the Apple one and they sold the Apple one. And then there's this idea like and they did that for a while and then they stopped and said, well, I guess what comes next? Apple two, I guess, let's do that. And that's not what happened. Steve Wzniak designs the Apple one setetting off everything we talked about in our last episode, he's not sitting still. He knows all of the limitations of the Apple one And he wants to make his next computer. So he's already working on what will become The apppple to. he has been counting all the ways that he could make a better computer than that first computer that he designed That would be the basis of a new product from Apple. The problem is they're going to need money They're going to need money. because they already had this issue with the Apple one to get enough money to make them and the thirty day net the technology supplier in order to get it to work, all of that And keep in mind that they're only this far because Steve Jobs sold his van and Steve Wzniak sold his HP calculator And even then they had to use the net thirty day credit policy from their supplier. So they don't have money. They don't have money. So what are they going to do build a real consumer product instead of just a hobbyist gadget. they're going to need serious investment and a business plan. probablybably a lot more discipline than you might expect from a couple of twenty somethings in their friends. who are assembing computers in a garage. Yeah Or alternatively, you could just sell the company and provide the technology for a more established company with a ready made hit new personal computer. You could do that. You could sell it Wish they tried. And they failed to do that. So In our last set, we talked about Mike Marla Who is thirty four. He seems like the wise old man, right And compared to Jobs and Wasniak, he is the wise old man, but he's only thirty four But he made enough money at a couple of previous tech companies to retire He likes messing around in Silicon Valley. he enjoys advising other up and coming Iustry types and the two Steveves, Jobs and Wosniak. are people he's going to help I want to be clear, the reason that Mike Marola comes into the scene and helps make Apple what it is going to be is because Steve Jobs is trying to sell Apple to anyone who might buy it. that this is the the other path. We can make a computer Surely a large company with lots of money will give us money take our technology and then help us build the next personal computer. That's the big idea that Steve Jobs has is can I take this little Apple thing that we did, this hobby sell it That's the plan. So Jobs is going around the valley. He's trying to sell Apple to the highest middlest or lowest bidder, I guess And that's how Mler comes into the picture when this thing becomes on the table It all will lead to Mike Markcala, but just putting in the context, Mike Marcala is always like, oh, well, and then he invested in Apple and G them a credit line and then everything worked out The truth is only happened because they were trying to just sell out And that didn't work. so they had to do Apple instead I actually didn't know about that. I didn't know because I guess it's not in the it's not in the condensed histories that people tell now that Apple was essentially trying to be sold for partots. One of the things we're trying to do with this show. is tell these stories and I hope that we are unflattening some of the history because there is a simple flat history of Apple that skips over a lot of these twists and turns that we're trying to get across here that are part of the actual story. The story is much as with any history, it's much more complicated and messy than the simple version that you might have heard And this is definitely an example of a path almost taken that literally, if Steve Jobs had gotten his way, they would have sold off Apple to somebody and they wouldn't have had to worry about it ever again. That didn't happen. Well, that feels like as perfect time as any for us to take a break. And then when we come back We can talk about the near misses of selling apple spiller sounds good Hello everybody. I hope you're enjoying this first preview episode of Designed in California. If you're enjoying this, you should go back to the Kickstartter campaign at design.F. Thank you so much if you have. So many of you have, in fact We are now going to be doing fifty episodes of this show for its first year. Essentially designed in California will be a weekly podcast when it launches later on this year. So thank you so much to all of you that have. We have been blown away by the support It really means the world to us and we're so excited that we're going to be able to get to tell you these stories over the next year. There's more to do and if you haven't backed yet or If you want to look at some of the higher level pledge levels where we've got cool stuff coming you can still adjust your pledge. We have stretch goals that we're working toward including And some of these have been announced and some of these will be announced as we go, but like including doing an interview series where I talk to people who have either written about Apple or who have worked at Apple about some aspect of history that they were involved with We can throw those in on the pile as well. And there will be more beyond that. Just stay tuned to the Kickstarter page and the kickstarter updates as we move along because we've got a whole month because this campaign ends july first Yeah in the morning, Pacific time. So lot of time left for us to hopefully reach and then add new stretch goals. We thought we would have more time to arrange a lot of these things, but your support has really blown us away.. We couldn't be happier. You know as we said in Ugrade, Jason and I been so excited about this project and we've really wanted this kickstart to the fund so we could make this show for you because we want to make it because we enjoy it and we know you're going to love it. We have so much great stuff planned If you just go to designed.Fm, you can read more. We're going to be updating the campaign throughout the whole month. We're going to be popping in during every one of these preview episodes and kind of giving you updates about where we are and the things that we're planning on. There is so much left to share throughout the campaign. So please go and check it out designed.f All right, so welcome back. Jason Can you fill me in? Wh was on the table to try and buy this little Apple computer company well, there are you, the giants of Silicon Valley of course. So when we talked about this on the fiftieth anniversary of Apple, I mentioned that this all started with Steve Wzniak saying, Well, I work at Heulet Packard. So I should probably give them the opportunity to buy the Apple O design before I go and make a company of my own. And every division of Hewlet Packard turned him down. notot going to be HP Now Steve Jobs had been working at Atari, the video game company, which for people who don't know was the name in video games. They did pong They were the the be all end all of Breakout. This was the earliest video game era and Atari was one of the first huge successes in Silicon Valley And since Steve had worked there jobs, he pitched them on buying Apple ends up meeting with the president of Atari, who is not the person that he'd been working with when he worked there And this guy's named Jo Kenan And he is a much more conservative business guy than the people Jobs had been working with at Atari and Okay. This is what I was referencing before And while it is a unfair flattening of the history, if you will, to say that Silicon Valley was a bunch of smelly hippies This is an era where Steve Jobs didn't want to bathe, only ate fruit, and frequently walked around barefoot It's not speaking for all Silicon Valley residents, but specifically for jobs. Joe Keane and the President of Atari could not stand him And he said Not only are we not going to buy this thing, get your feet off my desk Imagine. Just imagine. I feel like, I mean, obviously this is a different time. It was a time that I did not But I struggled to be able to reconcile a person who trying to either A start a company or B sell a company which is a very capitalistic endeavor a success driven end goal but then act in this way If you have a personal decision to only for and notot bathe, fine. But like but then you go into these rooms and put your fe on people's desks, like I feel like I can't get into the mind of the man who is doing this. It's very peculiar to me. The more I dive into Steve Jobs for this project The more I am reminded what an odd person he was throughout his life, and he grew a lot. There was a lot of personal professional growth no doubt In this era It is just kind of like, I don't know. I mean, he's kind of wild I mean, he grew up in the valley, but to be fair fair in the in the sixties and seventies He doesn't know what he's doing. I mean, that's that's really it. He clearly is so enamored with what they're doing and what they have and who he is, that he thinks that it's fine. And he's running into people who are more establishment types, right? I mean, there is a hippies and squares dynamic going on here a little bit. and Eventually, Steve Jobs will get with the program and put on a suit and stuff, but this is not that Steve Jobs. This is Summer of nineteen seventy six, Steve Jobs. And he's putting his feet up. I hope he was wearing shoes when he put his feet up on their desk. I'm assuming he wasn't, which is I'm assuming he wasn't. But who knows, right? We can't know. Noan Bushnell, who was the CEO of Itari at the time because Kenan was the president Nolan Bushnell had worked with Steve Jobs. and what he said, I believe to David Pog in his Apple first fififty yearsars book Ecellent book onn sale now Brishneel said, he asked me if I would put fifty thousand dollars in and he would give me a third of the company I was so smart. I said, no It's kind of fun to think about that when I'm not crying. In hindsight, this is a giant mistake, right? But at the time Do you blame any of these people for saying I'm not gonna to give these kids money? Even if jobs was more regular It's still a fly. It's a tough sell. Yeah. But he's not putting his best foot, his best dirty barefoot for Jobs also pitched a bunch of venture capital firms in Silic Valley where were VC existed even in the seventies folks, yes They all passed What next? two jobs? Like who will buy this Ale computer for me? He heard that there was a company that was big in electronic calculators. So before their computers There were calculators. so people were using electronics to build calculators or adding machines sometimes they were called, which I think is a whole. They never subtracted. They only added. We added backward to get the subtraction just. It was Commodore Business machines, the name of the calculator maker He had heard that they were interested in getting in the personal computer game And they had an office in Silicon Valley in Santa Clara. So there was a possibility there. L, let me stop you for a moment now and tell you about Commodore business machines The company that people now know if they know them at all as the makers of the Commodore sixty four, right? That was their hit. computer product in the eighties. There are a lot of our friends who are children of the C sixty four and love it and had it and played games on it. And that was that was Commodore to them This is before that Commodore is a little shady, I'm going to say Maybe a lot, shady. I've been really excited to talk about this b. So Michael S. Malone wrote a book called Infinite Loop that I think is out of print now, but it's a great book about Apple. He refers to Commodore as registered in the Bahamas, inccorporated in Canada, lists its headquarters of Santa Clara, and at times appear to be run out of Norristown, Pennsylvania. This is just normal stuff that you do when you have a regular business on the up and Pfectly normal business. Just regular smooth stuff Yeah. Yeah, well, because it's so normal, you will not be surprised by the other totally normal stuff that happened to Commodore. Like a decade earlier, its chairman had died under suspicious circumstances while under investigation for defrauding investors Perfectly norm It had become a major player in adding machines and calculators led By their CEO, a person who has the most main character energy of maybe anybody ever. A guy named Jack Tremill. Okay Trmill was Polish. He was a survivor of Auschwitz After being rescued from a Nazi labor camp, he emmigrated to the U.S. He learned how to repair office equipment, including typewriters, and started a business. It's American dream folks. It was post war America. He wanted to connect it to the military. He couldn't get the names admiral or general so the company became Commodore portable typewrit. Hang on a minute US USS. I mean, the Navy needs typewriters too, I guess. No. I mean, the idea is like everybody is very, you know, so many people are veterans of World War two in this era and he wanted to kind of like steal a little bit of that valor maybe and addmiral in General were taken. So Commodore it was His first big deal And I am not making this up was importing tyypewriter parts from Czechoslovakia. Okay to Canada to avoid importm issues. It's a tariff thing involving the Cold War because of course, Czechoslovakia was part of the Warsaw pact was part of the Russian sphere of influence, the Soviet sphere of influence. So the US didn't want you importing your Czechoslovakian typewriter parts. So Jack Tramill used Canada as a way station that he would assemble his typewriters from the parts in Canada And then the Canadian assembled typewriters, nobody mentioned Czechoslovakia. would be ressold throughout North America So that's that's how he built Comm and then he later pivoted to the adding machines and electronic calculators as well This guy If you've not already detected it, was a character Bald, he was gruff, he was impatient with employees. he was famous for withholding payment to suppliers, and generally throughout all of the references I can find to him Terrifying, Just terrifying. He would sometimes shut down all conversation. This was his big move. He would shut down all conversation. with people he felt considered themselves superior to him because of their educational background. because he was a poor kid from Poland who got out of the labor camp, got to the U.S, built himself up bootstraps, right? People who felt all fancy to him declare he also went University He went to the University of Auschwitz. Oh my God. Well I mean, And that station there. like okay. and then everybody leaves. I don't know what you're supposed to say to that. I don't. I mean What can you say? I mean, it's probably the way I kept reusing it because it worked every single time. You've heard of conversation starters. This was a conversation stopper. one hundred percent success right on I went to the University of Auschwitz. Man, Jack your meil, everybody. So another feature of Commodore's products, apparently, and their calculators in particular was that they were actually well designed, but then cheaply built. Okay That allowed him to sell them at low prices At some point, Treill was frustrated by his chip partners and he ended out buying MOS technologies, These are the people who made the six five hundred two chip, that was the chip that inspired Wz to make his first personal computer circuit board design. It is very much a Honestly, it's a very much a an Apple kind of move, which is we don't like how this chip business is going. We're going to buy the chip maker And then we're going to own them and then we can get all the chips we want, I guess Along with MOS technologies came the guy who created the six five hundred two, was a guyamed Chuck Petle And he convinced for meil, that Commodore could excel at personal computers too And he knew Chuck Petle knew where they could get a good computer design on the cheap Namely, are you getting it yet? Fr two guys who had to sell their van and calculator to make a computer in a garage pickings right for the taking. We can swoop in there. We can deduck into that garage, write them a check, get their computer and we're good And so this is what they tried sometime in the early fall of nineteen seventy six pedal and another Commodore executive who is not Jackrmal show up at the garage and ask Steve Jobs to suggest a purchase price. And remember, Steve Jobs wants to sell. Yep. This is what he wants. Steve Wzniak describes the scene to Walter Isaacson in the Steve Jobs biography as We'd opened Steve's garage to the sunlight and he came in wearing a suit boy hat This is the Commodore executives, right? Yeah. Okay. All right. So Steve Jobs makes this pit. He says, you can have Apple for a hundred thousand dollars plus some stock in Commodore And you have to guarantee Both of us have full time jobs at thirty six thousand dollars a year. whichich is a lot back then. So today, that's about half a million dollars for the company and jobs that would pay The Steves two hundred grand a year each. So they want to be set up It's a big request. This is one of those Steve Jobs moments, right where because that guy had Hutzpah, you got to say it. He is asking for the moon. He thinks what Apple has which is Wastniak's design is really valuable And so he's going to ask for more money than either of them has ever seen in their lives. Steve Wallm, meanwhile, is watching this And he can't believe it It's like, what are you doing This is a ridiculous amount. You were asking for everything. is this is I think wasz would have been happy to get like pat on the back and a stick of gum for his designs, right? He just he's not thinking about it like Jobs. It's just so Jobs. He's like He sees the big picture which is that that Wzniak's design is revolutionary, but also he sees a company that, you know, they got a lot of money, Maybe they'll pay us a lot of money for it. So the compor people are like, okay, okay We'll take your offer And we'll consider it and they leave Steve Jobs, meanwhile, researching who Commodore is. Oh, wow. So this is all like I've never met these people before. I don't know who they are We want to work in your company forever? I no pedal, but like I need to know if this is going to happen. I need to know who I'm getting into business with. So he starts researching and you know, they Remember when I said they were sort of shady Jobs calls everyone he knows who knows anything about Commodore, and the news is bad. The products are bad Again, good designs, but cheaply built and prone to failure People who worked at Commodore hated it Commodor often didn't pay its bills, which is a red flag if you're trying to get money from them And what Steve Jobs later said about it was, the more I looked into Commodore, the sleazier they were, I couldn't find one person who had made a deal with them and was happy Everyone felt they had been cheated So Steve Jobs. gets on the phone and calls Commodore and says No deal We're not interested. I guess the timeline of that is interesting because he's made the offer and they've gone away to think about it Jobs has had enough time to do some research And Comodore still hasn't said yes or no, which means that they were maybe Considering it, maybe. No they weren't Okay. Well this is all going on. Jack Tremill who was the CEO was like, no. the a Commodore exec who had been interested said they thought it was ridiculous to acquire two guys working out of a garage, which Fair Despite the best efforts of Chuck Petle and his cowboy hat No deal. Inead Commodore did what it always did, which it rushed out a cheaper, less impressive computer nine months later, called the Commodore Pet. And what was said about this whole thing was Pet kind of sickened me. this is what he said to Isaacson. They made a really crappy product by doing it so quick They could have had apple. So So the pet is that more in line with what they were building to become the Apple I persononal disclosure here, the Commod or Pet is the first computer I ever used. Okay It was impressive in the sense that it had the integrated keyboard and display. Right. Somet Apple wouldn't do until the Lisa on the Mac, by the way, the integrated display was not a thing that the Apple two ever had In fact, I do wonder if that aspect of the pet inspired Steve Jobs a little bit in terms of the MAC The idea that it was an all in one in a way that the Apple two wasn't W is not wrong didn't have color It didn't really have graphics. It had like this extra set of characters in its character set that were like shapes and stuff and lines and stuff. so you could like build graphics with it, but it was like if you wanted to do a box, you had to do like Right angle topop line, top line, top line, top, line, top line, right angle the other way. And then on the next line you had to do like Verttical line, a bunch of spaces, vertical line. You would like draw graphics out of these little teeny, tiny Lego almost. It was not graphics. It was not graphics. You could fake it, but it was terrible. Yeah. It was like Asie art, kind of but with some extra characters Eventually Commodore did get there. They shipped the Vic twenty and the Commodore sixty four, neeither of which had an integrated display. bothoth of them attached to TV sets basically But they could have had that all with the Apple two and And that's I think what Steve asniak laments about this whole situation is That Commodore had this right in front of them Question. And this is super important where we go next with this story is Steve Jobs didn't wait to be told no by Commodore Steve Jobs made an enormous request of Commodore that Steve Wzniak thought was beyond the pale And then Steve Jobs said, forget about it. We're not interested All while waz looks along aghast And this is going to become a major issue in the relationship between the two Steves But at this point Clearly Jobs still believes in what they're attempting to do because it seems like he would prefer Contue going it alone and struggling kind of just throw it all in for the only company that's interested in buying them. potentially Yeah, I think I think something must have changed in Steve Jobs' estimation of their potential this point because he could have made a lower offer, lower request to Commodore out of the gate and he didn't And he felt confident in walking away before they could tell him no. And that says something about how Steve Jobs feels about this. But keep in mind the dynamic here, which we will explore Soon which is Steve Wazniak is the engine that's creating the assets for this company, right? He's the creator of the computer that they're going to make or sell Steve Jobs is just like The front man, the hype man. So when he's asking for all that money, You know, he's making decisions for Steve Wzniak on his behalf, essentially because now they're a partnership But Steve Wznik, is the one who's the motor driving this thing and that dynamic is not comfortable And the shenanigans with Commodore, I think lead them down some darker paths You mentioned that Steve Jobs is a hype manan There are places where a hype man necessary and needed And we're actually going to talk about one of those places on our next episode. which is a computer fair in Atlantic City. Oh, there was drama. There was drama and excitement at Atlantic City. We will discuss that in our next episode as well as the inccreasing difficulties between young Steve Jobs and Steve Wzniak as they try to create the partnership that will become Apple compomputer Inor.