On March 5, 1975, Steve Wozniak attended the opening meeting of the Homebrew Computer Club in Menlo Park, California. Menlo Park has long been a hub for technology in the US. Serving as a gateway to Silicon Valley and located near Stanford University, the incubator of modern US digital technology. Firms like Cisco, HP, Google, Sun, Meta, and Instagram are all connected to the Bay Area. Woz and other computer hobbyists came together to consider the Altair 8800, which claimed to be the first personal computer. Bill Gates wasn’t himself a Homebrew member, but he knew about them and that Altairs were selling, but his software for the machines wasn’t, so when he learned that a member-hacker of the club shared a “borrowed” copy of his Microsoft BASIC with the computer club, Gates was livid and wrote angry letter to the club, ”As the majority of hobbyists must be aware, most of you steal your software,” the letter said. ”Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid?”
US companies like HP had made big scores in the past, but Gates knew something seminal about the difference between hardware and software. Hardware could make you rich, but for greed to be fully realized, writing a piece of software once and then making millions of copies and selling each one with a locked-down license was truly the Big Score. But clubs like this shared code to expand tech information and the reach of this new technology. “Hacker Ethic” members like Woz viewed this technology as a means to benefit humanity and advance social justice. That notion is best expressed today by Linux and Wikipedia, a shared endeavor to make the world a better, more equitable place. Entrepreneurs like Jobs and Gates realized that personal computing and the software required to use it were the door to unlimited riches.
While the “real” computer world, IBM, HP, Honeywell, Unisys, and Digital Equipment lived in the rarified air of mainframes and engineering computers, clubs like the Homebrew Computer Club were focused on making computers available to enthusiasts like the Altair and the IMSAI 8080, both of which depended on the groundbreaking Intel 8080 8-bit microprocessor. Interacting with these computers was initially tedious, requiring toggling switches to enter binary machine code and then monitoring LEDs to read the output. The IMSAI 8080 was the computer featured in the movie “War Games,” but with S-100 expansion cards for CPU, memory, video terminals, and disk drives, and it ran CP/M. Thus configured, it was a “modern” computer, capable of what was shown in the movie and of running games like Star Trek and Zork, as well as BASIC programming.
What Woz saw at that first meeting made him realize he could build something better. Woz began working on the Apple I, designing it to be more than a basic platform where hobbyists would only add cards or just flash lights by flipping switches. Instead, it performed useful functions from the start. The Apple I and Apple II were both usable “out of the box” and included built-in displays and keyboard interfaces. Unlike the Apple I, the Apple II featured a manufactured case, color graphics, and a disk drive. These features moved computers from simple hobbyist kits to effective tools for education, business, and gaming.
But before Apple existed, Wozniak and Jobs were already innovating by creating and selling “blue boxes,” electronic devices that allowed users to access phone systems without paying. In 1971, Ron Rosenbaum wrote an Esquire article, “Secrets of the Little Blue Box,” about ‘phone phreaks’—people who exploited telephone networks by building these devices. Jobs and Wozniak worked together to make and sell blue boxes, earning $6,000. The phone company enabled this by mistakenly allowing a technical journal to publish the exact frequencies needed for access; a Bell engineer had included a list of tones in an article on switching theory.
The most famous phone phreak was Captain Crunch, an Air Force serviceman who discovered that the toy in the Captain Crunch breakfast cereal emitted a perfect 2600-Hz tone which was the frequency used by AT&T to manage network trumks and tricked systems in to entering “operator mode” which allowed them to fool the system into thinking a call had ended, allowing for a new free call! In the movie “3 Days of the Condor”, Robert Redford plays a CIA analyst who uses manual phone phreaking to record the tones of a tapped call and then call that number back. Matthew Broderick in War Games does a little phreaking of his own when he uses a drink tab to short-circuit a pay phone into thinking a coin had been inserted to make a free call… which was actually a thing.
Woz & Jobs went from phone phreaks to the first Apple I and II, which became the first personal computers. Their “Big Score” was hardware, but the Big Score wasn’t really in chips and peripherals, or even in fully realized PCs with a keyboard & display. It was software. When the Macintosh was revealed in January of 1984, it was an amazing intro. When it woke up and said “Hello,” we were stunned, and everyone wanted one. But the flaw in the first Mac wasn’t hardware; it was software. Apple had incorporated a beautiful WYSIWYG graphical OS “borrowed” from the Xerox Alto, and that was amazing enough, but what could it do? The first Mac, the 128k Mac, never really took off because it lacked the memory and software to really be productive for business or individuals. It wasn’t until the 512k Fat Mac was released, and then, in 1985, PageMaker, Adobe Postscript, and the Apple Laserwriter made it a desktop publishing platform that created the desktop publishing industry. WYSIWYG, PageMaker, Adobe PostScript, and the LaserWriter were the Big Score for Apple. It was software that made the “scoring” so big, not hardware.
Software was the key. One of the most famous examples was that of Dan Bricklin, who was an MBA student at the Harvard Business School and developed VisiCalc for the Apple II after he realized, when teaching a class on spreadsheets, that he had an error in a cell and then had to go manually change the value in every other cell. He imagined a calculator like his TI Business Analyst, with a trackball that could dynamically update and correct spreadsheets on the fly. He sought help from programmers to write the code. Dan Fylstra convinced him to write it for the Apple II, and when it was finally released in 1979, it was an instant hit, and Apple II computers with ViviCalc included flew off the shelves. IBM took notice, and in 1981, they released the IBM PC, followed in 1983 by Lotus 1-2-3 was a much-improved business spreadsheet app that was released exclusively on the IBM PC, which spelled the end of VisiCalc, and the IBM PC took over a significant share of the personal computer space from Apple.
Microsoft’s empire was created by software. Apple’s was hardware enhanced by a beautiful interface and a killer app, Desktop Publishing, but that made it a niche product compared to the IBM PC and later IBM clones that mostly took over the business personal PC space while Apple limped along through the 80’s close to extinction until Jobs came back in 1997 and created the iMac, the iPod and ultimately the iPhone and iPad. Software had transformed technology from a slow-moving hardware business into a rapidly scalable, high-margin business where a small team could, almost overnight, create a startup that ramps up massively, delivers huge returns, and has life-changing IPOs. The Big Score finally returned to Apple, and it’s vertically integrated model of hardware, OS, and software.