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Triumph of the Nerds: Part 2: Riding the Bear | Multimedia HyperGuide | YouTubeToText
YouTube Transcript: Triumph of the Nerds: Part 2: Riding the Bear
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the story so far
in 1975 Edie Roberts invented the Altair
personal computer it was a pain to use
until nineteen year old pre billionaire
Bill Gates wrote the first personal
computer language still the public
didn't care then two young hackers Steve
Jobs and Steve Wozniak built the Apple
computer to impress their friends we
were all impressed an Apple was a
stunning success by 1980 the PC market
was worth a billion dollars now view on [Music]
[Music] [Applause]
we are nerds
most of the people industry are young
because the guys who had any real
experience were too smart to get
involved in all these crazy little machines
machines
it really wasn't that we were gonna
build billion-dollar businesses we were
having a good time
I thought this was the most fun you
could possibly have with your clothes on
when the personal computer was invented
more than 20 years ago it was just that
an invention it wasn't a business these
were hobbyists who built these machines
and wrote this software to have fun but
that has really changed and now this is
a business this is a big business [Music]
[Music] [Applause]
just goes to show you that people can be bought
bought [Music]
how the personal computer industry grew
from zero to 100 million units is an
amazing story and it wasn't just those
early funky companies and nerds and
hackers like Apple that made it happen
most of this transformation from Bobby
to big business can be linked to three
letters by B and [Music]
[Music]
IBM was and is an American business
phenomenon over 60 years Tom Watson and
his son Tom jr. built with their workers
called big blue into the top computer
company in the world but IBM made
mainframe computers for large companies
not personal computers at least not yet
for the PC to be taken seriously by big
business the Nerds of Silicon Valley had
[Music]
IBM never fired anyone requiring only
undying loyalty to the company and a
IBM hired conservative hard workers
straight from school few IBM errs were
they're turn-ons were giant mainframes
and corporate responsibility
they work 9:00 to 5:00 and on Saturdays
this is intergalactic HQ for IBM the
largest computer company in the world
but in many ways iBM is really more
country than it is a company it has
hundreds of thousands of citizens it has
a bureaucracy it has an entire culture
ok Sam we're ready to visit IBM country
obviously we're dressed for the part now
when you were in sales training in 1959
for IBM did you sing company songs
absolutely well just to get us in the
mood let's sing one right here I have
the IBM the songs of the IBM and we're
gonna try for number 70 for our IBM
salesman sung to the tune of jingle bells
bells
IBM happy men smiling all the way oh
what fun it is to sell products night
and day
IBM Watson men partners of TJ in his
service to mankind that's why we are so
gay now gay didn't mean what it means
today then remember that right ok I
guess it was ok perfect [Music]
when I started in IBM there was a dress code
code
that was an informal oral code of white
shirts you couldn't wear anything but a
white shirt generally with a starched
collar I remember attending my first
class and a gentleman said to me as we
were entering the building are you an
IBM ER and I said yes he had a
three-piece suit on vests were of the of
the vogue and he said could you just
lift your pants leg please I said what
and before I knew it he had lifted my
pants leg and he said you're not wearing
any garters I said what he said your
socks are not pulled tight to the top
you need garters and sure enough I had a
iBM is like Switzerland conservative a
little dull yet prosperous it has
committees to verify each decision the
safety net is so big that it's hard to
make a bad decision for any decision at all
which Seidner computer programmer and
wannabe Paul Simon spent 25 years
marching in step at IBM he feels better
now I
mean it's like getting 400,000 people to
agree what they want to have for lunch
you know I mean it's just like it's
gonna be Lois common then you know it's
gonna be you know hot dogs and beings so
so what are you gonna do so IBM had
created this process and it absolutely
made sure that quality would be
preserved throughout the process that
you actually were doing what you set out
to do what you thought the customer
wanted at one point somebody I looked at
the process to see well you know what
they're doing and what's the overhead
goes into it what they found is that you
would take at least nine months to ship
an empty box
by the late 70s even IBM had begun to
notice the explosive growth of personal
computer companies like Apple the Apple
to small inexpensive simple to use the
first compute what's more it was a
computer business they didn't control in
1980 IBM decided they wanted a piece of
this action
there were suddenly tens of thousands of
people buying machines of that class and
they loved them and they were very happy
with them and they were showing up in
the engineering departments of our
clients as machines that were brought in
because you can't do the job on your
mainframe kind of thing JB you wanted to
know why I'm doing better than all the
other managers it's no secret I have an
apple sure there's a big computer three
flights down but I won't test my options
do my charts or edit my reports like my
Apple people who'd gotten it were
religious fanatics about them so the
concern was we were losing the hearts
and minds and give me a machine to win
in business as in comedy timing is
everything and time looked like it might
be running out for an IBM PC I'm
visiting the IBM ER who took up the challenge
challenge [Music]
[Music]
in August 1979 as IBM's top management
meant to discuss their PC crisis bill
Lowe ran a small lab in Boca Raton Florida
he knew the company was in a quandary
wait another year and the PC industry
would be too big even for IBM to take on
chairman Frank Carey turned to the
department heads and said help he kind
of said well what should we do and and I
said well we think we know what we would
like to do if we were going to proceed
with our own product and he said no he
said at IBM it would take four years and
300 people to do anything I mean that
it's just a fact of life and I said no
sir we can provide you a product in a
year and he abruptly ended the meeting
he said you're on Lowe come back in two
weeks and tell me what you need an IBM
product in a year ridiculous down in the
basement bill still has the plan to save
time instead of building a computer from
scratch they would buy components off
the shelf and assemble them what an IBM
speak was called open architecture
IBM never did this two weeks later bill
proposed his heresy to the chairman and
frankly this is it
the key decisions were to go with an
open architecture
non IBM technology none IBM software
none IBM sales and non IBM service
and we probably spent a full half of the presentation
presentation
carrying the corporate management
committee into this concept because this
was a new concept for IBM at that point
mr. Kerry bought it and as a result of
of him buying it we got through it with
the backing of the chairman bill and his
team then set out to break all the IBM
once IBM had decided to do a personal
computer and to do it in a year they
couldn't really design anything they
just had to slap it together so that's
what we'll do you have a central
processing unit and see you need a
monitor or display and
a keyboard
okay a PC except it's not there's
something missing
time for the cringe Lee crash course and
elementary computing a PC is a box full
of electronic switches a piece of
hardware it's useless until you tell it
what to do it requires a program of
instructions that's software every PC
requires at least two essential bits of
software in order to work at all first
it requires a computer language that's
what you type in to give instructions to
the computer tell it what to do remember
it was a computer language called basic
that Paul Allen and Bill Gates adapted
to the Altair the first PC the other bit
of software it's acquired is called an
operating system that's the internal
traffic cop that tells the computer
itself how the keyboard is connected to
the screen or how to store files on a
floppy disk instead of just losing them
when you turn off the PC at the end of
the day operating systems tend to have
boring unfriendly names like UNIX and
CPM and and ms-dos but though they may
be boring it's an operating system that
made Bill Gates the richest man in the
world and the story of how that came
about is well pretty interesting
so the contest begins
who would IBM buy their software from
let's meet the two contenders the late
gary kildall then aged 39 a computer
science PhD and a 24-year old Harvard
dropout Bill Gates
by the time IBM came calling in 1980
Bill Gates in his small company
Microsoft was the biggest supplier of
computer languages in the fledgling PC industry
industry
many different computer manufacturers
are making the cp/m operating system
standard on most models for their
operating system though the logical guy
for the IBM is to see was gary kildall
he ran a company modestly called
intergalactic Digital research gary had
invented the pcs first operating system
called CPM he had already sold 600,000
of them so he was the big cheese of
operating systems early seventies I got
a need for an operating system myself
and it just was a very natural thing to
write and it turns out other people had
a need for an operating system like that
and so it was a very natural thing I
wrote it for my own use and then started
selling it in Gary's mind it was the
dominant thing and it would always be
the dominant cuz you know Bill did
languages and Gary did operating systems
and he really honestly believed that
would never change but what would change
the balance of power in this young
industry was the characters of the two
protagonists so I knew Gary back when he
was an assistant professor at monterey
post grad school and i was simply a grad
student and and went down sat in his hot
tub smoked dope with him and thoroughly
enjoyed it all and commiserated and
talked nerd stuff he liked playing with
gadgets just like woz did and does just
like I did and do he wasn't really
interested in how you drive the business
he worked on projects things that
interesting he didn't go rushing off to
the Patent Office and patent cp/m and
patent every line of code he could he
didn't try to just squeeze the last
dollar out of it gary was not a
fighter Gary avoided conflict gary hated conflict
conflict
bill i don't think anyone could say
nobody said future billionaires have to
be nice guys here at the Microsoft
Museum is a shrine to Bill's legacy Bill
Gates hardly fought his way up from the
gutter raised in a prosperous Seattle
household his mother was a homemaker who
did charity work his father a successful
lawyer but beneath the affluence and
comfort of a perfect American family a
competitive spirit Randeep I ended up
spending the Memorial Day weekend with
him out of his uh his grandmother's
house on Hood Canal
she she turned everything into a game it
was a very very very competitive
environment and if you if you spent the
weekend there you were part of the
competition and it didn't matter whether
it was hearts or pickleball or swimming
to the dock you know and there was there
was always a reward for winning and
there was always a penalty for losing
one time was funny I went to to Bill's
house and you really wanted to show me
his jigsaw puzzle that he was working on
and he really wanted to talk about how
like he did this jigsaw puzzle in like
four minutes and icon the box it's the
Furyk genius then you would do the
jigsaw puzzle in like seven and I know
he was into it he's like you know I can
do it I said don't you know I believe
you you don't need to break it up and do
it for me no
bill Gates can be so focused that the
small things in life get overlooked he
was busy he didn't be he didn't change
clothes we were in New York and the demo
that we had crashed the evening before
the announcement and Bill worked all
night with some other engineers to fix
it well it didn't occur to him to take
ten minutes for a shower after that just
didn't occur to him that that was
important and he badly needed a shower
the scene is set in California Laidback
gary kildall already making the
best-selling PC operating system CPM in
Seattle Bill Gates maker a basic the
best selling PC language but always
prepared to seize an opportunity
so IBM had to choose one of these guys
to write the operating system for its
new personal computer one would hit the
jackpot the other would be forgotten a
footnote in the history of the personal
computer and it all starts with a
telephone call to an eighth floor office
in that building the headquarters of
and about all about noon I guess I
called Bill Gates on Monday and said I
would like to come out and talk to him
about his products bill said to all I
was next week and they said we're on an
airplane we're leaving in an hour we'd
like to be there tomorrow well
hallelujah at all
Steve Ballmer was a Harvard roommate of
gates he had just joined Microsoft and
would end up its third billionaire back
then he was the only guy in the company
with business training both Ballmer and
gates instantly saw the importance of
the IBM visit
and Bill said Steve you better come to
the meeting you're the only other guy
here who our suit so we figured ok the
two of us we'll put on suits we'll put
on suits and we'll go to this this
meeting we got there roughly two o'clock and
and
we're waiting in the front and young
fella came up to take us back to mr.
gates office and I thought is the office
boy and of course it was Bill he was
quite decisive we we popped out the
non-disclosure agreement the letter that
said that he wouldn't tell anybody we
were there and that we wouldn't hear any
secrets and so forth
he signed it immediately IBM didn't make
it easy you had to sign all these funny
agreements that sort of said I eidm
could do whatever they wanted whatever
they wanted and use your secrets however
they they felt but it took a little bit
of faith
Jack Samms was looking for a package
from Microsoft containing both the basic
computer language and an operating system
system
but IBM hadn't done their homework
they thought we had an operating system
because we had this soft card product
that had CPM on it they thought we could
license some CPM for this new personal
computer they told us they wanted to do
and we said well no and we're not in
that business and when we discovered we
didn't have that he didn't have the
rights to do that and that it was not he
said but I think it's ready I think the
Gary's got it ready to go
said well no but no time like the
present come on Gary so bill right there
with them in the room called gary
kildall Digital research said Gary I'm
sending some guys down they're gonna be
on the phone treat him right they're
important guys
the men from IBM came to this Victorian
house in Pacific Grove California
headquarters of digital research headed
by Gary and Dorothy killed all just
imagine what it's like having IBM come
to visit us like having the queen drop
by for tea it's like having the Pope
come by looking for advice it's like a
visit from God himself and what did Gary
and Dorothy do they sent them away Gary
was they had some other plans and so he
said well darth you'll see you yeah so
we got down to three of us IBM showed up
with an IBM non-disclosure and Dorothy
made what I what a decision which I
think it's easy and wrecked respect to
say was dumb fully popped out our letter
that said
please don't tell anybody were here and
we don't want to hear anything
confidential and she read it it's just
that I can't sign this
she did what her job was she got the
lawyer to look at the non-disclosure the
lawyer Jerry Davis who's still in
Monterey threw up on this non-disclosure
it was uncomfortable for IBM they
weren't used to being waiting and and
and it was an unfortunate situation here
you are in a tiny Victorian house that's
overrun with people and chaotic and so
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
could
even talk to us about talking to us and
we left
this is the moment Digital research
dropped the ball IBM distinctly
unimpressed with their reception went
back to Microsoft Bill Gates isn't the
man to give a rival a second chance he
saw the opportunity of a lifetime
Digital research didn't seize that and
we knew it was essential if somebody
didn't do it the project was gonna fall
apart so we just got carried away and
said look we can't afford to lose the
language business that was the initial
thought we can't afford to have IBM not
go forward this is the most exciting
thing that's gonna happen in PCs and we
are already out on the limb because we
had licensed them not only basic but
Fortran COBOL assembler
typing tutor adventure basically every
every product the company had we had
committed to do for IBM in a very short
timeframe but there was a problem IBM
needed an operating system fast and
Microsoft didn't have one what they did
have was a stroke of luck the ingredient
everyone needs to be a billionaire
unbelievably the solution was just
across town Paul Allen Gates his
programming partner since high school
had found another operating system
there's a local company here in NC L
call CL computer products that in Tim
Patterson and he had done an operating
system very rudimentary opera system it
was kind of like CPM and we just old IBM
look we'll go get this operating system
from the small local company we'll take
care of it we'll fix it up and you can
still do a PC Tim Patterson's operating
system which saved the deal with IBM was
well adapted from gary kildall CPM so I
took a CPM manual that I'd gotten from
the retail computer store $5 in 1976 or
something and used that as the basis for
the with what we the application
programming interface the API for my
operating system and so using these
these ideas that came from different
places I started in April and it was
about half time for four months I before
I had my first working version this is
it the operating system Tim Patterson
wrote he called it cue dos the quick and
dirty operating system Microsoft and IBM
called it pc dos 1.0 and under any name
it looks an awful lot like CPM on this
computer here I have running a PC dos
and CPM 86 and frankly it's very hard to
tell the difference between the two the
command structures are the same so are
the directories in fact the only obvious
external difference is the floppy drive
is labeled a and PC dos and
C and CPM some difference and yet one
generated billions in revenue and the
other disappeared as usual in the PC
business the prize didn't go to the
inventor but to the exploiter of the
invention in this case that wasn't gary
kildall it wasn't even tim paterson
there was still one problem tim paterson
worked for seattle computer products or
SCP they still own the rights to kudos
rights that Microsoft had to have but
then we went back and said to look you
know we want to buy this thing and SCP
was like most little companies they you
know always needed cash and so that was
when they went into the negotiation and
so ended up working out a deal to
to buy the operating system from him for
for whatever usage we you know we wanted
for $50,000 hey let's pause there to
savor an historic moment
for whatever usage we you know we wanted
for $50,000 it had to be the deal of the
century if not the millennium it was
certainly the deal that made Bill Gates
and Paul Allen
multi-billionaires and allowed Paul
Allen to buy toys like these his own NBA
basketball team and arenas Microsoft
bought outright for $50,000 the
operating system they needed and they
turned around and licensed it to the
world for up to $50 per PC think of it
100 million personal computers running
ms-dos software funneling billions into
Microsoft the company that back then was
50 kids managed by a 25 year old who
needed to wash his hair nice work if you
there are no two places further apart in
the USA than southeastern Florida and
Washington State where Microsoft is face
this this is Florida Boca Raton and this
building right here is where the IBM PC
was developed
here the Nerds from Seattle joined
forces with the suits of Corporate
America and in that first honeymoon year
they pulled off a fantastic achievement
after we got a package in the mail from
the people down in Florida as August
1981 approached the deadline for the
launch of the IBM acorn the PC industry
held its breath supposedly maybe at this
very moment
IBM is announcing a personal computer we
don't know that yet in companies across
America software writers like Dan
Bricklin the creator of the first
spreadsheet waited with his staff for
news of the announcement
this is a moment of PC history IBM
secrecy had codenamed the PC the
Floridian project everyone in the PC
business knew IBM would change their
world forever they also knew that if
their software was on the IBM PC they
would make fortunes the attached
information and information is not to be
disclosed prior to any public announcement
announcement
it's on the ticker okay so now you can
tell people what we're watching are the
first few seconds of a 100 billion
after years of thinking big today IBM
came up with something small pewter big
blue is looking for his slides of apples
market share IBM acquits and bikes mean
nothing try boosts worth money now
they're going to sell thousand-dollar
computers to millions of couple hundred
piece of the five I have seen the future
today an IBM computer has reached a
personal nobody was ever fired for
buying IBM now companies could put pcs
with a name they trusted on desks from
Wallsend to Wall Street what IBM said
was it's okay corporate America for you
to know start buying and using PC's and
if it's okay for corporate America it's
got to be okay for everybody your own
IBM personal computer for all the hype
the IBM PC wasn't much better than what
came before so while the IBM name could
create immense to man it took a killer
application to sustain it [Music]
[Music]
the killer app for the IBM PC was yet
another spreadsheet based on VisiCalc
but called lotus 1-2-3 its creators were
the first of many to get rich on IBM's
success within a year Lotus was worth
IBM had forecast sales of half a million
computers by 1984 in those three years
they sold two million
euphoric I guess is right word everybody
was believed that the that they were not
gonna at that point two million or three
million you know they were now thinking
in terms of hundred million tons and
they were probably off the scale in the
what did all this mean to Bill Gates
who's operating system Doss was at the
heart of every IBM PC sold initially not
much because of the deal with IBM but it
did give him a vital bridgehead to other
players in the PC marketplace which
meant trouble in the long run for big
blue the
key to are the structure of our deal was
that IBM had no control of our our
licensing to other people the lesson of
the computer industry in mainframes was
that over time people built compatible
machines or clones whatever term you
want to use and so really the primary
upside on the deal we have with IBM
because they had a fixed fee we got
about eighty thousand dollars and we got
some other money for some special work
we did but no royalty from them and
that's the DOS in basic as well and so
we were hoping a lot of other people
would come along and do compatible machines
there were other pcs that were sorta
like the IBM PC kinda like it but IBM
now had 50% market share and was
defining what a PC meant what the public
wanted was IBM pcs so to be successful
other manufacturers would have to build
computers exactly like the IBM
they wanted to copy the IBM PC to clone
it how could they do that legally well
welcome to the world of reverse engineering
this is what reverse engineering can get
you if you do it right
it's the modest Aspen Colorado ski Shack
of rod Canyon one of the founders of
compact the company set up to compete
head-on with the IBM pc's back in 1982
rod and three fellow engineers from
Texas Instruments sketched out a
computer design on a placemat at the
house of pies restaurant in Houston
Texas they decided to manufacture and
market a portable version of the IBM PC
using the curious technique of reverse
engineering reverse engineering is
figuring out after something's already
been created how it ticks what makes it
work usually for the purpose of creating
something that works the same way or at
least does something like the thing
here's how you clone a PC IBM had made
it easy to copy the microprocessor was
available off-the-shelf from Intel and
the other parts came from many sources
only one part was IBM's alone a vital
chip that connected the hardware with
called the ROM BIOS this was IBM's own
design protected by copyright and by Big
Blue's army of lawyers Compaq had to
somehow copy the chip without breaking
the law first you have to decide how the
so what we had to do is have an engineer
sit down with that code and through
trial and error would write a
specification that said here's how the
BIOS ROM needs to work it couldn't be
closed it had to be exact so there was a
lot of detail testing that went on you
test how that all-important chip behaves
and make a list of what it has to do now
it's time to meet my lawyer Claude I've
examined the internals of the ROM BIOS
and written this book of specifications
now I need some help because I've done
as much as I can do and you need to
explain what's next well
the first thing I'm going to do is I'm
going to go through the book of
specifications myself but the first
thing I can tell you Robert is that
you're out of it now you you are
contaminated you are dirty you've seen
the product that's
the original work of authorship you've
seen the target product so now from here
on in we're gonna be working with people
who are not dirty we're gonna be working
with so-called virgins we're gonna be
operating in the clean room I certainly
don't qualify there I imagine you don't
so what we're going to do is this we're
going to hire a group of engineers who
have never seen the IBM rom bias they
have never seen it they've never
operated they don't nothing about it
have you ever before attempted to
disassemble decompile or to in any way
shape or form reverse engineer any IBM
equipment I know I have you ever tried
to disassemble or this is the Silicon
Valley virginity test and good virgins
are hard to find you understand that in
the event that we discover that the
information of providing us is
inaccurate you're subject to discipline
by the company and that can include but
not be limited to termination
immediately to understand that yes I do
okay that does after the virgins are
deemed intact they are forbidden contact
with the outside world while they build
a new chip one that behaves exactly like
the one in the specification in compacts
case it took 15 senior programmers
several months and cost 1 million
dollars to do the reverse engineering in
November 1982 rod Canyon unveiled the results
results
what I brought today is a compact
portable computer when Bill mirto
another compact founder got a plug on a
cable TV show their selling point was
clear 100% IBM compatibility without
that all major popular software runs on
the IBM personal computer or the Compaq
portable computer that extends through
all of the software for IBM yes all
works on the compact compact was an
instant hit in their first year on the
strength of being exactly like IBM but a
little cheaper they sold 47,000 pcs in
our first year of sales we we said an
American business record I guess maybe a
world business record largest first year
so rod canyon ends up in Aspen famous
for having the most expensive real
estate in America and I try not to look
envious while rod tells me which
executive jet he plans to buy next and
finally he picked the Lear 31 now that
that was a fun airplane yeah poor big
blue suddenly everybody was cashing in
on IBM success the most obvious winner
at first was Intel maker of the PCs
microprocessor chip Intel was selling
chips like hotcakes to clone makers and
making them smaller quicker and cheaper
this was unheard of what kind of an
industry had big blue gotten themselves into
into
things get less expensive every year
people aren't used to that in general I
mean you buy a new car you buy one now
four years later go buy one cost more
than the one you bought before
here are this magical piece of an
industry you go buy one later it cost
less and it does more what a wonderful
thing but it causes some funny things to
occur when you think about an industry
the industry where prices are coming
down where you have to sell it and use
it right now because if you wait later
we're compact led others soon followed
IBM was now facing dozens of rivals soon
to be familiar names began to appear
like Amstrad ast and Dell it was getting
spectacularly easy to build a clone you
could get everything off the shelf
including a guaranteed virgin ROM bias
chip each new clone maker free of IBM's
big overhead took another bite out of
Big Blue's business
well they really hit with a vengeance in
85 the prices were going down on the
competitive products at about 30% every
six months that terror would be a good
teller of course I mean it was getting
heavy we were able to sell a lot of
products but it was getting difficult to
make money and where did every clone
maker buy his operating system Microsoft
of course by the mid 80s it was boom
time for Bill the teenage entrepreneur
had predicted a PC on every desk and in
every home running Microsoft software it
was actually coming true as
Microsoft mushroom there was no way that
Bill Gates could personally dominate
thousands of employees but that didn't
stop him he still had a need to be both
industry Titan and top programmer so he
had to come up with a whole new
corporate culture for Microsoft he had
to find a way to satisfy both his
adolescent need to dominate and his
adult need to inspire
from the beginning Microsoft recruited
straight out of college they chose
people who had no experience of life in
other companies in time they'd be called
micro serfs and so a lot of young I say
people but mostly it was young men who
just were out of school or leader almost
guru I guess and they could sit and
spend hours with him and and he valued
their contributions and and there was
just a wonderful camaraderie that seemed
to exist between all these young men and
Bill and the strength that he has in
this and his will and his desire to be
the best and to be the winner and he is
just a like a cult leader really as
as
the frenzied 80s came to a close IBM
reached a watershed they had created an
open PC architecture that anyone could
copy this was intentional but IBM always
thought their inside track would keep
them ahead wrong IBM's glacial pace and
high overhead put them at a disadvantage
to the leaner clone makers everything
was turning into a nightmare as IBM lost
its dominant market share so when a big
gamble they staked their PC future to a
new system a new line of computers with
proprietary closed hardware and their
very own operating system it was war
start planning for operating system to
today IBM plan to steal the market from
gates with a brand new operating system
IBM would design os/2 yet they asked
Microsoft to write the code why would
Microsoft help create what was intended
to be the instrument of their own destruction
destruction
because Microsoft knew IBM was the
source of their success and they would
tolerate almost anything to stay close
to big blue it was just part of as we
used to call it the time riding the bear
you just had to try to stay on the Bears
back and the bear would twist and turn
and trying to you and throw you but
Don we were gonna ride the bear because
the bear was the biggest the most
important you just had to be with the
bear otherwise you would be other the
bear in the computer industry and IBM
was the bear and we were gonna ride the
back of a bear but it's easy for people
to forget how pervasive IBM's influence
over this industry was when you talk to
people who come into the industry
recently there's no way you can get that
into their into their head that was the environment
environment
the relationship between IBM and
Microsoft was always a culture clash IBM
errs were buttoned-up organization men
Microsoft EES were obsessive hackers
with the development of os/2 the strains
really began to show an IBM there's a
religion in software that says you have
to count K locks and a k' lock is a
thousand line of code
how big a project is also a 10k walk
project this is a 20k Locker and there's
no 50k locks and IBM wanted to sort of
make it the religion about how we got
paid how much money we made off for us -
how much they did how many K locks did
you do and we kept trying to convince
them hey if we have a developer's got a
good idea and he can get something done
in 4k locks instead of 20 K locks should
we make less money because he's made
something smaller and faster less clocks
well ok walks K walks that's the
methodology yeah anyway yeah almost
makes my my back just crinkle up at the
thought of the whole thing when I took a
rainy night it was an enormous amount of
resources working on os/2 both in
Microsoft and the IBM company Bill Gates
and I met on that several times
and we pretty quickly came to the
conclusion together that was not going
to be a success the way it was being managed
was also pretty clear that the
negotiations and the contracts had given
most of that control Microsoft
Microsoft
it was no longer just a question of
styles there was now a clear conflict of
business interest
os/2 was planned to undermine the clone
market where Doss was still Microsoft's
major moneymaker Microsoft was DOS but
Microsoft was helping develop the
opposition bad idea to keep DOS
competitive gates had been pouring
resources into a new program called Windows
Windows
it was designed to provide a nice
user-friendly facade to boring old DOS
selling it was another job for shy
retiring Steve Ballmer
advanced operating environment is worth
wait just one minute before you answer
watch his Windows integrates Lotus 1-2-3
with Miami Vice now we can take this
just as Bill Gates saw os/2 as a thread
IBM regarded Windows as another attempt
by Microsoft to hold on to the operating
system business we created Windows in
parallel I we kept saying the IBM hey
Windows is the way to go graphics is the
way to go
and we got virtually everyone else
enthused about Windows so that was a
divergence that we kept thinking we
could get IBM to to come around on it
was clear that IBM had a different
vision of its relationship with
Microsoft and Microsoft had of its
vision with IBM is that Microsoft's fault
you know maybe some but IBM's not
blameless there either so I I don't I
don't view any of that as anything but
Bill Gates is a very disciplined guy he
puts aside everything he wants to read
and twice a year goes away for secluded
reading weeks the decisive moment in the
Microsoft IBM relationship came during
just such a retreat in front of the log
fire bill concluded that it was no
longer in Microsoft's long-term interest
to blindly follow IBM if bill had to
choose between os/2 IBM's new operating
system and Windows he'd choose Windows
we said who IBM's probably not gonna
like this this is gonna threaten os/2
now we told him about it right away we
told them about it but we still did it
they didn't like it we told him about it
we told about it we offered two licenses
to him we always thought the best thing
to do is to try and combine IBM
promoting the software with us doing the
engineering and so it was only when they
broke off communication and decided to
go their own way that we thought okay
we're on our own and and that was
definitely very very scary and we were
in a major negotiation in early 1990
right before the windows launch we
wanted to have IBM onstage with us to
launch Windows 3.0 but they wouldn't do
the kind of deal that would allow us to
profit it would allow them essentially
to take over Windows from us and we
walked away from the deal wait to see
Jack Samms who started IBM's
relationship with Microsoft with that
first call to Bill Gates in 1980 could
only look on as the partnership disintegrated
disintegrated
then they at that point I think they
agreed to disagree on the future
progress of about ways to in Windows and
internally we were told thou shalt not
ship any more products on Windows
and about that time I got the
opportunity to take early retirement so
Bill's decision by the fireplace ended
the ten-year IBM Microsoft partnership
and turn IBM into an also-ran in the PC
business did David beat Goliath
the Boca Raton Florida birthplace of the
IBM PC is deserted a casualty of
diminishing market share [Music]
[Music]
today IBM is again what it was before a
profitable dominant mainframe computer
company for a while IBM dominated the PC
market they legitimize the PC business
created the standards most of us now use
and introduce the PC to the corporate
world but in the end they lost out maybe
it was to a faster more flexible
business culture
or maybe they just threw it away that's
the view of a guy who's been competing
with IBM for 20 years Silicon Valley's
most outspoken software billionaire
Larry Ellison I think IBM made the
single worst mistake in the history of
enterprise on earth which was which was
the manufacturer being being the first
manufacturer and distributor of the
Microsoft Intel PC which they mistakenly
called the IBM PC I mean they were the
first manufacturer and distributor of
that technology I mean it's just simply
astounding that they could
basically give 1/3 of their market value
to Intel and 1/3 of their market value
to Microsoft by accident I
mean no one you know now those two
companies today are worth close to you
know approaching a hundred billion
dollars I mean not many of us got chance
to make a hundred billion dollar mistake
as fast as IBM abandons its buildings
Microsoft builds new ones in 1980 IBM
was three thousand times the size of
Microsoft though still a smaller company
today Wall Street says Microsoft is
worth more both faced antitrust
investigations about their monopoly
positions for years IBM defines
successful American corporate culture as
a machine of ordered bureaucracy here in
the corridors of Microsoft it's a
different style it's personal this
company in its drive its hunger to
succeed is a reflection of one man its
founder Bill Gates
bill wanted to win
incredible desire to win and to beat
other people
at Microsoft we the whole idea was that
we would
that people under you know and unfortunately
unfortunately
that's happened a lot
Bill Gates is special if you wouldn't
have had a Microsoft with take a random
other person like gary kildall on the
other hand Bill Gates was also lucky but
Bill Gates knows that unlike a lot of
other people in the industry and he's
paranoid every morning he gets up and he
doesn't feel secure he feels nervous
about this they're trying hard they're not
not
relaxing and that's why they're so
successful and I remember I was talking
to Bill once and I I asked him what he
feared and
he said that he feared growing old
because you know once you're beyond
thirty this is this was his belief at
the time you know once you're beyond
thirty you know you don't have as many
good ideas anymore you'll think you're
not as smart anymore if you just slow
down a little bit who knows who it'll be
probably some company that may not even
exist yet but you know someone else can
come in and take the lead I said well
you know you're gonna age it's gonna
happen it's kind of inevitable and what
do you do about it and he said I'm just
gonna hire the smartest people and I'm
just going to surround myself with all
these smart people you know and I
thought that was kind of interesting it
was it was almost it was like he was
like oh you know I can't be immortal but
like maybe this is a second Beth and I
can buy that you know
if you miss what's happening then the
same kind of thing that that happened
IBM or many other companies could happen
to Microsoft very easily so no one's got
a guaranteed position in the
high-technology business and the more
you think about you know how could we
move fast or what could we do better are
there good ideas out there that we
should be going beyond that's it's
important and I wouldn't trade places
with anyone but the reason I like my job
so much is we have to constantly stay
stay on top of those things
the Windows software system that ended
the alliance between Microsoft and IBM
pushed Gates past all his rivals
Microsoft had been working on the
software for years but it wasn't until
1990 that they finally came up with a
version that not only worked properly it
blew their rivals away and where did the
idea for this software come from well
it came from the hippies at Apple lights
camera boot up in 1984 they made a
famous TV commercial Apple had set out
to create the first user-friendly PC
just as IBM and Microsoft was starting
to make a machine for businesses when
the TV commercial aired Apple launched
the Macintosh [Music]
the computer and the commercial were
aimed directly at IBM which the kids in
Cupertino thought of as Big Brother but
Apple had targeted the wrong people it
wasn't Big Brother they should have been
worrying about it was big Bill Gates [Music]
[Music] [Applause]
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