In 1976, Steve Wozniak offered his personal computer design to Hewlett Packard, where he worked as an engineer.
HP said no, so he and Steve Jobs started Apple.
Four years later, Wozniak was worth $88 million.
Then he did something that Silicon Valley still doesn't quite understand.
Something that violated every rule of how you're supposed to win in the Valley.
The man who created the computer that built Apple into a Fortune 500 company never wanted to run a company at all.
He just wanted to stay at the bottom of the org chart, building cool stuff.
This is the story of the founder who won by refusing to play the game everyone else was playing.
Welcome to Outliers.
I'm your host, Shane Parrish.
This show is all about learning from others, mastering the best of what they've figured out so you can use their lessons in your life.
While Steve Jobs was building a mythology, Wozniak was in his HP cubicle designing computers on paper, because he couldn't afford the parts.
While Jobs dreamed of changing the world, Wozniak just wanted to impress the homebrew computing club.
But here's what almost no one understands.
Wozniak's radical openness, the philosophy Jobs fought against, is the exact reason that Apple survived long enough for Steve Jobs to become Steve Jobs.
There's a lesson here about what happens when you refuse to compromise, even when it costs you billions.
It's time to listen and learn.
Silicon Valley didn't exist in 1957.
The place that would birth Apple and Google was still called Santa Clara Valley.
It smelled like apricots.
Seven-year-old Steve Wozniak had just moved to Sunnyvale with his family.
Their street was bordered by orchards on three sides.
But Steve wasn't thinking about fruit trees at all.
He was thinking about electrons.
His father Jerry, worked at Lockheed on military projects so secret he couldn't mention them at dinner.
But the physics behind them?
That was fair game.
When Steve asked questions, his dad didn't brush him off.
He pulled out a blackboard and started from the beginning.
Wozniak would later write.
The way my dad taught me was not to rote memorize how parts are connected to form a gate, but to learn where the electrons flowed to make the gate do its job.
To truly internalize and understand what is going on, not just read some stuff off some blueprint or out of some book.
His dad taught him to see the invisible, to understand not just what electrons did, but why.
Steve's IQ tested over 200.
Everyone knew he was gifted.
But Jerry never pushed.
Steve was in charge of his own learning.
The most important lesson came wrapped in a simple statement.
Engineering, Wozniak's dad told his son, is the highest level of importance you could reach in the world.
Someone who can make electrical devices do something good for people takes society to a new level.
Wozniak absorbed this like gospel.
While other kids had no idea what they wanted to be, Wozniak knew exactly what he wanted to be.
He would be an engineer's engineer, what his dad called a serious engineer.
The neighborhood boys called themselves the electronics kids.
Their fathers worked at Fairchild Semiconductor or other companies sprouting up along the valley.
They had access to transistors when most of America was still using vacuum tubes.
They had spools of telephone wire donated? by friendly utility workers.
They had fathers who could explain it all at dinner.
Steve became their unofficial leader, painfully shy, zero charisma.
But when the electronics kids decided to build a house-to-house intercom, Steve designed it.
He strung wire along wooden fences, connected their bedrooms.
After dark, they'd signal each other while their parents slept.
But Wozniak wanted more.
He didn't want to build what others had.
He wanted to create what no one else had thought of yet.
This obsession started early.
At six, his father gave him a crystal radio kit.
When voices came through the earphones, something shifted inside him.
I had actually built something, he'd later write, something they didn't have.
He told his classmates about it, and he explained how it worked.
They had no idea what he was talking about.
None of them could do what he'd done.
He liked that feeling, but he quickly moved on to the next thing, writing, "'Okay, that's done.
What else can I do?'
By sixth grade he'd found his hero, Tom Swift Jr, a fictional boy inventor who built submarines and spaceships, solving global crises with cutting-edge technology.
Steve would lie on his bedroom floor each night imagining himself as Tom Swift building machines that would change the world.
One day in 1960, flipping through his father's engineering journal, 10-year-old Wozniak found an article about Enoch, the world's first computer.
A room-sized monster with thousands of vacuum tubes.
But what captivated him was a single paragraph of boolean algebra building thinking into machines using only ones and zeros.
What happened next, Wozniak called the dream.
He realized that computers might soon fit in your house.
Not yet, but soon.
That vision became the driving force behind everything.
The math was simple, so simple a high schooler could learn it.
He started drawing logic gates obsessively, staying up all night, half moons with dots, triangles with circles.
These symbols became his alphabet.
He was obsessed.
He decided to build a machine for the science fair that could never lose at tic-tac-toe.
He programmed it to know every possible move, every possible outcome.
But the night before the science fair, the transistors blew up in smoke.
Wozniak was competitive.
He loved to win, but he also realized something.
The lesson he wrote down the most important thing is that you've done the learning on your own to figure out how to do it.
He was still proud of it, but for him, it's the engineering, not the glory, that's really important.
The famous physicist Richard Feynman said something similar.
I don't like honors.
I've already got the prize.
The prize is the pleasure of finding the thing out.
The kick in the discovery, the observation that other people use it.
Those are the real things.
By eighth grade, Wozniak built what he called his masterpiece, the Adder Subtractor.
It was the closest thing to a computer he'd ever designed, capable of adding and subtracting numbers up to 1023 using binary.
The machine used over 100 transistors, 200 diodes and 200 resistors, all mounted on a one-foot plastic square.
This time, nothing blew up.
At the Bay Area Science Fair.
The judges initially gave it only an honorable mention, but when he explained how it worked, everything changed.
The Air Force ended up giving their highest award for electronics to an 8th grader competing against 12th graders.
They even flew him to Travis Air Force Base as a prize.
But Wozniak would later write that his greatest achievement wasn't winning the award, it was developing the patience that engineering requires.
Listen to what he writes here.
Thanks to all those science projects, I acquired a central ability that was to help me through my entire career.
Patience.
I'm serious.
Patience is usually so underrated.
I mean for all of those projects from third grade all the way to the eighth grade.
I just learned things gradually, figuring out how to put electronic devices together without so much as cracking a book.
Sometimes I think, man, I lucked out.
It seems like I was just pointed in such a lucky direction in life.
This early learning of how to do things one tiny little step at a time.
I learned not to worry so much about the outcome, but to concentrate on the step I was on and to try to do it as perfectly as I could when I was doing it.
Not everyone gets this in today's engineering community, you know?
Throughout my career at Apple and other places, you always find a lot of geeks who try to reach levels without doing the in-between ones first, and it won't work.
It never does.
That's just cognitive development, plain and simple.
You can't teach somebody two cognitive steps above from where you are.
High school was brutal for Wozniak's social life.
Other kids were flirting and making small talk that Steve couldn't even relate to.
Imagine being smarter than nearly every adult on the planet and being stuck in high school.
He retreated deeper into electronics, but he found one way to connect with his peers, pranks.
In 12th grade he built an electronic metronome, removed the battery labels so that they look like plain metal canisters, taped them together and wrote contact explosive on the bundle.
He stuck it in his friend Bill's locker, but a teacher found it first and ran with it onto the football field.
When they hauled Bill to the office, he immediately recognized Wozniak's craftsmanship and gave him up.
Wozniak couldn't stop laughing in the principal's office.
The prank earned him a night in juvenile detention, where he taught the other inmates how to remove wires from the ceiling fan to shock the carts.
The pranks would continue for the rest of his life, only he'd be much better at not getting caught.
But Steve's real obsession was happening alone, behind closed doors.
In his senior year, he discovered something that would change his life, the small computer handbook.
It described a mini computer, and Wozniak spent sleepless nights studying it, figuring out how to build his own version.
He started designing computers on paper.
It was really messy at first, full of errors.
But it was the start of something incredible.
Soon he was collecting manuals for every mini computer being made.
His ritual never varied.
He wrote because I could never afford the parts to build any of my computer designs.
All I could do was design them on paper.
Typically, once I started a design, I'd stay up very late, one or more nights in a row, sprawled on my bedroom floor with papers all around and a Coke can nearby.
I was now designing computers with half the number of chips the actual company had in their own design, but only on paper.
The constraint of not being able to afford the chips fueled the competition with himself.
He became obsessive about doing more with less, but he told no one.
After high school, short on money, he needed work and access to real computers.
He and his friend Alan Baum walked in the wrong building looking for data general, but found themselves at a company called Tenet.
They were hiring.
Steve and Alan applied on the spot.
At Tenet, Steve mentioned his years of paper designs to an executive, lamenting that he couldn't afford the parts to build them.
The man's response changed everything.
I can get you the parts.
Finally, after years of paper design, Steve could build something real.
But he couldn't ask for hundreds of components.
There was a limit to free samples.
So he gave himself a constraint, 20 chips.
Most computers use hundreds.
Wozniak teamed up with Bill Fernandez, who lived down the block.
They worked in Bill's garage, taking breaks to ride their bikes for cream soda.
That's how it got its name, the Cream Soda Computer.
It was revolutionary in its minimalism.
No screen or keyboard.
Those didn't exist yet.
Just a tiny circuit board with flashing lights.
You'd punch a program into a card, slide it in, and read the answer from the blinking lights.
But it had something special.
256 bytes of RAM.
RAM chips were almost unheard of.
Most computers used magnetic core memory with messy voltages.
RAM was clean and simple.
You just plugged it in and connected it to the processor.
Steve's mother called the newspaper about her son's invention.
A reporter came to see it.
Then disaster struck.
The reporter stepped on the power cable and something blew up.
The computer started smoking.
It was broken, but Steve had proven something crucial.
The only important thing was that finally finally, I'd been able to actually build a computer, my very first one.
The cream soda computer also brought Wozniacki's future co-founder, Steve Jobs.
Hey, There's someone you should meet, Bill Fernandez told him one day.
His name is Steve.
He likes pranks like you do, and he's into electronics.
The two Steves met on the sidewalk in front of Bill's house.
They sat there for hours sharing stories about pranks they pulled and circuits they'd built.
Jobs was four years younger and still in high school, but he understood immediately what Wozniak had accomplished.
It was really hard for me to explain to people the kind of design stuff I worked on.
Wozniak wrote, but Jobs got it right away.
By 1971, their friendship took a new turn.
Wozniak discovered an article about phone freaks people who'd figured out how to make free phone calls by playing specific tones into the payphone.
So Wozniak and Jobs decided to test to see if the article was true.
They got in a car and headed for the Stanford Linear Accelerator Center, which had, at the time, one of the greatest technical libraries in the world.
They searched for phone manuals to find the right tones.
While the article mentioned some, it didn't mention them all.
Listen to what he writes here.
This is awesome.
I was flipping around and suddenly stopped on a page.
There it was, a complete frequency list.
Sure enough, just as the article said, a 1 was composed of 700 Hz and 900 Hz tones together.
A 2 was composed of 700 Hz and 1100 Hz.
I froze.
I grabbed Steve and nearly screamed in excitement that I'd found it.
We both stared at the list, rushing with adrenaline.
We kept saying things like, oh, shit, and wow, this thing is for real.
I was practically shaking with goosebumps and everything.
It was such a eureka moment.
We couldn't stop talking all the way home.
We were so excited.
They bought the parts and went to Jobs' house, but they couldn't get it to work.
We played the tones from our tape recording, but we weren't able to get the call to go through.
Man, it was so frustrating.
No matter how hard we tried to get the frequencies right, they wavered.
I just couldn't make them accurate.
I kept trying, but I just couldn't perfect this thing.
I realized I didn't have a good enough tone generator to prove the article true or false, one way or the other.
But I was not about to give up.
Woz ends up creating a digital blue box using crystals, which are far more reliable.
He didn't get it to work right away.
That's not what happens in engineering, but he plugged away at it for months and eventually got it to work.
The part in the story that I have to mention is not only did their parents know what they were working on, they didn't try to stop them.
Woz writes, we had promised our parents we'd never do it from our home.
The blue box changed everything.
Then Jobs had an idea.
Hey, let's sell these.
So they started selling these little blue boxes for $150 each, splitting the revenue.
It was their first business together.
In 1973, Wozniak landed his dream job at Hewlett Packard designing calculators.
This was the company for me.
He'd write because I'd already decided I wanted to be an engineer for life.
HP was different from other tech companies.
It was run by engineers for engineers.
During a recession, instead of layoffs, HP cut everyone's salary by 10, so no one would lose their job.
To Wozniak.
That's how a company should work, like a family, where everyone takes care of each other.
I never agreed with the normal thinking he writes where a company is more competition driven and the poorest, youngest or most recently hired workers are always the first to go.
At home, he worked on side projects constantly.
When coworkers asked him to build something for them, he never charged.
It didn't feel right to charge for something he loved doing.
Then one day at the bowling alley, he saw Pong, the first successful video game.
He stood there staring at it, mesmerized.
I could design one of these, he thought.
And he realized something crucial.
While he'd been contentedly designing calculators at HP, the field had advanced beyond what he thought was possible.
He didn't wait.
He decided to build his own version immediately.
Not just to have it, but to be the only person in the world with their own version of Pong at home.
And he'd do it his way, with just 28 chips.
He completed this a year before Atari released their home version.
When he showed it to Steve Jobs, who was working at Atari at the time, the engineers were so impressed they offered Wozniak a job on the spot.
He refused.
He could never leave HP.
But Jobs wouldn't let his friend disappear into the comfortable world of calculators.
Atari's games were bloating to 200 chips each.
They needed someone who could do more with less.
Jobs wanted Wozniak to redesign their new single-player version of Pong.
A brief aside here just to answer the question why the number of chips matter so much.
Not only were they expensive, but they were necessary.
Back in the days before a CPU, the entire game had to be implemented in hardware.
There was no game program.
It was all hardwired.
So the fewer the chips, the cheaper it was to make, the easier it was to test.
But WoW is one of fewer chips because more chips was just unnecessary complexity.
It wasn't simple.
It wasn't elegant.
Seeing Wozniak had built Pong with just 28 chips.
One of the Atari founders desperately wanted him to do it for a single player game of Pong.
Jobs approached him and Wozniak agreed immediately.
Then Jobs did what Steve Jobs does and dropped the bomb.
It has to be done in four days. four days for what would take a normal team months.
The game was called Breakout.
They didn't sleep for four days.
Wozniak would draw the design on paper.
Jobs would wire the chips together then bring it back for testing.
Somehow they finished it.
Woz writes the whole thing used 45 chips and Steve paid me half the 700 bucks.
He said they paid him.
They were paying us based on how few chips I could do it in.
Later I found out he got paid a bit more for it, like a few thousand dollars, than he said at the time.
But we were just kids, you know?
He got paid one amount and told me he got paid another.
He wasn't honest with me and I was hurt, but I didn't make a big deal about it or anything.
To Woz, the most important thing in life was happiness.
There's a passage in another part of the book which I think relates to this part, where he writes I was just starting to figure out that the secret to life and this is still true for me is to find a way to be happy and satisfied with your life and also to make other people happy and satisfied with theirs.
March 5th, 1975.
It's a cold, drizzly evening in Menlo Park, where 30 men are gathered in Gordon French's garage pulling up folding chair, their breath visible in the chilly air.
That was the day the computer revolution started.
It was the very first meeting of the Homebrew Computer Club.
Wozniak sat among them, regretting his decision to come.
His friend Alan had said, this was about TV terminals.
But when the men around him were throwing around terms he'd never heard Intel 8080 8008, 4004.
They were waving around a magazine with something called the Altair on the cover.
These weren't TV terminal people.
These were computer people.
Wozniak, an HP calculator designer who built games on the side, felt completely out of place.
I felt so out of it, Woz remembered.
Under my breath, I'm cursing Alan.
I don't belong here.
When the introductions came around, he mumbled something about working at HP on calculators.
He stayed only because he was too shy to leave.
But at the end, someone passed around data sheets for a microprocessor, the Intel 8008.
Wozniak took one home, figuring he'd at least learn something from this awkward evening.
But that night changed everything.
Back in his apartment, Wozniak studied the data sheet.
The 8008 had instructions for adding and subtracting from memory.
Simple operations, but Wozniak knew exactly what they meant.
And then it hit him.
All those mini computers he'd designed on paper for years.
They were just like this, except now the entire CPU is on a single chip instead of dozens of them.
The Altair everyone was excited about?
It was basically his cream soda computer from five years ago built with a microprocessor.
It was as if my whole life had been leading up to this point, Wozniak wrote.
His paper designs, his pawn game, breakout, they all converged into a single vision.
That night, the night of the first meeting, this whole vision of kind of a personal computer just popped into my head all at once, just like that.
Right then, he started sketching what would become the Apple I.
But this wouldn't be like the cream soda computer or the Altair with its primitive panel of switches and lights.
Wozniak had already built a terminal that could display text on a TV screen.
So why not combine them?
Why not put the computer right inside the terminal?
Every computer before the Apple I had a front panel of switches and lights, he noted.
Every computer since has had a keyboard and a screen.
While this seems obvious now, it wasn't in 1975.
Loading a simple program in the Altair took half an hour of flipping switches.
You had to know exactly which ones.
On Wozniak's design, you could do it in under a minute.
To see what was in the Altair's memory meant decoding patterns of blinking lights.
On his design, you'd see it instantly on your screen.
Still at HP, Wozniak went to the office early to study chip manuals.
The Motorola 6800 processor cost $40 with his employee discount.
Then he heard about the 6502, half the price, same functionality.
At a tech show, he bought several for $20 each.
Working alone in his HP cubicle before dawn and late into the night, fueled by TV dinners, he built his computer.
The soldering took one night.
Writing in the monitor program 256 bytes of code that would replace the front panel took several more.
All done by hand on paper because you couldn't afford computer time.
On Sunday, June 29, 1975, at 10 p.m., after hours of debugging, Wozniak typed on the keyboard.
Letters appeared instantly on the screen.
It's so hard to describe this feeling when you get something working on the first try.
It's like getting a putt from 40 feet away.
He didn't realize it then, but this was the first time in history anyone had typed on a keyboard and seen it appear on their own computer screen.
That's just over 50 years ago today.
Think how wild that is.
At homebrew meetings, Wozniak would set up this computer after the main sessions.
He was too shy to present to the whole group, but one-on-one, he was in his element.
People were shocked.
He'd used just 30 chips.
The Altair needed hundreds of dollars of additional equipment to do anything useful and his worked with your home TV.
True to the homebrew spirit, Wozniak gave away his complete design Xeroxing copies to anyone who wanted it.
Hundreds of copies.
Steve Jobs watched the crowds gathering around Wozniak's table.
By Thanksgiving, he noticed something Wozniak hadn't.
The people at Homebrew are taking the schematics, but they don't have the time or ability to build it.
So Jobs proposed selling printed circuit boards.
People could buy the board, solder their own chips and have a working computer in days instead of weeks.
Make them for $20, sell them for $40.
Wozniak hesitated.
They'd need $1,000 just to get the boards printed.
They'd have to sell at least 50 to break even.
Were there even 50 people who'd want one?
They were sitting in Steve Jobs' car when he said the words that changed everything.
Well, even if we lose our money, we'll have a company.
For once in our lives, we'll have a company.
That convinced me, Woz wrote, to be two best friends starting a company.
Wow, I knew right then that I'd do it.
How could I not?
The revolution had started in a garage with 30 engineers and it had moved through Wozniak's mind in one night.
Now, it was about to become Apple Computer, though neither Steve knew that at the time.
But first, Woz had to tell HP.
He was, after all, their employee.
To raise $1,000 they needed for printed circuit boards, Wozniak sold his HP65 calculator for $500.
Jobs sold his VW van for a few hundred more.
They needed a name.
Driving back from the airport one day, Jobs suggested Apple Computer.
He'd just returned from an apple orchard in Oregon, though it was actually some kind of commune.
They tried to think of something more technical sounding, but couldn't.
Apple it is.
But before they could officially start, Wozniak faced a dilemma that revealed everything about his character.
Everything he designed while working at HP technically belonged to HP.
I believed it was my duty to tell HP about what I had designed while working for them, he said.
That was the right thing, the ethical thing.
Plus, I really loved that company.
What followed was a comedy of corporate blindness that would cost Hewlett-Packard trillions.
Wozniak went to his boss and explained that he designed an inexpensive desktop computer.
A meeting was arranged with executives.
In the conference room, Wozniak showed them the Apple One.
The response was corporate and immediate.
What if it doesn't work on every TV?
How could HP ensure the quality if they couldn't control control which TV customers owned.
Besides, the division didn't have the budget for new projects.
They turned it down.
New ideas are so fragile, they need to be nurtured and not torn apart like this.
I was disappointed, Wozniak said, but now I was free to enter the Apple partnership.
A few weeks later, Wozniak showed the finished circuit board to other HP engineers.
Then his phone rang.
It was Jobs.
Are you sitting down?
No.
Well, guess what?
I've got a $50,000 order.
Paul Terrell from Byteshop wanted 100 computers fully built for $500 each.
I was shocked.
$50,000 was more than twice my annual salary.
With that kind of money on the table, Wozniak decided to give HP one more chance.
Their legal department contacted every division in the company.
It took two weeks.
Still no interest.
They even sent Wozniak a formal letter releasing all claims to his design.
I see now that HP would have done it wrong anyway, Wozniak reflected later.
When they finally built a personal computer in 1979, it went nowhere.
The bite shop order changed everything.
Jobs negotiated cash on delivery.
They borrowed money from Allen's father for parts.
In January 1976 they set up shop in Steve Jobs' parents' garage, hiring friends to plug in chips into sockets for a dollar a board.
Wozniak tested each one.
If it worked, they boxed it.
If not, he'd find the problem, fix it, then box it.
Jobs would drive the batches and collect cash.
They priced it at $666.66 because Wozniak liked repeating digits.
Neither of them knew the number of satanic connections until angry letters started arriving.
Within months, they'd sold 150 computers.
Other companies were now copying the Apple I's keyboard design and selling thousands.
But Wozniak had already designed something better the Apple II and it was 10 times more powerful than the Apple I, and he knew it.
Wozniak started designing the Apple II as soon as the Apple I was complete.
This wasn't just an upgrade, this was a revolution.
Color built in from the ground up, not tacked on later.
Half as many chips, but twice as fast.
High-resolution graphics, sound, game paddles, and basic language built right in.
The Apple II was the first low-cost computer which, out of the box, you didn't have to be a geek to use.
Wozniak wrote.
But they needed money to build it.
Despite selling thousands of dollars worth of computers, Wozniak still worked out of his apartment and jobs from his bedroom.
They started showing the Apple II to potential investors in Jobs' garage.
Chuck Petal from Commodore came by wearing a suit and a cowboy hat.
Wozniak was thrilled.
This was the guy who'd helped develop the 6502 chip.
Wozniak showed off his creation, typing basic programs displaying color spirals on the screen.
Petal was Unimpressed, a few weeks later, they presented to Commodore's executives.
Then Jobs made what Wozniak called the most ridiculous statement.
You might want to buy this product for a few hundred thousand dollars, Jobs told the executives.
Then he added, plus you'd have to give us jobs working on the project.
The meeting ended.
Commodore called a few days later, declining.
They decided to build their own machine and cheaper without color, sound, or graphics.
When Wozniak saw it months later at the West Coast Computer Fair, he was sickened.
They could have had Apple, he said.
They could have had it all.
Atari turned them down too, saying they were too busy with video games.
So let's pause just for one second.
Here's where we're at at this point.
HP turned them down.
They could have had Apple, owned all the design, the products, and incubated that.
Commodore turned them down, and Atari turned them down.
Don Valentine at Sequoia dismissed them, but did connect them with Mike Mercoula, 30 years old and already retired from Intel.
The very first time I met Mike, I thought he was the nicest person ever, Wozniak said.
Mercoula had everything, a beautiful house overlooking Cupertino, a gorgeous wife.
But the best part was he actually understood what they had.
To Mike, it was common sense that computers would be in regular people's homes.
They'd keep recipes on them, balance checkbooks.
He saw it coming fast, and he believed the Apple II could be that computer.
He agreed to invest $250,000.
Then he told them something else.
We're going to be a Fortune 500 company in two years.
This is the start of an industry.
It happens once a decade.
After investing his 250000, Mercoula delivered an ultimatum that would test everything Wozniak believed about himself.
Okay, Woz, you know you have to leave HP.
Wozniak didn't understand.
He designed both apples while working at HP.
Why couldn't he keep doing this on the side and have HP as his secure job for life?
No, you have to leave HP.
Mercoula gave him until Tuesday to decide.
Wozniak was torn.
He could design computers, show them off at homebrew, write software, play games with computers for the rest of his life.
He didn't need to own a company to do that.
The truth was, he was terrified of running a company, of pushing people around, controlling what they did.
He decided long ago that he would never become someone authoritative.
Tuesday camp, Wozniak said no.
He wouldn't leave his dream job at his dream company.
Markula shrugged.
Okay, fine.
But true to form, Steve Jobs would not accept it.
So he devised a clever way to get Woz to come.
Wozniak's phone immediately started ringing and wouldn't stop.
First his dad, then his mom, then his brother.
Jobs had recruited every person Wozniak cared about for an intervention.
Each one told him he was making the biggest mistake of his life.
It didn't work until Alan called.
Steve, you really ought to go ahead and do it.
You can be an engineer and become a manager and get rich.
Or you can be an engineer and stay an engineer and get rich.
That was exactly what Wozniak needed to hear.
I needed to hear one person saying that I could stay at the bottom of the organization chart as an engineer and not have to be a manager.
He called jobs immediately with the news.
The next morning, he came in early to HP and told everyone he was leaving to start his own company.
They were officially incorporated as Apple Computer in early 1977.
Mercoula had to meet with patent lawyers who went through every clever trick in Wozniak's design.
They ended up with five separate patents that would become, as Wozniak put it, one of these patents in history that became very, very valuable.
But there was one design decision that nearly destroyed Apple before it started.
It came down to a simple question.
How many expansion slots should the Apple II have?
Steve jobs wanted two one for a printer and one for a modem.
That's it clean simple, controlled.
He'd grown up watching his adoptive father build things with pride finished products, completed and perfect.
You don't leave the hood of a beautiful car open.
Wozniak wanted eight slots.
He'd been going to homebrew meetings watching engineers share ideas and push boundaries.
He understood something fundamental.
The true power of the computer wasn't what it could do out of the box, but what it might become in the hands of creative users.
Jobs was optimizing for elegance, for the mythical average user who would walk into a store and just fall in love with this beautiful beige box.
Wozniak, on the other hand, was optimizing for people who were just like him, the homebrew crowd, the engineers who would buy the first thousand units and become evangelists who would tinker.
Jobs wanted to control the experience.
Wozniak wanted to unleash it.
The argument got heated, really heated.
Finally, Wozniak delivered.
But at the moment, it was real.
Without expandability, without the ability for users to define their product for themselves, Wozniak wasn't interested.
Jobs blinked.
They settled on eight slots, seven general-purpose slots and one special slot for memory cards.
It was supposedly a compromise, but really it was Wozniak's victory.
And that victory would change everything.
The West Coast Computer Fair arrived in January 1977.
They get their first three plastic cases from the Apple II just three days before the show.
The cases were Jobs' contribution to the compromise.
Sleek and friendly, foam-molded plastic instead of cheap sheet metal.
No visible screws.
But there was one key feature.
The lid popped off easily.
So easily, it almost invited you to look inside and see how beautiful it was on the inside.
How beautiful the engineering was.
And more importantly, to show you how easy it was to add something of your own.
The Apple II launched successfully.
Soon after, RadioShack released the TRS-80 and Commodore released the PET.
The competition was real.
But the Apple II had something they didn't.
Color.
Up to 48K of RAM. and those eight expansion slots.
The competitors had black and white displays, way less memory, and zero expansion slots.
Radio Shack and Commodore had made a calculated decision.
They wanted to be appliance companies.
They kept their technical specifications secret, hoping to monopolize the market for peripherals and software.
RadioShack stores weren't even allowed to sell third-party products.
They were building walled gardens before anyone used that term.
The Apple II was the opposite because of Wozniak.
Within months, the entire industry sprang up around the Apple II.
Dozens of companies started writing games.
Other companies built circuit boards for those expansion slots.
Memory cards, sound cards, graphics cards.
They created products Wozniak hadn't imagined.
Computer magazines filled with Apple II product ads.
Suddenly, the Apple II name was everywhere, Wozniak wrote.
We didn't have to buy an advertisement or do anything ourselves to get the name out.
That was the power of the open architecture.
Every third-party company that made a product for the Apple II became, in effect, a marketing arm for Apple.
Every ad they bought, every review they got.
Every innovation they created made the Apple II more valuable.
It was a virtuous circle that started with those eight slots.
But Marcullo wasn't satisfied.
He was annoyed at how long it took to load his checkbook program from Cassette.
A cassette tape could read a thousand bits per second.
A floppy could read a hundred thousand bits per second.
A hundred times faster.
He told Wozniak they needed a floppy disk drive.
The Computer Electronics Show was coming up in January 1978.
Wozniak desperately wanted to go.
It was the industry's biggest event.
He asked Marcoule if he could go, if he finished the disk drive in time.
Markula, knowing how to motivate his star engineer, agreed.
That gave Wozniak two weeks to build a floppy drive.
Two weeks to design from scratch one of the most complex peripherals imaginable.
He'd never owned a floppy drive and never programmed one before.
The challenge would take a normal team of engineers months.
Wozniak had to work through Christmas and New Year's.
It would become his magnum opus.
Jobs got him one of the new 5.25 inch floppy drives.
Wozniak examined it, studied its schematics, and then came to a stunning conclusion.
Of the 22 chips in the standard controller, only two were actually needed.
This was classic Wozniak.
While competitors built controllers with dozens of expensive components, Wozniak's design was elegant, it was simple and it was dramatically cheaper.
But here's the really clever part, the part that showed why Wozniak is in a class by himself when it comes to engineering.
He realized he could offload the controller's functions to the Apple II's main processor.
Other drives use dedicated hardware chips, but Wozniak had the CPU do these tasks and software instead.
He knew it was unconventional.
Most engineers would tell you to use hardware for hardware tasks and keep the CPU free.
But Wozniak realized the CPU wasn't doing anything else at that time.
So why not put it to work?
Why pay for expensive controller chips when you have an idle processor sitting right there?
The result was a disk drive that was incredibly efficient and cost effective.
It made floppy storage affordable for personal computers for the first time ever, and it depended entirely on the expansion slots Wozniak had fought so hard to include.
The disk 2 that Woz designed in two weeks changed everything, but not in the way anyone expected.
Because in Boston Bob Frankston and Dan Bricklin had been working on something called VisiCalc, short for visible calculator, the world's first electronic spreadsheet, Excel's ancient ancestor.
It was crude, revolutionary, and it was about to change everything.
Before VisiCalc, if you wanted to run financial projections, you had a ledger book and a calculator and you'd spend hours, maybe days, recalculating everything by hand every time you changed one assumption.
When your sales manager called with new numbers, you'd have to start all over again.
VisiCalc changed everything.
It was Excel before Excel.
You could change one cell and watch all the numbers ripple through instantly.
For the first time, a middle manager could sit at their desk and ask what if?
Repeatedly, without calling accounting?
But here's what Apple didn't realize until later.
VisiCalc could only run on the Apple II.
And this wasn't because of some brilliant strategy.
It was completely accidental.
The Apple II just happened to be the only computer with everything VisiCalc needed.
Enough RAM to hold the spreadsheet, a proper keyboard Wozniak's floppy disk could load it quickly and a high-resolution display to see the columns clearly.
All the other computers couldn't run it.
They were stuck with 4K of memory and no disk drives.
By the time they caught up Apple had already captured a lot of the business market.
VisiCalc became the first killer app, software so compelling it sold the hardware.
Before VisiCalc, when a manager asked, why do I need a $2,000 computer?
There was no good answer.
But VisiCalc gave them one.
It will save you 40 hours a month on financial planning.
Productivity would be unleashed.
Apple went from selling a thousand units a month to selling 10,000.
Overnight, business people became 90% of their market.
Apple didn't chase the business market.
The business market came to them because the spreadsheets program revealed something nobody knew existed.
Every middle manager's desire to become their own financial analyst.
Apple thought they were selling to hobbyists.
Instead, they'd accidentally built the perfect business machine.
With money pouring in, they turned to the Apple III.
After everything they'd learned, what could possibly go wrong?
On December 12, 1980, Steve Wozniak became one of the richest people in America.
That morning, Apple went public.
The company that four years earlier had been two guys in a garage was now worth almost $2 billion.
It was the most successful IPO since Ford Motor Company in 1956.
The IPO created an estimated 300 millionaires.
Steve Jobs' stake was worth $217 million.
Mike Markula saw his $250,000 investment turn into tens of millions.
The parking lot at Apple headquarters changed overnight.
Hondas and Toyotas were joined by Porsches and Mercedes.
The company built on the joy of making something new suddenly had shareholders quarterly earnings reports.
Wall Street analysts.
The freewheeling culture that had produced the Apple II is now subject to the relentless demands of public market.
But something else happened that December morning, something that revealed the fundamental difference between Steve Wozniak and almost everyone else in Silicon Valley.
Wozniak looked around at his colleagues, the engineers who'd helped him debug code at midnight.
Many of them, the ones who'd joined just a bit later, weren't celebrating.
They hadn't gotten stock options.
Steve Jobs and the board had decided they didn't qualify.
This bothered Woz a lot.
So he did something corporate executives still struggle to explain.
He took his own shares and sold them at a deeply discounted price to 40 colleagues who'd been left out after the IPO.
He was giving away shares to people he felt deserved them.
He called it the Woz plan.
For many, it was life-changing.
And then buying their first house, achieving financial security, the company had denied them.
One recipient was Dan Cottle, Steve Jobs' oldest friend, who'd been there from the beginning but whom Jobs had refused to give stock to.
Years later, someone asked Wozniak why he did it.
His answer was simple.
It was the right thing to do.
Well, Wall Street celebrated the Apple III was dying on people's desks.
Launched seven months before the IPO.
It was supposed to be Apple's future, the serious business computer that would make the Apple II look like a toy.
Management was so confident they canceled all Apple II development, betting everything on the new machine.
But the Apple III was overheating, badly.
Steve Jobs had mandated no cooling fans and no visible air vents.
They were noisy and inelegant.
To dissipate heat, they added a heavy aluminum case, but it couldn't keep up.
Integrated circuits would physically expand and pop out of their sockets.
Screens displayed garbage.
Systems crashed constantly.
Sometimes floppy disks came out of the drive visibly melted.
Apple's official technical support advice became legendary.
When customers called about system failures, technicians would tell them to lift the front of the computer three to six inches off their desk and drop it.
The physical shock might reset the loose chips.
The official fix for the computer worth thousands of dollars was to drop it on your desk.
To Wozniak, the cause was simple.
The Apple III had been designed by the marketing department and not by the engineers.
Jobs had pushed his aesthetic vision without regard for technical feasibility, something he would do over and over again, and often it worked out.
The case was finalized before the motherboard, forcing engineers to cram immature technology into a space that was too small.
This was the complete opposite of the Apple II.
The Apple II started with brilliant engineering and built the product around what worked.
The Apple III started with how it should look and forced the engineering to comply.
This is a tension that still exists today.
What made it painful for Woz was that his Apple II was thriving.
While the Apple III failed, the Apple II was becoming the best-selling computer in the world.
And it wasn't because of Apple's marketing.
It was because of the ecosystem that had grown around those eight expansion slots Wozniak had fought so hard to include.
Third-party companies kept building expansion cards.
Software developers kept writing programs.
Tech magazines were full of Apple II advertisements, none from Apple itself.
The open architecture had created a virtuous circle that reinforced itself.
By 1983, the Apple II would become the first computer to sell a million units.
Meanwhile, Apple forced everyone in the company to have an Apple III on their desk.
When Wozniak traveled the country giving speeches to computer groups, he saw the same thing everywhere.
90 people with Apple IIs, 3 people with Apple IIIs.
The company was pretending to be an Apple III company when it was actually an Apple II company.
Almost every ad Apple ran showed the Apple III.
They never showed the machine that was actually paying everyone salaries.
In today's money, they'd lost at least a billion dollars on the Apple III, all of it subsidized by the Apple II's success.
The ecosystem Wozniak had fought Steve Jobs to create was now funding the failure of Jobs' closed system vision.
Apple was becoming a big company with underperformers as well.
Two months after the IPO on February 25th, 1981, Mike Scott unilaterally fired 40 employees.
Scott called a meeting with the remaining employees.
He was blunt.
The company had grown too fast, made poor hiring decisions, and lost its startup hustle.
Then he delivered a line that became infamous.
I used to say that when being a ceo at apple wasn't fun anymore, i'd quit, but now i've changed my mind.
When it isn't fun anymore, i'll fire people until it's fun again.
Steve jobs was furious and demanded scott's removal.
The board agreed.
Scott was stripped of his operational duties and resigned in july.
But the damage was done.
The culture that had built Apple was shattered.
Public companies answered to shareholders and not to engineers who built the products.
For Wozniak, this was the final confirmation the company he'd co-founded had become something he no longer recognized.
In 1981, IBM entered the personal computer market.
Apple ran a full-page ad in the Wall Street Journal that said It was meant to be cocky, but it was based on a fundamental misunderstanding about what was about to happen.
The IBM PC wasn't technically revolutionary.
It used commodity parts and a processor less capable than Apple's.
But IBM brought something that Apple couldn't match credibility in corporate America, their legendary sales force, their support network, their brand.
And IBM made a critical decision.
They designed the PC with an open architecture.
They published complete technical specifications and encouraged third-party developers to build for it.
They did exactly what Wozniak had wanted Apple to do.
The ecosystem that had made the Apple II so successful, the one that came from those eight expansion slots Wozniak fought for.
IBM replicated it on purpose.
Within a year, the IBM PC became the safe choice for corporate America.
Within two years, it dominated the business market.
The Apple III never stood a chance.
The irony was brutal.
The open architecture Wozniak champion was now being used against them by the world's most powerful computer company, and Apple's response was to double down on closed systems.
Steve Wozniak left Apple in 1985 and to this day he remains on Apple's payroll in this ceremonial position.
After walking away, Wozniak did what made him happy.
He went back to UC Berkeley under a fake name to finish his engineering degree.
He taught fifth graders how to build computers.
He funded museums and robotics competitions.
He became exactly what he always wanted to be an engineer who happened to have money, not a businessman who happened to know engineering.
When people ask him about walking away from billions, he always gives the same answer.
Happiness equals smiles minus frowns.
It's a formula he developed as a kid and never abandoned.
As for Apple, the Macintosh that Wozniak couldn't support eventually saved the company, but not before Apple fired Steve Jobs in 1985.
Not before Apple nearly went bankrupt.
Not before Jobs returned in 1997 and transformed Apple into the most valuable company on Earth.
Jobs' vision of the sealed, elegant appliance, the vision Wozniak fought against in 1976, eventually won.
The iPhone, the iPad, the modern Mac are all beautiful closed systems that users admire but don't really modify much.
But here's what's easy to miss.
Job's closed system only worked because Wozniak's open system funded them.
The Apple II kept the company alive for years. its profits bankrolled everything that came after.
Those eight expansion slots Wozniak fought for became the financial engine that allowed Jobs to eventually build his vision.
Steve Jobs once said I could never have built Apple without Woz.
And I think Woz could have built Apple without me, but it would have been a very different Apple.
Two philosophies, two Steves, and somehow they both ended up being right.
That's what made Wozniak an outlier.
It wasn't his genius, though that was real.
Not his generosity, though that was extraordinary.
What made him an outlier was his refusal to compromise on what he believed a computer should be, what a company should be and what a person should be.
He stayed true to himself, even when it cost him everything.
Instead of my usual reflections and rules at the end, I want to read you some excerpts at the end of the book that I think are the most valuable part of this book.
At the very back of IWAS, Wozniak spells out his rules to live by, and these are incredible.
First, believe in yourself.
Here's what Woz writes.
You need to believe in yourself.
Don't waver.
There will be people and I'm talking about the vast majority of people, practically everybody you'll ever meet who just think in black and white terms.
Most people see things the way the media sees them or the way their friends see them, and they think that if they're right, everyone else is wrong.
So a new idea, a revolutionary new product or product feature won't be understandable to most people because they see things so black and white.
Maybe they don't get it because they can't imagine it, or maybe they don't get it because someone else has already told them what's useful or good, and what they heard doesn't include your idea.
Don't let these people bring you down.
Remember that they're just taking the point of view that matches whatever the popular cultural view of the moment is.
They only know what they're exposed to.
It's a type of prejudice actually a type of prejudice that is absolutely against the spirit of invention.
But the world isn't black and white.
It's grayscale.
As an inventor, you have to see things in grayscale.
You need to be open.
You can't follow the crowd.
Forget the crowd.
And you need the kind of objectivity that makes you forget everything you've heard, clear the table and do a factual study, like a scientist would.
Second.
Be slow to form an opinion and hold it with the right grip.
Wozniak writes you don't want to jump to conclusions, take a position too quickly and then search for as much material as you can to support your side.
Who wants to waste time supporting a bad idea?
It's not worth it.
That way of being stuck in your ego.
You don't want to just come up with any excuse to support your way.
Engineers have an easier time than most people seeing and accepting the grayscale nature of the world.
That's because they already live in a grayscale world, knowing what it is to have a hunch or a vision about what can be, even though it doesn't exist yet.
Plus they're able to calculate solutions that have partial values in between all and none.
Third, on coming up with something new, Wozniak writes the only way to come up with something new, something world changing, is to think outside of the constraints everyone else has.
You have to think outside the artificial limits everyone else has already set.
You have to live in the grayscale world, not in the black and white one, if you're going to come up with something no one else has thought of before.
Fourth, nothing good has ever been invented by a committee.
Wozniak writes, most investors and engineers I've met are like me.
They're shy and they live in their heads.
They're almost like artists.
In fact, the very best of them are artists.
And artists work best alone, best outside of corporate environments, best where they can control an invention's design without a lot of other people designing it for marketing or some other committee.
I don't believe anything really revolutionary has ever been invented by committee, because the committee would never agree on it.
Why do I say engineers are like artists?
Engineers often strive to do things more perfectly than even they think is possible.
Fifth, work alone.
Wozniak writes if you're that rare engineer who's an inventor and also an artist, I'm going to give you some advice that might be hard to take.
That advice, work alone.
When you're working for a large, structured company, there's much less leeway to turn clever ideas into revolutionary new products or product features by yourself.
Money is unfortunately, a god in our society, and those who finance your efforts are business people with lots of experience at organizing contracts that define who owns what and what.
You can do on your own.
But you probably have little business experience, know-how or acumen and it'll be hard to protect your work or deal with all that corporate nonsense.
I mean those who provide the funding and tools and environment are often perceived as taking the credit for inventions.
If you're a young inventor who wants to change the world, a corporate environment is the wrong place for you.
You're going to be best able to design revolutionary products and features if you're working on your own.
Not a committee, not a team.
That means you're probably going to have to do what I did to do your projects as moon lighting, with limited money and limited resources.
But man, it'll be worth it in the end.
It'll be worth it if there's really, truly what you want to do, invent things.
If you want to invent things that can change the world and not just work at a corporation working on other people's inventions, you're going to have to work on your own projects.
When you're working as your own boss, making decisions about what you're going to build and how you're going to go about it, making trade-offs as to features and qualities, it becomes part of you, like a child you love and you want to support.
You have huge motivation to create the best possible inventions and you care about them with a passion you could never feel about an invention someone else ordered you to come up with, and if you don't enjoy working on stuff for yourself, with your own money and your own resources after work, if you have to, then you definitely shouldn't be doing it.
It's so easy to doubt yourself, and it's especially easy to doubt yourself when what you're working on is at odds with everyone else in the world who thinks they know the right way to do things.
Sometimes you can't prove whether you're right or wrong.
Only time can tell that.
But if you believe in your own power to objectively reason.
That's a key to happiness and a key to confidence.
Another key I found to happiness was to realize that I didn't have to disagree with someone and let it get all intense.
If you believe in your own power to reason, you can just relax.
You don't have to feel the pressure. to set out and convince anyone.
So don't sweat it.
You have to trust your own designs, your own intuition and your own understanding of what your invention needs to be.
Thank you for listening and learning with me.
I will see you next week.
