After he and Paul Allen had completed their BASIC
interpreter for the Altair, Gates was appalled that members of the Homebrew were making copies of it and sharing it without paying him. So he wrote what would become a famous letter to the club: “As the majority of hobbyists must be aware, most of you steal your software. Is this fair? . . . One thing you do is prevent good software from being written. Who can afford to do professional work for nothing? . . . I would appreciate letters from anyone who wants to pay up.”
Steve Jobs, similarly, did not embrace the notion
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that Wozniak’s creations, be it a Blue Box or a computer, wanted to be free. So he convinced Wozniak to stop giving away copies of his schematics. Most people didn’t have time to build it themselves anyway, Jobs argued. “Why don’t we build and sell printed circuit boards to them?” It was an example of their symbiosis. “Every time I’d design something great, Steve would find a way to make money for us,” said Wozniak. Wozniak admitted that he would have never thought of doing that on his own. “It never crossed my mind to sell computers. It was Steve who said, ‘Let’s hold them in the air and sell a few.’”
Jobs worked out a plan to pay a guy he knew at Atari to draw the circuit boards and then print up fifty or so. That would cost about $1,000, plus the fee to the designer. They could sell them for $40 apiece and perhaps clear a profit of $700. Wozniak was dubious that they could sell them all. “I didn’t see how we would make our money back,” he recalled. He was already in trouble with his landlord for bouncing checks and now had to pay each month in cash.
Jobs knew how to appeal to Wozniak. He didn’t argue that they were sure to make money, but instead that they would have a fun adventure. “Even if we lose our money, we’ll have a company,” said Jobs as they were driving in his Volkswagen bus. “For once in our lives, we’ll have a company.” This was enticing to Wozniak, even more than any prospect of getting rich.
He recalled, “I was excited to think about us like that. To be two best friends starting a company. Wow. I knew right then that I’d do it. How could I not?”
In order to raise the money they needed, Wozniak sold his HP 65 calculator for $500, though the buyer ended up stiffing him for half of that. For his part, Jobs sold his Volkswagen bus for $1,500. But the person who bought it came to find him two weeks later and said
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the engine had broken down, and Jobs agreed to pay for half of the repairs. Despite these little setbacks, they now had, with their own small savings thrown in, about $1,300 in working capital, the design for a product, and a plan. They would start their own computer company.
Apple Is Born
Now that they had decided to start a business, they needed a name. Jobs had gone for another visit to the All One Farm, where he had been pruning the Gravenstein apple trees, and Wozniak picked him up at the airport. On the ride down to Los Altos, they bandied around options. They considered some typical tech words, such as Matrix, and some neologisms, such as Executek, and some straightforward boring names, like Personal Computers Inc. The deadline for deciding was the next day, when Jobs wanted to start filing the papers. Finally Jobs proposed Apple Computer. “I was on one of my fruitarian diets,” he explained. “I had just come back from the apple farm. It sounded fun, spirited, and not intimidating. Apple took the edge off the word
‘computer.’ Plus, it would get us ahead of Atari in the phone book.” He told Wozniak that if a better name did not hit them by the next afternoon, they would just stick with Apple. And they did.
Apple. It was a smart choice. The word instantly signaled friendliness and simplicity. It managed to be both slightly off-beat and as normal as a slice of pie.
There was a whiff of counterculture, back-to-nature earthiness to it, yet nothing could be more American.
And the two words together—Apple Computer—
provided an amusing disjuncture. “It doesn’t quite make sense,” said Mike Markkula, who soon thereafter became the first chairman of the new company. “So it forces your brain to dwell on it. Apple and computers, that doesn’t go together! So it helped us grow brand awareness.”
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Wozniak was not yet ready to commit full-time. He was an HP company man at heart, or so he thought, and he wanted to keep his day job there. Jobs realized he needed an ally to help corral Wozniak and adjudicate if there was a disagreement. So he enlisted his friend Ron Wayne, the middle-aged engineer at Atari who had once started a slot machine company.
Wayne knew that it would not be easy to make Wozniak quit HP, nor was it necessary right away.
Instead the key was to convince him that his computer designs would be owned by the Apple partnership.
“Woz had a parental attitude toward the circuits he developed, and he wanted to be able to use them in other applications or let HP use them,” Wayne said.
“Jobs and I realized that these circuits would be the core of Apple. We spent two hours in a roundtable discussion at my apartment, and I was able to get Woz to accept this.” His argument was that a great engineer would be remembered only if he teamed with a great marketer, and this required him to commit his designs to the partnership. Jobs was so impressed and grateful that he offered Wayne a 10% stake in the new partnership, turning him into a tie-breaker if Jobs and Wozniak disagreed over an issue.
“They were very different, but they made a powerful team,” said Wayne. Jobs at times seemed to be driven by demons, while Woz seemed a naïf who was toyed with by angels. Jobs had a bravado that helped him get things done, occasionally by manipulating people. He could be charismatic, even mesmerizing, but also cold and brutal. Wozniak, in contrast, was shy and socially awkward, which made him seem childishly sweet. “Woz is very bright in some areas, but he’s almost like a savant, since he was so stunted when it came to dealing with people he didn’t know,” said Jobs. “We were a good pair.” It helped that
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Jobs was awed by Wozniak’s engineering wizardry, and Wozniak was awed by Jobs’s business drive. “I never wanted to deal with people and step on toes, but Steve could call up people he didn’t know and make them do things,” Wozniak recalled. “He could be rough on people he didn’t think were smart, but he never treated me rudely, even in later years when maybe I couldn’t answer a question as well as he wanted.”
Even after Wozniak became convinced that his new computer design should become the property of the Apple partnership, he felt that he had to offer it first to HP, since he was working there. “I believed it was my duty to tell HP about what I had designed while working for them. That was the right thing and the ethical thing.”
So he demonstrated it to his managers in the spring of 1976. The senior executive at the meeting was impressed, and seemed torn, but he finally said it was not something that HP could develop. It was a hobbyist product, at least for now, and didn’t fit into the company’s high-quality market segments. “I was disappointed,” Wozniak recalled, “but now I was free to enter into the Apple partnership.”
On April 1, 1976, Jobs and Wozniak went to Wayne’s apartment in Mountain View to draw up the partnership agreement. Wayne said he had some experience “writing in legalese,” so he composed the three-page document himself. His “legalese” got the better of him. Paragraphs began with various flourishes:
“Be it noted herewith . . . Be it further noted herewith . . .
Now the refore [ sic], in consideration of the respective assignments of interests . . .” But the division of shares and profits was clear—45%-45%-10%—and it was stipulated that any expenditures of more than $100
would require agreement of at least two of the partners.
Also, the responsibilities were spelled out. “Wozniak shall assume both general and major responsibility for
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the conduct of Electrical Engineering; Jobs shall assume general responsibility for Electrical Engineering and Marketing, and Wayne shall assume major responsibility for Mechanical Engineering and Documentation.” Jobs signed in lowercase script, Wozniak in careful cursive, and Wayne in an illegible squiggle.
Wayne then got cold feet. As Jobs started planning to borrow and spend more money, he recalled the failure of his own company. He didn’t want to go through that again. Jobs and Wozniak had no personal assets, but Wayne (who worried about a global financial Armageddon) kept gold coins hidden in his mattress. Because they had structured Apple as a simple partnership rather than a corporation, the partners would be personally liable for the debts, and Wayne was afraid potential creditors would go after him. So he returned to the Santa Clara County office just eleven days later with a “statement of withdrawal”
and an amendment to the partnership agreement. “By virtue of a re-assessment of understandings by and between all parties,” it began, “Wayne shall hereinafter cease to function in the status of ‘Partner.’” It noted that in payment for his 10% of the company, he received $800, and shortly afterward $1,500 more.
Had he stayed on and kept his 10% stake, at the end of 2010 it would have been worth approximately $2.6 billion. Instead he was then living alone in a small home in Pahrump, Nevada, where he played the penny slot machines and lived off his social security check. He later claimed he had no regrets. “I made the best decision for me at the time. Both of them were real whirlwinds, and I knew my stomach and it wasn’t ready for such a ride.”
Jobs and Wozniak took the stage together for a presentation to the Homebrew Computer Club shortly
