Upgrade - 619: Road to the Apple II: Apple for Sale (Part 1)

Episode Date: June 4, 2026

People have been hearing all sorts of things about computers during the past 10 years through the media. Supposedly, computers have been controlling various aspects of their lives. Yet, in spite of that, most adults have no idea what a computer really is or what it can or can't do. Now, for the first time, people can actually buy a computer for the price of a good stereo, interact with it, and find out all about it. We started a little personal computer manufacturing company in a garage in Los Altos in 1976. Now we're the largest personal computer company in the world. We make what we think of as the Rolls-Royce of personal computers.

It's a domesticated computer. People expect blinking lights, but what they find is that it looks like a portable typewriter, which, connected to a suitable readout screen, is able to display in color. There's a feedback it gives to people who use it, and the enthusiasm of the users is tremendous. We're always asked what it can do, and it can do a lot of things, but in my opinion, the real thing it is doing right now is to teach people how to program the computer. These are the words of a 22-year-old Steve Jobs quoted in the November 14th, 1977 issue of the New Yorker. Welcome to Designed in California, where we are telling the best stories from across 50 years of Apple history. My name is Mike Hurley, and I am joined by Jason Snell.

Hello, Jason Snell. Hello, Mike Hurley. It's good to be back. So many decades, so many eras, so many different stories to tell. Really excited to be telling those stories with you. Jason, what is this computer that Steve Jobs is talking about here in the New Yorker? He is talking about the Apple II computer, Mike. Okay.

The Apple two, Steve Wozniak's. second computer design, at least under the ages of Apple computer. Now, we are here continuing a story that we started on the 50th anniversary of Apple, which is to tell some of the story of the very earliest days, the prehistory and very early history. We're talking 1976 when they signed those papers through basically early 1977, extending essentially to where young Steve Jobs shows up randomly in an article in The New Yorker. Last time, we talked about how Apple came to be, how it all happened because a 26-year-old Steve Wozniak designed his own personal computer circuit board, and a 21-year-old Steve Jobs

had the idea to produce a bunch of them and sell them to a local computer store. Now, when we last left you, Apple had registered as a partnership. It had gotten some help in doing Net 30 accounts. counting from their suppliers because they didn't have the money otherwise to buy the supplies, to assemble the computers to fulfill that first set of Apple ones to their first customer, which was a computer store called the Byte Shop. Once they did that, they had money left over from their profits to make some more Apple ones and start to sell those.

That's where we left it. Eventually, Apple would need to become a real business. Eventually, they would need to ship a real product, not a sort of pre-assembled circuit board. that product was this new computer Steve Wozniak had been working on that would ultimately be known as the Apple 2. And we will get to that computer in this series. And we will get to the start of a real business of Apple Computer. But first, we need to take a few steps back

because I need to take you back to the late summer of 1976, where the Apple 1 is finally out there. And it's kind of a failure. It's not a technical failure necessarily. Everybody agrees it was a brilliant feat of engineering on the part of Steve Wozniak. The issue was that nobody was really buying them. The truth is that even though the Apple One was a major step forward in terms of the hobbyist computer world, you didn't have to buy the chips and install them yourselves, right?

That was part of what they were doing. It was still a do-it-yourselfers device. what Steve Jobs delivered in our last go-round with this to the bite shop and what Apple advertised in some computer magazines and took to the Homebrew Computer Club, you still needed to attach a keyboard and a display and talking about screwing it into a block of wood. You had to put it in a case. It was not a consumer product.

It was just a better hobbyist product. And it was a better sort of hobbyist product. But what it was not was a computer for the masses. This is not what they were doing. And as a result, the volumes of what Apple was selling were not even close to some early PCs like the Altair, which was, again, a lot less friendly, but that didn't end up mattering. Apple was a very, very niche player. So do we have a sense for the computers that were delivered to the Bight Shop?

Well, they sold? Do we get a sense that these were successful enough for them? I do. I think that the Bight Shop was catering to a. hobbyist market who appreciated the fact that they were completely assembled, even though there is that famous line about how the guy from the bite shop wanted it with keyboards and displays, which they're like, are you kidding? That's not, you know, that's not something we're going to be doing. But that's also a clue. Like, I have to imagine that that was also in Steve Jobs's mind,

that, oh, what people really want and what we really should get them is a whole product. Yeah. And this is the moment, right? This is the moment that Apple One is kind of like losing steam or has lost steam. Apple was created to make. the Apple One. It really, that was it. So does Apple go down one path and become a forgotten hobby project launched by a couple of kids from the Valley who should have known better? Or does it turn into a real business? This is the moment where they have to figure that out. So when I've been thinking about this and reflecting on our last episode and even you saying right now, this idea that the Apple One is kind of a failure, I guess the assumption is at this point that

Nobody would have assumed that Apple would have been able to be a company to be taken seriously at this point. Because I would guess there are many small teams in the Valley trying to do something in this space at this time. And that while the Apple One is interesting, it isn't an obvious path that we get to where we are today. Yes, including one of the prime movers in the Homebrew Computer Club, who we'll be hearing from soon, who has started his own computer company. So there are a lot of computer companies out there. There is nothing. The most notable thing about Apple in this point is that they would become Apple that we know.

This is going to come back again and again, Mike, in this series, which is it's a couple of kids and their friends making technology things in one of the kids' parents' garage. It's not impressive. We are only talking about this because of who they became. Right. Not because what they were doing at this exact point was really that notable. Yeah, well, it's very formative for where they go. And they are doing things technically that are going to be the reason they lift off.

Right, okay. But they're not quite there yet. The combination, the alchemy between Steve Jobs and Steve Wozniak is going to launch them on that path. But at this moment, I guess what I could say is there's a path here where Apple just ends right now. That's like, well, we had fun, didn't we? We sold those things and made a little bit of money. But that's not what happens. So part of this is the creative drive of Steve Wozniak.

We often think so linearly about this. It's like, well, they made the Apple One and they sold the Apple One. And then there's this idea like, and they did that for a while. And then they stopped and said, well, I guess what comes next? Apple II, I guess. Let's do that. And that's not what happens. Steve Wozniak designed the Apple One, setting off everything we talked about in our last episode,

he's not sitting still. He knows all of the limitations of the Apple One. And he wants to make his next computer. So he's already working on what will become, the Apple 2. He has been counting all the ways that he can make a better computer than that first computer that he designed. That would be the basis of a new product from Apple. The problem is they're going to need money, right?

They're going to need money because they've already had this issue with the Apple 1 to get enough money to make them and a 30-day net at the technology supplier in order to get it to work, all of that. And keep in mind that they're only this far because Steve Jobs sold his van and Steve Wozniak sold his HP calculator. And even then they had to use the net 30 day credit policy from their supplier. So they don't have money. They don't have money. So what are they going to do to build a real consumer product instead of just a hobbyist gadget? They're going to need serious investment and a business plan and probably a lot more discipline than you might expect from a couple of 20-somethings and their friends.

who are assembling computers in a garage. Or, alternatively, you could just sell the company and provide the technology for a more established company with a ready-made hit new personal computer. You could do that. You could sell it, which they tried. And they failed to do that. So in our last set, we talked about Mike Markela,

who is 34. He seems like the wise old man, right? And compared to Jobs in Wosteak, he is the wise old man, but he's only 34. But he made enough money. at a couple previous tech companies to retire. He likes messing around in Silicon Valley. He enjoys advising other up-and-coming

interestry types. And the two Steve's, Jobs and Wozniak, are people he's going to help. But I want to be clear, the reason that Mike Markala comes into the scene and helps make Apple what it is going to be is because Steve Jobs is trying to sell Apple to anyone who might buy it.

This is the other path. We can make a computer. Surely a large company with lots of money will give us money, take our technology, and then help us build the next personal computer. That's the big idea that Steve Jobs has. Can I take this little Apple thing that we did, this hobby, and sell it? That's the plan.

So Jobs is going around the valley. He's trying to sell Apple to the highest, middleist, or lowest bidder, I guess. And that's how Markler comes into the picture when this thing becomes on the table. It all will lead to Mike Markola. But just putting in the context, Mike Marklea is always like, oh well, and then he invested in Apple and got them a credit line and then everything worked out. And the truth is, it only happened because they were trying to just sell out. And that didn't work.

So they had to do Apple instead. I actually didn't know about that. I didn't know because I guess it's not in the, it's not in the condensed histories that people tell now that Apple was essentially trying to be sold for parts. One of the things we're trying to do with this show is tell these stories. stories and I hope that we are unflattening some of the history because there is a simple flat history of Apple that skips over a lot of these twists and terms that we're trying to get across here that are part of the actual story. The story is much as with any history, it's much more complicated and messy than the simple version that you might have heard.

And this is definitely an example of a path almost taken that literally if Steve Jobs had gotten his way, they would have sold off Apple to somebody and they wouldn't have had to worry about it ever again, but that didn't happen. Well, that feels like as perfect time as any for us to take a break. And then when we come back, we can talk about the near misses of selling Apple to the best bidder. Sounds good. Hello, everybody. I hope you're enjoying this first preview episode of Designed in California.

If you're enjoying this, you should go back to Kickstarter campaign at design.fm. Thank you so much if you have. So many of you have, in fact, that we're now going to be doing 50 episodes of this. show for its first year, essentially designed in California, will be a weekly podcast when it launches later on this year. So thank you so much to all of you that have. We have been blown away by the support. It really means the world to us, and we're so excited that we're going to be able to get to tell you these stories over the next year. Yeah, but there's more to do. And if you haven't backed yet, or if you want to look at some of the higher level pledge levels where we've got

cool stuff coming. You can still adjust your pledge. We have stretch goals that we're working toward including, and some of these have been announced and some of these will be announced as we go, but like including doing an interview series where I talk to people who have either written about Apple or who have worked at Apple about some aspect of history that they were involved with. We could throw those in on the pile as well. And there will be more beyond that. Just stay tuned to the Kickstarter page and the Kickstarter updates. as we move along because we've got a whole month, because this campaign ends July 1st in the morning, Pacific time.

So a lot of time left for us to hopefully reach and then add new stretch goals. We thought we would have more time to arrange a lot of these things, but your support has really blown us away. We couldn't be happier. As we said in Upgrade, Jason and I have been so excited about this project, and we've really wanted this Kickstarter to fund so we could make this show for you because we want to make it because we enjoy it and we know you're going to love it. We have so much great stuff planned and if you just go to designed.fm, you can read more.

We're going to be updating the campaign throughout the whole month. We're going to be popping in during every one of these preview episodes and kind of giving you updates about where we are and the things that we're planning on. There is so much left to share throughout the campaign. So please go and check it out at designed.fm. All right, so welcome back. Jason, can you fill me in? Who was on the table to try and buy this little Apple computer company? Oh, well, the giants of Silicon Valley, of course. So when we talked about this on the 50th anniversary of Apple, I mentioned that this all started with Steve Wozniak saying,

well, I work at Hewlett-Packard. So I should probably give them the opportunity to buy the Apple One design before I go and make a company of my own. And every division of Hewlett-Packard turned him down. So, okay, not going to be HP. Now, Steve Jobs had been working at Atari, the video game company, which for people who don't know

was the name in video games. They did Pong. They were the the be all, end all of breakout. This was the earliest video game era, and Atari was one of the first huge successes in Silicon Valley. And since Steve had worked there jobs,

he pitched them on buying Apple. He ends up meeting with the president of Atari, who is not the person that he'd been working with when he worked there. And this guy's named Joe Keigh, Heenan, and he is a much more conservative business guy than the people jobs had been working with at Atari. And, okay, this is what I was referencing before.

And while it is an unfair flattening of the history, if you will, to say that Silicon Valley was a bunch of smelly hippies, this is an era where Steve Jobs didn't want to bathe, only ate fruit, and frequently walked around barefoot. It's not speaking for all Silicon Valley residents, but specifically for jobs. Jo Keene and the president of Atari could not stand him. And he said, not only are we not going to buy this thing, get your feet off my desk. Imagine. Just imagine. I feel like, I mean, obviously this is a different time.

It was a time that I did not occupy. But I struggled to be able to reconcile a person who is trying to either a start a company or be seller company, which is a very capitalistic endeavor with a success-driven end goal, but then acts in this way? Like, if you have a personal decision to only eat fruit and not bathe, fine.

But then you go into these rooms and put your fee on people's desks. Like, I feel like I can't get into the mind of the man who is doing this. It's very peculiar to me. The more I dive into Steve Jobs for this project, the more I'm reminded what an odd person he was throughout his life. And he grew a lot.

There was a lot of personal and professional growth, no doubt. In this era, it is just kind of like, I don't know. I mean, he's kind of wild. Yeah. I mean, he grew up in the Valley, but to be fair, in the 60s and 70s, but he doesn't know what he's doing. I mean, that's really it. He clearly is so enamored with what they're doing and what they have and who he is

that he thinks that it's fine and he's running into people who are more establishment types, right? I mean, there is a hippies and squares dynamic going on here a little bit. And eventually, Steve Jobs will get with the program and put on a suit and stuff,

but this is not that Steve Jobs. This is summer of 1976, Steve Jobs, and he's putting his feet up. I hope he was wearing shoes when he put his feet up on their desk. I'm assuming he wasn't, which is... I'm assuming he wasn't. But who knows?

right? We can't know. Nolan Bushnell, who was the CEO of Atari at the time, because Keenan was the president. And Nolan Bushnell had worked with Steve Jobs. And what he said, I believe to David Pogue in his Apple first 50 years book, excellent book on sale now, Bushnell said, he asked me if I would put $50,000 in and he would give me a third of the company. I was so smart, I said, no. It's kind of fun to think about that when I'm not crying.

In hindsight, this is a giant mistake, right? But at the time, do you blame any of these people for saying, I'm not going to give these kids money? Even if Jobs was more regular, it's still a flyer. It's a tough sell. But he's not putting his best foot, his best dirty barefoot forward. Jobs also pitched a bunch of venture capital firms in Silicon Valley. There were VC existed even in the 70s.

folks, yes. They all passed. What next? Steve Jobs, like, who will buy this Apple computer from me? He heard that there was a company that was big in electronic calculators. So before their computers, there were calculators. So people were using electronics to build calculators or

adding machines sometimes they were called, which I think is a hilarious term. They never subtracted. They only added. You added backward to get the subtraction there. It was Commodore business machines. the name of the calculator maker. He had heard that they were interested in getting

in the personal computer game and they had an office in Silicon Valley in Santa Clara. So there was a possibility there. Let me stop you for a moment now and tell you about Commodore business machines. A company that people now know if they know them at all as the makers of the Commodore 64, right? That was their hit computer product in the 80s.

There are a lot of our friends who are children of the C-64 and love it and had it and played games on it. And that was Commodore to them. This is before that. Commodore is a little shady, I'm going to say. Maybe a lot shady.

I've been really excited to talk about this ball. So Michael S. Malone wrote a book called Infinite Loop that I think is out of print now, but it's a great book about Apple. He refers to Commodore as, registered in the Bahamas, incorporated in Canada, lists its headquarters of Santa Clara,

and at times appear to be run out of Norristown, Pennsylvania. This is just normal stuff that you do when you have a regular business on the upper-and-off. Perfectly normal business. Just regular smooth stuff. Yeah. Yeah, well, because it's so normal, you will not be surprised by the other totally normal stuff that happened at Commodore. Like a decade earlier, its chairman had died under suspicious circumstances, while under investigation for defrauding investors.

Perfectly normal. But it had become a major player in adding machinery. machines and calculators, led by their CEO, a person who has the most main character energy of maybe anybody ever, a guy named Jack Tremiel. Okay. Jack Tremiel was Polish. He was a survivor of Auschwitz. After being rescued from a Nazi labor camp, he emigrated to the U.S. He learned how to repair office equipment, including typewriters, and started a business. It's American dream, folks.

It was post-war America. He wanted to connect it to the military. He couldn't get the names Admiral or General, so the company became Commodore portable typewriter. Hang on a minute. USA, USA. I mean, the Navy needs typewriters, too, I guess. No, I mean, the idea is, like, everybody is very,

you know, so many people are veterans of World War II in this era, and he wanted to kind of, like, steal a little bit of that valor, maybe, and Admiral and General were taken, so Commodore it was. His first big deal, and I am not making this up, was importing typewriter parts from Czechoslovakia to Canada to avoid import issues. It's a tariff thing involving the Cold War because, of course, Czechoslovakia was part of the Warsaw Pact, was part of the Russian sphere of influence, the Soviet sphere of influence.

So the U.S. didn't want you importing your Czechoslovakian typewriter parts. So Jack Tremiel used Canada as a way station that he would have. assemble his typewriters from the parts in Canada, and then the Canadian assembled typewriters, nobody mentioned Czechoslovakia, would be resold throughout North America. So that's how he built Commodore, and then he later pivoted to the adding machines

and electronic calculators as well. This guy, if you've not already detected it, was a character. He was bald, he was gruff, he was impatient with employees, he was famous for withholding payment to suppliers and generally throughout all of the references I can find to him. Terrifying. Just terrifying.

He would sometimes shut down all conversation. This was his big move. He would shut down all conversation with people he felt considered themselves superior to him because of their educational background because he was a poor kid from Poland who got out of the labor camp, got to the U.S., built himself up by his bootstraps, right? People who felt all fancy. to him. He would declare he also went to university. He went to the University of Auschwitz.

Oh my God. Well, that end of, I mean, end of conversation there. It's like, okay. And then everybody leaves. I don't know what you're supposed to say to that. I, I don't. I mean, yeah, what can you say? I mean, it's probably why he kept reusing it because it worked every single time. You've heard of conversation starters. This was a conversation stopper. 100% success rate on I went to the University of Auschwitz. Man, Jack Tramiel, everybody. So another feature of Commodore's products, apparently, and their calculators in particular,

was that they were actually well designed, but then cheaply built. That allowed him to sell them at low prices. At some point, Tramiel was frustrated by his chip partners, and he ended out buying MOS technologies. These are the people who made the 6502 chip, that was the chip that inspired Waz to make his first personal computer circuit board design.

It was very much a, honestly, it's very much an Apple kind of move, which is we don't like how this chip business is going. We're going to buy the chip maker, and then we're going to own them, and then we can get all the chips we want, I guess. Along with MOS technologies came the guy who created the 6502. It was a guy named Chuck Petal. And he convinced Tramiel that Commodore could excel at personal computers, too. And he knew, Chuck Petal knew, where they could get a good computer design on the cheap.

Namely, are you getting it yet, from two guys who had to sell their van and calculator to make a computer in a garage? Write pickings, right for the taking. We can swoop in there, we can duck into that garage, write them a check, get their computer, and we're good. And so this is what they tried.

Sometime in the early fall of 1976, Chuck Petal and another Commodore executive who was not Jack Tremiel, show up at the garage and ask Steve Jobs to suggest a purchase price. And remember, Steve Jobs wants to sell. Yep. This is what he wants.

Steve Wozniak describes the scene to Walter Isaacson in the Steve Jobs biography as we'd opened Steve's garage to the sunlight and he came in wearing a suit and a cowboy hat. This is the Commodore executives, right? Yeah. Okay. All right. So Steve Jobs makes his pitch. He says, you can have Apple for $100,000 plus some stock in Commodore.

And you have to guarantee. that both of us have full-time jobs at $36,000 a year, which is a lot back then. So today, that's about half a million dollars of the company and jobs that would pay the Steve's $200,000 a year each. So they want to be set up. It's a big request. This is one of those Steve Jobs moments, right? Because that guy had Hutzpah. You got to say it.

He is asking for the moon. He thinks what Apple has, which is Wozniak's design, is really valuable. And so he's going to ask for more money than either of them has ever seen in their lives. Steve Wozniak, meanwhile, is watching this. And he can't believe it. He's like, what are you doing? This is a ridiculous amount. You are asking for everything.

This is, this is, I think Was would have been happy to get like a pat on the back and a stick of gum for his designs, right? He just, he's not thinking about it like jobs. This is just so jobs. He's like, he sees the big picture, which is that this, the, the, the, that Wozniak's design is revolutionary, but also he sees a company that, you know, they got a lot of money. Maybe they'll pay us a lot of money for it.

So the Commodore people are like, okay, okay, we'll take your offer and we'll consider it. And they leave. Steve Jobs, meanwhile, is researching who Commodore is. Oh, wow. So this is all like, I've never met these people before. I don't know who they are, but we want to work in your company forever.

They know pedal, but like I need to know if this is going to happen, I need to know who I'm getting into business with. And so he starts researching and, you know, remember when I said they were sort of shady? Jobs calls everyone he knows who knows anything about Commodore. And the news is bad. The products are bad. Again, good designs, but cheaply built and prone to failure.

The people who worked at Commodore hated it. Commodore often didn't pay its bills, which is a red flag if you're trying to get money from them. and what Steve Jobs later said about it was the more I looked into Commodore, the sleazier they were, I couldn't find one person who had made a deal with them and was happy. Everyone felt they had been cheated. So Steve Jobs gets on the phone and calls Commodore and says,

no deal. We're not interested. I guess the timeline of that is interesting because he's made the offer and they've gone away to think about it. Jobs has had enough time. to do some research. And Commodore still hasn't said yes or no, which means that they were maybe considering it, maybe? Well, they weren't.

Okay. While this is all going on, Jack Tremiel, who is the CEO, was like, no. A Commodore exec who had been interested said they thought it was ridiculous to acquire two guys working out of a garage, which, fair. Despite the best efforts of Chuck Petal and his cowboy hat, no deal. Instead, Commodore did what it always did, which it rushed out a cheaper, less impressive computer nine months later called the Commodore Pet. And what Waugh has said about this whole thing was the pet kind of sickened me. This is what he said to Isaacson. They made a really crappy product by doing it so quick.

They could have had Apple. So the pet, is that more in line with what they were building to become the Apple to? So personal disclosure here, the Commodore Pet is the first computer I ever used. It was impressive in the sense that it had the integrated keyboard and display. Right. Something Apple wouldn't do until the Lisa and the Mac, by the way. The integrated display was not a thing that the Apple II ever had. In fact, I do wonder if that aspect of the pet inspired Steve Jobs a little bit in terms of the Mac,

the idea that it was an all-in-one in a way that the Apple II wasn't. But Was is not wrong. the pet didn't have color. It didn't really have graphics. It had like this extra set of characters in its character set that were like shapes and lines and stuff. So you could like build graphics with it. But it was like if you wanted to do a box, you had to do like right angle, top line, top line, top line, top line, top line, right angle the other way.

And then on the next line you had to do like vertical line, a bunch of spaces, vertical line. You would like draw graphics out of these little teeny tiny. parts, like Lego almost. It was not graphics. It was not graphics. You could fake it, but it was terrible. It was like Aski art, kind of, but with some extra characters. Eventually, Commodore did get there.

They shipped the VIC-20 and the Commodore 64, neither of which had an integrated display, both of them attached to TV sets, basically. But they could have had that all with the Apple II. And that's, I think, what Steve Wozniak laments about this whole situation is that Commodore had this right in front. front of them. The question, and this is super important for where we go next with this story, is Steve Jobs didn't wait to be told no by Commodore. Steve Jobs made an enormous request of Commodore that Steve Wozniak thought was beyond the pale. And then Steve Jobs said,

forget about it. We're not interested. All while Woz looks along aghast. And this is going to become a major issue in the relationship between the two steves. But at this point, clearly Jobs still believes in what they're attempting to do, because it seems like he would prefer to continue going it alone and struggling than to kind of just throw it all in for the only company that's interested in buying them potentially. Yeah, I think something must have changed in Steve Jobs. estimation of their potential at this point because he could have made a lower offer, lower

request to Commodore out of the gate and he didn't. And he felt confident in walking away before they could tell him no. Right. And that says something about how Steve Jobs feels about this. But keep in mind the dynamic here, which we will explore soon, which is Steve Wozniak is the engine that's creating the assets for this company, right? He's the creator of the computer that they're going to make or sell. Steve Jobs is just like the front man, the hype man. So when he's asking for all that money, you know, he's making decisions for Steve Wozniak on his behalf, essentially, because now they're a partnership. But Steve Wozniak, you know, is the one who's the motor driving this thing. And that dynamic is not comfortable. And the shenanical, and the shenanical

begins with Commodore, I think, lead them down some darker paths. Well, you mentioned that Steve Jobs is a hype man. There are places where a hype man is necessary and needed. And we're actually going to talk about one of those places on our next episode, which is a computer fair in Atlantic City. Oh, there was drama. There was drama and excitement at Atlantic City. We will discuss that in our next episode as well as the increasing difficulties between the young,

Steve Jobs and Steve Wozniak as they try to create the partnership that will become Apple Computer Incorporated.