Upgrade - 621: Road to the Apple II: The Partnership (Part 2)

Episode Date: June 11, 2026

Welcome back, everybody, to Designed in California. When we last left you, we dropped you up in 1976. America's bicentennial. I'm Jason Snell, joined across the pond by one of our old foes in the UK. Why are we doing this? Mike Hurley. Why is this what we're doing? It's a 1776 thing.

Don't worry about it. So it is 1976. American patriotism is at its peak, but also the computer. industry is being born. When we last left you in 1976, Steve Jobs had tried to shop Apple around to lots of different companies. Ineffectively, perhaps it was the smell or the bare feet. Perhaps it was that nobody really valued two kids in their garage with a computer.

He had turned down Commodore before they could turn him down for his kind of ridiculously overhyped request for money. So it's all kind of hanging there. they're going to do. Now, we're going to back up just for a moment. A little bit before Commodore came knocking on the garage door and talk about sort of like the beginning of the Apple II and the partnership. Okay. So Waz and Jobs fly to Philadelphia on TWA, an airline that no longer exists, but it does put us in the 70s mindset. Flying to Philly on route to Atlantic City, on the red eye. Atlantic City is the home of a computer show called PC76. Whoa, I love it. And they're nervous because there's buzz around a competitor from a company called processor technology,

who sounds very professional, which is funny when I tell stories from this era because you're like, yeah, but it's not going to go well for them, is it? Because I've never heard of them. But they were very impressive. The computer is called the Sol. It's going to be announced. It is yet another company founded in a garage. This time it was a garage in Berkeley. So in the East Bay and not the South Bay, by members of the Homebrew Club. So this goes back to what I was saying last time, Like there were just a bunch of companies like Apple, and they're all kind of like circling around at this time. Yeah.

And so really any of them could have been the ones. Processor technology got money, right? Like they, unlike Apple, they had money. They hired a corporate sales staff. They had people in suits and stuff. Okay. So just to set the stage here, I want to make sure that I got it correctly. So PC76, this trade show, this actually happened before Commodore made

the offer to them. I have to back us up a little bit to tell you about this Apple II part of it. I'm like a time traveler, Mike. We're going to move around a little bit. We're going to have to move around. To get all these threads in order. This is the story, Jason. If it's a story, you can't just go chronologically. We've got to jump around. It needs to be told in the order that it needs to be told in. So Was is designing the Apple II

at this time, right? Like the Apple One was his previous project. He moved on immediately. He knew all the things that could be better about it. But Apple is still trying to move those Apple ones, right? I said last time they didn't sell a lot of them. So they're to go to this show and they're going to try to sell a bunch of Apple ones. Steve Jobs knows they need to be there. He knows they need to see the Saul because that is their competition. A competition for whatever Waaz is working on next. And they're going to secretly show some people what the Apple II is going to do and how it's going to beat the Saul. Okay. Now, as far as we know,

this would be their first trade show, their first something like this? I think so. I think this is their first anything that resembles a trade show at all. The Homebrew Computer Club was probably I mean, there maybe were like clubs and stuff, but this is a real trade show. With buyers and all this kind of stuff. I mean, it's a hobbyist. It's probably, I would say, think of it like a cross between like a flea market and like a hobbyist expo of like very niche parts. It's not a big business yet, but there's a lot of interest in this growing area. It was probably pretty shambolic, but for this era, it is the first trade show, I think, that they show up that.

Okay. So guess who's? on the flight, this TWA flight, sitting right behind Steve Jobs and Steve Wozniak, it's processor technology. Okay. Okay. So they are all dressed in a corporate fashion,

far more corporate than the Apple people, which is a very, as well I've established, a very low bar. Yes. But their computer, the saw, it looks like a real computer. It's got a keyboard and a motherboard and a tape drive, all in one metal

case. it's a productized computer. So this is the all in one. We touched on the only one before. We spoke about the Commodore Pet, which came a little bit later. Yeah. This doesn't have a display. Okay.

But it does have, I mean, it's basically, it's not what the Apple One was, which was a loose circuit board that you had to add stuff to. Okay. This is a, you buy this box. It comes in a metal case. It looks like a piece of industrial equipment. And it's got the keyboard and the motherboard and your storage drive all together. All you have to do is hook it up. to power and a display, and you're good to go.

It looks like a product in a way that so many of these products, including the Apple One, they just weren't products, really. They were part of a kit. This is a real product. But it feels like this is what people were shooting for at this time, trying to build a computer that was one box, essentially. Yeah, this is the next step. And everybody knows that Steve Jobs certainly knows it.

Was says that he knew that it was processor technology behind them on this flight because of how they talked. He said to Walter Isaacson, we could hear them talking in advanced business talk using business-like acronyms we've never heard before. I will always love Steve Wozniak. And the reason is because I believe

even at this point, Steve Wozniak doesn't know what any of these words mean. No, no. One of the prime movers behind the Saul is Lee Feldstein, who was the spiritual father of the Homebrew Computer Club.

Okay. And he does a little peek over the seat to see what jobs and wares are doing. And they're messing around with this computer mock-up they have in a cigar box. And Michael Moritz, who wrote the book, Returned to a Little kingdom, described to the prototype as forlorn and savagely deformed. A printed circuit board screwed to a wooden base with wires sneaking between the chips. It was a loser. Ha-ha. Lee Felsenstein peeks over the seat. He sees the stupid forlorn computer. in a cigar box.

Oh, we have a metal case on our computer. We have salespeople in suits. These guys are not a serious threat. By the way, that mockup is the Apple 2 and it will destroy processor technology. So I'm aware

of the Apple 2. I know what it is, right? Like I've used one. I have a sense of understanding it. But I am looking forward as we go through this series to understanding exactly why it was so much better than everything else? Because it must have been so good to have come from these kinds of beginnings and destroy products that ostensibly sound to me in the way

that you described them as just what the Apple II was. It is more technically advanced. We'll get into this in a moment. It is more technically advanced. But this is the story of Apple at this point, right? Which is that they're so unpolished that nobody takes them seriously, even though what's actually happening is that their technology is incredible because was is a genius and the first person who recognizes that is going to make a lot of money right the first person who recognizes the genius if if they can recognize it before they go out of business yeah we'll make a lot of money because they are super technically proficient thanks to waz but they do not have their act together otherwise also just one last thing about the difference

in the 70s and today. They were allowed to do that sitting on an airplane. They had a thing in a cigar box who chips and wires. If you got that out on the plane, you're going out of the door. It doesn't matter. They put it in a parachute and you're out of there. No, anything goes on these planes. So we get to Atlantic City, right?

Flying to Philly, go to Atlantic City, New Jersey. The show is not that interesting because all they have is the Apple One out on the show floor, and they sell some of them, which is great. This is Atlantic City before they brought in gambling and casino. So it's super run down and dilapidated. The hotel that this event is in and that they're staying in has like holes in its walls and stuff. Like it sounds really bad. There are elderly people who live in this hotel who are like watching these long-haired hippie types in the elevators and in the hallways.

And they're like, who are they? Why are they here? It sounds like a complete. I mean, it actually sounds kind of like a sitcom. Yeah. But forget about PC76. At night up in their hotel room, Waz has hooked his Apple. two up to the TV set in the room, which at least the hotel had a TV set in the room,

I thought, and has it like spraying color graphics all over the stream. And again, when I talk about the Commodore Pet, it didn't have color or graphics. Apple II, color graphics. And everybody who came into that room that they let peek at what Apple was working on, realized that they had something beyond what anybody else was doing. And Jobs knew it and Laws knew it. And this is the moment when Commodore came knocking on the garage door with a cowboy hat. And Steve Jobs made his outrageous demands. After seeing everybody's reactions and what they knew about what the Apple II prototype in a cigar box that looked forlorn, yes, yes, but they knew they were way ahead. They weren't ahead in making it a product yet. But I think they knew that the Apple two

was a next generation computer, if you will, from what was coming out. That Saul was a nice computer and all, and that Commodore Pet ultimately would be, too, but they lacked stuff that the Apple II was going to have, and that that put them ahead. And I think that's why Steve Jobs made those outrageous demands to Commodore. Okay.

And I think, because Steve believed in this, and was, I think, was always a little more self-deprecating about it and didn't value himself as much. It actually led to possibly the biggest conflict the two of them ever had. Huh. Now, this is very interesting. So it feels like the perfect time for us to take a quick break. I think so. What will happen next? Find out after the break.

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every week forever, just through the end of the month. Thank you so much. That's it. Now back to the show. All right, so welcome back to Designing California. And so in the timeline now, we've gone to the computer show. PC76, USA, USA. It's the, thank you, it's the bicentennial.

We're aware of that, which is really good news for everyone. Yep, Statue of Liberty, boats, flags. Brilliant. Love it. Fireworks. Fantastic. And so people are aware of what Apple's building. The word is getting out about the Apple too.

Slowly, yeah, they're very slowly revealing to people that they've, got something here. But they're still selling Apple ones. Commodals come knocking. Steve Jobs made his demands. But then Steve says, you know what? Forget about this Commodore. Yeah. We're not doing this. Yeah, they're shady. We're not going to go with them. So just to remind everybody, Apple Computer Company is a partnership. It's not an incorporated company yet. As we talked about at the end of our Apple at 50 episode, that didn't happen until 77. It was a partnership registered April 1st, 76. And when Ron Wayne

got cold feed, he backed out of his 10% tiebreaker share. It's 50-50 between the two steves. But part of the agreement of the partnership is that Was owns the rights to his creations. It's more of a marketing and distribution and productizing partnership than it is a full-on intellectual property agreement. This is not a corporation that Was has contributed his intellectual property to. And as a result, Waz owns his stuff, that the stuff that Steve is trying to sell is owned by Waz. I don't think this was smart. As we're going to discover, I think that it was

a smart move from Jobs in that it may have been the only way that he could have gotten Apple to happen. Ah, okay. That Waz was not prepared to be giving away the fruit of his labor, especially if he was still kind of like dreaming about, he's still working at HP, he's still dreaming about selling this

to H.P. or someone else. But you can also see the friction this might lead to if Jobs is trying to sell the company for a lot of money, and it's a 50-50 partnership. but the underlying technology is really their greatest asset and that's owned by Waz. Steve Jobs, has he earned the 50%? Not at this point. Not at this point.

Not yet. He will, but not yet. And that is part of the issue here. So, was, again, he does his own thing. He follows his muse. He builds his technological creations.

But over the last year, as they've been talking about what the Apple II is going to be, he's been arguing with Steve Jobs. It's this push and pull between a product visionary and a technical, visionary about what the end result should be. Expansion slots so that you can add cards later to a computer to make it do different things. Waws wants eight of them. Jobs wants two of them. You'll never need more than two for a printer and a modem, I think he said. Waz is like, no, no, no, no, it needs to be eight. Waus wins that argument, by the way. But you can see why there might be tension

between them. Steve Jobs is kind of an assassin of joy, right? It's like, Waus is like, I made this thing. And Steve's like, no, no, no, that's too many things. I don't want that. He's, because there's a push and pull here. Waws is floating free and inventing what he wants. And Steve Jobs, we know already at this point has some product sense. And he's like, I don't want to do that. I do want to do this. And if you're Waz, you're pushing against that. You're maybe not used to having a partner who is going to push back on what you want to do with your technology and with your designs. And then on top of that, Steve Jobs is now standing in the way of the nice people at Commodore, shady, but you know, the nice people at Commodore who maybe want to offer money

for Waz's invention, but Steve overprices it and walks away. And that even if they had gotten paid, Steve would take half the money. Do you think Wals saw it that way? Do you think that the money or anything like this was something that bothered Waz to that degree? I don't know. You know, Waz doesn't seem super money oriented, but at the same time he's always had more money than God, basically, since Apple was a success. And so maybe back then he was more concerned about it. Maybe the money is more of a symbol of ownership as opposed to actually what it buys you. I think it's pride. I think it's that he is the creator, and he has inscribed a lot of value into what he creates. He was also demoralized in Atlantic City. You know, Steve Jobs was gleeful.

He realized what we said earlier. Waz's designs were way ahead of the salt. and Jobs is thinking about the power of that nice all-on-one computer case that the salt came in. Jobs, I think in this period, when they go to Atlantic City, when they get the offer from Commodore, or make the offer to Commodore, I guess. Jobs at this point, I think, sees the path to success for Apple. So he's like, if we can put our incredible machine inside one of these cases, we blow everybody away. Yeah. And so that's the vision of the future. Right.

And maybe it's literally glass half full, glass half empty, but Waz looks at processor technology. And he says, well, they're a real company. They got like their salespeople wear suits. They're like HP, a real legitimate company. Was is working with teenagers and people in their early 20s. Remember, he's in his mid-20s. His business partner never showers. You know, like, what is he doing here?

Maybe he should just take his inventions, which he owns, and go somewhere better. And just to be clear about the difference. in age between them because we think of them as a pair. Steve Jobs is much younger than Steve Wozniak. Waz is married. He's spending late nights working on this Apple stuff while also working at HP. His wife feels neglected. His family is concerned that the slunky looking guy with dirty hair and bare feet,

that's an actual quote from Waz's sister, is exploiting their innocent genius brother, trying to get him to quit his good job and neglect his marriage. It is a bad dynamic, especially when you consider everybody around Steve Wozniak. Didn't know Waz was married at this point. Yeah. I always think of them as two young, single guys. It's how I've always imagined.

No, Waz's like 26 and married, newly married, his first wife. Okay. He's had many. So then, so bad dynamic, Shlunkey looking guy with dirty hair and bare feet, right? Waz's sister says that. Not great. Then Steve Jobs withdraws from the Commodore deal before they can even find out if there's an offer to be made. or a counteroffer to be made.

That money could have paid off debts, could have gotten Wozniak a sweet job building his dream computer. Remember, he couldn't even go to college for more than like a year at a time because he couldn't afford it. He had to go back and work and make money to pay for another year of college.

I think it is very clear and has been clear across this story so far, to me at least, Wals doesn't care if he owns the business that is producing this computer. He would have given it all to HP if they would have said yes. It was purely about who will let me build this.

He doesn't care if he's building it. That's it. He wants to build it and he wants to be, I think he wants that to be his job, right? That's the living the dream of like, now me making this computer is what I do, not what I'm moonlight at while I am working on whatever HP is doing. Although I think he does like the idea of wherever he builds it that you have some control over it in the sense that he will argue with jobs about how many slots there are. Like he wants to be a decision maker. And I think that there is a little bit of innocence here, right, where he's thinking, if a legitimate business will enable me to make these computers, which I love doing,

and that'll be my job, and it'll be a legitimate corporation with benefits and an office, and I can go in and all of that. Like, that's the dream. Part of that dream is probably a little more innocently, like, I will control this and still have my freedom to do this. But the fact is, whatever pushback Steve Jobs is giving him, If he got consumed by a big corporation and was given a whole management structure and stuff, it would have been way worse, right? Like it would have been a rude awakening, I think.

He just doesn't know this yet. Yeah, I don't think he's thinking like that. So what Steve Wozniak going to do? All of us know, Waz is a teddy bear of a man. He is proud for certain. He is a little needy of recognition, but he's a sweetheart. There's no doubt about it through and through. He's a sweetheart.

And I can say from personal experience as somebody who discovered fairly late in life, like when I was in my 40s, that I am a textbook conflict avoider. I recognize Waz's whole vibe here. Yeah. I get it. Yeah. I get it. Game recognizes game. I recognize.

It's like, yeah, I have some issues, but I'm not going to start. Can I avoid this conflict? Mike, you know who's not a conflict avoider? Okay. Steve's dad, Jerry. Okay. Welcome to the show Jerry Walsniak. Welcome.

He's burst in like the Kool-Aid man. He was an electrical engineer at Lockheed for his entire life. Now, I'm going to read something that Michael S. Malone wrote in his excellent book, Infinite Loop. And I agree with this, but it definitely comes from a perspective. Okay. Which is he's trying to explain how Jerry Wozniak views the world. This is what Malone says. Jerry Wozniak was as naive about the true nature of business as his son, like we were saying.

He was a good man and a good father, but a lousy businessman. R&D always believes it makes the real contribution to a company's success, while management merely follows behind sweeping up the credit. Management knows better, but is forever embarrassed about not being clever enough to work on the new inventions in the lab. Huh. So it's this classic right, like whatever part of the business you're in, you think it's the most important part of the business and everybody else is stealing your thunder. And what Malone is saying about Jerry Wozniak is from Jerry Wozniak's perspective as an electrical engineer, the engineers are the people who create all the value for the company. And everything else is just sort of sucking on that value and taking all the credit and taking all the money, which is, I mean, that's a real dynamic.

I've seen that in my career too. The salespeople, the company I worked for, they looked at their sales figures and said, well, all the money the company makes is from us. So we're the most important part. And all the editorial people were like, well, we create the product that the salespeople sell into. And if the product didn't exist, there'd be nothing to sell.

We're the most important part of the company. And the danger is if you really go down that path and think, I have all the value and you have none. That's the danger. And what Malone is saying is, this seemed to be what Jerry Wozniak felt about that dynamic between his son and this barefoot guy and Steve Jobs. Not sure whether at this point, but definitely at points in their relationships is exactly how Jobs and Wozniak feel about each other. Wozniak will believe that he has all of the technology and the technical skills all that matters. And Jobs will believe he has all of the business and marketing ideas.

and that is all that matters. I want to be clear as I tell the rest of this story, this is not the first fight between the steves. They've argued about product stuff before. However, this is the most important one. Okay. And it has ramifications for the rest of their relationship. So Jerry Wozniak decides he's not a conflict avoider.

He's going to do something about this. and he tells his son Mark Wozniak, he's going to confront Steve Jobs. This is his plan. This is a quote that Mark Wozniak has verified. I'm going to make the little son of a bitch cry, and that'll be the end. Okay.

Okay. So Jerry's got it out for Jobs at this point. Yeah, yeah. And so one September evening in 1976 at the Wasniak's house, Jerry Wozniak springs into action. And he tells Steve Jobs, quote, because, again, overheard by Mark Wozniak, you don't deserve shit.

You haven't produced anything. You haven't done anything. Now, to Steve Jobs' credit, while he did, as predicted, absolutely burst into tears. So congrats to Jerry Wozniak, then. He did what he set out to do. He also told Jerry Wozniak,

he didn't appreciate everything he'd done for the company. And he told Was, look, if we're not 50-50, you can just have the whole thing. He calls their bluff. He says, if you believe I have no value, take it. but I believe this is a 50-fitting partnership.

And Michael Malone's book, which is, again, it's out of print. Somebody bring it back in print. It's such a good book. His accounting of this moment is so great. Steve Jobs, he says, this kid with the least amount of work experience in the room was the one who was right. Malone says, his 50% share might be stretching things a bit after the first six months, but would be low in light of things to come. In the ever-repeating story of high-tech, engineering,

leads only for the first few months of a new revolution, and thereafter, marketing is king. Moreover, if there hadn't been a Wozniak, Jobs would have found somebody else. Without jobs, Wozniak would still be a low-grade engineer at Hewlett-Packard. Brutal. Maybe not wrong. What I would say is, I don't think Steve Jobs was ever going to find another Wozniak. He might have found another muse, another technical person, but I don't think they would have ever possibly been as brilliant as Steve Wozniak. I don't think that that actually would have happened. As for the other part, I think there's some truth in that. As brilliant as Steve Wozniak was, I'm not sure given everything we know about him, especially up to now,

he was ever going to be visible enough to his employers for them to see his genius. And he might have been content to work on his tinkering out of the office and then just kind of put in the work at the job during the day. Well, or in that he would do important things at his job because somebody recognized he was good, but he was never going to wrestle for the credit of them. Yeah, I think that's the point, is that he was a genius, but maybe a bit of a pushover. Yeah. And that would he have succeeded in a corporate environment? Would he have been allowed to flourish in the way?

You know, maybe. And if somebody had identified the Apple II and had been like, oh, my God, and they had bought the design and put him to work building an HP computer or whatever, maybe he would have ended up being a rock star. He certainly had rock star talent. but would he have stood out? I don't know. Yeah, I think time tells, even at this point,

but time as we go into the future tells that was is a pushover. Like, unfortunately, that is part of his personality. I don't know if he knows it at this point, but Jobs obviously eventually learns it and pushes was over and pushes him to the point that he will leave. So this is a really sad moment.

Malone's book says that this argument is like a crossing of the ruby, According to Randy Wiginton, who was one of those teenagers working for Apple at the time, in a different book called Icon by Young and Simon, Randy Wigginton said, The friendship between Waws and Jobs dissolved in that period. By the time of the Apple II's introduction, there was not much pretense left.

That's sad. It didn't really last very long from this point then, really, did it? Yeah, the Apple II wasn't even finished yet, not even close. Apple Computer hadn't even been incorporated yet. It's still 1976. It's only like six months after they registered the company. I appreciate that because it's hard

to keep the timeline. Doing this show so far and one of the reasons that I wanted us to do this show together is because so much happens so fast that it's reductive in the way that a lot of these stories are told. Yeah, and so many different things are happening simultaneously. is one of the reasons why I do sometimes sort of skip forward and back is I'm trying to follow these narrative threads. And if you did it just chronologically, it would be a mess. I'm trying to follow these individual threads. So in this case, yes, it's all happened so

fast. We haven't even gotten back to the point where we left our Apple at 50 episode, actually. Because there's so much else going on here. So I think this is basically the end of the tight childhood-esque relationship between Steve Jobs and Steve Wozniak. From this point on, they are business partners, not really friends. It's sad to think about that, but it was

almost immediately, almost immediately, they went into business together, at which point they really were business partners and not friends. By the way, you know, for all of the ultimatum of Waz's dad, they didn't dissolve the partnership. No. I mean, Jobs

clearly pulled something off in that moment. He called her bluff. And Steve Wozniak was not willing to walk away from the partnership. But it ruptured their friendship. But at the same time, and it may have kind of taught jobs a lesson at that moment. Because maybe he was a little bit scared of Jerry. Yeah. So after all this, guess what? We're back to Mike Markola again. I keep mentioning. Finally. Welcome back, Mike. Welcome back to the show Mike Markola. Apple has now failed to sell itself. So they've stopped now. They're done now. We're trying to sell this company. That's the end of it. Okay.

Yeah, venture capitalist Don Valentine, who jobs had been referred to by Nolan Bushnell at Atari. So like they go to Atari and Bushnell's like, no, no, no, no, no. You put the feet on the president's desk. It's not going to work. But he says, go talk to Don Valentine. He's a VC. Maybe he'll help. Don Valentine referred to Apple as renegades from the human race.

That was the line. But even Valentine was like, they're clueless, but they're kind of charming these kids. Maybe they're worth a shot in the dark. I'm not going to invest in them, but I know someone who might be interested. So he's looking through his mental Rolodex. It's 1976. It might be an actual Rolodex. It's not a metaphor in 76.

I know. It's like an actual metal thing with cards in it. People's names on them. For a marketing focus expert, you're saying who could get their act together, right? Think about how the Saul has a whole sales force with suits. And then there's Steve Jobs. A marketing focused expert might be able to bring them into the real world where they wouldn't be renegades for the human race.

And he suggests Mike Markela. Don Valentine knows Mike Markela. This is the chain that leads to Apple. It's quite an interesting causal chain, which is Steve Jobs worked at Atari. He knew Nolan Bushnell, who was the CEO, who recommended Don Valentine, the VC, who did not want to invest in them but thought enough to refer them to somebody kind of felt bad that he was going to just say no and says, why? don't you talk to Mike Markala? Mike Markala also sees something in these two guys. He gets a demo of that Apple II that Was is working on. And he decides, let's build a business plan. He sets sales goals. He invest some of his own money. He gets the company a quarter of a million dollar line

of credit at Bank of America. And as we've established before, on January 3rd, 1977, the actual 50th anniversary of Apple Computer. They file incorporation papers for Apple Computer Incorporated. This is the real birthday. And so with Mike Markala on the scene, Apple can be a company. What they're going to need is a product. And that product is going to be the Apple 2. But what is it going to be, Mike? What are they going to put in front of people that is going to sell better than the Apple 1, which you had to put in a cigar box. Well, that is the question we will answer on the next episode of designing California so people can look forward to that. Next time, we will dive in to the rise of the Apple 2.