JOBS AND GATES TOGETHER The boy wonders of computing, now thirtysomething, argue over where innovation comes from and where PCs will go.
By Steven P. Jobs, William H. Gates III, Brenton R. Schlender
August 26, 1991
(FORTUNE Magazine) – The two college dropouts most responsible for unleashing the PC revolution rarely see each other anymore, though they say that they're still friends. At FORTUNE's invitation, Bill Gates and Steve Jobs met for a Sunday evening in late July to discuss the prospects for the tumultuous industry they shaped. Gates, 35, left Harvard in 1975 to co-found Microsoft. His big break came in 1980, when IBM asked him to provide the operating system -- the program that manages a computer's inner workings -- for its now famous PC. Jobs, 36, who left Reed College to sojourn in India, is best known for co-founding Apple Computer.
What did you think when the PC appeared ten years ago?
Jobs: When IBM entered the market, we did not take it
seriously enough. It was a pretty heady time at Apple. We were shipping
tens of thousands of machines a month -- more computers than IBM was
total. Even so, a lot of people think IBM invented the personal
computer, which of course isn't true.
Gates: A lot of people think Apple did, and that isn't true
either. Our first program was for the Altair ((a mail-order kit sold in
1975)).
Does Microsoft's control of PC operating systems stifle competition in the industry?
Gates: There's not one element of the industry that's not
competitive. There are people who are cloning Intel's chips; there are
people who are cloning my operating system; there are many, many people
who make PCs; and for every software application there are lots of
people competing. There is no competitive imperfection.
Jobs: How come nobody has successfully competed with you?
I'm not accusing you or Microsoft of anything. I'm not even saying it's
necessarily bad. I'm just saying it's an interesting contrast. When I
zoom back and look at this, there are hundreds of people making PCs,
and hundreds of people writing applications programs for them . . .
Gates: Right.
Jobs: But they all have to travel through this very small orifice called Microsoft to get to one another. +
Gates: It's a very large orifice! ((Laughs.))
Jobs: But it's only one company.
Gates: Are you saying there's something wrong with our
popularity? My approach to the PC market has been the same from the
very beginning. The goal of Microsoft is to create the standard for the
industry. Nothing has changed.
What does the future hold for IBM and Apple? What do you think of their decision to collaborate on PC software?
Gates: It's surprising to me.
Jobs: Yes, we are confused about that.
Gates: ((Apple President)) Mike Spindler has said they want
to turn Apple into more of a software company. If that's your goal, you
don't go and give the half of the company that is the future of Apple
software to a joint venture. What is Apple getting in return? Here's
the part I don't understand: What is the contribution from IBM? The IBM
name? Did Apple feel so bad about their own work that they had to have
that?
Jobs: I truly believe the challenge for IBM is that they
can't survive by selling the same thing you can buy from somebody else
for 30% less money. Their cost structure doesn't allow them to compete
with companies that don't do massive amounts of R&D, that don't
have twice as many employees as they need, et cetera, et cetera. So IBM
has to do one of two things: One, suffer continuous erosion of its
market share until eventually it goes out of business, which I hope
doesn't happen. Or two, come up with some way to add value. In my
opinion the way to make your machines unique is with unique software.
Gates: I said that back in the Seventies! ((Laughs.))
There's something else I don't understand. If IBM already held a
license to your NextStep software, why did they get all this going with
Apple rather than just come to you and expand their license?
Jobs: I really want to answer this question, but I've got
to be careful what I say. It's not my purpose to alienate anyone at
IBM.
Gates: We share this interest. ((Both laugh.))
Jobs: Somebody at IBM a few years ago saw our NextStep
operating system as a potential diamond to solve their biggest and most
profound problem, that of adding value to their computers with unique
software. Unfortunately, as I learned, IBM is not a monolith. It is a
very large place with lots of faces, and they all play musical chairs.
Somewhere along the line this diamond got dropped in the mud, and now
it's sitting on somebody's desk who thinks it's a dirt clod. Inside
that dirt clod is still a diamond, but they don't see it.
Is the PC industry, which until now has been dominated by American companies, liable to get overrun by the Japanese?
Jobs: Computer companies fall on a spectrum of enthusiasm
for manufacturing. On the left end are companies that look at
manufacturing as a necessary evil, who wish they didn't have to do it.
And at the far right you have people who look at manufacturing as a
competitive advantage. Clearly a lot of the Japanese companies look at
themselves that way. Unfortunately a lot of American companies look at
manufacturing as a necessary evil. You can say the same thing about the
way they see software. My opinion is that the only two computer
companies that are software-driven are Apple and Next, and I wonder
about Apple. Most computer companies would rather that software didn't
even exist.
Gates: Good!
Jobs: It's good for Microsoft today. But unfortunately all
those companies could give way to Japanese companies a few years down
the road.
Gates: I think you give up too easily on Americans. You pick one dimension . . .
Jobs: I focus on manufacturing because I care about it.
I've seen IBM's. I built Apple's and Next's, and I know what Sun does.
Ultimately, I believe that most of the PCs will come from offshore.
We're just not good enough at manufacturing.
Where will the key innovations come from? Established giants like Microsoft or upstarts like Next?
Gates: I contend technology breakthroughs can happen by
extending what we already have. Let's take handwriting computers. The
hardware is coming from PC-compatible makers like Dell Computer ((of
Austin, Texas)) and NCR and some Japanese companies. The software will
come either from Microsoft or from a U.S. competitor named Go Corp.
((of Foster City, California)). That's going to be a major
breakthrough, and who do you give credit to?
Jobs: I think everybody gives credit to Go, but Go will be crushed.
Gates: That's one of the nastiest comments I've ever heard.
I've been working on handwriting since long before there ever was a Go
Corp.
Jobs: Really? I didn't know that. Most people would say
that Go is the company that first tried to commercialize that
technology.
, Gates: Well, Go hasn't shipped anything yet, and I'll ship my stuff before they ship theirs.
Jobs: My experience has been that creating a compelling new
technology is so much harder than you think it will be that you're
almost dead when you get to the other shore. That's why, when you take
big leaps, like the Mac, or object- oriented programming, or
handwriting recognition, you have to leave old technology behind. When
Lindbergh was going to fly from New York to Paris, he had to decide
what to take with him. There were a lot of demands. They fell into two
categories -- things that would make his journey safer or more
comfortable, and things that would increase his chances of making it to
Paris. Weight was a real problem. He could take more gas, which would
increase his safety, or he could take a compass, which would increase
his chances of getting to Paris. Every time he came down on the side of
increasing his chances of getting to Paris at the sacrifice of safety
or comfort. That's why he made it.
Gates: Smart people like Steve ought to try to build things
from scratch. That's a worthy thing. But every time it should be a
test. Right now there's a test in handwriting PCs, in object-oriented
operating systems, in multimedia computers. Those are the big questions
for personal computing in the 1990s, and I'm the one who has to prove
the validity of the evolutionary approach.
Jobs: It's true, your evolutionary approach with Windows is
bringing to PCs great new technologies that Apple and others pioneered.
But in the meantime -- and it's been seven years since the Macintosh
was introduced -- I still think that tens of millions of PC owners
needlessly use a computer that is far less good than it should be.
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