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Interview: Apple Employee No. 12 Dan Kottke on the Macintosh, Jobs and Woz, Stock Options (Pt 2)

| December 8, 2011
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Photo: Wikipedia

Two weeks ago we posted Part 1 of Peter Jon Shuler’s interview with Dan Kottke, aka Apple employee No. 12. Kottke first met Jobs when both attended Reed College in Oregon and the two became close friends, traveling to India together. Kottke was witness to the birth of Apple, plugging in chips into Apple I boards part-time for minimum wage before becoming an engineer for the company.

In Part 1, Kottke talked about the influences of eastern mystical literature on Jobs and himself, and what it was like to work for the nascent company that Jobs was putting together. In Part 2, Kottke reminisces further about the early days, discussing Jobs’ harnessing of the brilliant engineering of Steve Wozniak; the traits that allowed for Jobs to build the company; and the perils of not being savvy about stock options.

Edited transcript:

Daniel Kottke

By that first summer of 1977 I liked this kind of work. I didn’t have any training in computers and so what I didn’t realize is that I was headed on a very risky career path. Because I didn’t know I was not going to be eligible for stock options, and didn’t find out till many years later when it was too late.

In the early days of the Apple II, Hildy Licht ran a business where she had housewives doing the same work. She was there right at the very beginning of Apple. She built the power supplies. If you don’t want thousands of something, only 50 — and money was tight back then — you do something like that. From the very beginning Apple was hungry for all types of peripheral cards, and there was a steady stream of work to be done.

Hildy was a character. She had a start-up business where she had housewives doing the same kind of work Steve’s sister Patti Jobs was doing, where you could watch TV while stuffing boards with components. Then she had a wave solder machine and they would be run through.

I quickly developed an aptitude for troubleshooting. My whole first year was in production as an hourly employee. Then Bill Fernandez left, which left an opening for me to move into his place in engineering. I’ll always be grateful to him.

He left because he found out he wasn’t going to get a stock option. At the time, the issue of stock options wasn’t publicized, and there was no one to talk to about it because there was no such thing as a personnel department.

In the summer of 1984, we were all recruited to do the trade shows and to introduce the Mac to everyone else. At that point I was 30 and had been working since the week I graduated college. So I went off to Europe for a few months and then came back and instantly had people offering to hire me as a contract engineer. So I didn’t have enough excuse to go back to Apple. That went on for 10 years.

On the Macintosh, I was the one who did the keyboard, which was a single-chip computer, a computer subsystem. That was my first embedded system project. And I did many embedded designs over the next decade for a range of start-ups, none of which made money.

For me as an unskilled person working in a different field, I like to think I was using some natural perseverance, and was hard working got good at what I was doing. I looked at Woz and Jobs and saw they didn’t have degrees. But what I didn’t appreciate is that they had been steeped in technology for many years. I was such a newcomer, the whole time at Apple I felt I was playing catch-up.

It seems like Woz was the consummate engineer, and Steve was the promoter…

Very much so. And Steve to his credit was harnessing Woz. Woz did not have the entrepreneurial urge and was really happy at his job at Hewlett Packard, and I think he’s been on record as saying he would have been happy staying there. So Steve jobs gets credit for seeing what the situation was.

Nolan Bushnell of Atari also was a big part of forming Steve Jobs’ character. Because Steve looked at Nolan and his success at Atari.

It was very surprising to me how focused and serious Jobs got about what he was doing with the Apple I, because I didn’t understand the opportunity myself. That was where Steve’s personality shift happened –- long before there was money involved. There was money, but it was more like here’s something we can do and change society because the computer had huge growth potential.

How much did he contribute to Woz’s design of the Apple I? Possibly nothing. Woz had this idea about sticking the processor on the TV/typewriter. It’s a complicated thing to make the timing chains to generate video. Then using dynamic RAM was a stroke of great brilliance. So the Apple I came out with 4k expandable to 8k. I can believe that Woz came up with all of that hardware on his own and somehow Steve heard about it and was smart enough to say well this is unique, maybe somebody would want to buy this.

At the point that they decided to spend the money to lay out a circuit board, I think that was before the order to the Byte Shops, so they were going out on a limb. And that was when Steve sold his van and Woz sold his HP calculator and they raised a few thousand dollars and paid a layout guy to do a PC layout and make the circuit boards. And then there was the small item of the $30,000 worth of small parts that needed to be ordered. That was the point at which Ron Wayne, who was the third founding partner, got cold feet, because he had a mortgage to pay, unlike these 2 kids. He felt like he was the adult and he couldn’t keep up with these guys. When Steve Jobs told him he had ordered $30,000 worth of parts, that was a lot of money, and Ron backed out.

There was a lot of ferment going on. In 1975, that was the year of the Homebrew Computer Club. It was a whole auditorium filled with people and all kinds of stuff was going on. I didn’t appreciate technically what was going on; I was just tagging along. The Altair had launched onto the national market, and Bill Gates and Paul Allen were already down in Albuquerque starting Microsoft about that time. Right here, in Palo Alto, people were making graphic cards for the Altair other computers. And the first Internet broadcast packet at SRI was right around that time, too.

Steve gets immense credit for having the entrepreneurial spirit in taking that first step to make the Apple I. And Woz of course was a superhuman engineer in that he did the hardware architecture and built the prototype and got the hardware debugged and wrote the monitor ROM, which was the routines. And then he went right ahead and wrote his own BASIC. It was the BASIC running on the Apple I that really set it apart, because none of the others had something like that.

So what do you think there was about Jobs’ personality that allowed for his great success?

It’s a mix of all the various skills. You have to be technical enough to understand what you’re doing, you have to have a broad enough feeling for the culture you live in to know when to persevere.

I’m sure Steve idolized Thomas Edison as a boy; Edison gave us the clear message about perseverance. He was toiling away on lots of things, many of which were failures. The combination of perseverance, technical ability, and vision in a marketing sense.

He gets huge credit for the marketing vision embodied in the Jerry Manock to design the lightweight plastic case. Another factor – personal charisma – managed to recruit Mike Markkula, who has all these same skills. He was a retired millionaire at the age of 30 when he visited the Apple garage and saw the Apple I. He was the angel investor that took it to the next stage.

In a sense the two Steves were very lucky Mike Markkula came along, because the whole thing could have fizzled at that point. I have seen many companies that had promising first products that have fizzled, where you have a circuit board and it has some kind of market acceptance but you can’t get to that next level of getting funding.

In fact, funding alone is not enough. It’s the combination of pulling together people to get a board of directors, a line of credit at the bank, all those components. Steve was lucky Apple was able to pull in enough of the ingredients to keep the fire going and to follow up on that growth.

Then there was the whole episode of the Macintosh. Jef Raskin was was bitter about the way Steve treated him until the end of his life. Jef was a renaissance man in so many areas. Steve has a debt of gratitude to Jef in a personal growth kind of way. And it was Jef who clearly got that Mac project started. He and Brian Howard were compiling – they had those 2 big notebooks called the Macintosh papers, going back years.

Meanwhile, I was working on the Apple III, Apple’s business computer, which was a big disappointment. I got to build the Apple III prototypes. That was also the time Apple went public, and there was a huge frenzy about stock options. Everyone had stock options except me and a small number of others. So it was exciting to work on the Apple III but depressing to realize I wasn’t part of the millionaire club at the Apple public offering. But I didn’t have much of a career choice to leave.

And then Steve did hire me on the Macintosh project, which I’m grateful for. He didn’t have to do that. He could have given me a little bit of career advice about stock options. There was a kind of personal friendship element that was lost there, to put it politely. Those were difficult years for me.

But the Macintosh project was a wild ride, and that was pure Steve Jobs’ personality. At that point, he had learned how to be an entrepreneur, and Apple was successful, and he was very wealthy and he was able to start it and get it funded. He then recruited John Sculley at Apple, which came back to bite him. But Sculley was very clearly good for Apple.

Apple was floundering for awhile…

End Part II. We will post Part III soon…

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Category: Economy, Tech

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