The Silicon Jungle

As The Silicon Jungle was lighting up my Kaypro screen one September day in 1983, several similar machines were whirring and clicking in the Washington offices of Walter Mondale’s presidential campaign.

Kaypros kept track of donations and the $18-million budget. They helped churn out news releases, speeches, and letters to voters in important primary states. Just eighty people worked at headquarters seven months into the campaign; Kaypros and other affordable micros were a major reason why Mondale wouldn’t need legions of back-room staffers in Washington later on. I didn’t know if Mondale would win or lose the primary, but whatever happened, it wouldn’t be for want of computing power.

Forty-five miles away, near Baltimore, Kaypros at a Westinghouse plant were receiving computer messages from defense installations abroad. Other Kaypros sat on the desks of William F. Buckley, Jr., ex-Governor Jerry Brown’s research director, and the president of Tootsie Rolls; and still another, some months earlier, had helped study Barney Clark, the first man with an artificial heart. A Kaypro in the Midwest was tracking something else, the milk and manure output of cows.

All of us, Mondale’s people, the others, and I, had benefited from the struggle between Adam Osborne and Andy Kay.

Osborne, a brash ex-columnist for computer magazines, had marketed the first mass-produced portable computer. Andy Kay had soon followed with the Kaypro.

Adam Osborne was a dark-haired, mustached man in his forties who enjoyed toting his product within sight of photographers. His father, a British missionary of unconventional stripe, had tried to convert Christians to Hinduism. Nor did the younger Osborne himself blend into the crowd; he founded his computer company in 1981 and was soon comparing himself to Henry Ford and the Osborne 1 to the Model T. “I give you,” he said, “ninety percent of what most people need.”

His rival, Kay, was shorter, about five feet seven inches, but also slim; like Osborne, he had studied chemical engineering and was a maverick and newcomer in the personal-computer business. There, however, the resemblances ended. Kay was soft-spoken, graying, an old electronics hand; his friends depicted him as a quality-obsessed engineer and Osborne as a flashy marketing man. They said Osborne had seemed technically incapable of making a good portable with a nine-inch screen. Adam Osborne, in turn, spoke of Kay’s computer as if he were a four-hundred-pound wrestler forecasting an instant demise for a foe: “The Kaypro’s gonna die.”^[7]

The computer magazines had portrayed Osborne as a lone maverick taking on the Silicon Valley establishment with the portable that the rest of the industry said couldn’t be built. But Kay claimed a similar idea had hit him at the same time.

Andy Kay had seen his son-in-law struggling to carry an Apple and its trimmings between home and office and decided that a market might exist for a small machine for engineers, architects, and other professionals. Then, Kay said, he had heard of the Osborne. Modifying their original plans somewhat, his people at Non-Linear Systems had homed in on their rival’s weaknesses, giving their own computer a better screen and a better keyboard and the ability to store more data. Adam Osborne had struck back with a jazzed-up version of his first machine. By 1983, many other companies were in the fray, including Seequa Computer Corporation, a Maryland manufacturer whose computer sold for less than $2,000 and ran most IBM-style programs.

In mid-1983 an industry expert was saying Kay and Osborne might together enjoy $200 million a year in micro sales at the retail level. That was just a fraction of the $5-billion-a-year market for business micros, but the two firms then seemed the largest makers of portables in the $1,000-$2,000 range.^[8] Their fight was pivotal. Lines were fuzzing between economy business computers and the home machines; the winner of the portable battle might go on to fight Apple and IBM, provided it survived the onslaught of $1,000 computers that Japan was expected to unleash. By the end of the decade, powerful portables with a quarter the bulk of the Kaypro II might jam the shelves of the discount stores.

Kay waged his marketing war from several hillside buildings in Solana Beach, a small town near San Diego, hundreds of miles south of Osborne and the rest of Silicon Valley. His was a family business. Kay’s personal housekeeper served salads and fruit juice in the corporate lunch room, and his eighty-six-year-old father, known around the plant as “Grandpa,” repaired electronic equipment and ran a forklift. Andy Kay’s wife was secretary of the company. One son, David, was the vice-president for marketing and had helped develop the Kaypro; a second son worked in personnel, and a third ran the print shop; and Andy Kay’s daughter and her husband had designed the buildings—which were now the same light blue as the “KAYPRO II” lettering on the computer. Altogether, some 450 people worked for Kay’s company by mid-1983. That was more than twice the number a year earlier when the Kaypro II was just hitting the market and Kay was counting on a mere $10 million in sales.

Bulldozers were growling away amid the expansion, and the company newspaper said equipment-cluttered grounds resembled a scene from a bad disaster movie.

No longer was Kay a semiobscure maker of voltmeters and oscilloscopes and other test equipment. Sales, once $4 or $5 million annually, were barreling along toward $100 million. Even his company name soon changed—from Non-Linear Systems to Kaypro—in recognition of the success of the division making his hot new computer.

Wall Street and Andy Kay were getting to know each other. That summer four million shares of common stock hit the market at $10 each; and the prospectus said Arthur B. Laffer, the “Laffer Curve” economist, would serve on the board of directors. Kay still owned most of the company personally. And now, with the new money, he could give IBM and Apple a better fight. “After 30 years in business,” San Diego Magazine had said, “he’s suddenly the new kid on the block, clutching under his arms a couple of excellent bags of marbles.”^[9]

Before the Kaypro, Kay hadn’t exactly been on the verge of starvation—he owned an art-filled home overlooking the Pacific and gave to the local symphony and other cultural causes—but now he’d reached the point where his admirers were depicting him as a silicon-age Horatio Alger character.

That’s a little exaggerated. Kay, though poor in his New Jersey days, was never an orphaned newsboy toughing it alone.

“Grandpa” prodded Andy. Frank Kopischiansky—an Eastern European immigrant and an ex-coal miner—worked in silk mills and wool factories and as a chauffeur. Frank had come to the United States from what is now Poland. Andy Kopischiansky would later become Andy Kay after his original name baffled some colleagues at work and they kept calling him “Kay” for short.

The Kopischiansky home lacked a bathtub. “But,” Andy recalled, “we always had food, and I always had a nickel in my pocket.” Frank enjoyed fixing broken-down cars and tinkering with electrical equipment, and Andy himself built a shortwave radio when he was only twelve years old. Math was another love. Andy even considered a career as an actuary after Prudential Life told him he could eventually make $15,000 a year. “I flipped out,” Andy said, “because it was a lot of money in 1935.” Frank shrugged off the $15,000, however. “That’s not very much,” he said. The words, incredibly, came from a man who seldom made more than $1,000 a year during Andy’s youth and who sometimes earned just $15 a week.

Andy, growing up in Clifton, New Jersey, took it for granted he could never afford college, but then the letters M.I.T. came up in a drafting class.

“What’s that?” Andy asked. “I’ve never heard of the place.”

Frank had lost most of his savings in a bank crash, but his wife somehow scraped up enough money to help Andy reach M.I.T. on a partial scholarship. Andy graduated in 1940 with a bachelors degree in chemical engineering, mathematics, and premedicine and worked for the Bendix Corporation and several other companies before founding Non-Linear Systems in 1953. Kay reached California through a job, although for years he’d been hoping to enjoy the warm climate there. He started his company in Solana Beach rather than Silicon Valley because he was already working in the area. Osborne himself would found his own firm while living in Berkeley—he’d locate it in Hayward, a medium-sized city within twenty miles of the Valley proper, the Palo Alto-San Jose area southeast of San Francisco.

For Non-Linear Systems Kay developed the world’s first commercially successful digital voltmeter. It was the result of some memories from World War II, when unskilled workers were constantly damaging voltmeters and having trouble reading them accurately. Kay’s new machine easily survived the careless. The instrument displayed numbers and didn’t require workers to make a reading off the thin needle of a conventional meter adjusted for the right voltage. “I don’t look at myself particularly as an inventor,” Kay said. “I’m a solver of problems. There are inventors who have many, many more ideas than I get.” Instead, he tried to refine ideas in “ways that make sense from an industrial-engineering standpoint and a customer standpoint.”

Kay’s digital voltmeter was perfect for the military and for the National Aeronautics and Space Administration (NASA) and their contractors; unskilled people could help test thousands of voltages on American missiles. “The silos are full of our instruments,” he said. But the NASA cutbacks of the Nixon era hit Non-Linear Systems hard.

“The seven vice-presidents went,” recalled a trade publication, “as did their white Cadillacs.” Frank Kopischiansky was willing to help see Non-Linear Systems through bad times, loaning thousands of dollars of painfully saved money. But that was hardly enough to sustain a corporation. What about the future? How to avoid the boom-and-bust cycle of government spending?

Kay decided to carve out a niche as a maker of rugged portable test gear for private industry. He wanted to offer many of the same wrinkles found in costly, bench-bound equipment, and one of those features was a microprocessor in a voltmeter: a miniature electronic brain that would make it easier to use. The idea came from an old friend, Bill McDonald, whom Kay had met decades earlier at M.I.T. Their gym lockers were next to each other’s there; both men had loved handball and hated team sports. McDonald, a husky man of basketball-player height, had worked for Non-Linear Systems in the early 1950s, then had returned East, where he had acquired a computer background. Then, in the late 1970s, he’d rejoined Non-Linear Systems, where his friend Kay hoped he would help develop a computer. Correctly or not, Kay believed that “ninety percent of the electronics business was computer and ten percent was test equipment, hi-fi, stereo, and stuff like that.” Non-Linear Systems had offered other companies’ minicomputers in systems it packaged for military contractors, but still wasn’t making machines of its own. Maybe a small business machine would be one way to enter computerdom.

“Two months after Bill came to work for me,” Kay recalled, “he showed me some microprocessor-based computers for doing accounts payable-receivable at the local computer dealer’s place.

“They were very reasonable, so I bought some and was very intrigued with them. And I wondered: ‘Why not make this stuff? I could make a better disk drive. And look at this: this connector doesn’t work too well.’ And Bill said, ‘We could make them, all right, but I don’t know where you’d sell them.’ This was in late 1979. I said okay and dropped the idea.”

Two years later, however, Kay watched his architect son-in-law, Michael Batter, struggling with an Apple and knew the time was ripe for an easier-to-tote portable.

Kay tried VisiCalc, the electronic spreadsheet, on the Apple and came away thinking the machine was too complicated, beyond being a hassle to move from home to office. So Kay told Bill McDonald, “Listen, we’re selling instruments to engineers. Let’s make a computer that we can walk in to an engineer and set on his desk and say, ‘Hey, look at this. You can use it.’”

Still, Kay worried about the new technology. “It’s a fairly stylized dance,” McDonald reassured him in spring 1981. “You buy the chips, and there is black magic in getting them to work—but not in how they work.”

“Okay,” came the reply, “that’s it. We’ll get rid of the disadvantages of the Apple and cram our computer into one box without cables all over the place.” In ads the Apple looked incredibly compact. Actually, though, serious computer users needed disk drives to store large amounts of information for quick retrieval. They also needed a TV-like monitor to see the letters and numbers they typed out on the computer. And Kay wisely wanted everything squeezed into one box. If you bought his machine, you’d get the whole works except perhaps for the printer, which spewed out your calculations or typed up your letter. Also, it would cost you less than a full Apple system. Kay could bring down the cost of a complete machine if he planned on every computer being one.

All this was the logical culmination of Kay’s skill in shrinking gear for the military and aerospace industry. For years he had been making printed circuit boards and filling them with components. And he could order the disk drives, keyboards, and other special computer-type parts from outside suppliers.

The way Kay tells it, he had no idea—at first—that he was about to take on Adam Osborne. “It was six months,” he said, “before we ever saw Osborne’s literature. He introduced his computer in March 1981, but I didn’t know anything about it.” Some would question that statement, of course, given the novelty of the Osborne 1 and its creator’s flair for publicity.

Whatever happened—with Osborne in mind or not—Kay selected the same basic technology and essentially similar parts.

A Z80-Style Microprocessor

A microprocessor is simply the main brains that tie together the memory devices, the keyboard, and other parts of the computer. You can also call it a central processing unit (CPU).

Okay, but why a Z80 in the Kaypro?

That’s simply a style of chip from a company called Zilog. “You could buy those all over the place,” Kay said. “We wanted something proven and reliable.” The Z80 was the only kind of CPU that could run CP/M (Control Program for Microcomputers)-style programs, then an industry standard.

The Z80, though, can’t handle programs as complicated as the newer 8088 chip that ended up in IBM PCs and countless clones. Here’s why.

A bit is a “1” or a “0.” Patterns of bits form bytes. And what’s a byte? Nothing more than a letter or number. So how does this tie in with the early Kaypro’s Z80 versus the IBM’s 8088?

Well, the Z80 processes information in words of only 8 bits at a time. The 8088 in the IBM, however, gulps it down in 16-bit chunks and works with larger memories—so that the IBM can run more complicated programs, like the more elaborate electronic spreadsheets for forecasting profit and loss. There’s another benefit, too. A 16-bitter doesn’t need to call up programming information as often from the spinning floppy disks, which are slower than the purely electronic memories.

The Kaypro II, however, won’t immediately become a has-bit—er, has-been. “Converting the Kaypro to a 16-bit machine is no big deal,” Kay observed. In fact, several months after he said it, his company announced a computer called the Kaypro II Plus 88 with both the 8-bit Z80 and the 16-bit 8088. It couldn’t run all IBM programs, especially those boasting graphics or pictures as well as words and numbers. Here, as in many cases, the term “IBM compatible” is grossly misleading. There are degrees of compatibility, and even if a computer supposedly uses the same style of floppy disks, you must test it with the program you want to run. (Many computer aficionados test for general IBM compatibility by running a game called Flight Simulator, or Lotus 1-2-3, a program combining a spreadsheet with graphics and several other capabilities.)

Some existing programs, by the way, are configured so that it doesn’t matter much whether you’re running the 8- or 16-bit version.

That will change as special programs come out for the 16-bit machines and as old ones, like WordStar, begin to take full advantage of 16-bit capabilities. Already Apple and other companies are writing new software for computers like the Macintosh, which, if not universally regarded as a true 32-bit machine, contains chips faster than the IBM’s 8088.

For many small businesses, however, 8 bits may be powerful enough even for number crunching as long as the right programs are available.

The wisdom in the micro business is that no machine is ever obsolete—just so it does the job for you.

64K Random-Access Memory (RAM)

RAM, once the power goes off, will throw out everything you’ve typed.

This temporary computer memory, this electronic scratchpad, is like a bright student cramming for a quiz in a useless subject: he’s a quick learner—and a quick forgetter. Don’t confuse RAM with ROM, or read-only memory. ROMs keep remembering even after the power goes off. But you can’t “write” new material on them; commonly, ROMs store programs used over and over again.

What about the RAM, though? How to get around the forgetting? You just transfer the information to floppy disks, which are slower but as stable as a music cassette.

Different computers hold different amounts of information in their RAMs. The Kaypro II holds 64K; K is normally a scientific abbreviation for 1,000. So 64K stands for a memory capacity of about 64,000 letters or numbers. No, I won’t mess with the technical explanation of why it isn’t exactly 64,000.

Okay, but why 64K?

It’s a magic number to the computer. Sixty-four K bytes is the largest memory with which the Z80 and other 8-bit microprocessors can easily communicate without too much technical trickery.

Also, you need at least 64K to make good use of some popular software like the WordStar word-processing program.

Moreover, the RAM must be roomy enough to handle electronic spreadsheets. Most small businesses will find that the 64K Kaypro can juggle around enough columns and rows on the sheets. But in some cases you may still want a micro with 500K or even 1,000K or more of RAM. To sum things up, that’s because:

1. Bigger RAMs can work with more and larger numbers—a handy capability for a company with extremely complicated spreadsheets.

2. More RAM can accommodate programs more complicated for the computer. Note the words “for the computer.” Some of the programs most complicated for the computer may be the easiest for you to use.

Or they may be the most versatile. Lotus 1-2-3, a combination of a spreadsheet, a graphics program, and several others, is far too complex for an 8-bit machine with 64K RAM. Many 16-bit programs require 192K or more just to load the program before you even put in your reports or spreadsheets.

3. You may want the most sophisticated software to thwart computer crooks. That could be particularly true in a large company where many people can poke through a computer’s memory either in person or via other machines connected by phone or other wires.

Never buy a computer without seeing for yourself that it and the software will together serve your needs. Don’t take the sales rep’s word. Instead, make him or his software specialist put the machine through its paces. Do so even if you’re not buying software at the store. Of course, the sales rep may not have access to the software, in which case you may want to visit another store for a demo. And if no one can assure you, no ifs or buts, that the computer-software combo works fine? Then you may want to hire a consultant.

Use of CP/M Software

CP/M is a kind of operating system. It tells a computer how to do garden-variety jobs, like moving data from a memory unit to one that does the machine’s electronic reasoning. CP/M isn’t the only operating system that business microcomputers use. When I was writing this chapter, however, it was one of the more common, with variation present on more than half a million computers. A company called Digital Research marketed CP/M, selling to manufacturers, which, in turn, didn’t have to create their own operating systems. In the early 1980s, the big software hits almost always came in CP/M formats.

“We wanted to use CP/M because 10,000 programs were available,” Kay said. They were for computers with 8 bits, not 16—another reason he made the original Kaypro an 8-bitter.

“If we’d used 16 bits,” Kay said with uncharacteristic profanity, “people would have said, ‘Where the hell’s the programs?’ IBM could sell their computers without programs, which is what they did essentially and let the programs come later.”

In contracting software design to outsiders, “Big Blue,” as IBM is called, was defying its own tradition. It hired Microsoft—a Washington State software company headed by a brilliant young Harvard dropout—to create a whole new operating system. Called MS-DOS, the system would become an industry standard by 1984. And from the start, independent software houses hustled to market MS-DOS-style programs usable on the hot new machine for applications like word processing and spreadsheets.

The existing CP/M applications programs wouldn’t work on an unmodified IBM Personal Computer unless the programmers converted them to MS-DOS or another compatible operating system.

They’re the gizmos into which you insert the floppy disks through slots in the computer.

From the outside a disk looks square. It’s inside a container that helps protect it from fingerprints and other threats to the plastic disk’s magnetic coating.

You can’t cover the delicate disk completely, though. Some of it must touch the head of a disk drive. A head “writes” magnetic patterns on the oxide coating of a disk; in other words, it stores information that you’ve typed into your computer or the results of your calculations.

And to fetch the information? Then you simply type out commands instructing the head to “read” from the disk to the RAM.

It’s much like a tape recorder storing your voice magnetically. But a disk drive can read or write information much more rapidly than a tape-recorder-style arrangement could. That’s because the disk spins so rapidly—hundreds of revolutions per minute.

Why twin disk drives, however?

There are two reasons:

1. You can quickly make safety copies of valuable disks—something that’s more of a hassle with single-drive computers like the bare-boned Macintosh.

2. You can more easily work with long electronic documents.

With one drive I’m storing WordStar and a number of other goodies that take up almost all the space on the floppy; there’d be hardly any room for the information I’m typing out. All this is happening on my “A” drive.

TheThe “B” drive is my data disk, devoted entirely to storage of my writing. I can easily squeeze the equivalent of about fifty pages of double-spaced typing with WordStar, which is one reason I bought a Kaypro instead of an Osborne. Brand O’s earlier versions could store only half that amount of material. Before buying a computer, you should always analyze your paper records in terms of “K.” Each K stands for 1,024 characters; and that includes letters, numbers, punctuation marks, and spaces in between. A double-spaced page of typing might be 66 (the number of columns across each line) × 28 (the number of lines), or 1,848 characters. Bingo! That’s 1.8K, plus a little slack for safety. Since Andy Kay allowed 191K of working space on each floppy, I’d have enough room for a document some hundred pages long, except that WordStar makes an electronic carbon copy for additional security. So my actual working space is around 50 pages. That’s easily enough for this chapter to fit on one of the Kaypro II’s floppies. And newer floppy diskdisk drives can accommodate more than 2.5 million bytes.

Although the Osborne and Kaypro both used twin drives, there were also major differences between the two—beyond the double-density feature that allowed Kay to squeeze twice as much material on each floppy.

Osborne’s first computer, for example, came with only a five-inch monitor. “Adequacy is sufficient,” he once said. “All else is irrelevant.” It was a neat excuse for his early machine’s limited disk space and for the five-inch, black-and-white screen, which could display only 52 columns and which wasn’t as kind to the eyes as green.

The production-model Kaypro, on the other hand, boasted a nine-inch, 80-column green screen from the start.

And the Kaypro keyboard made the Osborne board seem flimsy. “I like something I can feel when I’m pressing a letter down,” said Kim DeFilippis, a dealer relations woman who was one of the touch-typists chosen to try out different keyboards for the new machine. “The board doesn’t feel like one on a computer. It feels like a typewriter.” And the keys, unlike the Osborne’s, were in all the right places for people weaned on Selectrics. Kay had used the same Tiffany-quality keyboard found on computer terminals costing thousands of dollars more than his economy machine.

Kay, moreover, had given his Kaypro a metal case unlike the plastic one of the Osborne. Metal dispersed heat better, and that meant that the parts might last longer than those in the early Osbornes. Brand O tended to overheat floppy disks. Recalling that Non-Linear Systems made test instruments, however, one reviewer gibed that the metal case betrayed the Kaypro’s heritage. I didn’t care. The Kaypro reminded me of old Heathkits, of smoky soldering irons, of crisp, cold evenings in my youth when I’d listened through the static for the whistling dots and dashes from my fellow hams. But many people shrugged off the Kaypro’s appearance as unprofessional, and so I asked about the case. Kay said its contents dictated the shape. “Unless we created air space and made it larger,” he said, “we couldn’t have made the shape much different.” A hood shaded the Kaypro’s cathode ray tube (CRT; the TV-like screen). And as it turned out, that matched the comfortable slope of the keyboard that attached to the front of the machine for carrying. I noticed only a few adornments added for buyers’ eyes. One was the blue “KAYPRO II” lettering on the case and the stripes on it and the keyboard; another was the blue color of the keys on the calculatorlike numbers pad. No, you couldn’t mistake the Kaypro for a Gucci creation. And yet, as good, functional design, the Kaypro succeeded: at least one other portable appeared in a sharp-edged metal box.

The location of my Kaypro’s two disk drives, to the right of the CRT, was especially logical. Kay and his engineers wanted them well separated from a high-voltage transformer on the left—an electrical component that was part of the video circuitry and whose magnetic radiation could interfere with the operation of the drives. Bill McDonald noted the Osborne disks were on either side of the tube. Circuitry for a nine-inch tube produced more electronic noise than that given off by a five-incher. And McDonald speculated that this was one reason Osborne had to make do with the smaller size.

Inside the Kaypro, atop the printed circuit boards, you saw integrated circuits with leglike leads of the kind that one writer compared to caterpillars. You found somewhat similar looking parts inside the Osborne. But there was a difference. “Oh, my God,” said Michael Pond, owner of a Washington-area Kaypro dealership, the Computer Shoppe, “once you take the cover off the Osborne, everything sort of falls apart in your hand. It’s held together by the wiring harness. It’s like a jellyfish.” That may have been a bit off target. Chris Christiansen, however, a computer analyst with the Yankee Group, a high-tech marketing research firm, compared the Osborne to a Chinese puzzle and said an Osborne user “in the next office gets very nervous when I come around with a screwdriver.” By contrast the Kaypro looked eminently repairable. “When you take one part of the machine off,” Pond said, “the rest of the machine doesn’t fall apart.” Andy Kay’s people had divided up the circuitry into several modules that repairmen could remove easily. His computer had far fewer chips than the old Apple II. And with fewer chips, repair people more often could locate glitches by replacing various parts until the machine was working again. Fondly, Pond said the Kaypro II was “over-engineered,” like an early-model Volvo.

“Well,” you’re wondering, “what about the Kaypro I?”

It never existed except as a prototype. Of course, the II didn’t hurt Kay’s efforts to convince buyers that he had one up on Osborne.

The prototype’s screen was between the disk drives, interfering with them, and another flaw became clear: the shortness of the cable between the keyboard and the main unit. Bill McDonald was worried. Suppose a customer crushed a finger while wrestling with the little cable? Why not hinge the keyboard to the twenty-pound console? And that’s how Non-Linear Systems indeed built the prototype. But McDonald still fretted that someone might undo the latches; and so, driven by fear of a lawsuit from a klutzy Kaypro owner, the engineers redesigned the computer to accommodate a coiled cord several feet long.

Altogether, Andy Kay’s people spent only a year and less than half a million dollars developing the Kaypro II.

“After we’d been at it eight or nine months,” he said, “someone brought in some literature from Osborne, who had just announced his portable computer. I said, ‘Oh, oh, somebody beat me to the punch.’ But I saw he had a different idea in mind—a smaller screen, plastic case, different market.”^[10] The words “different market” are more than a little off mark. Andy Kay, like it or not, was in direct competition with Osborne. Kay might sell his computers at independent stores rather than at the ComputerLands and Sears stores where many of Osborne’s machines ended up. But at meetings of Kaypro owners and “Ozzies,” I found the same hodgepodge of small-business people and professionals.

Hearing of Osborne, Kay actually was grateful in a sense. “When he started telling the world about how many orders he’s got, I said, ‘Well, if he’s getting all these orders, I’ll start making more of them.’”

Kay used an electronic spreadsheet on his newly developed computer to forecast its sales. The Kaypro II had better succeed, since the half million in expenses didn’t include marketing costs and miscellaneous ones such as manuals—another million altogether. Kay, however, said the high-interest loans for the project “never really bothered me that much. I felt confident of getting it done. In one sense I place very little value on money. My wife, Mary, is quite different. She said, ‘You’ll lose your money.’ She was secretary of the company. She had to sign mortgages on our home that we had paid for, property we owned, the plant site. It was a heavy burden for her. If you’re in an airplane or car, going up a winding road on a mountain, the fellow who’s driving isn’t as nervous as if someone else is driving. I was involved in getting it done. She was on the sidelines worrying about it.”

The Kaycomp—that was the original name before the Kays changed it because it resembled another computer firm’s—first went public at a San Francisco computer fair in March 1982. Just a routine item appeared in Byte, the phone-book-sized microcomputer magazine. I wondered why. Maybe it was because Andy Kay’s technology wasn’t new, merely good repackaging, and he wasn’t selling himself as God or Henry Ford. But dealers at computer shows were raving. The Kaypro’s suggested retail price was $1,795, the same as the Osborne’s, and Kay, too, threw in software: a word processor, an electronic spreadsheet, and other programs that could have cost more than $1,000 if purchased individually. Kay was smart. Osborne had pioneered by including business software for “free” with an economy-priced machine, and now Kay must follow with its own “bundled” programs.

“Has Catch 22’s Milo Minderbinder, World War II’s greatest wheeler-dealer, hired on as a software buyer at NLS?” San Diego marveled.

“You don’t think that took a lot of time to put together?” Kay said. “We purchased some software outright and pay royalties for some.”^[11]

By mid-1982, customers and dealers had placed several thousand advanced orders. Kay’s production lines cranked up, though the pace was slow at first as his people searched for bugs. They did not always stamp them out. A disk drive on my Serial #3083, lasted only a year; my warranty was for the industry’s usual ninety days. Moreover, despite visits to several dealers, my computer still streaked lightly across the screen when I typed, and finally I had to have the monitor replaced. But the view easily beat the Osborne’s. And later, modifying the circuitry and positioning the disk drives horizontally instead of vertically, Kay ended the streaks on new units. “In an emergency I get all the senior engineers on the job,” he said. “We don’t let problems go on like old man river.”

Andy Kay rewarded his top problem solvers with benefits like stock options, and the stock offering prospectus from Prudential-Bache Securities anticipated that in 1983 Kay himself would earn $187,000 in salary, bonuses, and other remuneration.

Not everyone fared so well; Kay said his labor costs were half those of competitors. “The wages on the line are so low,” quipped a disgruntled ex-employee, “I’d call them south of the border.” Kaypro was typical of many high-tech companies; the production workers were mainly women, many of them foreign born, some of them incapable of speaking English, all of them nonunion. Adam Osborne, too, tried to cut labor costs to the bone. And Atari had laid off scores of Americans and farmed out jobs to cheaper labor abroad, reddening the faces of the politicians known as “Atari Democrats” who believed that high tech could fight unemployment.

Regardless of the low wages, Kay’s own company at least appeared to be the antithesis of a sweatshop. His hillside buildings didn’t look like normal factories; they were long and narrow, well windowed, split into small rooms without the racket of mechanized production lines. Kay described his workers as “always moving, interacting constantly. If one piece is missing, they work around that. If one person is slow because he happens to be new, they work around him and help him out. It’s exactly the same approach we used for stuffing printed circuit boards on the voltmeters. It uses the least amount of capital equipment, and it’s the easiest on the assemblers, because they aren’t just sitting or standing in one spot.”

Lacking a conventional assembly line, Kay said he needed few mid-level managers; and even after Kay went public, he still hated to bring in MBAs. Managers built empires. They feuded. They got in producers’ way. That was how Kay felt, apparently—a legacy of the 1960s when Non-Linear Systems had splurged thousands on those seven vice-presidents and their white Cadillacs. But some practices from the go-go years lingered. One, said Kay, was participative management, the philosophy that had led to the formation of those small, friendly assembly teams. The atmosphere around the plant was informal. “We have very few written policies on anything,” he said. No dress code existed, save for an informal ban on attire like short shorts—a policy bent to accommodate workers who labored in the hot Southern California sun.

Also, Andy Kay’s company at times hired people with unusual backgrounds. Clifford Odendhal, a musician-dancer-songwriter in his thirties, had come by way of COJO Wind, David Kay’s alternative energy firm. David asked Odendhal to help Non-Linear Systems catch up on back correspondence, leading to a customer-service job there. Eventually, Odendhal was helping with public relations. “This is the first job outside of entertainment that I have ever cared about beyond my paycheck,” he said.

Andy said of David, “He’s less cautious about hiring people than I am. If they don’t work out, he just lets them go.”

David, a six-foot-three-inch surfer with a degree in math and a hobby of collecting dictionaries, had himself started with the company several years before the birth of the Kaypro. Now he was vice-president for marketing, and when an investment banker asked Andy if David was a vice-president because he was Andy’s son or because he was the best man for the job, Andy replied: “Both.” He believed that David’s role in the development and marketing of the Kaypro “was extremely important. In thirty years I’ve never seen a man in marketing who measures up to one-tenth the dedication and performance he’s shown.”

Andy’s son used what the Wall Street Journal described as “idiosyncratic” marketing techniques. Dealers couldn’t sell Kaypros by mail. They didn’t enjoy extended credit. The Kaypro Division, in fact, did not even spend much at first on national advertising.

Examined closely, however, each policy seemed logical. Most customers couldn’t just walk out the door of their computer dealer and wave an eternal good-bye. Chances are that they’d be back for advice or repairs. So Kaypro wanted local dealers not to face competition from cutthroat mail-order houses that left the customer on his own.

Without a strong network of local stores, Kaypro might perish. Andy Kay appreciated this. “If a fellow does mail order and the contract says he can’t,” Kay said, “David cuts him off without a qualm. Maybe the dealer says we need him or he won’t be able to support his family and kids. Well, forget it. This is a business, but it’s also our livelihood, too.” Of course, not all mail-order establishments in the computer trade were unethical: I knew of some good ones. But from a manufacturer’s viewpoint the policy made sense. The Kays at the time wanted to befriend the independent dealers, who were less likely to flood the market with heavily discounted computers than the chains were.

However sympathetic to the independents, Kaypro didn’t follow the lead of some expansion-minded computer companies and grant extended credit—a sensible policy in this volatile business. A California chain folded, owing hundreds of thousands to Apple as well as customers. As to how he originally picked up many dealers, Andy Kay said, “The orders just started rolling in. Now we’re sort of clearing out dealers which are operating out of backs of cars or whatever.”

Kay was also benefiting by selling through his own network rather than being at the mercy of distributors—and supporting their profit margins.

By the summer of 1983, Kaypros were selling at some thousand dealerships. Christiansen observed that Kaypro gave dealers “30 or 40 percent margins. So does Osborne. That’s how they get the dealers to carry the damned things. You know, when you have fifty guys a week knocking on your door, you pick the one who’s going to put the most money in your pocket, and Osborne and Kaypro both know how to play this game as well as or better than anyone else. How do you think Kaypro went from nothing in 1982 to 100,000 units in 1983?” Kay disputed this. He said that the Kaypro’s quality sold the computers, that he hadn’t offered more than 25 percent dealer discounts, and never would; and his claim seemed creditable enough when some stores dropped the Kaypro because the markup wasn’t big enough. Whatever the facts, Kaypro in 1983 boasted sales offices in some fifteen U.S. cities and one in the Netherlands. One-third of the computer-store ads in the Washington Post business supplement of August 8, 1983, mentioned the Kaypro.

The limited national advertising was equally wise. Why not depend at first on local ads telling where people could buy the product? And what was the use of creating a demand for more computers than Kaypro could make? Andy Kay had learned from Osborne’s example. Adam Osborne’s splashy ads had helped create the market that the Kaypro was now enjoying.

Besides, Kay was benefiting from something better than advertising: the articles of friendly writers. And why not? Writing was just another form of word processing—a category for which most Kaypro owners had bought their machines. Certainly the Selectric-style keyboard and 80-column screen had impressed me. Peter McWilliams, the very same writer who had ledled the cheering in the micro magazines for the Osborne, was a Kaypro convert. “Put simply, as a personal computer, the Kaypro II is superior to the Osborne 1 in almost every detail,” he wrote—“yet it retails for the same $1,795. As David Letterman might say, ‘Unbelievable!’” James Fallows, the Washington editor of the Atlantic Monthly, free-lancing for TV Guide, called the Kaypro “the best value” for “complicated accounting” or “heavy-duty word processing.” I was used to seeing hype in and out of computer magazines for inferior products. The Kaypro, however, deserved the paeans. Granted, I didn’t like Perfect Writer, a word processor included between 1982 and early 1984; and the sharpness of the monitor was no match for some more expensive machinesmachines. The Kaypro wasn’t the best computer, period. But at the time Fallows praised the Kaypro to the millions of TV Guide readers, it may well have been the best dollar-for-dollar value. Fallows himself didn’t own a Kaypro. He honestly reached his conclusion unassisted by a special offer from Kaypro: 40 percent discounts for writers; the company said—convincingly or not—that it didn’t attach any strings.

As production increased, Kaypro finally did trot out national advertisements. One, in Esquire, showed a young Kaypro user in an office swept by a fierce wind, blowing coworkers’ papers away and tousling his hair, while he was typing happily away with his chair and desk raised a foot off the floor, “KAYPRO RISES TO THE OCCASION,” said the advertisement. I didn’t really see the point. The technical specs were buried in small print at the bottom of the page; why couldn’t the ad tell me in large print and simple language what the Kaypro could do? A Kaypro staffer said the ad was to build name recognition. Then the company might unleash a campaign portraying its steel ugly duckling as the Volkswagen of small computers. It seemed a sensible-enough idea. Then, again, it was another indication that the computer business was becoming more like Detroit—selling not only economy but the image of economy.

Finally, the new ads came out. In simple, helpful language they told novices what to look for in a small business computer. And yet you could hardly confuse the ads’ goals with Consumer Reports'. The ads for beginners recommended consulting with an expert before choosing a machine; at the same time ads in sophisticated magazines like Byte asked computer pros to suggest the Kaypro to beginners. (“Once you tell people about the complete business computer for $1,595,” said an ad appearing after the Kays lowered the price $200, “they’ll probably stop bugging you with a lot of questions.”)

The public relations campaign was just as slick. No one lied. But Hill & Knowlton, the fast-track public relations agency, laced its Kaypro releases with quotes skillfully reflecting the computer makers’ self-interest. In one, David Kay said, “If it isn’t portable, it doesn’t pay to buy it.” That was hyperbole, pure and simple.

The nine-inch screen, for instance, was a major improvement over the Osborne, and it was entirely right for an economy portable from which many buyers would eventually trade up, anyway; but writers and other heavy-duty users might prefer a twelve-incher from the very start. For not much more than the Kaypro at the time of the release, you could buy a desktop computer called the Morrow Micro Decision with good software and a twelve-inch screen. Milton Viorst, a Washington journalist, couldn’t stomach the Kaypro monitor. He considered the Kaypro the kind of machine you might tote back and forth between home and the beach but not the best for heavy-duty viewing. He bought the Morrow, or two, actually: one for himself and one for his wife, Judith, a well-known poet and magazine writer. However pro-Kaypro, I could see why. The Kaypro, strictly speaking, wasn’t even portable; instead, it was transportable. Unless you were a 300-pound tackle playing for the Pittsburgh Steelers, you weren’t about to tote a sharp-edged, 26-pound computer and battery pack as casually as you would an attaché case.

Other “feature information” from Hill & Knowlton in spring 1983 offered more tips for computer shoppers in a way cunningly designed to steer them to the Kaypro without the customers’ quite knowing what was going on.

“KAYPRO Division of Non-Linear Systems” appeared on the first page in big blue letters above the text. But the seven-page “feature information”—the part intended for publication—mentioned the computer by name just once and in an inconspicuous location. It laid out the specs for a good portable. Then, several hundred words after the Kaypro mention, it triumphantly concluded, “For as little as $1,795, you can already buy the only fully portable personal computer with a full-sized screen, one that offers large enough memory capacity to handle business, entertainment and educational programming and a service network that’s available anytime or anyplace—just like the optimal portable personal computer itself.” I recalled the canned releases from food companies that women’s pages ran verbatim. How many newspapers and magazines would do the same with “feature information” from Kaypro? David and his father had made a good machine. And yet I wondered how many manufacturers of bad computers might start using similar tactics. Joel Strasser, at the time the Hill & Knowlton man handling Kaypro, later protested that he was engaging in standard public relations practice, but his remarks simply dramatized how the welfare of shoppers might clash with that of the manufacturers. Disguised puffery was hardly in keeping with David Kay’s portrayal of himself as a consumer advocate.

Around the time the Kays were calling in high-powered public relations people, Adam Osborne himself went a step further. In January 1983 he hired a professional manager to be Osborne Computer’s president, Robert Jaunich II, formerly president of Consolidated Foods. Osborne would later blame Jaunich for many of the computer firm’s problems, telling a reporter that Jaunich wasn’t fleet-footed enough for a young company in an industry with a fast-changing market.

Jaunich’s recollections would differ. Recalling the discoveries he made during the audit before the never-to-take-place public offering of Osborne stock, he told the Wall Street Journal, “Every day you came in, the numbers got worse. Every number you touched went soft.” He blamed the corporate chaos on Adam Osborne. “The real message,” said Jaunich, who resigned as Osborne president in December 1983, “is the professional people got here too late to help.”

Osborne was also critical of another executive; he accused him of cutting a deal with a supplier—while still working at Osborne Computer—to make a rival machine. Whatever happened, the internal squabbles at Osborne may have wasted time and energy that he and colleagues could better have devoted to their battle against the Kaypro.

He himself would later admit in his book Hypergrowth that “new product development moved slowly” until the second half of 1982. A smaller, cheaper Osborne 1, the Vixen, never reached the market while he was running the company. His $2,495 Executive computer—with a seven- rather than five-inch screen—did make it out the door. “Wayne” didn’t. Introduced early enough, Wayne could have given the Kays fits. This $1,995 model was to offer a nine-inch screen and include a built-in printer and a pile of free programs for word processing, communications with other computers, and other tasks. But technical problems bedeviled Osborne. When Osborne finally caught on that IBM had established a new industry standard, he sought to make his Executive compatible, but he was aware of his own company’s “dismal record in engineering development.”

Osborne entrusted the task to a San Diego firm. By May 1983, however, Osborne realized that the firm’s IBM-compatible prototypes were “expensive, late, and included wholly unacceptable features such as circles that would be displayed as ovals when an Executive user switched from CP/M to IBM compatibility.”

Adam Osborne was clearly losing his sales war with Andy Kay. He had talked to reporters about the Executive in early 1983, and in July newspapers said this had discouraged some dealers from ordering too many Osborne 1s. The story was that Osborne’s cash reserves had fallen as orders for the older machines dropped from 10,000 a month to almost nothing. Apparently he’d forgotten one of the precepts of any business with changing products: you're always competing against yourself. If you make too many old models or brag too soon about the new ones, then you may imperil your cash flow and see surplus product inventory pile up. Your customers will keep their wallets shut as they await your coming attraction. It was a most plausible explanation for Osborne Computer’s cash-flow problems but perhaps not the main one. In Hypergrowth Osborne revealed that his sales levels for his Osborne 1 had been dwindling even without all the puffery about the forthcoming Executive model; he confessed that he had lied to the press to throw it “off the scent of the real story.” His bankers were threatening to call in loans; he was laying off workers, yet he still hoped to woo private investors.

As the end neared, Osborne dealers were fighting Kaypro ones with price reductions. An Osborne 1, discounted, sold for as low as $1,000 by late August 1983. Stores also were dropping the Executive’s price, and with good reason: why so expensive a machine without IBM compatibility right off the bat?

The first prototypes of the new IBM-compatible Executive weren’t being built until September 1983, or as Osborne later observed, “precisely at the time the company was filing for bankruptcy.”

The bankruptcy papers showed next to no income and $45 million owed creditors. Newsweek ran a photograph of Osborne leaving his office without a portable computer in sight. Instead, a briefcase was shielding his face, and the caption read: “Founder Osborne exits: IBM was too big.”

That was somewhat wrong. The IBM-compatibility issue notwithstanding, Kaypro had been Osborne’s main competition.

“I’ve always had a great deal of respect for Kaypro,” he would later confess to Popular Computing. “You’ve got to make those statements [knocking the Kaypro]. It makes good copy, damn it.”

It didn’t make for the best-informed computer buyers, however. Bowled over by Osborne’s marketing campaign and well-publicized disparagement of the competition, some consumers had ignored the information that mattered in the end: the numbers. The screen measurements, disk-drive capacity, almost everything, said the Kaypro was a better computer for common applications. Osborne had faced a moral dilemma. Should he badmouth the competition and help his company survive? Or should he tell the truth—that Brand X was better than his own product? Not surprisingly, Osborne, like any other computer manufacturer, had made the former choice.

In fighting Osborne, Kay had dropped his suggested retail price $200 in May 1983 to $1,595, an indication that small business computers were becoming no more impervious to price wars than the home ones were. He also offered a souped-up version of his II and beefed up his software. His Kaypro IV—the jump from II to IV reflected the substitution of two 400K floppy disk drives for the II’s 200K ones—sold for $1,995.

Yet another weapon against Osborne was the Kaypro 10, a deluxe model with a 10-megabyte hard disk. It sold for $2,795, an amazing deal at the time. A hard disk is an aluminum platter coated with magnetic film, and 10 megabytes is the equivalent of 5,000 double-spaced typewritten pages; yet Kay was selling the computer and software for less than the prices of many hard-disk add-ons.

“Adam Osborne,” said Kay, “has said he couldn’t make a portable hard disk because the hard disks are so sensitive to shock. Well, engineering advances are such that hard disks now are capable of being moved. Our very first one was shipped to a show in Germany.”

An InfoWorld headline was less sanguine: “Hard disk, portable ‘newlyweds’ face some problems.”

Could Kay succeed with his hard disk? Another company made the disk itself, and Kaypro had to replace some drives on the early Kaypro 10s. But some glitches were hardly a surprise in any new micro, hard-disk style or floppy. Meanwhile, no less than Control Data, the computer giant, was planning to offer a 5-megabyte hard disk for portables. Already some smaller companies had put out portables with hard disks. And yet Kay, turning out thousands of the machines, was gambling more heavily on their reliability than the others. It could pay, however. New technology might or might not succeed; but in his fast-moving industry, old technology sooner or later would surely fail. To stay alive, he must be among the leaders. More than 150 companies were clawing their way through the micro business in late 1983, and some analysts believed that fewer than 20 could survive five more years. Many of the 150 had only what one expert called “press release products.” But others were real threats; and without the resources of an IBM or Apple, Kay ideally would fight back through innovation as well as good marketing. He needn’t invent any new micro technology. Yet as a survival-minded “solver of problems,” he had better be prepared to make prompt use of the breakthroughs of others.

So major risks were ahead—inevitable—as Kay girded for his next fights with the valley.