Mitch Kapor: Founders at Work Excerpt

"...So we decided to bet on doing something for the IBM PC, which proved to be one of the reasons why we were successful. They had decided to outsource a lot of the key elements of what they were doing, right to the distribution. Rather than selling it just though their own sales force, they were selling it through retail stores like Computerland and Sears, which at the time was a very radical idea.  They had gone to Intel for the microprocessor; they had gone to Microsoft for the principal operating system. And I said, “They’re smart. They realize they don’t understand this business, so they’ll go to the best people. They’re not going to have a lot of ego and this is the way things are going to work.” Also, they had put a 16-bit chip in the machine with greater memory capacity. And memory capacity was an enormous issue.

The Apple II had 64 kilobytes – not megabytes, kilobytes– of memory. It was tiny. And not all of that was available. Actually, if you wrote programs on the Apple II, you started with a 48-kilobyte memory space. So the programs were tiny and the user data was tiny and people were building spreadsheets that exceeded memory. It was a fundamental limit of the Apple II, because it was an 8-bit microprocessor. IBM used a 16-bit microprocessor. And I said, “Ah, this will permit people to build bigger spreadsheets.” The memory space of the IBM PC when it came out was 640 kilobytes, 10 times the size. So I said, “16 bit, faster processor, more memory says IBM. We should target it. We should build a product that is optimized for it.”

Now, the IBM PC came out day 1, August ’81, with a version of VisiCalc, and with a version of Multiplan, which was Microsoft’s spreadsheet, but neither of them took advantage of the full capabilities of the IBM PC. In particular, because they had been put under a lot of pressure to get a product out, they had taken the code for the 8080/Z80 Intel/Zilog processors– 8 bit code– and tweaked it a little bit. The point is that VisiCalc on an IBM PC still ran in 64 kilobytes of memory.  You had 640k available, but you couldn’t address it in a spreadsheet so it was as if it wasn’t there. And I said, “Oh, wait, this is really an opportunity here.”

Plus another factor: because I knew all of the individuals, I knew that Software Arts and Personal Software were fighting with each other over the royalty rate. And I knew that they were essentially distracted and they were not working together, and I knew that Personal Software was hiring its own developers. I felt guilt-ridden about coming out with a product that was going to be competitive with VisiCalc, so I did my best to pretend to myself that it wasn’t going to be competitive. I ultimately said to myself that the fact of the matter is that I didn’t create this opportunity, they did.  If they had been on the job, I would have gone and done something else because the opportunity wouldn’t have been there. But I saw a gap in the marketplace and I said, “We should do something that lets you do bigger spreadsheets, that’s faster, that takes full advantage of the IBM PC, that integrates the graphing, so you could hit one button to get a graph”– because I knew people wanted that–“and have a better user interface for non-expert users”– which we did– “and allow user customization and user programming”– which we did in the macro language. So there was a set of ideas that gave 1-2-3 its character, that really made it a second generation product, that had sufficient differentiation that was immediately visible in 30 seconds when you demoed it, and that was what gave it its market entree.

Being at the right place at the right time also helped. The business world was poised to adopt personal computers. They were reasonably priced and they did something useful, which turned out to be Lotus 1-2-3.  So the market just expanded dramatically, far faster than anything any of us in the company would have imagined..."