Personal Computer, Commodore 64, IBM PC, DOS, Macintosh, Mouse, GUI, Modem, Internet, HTML, URL and World Wide Web

Posted by PITHOCRATES - August 7th, 2012

History 101

The IBM PC operating DOS set one Standard for the Personal Computer

The first personal computer (PC) appeared in the Sixties.  (People called these first PCs ‘minicomputers’.  But we’ll use the term PC to cover all work and home single-user computer systems.)  These first PCs were little more than a programmable calculator.  Not very useful in most homes.  PCs got a little more useful in the Seventies.  The Commodore PET, the Apple II and Radio Shack TRS-80 hit store shelves in the Seventies.  And if you were a school boy without a girlfriend chances were that you were home playing games on these PCs.  Some were even writing programs.  So these PCs offered an exciting new world for geeks and nerds.  But offered little to their sisters and parents.

In the early Eighties one of the most popular PCs hit the market.  The Commodore 64.  Which offered better graphics.  And accessories like tape drives, disc drives, joy sticks and printers.  Allowing better gaming.  And the beginning of business programs.  Like a database program.  Sure, it was primitive.  And you needed a TV to use the Commodore 64.  But it was state of the art then.  Kids who played with these PCs gave up a lot of their youth to these machines.  But other than those fascinated by technology (and ardent fans of Star Trek), few others were interested in the PC in the early Eighties.  It just wasn’t anything the masses were demanding.

Then came the IBM PC.  This set one standard for the personal computer.  And we call every personal computer that uses the IBM platform a PC.  This PC came with its own monitor.  That was one color.  Monochromatic.  Either green.  Or amber.  The monitor sat on the computer box.  In the front of the box were two 5-1/4 floppy disc drives.  State of the art then.  Extinct dinosaurs today.  Businesses started buying these for the word processing and spreadsheet programs they could run.  But the PCs themselves weren’t very people friendly.  Before you could use your word processing or spread sheet program you had to boot up your computer with DOS first.  DOS was the disc operating system that made the computer work.  In those early days you had to type a DOS command to get those word processing and spreadsheet programs to start.  It required even more DOS mastery to do some basic things like installing a printer or copying a disc.  Making these PCs complicated machines that most people still did not see any reason to buy one.

The Defense Department’s ARPA created the ARPANET which was the Forerunner to the Internet

Then came 1984.  And the Macintosh computer (the Mac).  The other computer standard.  And rival to IBM.  And like their iconic Super Bowl ad said, it changed the world.  The Mac introduced us to the mouse.  And the graphical user interface (GUI).  Which Xerox actually created during the early Seventies but didn’t do anything with it.  But a guy by the name of Steve Jobs did.  He incorporated it into the Mac and made using a computer a whole lot easier.  The PC makers soon followed, adding a mouse and the Windows GUI to the PC.  Computers were never easier to use.  Businesses began buying computers in droves.  People were even bringing them into their homes.  Primarily for gaming.  Though some were using personal finance programs to pay their bills.  Writing letters and addressing envelopes.   And a few other things.  But the masses weren’t buying them yet.  Because there was little the masses could do on these remarkable machines.

Computer scientist JCR Licklider left Bolt, Beranek and Newman (BBN) to head the Behavioral Sciences and Command and Control programs at the Defense Department’s Advanced Research Projects Agency (ARPA).  He had an idea about making computers talk to each other.  Distant computers.  Others continued his work at ARPA.  Eventually issuing a request for quotation to connect the powerful computers at the University of California, Los Angeles (UCLA), the Stanford Research Institute’s Augmentation Research Center, the University of California, Santa Barbara (UCSB) and University of Utah.  BBN won the contract.  Built the network between these computers.  And on October 29, 1969, they sent the first message over the ARPANET.  An incredible achievement.  It was paradigm changing.  The Department of Defense had just created the Internet.  And the world would never be the same.  In another 20 years or so, that is.

The birth of the Internet in 1969 meant nothing to the masses.  The only people using it were computer people working on big, powerful computers located only at universities and research facilities.  Who could share these incredible computing resources.  But the masses had no concept of computer networks.  And weren’t asking for this technology.  They wanted other things during the Seventies.  And were only warming up to computers during the Eighties.  It was going to take a lot more to get the masses interested in this new technology.  Something that made it fun.  Without having to learn a lot of new stuff.  Something that was no more difficult than watching television.

A Favorable Business Climate in the Eighties created a High Tech Boom and ushered in the World Wide Web

As the Internet grew it allowed more computers to network with each other.  Sort of like having a new system of interstate highways.  A quick way to get places.  But unlike the interstate highways the Internet didn’t have tourist attractions and destinations of interest to go to.  At least, not yet.  And then came along Tim Berners-Lee.  Sir Timothy John “Tim” Berners-Lee these days.  Thanks to a knighthood bestowed by Queen Elizabeth II.  He helped to populate the Internet with destinations of interest.  He created a ‘web’ of hypertext documents that sat on servers.  People with computers could access these servers via their modems.  At first with dial-up modems that took forever to download anything off of the World Wide Web.  Then with broadband high speed modems.  These would connect them to the Internet.  The HyperText Markup Language (HTML) provided a common programming language for these interconnected computers.  The uniform resource locator (URL) provided a unique destination address for each thing (document, picture, video, etc.) on the World Wide Web.  And a web browser provided the virtual car to travel the Internet to these destinations of interests at various URLs all across the web.

Of course, none of this would have been possible with only those early PCs running DOS.  It was the marriage of the mouse, the GUI and the World Wide Web that made using the Internet fun and as easy as watching television.  Surfing the Internet took off in the Nineties because you could read, watch and listen to anything on the web without knowing the first thing about computer programming.  Even our parents could use email so deftly that first class mail may soon be joining the 5-1/4 floppy drive into extinction.  Along with the printed telephone directory.  And the printed newspaper.  Everything we want to know, look-up, enjoy, share, etc., is online these days.  We can even live-stream movies to our television via our PC connected to the Internet.  We bank, shop, chat and use social media like Twitter and Facebook.  We now have smartphones that can do all of this for us.  As well as take pictures and post them online.

People now use this technology throughout their day.  And most can’t imagine living without it.  This all starting with technology in the Sixties that people didn’t know a thing about.  Didn’t understand it.  And never asked for it.  But a few individuals advanced this technology.  Then some companies figured out how to commercialize it.  To make us demand something that didn’t exist only a short time earlier.  And once they explained why we had to have this technology we had to have it.  And now can’t live without it.  Proving Say’s law.  Supply creates demand.  And disproving Keynesian economics.  For demand didn’t make any of this happen.  Supply did.  A favorable business climate in the Eighties (low taxes, low regulatory burdens, sound monetary policy, etc.) created a high tech boom.  That showered us with high-tech toys.  And ushered in the next big thing.  The World Wide Web.

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LESSONS LEARNED #20: “It is never a consumer that complains about ‘predatory’ pricing.” -Old Pithy

Posted by PITHOCRATES - July 1st, 2010

ECONOMIES OF SCALE and vertical integration can do two things very well.  Make industrialists rich.  And make the things they sell cheap. 

The more you make, the less each thing you make costs.  Businesses have fixed costs.  Big one time investments in plant and equipment.  Businesses have to recover these costs.  Each thing they sell has a portion of these fixed costs added to its price.  The more they sell, the less they need to add to each unit sold.  This is economies of scale.  Think of bulk goods.  Warehouse clubs.  Places where you can buy large quantities of things at lower unit prices.  You may buy an ‘economy pack’ of 3 bottles of shampoo shrink-wrapped together.  The purchase price of a 3-pack will be greater than the price of a single bottle of shampoo at your convenient corner drug store.  But the unit cost of each of the bottles in the 3-pack will be less.  You save more over time by buying 3 bottles at a time.  Spending more, then, means spending less.  In time.

Few of us buy raw materials.  Few have a need for crude oil.  Iron ore.  Coal.  Limestone.  Manganese.  But they make the stuff we buy.  A lot of things have to happen before those raw materials make it to us in those things we buy.  It has to be mined or drilled/pumped.  Transported.  Processed.  Stored.  Transported again.  Processed again.  Stored again.  Transported again.  There are many different stages between extracting raw materials from the earth and incorporating them into a final product we consumers buy.  At every stage there are costs.  And inefficiencies.  Which add to costs.  By reducing these costs along the way, the component materials used at the final manufacturing stage cost less.  This reduces the selling price of the final product.  This is what vertical integration does.  It puts everything from the extraction of raw materials to the incorporation of those processed materials into the final product for sale under control of the final user.  It brings in a high level of quality, cost containment and reduction of inefficiencies into the entire process resulting in a high quality, mass produced, inexpensive product.

Not everyone can do these things.  You have to live and breathe the industry you’re in.  You have to understand it intimately.  An industrialist at the top of his game can do this.  A politician can’t.  States trying to take control of their economy have failed.  Every time they’ve tried.  Why?  Politicians are ‘intellectuals’.  They’ve never run a business.  They only thought about it.  And, somehow, that gives them the moral authority to tamper in something they are simply unqualified to do.  And when they meddle, they destroy.  Purposely.  Or through unintended consequences.  In the process, though, they enrich themselves.  And their cronies.

ANDREW CARNEGIE WAS a brilliant entrepreneur.  After working for a railroad, he saw the future.  Railroads.  And he would build its rails.  And its bridges.  With his Keystone Bridge Company.  Which used steel and iron.  So he built his Union Mills.  Which needed pig iron.  So he built his Lucy blast furnace.  Which consumed raw material (iron, coke, limestone).  So he secured his own sources of raw materials. 

His Lucy blast furnace set world records, nearly doubling the weekly output of his steel competitors.  No one made more steel than Carnegie.  For less.  In about 20 years, he brought the price down for steel rails from $160/ton to $17/ton.  And got rich in the process.

Economies of scale.  Vertical integration.  And innovation.  Carnegie hired the best people he could find and used the latest technology.  Always improving.  Always cutting costs.  Always making steel more plentiful.  And cheaper.  His steel built a nation.  Dominated the industry.  And destroyed the competition.  Of course, that drew the attention of the government.  And they tried to break up the steel giant because it was unfair to the competition.  Who couldn’t sell steel as cheap as he could.

JOHN D. ROCKEFELLER was a brilliant entrepreneur.  After trying the oil drilling business, he saw the future.  The refining business.  For America lit the night with kerosene.  And he would provide that kerosene.  At prices that a poor man could afford.  And he did.  And he saved the whales in the process (his cheap kerosene put the whale oil business out of business).

Like Carnegie, cutting costs and production efficiencies consumed him.  He built his own kilns and used his own timber for fuel.  He made his own barrels from his own timber.  He used his own horse-drawn carts, boats, rail cars and pipelines.  He bought up competitors.  He grew to dominate the industry.  By far the biggest shipper, he got better shipping rates than his competitors.  And he constantly innovated.  When others were dumping the gasoline byproduct from refining kerosene into the river (no internal combustion engine yet), he was using it for fuel.  He hired the best talent available to find a use for every byproduct from the refining process, giving us everything from industrial lubricants to petroleum jelly (i.e., Vaseline).

His company, Standard Oil, was close to being a monopoly.  When they controlled 90% of the market kerosene was never cheaper.  He brought the price down from $0.26/gallon to $0.08/gallon.  And that was an outrage.  We can’t allow any one company to control 90% of the market.  Sure, consumers were doing well, but the higher-cost competitors could not stay in business selling at those low prices.  So the government broke up Standard Oil via antitrust legislation (the Sherman Act).  To protect the country from monopolistic practices.  And cheap kerosene, apparently.

BILL GATES WAS a brilliant entrepreneur in building Microsoft.  The personal computer (PC) was new.  You couldn’t do much with it in the early days unless you were pretty computer savvy.  But programs were available that made them great business tools (word processing and spreadsheet programs). 

IBM created the PC.  And they licensed it so others could make IBM-like machines.  IBM clones.  The PC industry chewed each other up.  But Gates did well.  Because all of these machines used his operating system (Microsoft’s Disk Operating System – DOS).  Apple developed the Macintosh (with a mouse and Graphical User Interface – GUI) but it was expensive.  Anyone who used one in college wanted to buy one.  Until they saw the price.  So they bought an IBM clone instead.  And when Gates came out with Windows, they were just as easy to use as the Macs.

Because of the higher volume of the IBM platform sold, Microsoft flourished.  Software was bundled.  New machines came preloaded with Windows.  And Internet Explorer.  And Windows Media Player.  You got a lot of bang for the buck going with a Windows-based PC.  And Windows dominated the market.  Consumers weren’t complaining.  Much.  Sure, there were things they did bitch about (glitches, drivers, viruses, etc.), but it sure wasn’t price.

Of course, Microsoft’s competitors were hurting.  They couldn’t sell their products if Microsoft was giving away a similar product free.  Because they were hurting their competitors, the government tried to break up the company with the Sherman Act. 

THE NORTHERN SECURITIES SUIT of 1902 found a holding company guilty of not yet committing a crime.  Teddy Roosevelt’s administration filed a Sherman antitrust suit against Northern Securities.  This was a holding company for Northern Pacific, Great Northern, and Chicago, Burlington, and Quincy Railroads.  What’s a holding company?  It replaced a trust.   Which large corporations created in response to government’s attacks on large corporations.

Small competitors feared large corporations.  They could not compete against their economies of scale and vertical integration.  The little guys couldn’t sell things as cheap as the big corporations could.  So the government intervened to protect the little guy.  So they could sell at higher prices.

But businesses grow.  All big corporations started out as little guys.  And the growing process doesn’t stop.  So the big corporations had to find other ways to grow.  They formed trusts.  Then the trust-busters busted up the trusts.  The next form was the holding company. 

The trust-busters said that the big corporations, trusts and holding companies were all trying to become monopolies.  And once they eliminated all competitors, they would raise their prices and gouge the consumers.  Northern Securities never did.  But they could.  So they were guilty.  Because they might commit a crime.  One day.

ALL BUSINESS OWNERS aren’t morally ethical and honest.  But the market is, albeit cruel.  Economies of scales will always put the little guy out of business.  Sad, yes, for the little guy.  But for every little guy put out of business, millions of consumers save money.  They can buy things for less.  Which means they have more money to buy more things.  New things.  Different things.  From new little guys who now have a chance with this new surplus of purchasing power.

But when politicians get involved, consumers lose.  When they help a competitor, they help them by keeping prices high.  To keep competition ‘fair’.  For the politically connected.

Consumers never complain about low prices.  Only competitors do.  Or their employees.  Those working on whaling ships didn’t like to see the low price of Rockefeller’s kerosene.  But the new refining industry (and its auxiliaries) created far more jobs than were lost on the whaling ships.  We call it progress.  And with it comes a better life for the many.  Even if it is at the expense of the few.

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