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THE NANNY STATE CAN MAKE YOU FILTHY RICH: It is documented that Apple Computer might have gone belly up in the 1980s if it wasn’t for the fact Steve Jobs embarked on a rather ambitious strategy to create demand for his company’s products by aggressively marketing them to taxpayer-subsidized K-12 public schools throughout the United States.
In an article entitled, “Steve Jobs: Free Market Capitalist,” recently posted on Calwatchdog.com, a libertarian-leaning website, Joseph Perkins, the author, made the claim that Jobs, unlike some entrepreneurs, received “no government help” as he helped build Apple into the multi-billion dollar company it is today:
There’s another aspect of the Jobs legacy that has been underreported, that has nothing to do with his technological prowess, or his keen entrepreneurial instincts:
In launching Apple, in building it into one of the world’s foremost companies, in helping to make California’s Silicon Valley the world’s high-tech capital, Jobs never relied on government subsidies.
Although Perkins might be technically correct in saying Apple did not depend on “government subsidies”–at least not directly–it is documented the company might have gone belly up in the 1980s if it wasn’t for the fact they created demand for their products by aggressively marketing them to taxpayer-subsidized K-12 public schools.
When Apple was formed in the late 1970s, there was no mass consumer market for personal computers. Not only was there no use for them in domestic households, but most people didn’t have a clue as to how they operated. If you wanted one, you had to assemble it from a kit and learn complicated codes to make it function.
Under Jobs’ leadership, Apple embarked on a rather ambitious strategy of creating a market out of thin air for its products. One way it did this here in California was to give away hundreds of free computers to schools across the state. In return for its “good deed,” it got a very generous tax break from the politicians in Sacramento.
As the trade journal Infoworld observed in 1990:
Apple Computer’s involvement in elementary education in the early 1980s was a work of marketing genius. The then-fledgling company offered to donate one Apple II system to each elementary school in the country — that is, once the government guaranteed them certain tax advantages in exchange for their corporate largesse.
Many schools accepted Apple’s generosity. Immediately, they all faced the same question: “What does a school with hundreds, or in some cases thousands of students do with one computer?”
For many, the answer was to buy more Apple computers, build computer labs, and create computing programs. And, as schools began equipping labs with discounted Apple equipment, parents of elementary school children began buying up Apple II computers for use at home, paying full price.
Nearly 10 years later, elementary schools continue to buy Apple II technology. As a result, the strategy has kept what many industry observers contend is an overpriced and technically obsolete system in the mainstream. And it provided Apple with a virtual lock on the elementary school market that continues today.
In 1995, the New York Times reported that “Apple’s share of computer sales to elementary and high schools was expected to climb from 46 percent of all educational computers bought last year to 58 percent of the total being bought in the 1995-96 school year.” It further pointed out that:
The schools market is sizable: in the 1994-95 school year, the nation’s public schools bought nearly a million personal computers, spending roughly $2.5 billion on machines, printers, communications devices and other hardware. Besides the dollar amount, Apple hopes to win the loyalty of children who might grow into future customers, much as the company is doing in the college world.
According to the survey, conducted by Quality Education Data, or Q.E.D., an education market research firm based in Denver, the share of Macintosh sales to elementary and secondary schools jumped sharply in the last school year, while such sales of I.B.M. and I.B.M.-compatible PC’s fell. This was in sharp contrast to the market for business and consumer computers, in which the Macintosh has rapidly lost ground.
“Apple’s longtime courting of the school market has paid off in strong brand loyalty,” said Jeanne Hayes, president of Q.E.D., which says it surveyed 80 percent of the nation’s public elementary and secondary schools for the report. “Special pricing, strong service and support and habit have made the K-12 market an unusually loyal Apple niche.”
The public school district in Hampton, Va., for example, has 4,000 Macintoshes, all linked on one gigantic network. “We’ve had Apples for seven or eight years now and see no reason to change,” said Dr. Charles Stallard, director of information services and technology for the Hampton schools….
So as the evidence suggests, Perkins’ assertion that Apple received “no government help” during its transformation into a multi-billion dollar company is nonsense. Jobs did what many other “free market capitalists” in this country do to become filthy rich: they get the nanny state to buy most of their firm’s products.
Jobs’ behavior shouldn’t be of any surprise given he grew up in Silicon Valley, an urban settlement that developed around clusters of high tech industries built from the ground up thanks to billions of dollars of taxpayer money from the Department of Defense. Understand that birds of a feather really do flock together.
Schools received computers for free – Apple received some breaks on taxes in California. I was one of the students who had an Apple ][ lab in New York City, in a private school no less. We did receive some breaks and bought some other Apple computers. While the market may have considered them obsolete after a few years the reality is that educators use computers in fundamentally different ways than business do. Computers that were well made and could withstand lots of use and abuse (you had to see some of those kids beating the keyboards playing Microsoft Decathalon -yes, Microsoft on an Apple ][+ -back in 1982)
Software from years before would still work well into the 1990’s on the same hardware. Color Monitors could be added or even a big Color TV. The Apple //e line was especially upgradable and there were even hard drive options, network cards, mice and Hypercard-like functionality and content creation options. No other computer offered this many options with so much support in the broader education market. I myself was using *and purchasing brand new!* Double-sided- Double density disks (formatted for 143 Kilobits per side) well into the 1990’s for the heavy use the Apple //e lab computers had as late as 1994.
Technically obsolete? Sure – laser printers at several jobs I have worked over the years that have a simple hardware problem are thrown out if they are over the 1-year warranty. Same with monitors and even laptops. The Apple //e was the Mack truck of computers and any educator who relied on them day to day can attest to that. Apple did right by America and themselves…
Word was originally a succes for the Mac PC dominance followed later. The true WISYWUG for the Macs of the late 1980ies did a much better job delivering what Word was meant to deliver than the DOS PCs of the time.
So … MS on an Apple computer wasn’t that far fetched 🙂
It should be said that Apple had to kill the Apple //e around 1994 – Schools were STILL BUYING THEM. Why? because those ‘obsolete’ computers were still fantastic learning tools. Typing Tutor on an Apple //e was fantastic – as the computers didn’t break and they cost next to nothing to maintain. Spray ’em with some windex or formula 409 when they got too greasy!
No other tech company that i can recall had to tell its customers to please stop ordering their products.
>>>”No other tech company that i can recall had to tell its customers to please stop ordering their products.”
Commodore 64s were still in high demand too when they were discontinued in 1993. In fact the C64 holds the record for most units sold (30 million). Commodore stopped making them for the reason Apple stopped — they wanted people to upgrade to their 32 bit machines (Amigas and Macs).
Thank you for linking to an article on our CalWatchDog.com site. But everybody gets tax breaks for charitable donations. The article also leaves the impression that this was the main way Apple created demand. Actually, its great products created demand. I saw this when I was in the U.S. Army in West Germany, a Russian linguist with Military Intelligence 1979-82. Some guys were so obsessed with microcomputers that they went outside the Army supply channel (which always was years behind) to buy some Apple computers and key in data on the Soviet military.
You’re also wrong to blame Jobs for anything that happened at Apple from 1985, when he was fired, until his return in 1997, when he save the company from bankruptcy. So your quotes from news articles from 1990 and 1995 are irrelevant.
LewRockwell.com just posted an interesting article suggesting that Jobs could have been anti-government: http://lewrockwell.com/wenzel/wenzel134.html
We might find out more when the Walter Isaacson bio of him comes out soon.
Hi John:
> Thank you for linking to an article on our CalWatchDog.com site.
> But everybody gets tax breaks for charitable donations.
I’m not of the opinion tax breaks are what motivated Apple to donate hundreds of computers to taxpayer-subsidized K-12 public schools. The goal was to make the government purchase tens of thousands of them in the long run.
> The article also leaves the impression that this was the main way
> Apple created demand. Actually, its great products created demand.
Maybe so. But Apple almost went bankrupt when Steve Jobs was running the company in the early 1980s because two of his brainchilds, Apple III and Lisa, were complete flops. Remember those infamous products? They were costly mistakes.
And you know what kept Apple from filing for Chapter 11? It was the fact that Apple II sales to taxpayer-subsidized K-12 public schools–i.e., the government–kept them profitable. It brought in cash to pay the bills. The state was their most important market
That’s why when Mr. Perkins asserted that Apple received “no government help” during its tranformatiom into a multi-billion dollar company, I said that was nonsense. He’s right in the sense it received no direct taxpayer subsidy.
But the reality is, the government was a major purchaser of Apple products in 80s and 90s–and probably still is. If it wasn’t for the state, Apple would have gone belly up long ago. I doubt Steve Jobs would have become a mega-billionaire.
> I saw this when I was in the U.S. Army in West Germany, a Russian
> linguist with Military Intelligence 1979-82. Some guys were so obsessed
> with microcomputers that they went outside the Army supply channel
> (which always was years behind) to buy some Apple computers and key
> in data on the Soviet military.
I’m not denying the possibility some demand for Apple products came about because of quality and reliablity. Heck, I owned a used Apple II and a new Mac IIsi myself for many, many years before I switched to PC compatible systems.
But most people at the time you mentioned were not as familiar with computers as military intelligence officers were. Apple was struggling with ways to expand markets. That is why they targeted the government: to create more demand.
> You’re also wrong to blame Jobs for anything that happened at
> Apple from 1985, when he was fired, until his return in 1997, when
> he save the company from bankruptcy. So your quotes from news
> articles from 1990 and 1995 are irrelevant.
I think you completely misinterpreted the reason why I quoted the articles that were published in Infoworld and the New York Times.
First, the strategy I made reference too in my blog piece–i.e., creating demand for Apple products by aggressively marketing them to taxpayer-subsidized K-12 schools–was initiated by Jobs himself shortly after he co-founded Apple. He was VP of Marketing at the time.
Second, Jobs’ strategy was enormously successful for the company. It was selling computers to the government–not the private sector–that kept them even barely profitable during incredibly rough times. If it wasn’t for the state, Apple would have gone belly up.
And thirdly, when Apple was founded in 1977, the government–not the private sector–was one of the biggest purchaser of computers. Jobs was doing what every “free market capitalist” in Silicon Valley was doing at the time: get the state to buy your products.
The articles are not irrelevant at all.
> LewRockwell.com just posted an interesting article suggesting
> that Jobs could have been anti-government:
> http://lewrockwell.com/wenzel/wenzel134.html
That would be ironic since the government made Jobs a very wealthy man.
> We might find out more when the Walter Isaacson bio of him comes out
> soon.
John, my kids at Fisler in the FSD were dragooned into buying Apples in the mid 00’s by the busy educrats therein.
I have no idea how much of Apple’s revenue is/was based on the type of marketing, but the computers were fabulously overpriced compared to basic PCs at Best Buy. Naturally.
The District gave them a monopoly and discriminated against families who didn’t want to participate.
Tony Bushala wrote:
> John, my kids at Fisler in the FSD were dragooned into buying
> Apples in the mid 00′s by the busy educrats therein.
>
> I have no idea how much of Apple’s revenue is/was based on the
> type of marketing, but the computers were fabulously overpriced compared
> to basic PCs at Best Buy. Naturally.
>
> The District gave them a monopoly and discriminated against families
> who didn’t want to participate.
Apple knew if they could sell say $500,000 worth of product to a school district, it would be much harder for them to justify switching to something better and cheaper. If a district were to suddenly dump Apple, not only would it have to spend thousands of dollars buying new computers, but it would have to purchase new software, retrain teachers and technicians, and completely revise the curriculum. Knowing that districts were “locked-in” because of these investments, Apple could charge higher prices and get away with it.
That’s perhaps why the New York Times described the “education market” as being an incredibly lucrative endeavor for Apple. You can make a hell of a lot of money ripping off the taxpayers.
Since I was in a forefront of technological making in 70’s let me say, there was many computers which did not make it. S100 bus system CPU was predecessor of Microsoft MS DOS. We were always laughing at MS DOS and Apple as plastic toys since S100 was considered professional computer.
The truth was that only Apple was consumer marketable computer. Rest were too complex to maintain and install.
There was no competition to Apple for use in classroom.
I have donated about 3 – 4 S100 based computers in early 90’s to Jefferson Elementary in Santa Ana where my daughter attended kindergarten.
There was no way for me to install any graphical game which was of interest to kids.
Only editor on B/W screen.
So the Apple was a winner by default and is up to today if you want idiot proof computer without any hustle.
Stanley Fiala wrote:
> There was no competition to Apple for use in classroom.
By establishing a monopoly, you can charge higher prices and earn bigger profits from the products you sell. But it sort of proves the point of my article, doesn’t it? I mean, in the early stages of Apple’s growth, it was more profitable to sell computers to the state, not the private sector. Why? Because that’s where the money was. There was no real demand at that time coming from the private sector. Businessmen were reluctant to buy Apples. They thought they were toys.
Look Duane, the point is that there was certain monopoly, however, by a default not by a design. There was no one who could produce such computer that time. Trust me because I was a designer at that time in 70’s, 80’s, 90’s and CEO of the Digital Media Inc. among other ventures.
In mid 70’s I personally believed that computers have no place in consumer market only in industrial one.
I do not know your age but only geeks knew how to operate and use a computer. There was 8″ floppy disk with a storage of 350kb. Look-up in your directory to see which file would fit in there. None, and that floppy cost about $1,200.00
You could throw money at it and no one could do it because everyone believed that Apple II was plastic toy and not a computer.
It was Jobs’ strategy which prevailed by a true competition.
In contrast it was Microsoft which was sued for monopoly not Apple. If you would know about the technology those days you would know that Gates intentionally made traps in windows so no third party program would work correctly. The World Perfect was a clear example.
Nice article but you are copying without a proper historically technological knowledge.
Stanley Fiala wrote:
> Nice article but you are copying without a proper historically
> technological knowledge
I was not a “geek,” but I did develop a strong interest in the Apple II and other personal computers when they came out.
So I’m actually quite familiar with some of the issues you make reference to in the postings you’ve made in response my piece.
Stanley, nice posts, and none of your rambling for a change.
As a hardcore geek myself, an old-school hacker (in the good sense, not the misuse of the word by clueless journalists), I can only say you are spot-on.
In the mid-70ies, my high school bought a mini computer for outrageous amounts of money. It was good for us geeks, but for nobody else. Later, after I graduated, they replaced that clunky machine with Apple II machines.
PCs didn’t even exist yet. All that was there was Apple II, Radio Shack’s TRS-80, and the Commodore PET (and some DIY assembly kits, like the Rockwell AIM-65, which I had). I sampled all these machines at my friends, and the Apple was by far the best.
While you may not like it, the government IS a potential customer. K-12 schools ARE a potential customer. If Jobs saw this and said, “Hey, let’s give these customers a free sample and see if we can get them to buy more.” He is certainly entitled. If he had the vision to realize that they not only would buy more, but that children would be more familiar with his product than his competitors and thus more inclined to buy, it was like getting double the benefit. Again, where is the problem? If he started this program when the company was doing well, and it helped to sustain him in leaner times, I still don’t see an issue. Government, schools, and many businesses use computers long after people have upgraded. It is a good long-term move. OF COURSE any accountant worth his salt would point out that donations to public schools were a tax deduction. If Exxon donated heating oil to public schools, they would be entitled to claim that, too (as opposed to just getting ‘food stamps’ as a needy corporation). Of course, if you are opposed to public education in general (as you seem to be) you might not like that either, but that is another argument.