TweetFollow Us on Twitter

May 86 History
Volume Number:2
Issue Number:5
Column Tag:Historical Computing

Historical Computing

By Dick Heiser, Industry Pioneer

PROBLEMS WITH SILVER LININGS

Today, Thursday sixth, is a rest day. I'm sitting on the lawn at Glen Helen Park, near Devore, California. This is where Steve Wozniak organized the US Festival. It's a beautiful, green, bowl-shaped area beside two lakes. When it's not a rest day, I'm marching in The Great Peace March from Los Angeles to Washington, D.C. This is still our first week, and today is our first rest day. Glen Helen Park is just as ideal for our camping as it was for the US Festival, maybe better. We have a lot of organizing to do yet, so there are lots of loose ends.

The computers, including a Macintosh, share an RV with the Pro-Peace radio station, WQO, 1630AM. The Mac showed up at the last minute, and has proven invaluable. It's being used for daily schedules, bulletins, letters, etc. It has also taken over route planning from my IBM PC, which has been having keyboard problems. Why did I bring an IBM PC if I am such a Mac enthusiast? I'm saving my Mac for after the march, and sacrificing my IBM to the rigors of camping life. Sure enough, I dropped the IBM's keyboard the very first day. I've taken the keyboard apart, popped-off non-functional keys and fixed them by blowing hard. I've glued the broken foot back on. At Radio Shack, I found out the difference between a capacitor and a varistor. They fixed our uninterruptible power supply for free. It was a nice example of community support for The Great Peace March. On the way back to camp, I thought of a neat way to prevent the burnout from repeating. Fixing "handyman" problems feels good. It reminds me of the early days at my computer store.

LITTLE PROBLEMS

Operating a store is just a process of solving lots of little problems. Cash flow, for example, is a strange little problem. It seems like a big problem when you don't have enough cash, but it's also a guiding hand from mother nature to keep mistakes small enough to recover from them. With enough cash, I could have plunged deeply into the wrong projects, and would have gone out of business. The funny thing about cash requirements, is that they go up if business goes up, and go up if business goes down. When sales increase, I re-order big quantities, and need lots of cash for C.O.D. shipments. When business slackens, the credit bills become due, and fixed expenses eat-up cash as well. My advice to entrepreneurs: Get Don Lancaster's book The Incredible secret Money Machine and read it carefully.

Inventory space was another problem. I'm glad I resisted the urge to get proper inventory shelves. We piddled along for seven years with a few cardboard boxes stacked on edge. Not having enough space for inventory kept us lean. That's very important in the computer business where inventory can cost a thousand dollars per cubic foot! Nowadays stores seem to have more resourses. but it was a struggle for us to do $80,000 in monthly turnover with $100,000 worth of inventory.

Another little problem was limiting what we carried. We sold ultraviolet lamps to erase your EPROMS, anti-static carpets to protect your keyboard, cables, connectors, etc. Where could we draw the line? Everything is connected. Somebody needs every possible item - that's why it exists. We refused to sell general electronic parts, and sent prospects elsewhere for bookkeeping software, for example. Some items that customers needed badly, we found hard to sell: Metal cases for keyboards were a huge hassle. A local fellow tried to make them, but couldn't control schedules or quality. Used Teletypes (the Volkswagens of the computer industry) were hard to find, and Teletype dealers were a surly lot. In the beginning, nobody knew what a computer store should sell, so every store decided for itself.

BIG PROBLEM: PROFIT MARGINS

The personal computer industry has always had trouble with profit margins. Because we started with mail order products, the discounts available to dealers started out very low.

My first negotiations with MITS were based on a set of simple pencil-and-paper spreadsheets. I prepared three plans: Optimistic, Pessimistic, and Best-Guess. Since this was a completely new kind of business, it's not surprising that all the estimates were wildly off. I had calculated sales at $450.00 per computer instead of the $2000.00 per computer that would have been a better guess. On the basis of my plan, MITS offered to supply kits on an OEM discount schedule. Original Equipment Manufactures sell products to a reseller (now called a Value Added Reseller or VAR), at a discount that depends on quantity. To avoid being fooled by big promises of future quantities, these deals usually begin with very modest discounts that only get good when the significant volume is actually achieved.This would have made it hard to start a business with limited capital, because profits would be postponed along with the discounts. My first order to MITS was at only a 15% discount from list prices; not enough.

MITS increased the discount, and created a dealer plan when they realized stores like mine would be good for them. They wanted me to succeed. So I placed another order, at 25% off, and we went on to do a lot of business together. Discounts remained at 20% to 25% off list until Apple came along. All dealers complained about these unrealistically low profit margins.

When Apple offered 35% discounts to dealers, I shuddered. It was too good to be true. Sure enough, price wars between Apple Dealers shaved the gross profit margin to 10% - 15%, and I found it harder to make money in the later big business years than in the early years when all the dealers were griping about short margins. Nowadays, dealers are going down the tubes (or, as the Germans have it, "Rorchenhin Unterdurchgang"), trying to do business at 5% - 10% margins, even without paying hackers to provide answers and training. I call this a "Big Proglem" because I don't have an answer yet. The Law of Survival is a good way to separate the weak from the strong, but I've seen too many tough-guy discounters in my neighborhood, Olympic Sales and Computique, have reorganized under Chapter XI. Survival of the fittest, yes, but there should be more to fitness than just price.

BIG PROBLEM: EXCLUSIVE DEALERSHIPS

This almost ruined me. MITS refused to allow dealers to carry competing products. They believed it was an illegal demand, but they made it, verbally, anyway. I started as an ALTAIR dealer, but new products from IMSAI and Processor Technology looked interesting. MITS threatened to cancel the dealership of anyone who carried other brands. The MITS people tried to protect their leadership position the wrong way.

Brand-name competition in iron wasted enormous amounts of time. People would come to The Computer Store to ask, "Why is an ALTAIR better than an IMSAI?" We responded, "Choose a computer that can do a function or solve a problem, don't just choose some brand of iron." I'm sure most people believed we were just defensive about the ALTAIR, but we really believed in solving a problem with software and hardware, rather than selling features of brand-name iron. We could honestly recommend the ALTAIR computer, and we were especially impressed with ALTAIR software, but we grew tired of defending our choice of brands.

Many dealers left MITS because of their prohibition on competitive brands. Finally, we too changed brands and lost the MITS ALTAIR line. I delayed for over a year and finally acted with fear. I fully expected our customers to associate us only with MITS, and expected them to stop dealing with us. I imagined it would be like starting business all over again. After we changed lines, I was astonished: Not one customer left us! Customers understood, after all: Iron is secondary; problem-solving is primary. This was a big problem that ruined MITS, almost ruined my store, and wasted a lot of energy.

BIG PROBLEM: BUILDING RELATIONSHIPS WITH PROSPECTS

IBM Mainframe installations are locked-in to IBM by a huge investment in programs, procedures, training, and momentum. At The Computer Store, we put a lot of effort into before-the-sale problem analysis and planning with the prospect. When we completed this planning process, we developed a list of recommended hardware and software with prices. For our prospect, this became his shopping list! Our effort was always appreciated, but everyone's a price-shopper, too. We tried to think of ways to get "account control", or to sell our consulting services, but we never solved this problem. Neither has anybody else, to my knowledge.

COMPARING TWO ENVIRONMENTS

Working at The Computer Store was an exciting job. We responded to an enormous variety of requests. We designed, recommended, specified, configured, installed, trained, debugged, and fixed computer systems for every conceivable application. Perhaps that is the answer after all; helping people help themselves!

In many ways, operating The Computer Store then and participationg in The Great Peace March now are strikingly similar. In both cases, we operate with inadequate resources and face great uncertainty. Many problems remain to be solved. Solving these problems will offer excitement, and we eventually see the problems as great opportunities.

 
AAPL
$100.75
Apple Inc.
+0.64
MSFT
$46.36
Microsoft Corpora
-0.08
GOOG
$577.36
Google Inc.
+1.00

MacTech Search:
Community Search:

Software Updates via MacUpdate

QuickBooks 2015 16.0.0.1352 R1 - Financi...
QuickBooks 2015 helps you manage your business easily and efficiently. Organize your finances all in one place, track money going in and out of your business, and spot areas where you can save.... Read more
Mac DVDRipper Pro 5.0.1 - Copy, backup,...
Mac DVDRipper Pro is the DVD backup solution that lets you protect your DVDs from scratches, save your batteries by reading your movies from your hard disk, manage your collection with just a few... Read more
Apple OS X bash Update 1.0 - Fix for sec...
The OS X bash Update fixes a security flaw in the bash UNIX shell on OS X 10.9.5 (also on OS X 10.8 and 10.7 [see Related Links below]). OS X 10.9.5 or later Downloads for OS X 10.8 and OS X 10.7 in... Read more
SyncTwoFolders 2.0.5 - Syncs two user-sp...
SyncTwoFolders simply synchronizes two folders. It supports synchronization across mounted network drives and it is a possibility to run a simulation showing in a log what will be done. Please visit... Read more
FinderPop 2.5.7 - Classic Mac utility, n...
FinderPop is a Universal preference pane that extends OS X's contextual menus using a FinderPop Items folder much as the Apple Menu Items folder used to do for the Apple menu. It has other features... Read more
VueScan 9.4.45 - Scanner software with a...
VueScan is a scanning program that works with most high-quality flatbed and film scanners to produce scans that have excellent color fidelity and color balance. VueScan is easy to use, and has... Read more
LibreOffice 4.3.2.2 - Free Open Source o...
LibreOffice is an office suite (word processor, spreadsheet, presentations, drawing tool) compatible with other major office suites. The Document Foundation is coordinating development and... Read more
calibre 2.4 - Complete e-library managem...
Calibre is a complete e-book library manager. Organize your collection, convert your books to multiple formats, and sync with all of your devices. Let Calibre be your multi-tasking digital... Read more
Default Folder X 4.6.9b1 - Enhances Open...
Default Folder X attaches a toolbar to the right side of the Open and Save dialogs in any OS X-native application. The toolbar gives you fast access to various folders and commands. You just click... Read more
Beamer 2.0.4 - Stream any movie file fro...
Beamer streams to your Apple TV.... Plays any movie file - Just like the popular desktop movie players, Beamer accepts all common formats, codecs and resolutions. AVI, MKV, MOV, MP4, WMV, FLV. To... Read more

Latest Forum Discussions

See All

WW2: Sandbox. Strategy & Tactics (G...
WW2: Sandbox. Strategy & Tactics 1.0.0 Device: iOS Universal Category: Games Price: $9.99, Version: 1.0.0 (iTunes) Description: Sandbox is the unlimited sequel to our Strategy & Tactics: World War II. We've abandoned... | Read more »
apeFilter (Music)
apeFilter 1.0 Device: iOS Universal Category: Music Price: $6.99, Version: 1.0 (iTunes) Description: | Read more »
Shred It! Review
Shred It! Review By Jennifer Allen on September 30th, 2014 Our Rating: :: GORGEOUS BUT BASICUniversal App - Designed for iPhone and iPad It might look lovely, but Shred It! is a pretty shallow endless runner/snowboarding game.   | Read more »
It Came From Canada: Angry Birds: Transf...
Anyone afraid that throwing Transformers into the Angry Birds mix would result in a Michael Bay-level of childhood pillaging can rest easy. While Rovio’s famous fowls may be a 21st century staple, Angry Birds: Transformers wears its affection for... | Read more »
Galaxy Trucker Review
Galaxy Trucker Review By Rob Thomas on September 30th, 2014 Our Rating: :: IN FOR THE LONG HAULiPad Only App - Designed for the iPad We got a great big convoy, rockin’ through the night… the endless night of outer space, that is.... | Read more »
Moon and Sun – children’s book Review
Moon and Sun – children’s book Review By Amy Solomon on September 30th, 2014 Our Rating: Moon and Sun is a fable-like children’s book with lush illustrations.   Developer: Marcio Monteiro Price: $3.99 Version: 1.0 App Reviewed on... | Read more »
Kairosoft Finally Brings The Pyraplex to...
Kairosoft Finally Brings The Pyraplex to iOS Posted by Jessica Fisher on September 30th, 2014 [ permalink ] Universal App - Designed for iPhone and iPad | Read more »
Yeti’s Parole Officer Review
Yeti’s Parole Officer Review By Jennifer Allen on September 30th, 2014 Our Rating: Universal App - Designed for iPhone and iPad Yeti’s Parole Officer proves that looks aren’t everything in this entertaining, if plain, piece of... | Read more »
Record Keeper and World Wide Words – Two...
Record Keeper and World Wide Words – Two New Final Fantasy Games Arrive on iOS in Japan Posted by Ellis Spice on September 30th, 2014 [ permalink ] | Read more »
iPollute Review
iPollute Review By Nadia Oxford on September 30th, 2014 Our Rating: :: iPOLLUTE, uPOLLUTEUniversal App - Designed for iPhone and iPad iPollute is a delightful-looking pollution simulator, though it’s a bit light on “game” content... | Read more »

Price Scanner via MacPrices.net

Apple Boycotts German Magazine Computer Bild...
Apple has revoked its PR accreditation of Germany’s Computer Bild, Europe’s best-selling PC magazine, in reaction to Bild’s posting of a “#Bentgate” YouTube video. Axel Telzerow, editor in chief of... Read more
iPhone 6 & iPhone 6 Plus Available in Chi...
Apple has announced that iPhone 6 and iPhone 6 Plus will be available in China beginning Friday, October 17 from the Apple Online Store (http://www.apple.com), Apple’s retail stores, and an expansive... Read more
MacBook Airs on sale for $100 off MSRP, start...
Best Buy has the new 2014 MacBook Airs on sale for $100 off MSRP on their online store. Choose free home shipping or free local store pickup (if available). Prices valid for online orders only, in-... Read more
Apple Releases OS X Mavericks bash Update 1.0...
Apple has released a patch update for OS X Mavericks users to address the recently-detected “Shellshock” security bug in BSD UNIX’s bash shell. Apple says only a few Mac users who had manually... Read more
Pivotal Payments Ready for Apple Pay – FlexPo...
Pivotal Payments, a provider of merchant services and global payment processing solutions, has announced its proprietary FlexPoint platform will support credit and debit transactions through Apple’s... Read more
iStabilizer Announces Tabarm — First Friction...
iStabilizer, a specialist in universal lightweight compact tripods, steady cams, dollies, mounts, and remotes for smartphones, tablets, and cameras, announced today the iStabilizer tabArm, the first... Read more
IStabilizer Flex Smartphone Tripod Wins Usa T...
iStabilizer, a specialist in universal lightweight compact tripods, steady cams, and other products for smartphones, tablets, and cameras, has announced today that its iStabilizer Flex smartphone... Read more
13-inch 2.8GHz Retina MacBook Pro on sale for...
B&H Photo has the new 2014 13″ 2.8GHz Retina MacBook Pro on sale for $1699.99 including free shipping plus NY sales tax only. They’ll also include free copies of Parallels Desktop and LoJack for... Read more
15-inch Retina MacBook Pros on sale for up to...
B&H Photo has the new 2014 15″ Retina MacBook Pros on sale for up to $150 off MSRP. Shipping is free, and B&H charges NY sales tax only. They’ll also include free copies of Parallels Desktop... Read more
Get Down to Business On Your iPad With Free N...
Utah based Poem LLC has introduced Nexticy 1.0, a full-featured, affordable (Free) forms application for iPad. Nexticy makes it ‘way easy’ to create, store, retrieve and analyze paper-like forms of... Read more

Jobs Board

*Apple* Retail - Multiple Positions (US) - A...
Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, you're also the Read more
*Apple* Retail - Multiple Positions (US) - A...
Job Description: Sales Specialist - Retail Customer Service and Sales Transform Apple Store visitors into loyal Apple customers. When customers enter the store, Read more
Senior Event Manager, *Apple* Retail Market...
…This senior level position is responsible for leading and imagining the Apple Retail Team's global event strategy. Delivering an overarching brand story; in-store, Read more
*Apple* Solutions Consultant (ASC) - Apple (...
**Job Summary** The ASC is an Apple employee who serves as an Apple brand ambassador and influencer in a Reseller's store. The ASC's role is to grow Apple Read more
Project Manager / Business Analyst, WW *Appl...
…a senior project manager / business analyst to work within our Worldwide Apple Fulfillment Operations and the Business Process Re-engineering team. This role will work Read more
All contents are Copyright 1984-2011 by Xplain Corporation. All rights reserved. Theme designed by Icreon.