Ben Gilbert: uncertainty

Transcript context

…Totally. They sell 13,500 IBM PCs within the first couple of months after they announce it. Over the next two years, they sell half a million of them, makes them unquestionably the largest personal microcomputer manufacturer/market leader. Everybody at IBM is celebrating. The clones haven't arrived yet, and maybe they won't. It'll play out like they think. Not exactly. Before we talk about the clones, this is really just a footnote because of course all the incentives are aligned for IBM to push DOS as the operating system for the PC. They've done this whole deal with Microsoft. They have a royalty-free deal with them. When they launch the PC, customers actually have a choice of which operating system they want on their IBM PC. They don't have to go with DOS. Consumers can choose between DOS, 16-bit CP/M. By this point in time, Gary and Digital Research have gotten their act together. They've written a 16-bit version of the CPM operating system. Or another 16-bit operating system called Pascal that came out of the University of California at San Diego. The price sheet for the operating system option is Pascal is an extra $450 with your IBM PC. CP/M is an extra $175 with your IBM PC, and DOS, which was developed specifically for the PC is the best way to run it is only $60. IBM is making $60 of full 100% margin on top of their hardware for the PC by selling DOS because they don't have to pay Microsoft any of that, and they've set up the incentives that obviously everybody's going to choose DOS. It's fascinating. And you know what? To give them a little bit more credit too, they did try to enforce that there's some amount of lock-in to the IBM PC. They did that in two ways. One is we're simplifying calling it DOS. It was PC-DOS, which is different than MS-DOS, which would get licensed to other computer makers. I don't know exactly what happened, but it basically seems like it just wasn't different enough to be meaningful to application developers. That's one piece of it. The second is IBM did actually have proprietary BIOS. That was another part where they thought that that might provide them some protection, where they could stay a linchpin in the ecosystem. It wasn't just all off-the-shelf. They actually did have something that was theirs that was proprietary. It just turned out that the effort required to reverse engineer the IBM BIOS was trivial, basically.…

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