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Chapter 1 - Introduction

1.1 Entrepreneurial Capitalism

In 1968, it was thought that only large corporations could amass the investment capital required to undertake the uncertain process of creating new knowledge to then be managed into innovative products, sales, jobs and the ultimate goal of economic growth. No two companies better represented this economic model than American Telephone & Telegraph and International Business Machines. American Telephone & Telegraph (AT&T) was the largest corporation in the world and controlled roughly 90% of telecommunications in the United States. A regulated monopoly since 1913, AT&T legally kept competition at bay while simultaneously turning a deaf ear to the needs of computer users. On the other hand, International Business Machines (IBM) had won its near monopoly position in computers by dint of market competition. Notwithstanding that competitors protested about IBM’s unfair practices such as prohibiting use of non-IBM software or attachment of non-IBM products to IBM computers. Each firm had built enviable research laboratories, touted as the source of unending innovation. No one had any doubt the future of communications and computers belonged to the coming battle between these two economic behemoths. But the battle never came. Instead fearless entrepreneurs rushed their ramparts with new products and services until both AT&T and IBM lost their Olympian holds on markets they once ruled.

The source of the new ideas that would transform both computers and communication came not from private investment but from government funding. That knowledge was then public so that any firm or individual could attempt to appropriate its economic value. This history is filled with entrepreneurs seeing the promise of these radical ideas when large corporations disregarded their value or attempted to prevent their adoption in order to protect their own products or systems. What made the time of this history different was the emerging availability of venture capital to fund entrepreneurs chasing their dreams. Entrepreneurs by the hundreds and then thousands, all of whom would then have to endure the test of intense market competition before claiming the prize awarded to the fittest: Initial Public Offerings (IPOs). This new engine of economic growth – innovation, entrepreneurs, venture capital, market competition, accessible public equity markets – differed radically from the model of economic growth that prevailed on the eve of this history: corporate capitalism. Entrepreneurial capitalism would find unending opportunities in information technologies and, in our focus, computer communication technologies.

Obviously, it is impossible to reconstruct all of what happened in computer communications from 1968 to 1988. Given the perspective of time, those technologies and firms that were the most successful have become clear, and it will be those histories that will be reconstructed. Even so, even one firm’s history could fill this volume. So a further reduction of all that happened is necessary, a task that is aided by the narrative schema about to be described. Even so, the histories of over twenty companies will be told, and six firm histories will be reconstructed in sufficient detail to elaborate the schema.