Attack of the Clones: An Extremely Brief History of the Personal Computer Industry

Before the personal computer, there were mainframes. IBM was the primary producer of mainframe computers. Large companies, not individual consumers, bought mainframes. Apple was the first company to sell easy-to-set-up computers to consumers and its early success caused IBM to enter the desktop computer market.

IBM wanted to sell a desktop computer, but it didn’t want to design all of the computer parts itself, so IBM asked Microsoft to write an operating system for its personal computer and asked Intel to manufacture its computer’s microprocessor. IBM’s personal computer was a huge success and far more people bought personal computers from IBM than Apple. Unfortunately for IBM, the sale of clones caused most of the profits from the personal computer industry to go to other firms.

IBM clones worked almost exactly as an IBM-manufactured computer did. Most importantly, they would run software that had been explicitly written for IBM personal computers. These IBM clones still mostly used Microsoft operating systems and Intel microprocessors. Microsoft and Intel made far more money from personal computers than did IBM or Apple. The vast majority of the personal computers in use today have Microsoft operating systems and Intel microprocessors—not necessarily because of these products’ quality, but rather because of network externalities and coordination games.