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Would you like to make history? Most of you will say yes.
But, there's a catch: when you do,
no one will remember you. Those who do will look back at you as a failure.
So, I ask again: would you like to make history? Well, that's what General Magic did.
Its story is one of the most important in Silicon Valley. But, chances are,
you've never heard of it.
So, let's look at how visionaries wanted to change the world and did. Just not the
way they intended. Let's talk about General Magic in this episode of Company Forensics.
Can you name the leader of making unheard of history? That’ll be Marc Porat.
He had previously worked at the reputable Aspen Institute. After his time there,
he co-founded the Private Satellite Network, a videoconferencing system,
which he eventually sold to Apple. So, he ended up working for them.
For years, he had had one idea that he believed could change the world. In today’s terms,
his concept is ordinary, but back in the late ‘80s, it was nothing short of sci-fi.
Porat had envisioned a sleek, elegant buttonless device. It could make calls,
send emails, and had a varied app catalog from games to stock trading. Moreover,
it was portable so that people would carry it all the time.
So he named it "Pocket Crystal," and, in his own words, "We really had it."
In short: he had envisioned today's smartphone.
But we have to remember that back then, computers were gray and clunky,
chips were massive, and RAM was scarce. So the idea of portable devices was ludicrous.
John Sculley, Apple’s CEO,
admits that Porat won him over in no time, and it wasn’t only him. He also convinced
Andy Hertzfeld and Bill Atkinson to join him - two essential figures for Apple’s early growth.
So he, along with Herzfeld and Atkinson,
created a spinoff company with the backing of Apple: General Magic.
Anyone and everyone who spoke with Porat felt the force of his vision
and determination. He even convinced apple.
This startup had all-stars of the tech world, Apple's funding, and a tightly-guarded secret.
Plus, you couldn't get an interview, and peeking inside the offices was close to impossible.
Think of the intrigue! Of course, in no time, rumors started spreading around Silicon Valley.
People were desperate to work at General Magic. But access was so
tricky that some even tried to break in, just for an interview or a glimpse. Those
that did get in ran into top-level secrecy, with strict norms and security procedures.
But, once you got past the legal hush, it was the epitome of a startup. The team held
meetings on the floor. Rabbits roamed free to inspire creativity, and there was no dress code.
There were no managers, and any idea was worth analyzing. And, in the heart of it all, was one
vision: changing the world through one device. General Magic believed this device would change
your life. Atkinson even said that you were “going to run your life through it.”. Now, of course,
they just had to make it work first: a functional touchscreen, apps, emails, connectivity, a stylus.
Plus, it couldn't be too expensive and, by the way, it had to be small enough to carry.
Challenging, right? Well, the team wasn't afraid.
People like Tony Fadell and Megan Smith tackled the challenges with a smile on
their faces. Footage shows them with energy, determination, and no fear.
They were, after all, cradling the embryonic stages of smartphones.
A software architect for the company, Darin Adler,
told interviewers that the company aimed to create everything needed to fulfill its vision.
But, there was a problem. If you want to change the world, you need to harness the potential in
the right direction. And, it seemed like no one at General Magic was good at that.
So, people loved the creative stage. And only that stage. Remember that for the future.
The tales, the ideas, and the vision lured big names like Sony,
ATT, Philips, Motorola, and twelve others into investing
and creating the General Magic Alliance. Big corporations and also possible competitors?
So the money came with strict conditions. Tighter secrecy ensued, and there was a looming tension,
but the company could create prototypes and continue dreaming with the newfound cash.
But one mistake and any of the sixteen companies could pull out.
Ironically, the first big blow wouldn't come from the outside.
A small startup with an all-star team, relentless attitude, funds
from Apple and other giants, and a great idea: it's a Silicon Valley fairy tale.
What's missing? That's right—a product.
This situation left John Sculley, Apple's CEO, at a crossroads. And a tough one, at that.
Apple was also creating its portable device: the Newton.
Contrary to General Magic, Apple had a high chance of rolling out a product.
So, Sculley had to choose, and he did.
Just months after General Magic was born, Apple released
the Newton. It was a portable device that did what General Magic had promised.
And, that's not all. According to Forbes, when Sculley invested his time
and Apple's resources on General Magic, the Newton was already in the works.
Still, several within General Magic claim that the Newton was basically a product of Porat's
ideas. But, Sculley has insisted that he believed that both devices could exist.
And, if you think people at General Magic felt betrayed,
think about the investors. Each of the companies in the Alliance
had dished out $6 million. And now, the parent company had released a competing product.
Yes, the Newton failed. But, we know that now.
Back then, nobody knew what would happen. So, things got serious.
The Newton was a blessing and a curse. General Magic wanted to be the first and failed. But,
now, finally, somebody lit a fire under the company's ass.
The team doubled down on working. The engineers worked hard to punch out a
working prototype. Porat enamored the press, which released tons of articles and coverage.
But, all this light shining on the company created more pressure for General Magic.
Now, the devices had to work. The world wanted them. Worse, the world expected them.
But the added pressure opened the cracks inside the company. The General Magic Alliance was,
at the time, the biggest technological Alliance ever created in the US. But,
inside, there were many competitors.
So, General Magic needed some sort of independence. One way to do so
was to sell stock through a concept IPO.
This is when a startup doesn't have a working product, so they rely on concept alone. General
Magic had all the hype it needed, so Goldman Sachs decided to help them.
The product was nowhere close to completion. There were issues with the screen, the processors,
the software, and the stylus. Still, the heads of General Magic went ahead with the IPO,
the first of its kind in Silicon Valley. But, as everyone celebrated
that they raised $96 million, not everyone was sure the product would be ready on time.
The IPO was a hit. The stock rose more than 90%,
and the entire world wanted to be a part of General Magic. And, still,
most of the staff at General Magic was stuck in dreaming about perfect products for the future.
They were high on creativity, too high to notice. But, why?
To understand, let's look at the product. First, two brands would sell the devices,
Sony and Motorola. Each used a system called PersonalLink, from AT&T.
It would have advanced graphics, multimedia, and unforeseen usability. But, no internet.
That's because General Magic didn't believe in the internet back then. In fact, they
criticized it and called it static. Nothing happened there.
Their vision was narrow in other aspects, too. One engineer proposed having an online garage sale,
and they laughed it off. It would become eBay.
As you can see, many companies relied on General Magic to work. So when, in 1994,
there was no working model, they pressured.
It was time to ditch the fun, creative part and take on the grind of creating a working device.
The entire team doubled down. Many slept in the office,
working endless hours to come up with something that worked. Eventually,
after many delays, they pulled it off. Finally, they had a product that "worked."
It was now time to decide: to ship or not to ship. That's the question.
Management knew the Alliance was pressuring. The engineers knew the product wasn't ready.
But, in the end, Porat gave the go-ahead.
The company partnered with Fry's Electronics, one of the biggest electronics stores in the
US. With a big event planned, the media and celebrities flocked to the store.
And no one came.
On the day of the launch, General Magic sold only 3,000 devices. However, a member
of the legal staff told interviewers that he had recognized all those buyers. He knew all of them!
So, why did no one buy them? Well, the average consumer considered the devices unnecessary.
Those who did buy it said the AT&T network didn't work well.
There were responsiveness issues, and the batteries died quickly.
General Magic was a failure. The stock plunged and, in 1995, the pressure was on. The offices
were no longer this happy-go-lucky place with rabbits roaming free.
Well, we don't know what happened to the rabbits.
Sony threatened to leave, and so did Motorola. There was no point in working with a useless stock
and a bad product. Still, Porat exuded confidence.
He insisted that General Magic would get here, but in 1996,
the final blow would come - AT&T would drop PersonalLink, the backbone to General Magic.
After AT&T's departure, Porat left in September of the same year. Out of the 100 or so staff, 80 lost
their jobs. Those who remained were mere crumbles of the greatest company you've never heard of.
By 1997, the company filed for bankruptcy. After promising to create the future,
General Magic teetered in frailty. It launched a voice-recognition software
called Portico, but it only helped lengthen its death up until 2002.
So, why did General Magic fail?
That's what the media loves to discuss. And, yes, that includes us. But, unfortunately,
General Magic made several mistakes, one of which was rejecting the power of the internet.
Also, it was too perfect. The romantic attitude: no managers, no schedule,
just dreaming. There was no one reeling them in.
Then, of course, there's Apple. It was willing to sacrifice this small
startup for its own benefit. The bad thing is, they did.
One can't help but wonder. What if things were different?
What if Apple hadn't stabbed on the back? General Magic was visionary. Yes, but the product failed.
As for the company itself, we can't shy away from the truth: it dug its own grave.
Porat, Heltzerd, Atkinson all recognize that they didn't
lead the team well. But, instead of a typical problem of no vision for the future,
General Magic was the opposite: they didn't see the present.
But did General Magic fail in the end?
Look at the people who worked there:
Just to name a few. So, in the end, it's not all about products. It's also about
the people that carried that vision onto other projects. Not only their vision,
but probably their understanding of metrics, which we do with ChartMogul.
We’ve been using their tool for over 5 years to track the performance of our SaaS business.
And If you haven’t already, I highly recommend you watch this video that we produced in partnership
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into what is churn, and why it can be deadly for SaaS businesses, as we know all too well.
Thankfully, a tool like ChartMogul can save your business by providing you
with incredibly valuable insights about customer churn so that you can quickly
reduce it by addressing the root of the issue.
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