Why you should care
If you equip your company with tech wizards, you shouldn’t be surprised when you disappear.
Can you guess which company penned this mission statement in 1990?
We have a dream of improving the lives of many millions of people by means of small, intimate life support systems that people carry with them everywhere. These systems will help people to organize their lives, to communicate with other people, and to access information of all kinds….
Apple is a good guess, but the above was actually the dream of General Magic, an Apple Inc. spin-off that aimed to create a revolutionary hand-held computer. Named after Arthur C. Clarke’s famous maxim that “the best new technology is indistinguishable from magic,” it was Silicon Valley’s hottest startup, at least for a spell. But even magic and partnerships with Apple, Sony, Motorola and other big players failed to conjure a market for its innovative but unsettled technology.
General Magic was the brainchild of Apple’s Marc Porat, once labeled a “wizard with a business plan.” Months before the U.S. Olympic Basketball program started assembling its “dream team” in 1991, Porat began assembling his own all-star squad of coding legends and design and hardware gurus from within Apple’s ranks. Leading the talented crew of tech wizards were co-founders Bill Atkinson and Andy Hertzfeld — two of Macintosh’s key designers — as well as artist Susan Kare (designer of the trash can and other Mac icons).
General Magic’s vision was more an illusion than a reality.
Technology startups are often born in garages, but as the Los Angeles Times observed, “General Magic was born in a mansion.” Apple Chairman John Sculley, also on General Magic’s board, helped Porat build his dream team, and Apple, likely trying to hedge its bets with its own hand-held project, Newton, came aboard early with $10 million in seed money. The secret startup initially flew under the radar, but as it began drawing more big-name investors and partners, including AT&T, Sanyo and Sony, word got out.
Almost 17 years before the iPhone, General Magic’s aim was nothing less than a pocket-size communications device that could send messages, perform computing and make calls. The company called a dramatic press conference in February 1993 to announce two key components of that device: Magic Cap (a user-friendly operating system) and Telescript (a telecommunications language to allow devices to communicate across different networks). Industry observers raved that the company was creating “the digital version of English” to go with its hand-held personal assistant of the future. General Magic raised almost $90 million, and another $82 million at its 1995 initial public offering. Silicon Valley’s brightest angled to work at its Mountain View headquarters, equipped with free-roaming rabbits and conference rooms named after famous illusionists like Houdini.
But it soon became clear that General Magic’s vision was more an illusion than a reality. As the company burned through its cash, its products were plagued by delays and glitches. In some ways, the company had stacked the deck against itself, argues Sydney Finkelstein, a professor of management at Dartmouth’s Tuck School of Business, in Why Smart Executives Fail. Apple’s Newton essentially became General Magic’s competitor and, as both discovered, the world wasn’t quite ready for handhelds in the mid-1990s. Plus, as the World Wide Web expanded, it became clear that future devices would need to be internet ready, which put General Magic in a difficult position with investors and partners like AT&T that already had proprietary data communications networks. In short, the company’s “investors and board members had different goals than General Magic did,” Finkelstein tells OZY, making it hard for it “to go in any direction any one of their investors didn’t want to go.”
By 1996, General Magic had embraced the internet, but not before the PalmPilot had muscled in as the prime mover in the hand-held market. Apple’s Newton MessagePad would flop as well. Despite boasting an impressive list of former wizards, like Tony Fadell (Nest founder and a father of the iPod) and Pierre Omidyar (founder of eBay), as well as trying new tricks like voice recognition, General Magic finally disappeared in 2002.
So was General Magic just too far ahead of its time? “Had we started the company in 1994 instead of 1991,” Porat would later lament, “we would have ridden the crest of the internet. Timing in this business is everything.” (Porat did not respond to a request for comment.) That’s partly true, but what really boxed in the company — like so many startups — were its early decisions, especially its choice of partners and investors. “The lesson” of General Magic’s disappearing act, says Finkelstein, “is that who you take money from is one of the most momentous decisions you’ll ever make.”