The Most Important Company You’ve Never Heard Of

General Magic: The Most Important Company Nobody's Ever Heard Of00:00

General Magic was a company that went down in flames but became important because of the people that came out of it. The story illustrates the danger of having too few constraints.

Founding and Vision00:32

General Magic was founded by three former Apple employees, two of whom designed the original Mac. The third founder, Mark Porat, had worked inside Apple seeing what the next frontier was after personal computing. In 1976 at Stanford, Porat coined the term information economy on the first page of his PhD dissertation. He saw the future, including the promise of technology and the dangers with automation and misinformation.

In 1989, in his big red leather notebook, Porat drew a thin glass rectangle with no protruding buttons and a touchscreen with rectangular apps that would function as a phone, computer, fax machine, ATM, video games, and messaging system. The web did not exist yet, and only 15% of American households had computers.

Funding and Unlimited Resources01:31

The vision was so compelling that money and talent poured in. General Magic formed a 17-member alliance of international telecom companies. Their meetings had to start with an antitrust lawyer listing all the things they were not allowed to discuss. They had unlimited money and unlimited talent, so they frequently did anything.

Lack of Focus and Customer Definition02:00

Any good idea was pursued for the personal communicator. The customer was defined as "Joe Sixpack," which was effectively no definition at all because nobody had met that person. They created precursors to USB and emojis, but the company kept growing without focus until it collapsed under its own weight.

Three quarters of former employees interviewed said something to the effect of "I just couldn't figure out what not to do." The unlimited resources obviated the need to decide what they should actually be doing.

Steve Perlman's Calendar Function Example02:31

Engineer Steve Perlman wrote a calendar function for the communicator that went from 1904 to 2096. After checking it in, a team leader said someone might write historical apps, so it needed to go back farther. He updated it to go from year one to the future. Another team said he was tying it into an arbitrary religious context, so it should go back to the beginning of astronomical time. He updated it to go from the Big Bang to the future. It took months when it would have been four lines of code if they had stuck with 1904 to 2096.

Going Public and Implosion03:00

General Magic went public in the mid-90s. Marc Porat said he raised so much money because he wanted to create heaven for engineers, where they were free to create and limited only by their imagination. He asked, "What more could anyone ask for?" The answer was less freedom, because they could not figure out what not to do.

The stock price doubled the first day and was worthless two years later. The company totally imploded.

Lessons and Alumni Impact03:31

The young people who came out of General Magic were scarred by the experience and took lessons about the importance of putting limits in place. They co-founded LinkedIn, eBay, and Nest. They created Android, iPod, iPhone, Google Maps, and Safari.

Tony Fadell and the Power of Constraints04:00

Tony Fadell was one of the important characters. It was his first job out of college. The experience was traumatic for him. He went on to lead the design of the iPod and co-founded Nest.

Venture capitalist Bill Gurley connected the interviewer with Fadell, noting the venture saying that "more startups die of indigestion than starvation." Fadell claimed the saying as his own.

Nest and the Literal Box Constraint07:01

At Nest, Fadell forced the team to work inside a literal box. He made them prototype the packaging before the product because that is what the end user would see on a shelf. If they could not fit it in the box, the thing they were trying to tell customers was not a priority and went on the back burner.

Useful constraints force clarification of priorities in a way that would not otherwise happen.