INNOVATE

This 1 Failure Spawned the iPod, iPhone, Android, Nest, and eBay

General Magic could have been one of the biggest companies in the world, but it fell victim to the same problems that kill most startups today,

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BY Ben Parr - 28 Apr 2018

PHOTO CREDIT: Getty Images

General Magic might be the most important defunct Silicon Valley startup you've never heard about. That iPhone or Android in your pocket? It comes from ideas and people who started out at this little-known company.

In their documentary film General Magic, directors Sarah Kerruish and Matthew Maude tell the story of an ambitious startup and its idealistic team of star engineers and executives. Spun out of Apple in 1990, General Magic focused on building a handheld communications and personal assistant device for the masses. When you look at the early sketches, it looks an awful lot like a smartphone--nearly 20 years before the introduction of the iPhone.

"The legacy of General Magic is probably in your hand right now," Sarah Kerruish said to me over email. "Tony Fadell, co-inventor of the iPhone, and Andy Rubin, who invented Android, sat 20 feet apart at General Magic are directly responsible for the creation of 99.9 percent of the world's smartphones."

The film, which premiered this week at the TriBeCa Film Festival, dives into the rapid rise and fall of the company. Its successes are overshadowed by its failure to meet deadlines and launch a product consumers wanted. By the time the first devices--including Sony's Magic Link--hit the market, the world wide web had made the need for a $900 handheld device with limited speed and a closed communication network obsolete.

What I found most intriguing about the film, however, was its emphasis on the incredible people it assembled to build its intelligent communication device. Some of the most notable include:

  • Tony Fadell, who helped create the iPod, the iPhone, and founded Nest
  • Andy Rubin, the inventor of Android
  • Pierre Omidyar, founder of eBay
  • Kevin Lynch, Apple's current VP of Technology
  • Megan Smith, former Google exec and CTO of the United States
  • Peter Nieh, who founded Lightspeed Venture Partners

General Magic worked on technology that would eventually serve as building blocks for the iPod and the iPhone. Still, it failed to revolutionize mobile computing.

The five reasons for its demise are many of the same things that kill modern-day startups:

1. Lack of focus.

General Magic's brilliant engineers would come up with amazing ideas and then build them. Rarely would they ever scrap an idea in favor of launching sooner or developing more boring technology to improve its speed or responsiveness. This lead to a brilliantly bloated product that shipped late.

If you want to succeed as an entrepreneur, you must prioritize and focus on only the features you need to launch.

2. Failing to ship.

General Magic constantly missed deadlines and shipped years behind schedule. This gave Apple, one of its original partners, enough time to develop their own personal communication device--the Newton--before General Magic could. Its failure to ship also meant that it couldn't get feedback from the market and improve its product in time to save the company.

3. Believing your own hype.

General Magic received glowing press, especially around the time of its IPO, and the team started to believe it could do no wrong. Of course, this was a mistake that cost them greatly.

"Make sure that everyone has a seat at the table," Kerruish says. "Diverse perspectives increase the likelihood that you won't drink your own Kool-Aid."

4. Not testing market demand.

When the Magic Link hit the market, it landed with a thud. Nobody wanted to buy a slow $900 machine that didn't have enough battery life or responsiveness to be useful. Had General Magic shipped faster or tested market demand, it might have figured out that its product was far too expensive.

Too many startups spend months or years building the perfect product, only to be shocked when the market doesn't respond enthusiastically. The best startups ship fast, learn from the market's response, and quickly iterate on their product.

5. Bad timing.

One of the most important decision an entrepreneur can make is choosing his or her window of opportunity. General Magic had the right idea, but it was a decade too early. The communication network to make its product successful did not yet exist. You can't just have the right trend--you have to decide when the market is ready.

"Timing is everything--well almost," notes Kerruish. "General Magic was too early. Fifteen years too early."

The people who worked at General Magic who went on to create world-changing products and companies--despite multiple setbacks and failures--might be the company's most impactful legacy. "Sometimes the only difference between those that don't succeed and those who do is persistence," Kerruish says. "Tony Fadell had ten years of failure before he co-invented the iPhone and built Nest, which he sold to Google for 3.4 Billion."

The biggest lesson we can take from General Magic is that failure isn't the end--it's just a stepping stone towards building something better, so long as you persist.