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Tribeca Film ‘General Magic’ Shows How Capitalism Pulls Big Success Out Of Big Failures


One of the great paradoxes of Silicon Valley is that while its denizens are monolithically progressive, its creatives and entrepreneurs illustrate in their own lives the virtues of the free enterprise system that progressives loathe.

While the propensity for risk-taking is in part cultural, the ability to create and bring new goods and services to the public requires favorable social, political and economic conditions. This is why a communist nation like China resorts to stealing intellectual property to compete. It’s why innovation in progressive Europe pales in comparison to what we see in America.

Innovation requires the protection of individual liberty, private property rights and free markets. But Silicon Valley’s progressive political allies are often hostile to these principles.

A compelling new film featured at the 2018 Tribeca Film Festival reflects this tension. While the liberal audience at the world premiere for “General Magic” — a new documentary about the “failed” tech company of that name — might not have realized it, the movie is an exceptional story about capitalism that viewers of all stripes will appreciate.

In 1990, General Magic, the brainchild of a brilliant and charismatic entrepreneur and salesman named Marc Porat, was spun out of Apple to develop a product that in both form and function was stunningly similar to today’s iPhone — a smartphone before there were smartphones. The project was a magnet for the best and brightest of Silicon Valley, including instrumental players in the design, development and marketing of Apple’s Macintosh, such as Andy Hertzfeld, Bill Atkinson and Joanna Hoffman.

Alumni of the company would include Tony Fadell, known as the “Father of the iPod;” Andy Rubin, inventor of the Android; and Pierre Omidyar, founder of eBay, among many other hugely successful Silicon Valley engineers and entrepreneurs. With such an ambitious project and talented team, the company hired a film crew to document much of its founding and development.

The raw footage incorporated into the documentary captures the energy and excitement of these young, bright, determined visionaries who were seeking to build, raise financing for and bring to market a product that all involved felt would change the world. The General Magic team was fully aware that it was building the future, oozing with excitement that fueled all-nighters and mad dashes to (attempt to) meet timelines. They understood the potential for smart phones to revolutionize communications two decades ahead of the release of the first iPhone.

So great was the promise of the company that General Magic was able to bring together a true team of rivals in operational and financial partners across the telecommunications industry, raising $96 million in total from the likes of Motorola, Sony, AT&T, NTT and others. Goldman Sachs underwrote the company’s “concept IPO (initial public offering),” the first of its kind, an imprimatur that in part led investors to pump millions of dollars more worth of equity into General Magic before it had ever generated revenue.

General Magic was flush with genius and cash. But while the team was building its iPhone precursor, adding new functionality and working through glitches, a few things happened its leaders did not anticipate.

First, the internet exploded. General Magic had been developing its portable computer device for an AT&T-specific network rather than the world wide web. Apple launched a competing product, the Newton, which appears to have blindsided General Magic. The pressure of the Newton and the millions of dollars raised in the public market forced General Magic to rush its product to stores with bugs and without having adequately tested it with users outside its bubble.

The public was not ready for the product General Magic was introducing. One gets the sense based on the documentary that the product was neither intuitive nor practical for consumers. The end result was that the device General Magic launched with bombed. The stock cratered. By 2002 General Magic filed for bankruptcy.

While some would deem General Magic a failure, the reality is that the future successes of General Magic’s alumni were built on this traumatic experience, which is one of the overarching narratives of the documentary. If one takes a broader view, the firm’s failure can be seen as one iteration on the road to ultimate success. It provided valuable lessons that could be applied to future projects. It helped season young talent. It built a pool of knowledge, assets and connections that could be re-applied and leveraged in new, innovative and profitable ways.

This does not make failure any less devastating. As we see, the demise of General Magic took a major toll on those who put their hearts and souls into building the company. Founder Marc Porat, the tragic character in the story, says the company’s collapse has haunted him for decades. There is wreckage in creative destruction.

But for these individuals who sought to change the world, it is unimaginable General Magic and its successors would have ever been possible absent our free enterprise system. We often take this for granted.

This documentary beautifully portrays the magic of this system, where in popular culture “business” is generally portrayed as rapacious and evil. Given the popularity of socialism especially among those who are younger, it would appear the connection between creativity, dynamism and self-actualization in one’s work, and the capitalist conditions that enable this flourishing is often missing.

Whether witting or not, the producers of the documentary did a great public service in producing a documentary about a company that cuts against the Old Man Potter, Gordon Gekko genre. Even if the wizards of tech are treated differently from other businessmen because they are in a sexy industry and espouse the “right” political and cultural values and principles, the movie is no less meritorious.

That said, there is another less sunny insight one gleans indirectly from General Magic that bears significantly on much of what we are seeing from Big Tech and Silicon Valley more generally today. Confidence bordering on arrogance is often an essential trait in those with the audacity to believe they can change the world. But when this confidence meets success, it often breeds hubris.

Incredibly successful people may believe that their success in one area foretells success in others. Worse is when they believe that on account of their success, they are superior and thus have a moral duty to impose their views on others, including by government coercion. Like the technocratic progressives in the early 20th century, one can easily see how Silicon Valley’s masters of the universe might see themselves as best able to “manage” society. This Utopic aim may explain in part why entrepreneurs would support progressive politics that seek to organize society accordingly.

In response to albeit leading questions posed to many of the integral players in the company who were on hand for the premiere of General Magic, most focused on climate change and lack of diversity in tech (not of the ideological kind) as major problems. It was very clear that challenges to the prevailing progressive views on these issues would have been dismissed with contempt.

Prominent members of the company have focused their energies in these areas. Marc Porat has reoriented his career towards green initiatives, founding several “cleantech” startups. Megan Smith, one of General Magic’s critical engineers, served as Chief Technology Officer of the U.S. during the Obama administration, and is now focused on the diversity in tech issue.

To the degree to which Silicon Valley holds progressive views and creates voluntary initiatives in furtherance of such views, that is its prerogative. But given its politics, how long until it shifts from private efforts to public ones? If the pesky Deplorables will not go along voluntarily, will the progressives of Silicon Valley deem it legitimate to impose their favored policies through the state, for our own good?

General Magic is an amazing story of a company that embodies and illustrates much about the virtues of capitalism. Were it only that Silicon Valley realized the importance of protecting the system on which capitalism relies, rather than siding with those who would sacrifice it all for power over their fellow man.