Korva is a scroll of the internet’s best ideas.
An antitrust lawyer at every meeting
The Alliance
Apple's John Sculley introduced the three founders to Sony, and within days Sony was on board with a stake and a licensing deal. Motorola came next, then AT&T, Philips, Sony's bitter rival Panasonic, Toshiba, France Telecom, and more. Each partner in The Alliance put in millions, and the lawyer sat in to keep the discussions inside competition law. It was the biggest consortium of global companies that had ever existed in American business.
Selling Shares
General Magic still wanted more, so it offered shares to regular investors. Mom-and-pop investors are not unusual, but General Magic had no profits, no revenues, and no product. Tens of millions of dollars of shares sold on the strength of an idea.
Investment bankers from firms like Goldman Sachs elbowed each other aside to pitch. One offered the shirt off his back if it would win the deal, then stripped down in the conference room, and he got it. After General Magic's shares launched on the stock market, the price promptly doubled.
Why do rival firms worry about antitrust?
In the United States, the Sherman Act of 1890 makes agreements that restrain trade illegal. Competitors who coordinate on prices or divide up markets can be prosecuted, even when the plan never leaves the meeting room. Lawyers attend joint meetings so the talks stay on technology and standards. The penalties under the act include fines and prison time for individuals.
How can a company without revenue sell shares?
Investors price shares on expected future earnings, so a company with a promising idea can raise money before it earns anything. Pre-revenue and early-revenue offerings were common in the mid-1990s. Netscape went public in August 1995 at $28 a share and closed its first day at $58.25.
How did Sony and Philips cooperate on CDs?
Sony and Philips competed in consumer electronics, yet they jointly published the compact disc standard in 1980. The first CD players went on sale in 1982. A shared standard meant that every disc played on every player, which helped the format spread. The specification became known as the Red Book.
More from Cautionary Tales with Tim Harford
