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Unlimited Money

Money came from every direction. Apple invested from the start, each alliance member put in millions just to join, and retail investors poured in more. The company never had to worry about payroll, which almost no startup can say.

The limits were there all along. Every person and every organization has them, and General Magic acted as though it had none. When the Pocket Crystal could not be built with the technology of the early 1990s, the team tried to build it anyway, since it had the talent and the time.

No Target Customer

A company with less cash would have had to ask what it could make with today's technology that someone would want to buy. General Magic never got as far as defining someone. Its target market was Joe Sixpack, the ordinary person on the street, which meant everyone.

Eventually everyone would carry a portable communications device, but not one with a 200-page manual, the size of a hardback book, that costs thousands of dollars.

Why can limits make teams more creative?

Psychologist Patricia Stokes argued in her 2005 book Creativity from Constraints that limits narrow the search and push people off familiar routes. Open-ended tasks tend to produce the first solution that comes to mind. Poets have long worked inside fixed forms such as the fourteen lines of a sonnet. Dr. Seuss wrote Green Eggs and Ham with exactly 50 different words after a bet with his publisher, Bennett Cerf.

Why do startups begin with a narrow audience?

A small audience lets a team learn what a few customers want and fix problems quickly, while a broad one produces conflicting feedback. Facebook launched in 2004 only at Harvard before spreading to other colleges. Amazon began in 1995 selling only books.

More from Cautionary Tales with Tim Harford

Business & StartupsAlumni built iPod, iPhone, AndroidTwo questions turned General Magic's collapse into the iPod: what is newly possible, and what deadline keeps the team on track?
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