WEBVTT 00:00:00.000 --> 00:00:03.180 Welcome back to the Deep Dive. Today we are doing 00:00:03.180 --> 00:00:05.799 something a little different. We aren't just 00:00:05.799 --> 00:00:08.300 looking at a company, we are looking at a specific 00:00:08.300 --> 00:00:10.939 feeling. Oh, okay. You know that feeling when 00:00:10.939 --> 00:00:14.140 you hold a piece of technology and it just, it 00:00:14.140 --> 00:00:17.379 disappears. It stops being a gadget and it becomes 00:00:17.379 --> 00:00:19.780 an extension of your brain. The flow state, yeah. 00:00:20.160 --> 00:00:22.800 It's incredibly rare. It is so rare. And I want 00:00:22.800 --> 00:00:24.679 to take you back to a time before we were all 00:00:24.679 --> 00:00:26.760 doom scrolling on these glass rectangles for 00:00:26.760 --> 00:00:28.940 six, seven hours a day. I want to go back to 00:00:28.940 --> 00:00:32.820 the 90s, the era of the stylus, the era of the 00:00:32.820 --> 00:00:35.659 little electronic beep. The era of graffiti. 00:00:36.100 --> 00:00:38.159 And just to be clear for everyone, I don't mean 00:00:38.159 --> 00:00:40.359 spray painting subway cars. No, not at all. We 00:00:40.359 --> 00:00:42.539 are talking about palm. And look, if you're under 00:00:42.539 --> 00:00:44.560 a certain age, you might see that little orange 00:00:44.560 --> 00:00:47.619 logo on your LG smart TV and just think. What 00:00:47.619 --> 00:00:50.020 is that? Right. Or you saw that weird tiny phone 00:00:50.020 --> 00:00:52.280 from a few years back. Exactly. That little credit 00:00:52.280 --> 00:00:54.539 card sized thing. But if you were around in the 00:00:54.539 --> 00:00:57.659 mid 90s, the Palm Pilot wasn't just another gadget. 00:00:57.759 --> 00:01:00.530 It was the icon. It was everything. It was the 00:01:00.530 --> 00:01:02.950 iPhone before the iPhone even existed. It was 00:01:02.950 --> 00:01:05.049 the device that proved to the world that we actually 00:01:05.049 --> 00:01:07.530 wanted computers in our pockets. You know, it's 00:01:07.530 --> 00:01:10.310 almost impossible to overstate the cultural gravity 00:01:10.310 --> 00:01:12.790 of Palm back then. They didn't just make a successful 00:01:12.790 --> 00:01:15.290 product. They literally defined the category 00:01:15.290 --> 00:01:17.829 of mobile computing for an entire decade. For 00:01:17.829 --> 00:01:21.230 sure. But the story we have in front of us today, 00:01:21.349 --> 00:01:24.480 and this is all drawn from The really comprehensive 00:01:24.480 --> 00:01:28.340 history of Palm Inc. spanning from its founding 00:01:28.340 --> 00:01:32.359 in 92 all the way to its weird zombie -like existence 00:01:32.359 --> 00:01:36.099 today. It's about so much more than just nostalgia. 00:01:36.359 --> 00:01:38.599 Oh, it's a suck. It's a business thriller. It's 00:01:38.599 --> 00:01:40.659 a tragedy. In some parts, it's a comedy of errors. 00:01:41.129 --> 00:01:42.730 I was reading through the source material for 00:01:42.730 --> 00:01:44.530 this, and honestly, it reads like a script for 00:01:44.530 --> 00:01:48.109 a prestige TV drama. You have this scrappy origin 00:01:48.109 --> 00:01:50.890 story in Silicon Valley. Classic. You have a 00:01:50.890 --> 00:01:54.010 meteoric rise during the dot -com bubble. I mean, 00:01:54.010 --> 00:01:56.349 we are talking about an IPO where the stock hit 00:01:56.349 --> 00:02:00.030 nearly $100 a share on day one. Which is just 00:02:00.030 --> 00:02:02.909 insane to even think about. And then, as is tradition 00:02:02.909 --> 00:02:07.150 in tech, the inevitable crushing crash. A brutal 00:02:07.150 --> 00:02:09.409 crash. Yeah. But it's not just the stock price, 00:02:09.490 --> 00:02:11.550 is it? No, that's what makes it so fascinating. 00:02:11.969 --> 00:02:14.150 It's the infighting. You have these confusing 00:02:14.150 --> 00:02:17.859 corporate splits where the company basically 00:02:17.859 --> 00:02:20.840 divorces itself right you get mergers that feel 00:02:20.840 --> 00:02:24.180 like these really awkward family reunions and 00:02:24.180 --> 00:02:27.139 then you have this truly tragic ending with hp 00:02:27.139 --> 00:02:30.620 and a fire sale where they were selling their 00:02:30.620 --> 00:02:33.759 flagship tablet for 99 bucks just to get them 00:02:33.759 --> 00:02:37.180 out the door that 99 touchpad sale is uh it's 00:02:37.180 --> 00:02:39.379 a moment that's just etched into the memory of 00:02:39.379 --> 00:02:42.060 every tech enthusiast from that era but you're 00:02:42.060 --> 00:02:43.919 right to really get it you have to look at the 00:02:43.919 --> 00:02:46.120 entire arc the whole story we have to look at 00:02:46.120 --> 00:02:48.050 the product lines, the Trio, which basically 00:02:48.050 --> 00:02:51.210 invented the modern smartphone, the Pre, which 00:02:51.210 --> 00:02:53.349 was supposed to save the company, even the Zyre. 00:02:53.469 --> 00:02:55.789 Don't forget the Zyre. And we have to dig into 00:02:55.789 --> 00:02:57.909 the corporate maneuvering, the stuff with 3Com 00:02:57.909 --> 00:03:00.430 and Handspring. And through it all, we have to 00:03:00.430 --> 00:03:02.710 answer this fundamental question. How does a 00:03:02.710 --> 00:03:04.849 company that has the absolute best technology, 00:03:05.069 --> 00:03:07.469 and spoiler alert, near the end, they really 00:03:07.469 --> 00:03:10.389 did have the best mobile OS, how do they fail 00:03:10.389 --> 00:03:13.530 to survive? That is the $1 .2 billion question, 00:03:13.729 --> 00:03:15.979 isn't it? So let's set the stage. It's 1992. 00:03:16.539 --> 00:03:19.180 The Internet is barely a thing for normal people. 00:03:19.340 --> 00:03:21.280 Not at all. It's for academics and the military 00:03:21.280 --> 00:03:23.460 mostly. Right. And if you have appointments, 00:03:23.560 --> 00:03:25.780 you're writing them in a paper planner, a day 00:03:25.780 --> 00:03:30.020 timer, a filifax. Thick, leather bound, heavy. 00:03:30.259 --> 00:03:32.699 Yeah. If you lost that thing, your professional 00:03:32.699 --> 00:03:36.080 life was basically over. Exactly. And into this 00:03:36.080 --> 00:03:39.180 very analog world steps a trio that we should 00:03:39.180 --> 00:03:42.000 probably call the trinity of handheld computing. 00:03:42.219 --> 00:03:44.680 You have Jeff Hawkins, the founder, the real 00:03:44.680 --> 00:03:47.370 visionary. The brain. the brain, Donna Dubinsky, 00:03:47.530 --> 00:03:49.949 who is the business muscle, and Ed Colligan, 00:03:50.150 --> 00:03:53.349 the marketing genius. These three, Hawkins, Dubinsky, 00:03:53.469 --> 00:03:55.889 Colligan, they are the main characters of this 00:03:55.889 --> 00:03:58.629 entire saga. They really are. And Jeff Hawkins 00:03:58.629 --> 00:04:00.530 is such a fascinating character. He's not your 00:04:00.530 --> 00:04:04.050 typical swaggering tech CEO. He's an inventor, 00:04:04.189 --> 00:04:05.990 almost an academic, and he was obsessed with 00:04:05.990 --> 00:04:08.270 neuroscience, with how the human brain works. 00:04:08.330 --> 00:04:10.349 I read that he actually carried a block of wood 00:04:10.349 --> 00:04:12.810 in his shirt pocket for months. He did, just 00:04:12.810 --> 00:04:14.750 to get the size and feel of his ideal device. 00:04:15.240 --> 00:04:17.339 right before they'd even built it. So he found 00:04:17.339 --> 00:04:20.680 Palm Computing in 1992, but, and this is a key 00:04:20.680 --> 00:04:23.259 detail I found in the notes, they don't start 00:04:23.259 --> 00:04:25.319 by making the Palm Pilot. That wasn't the first 00:04:25.319 --> 00:04:28.019 thing. No, not even close. Their first attempt 00:04:28.019 --> 00:04:31.220 was something called the Zoomer. Even the name 00:04:31.220 --> 00:04:33.500 sounds like it's trying way too hard to be cool 00:04:33.500 --> 00:04:36.560 in the 90s, the Zoomer. It really does. It sounds 00:04:36.560 --> 00:04:38.600 like a bad Saturday morning cartoon character, 00:04:38.800 --> 00:04:41.579 but the Zoomer is so important because it was 00:04:41.579 --> 00:04:44.079 a complete and utter disaster. Okay, so break 00:04:44.079 --> 00:04:46.120 it down. What was it? It was a consumer PDA, 00:04:46.339 --> 00:04:49.439 a personal digital assistant. But Palm didn't 00:04:49.439 --> 00:04:51.779 make the hardware. Casio did. The watch company. 00:04:51.920 --> 00:04:54.180 The watch and calculator company, yeah. Casio 00:04:54.180 --> 00:04:56.920 made the device, and it was distributed by Tandy, 00:04:57.079 --> 00:05:00.220 which owned RadioShack. Oh, RadioShack, okay. 00:05:00.379 --> 00:05:02.100 And the operating system, the core software, 00:05:02.379 --> 00:05:05.040 was provided by a company called GeoWorks, Palm's 00:05:05.040 --> 00:05:07.759 role. They were just hired to run the PM software. 00:05:08.019 --> 00:05:09.839 PMM, that's the personal information management. 00:05:09.839 --> 00:05:12.120 So the calendar, the address book, the to -do 00:05:12.120 --> 00:05:15.490 list. That's it. So just think about that structure 00:05:15.490 --> 00:05:17.870 for a second. You have Casio making the hardware 00:05:17.870 --> 00:05:20.589 in Japan. You have Pandy trying to sell it in 00:05:20.589 --> 00:05:23.370 American malls. You have GeoWorks doing the underlying 00:05:23.370 --> 00:05:26.689 OS. And then you have this tiny company, Palm, 00:05:26.990 --> 00:05:29.490 doing the main apps on top of all of that. That 00:05:29.490 --> 00:05:31.930 sounds like a classic too many cooks in the kitchen 00:05:31.930 --> 00:05:34.689 scenario. I mean, who is actually in charge of 00:05:34.689 --> 00:05:37.569 the user experience there? Nobody. And everybody. 00:05:37.949 --> 00:05:40.639 And that was precisely the problem. The device 00:05:40.639 --> 00:05:43.399 was slow, it was clunky, and the handwriting 00:05:43.399 --> 00:05:45.279 recognition, which was supposed to be the killer 00:05:45.279 --> 00:05:47.959 feature, it was terrible. Why was it so bad? 00:05:48.120 --> 00:05:51.199 It tried to recognize your natural cursive handwriting, 00:05:51.480 --> 00:05:54.639 but... The processors back then, they just couldn't 00:05:54.639 --> 00:05:56.800 handle the variance. So you'd write lunch with 00:05:56.800 --> 00:05:59.439 Bob and the Zoomer would interpret it as launch 00:05:59.439 --> 00:06:01.839 with blob or something equally useless. It was 00:06:01.839 --> 00:06:03.899 unusable. So the Zoomer hits the shelves and 00:06:03.899 --> 00:06:06.759 it just flops hard. It didn't just flop. It was 00:06:06.759 --> 00:06:09.079 a commercial catastrophe. And this is the moment 00:06:09.079 --> 00:06:11.560 where most startups just die. Right. You launch 00:06:11.560 --> 00:06:13.399 your one product. Nobody buys it. You run out 00:06:13.399 --> 00:06:15.740 of cash. You close the doors. But Palm didn't 00:06:15.740 --> 00:06:18.519 go under. Because they pivoted. And this is where 00:06:18.519 --> 00:06:20.519 the story gets really interesting to me. Hawkins 00:06:20.519 --> 00:06:23.199 looks at the wreckage of the Zoomer and realizes 00:06:23.199 --> 00:06:27.079 they have to completely change tactics. But they 00:06:27.079 --> 00:06:28.759 didn't have money to build a new device yet. 00:06:28.879 --> 00:06:30.980 Not at all. So they looked at what assets they 00:06:30.980 --> 00:06:34.000 actually had. They realized that while the Zoomer 00:06:34.000 --> 00:06:36.939 itself was a failure, the synchronization software 00:06:36.939 --> 00:06:39.379 they wrote, the code that let the device talk 00:06:39.379 --> 00:06:42.060 to a VC, that part was actually really solid. 00:06:42.300 --> 00:06:45.060 Ah, the sync. The sync. So they started selling 00:06:45.060 --> 00:06:47.100 that as a standalone product called Palm Connect. 00:06:47.480 --> 00:06:50.300 to other companies like hp for their devices 00:06:50.300 --> 00:06:52.939 it kept the lights on but the real breakthrough 00:06:52.939 --> 00:06:55.899 the big idea came from analyzing why the zoomer 00:06:55.899 --> 00:06:58.459 failed it wasn't just that the hardware was slow 00:06:58.459 --> 00:07:01.540 it was the input method correct hawkins had this 00:07:01.540 --> 00:07:04.060 incredible epiphany he realized that trying to 00:07:04.060 --> 00:07:06.560 teach a computer to read messy complicated human 00:07:06.560 --> 00:07:09.540 handwriting was a fool's errand The technology 00:07:09.540 --> 00:07:11.959 just wasn't there yet. So he completely flipped 00:07:11.959 --> 00:07:14.279 the problem on its head. Okay. He thought, why 00:07:14.279 --> 00:07:16.819 don't we teach humans how to write in a simple 00:07:16.819 --> 00:07:18.779 way that the computer can easily understand? 00:07:19.120 --> 00:07:21.439 And that is the birth of graffiti. Graffiti. 00:07:21.699 --> 00:07:24.360 It's absolutely iconic. For the listeners who 00:07:24.360 --> 00:07:26.399 are too young to remember this, we really have 00:07:26.399 --> 00:07:28.560 to explain how weird and brilliant this was. 00:07:28.660 --> 00:07:30.199 You didn't just write anywhere on the screen. 00:07:30.339 --> 00:07:32.860 There was a specific little box at the bottom 00:07:32.860 --> 00:07:34.839 of the display. Right. The silk screened area. 00:07:35.240 --> 00:07:37.439 One side for letters, one for numbers. And you 00:07:37.439 --> 00:07:39.740 had to learn a new alphabet. It wasn't hard, 00:07:39.899 --> 00:07:42.139 but it was specific. It was a new way of writing. 00:07:42.279 --> 00:07:45.800 It was a system of unistrokes. Single continuous 00:07:45.800 --> 00:07:48.019 strokes for each letter. Think about a capital 00:07:48.019 --> 00:07:50.579 A. Normally that's three separate strokes. You 00:07:50.579 --> 00:07:53.240 go slant up, slant down, then the crossbar. Right. 00:07:53.300 --> 00:07:55.699 In graffiti, the letter A was just upside down 00:07:55.699 --> 00:07:58.579 V, one continuous stroke. The letter F was like 00:07:58.579 --> 00:08:02.100 a backwards upside down L. By stripping away 00:08:02.100 --> 00:08:04.480 all the complexity. The computer could recognize 00:08:04.480 --> 00:08:08.100 the text instantly and with near 100 % accuracy. 00:08:08.480 --> 00:08:10.379 It sounds like it would be a huge hassle asking 00:08:10.379 --> 00:08:12.759 the user to basically learn a new language just 00:08:12.759 --> 00:08:15.740 to use their calendar. But people did it. I remember 00:08:15.740 --> 00:08:17.680 practicing my graffiti strokes. It felt like 00:08:17.680 --> 00:08:20.139 learning a secret code or something. It did. 00:08:20.439 --> 00:08:22.980 And because it was so reliable, you could get 00:08:22.980 --> 00:08:25.139 really fast. You could take notes in a meeting 00:08:25.139 --> 00:08:27.459 without even looking down at the device. It was 00:08:27.459 --> 00:08:30.300 a true aha moment for human -computer interaction. 00:08:30.759 --> 00:08:32.879 And they actually licensed the software out first, 00:08:33.039 --> 00:08:35.820 didn't they? They did. They sold graffiti to 00:08:35.820 --> 00:08:38.220 Apple for the Apple Newton message pad. Which 00:08:38.220 --> 00:08:40.639 is just deeply ironic considering the Newton 00:08:40.639 --> 00:08:43.440 was the big, expensive, over -engineered competitor 00:08:43.440 --> 00:08:47.179 that Palm eventually crushed. Completely. But 00:08:47.179 --> 00:08:50.500 the software wasn't enough. Hawkins knew that 00:08:50.500 --> 00:08:52.960 if they stayed a software -only company, they 00:08:52.960 --> 00:08:55.200 would always be at the mercy of hardware partners 00:08:55.200 --> 00:08:58.100 who didn't get it. Like Casio with the Zoomer. 00:08:58.179 --> 00:09:01.059 Exactly. That's the critical insight from the 00:09:01.059 --> 00:09:04.240 Zoomer failure. Hawkins, Dubinsky, and Colligan 00:09:04.240 --> 00:09:06.340 realized that if you want the product to be great, 00:09:06.419 --> 00:09:08.460 you have to control the whole widget. You can't 00:09:08.460 --> 00:09:10.600 just write codes for some brick that another 00:09:10.600 --> 00:09:12.720 company designed. You have to build the hardware 00:09:12.720 --> 00:09:15.019 and the software together so they sing in perfect 00:09:15.019 --> 00:09:17.860 harmony. But building hardware is insanely expensive. 00:09:18.200 --> 00:09:20.080 You need factories, supply chains, distribution. 00:09:20.559 --> 00:09:23.720 They were a tiny software startup in Los Altos. 00:09:23.879 --> 00:09:26.789 They needed a sugar daddy. Enter U .S. Robotics. 00:09:26.789 --> 00:09:29.250 Now, when I hear U .S. Robotics, I immediately 00:09:29.250 --> 00:09:33.269 think of that Will Smith movie, I, Robot. But 00:09:33.269 --> 00:09:36.389 in the 90s, they were the absolute kings of modems. 00:09:36.570 --> 00:09:40.009 That 56k dial -up screech, that iconic sound, 00:09:40.090 --> 00:09:42.330 that was U .S. Robotics. They were a massive 00:09:42.330 --> 00:09:44.789 connectivity company, and in 1995, they acquired 00:09:44.789 --> 00:09:48.159 Palm. So that gave Hawkins the money he needed. 00:09:48.299 --> 00:09:50.240 It gave the funding and the manufacturing expertise 00:09:50.240 --> 00:09:53.279 to finally build his dream device. And then because 00:09:53.279 --> 00:09:55.899 the 90s were just a wild time for corporate mergers 00:09:55.899 --> 00:09:58.419 and acquisitions, U .S. Robotics itself gets 00:09:58.419 --> 00:10:02.259 bought by 3Com in 1997. Right. So suddenly this 00:10:02.259 --> 00:10:06.539 little startup. Palm is now a tiny division inside 00:10:06.539 --> 00:10:09.159 a massive enterprise networking giant. Which 00:10:09.159 --> 00:10:11.919 seems like a weird fit. A very weird fit culturally, 00:10:12.120 --> 00:10:14.419 but it provided the financial stability they 00:10:14.419 --> 00:10:16.279 needed to launch the product that changed everything. 00:10:16.500 --> 00:10:19.120 The Palm Pilot. The Pilot 1000 and the Pilot 00:10:19.120 --> 00:10:21.740 5000. Let's talk about these devices. They seem 00:10:21.740 --> 00:10:23.659 so primitive now. They didn't have color screens. 00:10:23.799 --> 00:10:25.340 They didn't play music. They didn't connect to 00:10:25.340 --> 00:10:27.259 the internet. Why did people go absolutely crazy 00:10:27.259 --> 00:10:29.639 for them? Because they respected the user's time. 00:10:30.029 --> 00:10:32.769 That was the core philosophy. Hawkins wanted 00:10:32.769 --> 00:10:36.129 it to be a companion to your PC, not a replacement. 00:10:36.389 --> 00:10:39.549 It was designed to do a few things and do them 00:10:39.549 --> 00:10:42.110 instantly and perfectly. And the hot sync button. 00:10:42.169 --> 00:10:43.850 We have to talk about the button. The cradle. 00:10:44.429 --> 00:10:46.909 The cradle was genius. You'd get home from work. 00:10:47.029 --> 00:10:49.409 You'd put the pilot in this little plastic cradle 00:10:49.409 --> 00:10:51.730 connected to your PC. You'd press one physical 00:10:51.730 --> 00:10:53.590 button. And you'd hear that little bloop bloop 00:10:53.590 --> 00:10:56.909 sound. That sound. And everything matched. Your 00:10:56.909 --> 00:10:58.769 calendar on your desktop was now in your pocket. 00:10:58.889 --> 00:11:01.710 Your contacts were updated. It sounds so trivial 00:11:01.710 --> 00:11:03.769 today where everything is just magically in the 00:11:03.769 --> 00:11:07.870 cloud. But in 1996, that was pure magic. It just 00:11:07.870 --> 00:11:10.129 worked every single time. And the battery life. 00:11:10.210 --> 00:11:12.789 It ran on two AAA batteries. Regular batteries 00:11:12.789 --> 00:11:14.620 you could buy at any drugstore. store. And they 00:11:14.620 --> 00:11:18.240 lasted for weeks, not hours, not days, weeks. 00:11:18.460 --> 00:11:21.240 It was also instant on. You tap the screen and 00:11:21.240 --> 00:11:23.360 boom, your address book was there. There was 00:11:23.360 --> 00:11:25.379 no boot up sequence. It was literally faster 00:11:25.379 --> 00:11:27.639 than finding a page in a paper planner. It was 00:11:27.639 --> 00:11:29.759 a status symbol, too. I remember when the Palm 00:11:29.759 --> 00:11:32.559 V came out a bit later, that anodized aluminum 00:11:32.559 --> 00:11:36.120 chassis. Oh, the Palm V was gorgeous. It was 00:11:36.120 --> 00:11:38.700 so sleek. It was cold to the touch. It didn't 00:11:38.700 --> 00:11:41.039 feel like a toy. It felt like a piece of high 00:11:41.039 --> 00:11:44.460 end jewelry. The Palm V was absolutely the peak 00:11:44.460 --> 00:11:47.220 of that design era. It was beautiful. But here's 00:11:47.220 --> 00:11:49.740 the crazy part. While consumers were falling 00:11:49.740 --> 00:11:52.220 in love with these devices, the Trinity Hawkins, 00:11:52.360 --> 00:11:56.120 Dubinsky, Colligan, they were completely miserable 00:11:56.120 --> 00:11:58.580 inside the company. They were winning. They had 00:11:58.580 --> 00:12:00.620 over 60 % market share. They were absolutely 00:12:00.620 --> 00:12:03.620 crushing Microsoft's Windows CE devices. They 00:12:03.620 --> 00:12:05.759 were winning, but they felt like they were suffocating 00:12:05.759 --> 00:12:09.720 inside 3Com. 3Com was a big, boring infrastructure 00:12:09.720 --> 00:12:12.460 company. They cared about selling Ethernet switches 00:12:12.460 --> 00:12:15.019 and routers to corporations. They just didn't 00:12:15.019 --> 00:12:17.340 understand consumer electronics. They treated 00:12:17.340 --> 00:12:20.080 Palm like this weird, quirky side project. They 00:12:20.080 --> 00:12:22.059 wouldn't give Palm the resources or the independence 00:12:22.059 --> 00:12:24.679 it needed to grow as fast as the market demanded. 00:12:24.879 --> 00:12:27.100 So it all came to a head, a confrontation. A 00:12:27.100 --> 00:12:29.500 big one. Dubinsky and Hawkins basically went 00:12:29.500 --> 00:12:32.059 to the 3Com board and laid it all out. They said, 00:12:32.100 --> 00:12:34.779 spin us off. Let us be our own independent company. 00:12:34.919 --> 00:12:37.480 And 3Com flat out... said no. So they walked. 00:12:37.659 --> 00:12:41.580 In June of 1998, the founders, the people who 00:12:41.580 --> 00:12:43.539 invented the product, the soul of the company, 00:12:43.740 --> 00:12:45.820 they just stood up and walked right out the door. 00:12:45.940 --> 00:12:48.539 That is a boss move. But they didn't just retire 00:12:48.539 --> 00:12:51.120 to a beach in Hawaii. They did something incredibly 00:12:51.120 --> 00:12:54.899 aggressive. Oh, yeah. They immediately started 00:12:54.899 --> 00:12:58.019 a direct competitor, a company called Handspring. 00:12:58.940 --> 00:13:01.059 This is such a crucial chapter that often gets 00:13:01.059 --> 00:13:03.139 glossed over. They basically said, we're going 00:13:03.139 --> 00:13:05.590 to build a better Palm than Palm. I loved the 00:13:05.590 --> 00:13:07.850 handspring devices. They had those translucent 00:13:07.850 --> 00:13:10.710 colored plastic cases, kind of like the iMacs 00:13:10.710 --> 00:13:12.870 of the time. You could get them in blue or orange 00:13:12.870 --> 00:13:15.549 or graphite. Totally. They were fun. But the 00:13:15.549 --> 00:13:18.590 big innovation wasn't the color. It was that 00:13:18.590 --> 00:13:21.620 slot on the back. The springboard expansion slot. 00:13:21.720 --> 00:13:23.519 This is absolutely brilliant. The handspring 00:13:23.519 --> 00:13:25.679 visor had this big slot on the back where you 00:13:25.679 --> 00:13:27.580 could just plug in these hardware modules. And 00:13:27.580 --> 00:13:29.299 you could get anything. You could plug in a GPS 00:13:29.299 --> 00:13:31.740 receiver module. You could plug in a primitive 00:13:31.740 --> 00:13:34.379 digital camera module. You could plug in an MP3 00:13:34.379 --> 00:13:36.860 player module. I swear I remember seeing a module 00:13:36.860 --> 00:13:39.019 that was a massager, like a little vibrating 00:13:39.019 --> 00:13:41.440 massager that was powered by your PDA. There 00:13:41.440 --> 00:13:43.860 were definitely some weird ones. But the most 00:13:43.860 --> 00:13:45.919 important module, the one that pointed to the 00:13:45.919 --> 00:13:50.259 future, was a cellular radio. They made a module 00:13:50.259 --> 00:13:52.399 called the Visor Phone. Right. You plugged it 00:13:52.399 --> 00:13:55.220 into the back of your PDA and boom, the whole 00:13:55.220 --> 00:13:58.159 thing became a phone. That was the seed of the 00:13:58.159 --> 00:14:01.100 modern smartphone era right there. So let's just 00:14:01.100 --> 00:14:02.659 pause for a second and look at the landscape. 00:14:02.799 --> 00:14:05.340 You have the original founders over at Handspring 00:14:05.340 --> 00:14:07.820 innovating like crazy with these modules. And 00:14:07.820 --> 00:14:11.039 you have Palm still stuck inside 3Com, just kind 00:14:11.039 --> 00:14:13.320 of churning out slight iterations of the old 00:14:13.320 --> 00:14:16.100 pilot design. 3Com must have been kicking themselves. 00:14:16.440 --> 00:14:17.779 Well, if they weren't, the market was kicking 00:14:17.779 --> 00:14:20.029 them. Investors looked at 3Com and said, why 00:14:20.029 --> 00:14:21.889 are you holding on to this diamond? This is the 00:14:21.889 --> 00:14:24.250 hottest thing in tech. The dot -com bubble is 00:14:24.250 --> 00:14:26.389 inflating like crazy tech stocks are going bananas. 00:14:26.950 --> 00:14:30.210 Everyone wanted a piece of Palm. So 3Com finally 00:14:30.210 --> 00:14:33.649 caved. They had no choice. On March 1st, 2000, 00:14:33.850 --> 00:14:36.610 they spun Palm off as its own independent publicly 00:14:36.610 --> 00:14:39.210 traded company. March 1st, 2000. I feel like 00:14:39.210 --> 00:14:42.210 I know where this is going. That date is etched 00:14:42.210 --> 00:14:44.330 in financial history. That is literally the peak 00:14:44.330 --> 00:14:47.519 of the dot -com bubble. The absolute. tippy top 00:14:47.519 --> 00:14:51.200 of the peak and the IPO. It was pure madness. 00:14:51.320 --> 00:14:54.000 It was mania. On the first day of trading, Palm 00:14:54.000 --> 00:14:57.580 shares, ticker symbol Palm LM, hit an all -time 00:14:57.580 --> 00:15:03.059 high of $95 .06. $95 a share for a company making 00:15:03.059 --> 00:15:05.279 electronic calendars. To put that into perspective 00:15:05.279 --> 00:15:08.159 for you, at that exact moment, Palm the spinoff 00:15:08.159 --> 00:15:11.340 was worth more than 3Com, its own parent company. 00:15:11.600 --> 00:15:14.460 That makes no sense. Gets crazier. For a brief 00:15:14.460 --> 00:15:16.940 moment, Palm was worth more than General Motors. 00:15:17.159 --> 00:15:19.840 A company making little plastic organizers was 00:15:19.840 --> 00:15:21.940 valued higher than a company making millions 00:15:21.940 --> 00:15:24.720 of cars and trucks. That is the very definition 00:15:24.720 --> 00:15:27.259 of irrational exuberance. I remember reading 00:15:27.259 --> 00:15:29.379 that people were actually buying shares of 3Com 00:15:29.379 --> 00:15:31.700 just to get the Palm shares that were being distributed 00:15:31.700 --> 00:15:33.620 and then immediately dumping the 3Com stock. 00:15:33.840 --> 00:15:36.519 It created this bizarre negative value for the 00:15:36.519 --> 00:15:38.440 parent company. It did. It completely distorted 00:15:38.440 --> 00:15:40.639 the market. But, you know, gravity always wins. 00:15:40.700 --> 00:15:43.039 The bubble burst. The Nasdaq crashed. And because 00:15:43.039 --> 00:15:45.340 Palm was the poster child for this new mobile 00:15:45.340 --> 00:15:47.620 tech bubble, it got hammered the hardest. How 00:15:47.620 --> 00:15:49.679 bad was the fall? It was a complete free fall. 00:15:50.139 --> 00:15:53.259 Within just over a year, they lost 90 % of their 00:15:53.259 --> 00:15:59.419 value. 90%. By June of 2001, that $95 stock was 00:15:59.419 --> 00:16:04.379 trading at $6 .50. Ouch. That is legitimate financial 00:16:04.379 --> 00:16:07.259 whiplash. You go from being one of the most valuable 00:16:07.259 --> 00:16:10.139 companies in the world to basically a penny stock 00:16:10.139 --> 00:16:13.179 in 15 months. They were the worst performing 00:16:13.179 --> 00:16:16.940 PDA manufacturer on the NASDAQ. And right in 00:16:16.940 --> 00:16:19.879 the middle of this crash. The leadership at Palm, 00:16:20.019 --> 00:16:22.340 remember, the founders are gone. They're at handspring. 00:16:22.360 --> 00:16:24.840 They make a strategic decision that, in hindsight, 00:16:24.980 --> 00:16:27.379 I think sealed their fate. The great split. They 00:16:27.379 --> 00:16:29.620 decided to chop the company right in half. Right. 00:16:29.720 --> 00:16:32.860 In 2002, they made the call to separate the hardware 00:16:32.860 --> 00:16:34.940 business from the operating system business. 00:16:35.240 --> 00:16:37.299 They created a new company called Palm Source 00:16:37.299 --> 00:16:39.919 to make and license the OS. And the original 00:16:39.919 --> 00:16:42.019 hardware company was eventually renamed Palm 00:16:42.019 --> 00:16:45.070 Own. Okay, let's really unpack this. Why on earth 00:16:45.070 --> 00:16:47.929 would you do that? The entire lesson of the Zoomer 00:16:47.929 --> 00:16:49.789 was that you need to control both sides of the 00:16:49.789 --> 00:16:52.750 experience. Why would they voluntarily unintegrate 00:16:52.750 --> 00:16:57.009 themselves? It was pure Microsoft envy. You have 00:16:57.009 --> 00:17:00.509 to look at the world in 2002. Who was the biggest... 00:17:00.750 --> 00:17:03.610 richest, most powerful tech company on earth. 00:17:03.769 --> 00:17:05.950 Microsoft. Microsoft. And what was their business 00:17:05.950 --> 00:17:08.410 model? They made the operating system, Windows. 00:17:08.710 --> 00:17:11.569 They licensed it to everyone. Dell, HP, Compaq, 00:17:11.569 --> 00:17:13.809 Gateway. They didn't make the computers. They 00:17:13.809 --> 00:17:16.230 just collected the rent on the software. So Palm's 00:17:16.230 --> 00:17:17.809 executives looked at that and thought, we want 00:17:17.809 --> 00:17:20.359 to be the Microsoft of mobile. They wanted Sony 00:17:20.359 --> 00:17:24.440 and Samsung and Kyocera and even Handspring to 00:17:24.440 --> 00:17:26.720 pay them a licensing fee to use the Palm OS. 00:17:27.039 --> 00:17:29.220 Exactly. They thought the real money, the high 00:17:29.220 --> 00:17:32.119 margins, were in the software licensing. not 00:17:32.119 --> 00:17:34.440 in what they saw as the low -margin hardware 00:17:34.440 --> 00:17:36.960 business. It was a logical thought process for 00:17:36.960 --> 00:17:39.619 the time, but it was a fatal strategic error. 00:17:39.799 --> 00:17:41.960 Because it created a massive conflict of interest, 00:17:42.099 --> 00:17:44.160 right? It's a huge conflict. PalmSource, the 00:17:44.160 --> 00:17:46.420 software team, was legally obligated to treat 00:17:46.420 --> 00:17:48.440 Palm on the hardware team just like any other 00:17:48.440 --> 00:17:50.940 customer. They couldn't share roadmaps. They 00:17:50.940 --> 00:17:52.680 couldn't coordinate closely on new features. 00:17:52.799 --> 00:17:54.900 They were legally separate entities. It slowed 00:17:54.900 --> 00:17:57.990 everything down to an absolute crawl. It's like 00:17:57.990 --> 00:18:00.990 if Ford split into an engine company and a car 00:18:00.990 --> 00:18:03.309 body company and they were forbidden from talking 00:18:03.309 --> 00:18:05.369 to each other, you'd end up with engines that 00:18:05.369 --> 00:18:08.269 don't fit in the cars. That is a perfect analogy. 00:18:08.529 --> 00:18:10.710 That is exactly what started to happen. Innovation 00:18:10.710 --> 00:18:14.710 just stagnated. Meanwhile, while Palm was busy 00:18:14.710 --> 00:18:17.849 fighting with itself, the founders over at Handspring 00:18:17.849 --> 00:18:20.670 were struggling too. Why? They had great products. 00:18:20.950 --> 00:18:23.170 They had great products, but they just didn't 00:18:23.170 --> 00:18:25.789 have the scale to survive the brutal dot -com 00:18:25.789 --> 00:18:27.890 crash. They were running out of money. So in 00:18:27.890 --> 00:18:30.829 a twist fit for a soap opera, the two halves 00:18:30.829 --> 00:18:33.809 decide to get back together. The reunion. In 00:18:33.809 --> 00:18:37.210 October of 2003, Paul Moan, the hardware company, 00:18:37.450 --> 00:18:40.130 acquires Handspring. And in doing so, it brings 00:18:40.130 --> 00:18:42.269 Jeff Hawkins, Donna Dubinsky, and Ed Colligan 00:18:42.269 --> 00:18:44.509 back into the fold. The Trinity returns. They 00:18:44.509 --> 00:18:46.829 return. And they don't come empty -handed. They 00:18:46.829 --> 00:18:49.279 bring a gift. Hansbring had been working on a 00:18:49.279 --> 00:18:51.000 new type of device that would define the next 00:18:51.000 --> 00:18:53.539 five years of mobile computing. The Trio. The 00:18:53.539 --> 00:18:56.519 Trio, specifically the Trio 600. Now we are entering 00:18:56.519 --> 00:18:59.240 the modern era. I had a Trio 650. I loved that 00:18:59.240 --> 00:19:01.819 little brick. The Trio 600 was a complete revelation. 00:19:02.180 --> 00:19:05.079 Before that device... Smartphones were these 00:19:05.079 --> 00:19:08.539 weird, clunky, Frankenstein devices. They were 00:19:08.539 --> 00:19:11.359 either a phone with a terrible tiny screen or 00:19:11.359 --> 00:19:14.559 a PDA with a clunky radio bolted onto the side. 00:19:14.700 --> 00:19:17.440 Right. The Trio was the first device to integrate 00:19:17.440 --> 00:19:20.420 them perfectly. It was a great PDA. It was also 00:19:20.420 --> 00:19:22.420 a great phone. It had that little stubby antenna, 00:19:22.559 --> 00:19:25.220 which seems so retro now. And it had that full 00:19:25.220 --> 00:19:28.119 QWERTY keyboard with the smile layout. The smile 00:19:28.119 --> 00:19:30.589 layout. The keys were curved slightly upward 00:19:30.589 --> 00:19:32.529 at the edges to mimic the natural arc of your 00:19:32.529 --> 00:19:34.829 thumbs. It made typing on that tiny keyboard 00:19:34.829 --> 00:19:38.250 incredibly fast and accurate. And it had a physical 00:19:38.250 --> 00:19:40.789 switch on the top to silence the ringer. Which 00:19:40.789 --> 00:19:43.650 the iPhone totally stole, by the way. 100%. The 00:19:43.650 --> 00:19:47.710 Trio 600 and the 650 that followed were the absolute 00:19:47.710 --> 00:19:50.589 gold standard. For a few years there, from about 00:19:50.589 --> 00:19:52.950 2003 to 2006, if you were a business person, 00:19:53.190 --> 00:19:55.430 a lawyer, a real estate agent, a techie, you 00:19:55.430 --> 00:19:58.009 had a Trio on your hip. It was a BlackBerry killer 00:19:58.009 --> 00:20:00.009 before BlackBerry really took over the corporate 00:20:00.009 --> 00:20:02.309 world. But there was a ticking time bomb buried 00:20:02.309 --> 00:20:05.309 inside that trio, the operating system. Right. 00:20:05.390 --> 00:20:08.829 Remember the split? Palmone bought Handspring, 00:20:08.829 --> 00:20:10.869 but they didn't buy back the software company, 00:20:11.089 --> 00:20:13.190 PalmSource. PalmSource was still out there, an 00:20:13.190 --> 00:20:15.930 independent company, just drifting. Okay. And 00:20:15.930 --> 00:20:20.029 then in 2005, PalmSource got acquired by a Japanese 00:20:20.029 --> 00:20:22.799 company called Access S. So wait a minute. The 00:20:22.799 --> 00:20:25.259 operating system that runs the Trio, the very 00:20:25.259 --> 00:20:28.460 heart and soul of the device, is now owned by 00:20:28.460 --> 00:20:30.859 a completely different company in Japan that 00:20:30.859 --> 00:20:33.880 has no real strategic interest in making sure 00:20:33.880 --> 00:20:36.680 the Trio succeeds. Precisely. And not only that, 00:20:36.700 --> 00:20:38.880 but the OS was getting really old. It was built 00:20:38.880 --> 00:20:42.619 on code from 1996. It didn't support proper multitasking. 00:20:42.660 --> 00:20:44.319 It didn't support modern networking protocols 00:20:44.319 --> 00:20:46.420 well. The whole thing was being held together 00:20:46.420 --> 00:20:48.839 with digital duct tape. And the hardware company, 00:20:48.960 --> 00:20:50.940 which was now just called Palm again, they knew 00:20:50.940 --> 00:20:52.759 this. They were desperate. They needed a modern 00:20:52.759 --> 00:20:54.819 OS to compete. Desperate is the right word. And 00:20:54.819 --> 00:20:56.779 this leads to what I personally consider the 00:20:56.779 --> 00:20:59.180 biggest betrayal in the entire story. The TRIO 00:20:59.180 --> 00:21:03.359 700W. The W stands for Windows. It still hurts, 00:21:03.500 --> 00:21:06.619 just to say it out loud. In January 2006, Palm 00:21:06.619 --> 00:21:09.059 released a TRIO that was running Microsoft Windows 00:21:09.059 --> 00:21:11.279 Mobile. I remember watching the keynote address 00:21:11.279 --> 00:21:13.700 online. They brought Bill Gates out on stage 00:21:13.700 --> 00:21:16.519 with the Palm CEO. It felt like watching Luke 00:21:16.519 --> 00:21:19.039 Skywalker join the Empire. It was just wrong. 00:21:19.220 --> 00:21:21.339 Why did they do it? It was pure desperation. 00:21:22.299 --> 00:21:25.279 Verizon, which was a huge carrier partner, demanded 00:21:25.279 --> 00:21:28.220 it. Corporate IT departments were demanding it 00:21:28.220 --> 00:21:30.200 because they loved Microsoft Exchange Server. 00:21:30.980 --> 00:21:33.099 And Palm didn't have their own next generation 00:21:33.099 --> 00:21:35.700 OS ready yet. So they had to do something to 00:21:35.700 --> 00:21:38.660 stop the bleeding. They did. But it signaled 00:21:38.660 --> 00:21:41.099 to the world, to their most loyal fans, that 00:21:41.099 --> 00:21:43.779 Palm had lost its soul. They were now just another 00:21:43.779 --> 00:21:46.500 hardware company pushing Microsoft's clunky software. 00:21:46.799 --> 00:21:49.319 But secretly, steep in the labs in Sunnyvale, 00:21:49.519 --> 00:21:51.779 they were cooking something up. They knew Windows 00:21:51.779 --> 00:21:54.000 wasn't the answer. They knew the old Palm OS 00:21:54.000 --> 00:21:57.000 was dead. They needed a Hail Mary pass. Enter 00:21:57.000 --> 00:21:59.400 John Rubenstein. The podfather. The podfather 00:21:59.400 --> 00:22:02.299 himself. John Rubenstein was the legendary hardware 00:22:02.299 --> 00:22:05.000 engineering executive at Apple who led the team 00:22:05.000 --> 00:22:07.910 that created the iPod. He left Apple, and in 00:22:07.910 --> 00:22:11.410 2007, he joined Palm as executive chairman. And 00:22:11.410 --> 00:22:13.210 he brought a lot of that Apple DNA with him. 00:22:13.349 --> 00:22:16.329 He came in, looked at the absolute mess at Palm, 00:22:16.509 --> 00:22:18.950 and basically said, we need to burn the ships. 00:22:19.210 --> 00:22:21.789 We are starting over. We are building a brand 00:22:21.789 --> 00:22:24.890 new operating system from scratch. And that incredibly 00:22:24.890 --> 00:22:28.710 ambitious project became WebOS. This is the part 00:22:28.710 --> 00:22:30.470 of the story that just breaks my heart every 00:22:30.470 --> 00:22:33.930 time I think about it. WebOS. It was. It was 00:22:33.930 --> 00:22:36.069 magnificent. It was so far ahead of its time, 00:22:36.109 --> 00:22:38.670 truly. They unveiled it at the Consumer Electronics 00:22:38.670 --> 00:22:42.769 Show, CES, in January 2009, along with the first 00:22:42.769 --> 00:22:45.410 phone to run it, the Palm Pre. And the audience, 00:22:45.630 --> 00:22:48.789 which was full of jaded tech journalists, just 00:22:48.789 --> 00:22:51.789 gasped. I remember the river stoned it on. The 00:22:51.789 --> 00:22:54.970 phone was the smooth, black, curved pebble. It 00:22:54.970 --> 00:22:57.259 felt organic in your hand. But the software, 00:22:57.380 --> 00:22:59.559 let's talk about the cards metaphor. This was 00:22:59.559 --> 00:23:01.980 the genius of Matias Duarte, who was the design 00:23:01.980 --> 00:23:04.059 lead they hired away from Danger, the company 00:23:04.059 --> 00:23:06.339 that made the sidekick. Right. At the time, on 00:23:06.339 --> 00:23:09.220 the iPhone, multitasking didn't exist. If you 00:23:09.220 --> 00:23:10.599 pressed the home button, the app you were in 00:23:10.599 --> 00:23:12.720 just closed. You could only do one thing at a 00:23:12.720 --> 00:23:15.160 time. On WebOS, every app was a card. Like a 00:23:15.160 --> 00:23:17.450 playing card. Exactly. You could have your email 00:23:17.450 --> 00:23:19.869 open as a card, a web page open as another card, 00:23:19.970 --> 00:23:22.130 and your maps open as a third. You could swipe 00:23:22.130 --> 00:23:24.190 through them like a deck of cards. And to close 00:23:24.190 --> 00:23:26.670 an app, you just flick the card up and off the 00:23:26.670 --> 00:23:29.130 screen. Which is exactly how the iPhone and Android 00:23:29.130 --> 00:23:32.130 work today. It took Apple and Google years to 00:23:32.130 --> 00:23:34.990 copy that interface. Years. And they had Synergy. 00:23:35.049 --> 00:23:38.029 That was another killer feature. WebOS automatically 00:23:38.029 --> 00:23:40.589 pulled your contacts from Google, from Facebook, 00:23:40.650 --> 00:23:43.170 from LinkedIn, and it merged them all into one 00:23:43.170 --> 00:23:46.480 single profile for each person. Nobody else was 00:23:46.480 --> 00:23:48.740 doing that in 2009. The height for the Palm Pre 00:23:48.740 --> 00:23:50.740 was completely off the charts. The stock shot 00:23:50.740 --> 00:23:53.480 up from $3 to over $18. Everyone thought they 00:23:53.480 --> 00:23:55.599 did it. They're back. Palm saved the company. 00:23:55.779 --> 00:24:00.220 But then the launch happened. June 6, 2009. The 00:24:00.220 --> 00:24:02.420 fatal flaw wasn't the software. The software 00:24:02.420 --> 00:24:04.220 was incredible. It was the business strategy. 00:24:04.339 --> 00:24:07.180 They launched exclusively with one U .S. carrier. 00:24:07.899 --> 00:24:09.940 Sprint. Sprint. I mean, can you hear me now? 00:24:10.079 --> 00:24:13.619 Guy was Verizon. AT &T had the exclusive on the 00:24:13.619 --> 00:24:16.240 iPhone. Sprint was the distant, struggling third 00:24:16.240 --> 00:24:18.799 place carrier. It was a suicide pact. It was 00:24:18.799 --> 00:24:21.720 an absolutely catastrophic decision. If you wanted 00:24:21.720 --> 00:24:24.160 this amazing new phone, you had to switch your 00:24:24.160 --> 00:24:27.420 whole family over to Sprint. And in 2009, nobody 00:24:27.420 --> 00:24:29.200 wanted to switch to Sprint. The network just 00:24:29.200 --> 00:24:31.279 wasn't great. And on top of that, the hardware 00:24:31.279 --> 00:24:33.579 build quality of the Pre itself was suspect. 00:24:33.799 --> 00:24:35.380 It was. There was something people called the 00:24:35.380 --> 00:24:38.279 Oreo effect. Right, the slider mechanism. Exactly. 00:24:38.460 --> 00:24:40.700 The phone was a vertical slider with a keyboard. 00:24:41.220 --> 00:24:44.079 But the mechanism was wobbly. If you twisted 00:24:44.079 --> 00:24:46.160 the phone in your hands, it felt like an Oreo 00:24:46.160 --> 00:24:49.299 cookie sliding apart. The plastic felt cheap. 00:24:49.680 --> 00:24:52.079 The keys on the keyboard were these tiny, sharp 00:24:52.079 --> 00:24:53.960 little things. People reported they actually 00:24:53.960 --> 00:24:56.839 cut their fingers. So it just felt cheap compared 00:24:56.839 --> 00:25:00.059 to the solid glass and steel of the iPhone 3GS, 00:25:00.160 --> 00:25:02.460 which came out at the same time. It did. So you 00:25:02.460 --> 00:25:05.279 have this beautiful, futuristic software trapped 00:25:05.279 --> 00:25:08.220 in a mediocre hardware body locked to a struggling 00:25:08.220 --> 00:25:10.240 carrier. And they just ran out of time and money. 00:25:10.619 --> 00:25:12.700 Completely. They burned through all their cash 00:25:12.700 --> 00:25:15.079 reserves marketing the prey. The sales were just 00:25:15.079 --> 00:25:18.099 okay, but nowhere near iPhone numbers. By early 00:25:18.099 --> 00:25:20.579 2010, the stock was back in the toilet. They 00:25:20.579 --> 00:25:22.819 were dead in the water and bleeding cash. They 00:25:22.819 --> 00:25:25.259 needed a buyer. They needed a white knight to 00:25:25.259 --> 00:25:28.039 ride in and save them. And who rides in? Hewlett 00:25:28.039 --> 00:25:32.230 Packard. HP. The Titan of Silicon Valley. In 00:25:32.230 --> 00:25:34.609 April of 2010, HP announced they were buying 00:25:34.609 --> 00:25:38.609 Palm for $1 .2 billion in cash. And at the time, 00:25:38.630 --> 00:25:39.990 this actually made a lot of sense to people. 00:25:40.089 --> 00:25:42.849 HP was the world's biggest PC maker. They had 00:25:42.849 --> 00:25:44.829 infinite money. They had global distribution 00:25:44.829 --> 00:25:47.450 channels. And they said all the right things. 00:25:47.549 --> 00:25:49.609 They said, we aren't just buying a phone company. 00:25:49.730 --> 00:25:52.170 We are buying WebOS to put it on everything. 00:25:52.430 --> 00:25:55.089 That was the scale argument. The CEO of HP at 00:25:55.089 --> 00:25:57.089 the time, Mark Hurd, said we're going to put 00:25:57.089 --> 00:26:00.049 WebOS on phones, on tablets, on netbooks, maybe 00:26:00.049 --> 00:26:02.269 even on our printers. They wanted to create a 00:26:02.269 --> 00:26:05.069 huge, unified ecosystem that could legitimately 00:26:05.069 --> 00:26:08.430 rival Apple's iOS. It was a bold vision. So we 00:26:08.430 --> 00:26:11.289 wait. A year goes by, 2011 arrives, and AGB finally 00:26:11.289 --> 00:26:14.029 launches the new lineup of webOS devices, the 00:26:14.029 --> 00:26:17.829 pre -3 phone, the tiny HP Veer phone, and the 00:26:17.829 --> 00:26:21.789 big one, the HP Touchpad. The Touchpad was supposed 00:26:21.789 --> 00:26:25.210 to be the iPad killer. It was the first and only 00:26:25.210 --> 00:26:28.730 tablet. to ever run webOS. And it thudded. It 00:26:28.730 --> 00:26:32.250 landed with a dull, sickening sud. The hardware 00:26:32.250 --> 00:26:35.130 was just not good. It was chunky, made of this 00:26:35.130 --> 00:26:38.450 thick, glossy black plastic that was a fingerprint 00:26:38.450 --> 00:26:41.190 magnet. It was heavy. And the app store was a 00:26:41.190 --> 00:26:44.170 ghost town. Right. No apps. All the developers 00:26:44.170 --> 00:26:46.569 were busy making apps for iOS and Android, which 00:26:46.569 --> 00:26:49.009 had millions of users. They didn't have the time 00:26:49.009 --> 00:26:51.430 or the resources to write apps for a third platform 00:26:51.430 --> 00:26:54.289 that had almost no users yet. The sales were 00:26:54.289 --> 00:26:56.650 abysmal. I read a story that Best Buy was reportedly 00:26:56.650 --> 00:26:59.190 refusing to pay HP for their inventory because 00:26:59.190 --> 00:27:01.170 the touchpads were just piling up in the warehouse, 00:27:01.490 --> 00:27:03.869 unsold. And this brings us to the villain of 00:27:03.869 --> 00:27:06.710 our story, or at least the executioner, a man 00:27:06.710 --> 00:27:09.349 named Leo Apotheker. He'd taken over as the CEO 00:27:09.349 --> 00:27:11.750 of HP. He was a software guy from a German company 00:27:11.750 --> 00:27:14.349 called SAP. He never seemed to care about hardware 00:27:14.349 --> 00:27:16.670 at all. He looked at the balance sheet. He saw 00:27:16.670 --> 00:27:19.170 the touchpad division losing money. And he had 00:27:19.170 --> 00:27:23.569 zero patience for it. On August 18th, 2011, and 00:27:23.569 --> 00:27:26.049 you have to get this timing, literally 49 days 00:27:26.049 --> 00:27:28.410 after the touchpad launched, he pulled the plug. 00:27:28.490 --> 00:27:32.329 49 days. That is just insane. Most companies 00:27:32.329 --> 00:27:34.990 will give a new product a year, maybe two, to 00:27:34.990 --> 00:27:37.690 find its footing and build an audience. He killed 00:27:37.690 --> 00:27:41.410 it in seven weeks. Immediate termination. He 00:27:41.410 --> 00:27:43.809 went on an earnings call and announced that HP 00:27:43.809 --> 00:27:45.869 was stopping all production and sales of all 00:27:45.869 --> 00:27:49.049 webOS devices effective immediately. He basically 00:27:49.049 --> 00:27:52.869 lit $1 .2 billion on fire right in front of the 00:27:52.869 --> 00:27:55.190 shareholders. But then the weirdest thing happened. 00:27:55.329 --> 00:27:58.410 The fire sale. Because they had all these warehouses 00:27:58.410 --> 00:28:00.910 full of these now -dead tablets, HP announced 00:28:00.910 --> 00:28:04.049 they were dropping the price from $499 to just 00:28:04.049 --> 00:28:07.829 $99 to liquidate the remaining stock. And complete 00:28:07.829 --> 00:28:10.230 pandemonium broke out. I have never seen anything 00:28:10.230 --> 00:28:12.509 like it. People were literally camping out at 00:28:12.509 --> 00:28:15.289 Best Buy. Retail websites crashed under the load. 00:28:15.559 --> 00:28:18.099 For a week, the HP Touchpad became the number 00:28:18.099 --> 00:28:20.819 one selling tablet on Amazon, outselling the 00:28:20.819 --> 00:28:23.460 iPad, but only after it was canceled. It proved 00:28:23.460 --> 00:28:25.440 that people actually liked the device and the 00:28:25.440 --> 00:28:27.339 software. They just didn't like it at the Apple 00:28:27.339 --> 00:28:30.119 price point. It was such a bitter, tragic irony 00:28:30.119 --> 00:28:33.759 for the WebOS engineering team. Suddenly, millions 00:28:33.759 --> 00:28:36.079 of people were using their software and loving 00:28:36.079 --> 00:28:38.099 it, right as they were all getting their pink 00:28:38.099 --> 00:28:40.099 slips. And we should mention the community that 00:28:40.099 --> 00:28:42.700 spurned up here. The homebrew scene for the touchpad 00:28:42.700 --> 00:28:44.680 was legendary. Oh, the community was incredible. 00:28:44.819 --> 00:28:47.440 Because HP had abandoned the device, the users 00:28:47.440 --> 00:28:49.880 took it over. They hacked the touchpad to run 00:28:49.880 --> 00:28:52.440 Android on it. They kept the webOS activation 00:28:52.440 --> 00:28:55.059 servers alive for years through their own efforts. 00:28:55.359 --> 00:28:57.220 There are people today who still have a working 00:28:57.220 --> 00:28:59.480 touchpad in a drawer somewhere, running some 00:28:59.480 --> 00:29:02.299 custom build of Android. It generated... so much 00:29:02.299 --> 00:29:04.700 love. But the corporate suits just didn't care. 00:29:04.940 --> 00:29:08.039 And Leo Apotheker, the CEO who made this call, 00:29:08.160 --> 00:29:10.640 he got fired shortly after that, right? He lasted 00:29:10.640 --> 00:29:14.019 less than a year as CEO. He destroyed Palm. He 00:29:14.019 --> 00:29:16.339 oversaw a disastrous acquisition of a software 00:29:16.339 --> 00:29:18.519 company called Autonomy that turned out to be 00:29:18.519 --> 00:29:22.599 a massive fraud. He tanked HP's stock by 45 percent 00:29:22.599 --> 00:29:25.579 and he got the boot. Meg Whitman came in to clean 00:29:25.579 --> 00:29:27.660 up the mess, but Palm was already dead and buried. 00:29:27.819 --> 00:29:29.819 So let's look at the afterlife. The body parts 00:29:29.819 --> 00:29:32.200 of Palm were scattered to the winds after HP 00:29:32.200 --> 00:29:35.720 was done with them. They were. WebOS, the software, 00:29:35.960 --> 00:29:40.059 went on a very strange journey. HP eventually 00:29:40.059 --> 00:29:43.779 sold the team and the source code to LG Electronics 00:29:43.779 --> 00:29:47.279 in 2013. Which is why if you go to a store today 00:29:47.279 --> 00:29:51.099 and you buy a high -end LG OLED TV, the smart 00:29:51.099 --> 00:29:53.960 TV interface it's running is webOS. You're using 00:29:53.960 --> 00:29:56.819 the great grandchild of the Palm Pre to watch 00:29:56.819 --> 00:29:59.079 Netflix. And it's actually a great TV interface. 00:29:59.420 --> 00:30:02.059 Those cards and the fluid navigation work really 00:30:02.059 --> 00:30:03.920 well on a big screen. So that's the software. 00:30:04.039 --> 00:30:06.259 What about the brand? The name Palm and that 00:30:06.259 --> 00:30:08.319 little orange logo? That was sold off separately. 00:30:08.359 --> 00:30:11.559 to a shelf company that was tied to TCL. TCL 00:30:11.559 --> 00:30:14.339 is a huge Chinese electronics manufacturer. They 00:30:14.339 --> 00:30:16.460 make TVs and they also make phones for other 00:30:16.460 --> 00:30:19.200 brands like Alcatel and, for a while, BlackBerry. 00:30:19.299 --> 00:30:21.319 And they tried to resurrect the Palm brand in 00:30:21.319 --> 00:30:24.099 2018 with that tiny little phone, the Palm phone. 00:30:24.299 --> 00:30:25.500 That was such a weird device. It was the size 00:30:25.500 --> 00:30:27.279 of a credit card. It ran a modified version of 00:30:27.279 --> 00:30:29.859 Android. But the marketing pitch was what was 00:30:29.859 --> 00:30:31.980 so fascinating. They didn't market it as your 00:30:31.980 --> 00:30:34.359 main phone. No, it was a companion to your big 00:30:34.359 --> 00:30:36.880 phone, a phone for your phone. Right. The idea 00:30:36.880 --> 00:30:38.799 was that you'd leave your big, distracting iPhone 00:30:38.799 --> 00:30:41.000 at home. You'd take this tiny... Palm out to 00:30:41.000 --> 00:30:42.859 dinner with you and you wouldn't be tempted to 00:30:42.859 --> 00:30:44.500 scroll through Instagram because the screen was 00:30:44.500 --> 00:30:46.660 just too small. It was trying to solve the problem 00:30:46.660 --> 00:30:49.240 that the original Palm Pilot solved. Digital 00:30:49.240 --> 00:30:52.579 complexity. But it was just too niche. And it 00:30:52.579 --> 00:30:55.500 was exclusive to Verizon. They repeated the Sprint 00:30:55.500 --> 00:30:58.660 mistake again. And it required its own separate 00:30:58.660 --> 00:31:02.339 monthly fee. It just flopped. It really seems 00:31:02.339 --> 00:31:05.319 like Palm was always cursed to be either Way 00:31:05.319 --> 00:31:07.480 too early to a market or just slightly wrong 00:31:07.480 --> 00:31:09.599 on the final execution. That's the recurring 00:31:09.599 --> 00:31:11.940 theme throughout this whole saga, isn't it? Yeah. 00:31:12.059 --> 00:31:15.099 They basically invented the PDA before the world 00:31:15.099 --> 00:31:17.700 was quite ready for it. They refined the smartphone 00:31:17.700 --> 00:31:19.960 right before the iPhone came and perfected it. 00:31:20.039 --> 00:31:22.660 They even tried to do a digital well -being phone 00:31:22.660 --> 00:31:25.559 years before people really started hating social 00:31:25.559 --> 00:31:28.319 media. They were the Cassandras of tech. They 00:31:28.319 --> 00:31:30.160 could see the future, but they could never quite 00:31:30.160 --> 00:31:33.029 capitalize on it. So we've gone from the zoomer 00:31:33.029 --> 00:31:36.130 to the pilot through the mania of the IPO, the 00:31:36.130 --> 00:31:38.710 absolute stupidity of the split, the brilliance 00:31:38.710 --> 00:31:41.509 of the trio, the tragedy of the pre, and now 00:31:41.509 --> 00:31:44.369 these zombie years. If we have to distill this 00:31:44.369 --> 00:31:46.950 whole epic story down to one key lesson for the 00:31:46.950 --> 00:31:49.170 listener, maybe for someone running a business 00:31:49.170 --> 00:31:51.750 today, what is it? I think the single biggest 00:31:51.750 --> 00:31:54.490 lesson is about the danger of disintegration. 00:31:54.930 --> 00:31:58.849 That great split back in 2002 is the moment that 00:31:58.849 --> 00:32:01.890 I think put Palm on the path to ruin. You cannot 00:32:01.890 --> 00:32:04.250 separate the soul of the product, which is the 00:32:04.250 --> 00:32:06.589 software, from the body of the product, which 00:32:06.589 --> 00:32:08.210 is the hardware. Not if you want to make something 00:32:08.210 --> 00:32:11.509 truly great. Exactly. Apple understood this. 00:32:11.529 --> 00:32:14.089 Steve Jobs was famously pathologically obsessed 00:32:14.089 --> 00:32:16.710 with controlling the whole widget. Palm had that 00:32:16.710 --> 00:32:19.089 model, and then they voluntarily gave it up because 00:32:19.089 --> 00:32:21.490 they were trying to beat Microsoft in a world 00:32:21.490 --> 00:32:23.710 that was rapidly moving toward Apple's integrated 00:32:23.710 --> 00:32:25.990 model. It was a fundamental misreading of where 00:32:25.990 --> 00:32:27.930 the industry was going. It's the difference between 00:32:27.930 --> 00:32:30.210 a product designed by a committee and a product 00:32:30.210 --> 00:32:32.690 designed by a singular, coherent vision. That's 00:32:32.690 --> 00:32:36.029 it. When the Trinity was there, Hawkins, Dubinsky, 00:32:36.190 --> 00:32:39.690 Colligan, they had that singular vision. Simple. 00:32:40.009 --> 00:32:43.599 Fast. Fits in your pocket. When they left, and 00:32:43.599 --> 00:32:46.460 after the split, that vision got diluted by committees, 00:32:46.660 --> 00:32:48.900 by licensing deals, by carrier requirements, 00:32:49.019 --> 00:32:51.579 by corporate politics. The soul left the building 00:32:51.579 --> 00:32:54.440 long before HP finally shut the lights off. It's 00:32:54.440 --> 00:32:56.960 a sad story, but in a weird way, it's also an 00:32:56.960 --> 00:32:59.779 inspiring one. Because every time you swipe up 00:32:59.779 --> 00:33:02.279 to close an app on your iPhone, or you see your 00:33:02.279 --> 00:33:04.660 contacts merge on Android, you are using a little 00:33:04.660 --> 00:33:07.480 piece of Palm's DNA. They may be gone. But they 00:33:07.480 --> 00:33:09.299 are absolutely not forgotten. Their influence 00:33:09.299 --> 00:33:11.480 is everywhere. And on that note, I think I'm 00:33:11.480 --> 00:33:13.279 going to go on to eBay and see if I can find 00:33:13.279 --> 00:33:16.140 a working Palm V for my desk. I miss that green 00:33:16.140 --> 00:33:18.460 backlight. Just don't try to connect it to your 00:33:18.460 --> 00:33:21.160 Wi -Fi. It probably won't end well. Fair enough. 00:33:21.599 --> 00:33:23.680 Thanks for joining us on this deep dive. Always 00:33:23.680 --> 00:33:25.099 a pleasure. Catch you in the next one.