Sarah Lacy writes for PandoDaily, a news site which she founded.
She is also an award winning journalist and author of two critically acclaimed books, “Once You’re Lucky, Twice You’re Good: The Rebirth of Silicon Valley and the Rise of Web 2.0” (Gotham Books, May 2008) and “Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit from Global Chaos... → Learn More
For the last eighteen months, the tech world has been anxiously awaiting news of what iPod godfather Tony Fadell is up to. His staff has been sworn to secrecy since word got out he was leaving retirement to do something new. Despite reporters camping out in front of his office with cameras, the news somehow stayed a secret– no small feat in the ever-leaky land of Silicon Valley.
No doubt the anticipation raised expectations in fan boys’ minds that the next great entertainment or communication device was going to be unveiled by the former DJ who oversaw 18 versions of the iPod and the first three versions of the iPhone.
Fadell is well aware that those fan boys may be in for some confusion or some disappointment today. Because he’s announcing what finally got him to come out of retirement and start a new company: A desire to reinvent thermostats.
That’s not a moniker for some cutting edge game device– Fadell’s new company, Nest Labs, is bringing Apple-level design and cool to the those little boxes on the walls of a quarter of a billion US homes and offices that control the internal temperature. Why? Because all the ones on the market are ugly, they are too hard to use and they control a whopping 50% of the average American home’s energy budget. His goal is to take something we never think about and make it more than just sexy– he wants to make it a “beloved” object in the home.
Fadell got the idea designing his green home in Tahoe. He was shocked there wasn’t a single attractive thermostat on the market so he decided to build his own. The size of the market and the potential impact on the planet convinced him it was a great business. And if he didn’t do it, who would? The unit uses the guts of a smart phone and required someone who knows how to build drop-dead-easy user experiences.
When Fadell left Apple, he promised Steve Jobs he wouldn’t build a device to compete with what he’d done at Apple. Instead, he’s taking the design philosophy to an utterly different industry. Will consumers bite?
We sat down with Fadell for his first video interview about Nest last week. In this segment, he talks about why he feels this opportunity was too good to pass up. Stay tuned for part two of the interview, when Fadell will demo the Nest Learning Thermostat.
Hi, this is Sarah Lacy from Techcrunch t.v. and I am here with Tony Fadell, the CEO and co-founder of [xx]. So, finally, we get to see what you've been up to. Finally, after a year and a half of being very stealth we are, now Coming alive to the world showing what we have.So, for people who don't know, you had quite a famous job before this?I had a Quite an amazing job. I got to have two dream jobs and one job.So, you called the God father the iPod?Well, the iPod was. It was a Team effort, but yes, I led the team that created eighteen generations of the I-pod and then three generations of the I-phone.So you have this amazing run building some of the, you know, most phenomenal tech products, you know, our generation has ever seen. Things people adore. You leave Apple. You're in retirement for three years. You come out of retirement and everyone's excited. You're in stealth for a year and a half. And you're doing thermostats.Right. Thermostats with a big question mark. Why thermostats? Why would you do such a crazy thing? Well, about three years ago when we left Apple, we had young kids. My wife and I both left Apple. And we wanted to change our lives. We wanted to have a green lifestyle and make sure we educated our kids that way. And so we started to, you know, make the necessary personal changes in our life. And then we'd started designing a home in Tahoe that was going to be green. So we were adding solar panels and we were putting in geothermal walls, doing everything. And one day my architect came with a specification for a heating and cooling system for the home. And it was a very expensive system with expensive thermostats on there. I was like, "These thermostats, wow, that's how I'm going to control them." Three hundred and fifty thousand...$350 thermostats. I was like, "Whoa. Those are expensive." Those have to be incredibly nice given, you know, iPods and iPhones and those things. And I looked at him and I was like, Wait a second. This looks like a beige box from the '90's. It looked like a computer before the iMac. There's got to be something better. So, I quickly scanned the web. Get out of the way.I'm going to find something better and I found about 350 tourists. That all looked about the same and worked about the same with different feature sets, but But none of them seem to be any good.So, I said, "okay." I think I'll do this on my own. So, I started designing depending my own what would it look like and how it would be different.And was aesthetic what you cared about first and foremost? Was it the functionality? Was it Well, I care about They were all ugly.Right.So, when you're building a house and you wanted to look beautiful and you worry about everything From the kitchen detail, what kind of stove you're going to get? What kind of refrigerator?Right.What's the countertop's going to look like? You care about every detail and this was one I couldn't text. I couldn't just select something There wasn't a select option. Yeah From the shelf and say, "Okay. That's the best thing." So, I just started designing my own and it just it slowly evolved, and I found it was a very complicated problem and I was intrigued and I thought "who is going to actually make this kind of product?" It's a sophisticated product. It's almost a cellphone. It's a cellphone with a little heating and cooling technology. Who knows how to make cellphones? Do any of the current thermostat guys know how to make cellphones? No. It's hard enough to make a cellphone, a good cellphone, let alone an iPhone.Yeah, a lot of cellphone companies aren't very good at it.That's correct. So, I was like, "Wait a second. This sounds like a really great project." So, I'm going to keep embarking on it and I was like, "Wow. This is going to turn out pretty cool." But is this something really worthwhile to spend my time on?Yeah.Can I really save energy? Is it really a great business and both of those things turned out to be very true. If you look at how much energy is used or is controlled by the thermostat, over 50% of your home's energy is controlled by a thermostat. That's an average home. A small home is $1200 a year for heating and cooling bills and it can be thousands more for larger homes.Right .And that's a thermostat, this dumb device that no one likes, no one loves, no one cherishes, controls this big part of your energy budget. Like that doesn't hundred. So, let's make it a cherished item. Secondly, if you look at the issues with the design of the product, they're just very, very difficult to use. And so I was like we've got to able to have a really great interface, so let's make it simple to use. And let's make it simple to use for not just the person who pays the bills and is concerned about the bills. But let's make sure that everyone in the house, the kids, the other people who use the house understand what energy costs. Actually, affected right at the point of where you use the energy. So, that's really important.So, did you know that you wanted to come out from retirement and do something? I mean you've talked a little bit about deciding to do this. turn it into a business, but was it hard for you to come out of retirement or do anything? I mean how do you follow up the experience that you'd had at Apple?You know I got to live the dream twice. And so you didn't want to go and do the same thing over. I got all the typical calls from all the competition. There is no way I'm doing that. Actually I promised Steve I wouldn't do that and so I'm not going to do that. But this was such an intriguing problem and it was just slightly different than what I've done. And that's how we actually were able to build a team. Slightly different than what everyone's doing. They were like of course, this makes total sense.Right.Take all of our skill sets that we've gained over decades and reapply them. So, it just became a natural, like, "We need to do this." For everyone it became a mission, a crazy mission.Right. Now could see an almost Saturday Night Live skit of you walking around the world and seeing lots of ugly sayings and saying I'm going to build a cherished version of this. I mean there's alot of ugly things we interact with that no one has ever taken the time to update. Had you gone through this sort of thought experiment with things before? Yes, actually I did. I looked at all kinds of different categories. And I would say, "Oh, that's an interesting thing, let's revolutionize it." And then, OK, there's some cool things we can do to it. But does it really make a difference?Mm-hmm.And then, is it really great business? And you have to come up with all three of those sections to be filled out and say, "This is a great reason to do it." And so thermostats control a lot of energy. It's a really tough problem, and if you look at the business, there's over a quarter of a billion thermostats installed in the US in residential like commercial. A quarter of a billion.Mm-hmm.So, that's big install base.Right.Right? That's as many as cell phones. And if you look at the number sold a year, that's 10 million residential thermostats that are sold a year. That's more than refrigerators, stoves, washers, dryers, dishwashers. Almost as much as bicycles and TVs. That's more than video cameras and more than these media products. Right.So you're like, it may not be as large as an iPhone business, but it's a pretty damn good business at 10 million units a year. So it's like, okay, the three sections are filled up. Can help save energy, can be an interesting, difficult problem that I can apply my experiences to, and it looks like it's a great business.Right. So, you know, I'm 35 years old. I've never walked into a store and thought, "I need to buy a thermostat." I've never bought a thermostat for anywhere that I lived.Right, right. Are you going to turn this into a consumer-driven category? Are people going to be walking into stores and saying, "I, you know, I need a Nest."Well, that is the big difference. I think if you look at the products and how they're designed today, they're designed for contractors. The reason why there isn't a lot of differentiation is because they're designed for contractors that just come to your house and say, "Here's what I have. Let's put it on your wall."Right.We decided we need to have the conversation with the person who actually puts it on their wall, who actually says, "I want that thing," which is the consumer. Right? We wanted to make sure that The iPhone generation can now understand that they can select one of these types of devices, and hopefully they select ours. So our marketing is all in our product design. All of our messaging is geared for the end user, not for the contractor channel. Not for you know HVAC installers. It's for consumers. So, they can learn that there might be a better way of controlling their energy.
