Season 2, Episode 3: Nest

[0] The color really does have an impact on your brain.

[1] Yeah.

[2] Yeah, it's like with these billions of dollars, the technology companies actually hire psychologists to intentionally do this stuff.

[3] Welcome to Season 2, Episode 3 of Acquired, the podcast about technology acquisitions and IPOs.

[4] I'm Ben Gilbert.

[5] I'm David Rosenthal.

[6] And we are your hosts.

[7] It's finally time to cover a no -brainer story here on Acquired, Google's 2014 acquisition of Nest.

[8] David, are you pumped?

[9] I am so pumped.

[10] We, uh, um, there's no shortage of research for this one.

[11] There's no shortage of requests for this one.

[12] And actually, it's pretty timely with, uh, uh, the announcement coming out last week that Google is rolling Nest back into, or I guess for the first time into its, its main hardware business instead of running as an independent subsidiary.

[13] Yeah.

[14] I mean, the question is like, which Nest acquisition or divestiture is this officially going to be about because there was the original acquisition, the rolling out into a standalone unit of alphabet, and now the re -acquisition back into Google.

[15] Yeah, well, and not to mention a half a billion dollar pickup of drop cam along the way.

[16] Not along the way.

[17] We just might cover that.

[18] It's true.

[19] It's true.

[20] So to make sure we're on the same page for the full episode, this is the original acquisition of Nest where they Google actually wired cash to the bank accounts of people who own shares in Nest.

[21] That's so prosaic, then.

[22] A couple of announcements for listeners, before we dive in, David and I have been playing around with a lot of new podcast apps recently, and one of them that's pretty cool is Breaker.

[23] So if you're using the Breaker app and listening to us right now, or if you want to try it out, please comment on this episode.

[24] We're experimenting with how the rise of social podcast apps sort of affects discoverability and would love your comment on this episode to see how it compares to the effect of people leaving reviews on iTunes accounts.

[25] So maybe if we mobilize the acquired base, we can help discoverability the show.

[26] If you are new to the show, you can check out our Slack at Acquire.

[27] Acquired .fm, over 1 ,100 strong.

[28] Okay, listeners, now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[29] Yes, ServiceNow is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

[30] 85 % of the Fortune 500 runs on them, and they have quickly joined the Microsoft's at the NVIDIAs as one of the most important enterprise technology vendors in the world.

[31] And, just like them, Service Now has AI baked in.

[32] everywhere in their platform.

[33] They are also a major partner of both Microsoft and Nvidia.

[34] I was at Nvidia's GTC earlier this year and Jensen brought up ServiceNow and their partnership many times throughout the keynote.

[35] So why is ServiceNow so important to both Nvidia and Microsoft companies we've explored deeply in the last year on the show?

[36] Well, AI in the real world is only as good as the bedrock platform it's built into.

[37] So whether you're looking for AI to supercharge developers in IT, empower and streamline customer service, or enable HR to deliver better employee experiences, service now is the platform that can make it possible.

[38] Interestingly, employees can not only get answers to their questions, but they're offered actions that they can take immediately.

[39] For example, smarter self -service for changing 401K contributions directly through AI -powered chat, or developers building apps faster with AI -powered code generation.

[40] or service agents that can use AI to notify you of a product that needs replacement before people even chat with you.

[41] With ServiceNow's platform, your business can put AI to work today.

[42] It's pretty incredible that ServiceNow built AI directly into their platform.

[43] So all the integration work to prepare for it that otherwise would have taken you years is already done.

[44] So if you want to learn more about the ServiceNow platform and how it can turbocharge the time to deploy AI for your business, go over to ServiceNow .com slash acquire.

[45] and when you get in touch, just tell them Ben and David sent you.

[46] Thanks, service now.

[47] So David, I think we've got one piece of follow -up before diving in.

[48] Yeah.

[49] So we wanted to do a follow -up on the Apple Beats episode, which actually kind of hard to believe was the last episode, just you and me that we did together.

[50] We had so many guests and specials since then, which had been great.

[51] But in the interim, listener Devin wrote into us about something that we didn't talk about in the Apple Beat's story.

[52] And that's that Dr. Dre has a history of assault back in his earlier days with NWA.

[53] And in particular, assault and violence towards women, which is obviously a pretty important thing.

[54] And we should have mentioned it as part of the episode.

[55] So now in this case, it's somewhat of a complicated situation.

[56] And we aren't really equipped on acquired to prosecute the specifics of this or any other case, really.

[57] But the documentary that we mentioned, the defiant ones, addresses it pretty well and pretty fully.

[58] So definitely you should go watch the movie for lots of reasons, but this is an important one.

[59] But that said, we do think it's important for us to acknowledge it, and we want to make sure we put it out there on this show.

[60] So thank you, Devin, for calling it out.

[61] Yeah, but I think, David, to just underscore your point, this just hit us like a ton of bricks when we got this email, because we, you know, we didn't mention it once on the episode, and it shouldn't go overlooked.

[62] And, you know, we do a lot of founder glorifying on the show.

[63] And I think it's really important to, you know, look at the whole person.

[64] Yeah.

[65] It's a good reminder that just like you said, Ben, it's easy to treat, you know, founders and Silicon Valley folks as heroes.

[66] We often do on this show.

[67] But, you know, they're people like any other people and some have good sides, some have bad sides.

[68] And it's just important to remember that.

[69] So we'll try and keep that in mind with everyone going forward.

[70] Thanks again, Devin, for pointing it out.

[71] And with that, we'll Let's move on to Google and Nest.

[72] Okay.

[73] So you definitely can't talk about Nest without talking about the well -known and at times controversial, though not as controversial as Dr. Jay, co -founder, you know, whose name is basically synonymous with the company.

[74] Of course, I'm talking about Matt Rogers.

[75] Classic.

[76] Matt Rogers is always all over the news.

[77] Always all over the news.

[78] Matt Rogers is the co -founder and, I believe, cheap product officer of Nest.

[79] And we're going to talk a lot about Matt.

[80] But no, the person I'm referring to is the quote -unquote father of the iPod, Tony Fidel, which I presume most folks listening to this show have heard something about in the past.

[81] But who is Tony?

[82] Well, so Tony grew up in the 70s and early 80s.

[83] primarily in Detroit, although his father was a salesperson for Levi Strauss, the jeans company, based here in San Francisco.

[84] So they moved around quite a lot.

[85] But Tony, turns out, was really influenced by his maternal grandfather, so his mom's dad, who also lived in the Detroit area.

[86] And he was like this sounds like awesome kind of depression era, like, you know, self -reliant, like tinkerer sort of he was not an engineer, he was a school teacher and a school superintendent, but sort of proto engineer.

[87] And he really encouraged Tony when he was growing up to like fix stuff around the house and do everything yourself and take things apart and understand how they worked.

[88] And so this had like a big impact on Tony.

[89] And then when he was around the age of 12, he discovered computers and took that same approach to computers.

[90] So he got an Apple 2, he took it apart, you put it back together, um, was totally obsessed with it.

[91] David, can I just pause for a minute?

[92] Like I have some of the stuff that you find like it's like you grew up with Tony somehow.

[93] It's like, oh yeah, like he was down the street for me. And it's just impressive.

[94] Well, there's, uh, we do a lot of research on this show.

[95] Um, and, uh, a lot of this comes from, um, Tony, uh, was part of, um, I forget exactly what this organization is called.

[96] It's like the achievement organization or achievers or something like that.

[97] received a word from them and did a big oral history on his background.

[98] So we'll see if we can link to that in the show notes.

[99] But there's a lot of good stuff out there about all this history.

[100] And so he's hooked on, he buys the Apple II.

[101] He's hooked on computers.

[102] He ends up going to college at the University of Michigan.

[103] This is in the late 80s, mid to late 80s.

[104] And he studies computer engineering, which is a combination of computer science and electrical engineering.

[105] So he's getting both hardware and software in school.

[106] And then he also gets an education in entrepreneurship at school.

[107] He starts actually not one but three different companies while he's at the University of Michigan.

[108] The largest, most successful of which was an education software company that he started with one of his professors that was called, I think, constructive instruments.

[109] so he's kind of he's got the he's got the hardware he's got the software he's got the entrepreneurship he's a total mac nerd and nut and apparently he also he's a subscriber to mac world and he reads the magazine religiously and he hears about this right as he's a senior getting ready to graduate he hears about this stealth startup in silicon valley that was a spin out from apple started by a bunch of legends from the initial mac team called general Magic, and Tony decides, I need to go get a job at General Magic and move out to Silicon Valley.

[110] So, David, before the show, we were texting and you, like, alerted me to the existence of General Magic.

[111] I have, like, a shame bag over my head of, like, calling myself an Apple nerd and having, like, you know, having cared about the company for a long time.

[112] Like, I did not know about this company, and it's insane.

[113] Like, tell us about some of the history of General Magic.

[114] Totally insane.

[115] So this company was started in the early 90s in the Valley.

[116] And it was like all the legends from the original Mac team at Apple.

[117] So it was Bill Atkinson, Andy Hertzfeld, Mark Porat, and Joanna Hoffman.

[118] Many, if not all of those, I think, are kind of central characters in the Steve Jobs movie, which is another good movie you should all go see if you haven't.

[119] and they were like all super well known in the Mac community and they left Apple to start this company and it was totally secret what they were doing so Tony and nobody else had any idea what they were actually doing it was just that it was this dream team out in the valley so he he graduates he goes out there and he basically like talks himself into a job with General Magic I think he was like the 30th employee or something like that and it turns out that what they're doing is they're basically, they have a vision to essentially build the iPhone, but it's like the early 90s.

[120] So it's like way too early for the iPhone.

[121] And the company actually turns out it would, you know, consume a whole bunch of capital.

[122] It would go public.

[123] It would fail.

[124] It would pivot a bunch of times.

[125] One of the things that comes out of it ends up being OnStar.

[126] They'll like, you know, if you've ever driven a Chevy or a GM vehicle, the like connected roadside assistant thing.

[127] But the vision was to build an internet connected, an internet connected PDA, personal digital assistant that people could keep with them, you know, all throughout their day in their lives, would be connected to the internet, could do email, could do phone calls.

[128] And amazingly, like some of the other people who worked at General Magic along the way, Andy Rubin, who started Danger and Android, Pierre Omidyar, the, or Amidier, I never know.

[129] Amidiar, I think, yeah.

[130] Mediare, founder of eBay.

[131] Kevin Lynch, who was the CTO of Adobe and now runs Apple Watch at Apple, there's this ridiculous mafia of people that worked at General Magic.

[132] And each sort of, even though the company failed, like took little pieces of its vision and made them reality at different pieces of the ecosystem.

[133] Yeah, yeah, it's awesome.

[134] We didn't know when we started digging into the history for this, that this was going to be as much an Apple episode as a Google episode.

[135] With Tony Fidel, you just can't stay away.

[136] You can't stay away from it.

[137] So Tony works there for three years in his first job.

[138] And it kind of becomes clear that like the market is not ready.

[139] The technologies are not ready for, you know, essentially the iPhone.

[140] Yep.

[141] So he leaves.

[142] But he's not done.

[143] He goes to Phillips, the big Dutch electronics manufacturer.

[144] He becomes the youngest senior management member there.

[145] And he essentially tries to do what General Magic was trying to do, build a connected PDA inside Phillips.

[146] And he spends four years there trying to make it happen also fails.

[147] And he kind of develops a reputation as it's unclear like how much of this is just who Tony is and how much is he was intentionally trying to cultivate this persona.

[148] But he's like the brash, like young like Silicon Valley hot shot in this big stodgy company.

[149] he gets a reputation for like yelling and screaming during meetings and all sorts of stuff.

[150] At one point, I guess Fast Company does a profile on him and they ask him, you know, what would you be doing if you weren't in tech?

[151] And he says, I'd probably be in jail, which is probably not true.

[152] But, you know, there we are.

[153] That was the reputation he was cultivating.

[154] So it's not working.

[155] This whole connected PDA thing isn't working with.

[156] Phillips either.

[157] A couple years later, 1999, Napsters around, the internet's really taking off music and MP3s are a thing.

[158] And Tony's like, MP3s.

[159] Like, this is the future.

[160] I want to get involved in this.

[161] I need to go get in this industry.

[162] And so he takes it.

[163] Isn't there some crazy story about like, Toshiba made these tiny hard drives, but they didn't exactly know what to do with them?

[164] And somehow Tony's like, oh, I know what to do with them.

[165] Well, that was not Tony, but that was John Rubenstein at Apple.

[166] We'll get to that in a sec. But so Tony's like, I want to get into music.

[167] You know, he could go to Apple.

[168] He could do all these things.

[169] He's like, I'm going to go to Real Networks, which is the company in Seattle.

[170] Yeah, baby.

[171] Right in our backyard.

[172] Right in our backyard.

[173] Which, speaking of, speaking of mafias, the, like, mafia of people that came out of real is pretty insane, too.

[174] Like, particularly in the Seattle tech ecosystem, you look around at, particularly all the major like successful consumer companies and the the real networks mafia is is is probably sort of the most dominant source of talent in the region over the last 20 years yeah that and um the equanim mafia of course too yeah um but anyway so tony takes a job at real he lasts all of six weeks remember he's like the controversial executive here uh he stays at real for six weeks something happens and uh he decides you know what i'm still going to pursue this mp3 thing but I'm going to do my own startup and do it on my own.

[175] So he leaves.

[176] He starts a company called Fuse Systems.

[177] And his approach to MP3s is he wants to build hardware to play MP3s.

[178] But he's not yet thinking about, you know, portable iPod -style hardware.

[179] He wants to make like audio file quality rack -mounted, like stereo hardware, like something you would keep next to your, you know, receiver in your home hi -fi system.

[180] Next to your home pod.

[181] Yeah, next to your home.

[182] home pod.

[183] Exactly.

[184] He's just, he's, he's, he's habitually like 20 years ahead of the, ahead of the world.

[185] Um, so he does that.

[186] Uh, he starts the company, like I said, in 1999, um, things go along.

[187] He raises some money.

[188] Uh, but then the dot com crash happens.

[189] Um, and, uh, and it's 2000, 2001, the company, even with Tony's, you know, reputation, uh, is not able to raise money.

[190] He's running out of cash.

[191] He's trying to figure out what to do.

[192] Um, and so one weekend, um, and so one weekend, And apparently, he's skiing.

[193] He also loves skiing.

[194] This is going to become a recurring theme here.

[195] He's skiing in Tahoe, and he gets a call on his cell phone, and he picks it up, and it is John Rubinstein from Apple, who is the SVP of hardware at Apple.

[196] And John had been, was a veteran of Next.

[197] So he had joined Next when Steve Jobs was at Next, then came with Steve back into Apple and was running hardware at the time.

[198] And so John and Steve have been thinking about.

[199] the music space for a long time.

[200] They just, this is now the, like, spring of 2001.

[201] They just launched the iTunes software.

[202] The store wasn't out yet.

[203] And they're looking for potential to build a hardware player to go along with it.

[204] And they couldn't quite find the technology to do it.

[205] And then apparently the story is that John and Steve are separately on business trips to Japan.

[206] And John's meeting with Toshiba.

[207] and they show him this 1 .8 inch hard drive that they have.

[208] And they're like, we don't really know what to do with it like you were saying.

[209] And John's like, I know what to do with this.

[210] So apparently, Steve was also in Japan at the time.

[211] John calls him up and he's like, we got to get together.

[212] They get together for dinner at a hotel.

[213] And he's like, I've got it.

[214] We can do it.

[215] A thousand songs in your pocket.

[216] Toshiba has the hard drives.

[217] We can make it happen.

[218] And so Steve's like, all right, go ahead.

[219] And John finds out about what Tony have been working on calls him up.

[220] And he's like, Tony, you're the guy.

[221] You got to come in here.

[222] We need your help.

[223] Can you come do a consulting project for us?

[224] And Tony's like, okay, you know, I need some money because I'm running out of cash at my startup.

[225] He comes in, he starts the consulting project.

[226] And he quickly figures out that, like, this is like the most important thing at Apple going on here.

[227] So he spends six weeks.

[228] He puts together a whole plan for what components Apple needs to build this hardware, all the software are coming together.

[229] and he actually builds a styrofoam model of what the iPod could look like.

[230] That's amazing.

[231] That's super similar to the story of the original Palm.

[232] The founder of Palm ended up carving it out of a block of wood.

[233] And then for like weeks, bringing around this block of wood to meetings and pulling it out of his pocket to like pretend to take notes on the block of wood to see like, does the form factor work for me?

[234] Yeah.

[235] It's, you know, product design.

[236] It starts with tinkering.

[237] That's right.

[238] So, so the end of the project, he presents to the whole senior leadership team at Apple.

[239] And they're like, okay, great.

[240] We want you, we want to hire you to come do this.

[241] And Tony is like, well, but I've got this startup and I've got all these employees.

[242] Which, let's be clear.

[243] Like, how is he doing a consulting gig while running a startup?

[244] Like, for anybody running a startup, like, imagine going and taking on a, you know, incredibly important product, even for like a month and a half at a company.

[245] like Apple, how does that work?

[246] Yeah, this is where the research gets a little unclear.

[247] This is the problem with, you know, when you're listening to Tony, tell the story only from his side.

[248] I couldn't find anything out there of how the employees of Fuse felt about this.

[249] It feels like there may be like a very strong C .O. presence or something at Fuse.

[250] Yeah.

[251] Well, who knows?

[252] So anyway, Apple and Steve and John Rubenstein are like, great, we want to hire you.

[253] We don't want to acquire Fuse.

[254] we want to hire you.

[255] And after a bunch of thinking about it, Tony says, okay, fine.

[256] So he shuts down fuse and he goes to work in the spring of 2001 for Apple.

[257] And basically, like, this becomes the focus of, like, the entire company for the next couple months because they want to get the product shipped for the holiday season.

[258] And they do.

[259] It's kind of, it's pretty amazing from like, it's like 10 months from when Rubenstein sees the, 1 .8 inch hard drives at Toshiba in Japan until they ship the iPod in October of 2001.

[260] That's mind -blowing.

[261] Like, think about the number of Kickstarter that, like, take three years and then don't ship a product.

[262] I mean, to be able to do that in 10 months.

[263] Totally mind -blowing.

[264] And I promise this is all leading to Nest eventually.

[265] So Tony stays on at Apple after they ship the first iPod.

[266] He ends up working on the next 18 versions of the iPod.

[267] and in 2006, John Rubinstein retires, and Tony replaces him as SVP of the iPod division.

[268] So he's reporting directly to Steve, one of the senior managers, most senior managers within Apple.

[269] And so just before that happened, I promised that Matt Rogers would come into the story eventually.

[270] The famous, famous Matt Rogers.

[271] The iPod team hires an intern from Carnegie Mellon, who shows.

[272] up in, I think this was 2005, and it's Matt, and he shows up.

[273] And he gets, they sit him, I don't know if he was the first intern or one of the only interns on the iPod team.

[274] They sit him next to the printer cube.

[275] And like, they basically make him do like all of the grunt work for, for the iPod team.

[276] And Matt, like, loves it.

[277] There's, he does a great, he does a great to entrepreneurial thought leaders talk with at Stanford a couple years after he started Nest and talks about this and how like he was just so happy to be working at Apple, so happy to be working on the iPod team.

[278] He was like fetching printer paper.

[279] He was traveling around the world handling logistics for like installing firmware on the iPod shuffle and all this stuff.

[280] So he makes a big impression on Tony.

[281] And apparently at the end of the summer, Tony gives him a cash bonus for his work during the summer, which like the Apple and the iPod team had never done before.

[282] Matt was the only person to have this happen.

[283] So he graduates.

[284] He comes back to work for Apple and for the iPod team, right as Tony is getting promoted to being the head of the whole thing.

[285] And this was in 2006.

[286] And at the same time, this is when the iPhone is starting to get worked on within Apple.

[287] And this is so cool, reaching back to, other of our episodes here.

[288] And it was fun to read about this.

[289] There, as is now kind of widely known, there were two competing projects to become the iPhone.

[290] Purple 1 and purple 2.

[291] Yeah.

[292] And so I think the iPod, I think Tony's was Purple 1.

[293] And it was, the plan was they were going to take the iPod software and hardware and push that towards a phone.

[294] And so Tony, Matt, everybody's working on that.

[295] And then competing within the company, Steve also had Scott Forstall take OS10 and try and shrink that down to fit it onto something the size of a phone.

[296] And famously, the direction that Tony goes is using the iconic click wheel for the iPod.

[297] And that's the primary interface to the phone.

[298] And Scott goes with the touch interface.

[299] And this is all now talked about when the 10th anniversary of the iPhone happened.

[300] happened last year, both Tony and Scott, you know, did a bunch of interviews and talked about this.

[301] And apparently it was like pretty bitter rivalry within the company between these two teams.

[302] I bet.

[303] It's interesting, too, thinking about like, you know, now when we reflect on like Apple's revolutionary interface, it's multi -touch.

[304] Like that they invented this incredible capacitive touch thing that is like the dominant way that people interact with technology now.

[305] But they had already done that once before.

[306] Like, Tony and team with the iPod, the click wheel was completely revolutionary.

[307] Completely revolutionary.

[308] You know, compared to, like, the Rio players and the Walkman that came before it, like, it was a completely different experience.

[309] And, you know, companies rarely have, like, that dominant of an innovation twice.

[310] Or, and you could argue multiple more times after that, too.

[311] Yeah.

[312] It's pretty amazing.

[313] And it all comes from different people within Apple.

[314] and so obviously Scott Forrestle's team with the multi -touch wins the battle the battle of the code name purple iPhone to future the iPhone and this is this was just shocking when I saw it we're going to link to this in the show notes so if you watch the demo in January 2007 when Steve Jobs announces the iPhone like probably the most famous Steve Jobs moment in history the When he's walking through how the phone app works and he's going through the favorites, he's showing how you can add favorites, the favorites tab, and it's all visual, and this is all new.

[315] And then he talks about like, well, and, you know, it's easy to remove somebody.

[316] And he removes a contact from his favorites.

[317] The contact he removes is Tony Fidel.

[318] No way.

[319] Cold -blooded.

[320] it's brutal and of course nobody nobody knew but apparently you know there are a bunch of interviews now afterwards now this is all come out that like all the engineers at least on the iPod team like knew that that like they knew exactly what that meant and so as as you know foreshadowed by Steve in the demo within the next couple months Tony is gone from Apple and and so he's it's it's now late 2007 2008 he's left apple uh his wife who he had met at apple uh they they both leave and they're like all right we're we're done with this like this is this is too much we're going to spend some time with our kids they have young kids they do two things one uh as you mentioned tony'd always love skiing he loves taho uh they decided they're going to build their dream vacation home in taho uh and they're going to travel all around the world make up for all this time they'd spent you know at apple working super hard for the last 10 years um so they start they start building the tahoe house um and uh and then they're traveling around the world they start spending a lot of time in paris they end up buying an apartment in paris um but when they're working through the tahoe house tony's like he he's kind of like going back to his grandfather and like as he talks about it and like you know tinkering wanted to be involved with everything you can't help himself and he's like all these products everything that's going into the house, it's all, like, total BS.

[321] Like, these things suck.

[322] Like, I can do so much better.

[323] So he's, he's thinking about that.

[324] He also wants the house to be super green and energy efficient.

[325] He's finding it really hard to do that.

[326] And he ends up one day he, when he's back in the valley, and he's from Paris, and he's working on the, on the Tahoe stuff, he gets lunch with his old intern with Matt.

[327] And it turns out that Matt had also bought a house recently in the valley and and the house was like from the 70s and had all this old you know 70s style equipment in there and Matt's also trying to kind of retrofit it having a super hard time and Matt's like you know he's having lunch with his like boss's boss who he was the internies like we should start a company together which which is we got to do this that is the strangest feeling after you leave a company and someone was like a mythical person from on high that you only saw speak to a thousand people and you know you may have had one or two interactions with but like then to just like all the pretense is gone because you've both left the company and you have this happened to me just a couple times and you're like oh my gosh like that it's weird to collapse all those levels of management and then just have like a human to human relationship with someone yeah i mean you're talking about a guy who was literally once in steve's jobs favorites on his iPhone so so tony's like yeah i don't know i'm kind of enjoying this you know paris thing But, you know, maybe, maybe, like, you work on it and you see, see kind of what's there.

[328] So Matt throws himself into this.

[329] He's still at Apple.

[330] He starts doing a ton of market research.

[331] He gets totally excited.

[332] They're doing it too.

[333] They're talking to installers.

[334] They're going and they're looking at homes.

[335] They end up talking to somebody in the EPA who's done a lot of thinking about how thermostats can influence, you know, energy consumption.

[336] Matt was still at Apple during this.

[337] And Matt was still at Apple doing this.

[338] and so he's pumped he's trying to get Tony excited and then supposedly as the story goes told by Tony one day he's back in Paris he's just dropped his kids off at school I think they're at a French preschool and he's walking along a bridge by the Louvre and he looks at the Louvre and he thinks about all the great stuff and great creations in there and he's like you know what I'm not done I want to get back in it and so he calls Matt up from a bridge over the sand what a setting right there what a setting and he's like i'm in we're doing it um so uh so matt leaves apple at this point rents of course a garage in palo alto and starts uh starts tinkering on on stuff um and apparently in those early days like nobody even knew that tony was involved they wanted to be super super stealth um so it was just matt uh tony moves back to the valley in june uh he and his I've moved back, he becomes CEO, and they decide that they're going to name the company Nest because the goal is, I don't think they've even landed fully on doing thermostats yet, but they want to reinvent the home, and they're talking about the, like, what can we call the company?

[339] They're talking about the old MTV show, Cribs, and they start riff it on that, and that's how they come up with Nest, apparently.

[340] They should have just called it Crib.

[341] I know, they should have called it Cribs.

[342] Maybe it would be, you know, they would be doing better in Google, but.

[343] Whoa, David.

[344] Let's, let's, you know, we're not at that part yet.

[345] We're not at that part yet.

[346] So they recruit a killer team from, from Apple, folks they'd worked with.

[347] They recruit some folks from General Magic.

[348] And then they make one really key hire.

[349] They're able to land Matt's thesis advisor at, from CMU.

[350] It's a woman named Yoki Matsu who is a pretty incredible person.

[351] So in a couple of years since Matt was at CMU, she'd left academia to co -found Google X with Sebastian Throon.

[352] She was a robotics expert at CMU and then actually at the University of Washington in Seattle.

[353] And so she co -founds Google X with Sebastian Throon.

[354] She also gets awarded the MacArthur Genius Grant for her work.

[355] And she'd been at Google X about a year.

[356] and Tony and Matt are able to recruit her away, and she joins as VP of Technology in the super early days at best.

[357] And then Sebastian, he's like, of course, interested by this.

[358] So he ends up getting involved.

[359] He becomes an advisor to the company as well.

[360] So there's a lot of momentum here.

[361] While he's still running Google X?

[362] While he's still running Google X, yeah.

[363] So September of that year, 2010, there is a $9 .5 million series A from Kleiner Perkins and Shasta.

[364] and then they get to work.

[365] At this point, they've decided that the thermostat is their entry point into the home.

[366] They want to build a whole generation of both products, hardware products, to make the home more intelligent, but also the software layer and the operating system that's going to bring it all together.

[367] So they raise their Series A. And then apparently, in early 2011, so they don't ship the product until they take a whole year, October 2011, they ship the product.

[368] In early 2011, though, Sergey Brin, the Google co -founder sees an early demo and an early version of the thermostat and apparently he's blown away.

[369] He thinks that like immediately this is going to be the next, you know, after smartphones, the home is going to be the next operating system.

[370] He wants to acquire the company right away.

[371] And, uh, and the company said no. So that was the first time Google tried to buy the company.

[372] Well, perhaps my grade at the end of this episode would have been higher if it was bought at that stage.

[373] Well, we may be.

[374] We'll have to save it for what would have happened otherwise.

[375] That's right.

[376] And so it's worth like touching on, you know, now this doesn't seem as revolutionary.

[377] Like, of course, the smart home, you know, it's in many news stories.

[378] There's many great companies.

[379] It's a lot of funding around this now.

[380] Clear ecosystem plays with Google Home and Alexa and all that.

[381] This is ridiculous at the time.

[382] Like I remember seeing their landing page and it's like it's Apple -esque and it's beautiful and it's got the thermostat on it.

[383] and it's, you know, announcing, like, at some point, we'll ship this thing, and you can get information on updates here.

[384] And just the media cycle around this was just ripping it apart.

[385] Like, this is the peak of Silicon Valley, you know, buying their own BS.

[386] Are you kidding me?

[387] Like, this is not innovation.

[388] Like, really thermostats.

[389] Thermostats is the next frontier.

[390] And it was just kind of prescient.

[391] Yeah.

[392] Well, and I feel like there's a lesson here, because the same thing happened with Rover, which started right around the same time, almost exactly at the same time.

[393] And there were all these tech crunch articles like Airbnb for dogs.

[394] Like this is a sign of the apocalypse, Silicon Valley is over.

[395] Well, and people thought Aaron, the CEO of Rover initially, people thought he was nuts for going and doing this.

[396] Total nuts.

[397] Yeah.

[398] I mean, Aaron had a super successful career at, actually, somewhat similar to Tony.

[399] Although I think Aaron's personality and Tony's personality are polar opposites, probably.

[400] but Aaron was the youngest GM at Microsoft ever.

[401] He came from a quantitative when Microsoft acquired that and that he would go work on Airbnb for dogs.

[402] It's crazy.

[403] And yet both of these companies, you know, turn out to be quite important.

[404] Fidel from reinventing consumer electronics to becoming a thermostat maker.

[405] Yeah.

[406] Well, if somebody makes fun of your startup, you should probably take that as a compliment.

[407] If people care enough to make fun of your startup.

[408] Or at least it's still, likely to fail but if people aren't making fun of it you know for sure it's not going to be huge yeah so the next year October 2011 as I mentioned they launched the product nest learning thermostat there's a ton of buzz ton of hype they raise a 55 million dollar series B which remember this is back October 2011 like we're not yet in the steroid era of you know, like super rounds for startups.

[409] This is one of the early, like a $55 million series B is a lot for a company that just launched a product.

[410] But it's all on the back of this hype and the quality of the team.

[411] And the fact that they're making, you know, expensive hardware.

[412] That's a, yeah, startups are making, yeah, I mean, it just feels like it, it's a super capital intensive business to do that R &D in production.

[413] Yep.

[414] It definitely is.

[415] And so the lead of their series B is, you guessed it, Google Ventures, one of the first big investments out of Google Ventures, which at that point was a relatively new operation within Google.

[416] And they would actually, they would end up owning at the time of acquisition foreshadding a little bit 12 % of the company before even buying it.

[417] Yep, yep.

[418] So that was at the end of 2011.

[419] 2012, they launched the second generation of the thermostat, which is compatible with.

[420] with a bunch more homes and wiring systems gets up to, I believe with that version up to like 85, 90 % of home wiring systems are compatible with the nest, the second version of the nest.

[421] Then January 2013, they raised their Series C, they raise $80 million at an $800 million pre -money valuation.

[422] And it gets announced that they're shipping on the order of 50 ,000 thermostats per month, which at a price of $250 per thermostat puts them well over $100 million annual revenue run rate.

[423] Now, as you pointed out, Ben, this is hardware revenue with a bunch of costs and expenses associated with it.

[424] This isn't Facebook here.

[425] This is not Facebook, but still, like, that's pretty impressive, you know, about 15 months after launching the product and, what is that, like, you know, less than three years after starting the company, or just about three years from starting the company.

[426] no, less than three years, you know, at a $100 million revenue run rate.

[427] And I believe not profitable.

[428] I think they went all the way through the acquisition and years after.

[429] Maybe even today, it's not totally clear, but not profitable revenue.

[430] Yeah, not totally clear, but it seems unlikely, especially given how much money they were raising.

[431] Presumably they were doing that for a reason.

[432] And so then later in 2013, they launched the second product, which was hotly anticipated.

[433] they'd always talked about, you know, the vision of being a fully connected home.

[434] And it's funny, like the same thing happens.

[435] It's a smoke detector, smoke detector and carbon monoxide detector.

[436] And everybody's like, smoke detector.

[437] Come on.

[438] This is what this is next, Nest's next product.

[439] And we'll come back to the smoke detector later.

[440] But that was October 2013.

[441] In January 2014, so a couple months later, it gets reported that Nest is now going to be raising a monster round from DST, from Yuri Milner's investment firm that invested in Facebook and many others, they're going to be raising over $200 million at a $3 billion valuation.

[442] But instead, on January 13th, it gets announced that Google is finally acquiring the company for $3 .2 billion in cash.

[443] But Ben, as you pointed out, they already owned 12 % of the company.

[444] Yeah.

[445] And at this point, still only 280 employees.

[446] I mean, to be purchased for that price, making hardware with supply chain and, you know, full operations logistics, you know, retail on their website, channel to retail partners, full R &D team, only 280 employees.

[447] It's, it's impressive.

[448] I mean, it's 11 billion bucks per employee.

[449] It is, it is.

[450] And, you know, remember, too, like, you know, you mentioned channel, like that means, you know, best buy.

[451] that means Lowe's, that means Home Depot.

[452] Right, right.

[453] That means not just building the relationships with those retailers, but, you know, getting product in shelves, keeping them stocked, you know, all this stuff.

[454] It's not easy doing this stuff.

[455] Totally.

[456] So it's announced and the terms of the deal are pretty interesting.

[457] So Nest is to remain wholly independent.

[458] So Google is still Google at this point.

[459] There's no alphabet yet.

[460] But they announced they're very clear this is going to be like YouTube going to, you know, Tony's going to remain CEO, the management team.

[461] Matt and Yoko and everybody else are going to stay independent, going to have their own offices.

[462] Which is very much a Tony demand.

[463] Like we're not getting bought by Google to be integrated and me to have a boss.

[464] Like I get my own P &L.

[465] I get my own budget.

[466] You know, we have our own office.

[467] And remember, of course, you know, Tony is a is the veteran of first general magic and then Phillips and then Apple where he's seen all these corporate politics play out and, you know, he's kind of, he's had a lot of success, but he's also ultimately lost the game in every case.

[468] And so supposedly there was a term in the deal.

[469] It's not public, no way to know, but it's been reported that there was a term in the actual documents that Nest was given a five years runway, end up completely independent of any financial goals.

[470] So essentially as much financial resources as they wanted to, with the goal of building, like, the OS layer hardware and software for the connected home and no accountability for any sort of profitability or revenue growth, supposedly, in the deal.

[471] And then, is it later that they wanted them to hit $300 million a year of revenue?

[472] There was some target set there at some point.

[473] Yes, yes.

[474] Okay.

[475] So that was January 2014.

[476] That was basically the high water point for Nest, or at least, a nest in Google's relationship.

[477] And here's an interesting data point on that, too.

[478] So from Google's 10Q that they filed with the SEC a few months after this happened, they talk about how they came to value the deal.

[479] And so they say the fair market value of our previously held equity interest was $152 million, so that's that 12%.

[480] $51 million was cash that they acquired.

[481] so from the last fundraising round or however they were generating cash at NEST 430 million was attributed to intangible assets 157 million to net liabilities assumed and $2 .35 billion attributed to Goodwill that is primarily for the synergies expected to arise after the acquisition.

[482] So, you know, this is not a multiple of current cash flows or anything like that.

[483] This is a we believe there are serious, serious synergies with Google.

[484] And that's why we're doing this.

[485] Yeah.

[486] And interesting.

[487] Did you say $51 million in cash at the company that acquired?

[488] Yeah.

[489] Okay.

[490] So, and they had raised at that point about $145, $150 million.

[491] So that means they'd burned roughly $100 million on the product.

[492] Now, we don't know what their cash flow was like at the moment in time they were acquired, but I think it's safe to assume they were not profitable and burning a lot of cash.

[493] Right, right.

[494] Even with the relatively small amount of employees, as you mentioned.

[495] Okay, so that was January, 2014.

[496] Now the bad news starts.

[497] April 2014, they have to halt sales of the second product of Nest Protect of the smoke alarm and carbon monoxide system because apparently there was a way for the alarm to accidentally be disabled.

[498] you had one job to do and and so it's a pretty bad thing if your smoke alarm doesn't go off so they have to recall all the units that are on the shelves at all their retail partners fortunately for units that are already installed they're able to do an over -the -air software update but but not a good way to to start under under new ownership of Google then the next thing that happens to start there with not protecting your customer's homes.

[499] Ew.

[500] In June 2014, Nest acquires DropCam, which was a very cool company that made Wi -Fi -connected cameras that you could drop around your home, hence DropCam.

[501] And apparently Google CorpDev, Google the parent company, had been pursuing this deal for a while, And then kind of send it over to Nest and said, hey, we want to acquire this.

[502] Like, why don't we make this part of Nest?

[503] And Ness says, okay, they acquire it.

[504] And it's basically a complete disaster from a cultural standpoint.

[505] Didn't the founder leave, like, immediately?

[506] Well, not immediately.

[507] But there's even more drama than that.

[508] So Dropcam, the founder, Greg Duffy, he had worked for Zobney, which is inbox backwards.

[509] That was one of Y Combinator's first companies.

[510] in one of the first batches of YC.

[511] And that was, like, reportive, right?

[512] Like, it was like a Gmail plug -in CRM type thing.

[513] Yeah.

[514] Yeah, it was like a, I think it was like an outlook plug -in CRM.

[515] And I actually got it confused with Plaxo, which was trying to do the same thing, which was Sean Parker's startup after Facebook, or no, before Facebook.

[516] Anyway, so that's kind of the DNA that Greg, Duffy, the founder of JobC came from, was like right out of school, joins this YC company.

[517] first batch, he's there for two years, he starts DropCam.

[518] A lot of the folks at Dropcam would then go on to, like, plenty other, like, you know, new startups in the Valley afterwards.

[519] So it's kind of a young, like, you know, scrappy team.

[520] Super different from like the Apple DNA that Tony and Matt are bringing to, are bringing to Nest.

[521] So basically nothing happens.

[522] They had this roadmap.

[523] And the next major product that Nest was working on was a security product like a home alarm system and drop cam had also been working on a security product uh i think called tabs um but nest put drop and that was like pretty close to launching nest puts drop cams security product on indefinite hold moves everybody over to working on the nest product and it just keeps getting delayed and delayed and delayed and doesn't ship and so like a year goes by and uh and and Dougie, the job cam CEO, he's really frustrated.

[524] He sends a memo to Larry Page saying that Tony is mismanaged.

[525] It always good.

[526] When someone feels to email the CEO directly.

[527] He email the CEO.

[528] He emails, this is all reported on and then later published.

[529] He emails Larry Page and basically says Tony is completely mismanaging NAST.

[530] He should be fired and I should be the CEO of Nasta.

[531] Oh, God.

[532] We've seen this story before.

[533] Yeah, and it predictably does not play well for anybody, really.

[534] First of all, Greg, so Greg pretty immediately after that leaves the company, Larry sides with Tony.

[535] And as this story gets even worse, so Greg's leaving, and Tony then is interviewed in an article by the information, and he badmouths not just Greg, but the whole drop cam team, and says that they were, quote, not as good as we hoped.

[536] It was a small and not very experienced team.

[537] So just completely throws them under the bus.

[538] Not good, not pretty.

[539] In response, Greg rates a media article, which is still out there, basically taking all of his complaints that he emailed Larry about with Tony and Nest and publishing them for the public.

[540] And implying that Tony took essentially all of Steve Jobs.

[541] his personality traits, the yelling and the screaming without his product sense.

[542] That's right.

[543] I remember that.

[544] Yeah.

[545] Fun stuff.

[546] So once again, we're not here to a pine one way or another unacquired, but certainly made for a lot of drama.

[547] So I'm here for.

[548] I mean, speak for yourself, David.

[549] So now what you were referring to earlier, Ben, all while this is going on, another big thing happens at Google.

[550] Two big things, actually.

[551] First, they hire Ruth Porat to join as CFO.

[552] And Ruth had been CFO of Morgan Stanley before coming to Google.

[553] And a big part of Ruth's coming, you know, as was talked about, and I think it's played out in practice, is bringing a lot more structure to Google and particular financial discipline.

[554] So she's part of the whole sort of restructuring of Google into alphabet.

[555] And that happens towards the end of 2015.

[556] Now, apparently when that happens, all of those agreements between Nest and Google got redone.

[557] So the five -year runway, the lack of financial accountability.

[558] If it existed in the first place, it certainly doesn't anymore once Nest gets pushed out as its own independent company under Alphabet.

[559] And part of this, too, if I recall, was that during the acquisition, there was super, super heavy incentives for the management team and key engineers to stay at Nest, right?

[560] Like, they, I think they couldn't, they couldn't sell their, no way, it was a cash deal.

[561] So maybe they just didn't get Google Stock Awards or something for an extended period of time.

[562] Or it could have been S -grade.

[563] Hmm.

[564] Hmm.

[565] But yeah, I do remember, you know, there was, it was an abnormal, sort of abnormally long retention period.

[566] And I suspect that is definitely the case, because now some, now some just weird behavior starts, starts occurring.

[567] So at the very end of the year, there start to be rumors that Alphabet's looking to sell NEST, that NEST hasn't been able to ship products.

[568] They're not realizing their vision of, you know, what Google and Alphabet really care about, which is like the operating system for the connected home.

[569] And Tony, of course, is really unhappy about this.

[570] But for whatever reason, maybe retention reasons, he stays at, he stays at Google.

[571] He starts it's also working on the Google Glass team on redoing Google Glass to be, you know, less dorky.

[572] Literally looking to maintain the same W -2 so he gets whatever bonus needs to happen.

[573] You said it, not me. And they also, they got so serious into trying to sell nest, it had like a project code name called Amalfi, Project Amalfi.

[574] Hmm, interesting.

[575] I didn't see that.

[576] Yeah, failed to find a buyer, though.

[577] Yeah, wow.

[578] And then the icing on the cake, the kind of last straw on the camel's back here is in May of 2016, a Nest employee files a complaint against Google with the National Labor Relations Board saying that Alphabet and Nest fired him because he was posting on Facebook about all the leadership issues at Nest.

[579] So it's just a firestorm.

[580] And then the next month in June 2016, and Tony finally leaves Nest.

[581] And since then, you know, whether all of these problems were on Tony, on Google, on Greg and Dropcam, who knows, probably some responsibility is shared amongst all of them.

[582] But things do start to turn around at Nest.

[583] So they bring on a new CEO, Marwan Farwaaz, to replace Tony.

[584] And Marwan came actually first from the cable industry, but then he was part of Motorola and part of Motorola when Google owned Motorola, flashing back to our HTC episode and Android and everything here.

[585] And he was part of the division that made set -top boxes and cable modems within Motorola.

[586] And so he worked with Rick Osterlo, who was head of Motorola under Google, now has come back and is Google's SVP of hardware.

[587] So they have a working relationship.

[588] And once he joins, things start to move a little farther.

[589] So first big thing that happens, which we're definitely going to talk about in tech themes, Google itself launches Google Home in late 2016, which is their Echo, Amazon Echo and Alexa competitor.

[590] Now, interestingly, totally separate from Nest.

[591] So it was Google, Google's hardware division that worked on that, not Nest.

[592] Which when you start reading blog posts that are, trying to like rewrite history a little bit.

[593] They talk a lot about sort of the shared DNA and collaboration and how we couldn't have done it without working together.

[594] And, um, I think over time they became much more integrated.

[595] But yeah, certainly, uh, was a little odd when Google Home got announced and it had nothing to do with Nest.

[596] Yeah.

[597] Yeah.

[598] Um, but in the meantime, Nest, so Nest finally ships a new camera, uh, new drop cam product, uh, Nest cam outdoor.

[599] And then they follow that up with NestCam IQ, which is actually using, starting to use some of Google's expertise here.

[600] They use machine learning to recognize faces in the drop cam.

[601] So for security features, you can tell if it's someone who's supposed to be in your house or not supposed to be in your house.

[602] Late last year, they launched a lower, a lower priced version of the thermostat, I think called the Nest E, thermostat E or something like that.

[603] And then they also finally launched the security product, Nest Secure, after a bunch of delays, along with Nest Hello, which is a smart doorbell camera, sort of like the ring doorbell.

[604] And then all of that happens.

[605] Sort of like.

[606] Sort of like.

[607] Inspired by.

[608] All of that happens.

[609] We mentioned at the beginning of this whole history, Matt's thesis advisor at CMU, Yoki Matsu, who was the VP of Technology, when all of this drama really started going down, she actually left Nest in 2015, and she went to Apple, of all places.

[610] And then in 2017, she left Apple, came back to Nest, rejoined Nest as CTO in 2017, right before they launched the ML version of the camera, and now she's Nest CTO again.

[611] Wow.

[612] Man, the horse trading here is pretty amazing.

[613] Like everybody cycles through Apple and Google in some way.

[614] In some way.

[615] And general magic.

[616] Yeah.

[617] Well, let's let me take a minute here to talk about some of the financial numbers that evolve throughout this time and sort of how is Nest doing today and how did it, you know, how was it doing sort of from 2014 on.

[618] You know, it's difficult to know exactly.

[619] There's some, there's some leaks that have happened.

[620] So we know those things.

[621] there's things we can infer by looking at the large percentage of Google's other bets category, which come from Nest revenue.

[622] And so let's dive into those a little bit.

[623] So I mentioned there was a mark that Ness was supposed to hit that was $300 million a year in revenue.

[624] In 2015, they did hit that.

[625] They had $340 million in revenue, as reported by a leak out of the division.

[626] And that includes the drop cam revenue.

[627] so a lot of people were speculating they probably weren't going to hit that alone but having drop cam helped them sort of bolster and and hit that goal um you know things uh it was an expensive division to run it stayed very separately they've got all this turmoil so you know in 2016 they were um they were looking to explore a sale it didn't happen um so okay let's look at what in in 2016 2017 um what actually happened in the other bets category so for the first nine months of 2017, it did quite well.

[628] The revenues grew by 45 % in other bets up to 794 million and are on pace to exceed a billion in 2017.

[629] It's pretty fair to assume that happened.

[630] And it was reported in 2016 that Ness had contributed about three quarters of the other bets revenue.

[631] And while the other segments of other bets are growing, there's certainly nothing revenue generating on the scale that Nest is revenue generating.

[632] So, you know, we, we, we, And YouTube is not included in other bets, right?

[633] Correct.

[634] I believe that rolls up under Google.

[635] I think that's right now, but I haven't actually read Google's 10K in a while.

[636] I'm not sure.

[637] It's definitely not other bets because it generates a ton of revenue, at least as far as we could tell a year or so ago, it was about a break -even business at YouTube.

[638] But despite the growth in revenues, these businesses and other bets continue to lose money.

[639] So, again, in the first three quarters of 2017, they reported $2 .44 billion in operating losses, and Google's operating profit rose by 20 % to over $24 billion.

[640] So if you look at, you know, the other bets is losing $2 .44 billion.

[641] Google's operating profit as an entire, you know, or actually just the Google division, is $24 .1 billion.

[642] So, you know, losing a colossal amount of money over and other bets, you know, that's a lot.

[643] largely attributable to Waymo and a lot of the other sort of major R &D things they're doing.

[644] But, you know, I...

[645] But you've got to imagine NEST, too.

[646] Yeah, yeah.

[647] Because there's, you know, three, four new products coming out at a pretty rapid clip here from NEST and a lot of hardware R &D to get there.

[648] Yep.

[649] But it is, it is, you know, we should look and say conservatively that Nest is doing over a half a billion in revenue now.

[650] Yep.

[651] annually and that's and that's and that's gotten better and you know the last year i think looked really promising for them um they're starting to do more integration with google home but they still feel largely like two separate ecosystems and um in fact nest uh nest integrates quite nicely with Alexa and it's kind of an accessory to the oh that's hilarious lady a ben yeah lady a that's right that's right i woke her um but yeah you know i think uh um We'll get a lot into talking about the sort of vertical horizontal strategy there, but NEST products doing well.

[652] Is it contributing to the operating system of the home effort on Google's part?

[653] You know, TBD.

[654] Well, I mean, this is the perfect seg into the finally, the end to the history and facts here, which is that in the first week of February in 2018, there is an announcement that Nest is getting acquired again.

[655] It's just getting acquired by Google, moving from a wholly separate division under Alphabet in the other bets category, being integrated back into Google as part of the hardware team led by Rick O'S to Lowe.

[656] And there's going to be much tighter integration now between Nest, all of its suite of products, and Google Home, and everything that's an Android and everything that's going on from a hardware standpoint within Google.

[657] interestingly so Matt Rogers the famous co -founder who actually seems like a really awesome dude was he stayed at Ness throughout all of this the day after that announcement he announced that he was leaving so he'll now be leaving Nest and both founders are gone and it'll be fully within Google he's transitioned to a full -time investor right he's going to be in venture I think that's the that's the plan for now now interestingly Tony so when Tony left left Nest back in the summer of 2016 he he resumed where he was before his starting nest he moved back to Paris so he and his family moved to Paris and he's been very vocal that he's going to live in Paris you know indefinitely now he has started his own venture investing practice with his own money he hasn't raised any outside money called future shape and he's all in on on Paris and very, he's given a bunch of interviews, very, very anti -Sylican Valley.

[658] And you can sort of imagine that.

[659] I mean, he's had such negative experiences with the biggest companies in the valley.

[660] So it'll be super interesting to see how this all plays out.

[661] You know, he's still, he's funding companies in Europe and in the U .S. and in the valley.

[662] Some of his portfolio companies have had run -ins and fights with Apple, with Google.

[663] So he's still very much part of the scene, but hanging out in Paris.

[664] Wow.

[665] Leave the gloves on, but just hang out far away from the fight.

[666] Yeah.

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[688] All right, acquisition category.

[689] All right.

[690] This one might be even harder to tell than the history and facts here.

[691] Yeah.

[692] I mean, so what it comes down to for me is what Google said they were going to do and what they did.

[693] And so, you know, I mentioned earlier and kind of foreshadowing my feelings about this.

[694] Massive amount, you know, $2 .35 billion of the $3 .2 billion of the purchase price was attributable to synergies, you know, to we believe that, you know, we'll combine these businesses in some way and it'll bolster our existing business.

[695] So when you start walking through Google's existing business, it is we make a ton of money on search ads because when people have intent to do anything on the internet, then they go through Google and businesses pay the Google tax to acquire those people as customers.

[696] And so that's their business.

[697] It's to be horizontal and broad and touch as many people as possible and get as much data about all people as possible so that they can more effectively advertise to them.

[698] It's Google's core business.

[699] It's super different than Apple's business of making hardware differentiated by software that they charge a premium for.

[700] You know, it's it's not that business.

[701] Nest was making sort of the high -end hardware bets that Apple had made.

[702] I mean, Tony came from that business, understood that really well.

[703] And so when I look at this, this, this, synergies, you would think that what they do with Nest is integrated into Google and help build that corpus of data and that ecosystem of being a Google user so that they can better have their core business and advertise.

[704] What they actually did was, you know, as a separate business unit for this long, try and hedge their bet and say, where does our next, you know, multi -billion or multi -hundred billion dollar innovation come from?

[705] Maybe it's an Apple -like business that exists next to a Google -like business in this subsidiary portfolio called Alphabet, and it actually is not a synergy with the Google business that feeds data in there.

[706] And it's a, it's the separate thing.

[707] And it is realizing Tony Fidel's vision.

[708] But they flip -flop back and forth on it so many times that I think that $2 .3 billion was just super value destructive.

[709] They, they, you know, if they were going to build, if they were going to have Nest and do with Nest what they did, they should have acquired it for, you know, a couple billion less, um, or they should have gone harder at this strategy of synergy.

[710] So I'll say what they ended up buying was a business line and massively overpaying for it.

[711] Are you saying there's a vertical and horizontal issue?

[712] Yeah.

[713] I mean, I think, I think to me, as I was thinking about this, like, and I believe me, we had a long time to think about it during that history and facts.

[714] Um, I think the, problem is that Google didn't really know what category they were buying when they bought it, right?

[715] And there's a compelling argument for each one, but make one and carry it out.

[716] Yeah, yep, yep.

[717] And if you think about how it started, like this whole relationship started, well, it really started when, you know, when, when Yoki, um, uh, when Yoki, um, uh, joined the company and Sebastian Throon was turned on to what was going on here.

[718] Um, and then when Sergey saw the prototype, you know, and I think what it seems like that Google got excited about, rightly so, is this idea of, like, this could be the next computing platform, you know, after, after smartphones.

[719] Right.

[720] And that probably was the right thing to get excited about.

[721] But I don't think they thought through, like, how to what the right way to attack that is.

[722] And I was thinking about this, like, the parallels between the Google Nest acquisition and the Facebook Oculus acquisition are like really apt, I think, because in both cases, like, what was what was hot at the time were these, you know, quote unquote Facebook style acquisitions of we're going to buy these promising companies.

[723] We're going to let them be independent.

[724] We're going to give them a ton of runway, you know, the Instagram style, the WhatsApp style.

[725] But I think the difference is like those worked because fundamentally those are not platform companies.

[726] Those are networks and services built on top of computing platforms.

[727] But what Oculus and what Nest were trying to do, they were trying to build new computing platforms.

[728] And when you're trying to do that, when you're trying to be a full, full stack hardware software OS company along the lines of Google or Apple, you need as much resources as possible.

[729] And you need like the best engineers in the world and the best product people.

[730] And if you're, you know, there's a hardware element, the best folks there, too.

[731] And so I think leaving them separate was kind of like not, not realizing the best vision.

[732] And now you see like Oculus is now integrated into Facebook.

[733] And Nest is, of course, now integrated back into Google.

[734] I think if you're going to make a platform play, you got to be, have the resources of a platform company.

[735] Yep.

[736] And there's there's one thing when I was doing research for this.

[737] There's a Stratory quote that's like just too freaking spot on not to not to use because it's a brilliant framework.

[738] so if you think about um if you think about what amazon did with alexa like they just hang on i got let me turn her off if you think about what amazon did with alexa they said there's going to be a home operating system and there's going to be a center control point for that and we believe it's going to be voice and so we're just going to build the central controller and then there's a whole ecosystem around it and they just went right through the middle right they said this is it This is the heart and soul of this thing.

[739] This is the digital hub.

[740] And when you look at what Google strategy was, it's, we don't know exactly how that ecosystem will play out.

[741] We know there's going to be an operating system of the home.

[742] This feels like a good vector into it.

[743] But what they ended up doing was kind of creating the side entry, the same way that Microsoft wanted to own the living room.

[744] And so they created a gaming console that fit into an existing market and tried to branch out from there.

[745] And so Ben Thompson's quote in Stratory, which I think is just a brilliant, brilliant.

[746] point is in any new market it pays off to simply aim for the sweet spot.

[747] Amazon Echo is unabashedly trying to be the key interaction point for an automated home.

[748] Nest is more of an attempt to slide through the side door.

[749] And it's so, it's such a simple way to think about it.

[750] Like if there's an existing market, you have to figure out how you're going to flank and an attack from sort of where you think the market is moving rather than where it is today and then Trojan horse your way into it.

[751] If it's a brand new market, like smart homes, people have been trying to make a smart home for 30 years and like it just hasn't happened.

[752] And we're in this era now with, with IOT in the home that it's finally here.

[753] It's a reality.

[754] And this is the timing is exactly right to do it.

[755] And so if you're going to do it, then just aim right up the middle, create the center control point.

[756] You be the bundler.

[757] And then, you know, then you own the ecosystem.

[758] And I think it's easy to say now by a couple of, you know, pundits who do a podcast, but like the, the, really hard to see at the time.

[759] And Google did sort of this side entry strategy.

[760] And, you know, now is doing the Google Home thing for their, so they're going for the central control point.

[761] But years later, lost a lot of market share, lost a lot of ecosystem development.

[762] And in fact, Nest, their own thing is integrating with, with their biggest competitor who's out ahead in the lead.

[763] Yeah.

[764] Yeah.

[765] Well, and I think I think it's also like all of the history and facts is instructive here that like the way if you're going for that straight down the middle the new operating system in a new market you need the res like startups are not best equipped to do that you need the resources of a big company and I'm thinking like back to Tony when he was launching the iPod at Apple like the iPod worked because of iTunes and the iMac and it was part of the digital hub right the iPod pod in and of itself there were plenty of startup mp3 player companies of all types but like apple worked because it had the whole ecosystem and the operating system um and and similarly you know with amazon and and lady a i won't i won't sit off here she's off now nice uh with amazon and alexa um you know it was all of the divisions within amazon that came together to build Alexa i mean one of one of my one of my best friends from undergrad was was an early PM on Alexa.

[766] And they were working on it for years before the first Echo was shipped.

[767] And he came from AWS.

[768] And a lot of the team, a lot of the early Alexic team and Echo team came from that part of the company, not to mention the Kindle and the devices and then all of Amazon's whole ecosystem.

[769] It wasn't like we're going to make a point product.

[770] It was from the beginning.

[771] Like, you know, this is a computing ecosystem.

[772] Yeah.

[773] And so like for Google and Facebook, with Oculus to then buy these companies and leave them, you know, independent, to me is like when you're, when this is the goal is, is not the right way to do it.

[774] Yeah, David, I think that's a great point.

[775] I was trying to think of counter examples and listeners, maybe you can come up with some and email us Acquired FM at Gmail .com.

[776] I don't actually, I was going to make the point of like, what, come on, startups can totally jumpstart an ecosystem.

[777] But a lot of times when you think about this, it is like the second or third innovation after a company already gets their foothold.

[778] It was when they start that ecosystem.

[779] You had a great point with the iPod.

[780] Even looking back with Microsoft, I mean, Windows was after they already had a strong foothold shipping DOS on IBM PC and a variety of other PCs.

[781] It's often the second or third swing is when you take a new ecosystem.

[782] When you build the platform.

[783] Yeah, and look at Facebook and Google, which have certainly become platform companies in their own right, but their first products were, you know, network.

[784] opportunities and network products, really, built on top of existing platforms, you know, on top of the web in both of their cases.

[785] Yeah.

[786] And it was only then after they had that, that they then turned it into a platform.

[787] Hmm.

[788] Hmm.

[789] And to put it into perspective, too, how much getting this head start that Alexa got really gives them an advantage from Google Home, there was a 2017 report.

[790] September that there was about 20 million echoes that had been sold versus about 7 million Google homes.

[791] Then over the holidays, Amazon announced there were tens of millions, so we should assume minimum 20 million sold over the holiday season.

[792] And so, you know, you're looking at, I don't know, 40 plus million compared to maybe 10 or 15.

[793] It's a pretty, you know, assuming they both keep growing on the same curve for a while.

[794] And, you know, Google doesn't do something that is like totally 100 % better and causes people to switch or to, you know, forget about Alexa.

[795] It feels like a winner's been defined here.

[796] And particularly friends who went to CES this year said freaking everything had a works with Alexa badge on it.

[797] Well, even like, you know, your lady A that keeps activating in the background, right?

[798] Like you've got it all in Sonos in your house, you know?

[799] Well, yeah, the cool thing.

[800] So personally, I'm not willing to make the bet yet on like, it's funny anyhow, like, Sonos lets you hedge because they are going to be rolling out Google Home.

[801] You can flip it back and forth between the two ecosystems.

[802] So I haven't committed yet.

[803] Oh, interesting.

[804] I didn't realize.

[805] Oh, yeah.

[806] Sonos has changed in their strategy.

[807] They decided to be Switzerland.

[808] Ah, interesting.

[809] But the Google Home on other devices isn't ready yet, right?

[810] I don't think so.

[811] And AirPlay 2 isn't out yet either, so Sonos doesn't, we'll start bundling in Airplay 2.

[812] I'm assuming not Siri, but we'll be able to work.

[813] in the Apple ecosystem a little bit.

[814] But it's interesting, like, it's such an important head start for Amazon and Alexa, right?

[815] Like, right now, they're the only game in town for third -party computing devices to use the assistant.

[816] Totally.

[817] Totally.

[818] All right.

[819] Well, I feel like related, you know, what would have happened otherwise is kind of in this camp.

[820] I think the interesting thing for me to think about is, like, would any of what we just talked about have been different?

[821] In terms of category and strategy, if, let's say that Sergei had gotten his way and acquired Nest in 2011 when it was still so young.

[822] Yeah, and it didn't have a strong, well, I mean, I already had Fidel.

[823] It's not like it didn't have a strong culture of its own.

[824] But maybe then, maybe Tony and Matt would have become leaders within Google.

[825] Yeah.

[826] Well, here's the thing is like, what we glanced over is like the innovation.

[827] for the home was voice like hands down that that that is the that's the bundle point for the the home yeah and nest wasn't there like nest was doing this very cool smart internet connected appliances thing and they'll you know they're let's say they developed 20 or 30 or those like at what how long would it have taken for nest to realize oh the center locustic control is putting a voice thing in the in the middle of the home and amazon figured that out and of course google had google assistant on the phones and sir and syria existed on iPhones but like actually it wasn't google assistant in it was uh whatever the okay google thing um the amazon was really the one to realize that that's that's how we win the home and so uh i'm not sure that either acquiring nest earlier or bundling nest into google instead of keeping it as its own thing earlier would have necessarily yielded google producing the google home one or two years earlier yeah although this is i was just thinking about this and looking back on my note to make sure I got the history right.

[828] If Google had acquired NEST in 2011, it would have been a very similar playbook to when they acquired Android in 2005.

[829] And Android, if we remember our history and facts correctly, when Andy Rubin was running it as a startup, the vision was not phones, but to be a Linux -based operating system for digital cameras, which sounds really simple here too, right?

[830] They had the right, they had the right technology and the right, you know, market, but the wrong approach to it.

[831] And then it was within Google that it, you know, has got reshaped to become Android we know today.

[832] These general magic guys are like 90 % of the way there, but just need a form factor pivot.

[833] Clearly, none of them can exist as independent companies.

[834] I don't mean that as a dig.

[835] Like, they've done amazing things.

[836] But I think it's all part of the same theme, though, right?

[837] Like when you're talking about building a platform, it's just so hard to do it as an independent company.

[838] Hmm.

[839] Well, you know, at the very least, I would say buying it earlier, there's two ways that this could have gone better for Google.

[840] Buy it earlier, so you pay less money for it, and then you can execute a similar strategy.

[841] Or bundle it in with Google and just have one strategy and understand exactly what you're building and why, rather than sort of making a separate new business line bet on it.

[842] the question I have no data on is like what happens to nest if Google doesn't buy them and I maybe I mean it would well they were raising that big funding round so they probably would have been able to continue sure but but do they come out with an Alexa Google home type thing like do they do they figure out how to be the ecosystem in your home or do they just become the best peripherals to integrate with someone else's ecosystem it's hard to do without AWS or Google Cloud Engine on the back end because so much of the voice interaction is driven by the server side, you know?

[843] I don't know.

[844] Tech themes?

[845] All right.

[846] Tech themes.

[847] Let's do it.

[848] Okay.

[849] So my first tech theme, which is just reminded me, this whole thing, as I was thinking about it, reminded me so much of, is the famous quote, the Steve Jobs quote, which he stole from, I'm blanking, Ben, you're going to remember the guy he stole it from.

[850] But, you know, if you really care about software, you care about hardware too.

[851] Yeah, the Alan K quote, you know, when you're talking about, when you're talking about computing platforms, like, it's not just software, it's not just hardware, it's not just services, it's all three altogether.

[852] And I think that's like, to my mind, a big thing that, like, who knows if Nested remained independent, if it could have gone after all that.

[853] but it was it was too focused on just the hardware you know and not enough on the software not enough on the services and not enough on the ecosystem altogether hmm that's a yeah that's a great theme and it's interesting too in the last couple of years how it's become not just hardware and software but hardware and services or hardware software and services and I noticed um you know and services are effectively software just running on a different different piece of hardware than coming down to yours.

[854] But earlier when I was saying, you know, Apple's business model is, is hardware that's differentiated by software.

[855] It's differentiated now by software and services.

[856] And it's so, you know, the game has changed.

[857] And the table stakes are, are now all three of those when it was just the two when Alan Kay came up with a quote.

[858] Yep.

[859] Yep.

[860] That's my first one I got.

[861] And then the other one we've also talked about, but which is, you know, in some ways, I think you could listen to what we're saying here.

[862] And if you buy it, it could be discouraging for startups.

[863] But I think it's actually just more like a lesson about how to, how to stair step as a startup.

[864] You know, it's borrow another Ben Thompson term, which is that you can't start with the platform in mind, but you can start with a product and a product that has a network effect.

[865] And then you can use that to then in the next generation bridge into the platform.

[866] And you've seen this.

[867] I mean, again, this is how Google, this is how Facebook started.

[868] As you pointed out, this is really how Microsoft.

[869] Microsoft started to, you know, Apple as well, all of them.

[870] Netflix couldn't start producing shows without having previously cheaply gotten all the rights to the other shows.

[871] And before that, have done the DVD distribution business to bootstrap the customer base.

[872] Like, you need to do a network effect product first, and then you can have a platform that you can build on top or adjacent to it.

[873] Yep.

[874] And I'm thinking again about Snap, right?

[875] Like, we haven't talked about Snap in a while.

[876] but we can certainly argue the degree of success here.

[877] But like, I think the strategy was right.

[878] Like Snapchat is a app with a very strong network effect.

[879] And then, you know, can they, they've built off that and then can they, can they leverage that into becoming a broader platform like they tried with spectacles unsuccessfully?

[880] but I still think there's something to what they're doing with AR versus what any of the other big platform companies are doing.

[881] You could argue that they are the most successful, you know, AR company out there right now, and will they be able to stare, step up?

[882] So anyway.

[883] Hmm.

[884] Hmm.

[885] Well, one for me was timing.

[886] I remember the first time I went and visited Microsoft before working there in, when did I go, 2010, 2011, seeing the smart home.

[887] And that was a thing that it had existed for like years and years and years.

[888] And there was like always this promise of getting to the smart home.

[889] But many companies had failed at delivering on that over the years.

[890] And one thing I've been sort of thinking to myself is like, why now?

[891] Like, why is it actually coming to fruition now?

[892] Why are there Sonos with Alexa littered around my house and, you know, I can unlock my front door with my phone and what is it that finally made it hit a tipping point where it's a real market now?

[893] And Nest nailed the timing.

[894] I mean, strategy would be damned.

[895] And maybe their strategy was just be the best peripherals and not on the ecosystem.

[896] but um you know they they really nailed it with they were about six to 12 months ahead of when people really wanted this stuff but they weren't five years ahead and they're they're really starting to hit their stride i think with uh with all the products that that people want um like i don't think people like people no longer move into a house and think okay i'm going to go get an ADT security system like people now for the first time and i think we're still in the early adopter phase, but it's like, well, of course I'm going to get something that integrates with my, you know, whatever my ecosystem is.

[897] I'm not just going to go with the status quo thing.

[898] So I don't know.

[899] Dave, what do you think?

[900] Is it like, is it cloud computing?

[901] Is it, why, why now?

[902] Why today?

[903] Hmm.

[904] Long silence.

[905] I don't know.

[906] I mean, this is why, uh, uh, I'm trying to think in retrospect, I think we can look back on it and we can say, sensors we can say certainly the smartphone was a big part about that you can like control your Nest from your smartphone and that existing.

[907] Because you wouldn't have cared before that you could control it from anywhere else because that anywhere else would have been like a website.

[908] Yep.

[909] And you know I think one of the piece of the positioning and functionality that Nest got really right was this idea of being a learning smart home device, not a smart home device.

[910] Not a smart smart home device like it learned from like when you were home and when you were not home and and all that stuff um so i think those are enabling factors but i but i also think like when when matt and tony started working on this in 2010 nobody could have seen that i mean you maybe you could have seen like the smartphone piece but like this is really like that to me what um what makes really great product oriented founders is that ability to take take some seemingly disconnected pieces, assemble it together just like Tony did in the six -week consulting stint with Apple for the iPod and say, we can take these pieces, put it together, this is why the timing is right for now, and why consumers will buy this.

[911] And it definitely worked.

[912] Like, I mean, they sold a lot of thermostats, you know?

[913] And I think it's like because of that vision.

[914] Hmm.

[915] Hmm.

[916] That's a good point.

[917] Any other tech themes?

[918] Uh, that's, that's what I got for now, but I think that's, that's a good, uh, good seg and degrading.

[919] Yeah.

[920] I mean, I'm so negative on this.

[921] Like, I don't know if anybody could tell.

[922] I think, um, it's a fine business.

[923] Uh, it wasn't the big play.

[924] They started doing the, the big play pretty late and internally and centrally.

[925] Uh, and they overpaid by a couple billion dollars for the small play.

[926] and it created a lot of turmoil and PR stuff and, you know, internal politicking.

[927] Like, I think this is a D. Yeah.

[928] Well, to me, thinking about grading, the biggest, the biggest opportunity cost here associated with this whole saga was being really slow to respond to Alexa.

[929] And like, I'm sure, you know, when Google Home finally did come out and was done primarily through Google and whatnot, you know, I mean, end to 2016, like, wow, that's crazy late, crazyly.

[930] I mean, not as late as the HomePod, you know, which is both late and terrible.

[931] It sounds like, I mean, good sound, but like terrible as a voice assistant.

[932] Hey, we'll see.

[933] We'll see.

[934] We'll see.

[935] Apple has a different strategy than Google and Alexa have here.

[936] So I don't know.

[937] if it's right or wrong, but I think it's distinct enough where I don't think it should be what people are trying to make it out to be, which is like, Apple releases their exact competitor with these guys.

[938] Right, right, right.

[939] Fair enough, but still, I mean, Homepot aside, Apple doesn't have a credible competitor to Amazon and the smartphone in the home either, you know, nor does Microsoft.

[940] Nobody does.

[941] So, but arguably Google should have been.

[942] Isn't there actually a Cortano piece of hardware?

[943] Like, there is actually some kind of thing.

[944] I just haven't.

[945] I said credible competitor.

[946] I'm sure Microsoft does have some sort of competitor.

[947] It's a competing product.

[948] But yeah, I think, you know, again, it's impossible to know, right?

[949] But, like, to me, the biggest miss here is not the money they spent on Nest, is not the corporate drama, is not all this stuff.

[950] It's like, why did it take until November 2016 for a Google home to come out, you know?

[951] yeah yeah so i uh i uh i think i'm i'm sort of with you too on this one not because i'm going to go agree with you on a d um not because nest is a terrible business not because uh tony and matt weren't super in fact it's probably a good business i mean it's probably good business and and yeah and like the product um innovation is great and you know um and i I think they do have a really solid team there, as we've talked about.

[952] But, like, it's not where Google needed to be competing.

[953] Yeah.

[954] I mean, from a financial analysis perspective, like, I do wonder, it's probably higher than a D if you're like, if you just think about, like, okay, in $20, if you pay $2 .3 .2 billion for something and presuming that their growth continues, like, when will that investment sort of pay back?

[955] And what will the, you know, if you look at it, like, out of $15 ,000.

[956] 20 -year horizon, like maybe it actually was a great investment, but I just think strategically for Google, wrong bet.

[957] Yeah, a lot of wasted time.

[958] All right, well, there we are.

[959] There we are.

[960] Nest in 90 minutes or less.

[961] Carvouts?

[962] Carvouts.

[963] So I started listening to my new favorite podcast this week.

[964] It is called Dubai Friday.

[965] And it is a weekly challenge show hosted by Merlin Man, Alex Cox, and Max Temkin.

[966] And Alex Cox and Max Temkin are from Cards Against Humanity.

[967] And Merlin Man is the famed author of the productivity blog back in the day, 43 folders.

[968] He's on a bunch of the sort of Gruber talk show type podcast.

[969] He's Hot Dogs Ladies on Twitter.

[970] He's got another couple of shows he's on a bunch of podcasts but he's pedantic quick uh brilliant and and like is very very into like productivity hacking and tools and stuff like that and it's like the the podcast is hilarious you you'll get almost no utility value out of it but it is like three very smart people who are very quick who are uh um you know just talking about like a lot of the things that uh apparently make me light up so So I highly recommend it if you like less serious versions of Acquired with less content, less utility, but like a lot.

[971] It's just three people who really enjoy each other's company, and it's really fun to listen to.

[972] We're not that serious here, I'm Acquired.

[973] No. We've gotten more serious, though.

[974] You listen to the early episodes, and you're like, did they even, like, Google it?

[975] Yeah, now we're, yeah, the opposite end of that spectrum.

[976] Well, give us some feedback in the Slack.

[977] Tell us what you think.

[978] That sounds awesome, though.

[979] Also, Merlin, man, what a great name.

[980] He's so good.

[981] Oh, yeah.

[982] It's an amazing name.

[983] He's got, and his vocabulary is as good as his name.

[984] Like, you listen to it and you come up with, like, just awesome ways to express feelings that you didn't realize you had.

[985] Well, my carve -out is a article by Mark Erick's in the California Sunday magazine, which I didn't, even though it was a thing until I found this link.

[986] But this is an incredible piece of reporting.

[987] It's very, very long, but it's called A Kingdom from Dust.

[988] And it's about the farming industry in Central California.

[989] And in particular, one farmer farming company, the wonderful company, which makes I think about 65 % of the world's almonds and pistachia, And pomegranates, like palm juice, remember, remember that stuff?

[990] Like, they make that.

[991] They have a bunch of other brands.

[992] And Halo, those little mini Clementine oranges things.

[993] Oh, yeah.

[994] You buy them by the little cardboard box.

[995] Yep, yep.

[996] They make those.

[997] And it's just this super, super in -depth piece about, like, the history.

[998] This couple, it's a husband and wife who owns it.

[999] They live in Beverly Hills.

[1000] They had nothing to do with farming before they started buying.

[1001] up all this stuff, uh, the environmental impact of everything, particularly through the drought in California.

[1002] Um, and like, it's insane the amount of water that goes into, well, first off, central California is a desert.

[1003] So all the water is, is, is pipe, either piped in from snowmelt or other parts of the state or essentially mined from the aquifer below the earth.

[1004] Um, and, uh, uh, the amount of water that goes into like one year's worth of, you know, almonds in the central Valley could be enough water for San Francisco for a decade.

[1005] And yet, like, there's, so it's this really good piece of, like, this husband and wife and company have done a lot of good things for the community there and a lot of philanthropy.

[1006] So it's very ambiguous.

[1007] I feel like the author set out to write a very negative piece, and there are very negative aspects of it, but, like, it's a very nuanced, balanced take.

[1008] So really, really good long read.

[1009] if you're looking for something about California and history and water.

[1010] Wow.

[1011] Cool.

[1012] I'll have to check it out.

[1013] Yeah.

[1014] Well, I think that's all we got.

[1015] Yeah, I think this might be our longest episode, but, you know, a storied history at Apple, Google, Nest, and basically talking about sort of what is the next frontier?

[1016] Like, what is the next multi, multi -hundred billion dollar business?

[1017] It deserves the time.

[1018] Indeed.

[1019] Our sponsor for this episode is a brand new one for us.

[1020] Statsig.

[1021] So many of you reached out to them after hearing their CEO, Vij, on ACQ2, that we are partnering with them as a sponsor of Acquired.

[1022] Yeah, for those of you who haven't listened, Vijay's story is amazing.

[1023] Before founding Statsig, Vijay spent 10 years at Facebook, where he led the development of their mobile app ad product, which, as you all know, went on to become a huge, part of their business.

[1024] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

[1025] Yep.

[1026] So now Statsig is the modern version of that promise and available to all companies building great products.

[1027] Statsig is a feature management and experimentation platform that helps product teams ship faster, automate A -B testing, and see the impact every feature is having on the core business metrics.

[1028] The tool gives visualizations backed by a powerful stats engine unlocking real -time product observability.

[1029] So what does that actually mean?

[1030] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

[1031] It's super cool.

[1032] Statsig lets you make actual data -driven decisions about product changes, test them with different user groups around the world, and get statistically.

[1033] accurate reporting on the impact.

[1034] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

[1035] There are like so many more that we could name.

[1036] I mean, I'm looking at the list, Plex and Versel, friends of the show at Rec Room, Vanta.

[1037] They like literally have hundreds of customers now.

[1038] Also, Statsig is a great platform for rolling out and testing AI product features.

[1039] So for anyone who's used Notion's awesome generative AI features and watched how fast that product has evolved, all of that was managed with Statsig.

[1040] Yep.

[1041] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's Statsig is awesome for that.

[1042] They can now ingest data from data warehouses.

[1043] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today.

[1044] You don't even have to migrate from any current solution you might have.

[1045] We're pumped to be working with them.

[1046] You can click the link in the show notes or go on over to stat sig .com to get started.

[1047] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[1048] Listeners, if you aren't subscribed and you want to hear more, you can subscribe from your favorite podcast client.

[1049] And if you feel so inclined, we would love a comment on Breaker.

[1050] And thanks so much for trying new things with us.

[1051] And appreciate listening to the show.

[1052] We'll see you next time.

[1053] See you next time.