The podfather, part iii

Brain scan

路The Economist Technology Quarterly March 9th 2013

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The podfather, part III Tony Fad ell helped revolutionise the music and phone industries. Now he is turning up the competitive heat in an entirely different field

"I

DON'T want the iPod to be my defining thing," says Tony Fa dell, the chief executive of Nest Labs, a firm that he co-founded in 2010 after leaving Apple.

"I'm all about peaking late in life." Mr Fa dell, who is 43, has already done more than enough to secure a place in Silicon Valley's pantheon of innovators. During his nine years working for Apple, he led the team that turned his novel idea for a digital-music player into the blockbuster iPod- and then went on to play an important role in the development of the mouldbreaking iPhone. These twin peaks will be hard to beat, but Mr Fa dell is convinced that he and his colleagues at Nest Labs can come up with other devices that w ill prove just as disruptive.

They have chosen to start with a household gadget that largely goes unnoticed. The Nest Learning Thermostat is a $250 web-connected device that is already on sale in America and Canada, and will soon be available in other countries. As well as letting people manually adjust their heating or cooling systems, it also learns their preferences. Its software monitors the way people turn a thermostat up and down at different times of the day over a period of time, and can then autom atically create a schedule based on their habits. The Nest, as it is known, also uses built-in sensors to work out when a house is empty, and then reduces the heating or cooling to an energy-saving setting or switches it off altogether.

This is clever stuff and explains why theN est costs much more than most programmable thermostats, w hich typically sell for less than $100. It also underlines Mr Fa dell's ability to take an everyday device and reinvent it. But some people wonder why somebody who made his name- and a fortune - producing amazing devices that changed the way people listen to music and communicate with one another is now putting his energy into something as, er, uncool as a thermostat.

Like many innovations, Nest was born ' out of a sense of frustration. Mr Fa dell was building an energy-efficient home near Lake Tahoe in California and went looking for a thermostat. Those he found had limited features and looked like they were stuck in a time warp. He started thinking

about how they could be improved. Soon he realised that he had the makings of a new business, and together with Matt Rogers, a former Apple colleague, he created Nest Labs in a Palo Alto garage.

The company is following an Applelike strategy. This involves finding a big market-Nest Labs reckons that there are some 250m thermostats in homes, restaurants, office buildings and shops in America alone- that has seen little innovation and then shaking it up by producing a smart, elegant device at a premium price.

With its rotating stainless-steel control wheel, its sleek industrial design and its clever software, the Nest thermostat feels a lot like the first iPod in spirit.

And all of this fits into Mr Fa dell's broader vision of where technology is heading. People have long dreamt of the day when the devices they bring into their homes work with one another straight out of the box. But Mr Fadel! is convinced that an "internet of things", in which smart machines can communicate easily with their owners and one another, is around the corner. "In ten years' time it will be as mundane as a paper clip," he claimsthanks to several trends.

From smartphones to smart homes The first of these is the rapid spread of smartphones, which Mr Fadel! believes will become the principal remote controls for people's lives. Companies are already making all kinds of products, from televisions to washing machines to security systems, which can be controlled via apps.

Another trend is the proliferation of tiny, cheap sensors that are being packed into smartphones and many other devices. These allow gadgets such as the Nest, which includes motion, humidity and other detectors, to respond autonomously to changing conditions. When combined with clever software, sensors can help gadgets work seamlessly with one another without the need for human fiddling. A shift in consumer psychology will also boost demand for smarter dwellings, Mr Fa dell predicts. As the cost of energy and other utilities rises in exorably, he reckons people will want far greater control over them, boosting demand for smart, energy-saving gadgets.

People are used to predictive systems such as Amazon's personalised shopping recommendations. The next stage, Mr Fa dell reckons, involves moving from prediction to machine action. "People will have to learn to trust the new technology in the same way that they leatnt to trust

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Brain scan

The Economist Technology Quarterly March 9th 201 3

"If you don't have an emotionally engaging design

for a device, no one will care about it." ~ predictive

text input on an iPhone," he says. They will also need to accept having companies and algorithms monitoring their habits using data aggregated to protect the privacy of individual users. Nest Labs is already doing this. After studying aggregated information from numerous Nests, it found that when people left home early in the day they tended not to come back quickly. So the firm tweaked the Nest's algorithm to turn down heating and cooling systems faster in the mornings.

Just as the iPod opened Apple's eyes to new possibilities that eventually led to the iPhone and then the iPad, Mr Fa dell is convinced that the thermostat can do the same for Nest Labs, and that it will be just the first of a series of smart, energy-saving devices. "This is not about creating random one-off products," he says. "It's about finding synergies between them and building a really long-term business." He is coy about other areas the firm might tackle, but lighting is an obvious one.

Thanks, grandad Mr Fa dell credits his grandfather for giving him a taste for experimenting with stuff.

The superintendent of a school district in Michigan, he encouraged his grandson to build all kinds of things, from go-karts to remote-controlled cars. Although his grandfather never used a computer, Mr Fa dell quickly became hooked on them as a teenager in the 1980s. He then showed an entrepreneurial bent while studying computer science at the University of Michigan, co-founding an educationalsoftware business with his professor, Elliot Soloway. "Tony didn't do safe," says Mr Soloway, who recalls that his student loved to try challenging projects such as building a hand-held computer.

After leaving university Mr Fa dell spent time at several technology companies, including General Magic and Philips Electronics, before landing at Apple in 2001, where he met another influential figure in his career: Steve Jobs. Apple's legendary boss was convinced that Mr Fadell's idea for a digital-music player had potential and hired him to run a small team of mavericks to get the fledgling iPod to market in double-quick time.

Mr Fa dell ended up overse eing the development of 18 generations of,the iPod and then led the hardware design and development for the first three generations of the iPhone, as well as getting involved in various aspects of its software and user interface. "Tony's pretty much in the classic Apple mould, equally adept at

hardware and software," says Andy Hertzfeld, a member of the team that developed the Macintosh computer and a co-founder of General Magic. Mr Fa dell also proved adept at pitching ideas to others. Bill Campbell, an Apple board member, says that in the case of the iPod, Mr Fa dell "had the great ability to get Steve Jobs to understand his vision. This was the first time Steve had gone into another category. It was a big, big deal."

For his part, Mr Fad ell says Jobs taught him the importance of looking carefully at all the ways in which consumers interact with a device, including seemingly minor things like packaging and customer support. He also developed a healthy respect for his boss's habit of "point-of-view editing", which involved spelling out in detail to employees the reasons for changes he made to products. And he got to witness at first hand Jobs's instinctive feel for great design. Mr Fa dell is firmly convinced there needs to be "one judge, jury and executioner" who makes the final call on how products look, rather than a committee of equals.

His time at Apple also allowed the podfather to indulge his penchant for risk-taking. Kwon Oh-Hyun, the boss of Samsung Electronics, an Apple supplier, says Mr Fadellliked to try out new technologies that rivals avoided because they were considered untested. And he was keen to get them into gadgets and out of the door quickly. Philips cancelled many of the products under development during Mr Fa dell's time there. Apple, by contrast, launches almost everything it works on. "You must ship every year or so because otherwise you can't keep your engineers engaged," Mr Fa dell advises.

Although he flourished at Apple, Mr Fa dell occasionally clashed with other executives there. He left the firm in 2009 and went travelling for a year before creating Nest Labs. Some sceptics question whether enough people will pay a hefty premium for its thermostat, no matter how good it looks. Mr Fa dell sees things differently. "If you don't have an emotionally engaging design for a device, no one will care about it," he says. But any new gadget needs to impress with its features, too. Nests seem to be doing just that, even in places where they aren't officially on sale. Mr Fa dell's company has seen its thermostats activated as far away as Saudi Arabia and Siberia, even though they are currently configured only for the North American market.

Which suggests that people are doing

what Mr Fa dell's grandfather would wholeheartedly approve of: getting hold of a device and tinke ring w ith it to see if they can get it to work for themselves. Mr Fa dell dismisses con cerns that the urge to create, inculcated in him as a child, is waning in to day's society. He notes that youngsters can now learn fro m one another, as well as from parents and grandparents. His son, for example, posts videos on You Tub e (complete w ith soundtrack) of things he has built out of Lego, and is inspired by other chil dren 's creations he sees online. "I feel like it is a reawakening of my childhood," says Mr Fadel!, who points to the rise of Maker Fai res, which bring do-it-yourselfers together at big events, as another encouraging sign.

But he frets that too much creative energy is being sucked into so cial-media start-ups rather than ones that produce gadgets. Impressive though some of these new social services are, Mr Fa dell thinks many of th em get too much attention because the m edia fin d th em so easy to write about. "Ii's like they have become the social pages of technology," he sniffs.

Hardware is, as its name suggests, harder to make-and to make sexy.

Yet Apple has shown it can be done, and Mr Fadel! reckons firms like his now have a huge opportunity to impress people by combining hardware and software in striking ways. Thi ngs like driverless cars are already capturing th e popular imagination. Those w ho w ork closely with Mr Fadell say he is brimming with ideas for new products. He has already produced some world-changing gadgets. It is worth keeping an eye out for the next instalments in the saga of the podfather. • Offer to readers

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