 Hey guys, it's Neil Ive with The Verge. I'm here at CES 2013, obviously. I'm here with Matt Rogers from Nest. You guys, you're not showing anything new at the show, but you are in many ways the talk of a huge story at the show, which is home automation, basically smart sensors of all kinds that connect to your iPhone and your Android device. So we introduced four months ago now. Since then, amazing Christmas, lots of getting the word out. People are buying it, people buying it for their parents and their grandparents. So Christmas was amazing. So this is the first year, I think, on record where thermostats were a popular Christmas gift. Well, so that's really, I want to talk about that. You guys made a thermostat. You've got this huge team. You were on the iPhone team. Tony Fadella, the CEO, your co-founder, also famously in the iPod and iPod iPhone teams at Apple. You built a thermostat that is basically a smartphone, right? It looks very much like a smartphone. But what's interesting to me is I went to the Samsung booth. It's like Samsung didn't build a thermostat this year. None of the other big LG didn't build a thermostat this year. I'm getting a lot of PR from little companies that are doing thermostats. But it's funny because there's a trend of home automation, and it's all gone to light switches and power outlets and all this other weird stuff. And no one's starting where you started. So we did thermostats because it matters. So half of home energy is controlled by the thermostat, and it's a big problem. I'm amazed that no big companies have taken notice and have started doing this. Well, Honey wants to. Yeah, but they're the old player. What new things are they going to do? They're going to add Wi-Fi. Big deal, right? It's still a white plastic box with a horrible touch screen. It's really more of the old, more of the same. In terms of new players, I love all the new stuff. There are new players who are making thermostats. I think we've awakened that space. But what I'm saying is it's interesting that we do our CES previews, and we say things like, home automation is going to be a story at this CES. And it's kind of like when we say tablets are a big market, and what we kind of really mean is the iPad. It's almost like when people say home automation, what they mean is the Nest proved a model for connected pieces of your home. That's right. But you have just one little thing. You have one piece of it. But we do it really well. That's our whole culture. That's our strategy. Let's do it the best we possibly can. And the reason why we've only done one thing is because we have to do it the best we absolutely can, and be able to focus and do it, build the best thermostat there is. Looking at the kind of connected home, I don't think people want to buy a connected home. They want to buy great stuff. And they want to buy a great thermostat. Or they want to buy a great lighting product. If all those products existed, I think people might have a smart home. But I don't think people want to buy a box full of white plastic things. And my kids and yeah, it doesn't make any sense. The Nest was announced, I want to say a year ago. I feel like you guys announced the Nest the day we announced the Verge. So we've been following you very closely. You're here at CS. You're seeing this ecosystem of smart products. And you've got the one. Are you thinking about moving into that broader ecosystem? I know Tony always says, you don't put this team together if you're only going to build a thermostat. But then you're sitting here being like, we've got to build a thermostat first. We have to build the best thermostat out there. And we spend a lot of time improving the software, adding analytics, these energy reports we send out every month, emails describing how much you're using and why and how you could save more. Of course, we're looking at some new stuff. We're going to do one or two things really, really well. And then we'll branch out. We'll add another thing. It's like, think about Apple. So Apple did iPods for five or six years before they introduced the iPhone. People forget how long these time frames were. They probably waited three years before they introduced the iPad. These things are, they take time. You want to educate your customers about what this whole experience is about. There's a reason why none of this smart home stuff has taken off yet. It's because most of it's crap. Right. You're being too honest. I mean, I agree with you. Most of it's crap. And it's the initial outlay, the cost of the adventure, if you will, is extremely high. It's buy 100 light switches. How do you solve that kind of problem? I get why you started with the thermostat. It's one thing. You can get a tangible benefit from it. It's important. So that you can buy it. But you don't buy it a lot. You buy one like every 10 years. I don't think you're going to get upgrades every year on this thing. Nope. Not expecting it. So there's a few enabling technologies. So there's connectivity. And it's a lot easier and cheaper to add connectivity to products now. So that's one enabler. One is, I think, great algorithms, great intelligence. And that's something that's kind of a secret soft that we spend a lot of time. And we hired my old professor, Yoki, to run that team because it's so important. I think that's an enabling technology. I don't think you need a smart light bulb, smart light switch. The smarts can be somewhere else, but as long as that product is connected, it could participate in all these kind of ecosystems. So you're saying this is like a Trojan horse. You're putting a processor on the wall and everything else is going to connect. This thing is a smartphone. I mean, it has 800 megahertz CPU. It is like a smartphone. It's a lot like a kind of iPhone 4 era product. And we are able to deliver great new products and new algorithms, new software through updates. So in the last 15 months, we've delivered 13 software updates to our customers for free. So there are things we haven't even cooked up yet, things we haven't even thought of that we can then go push out to people. And they have all these new features now. Right. And so that's cool. Well here's my big question. You've got one smartphone in your pocket. You've got another smartphone caliber thing on the wall. If you look around, Belkin's got a bunch of stuff. And it's like the smartphone is the brain for those things. Some of the other home automation, it's more let's put an even bigger brain on the wall. Let's have your PC do it. Where should that live? Is it one place? Is it many places? Yes. I think it lives a little bit of everywhere. So there's some things that you want to have in your palm of your hand, like things like control. It makes sense to do it in your palm of your hand. Like you pick up your phone, you want to change your temperature, you could do that. There are things that you want the home to be able to do on its own. So when you arrive home, you want the home to wake up for you, or when you're going home, when you're on your way home, you want it to wake up for you. There's latent technology that needs to exist in the home, and you actually want these things to be distributed. Much like there's no one central server that runs the entire internet. Right. There should be. Yeah. Hope it doesn't go down, right? So that's one of the things we think about is as we have more of these products, we want to have them exist and work well in a disconnected world. So if your internet goes down or if your Wi-Fi fails, your thermostat still performs great and all the intelligence is still there. That's one of the reasons why we did it that way. So that actually brings me to kind of another big trend here at CES, which is, and it's disconnected but I think it's actually directly related, which are the body monitors, right? The Fitbit, the Nike stuff, the Pebble smartwatch in a way is like one of these things where it's an external device to a central processor, but you're sending data back and forth. Do you see those as being complimentary to what you're doing? Because I see a world of people with smartphones in their hands and they're just buying sensors all over the place. And the Nest is a sensor in many ways that does some other control. The Fitbit's a sensor. And I just see basically we're making the world around us smarter so it can send data to a smartphone. Yes. Well, so I think all these new health applications are amazing. So you think health is kind of where we were a few years ago. I mean, industry in the dark ages, you have to go to a doctor to get your temperature taken. My God, no. You have to go to see someone. You're disrupting doctors. Well, I'm not, but others are. Why should you have to go drive somewhere for them to take your temperature and your blood pressure? Why can't the wristwatch you have do that for you and alert you when there's a problem? Same kind of analytics we're providing on the energy side. Why couldn't somebody do the same thing or apply similar technology on the health side? Enormous benefits to me. It's an industry disruptor. Right. But do you see a connection between what you're doing and those things? Because to me, it's just a bunch of sensors. There's sensors, there's connectivity, and there's intelligence. Where all those things live, they could live all in one place, they could live in different places. Actually, it's very similar. Someone could make a nest for home health, and we could work together. Who knows? Well, so the work together stuff, right now you guys, I mean, I know I have family members who have big home automation systems. They have control four at a restaurant, and they're like, I'd love to get a nest, but that thing doesn't talk to me. So we haven't integrated yet, and there's a reason why. It's one, there's a lot of privacy. People trust us. We have a lot of very private data. We know when they're home, when they're not. We want to make sure we're doing the right thing there. Oh, sure. Okay. I was like, you know how hot my house is? No. In terms of private data, that's way low on the list. It's like photos of my children, and my house is 72 degrees. Occupancy is the main thing, right? So we want to make sure we're doing the right thing there. You got my humidity. That is- Super top secret. Stay away from that. Don't let that shit get out there. I don't want anybody to know it's like a jungle. It's weird. Okay. Go ahead. So, I mean, eventually, of course, there's a whole industry that we could enable, and it's about focus for us. And we want to do a few things well. So eventually, when it makes sense and there's enough kind of, I'd say, momentum behind some of these things, we'll do it. But right now, home automation as it stands today, it's kind of geeky. It's terribly geeky. Yes. Everybody who has serious home automation systems in their home has hacked Android phones. It's like they're combined. Yeah, you shouldn't need an IT guy for your house, right? That's why we haven't done it right. Right. But all that stuff is here. I mean, that's what I'm saying. It's there is, when we were doing our previews, and I looked at all the previews around the industry of CS 2013, there's going to be a bunch of Windows 8 stuff. Everybody's going to have a new phone. And home automation is going to be a big story at this show. And what they were talking about is companies like Nest. But you don't do home automation. You automate. I don't think you automate one thing, right? You think of it as automating? So I mean, there's some elements of automation that we learn. We learn and we act on your behalf. We don't really consider ourselves a home automation product. There's so much stuff out there. There's a lot of noise at CES about home automation, and internets of things, and all these kind of things. Do you just walk around creeping around the show floor, seeing what people are doing? It's always good to see what's going on. Part of our job as technologists is to be aware of what the industry is doing. And sometimes we'll follow, and sometimes we're going to lead, and sometimes we're going to do the exact opposite, we'll do something totally different. Right. Well, let me ask you what totally different is. What is totally different? If you had to pick the wildest thing you could do, what would that be? So doing a thermostat was pretty wild. I mean- Old hat. Everybody's doing proofs. I'm probably wrong. I bet Samsung does have a thermostat. I'm sure they're working on it. Yeah. Yeah. What's the wildest thing we could do? We saw some interesting VR stuff at the CES. Oh yeah, did you see Oculus Rift? It's freaking awesome. That thing's amazing. It's awesome. I looked like a moron. On camera yesterday, just like pawing up here. I had a nice moment of peace in the crazy CES noise. Yeah, because you were literally in a different place. Yes, that was kind of nice. They've got a lot of potential, but they've got to deliver. Yeah, that's right. And actually, that brings me... There's a trend here of hardware startups, really interesting hardware startups. Yes. And you guys are a hardware startup. I mean, obviously you have a lot of experience. You and Tony did the iPhone. Our team has a lot of experience. Your team has a lot of experience. But you made the iPhone. When you go out in the world and ask for money to make anything, I'm sure they're like, take the money. The hardware startups here are Kickstarter guys. The Pebble Watch, the Oculus Rift. There's another one today that I can't remember if it announced. There's just a lot of Kickstarter. And we're actually thinking, man, Kickstarter's like kind of the story of CES. But I know that you're kind of old school. You think that you need real backing. When we do something, we want to put it all... We're going all in. We hire the best team. We spend a lot of money to build lots of prototypes. We break them. We bash them in. We do hundreds of field trials around the country. If we're going to do something, we're going to do it really, really well. There's a certain culture to kind of perfection. And we are in every freaking detail out there. And we're thinking about the whole product. That's something that you need a lot of money to do. We invest in packaging, in our retail channel. Doesn't Kickstarter provide you with that money? That's what I kind of don't understand. To do a product right, in my opinion, it takes multiple millions of dollars. It's a rare thing you can do on Kickstarter. So, you think the rise of hardware startups here is... I mean, that's a story, right? Why aren't there hardware startups the way there are web startups? I get that there's probably an order of magnitude because the web is so easy. There's an enormous complexity involved. It's more than just writing some code. You need mechanical engineers, electrical engineers. You need vendors. You need supply chain. You need manufacturing. You need embedded software. It takes an army to go do one of these kinds of things. Our initial team to do kind of the first thermostat at the end of the day was about 70 people. That's ridiculous. Yeah, it's hard to kickstart that. It's a lot of money to run the kind of team. You've got kind of a crazy team. You've got people from... We've got a lot of people from Logitech. You've got your professors doing all the neural stuff. Most of our kind of hardware and embedded engineering organizations are all from Apple. Most of our kind of cloud side stuff is Twitter, Dash, Microsoft, guys who have that kind of DNA. We wanted to put these kind of two worlds together. Our story with Apple is they're not good at the cloud stuff yet. They're still working on it. They're learning. They've hired a lot of great guys the last couple of years. That entire organization has changed dramatically. Eddie's a solid guy. Well, actually, I'm curious about this. Just give me a little background of what you did with the iPhones. I started out way back in 2004 as an intern. Did some early iPod stuff on Nano. Then we were doing the first kind of first iPhone prototype, the ones that me and I have shipped. We had the first firmware guys on the ground to bring it up, make the first call out in China. You were in China with a non-shipping group. It was a giant board. It was probably two feet long. We called home. We actually called Tony on this giant breadboard thing. That's really funny. Did it have the display and everything, like the touch display? Not yet. So this is bare metal. From that point, it probably took us 19 months to get to product. Wow. We had our first prototype. Let me ask you, we're here at CS. The first iPhone was aluminum, right? Then you had the plastic antenna. Yes. The antenna has to be plastic. It doesn't go through metal well. It's funny because then they went to the iPhone. I just asked you because this is a thing at CS that I think is hilarious. Then you iterated, iterated, iterated, iterated up the iPhone 4 with the glass back, which was I think a mistake. It was beautiful, but it breaks, scratches. Then Apple went away from it. Now everyone here at CS is like, Sony has a phone with a glass back. Everybody copies Apple. The iPhone 4 has a glass back. I think there is an entire industry that just follows Apple. That's what they do. It's what they do. But do you walk around seeing your old mistakes? We used to walk around CS and see iPod knockoffs back in the day. It's a lot of fun. Mimicry is a great compliment. It's just funny because the idea of Sony putting out a 5... I will say, I think the industry is way ahead of Apple in terms of screen size. I think 5-inch Sony P is gorgeous. You should go to Sony's booth and look at their phone. Then it's like you turn it over and you're like, why did you make this mistake? But that's specs. Apple doesn't compete on the specs war. That's not what they do. It's all about user experience. It's about building the absolute best product out there. It doesn't matter how many megahertz or inches. The spec of how big your screen is is a pretty valuable spec. People's hands are all about... There's a size to people's hands. They're sizable. They're serious hands. You need a 5-inch screen for those hands. I'm at about a 4. I need a 5-inch screen for my eyes. These are serious eyes. I'm just going to hold this one for a little bit longer. Let's talk about some of your favorite stuff on the show floor. The Audi booth is really cool. Those guys have done some amazing stuff. I want a self-driving car. I really, really want one. If someone could make one and I could go buy it, I'll do it today. I would do it. Have you played in one of Google's self-driving cars? Google Ventures is one of your best. Yes. Google Ventures is one of our biggest investors. Bill Maris is on our board. Actually, at our last board meeting last month, he showed up in a self-driving car. That is ridiculous. I come to your next board meeting. Show up. Check out the car. How do you steal a self-driving car? I don't think you steal it. It comes to you. I think they just check them out. They had a bunch of them over at Google. Audi, what else? I like this Oculus Rift. That's really cool. Honestly, the TVs are pretty cool. Some of these 4K. Isn't that just specs? It is, but it's freaking beautiful. Everything super, super high resolution, ultra thin. It's nice. I'm a gadget geek. All right. Let me ask you this. We have a bet, and then I should let you go. We have a bet. Josh says 4K is basically not going to happen. Because no content. Yeah, but I say people will buy them as a regular product within two to three years. What's your take? I think so too. I was an early adopter on 1080p. I bought one of the first 1080p TVs. That sounds crazy to say now, an early adopter on 1080p. That's everything you buy. I bought a 1080p TV in 2005 for like five grand. It didn't make any sense. There was no content. And now there is. So there will be content. It will be mainstream. The prices will come down. That's how this all works. You know, I was talking to somebody at Sony, and they're like, you know, we have a chicken and egg problem with content. And I was like, do you think your TV is the chicken or the egg? And they literally just like shut down, like walked away. I'm like, I'm not answering that question. This is the irony. So Sony, they build TVs. They control the content. Why couldn't they pull something off? You're literally saying all the things that I say all the time. Why couldn't they pull this off? They're completely vertically integrated. They have so many different business units. Why don't they just all work together? It's funny because you could, you know, this is a prototype for Nest. You're going to build this. You're going to build that. You know, cloud service. And they're going to work well together. I hope so. All right. Anything else to say about this thing before we wrap up here? It's freaking great. I mean, honestly. Please, pitch your products to the people. It's one of the best things I've ever built. Like, as a team. And you built the iPhone. And we built the iPhone. We built the iPod. So this is better than the iPhone. I think it's, honestly, it's very useful. It saves people money. It saves energy. And it's beautiful. I mean, we're really proud of it. We put a lot of time and energy. For us to quit a job at Apple, making the biggest products in consumer electronics history, to make a thermostat, it's got to be freaking awesome. Or you're insane. You realize there's a distinct second possibility. We are a little bit of crazy. I like it. Maybe a lot. Matt, always good to have you, man. Great seeing you. Talk soon. Bye.