 here at CES 2014. I got Matt Rogers, co-founder of Nest. Matt has brought us a fire truck. MATT ROGERS We got a fire truck here. And it's awesome. This is the best thing ever. I honked the horn earlier. And now I don't have any experiences left to have. Why on earth would you want to be a fire truck driver? Why on earth do you have a fire truck? Because it's awesome. It is awesome. And which engineers do not want to have a fire truck? Yeah, this is the best thing. We talk about fire safety. We take kids for rides. We show up at schools and home depot locations and talk about the product and talk about fire safety. So you actually, there's like demos and stuff on the side, right? Yeah, so we demo the product, show some of the cool features. We have like fireman suits and hats for the kids to play with. We have t-shirts. It's all good stuff. I mean, I really want one. They let me light off the siren earlier and I'm going to do it again. I just want everyone to be warned. So Matt, why does an S come to CES? So we do a lot of meetings at CES. So it's kind of the one time of the year where every vendor under the sun comes to one place at one time. So like all of our different chip vendors and manufacturing partners are all here. I mean, CES, it seems like the whole nature of the show is changing. It's like there was a minute when everyone was making laptops and then a minute when everyone was making phones, a minute when everyone was making tablets. And this year it's sort of like sensors for the phones and tablets you already have. That's right. And in a lot of ways, Nest is like part of that sensor network, right? So do you see that like as a big trend here? Are you part of it? Well, you see a lot of smart home stuff and there's a lot of noise, but in the end there's a lot of stuff coming out. And I feel like we're at kind of the dawn of something new. And it's not like an immediate thing, but I think over the next five to ten years, we're going to see a lot of cool interconnected devices. Again, it's still early days now. So you just launched your second device to protect, right? Yeah, we launched it about two months ago. How's it going? I mean, it's going really well. I mean, one, it's selling very well. Like we're a top seller on Amazon, we're kicking butt in Home Depot and Apple stores, all those kind of things. But it's also working and saving lives. We actually got an email from one of our customers saying they never had a carbon monoxide alarm before, but they bought Nest Protected. They actually had a carbon monoxide alert and they left the house, they called the fire department, and they had a real emergency. Really? They had like ten times the safe limits and they could have died. It's a serious product and it works. So that's actually, when you were launching it, when we were doing the big story before it was launched, I asked you, you know, the thermostat, you get to play with it all the time, it's a toy. And the Protective kind of mount on the ceiling, you wait for kind of something bad to happen. Are your customers like seeing it that way, they're mounting it, they feel safer? You have all these features in it to like sort of interact with you all the time. Are they asking for more feedbacks? So we get a lot of feedback for more. Like actually the biggest thing we get is more ties in with our old product, with our thermostat. So today you have this feature where it turns off the furnace if there's carbon monoxide in the house because the furnace can't generate fire. And also we have this feature where basically they tie together for auto way. So if you're in one room in the house and your thermostat doesn't see you, Nest Protect will see you. But that's all we've done to date and there's a lot more we can do. We actually have a temperature sensor and humidity sensor in Nest Protect. Now why couldn't that be communicated to the thermostat at candy? It's just things we've got to do. There's lots more ways to tie those two products together. And then there's a whole wide world of other products. And you announced some stuff that, you know, there's a lot of question marks over whether Nest would ever open up and kind of work with other partners. And you recently announced you're going to start doing that. So are you seeing anything great at CES that makes you excited for what could happen in smart home in general? Definitely. Actually we met with some of the Phillips you guys yesterday to talk it through, like what things we could do together there. I mean there's a lot of really interesting stuff. I don't know if you saw the Mercedes booth, but there's a tie in there where like your car now tells Nest it's coming home. So like it ties in like that. I think it could be really cool and add good user features. It's not about connectivity for connectivity's sake. It's about adding some cool stuff that users can appreciate. So let me ask you, if you put in all these sensors on all these smarts in your house, how do you guys think about like security, right? Like I can control my parents' thermostats at will, and I'm always like I should just turn them up all the way. Like do you guys worry about that aspect of it? Like once you have more sensors and more cameras and more whatever in your house, how do you sort of lock things down to make sure that everything is safe and secure? So we actually worry about it a lot. To the point where sometimes we do things that are a little bit more difficult because it's for security and privacy reasons. Like for Nest Protect, when you installed it, it asked you to scan a barcode, not just to kind of connect to its network. And the reason why we do that is we want to make sure it's you who are installing it, not your neighbors trying to kind of hack into your system. So we actually put a lot of time and thought into this. We have all these encryption protocols, and we actually go above and beyond to make sure this stuff is secure. We have to. I mean if we don't, again, like your parents, heat could get turned up and that would be horrible, right? I mean I'm doing it to them constantly. I temperature-troll my parents. That's a phrase that you should use. Temperature-troll. I do it constantly, like all the time. And so that was actually another thing. I was telling you a story before we started the interview. You guys are still kind of teaching your users how the products work, right? So I went home over the holidays, and my parents' program was like wild swings. My mom turned it all the way up to 80, and my dad would turn it all the way down to 60. And Ernest was like, he kind of didn't understand it. You had a big base of early adopters who kind of understood this stuff. I think it's a challenge for smart home in general. You've got a big base of early adopters who have like control 4, and they want this stuff. And gadget heads are like, fine, I can just buy one thing. But you've got to, there's the big broad market out there that's still learning how this technology integrates. How do you go after that? Like in terms of, there's a lot of cost there, right? So we have a lot of work to do in terms of explaining the features and letting people know what Nest does. So I think for the most part, people aren't even aware of who Nest is yet. Really? Like in the tech community, people know who Nest is. I think the broader population has no idea who we are. And part of that is learning is a difficult concept to understand. And part of it is we have to get the word out, and we're a new company. Well, there's getting the word out, but there's also like, wearables are a big story at the show. I think the roadblock to wearing something on your body is it has to provide you with benefit that's worth the cost. Like glass, the cost is you look like a huge dork, and the benefits aren't in line, right? The benefits aren't in line. You don't get something out of being a huge dork all the time. You like take a picture. And that's kind of not worth it all the time. With stuff in the house, it's like, well, I've got to replace all of my light switches, and that's a big cost. With Nest, it's a pretty low cost. Like it's a great product, and you can install it really easily. You can install mine in like 20 minutes, right? But once you kind of get beyond that set of products, you've got to start telling people what the benefits of these extra costs are. Is that a challenge for you in the home? Or are people eager for it? I think people are pretty eager. And from what we've seen, what's helped us get more mass is actually utility partnerships, and rebain the product, and getting people to understand more about the energy savings. Because you can save a lot of money with Nest, and it's about getting that word out. And again, there's a lot of work we need to do in terms of making it easier to use, and efficient, so that you don't have to think about how it works. You just use it. But this is, again, early days. Yeah, and it's funny because you see, I see at CES, like the halls, every hall is popular at different times. So like five years ago, the South Hall was all Intel and Microsoft. And then right now, it's all the device manufacturers sort of in the middle. And then you see the car companies, they're in North Hall. And like in five years, the North Hall will be the most popular one, because the car companies are doing crazy stuff. What I don't see is anywhere where like a unified home, there's bits and pieces everywhere. There's no standards to talk to each other. You kind of walked into one ecosystem, or Nest only has two products, and you're waiting for them to have more. How do you see that kind of network? How do you make it so that all these things can talk to each other, and people have like choice in the market? Or is that not something you guys really worry about? So what we think about it is, there are standards today. But there are multiple being standards. So it's really hard to pick one from the other. I mean, from a user's perspective, they shouldn't care what communication standards that companies use, as long as the products work together. So the way we think about it is, let's find some really high value products and work with those guys, and build out really obvious experiences that people can understand. So like Philips Hue, like what if the lights could turn down when you leave home. Like really obvious stuff, but that's kind of the important things. Like it's less important about tying all these things together and having one app. Just let's make it work together. Right. But doesn't that like, with the Hue, to me the Hue is crazy because it's light bulbs, not switches. And I kind of in my mind can't understand why people are more willing to change a light bulb than they are to change a light switch. But they are. Like absolutely, the entire market has gone to light bulbs. And it's like, I look at Nest and you guys are reinventing these all-moth products, like that's the line you always say, Tony always says. But I don't see, I'm always curious like, where do you guys see the next one? That's always the question. I know you're not, you probably won't answer it. But I always see, in terms of how you think about the next one, is it where the market is not gone or is it where the market is rapidly expanding? Like, you know, you surprised everybody at the thermostat, but people aren't going to be surprised anymore. Like Samsung's here, right? They're trying a bunch of stuff. LG's here, Sony's here, they're all trying a bunch of stuff. Where do you see like the market really going in terms of smart homes? Do you think it's a broad penetration? It's like going to happen everywhere from every company? Or is it going to be kind of select vendors? So I think it should be pretty broad. Any company that makes home appliances today, in the next five years, will build a connected appliance. That said, there's not a really good reason to have a connected appliance. Yeah, I can't think of one. Have you tried the texting and washers thing? I have not, but I can imagine tweeting from your refrigerator is not too useful. It's about finding an application. That said, what's next for us? We have to find other great products to do. We're going to. When we're going to improve the products we already made, those are going to get better. But too, find those unloved categories. And we like to find things that have no innovation, that people are not. Like the Wayne Gretzky style, that's where the puck isn't, right? Where it's going to be, right? So we're not going to follow. We're going to lead. I look at what you guys do as almost an extension of a phone. They're standalone devices, but really they become great when you add a phone to the mix. And the phone knows what your sensors in the house are doing, what your temperature is, what's going to happen. You can look at all your energy saving charts. Do you think the phone is kind of the central computing device? Is it the tablet? Is it still the laptop? I don't think there's any central computing device. It's definitely a primary user interface device. It's what you're going to look at. It's the best way to interact with your house. That said, I think the intelligence in the home has to be distributed amongst the home. So if your phone isn't there, it still works, right? One of the things that we're thinking about is, how do you take advantage of the phone, the hardware you have in your house, like your smoke alarm or your thermostat, but also the cloud? And how do you tie all these things together and make sure they work seamlessly, and when one's there and one's not there, how does the benefits remain? Those kind of things. I've been wanting to do a contracting interview all the time because we're in a fire truck. And I've been wanting to lean out the windows and scream I'm in a fire truck this whole time. And thank you very much for letting me ride in your fire truck. Matt, it was a pleasure. Great. This is the best. Ready? Oh, God. That's the best thing I've ever done. It is the best thing I've ever done. Okay, I'm done.