Tony Fadell: Innovation Must Never Stop (Even If You’re #1) | E46 - podcast episode cover

Tony Fadell: Innovation Must Never Stop (Even If You’re #1) | E46

Jan 31, 20231 hr 2 min
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Episode description

Tony Fadell is an amazing and successful engineer, entrepreneur, and investor. He is the father of the iPod, co-creator of the iPhone, founder and former CEO of Nest Thermostat, and the founder of Future Shape, a global investment and advisory company.

In 2014, Tony Fadell was one of the Time Magazine’s 100 most influential people in the world. He is also a NY Times bestselling author with his book Build: An Unorthodox Guide to Making Things Work.

It’s a true pleasure to have Tony on our show and hear how he searched and found his excellence!

(00:28) Introduction

  • Learning from his dad about building trust in business (relationships, not transactions build trust)
  • 50% is what you know and the other 50% is who you know
  • When rejected for a job, don’t take it personally (send follow-ups, keep the line open create the conversation, ask how to improve)

(10:18) Tony’s childhood

  • Selling eggs to neighbors as a young kid (money = freedom)
  • Degree in Electrical Engineering and Computer Science studies
  • As a sophomore, made an improved processor for Apple 2 – offered it to Apple and Apple bought it!

(16:44) The value of cold calling skills

  • The first job in Silicon Valley – got it through cold calling (overcome the fear of cold calling)
  • Know how to tell your story to engage people – what value you can bring?

(21:13) Is education worth it?

  • Most people attend college in the wrong way
  • Tony’s mantra "Do, Fail, Learn"
  • The importance of internships (do a lot of things to know what you don’t want to do)
  • After college, go and learn from experts

(28:30) Turning disappointments into opportunities

  • General Magic – failed
  • 6 years in Silicon Valley of failure
  • In 2000 Internets stocks tanked, the market froze
  • Called to work for Apple when the company was about to bankrupt
  • Apple was developing a new generation of Walkman
  • Randall’s experience with Apple

(40:25) Tony at Apple

  • 6-week contract to research and design the iPod
  • The importance of constant improvement
  • Innovation must never stop, even if you’re #1 (you must be ahead your competition)

(48:59) What is an entrepreneur?

  • Someone who disrupts the market
  • Resonate with people in the first 30 seconds
  • Start with a pain and offer the painkiller (the development of iPhone – solved the issue of taking three devices with you)

Resources Mentioned:
Build: An Unorthodox Guide to Making Things Worth Making, Tony Fadell
Nest Thermostat
Apple


Coaching and Staying Connected:

1-on-1 Coaching | Instagram | YouTube | TikTok | LinkedIn

Transcript

Tony Fadell

To find the thing that you love, you have to do a lot of things that you don't love to find the thing so you need to try. And so what if you didn't like it and you failed at it, that's fine, you learn that bad thing is you don't want to do so you're now you can constrain your decision making set smaller and smaller to find that thing. So as far as I'm concerned, you need to try and do a lot of things to figure out what you don't want to do in life.

Randall Kaplan

Welcome to In Search of Excellence, which is about our quest for greatness and our desire to be the very best we can be to learn, educate and motivate ourselves to live up to our highest potential. It's about planning for excellence and how we achieve excellence through incredibly hard work, dedication and perseverance. It's about believing in ourselves and the ability to overcome the many obstacles we all face on our way there. Achieving Excellence is our goal and it's never easy to

do. We all have different backgrounds, personalities and surroundings. We all have different routes and how we hope and want to get there. My guest today is Tony Fidel. Tony is an incredibly successful engineer, designer, entrepreneur and investor. He is known as the father of the iPod where he oversaw all iPod hardware, software and accessories

development. He is the CO creator of the iPhone, which has sold 2.2 billion units since he invented it 15 years ago, and which has generated $1.5 trillion in lifetime earnings

for Apple. He is the founder and former CEO of Nest thermostat, which sold to Google for $3.2 billion, four years after he started it, and is the founder of future shape a global investment and advisory firm, which has coached more than 200 startups, Tony has more than 300 patents issued in his name, and in 2014 was named one of Time magazine's 100 most influential

people in the world. In 2016, Time named the Nest Learning Thermostat, the iPod or the iPhone, as three of the most influential gadgets of all time. Tony is also the author of the best selling book build in unorthodox guide to making things work, which is which was released in May of last year. Tony, it's a true pleasure to have you on my show. Welcome to In Search of Excellence.

Tony Fadell

Randall, thanks, I didn't know how long the intro is gonna go. Wow, I feel very old when you do that. Thanks. We,

Randall Kaplan

we have a lot to talk about today. So let's just jump into it. I always start my podcast with our family because from the moment we're born, our family shapes our personality, our values and the preparation for our future. You were born in the great city of Detroit, your dad was a sales executive to Levi Strauss. And your family had to move around a lot because of his job when you were when you were young, he went to 12

schools and 15 years. I want to start by talking about an important lesson you learned from your dad about sales and building trusting relationships? What did he tell you about the relationship between the two? And how did learning these lessons at a young age influence your future? And In Search of Excellence? How important is trust to our success?

Tony Fadell

So wow, okay, well look at that. What my dad taught me. And this was when I was literally 5678 years old. And I actually would go on sales calls with him. That was the time when, you know, he would actually literally take a car and in these physical samples of clothes and going into small department stores and what have you and show them off. And I

would be with him sometimes. And he would sit there and and I would watch him and he would show like different clothes, and then this then the buyer who would be on the side of the store one and say oh, I want to buy that one. And he's like, look, my dad would go look, no one's bought that one, I don't think you should buy that one. I don't think that's going to be a hit this year. Literally don't buy that one. If I if you want to know my opinion, buy these because these are what's seems

to be selling really well. This is the trend that you want to be able to, you know, use. And I was like, and then my dad and I left the meeting and I was like Dad, why did you do that you could have made the guy wanted to buy that. But you said that he goes look if he and his job is to buy things, but it's also his job to make sure the things

he buys sells. And if he's buying things that aren't going to sell, and I don't give him the advice of what to make him look great, then that is not going to be a great and happy

relationship. I'm in this further relationship, not just a transaction, that one that one sale, but really something that you know, they can trust me, the buyers can trust me that I'm going to tell them and steer them right so that they look good and that they keep their job and you know, then the company does well the department store what have you as well. And he's like we you all have to be aligned. And sometimes you don't always make that sale even though that they might want it.

You're going to tell them what's the right thing to do because you want to make sure that you have a long term relationship with them. And so that is about building trust. Right? So if you just think about transactions transactions, don't build trust you buy and sell stocks but doesn't mean you necessarily

trust the company. If you build have a relationship with a company, then you start going, oh, I want to long term, you know, I want to hold this stock long term and you learn more about the company, you build a relationship. And so then you can really, you know, you believe you trust what's going on there. So that you can you feel, you know, invested in it, and you want to really take it

to the next level. So that's what he really taught me was, it was about that human connection, relationships, not transactions. And that's what really propelled me in you know, into excellence further on in my my life, because I wouldn't have never gotten my the job at Apple, to do the iPod, if I didn't have a relationship that I kept over a whole decade of just, you know, going to, to lunches and meeting with a guy, Ollie, I lost it, who I worked with at an early, early time, you know, 10 years

earlier, at General Magic. And so those are the kinds of things where you learn that relationships mean a lot, and they may not end up in any kind of, you know, exchange of value at that moment. But who knows what will happen in five or 10 years. And if they're good people, you know, you collect good people, and you help them out, even if they can't help you at the time, and vice versa. And

you never know what happens. And that's really one of the big things that I've that I've learned in my career, which is 50% is of what you know, and your excellence of what you know, but the other 50% is the excellence of who you know, and your network. Because those two

things come together. And then you can multiply what you know, with all the people who you know, and trust, and then they can tell their people about you and, and, and find opportunities that way outside of your yourself and your day, day to day existence.

Randall Kaplan

I do a ton of mentoring. I love it. I love giving back. It's one of the purposes of my podcast to coach and inspire and make a difference. And one of the things I see I have a summer intern program every year 35 Kids, we got about 1000 applications now. And one of the things that's very hard to teach is the value of building long term relationships. For example, this is a no brainer, they interview for a job, my daughter just had a call back, she was a

college junior at Cornell. And she got a rejection from one of the top investment banks in the country probably in the world. private equity firm, actually. And I said to her, the end can only be the beginning in most of the time, meaning right back, say, All right, I'm sorry, I'm not working there. I really love my time getting to know you. And I think she had three rounds there, right? Everybody a ladder, because the world is such a small place. You know, we used to talk about Kevin Bacon

six degrees of separation. Now there's wonder you've got LinkedIn and you can find anyone's contact information online. I mean, yours was a little hard to get, we have a service called Lucia. But this is not creepy, but actually have your cell number and didn't even know you. I don't recommend people texting people when they don't get a job. But I do recommend sent follow ups and sent follow ups earlier. Every year. Nobody does this, you should do things that no one

else does. So what what's your advice to not like kids coming out of college graduate school, but you know, that person who interviewed you is going to move on and probably stay in the same business, that person you may be working with one day, and frankly, this happened to me, you may be that person's boss one day.

Tony Fadell

Exactly. And so when you look and you find good people that you're talking to, and that you connect with, and even if it doesn't work out at that moment, sometimes literally, and I'm going through this right now, I met some very interesting people six months ago, and it didn't work out for certain reason. But now I'm calling again, because the opportunity reopened because some other things happened in those six months. And I'm like, I want to talk to those people. So if you can keep that warm,

that connection warm. And so you know, I was really interested. And I was, you know, I believe I'm a great candidate. Maybe I have to do some other things. But I hope I'm going to be able to work with you or work with this company in the future. Keep that line open. And so it's really just about, you know,

having those contacts. And remember, it's not, it's also about getting together with these people like in a not always about that transaction, you're trying to complete of getting into the company and going like, Hey, do you know somebody at another company that I could do? Like, there's always ways of creating a conversation to keep going and maybe they'll know some people like, oh, yeah, my friend is hiring over at this company, you should go talk to

them. So there's a lot of times it's like, oh, you're not right for me, but do you know somebody who so there's always some way that you can continue the conversation and don't avoid that and don't think that just because the rejection don't take it personally, there might be another reason or maybe you just just to you're not experienced enough yet. And he said what could I do to improve that's the other thing is follow up. What could I do that you saw that in my my interview that I could do

to improve? So the next time I do this one Whether it's at your company or anywhere else, what can I whatever can teach me, right? Don't just take it as a rejection. But take it as a learning exercise to see what else you can do to better yourself so that you know the next time around, maybe you're more likely to get that and keep that connection alive.

Randall Kaplan

Let's talk about your childhood as a child you love listening to and collecting music and you also loved engineering. You're curious about how things were built when you were four years old. Your grandfather showed you how to build things and paint things even worked out wiring electrical projects with him at that age. Through the years you fix bikes repaired lawnmowers, you were also a caddy at a local

country club. He tell us about the Apple two computer how you invented a new processor for a successful Apple two computer in high school, got a patent on it, and sold it to a company that use your process. Are you going back a little bit before then? Okay, can you tell us how selling eggs in the third grade when you were 10 years old? And the feeling of freedom it gave you at such a young age influenced your future?

Tony Fadell

Well, look, I you know, I saw kids in the I was a third grade. Yes, sir. Great. And I saw kids out there, you know, they were delivering papers or doing whatever. And they were older than me. And I was just like, hey, these kids. And then I saw them with money. And they were like, Yeah, I got money from my job. And I'm like, what job? What's this? You know, it was my, I knew my parents had a job, and I don't have kids could have a job. So I'm like, okay, and then you know, I saw

them having fun or whatever. And then they had money in their thing. And they were buying whatever it is they wanted to buy. And I was like, I like that. Let me try that. And so I just talked to the kids in the neighborhood. I said, Hey, what are you doing? And like, oh, yeah, and you know, there's this thing called an a grab, maybe you want to do that. And so literally, I was like a grout, what's that and literally learned about it in like a day. And I was like, hey, I'll try

it. And so my brother and I went around the rent around the neighborhood selling eggs once a week, to the neighbors and you know, they have their order, and we'd fulfill it. And I didn't know necessarily how to do change, or I didn't think I knew how to do change. So they just gave me all the change as tip. And so my mom didn't like that. So she taught me all about how

to give change. But again, it started and then when you have that money in your pocket, it is its freedom, its empowerment, and saying I can do what I want with this money. And I earned it. And I was like, wow, like it was a drug in a way. And it just led me to more and more experiences along the route going, Oh, I like being my own boss. And I like to be, you know, self reliant. And so it just continued from, like the egg route to the paperboy to

teaching computers. Like I literally would teach or set up computers and teach people computers. I was being a caddy. There was always some kind of job I always have, because I wanted to be empowered to have my independence, and didn't have adults telling me no.

Randall Kaplan

Talk about the Apple TV, the invention the power you earned in Middle High School. No, no,

Tony Fadell

no, no, that was so so the apple two and stuff like that. So one is I got an apple two plus. And that was because my grandfather, when I was a caddy, I could only make so much money in the summer. And he said he double it because I really wanted a computer. So he and I worked out a deal. And I worked really hard that summer as a caddy made. I don't know if that

$1,000 are $1,100. And this is in 1981 I think it was and he doubled it and I was able to buy an Apple two plus, which was like $2,500 at the time, which is incredibly expensive in this day and age. And then ultimately, I fell in love with that computer. And then when I was in college, I was in electrical engineering and computer science and dual major at University of Michigan. Go Blue. And we're gonna talk

Randall Kaplan

about Michigan a little bit.

Tony Fadell

And then the apple two was dying. And the reason why the apple two was dying my love my first computer, right? It was dying because it didn't have a better processor. And I met a guy in California was interning, and he said hey, you know, he was already building coprocessors just accelerate the apple two and I said why don't we build an apple two to E and two Gs? That was the next generation Apple two processor. Let's go make our own. And that's what we did over a summer

so I was a sophomore. In it was my sophomore summer, and literally in college with another guy he was I think, William he was I think 23 or 24 and he and I put together a whole processor did all kinds of crazy stuff to make it happen and we even had it fabbed and then we showed it to Apple and Apple actually bought some parts from us and wanted to try it out and put it in a computer and made it work and it did work and it made the apple to go like eight times faster or Apple TV

or Apple two Gs eight times faster. And they were astonished and but then they canceled you know the any new Apple two's but we made a processor and I was literally under 20 years old and I never taken a processor design class. That was actually the neck semester. But I got to learn when I was, like really learn what I did you know, the quarter or two before that. So that was that was an amazing

experience. It was very tiring, tiring, but it was an amazing experience to actually build your own computer chip and have it fabricated and it worked in the computer that you love. Like that was just amazing.

Randall Kaplan

When you were selling eggs, and I had a hard time with this one because you grew up in Grosse Pointe, and I didn't see a lot of farms there when I was growing up. But yeah, we were you going door to door and knocking on peoples door, Hey, you want to buy some eggs?

Tony Fadell

So so the AIG route was in the egg rat was in Rochester, New York really, truly for New York. So that was in New York, and there was farms around that area in Grosse Pointe. I was a paperboy and a caddy and all kinds of other things. But no, it was not a de gras. It was not in in Michigan.

Randall Kaplan

But did you go door to door selling the eggs? Or was there an ad for

Tony Fadell

door to door with a wagon? loaded up? My brother was with me. And we would go door to door to each of the houses and you know, say how many eggs do you want? What grade did you want, you know, and, and that's, that's what it was, and we'd get the eggs from the farm or the farm would come off and drop a pallet of eggs. We'd pay him for the eggs. And then we take them and sell them, you know, as wholesale price. And then we had the retail price. No. And that was our margin.

Randall Kaplan

We, I started essentially part of my career at Michigan, making Michigan T shirts going door to door cold calling on dorms, I'd go to every door, I'd knock I'd knock on the door get kicked out by the room monitor or whatever they call that person. And I found cold era cold calling. Yeah, the RA. I found that cold calling is one of the best skills we can have in our career. Can you talk about the value of cold calling, because I think a lot of people are afraid of it. They're afraid of

rejection. And my dad taught me something at a very young age. And he said it in a dating context. Because you know, you like someone who you want to date? And you're afraid she's gonna say no. And he said you ask 100 women out on a date, and the hunt and the first 99 Not making you feel so great. But on the 100 That said, Yes, you forget about the other 99 Tell me about the value of cold calling skills? And what's your advice to people who have never done it? And who are afraid to do it?

Tony Fadell

Right. So I'll tell you this, I wouldn't have gotten my first job in Silicon Valley, if I wasn't cold calling literally VCs and saying, I want to work for this company in your portfolio, because I didn't even know how to get to the company. And this was before the internet. This was before LinkedIn and everything else. And so now it's so easy to cold call, because you can just send a DM or something else. And so I

get them all the time. But it's so you won't get you won't get any action if you don't ask for it. Right. So you're, it's you know, it's the it's the chance you didn't take. And so you're always going to lose. So you have to understand you have to make your own opportunity. People don't know who you are. So you have to present yourself and you have to have that not just the cold call. But you also have to have that elevator pitch to say, Why am I calling and why am I going to make your life

better? Right? Not just, I'm calling you and I need you to do this for me. There's so many people that get in DMS and LinkedIn messages and all these things. They just send emails, they send me something and they say I want to talk to you about this. I'm like, What's in it for me? Right? Like they forget that they're trying to build a relationship. They just think there's a transaction with this person that's on podcasts, right? Like, oh, he'll help me.

Just if I ask, it's like, no, no, no, no, you have to just it's not it's one overcoming the fear of doing the cold call. But then the second thing is really understanding how to tell a story about why they should be talking to you and what value you can bring to them. And, and what a pain killer in some way that you can bring to them for the pain that they have. So you have to really understand your

audience. So what is getting into a conversation and to them is really being able to tell a nonfictional story to get people to want to engage. And those two things are very critical. And that's about anything in life. But really that storytelling component, once you get that door open, or maybe even if somebody introduces you to someone, it wasn't even cold calling that you got to have that story there. So you have to

have both. And that's a really important those two things are very important skills you need to learn. And I know that you know there's these, there's wisdom in, in VCs, they're like, who are your best sales, you are your best VP of sales. It's the ones who grew up as cold callers. Because they understand what it takes to really make a sale and how to make, you know, make opportunities happen.

Because you really want somebody with that resilience and that determined determination to say I'm going to do it just like your dad said you 100 times or 99 times and then the 100th time you feel really good about it, but you got to make sure you You understand that you know, and then you learn about qualification before you make the cold call, like making sure you're like in the right subsets you, the 99 becomes nine, right instead of, you know, staying

100. So there's all kinds of things to learn through that process of that journey to create a relationship with a potential customer.

Randall Kaplan

What door did you live in at Michigan?

Tony Fadell

I lived in East quad.

Randall Kaplan

So I lived in West quad. And as I was doing preparation for our podcast today, the alright I'm you're You're younger than me. We're there the same time. The CES guys didn't really, it was kind of a separate group. And

Tony Fadell

I should have never been a nice quad. I should have been up in Bursley. I should have been up in it on north campus. But there was a crazy year in terms of coders and stuff. And my my roommate now who I just talked to actually, we got a special dispensation. So we got to be on main campus.

Randall Kaplan

Yeah, I mean, Bursley was a kiss of death, especially in the winter time. Way back up there. I got to take a bus to get up there.

Tony Fadell

Yeah. Doing anything on the weekends or evenings.

Randall Kaplan

Right. All right, let's talk about education, which I think is one of the most important ingredients to our success, and our future. It was probably the best investment we can make in ourselves, US Grosse Pointe South High School in Grosse Pointe Farms, Michigan, and then attended the greatest school on Earth, the University of Michigan in 1991, a year later than me, you're not with I'm not bias. A year later than me with a BS in engineering, computer

science. How important was your education to in terms of preparing you for success, both academically and in other ways. And In Search of Excellence in a world where 65% of college graduates have on average $34,000 of student debt when they graduate, which on average will take them 22 years to pay off? What value should we place on education? Okay.

Tony Fadell

We should value education. But I believe that most people go about it wrong, when they decide that they're going to go to college and how they go about going to college. My years before going to college, I learned by doing whether that was on a grout or you know, doing a startup or whatever else. And so through doing, I learned where I needed to, I learned where my challenges were and what I needed to learn, because of the failures that happened along the way after doing doing failing

and then learning. So my mantra is do fail, learn. And so if you're doing and you fail, then you learn the things that you should go and learn at school. So most people just take a program and say, Oh, they're teaching me everything I need to learn about this thing. And then you come out and you're like, Oh, I learned all this stuff.

But you never really applied it, you really didn't know why you were learning and you didn't know what the real, you just say, if I put one foot in front of the other, and I do all these tests everything, I will No, I did it the other way, which is do first like I did the processor, then learn how to do it the right way. Right. So I could understand what it is I was learning and have the context, right. And so through that, each year, I would be in internships and do these things.

And then I could understand what I didn't know or wanted to know more of, so that when I selected my electives, or the other things that I made sure I was tailoring that to the things that really resonated with me, as opposed to just taking some standard set of classes that people said and what interested me, you know, that seems interesting, but it didn't know that it was necessary applied.

So if you're going to go and take on that kind of debt, and everything, make sure you understand why you're taking those classes and make sure you understand the context. And that means you need to do some of it before you actually take the classes. So you can understand take those internships, like I can't tell you how many people go through pre law or pre med or whatever else. And then they don't, then they start to take their first job between their

bachelor's or master's. And then all of a sudden they go, I hate this job. I hate this industry. I'm like, Well, why don't you try that when you were like at getting out of high school or when you were an intern, you could have been an intern in your freshman year. So you can learn and make the change. You just wasted four years of your life now obviously getting you

learn stuff. But it was really You didn't also build the connections, the networks and everything to understand what you really want to do in a given discipline. Because you just went along with the program and said, Oh, yeah, that's what I want to be because you had some image of what it was and you didn't have any reality of it. And so you need to know early on and iterate and get there and fight and adjust. If you pick

wrong that's okay. But don't pick wrong four years later because you were you didn't go and do the job. Go do it early as possible. I was doing things well before college to know what it was I wanted to do in college and then even in college, I was still adjusting because I was doing all these other startups and everything on my off time.

Randall Kaplan

I mean, I Like I said, I coach, a lot of interns, we have a summer program. It's a 12 week program, one of the most common issues in my daughter's my son as well is the anxiety, the students feel. And it's, it's mostly true. I mean, I see it with the interns because of their age, and I work with them very closely for 12 weeks. But I also do a lot of coaching for people in the workforce. The problem is the anxiety they have of not knowing what they want to

do. And my advice to them is, go try something that you think you're interested in. Frankly, some people don't have a choice to do that. It's a tough job market. They didn't go to Harvard or Michigan, and don't have a lot of job opportunities. You take what you can get. But my advice to them is go try something and it all works out in the end doesn't work out in the end.

Tony Fadell

Yeah, as far as I'm concerned, yes. Because what you do is to find the thing that you love, you have to do a lot of things that you don't love to find the thing, you're not going to know it until you do it and you go, Oh my God, there's sometimes there's things that people like, I don't know if I like that, and they try it and they go, Oh my god, I love that I because their gut reaction was I shouldn't like this. And then they like, Oh, I really liked

that. They find unexpected things in themselves, because they're trying, right? So you need to try. And so what if you didn't like it and you failed at it, that's fine, you learn that bad thing is you don't want to do so you're now you can constrain your decision making set smaller and smaller to find that thing. So as far as I'm concerned, you need to try and do a lot of things to figure out what you don't want to do in

life. Right? Like I dug in Dallas, Texas, I was digging pools, I did it one day, and I would never do it again. I literally quit that evening, one day. And that was enough. I'm not doing that I was doing stuff in grocery stores quit. Like I did a lot of things. And I was like, and then it learned that I didn't want to be in certain types of businesses, right, or to certain types of industries. And it also forced me to want to take more and more knowledge work or kind of things, right?

So you got to do a bunch of this stuff, even if it seems like you know, a lot of times that's the other thing is, graduates are soon to be graduates they go I can't take that job that's beneath me. I'm a Harvard educated, it's like Dude, give me a freaking break. Go work with a team that you can learn from because you're not you haven't, you don't have almost any experience. Even if you have internships, you have almost no experience and you have no

network. If you can go into one of these great companies, small or big, that have great people in it that you can go learn from, think of your first job as you're getting your PhD, or your masters in whatever you're trying to do and go in at the lowest rung if that's what they're offering. So you can go learn from the experts so you can build up there like I'm so and so and blah, blah, blah, like get the hell out of here. That's the first thing I signed that I don't want to hire that person.

Randall Kaplan

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I thought it was cool. Okay, sure. I just graduated or I guess I was going to my senior year in college. I thought it was really cool. I have the skinny, scrawny kid I had my shirt off. I was getting tan hanging out with the guys and I also bagged groceries at Kroger my senior year of high school at Country Day by the way we played you

Tony Fadell

I begged to grow Kroger's to

Randall Kaplan

they made us join the unit. It took all of our money. I mean I was making $6 An hour and I was using it to pay my long distance phone bill for a girlfriend I had a Michigan when I was a senior let's move to post college you you move to Silicon Valley worked for a spin off of an apple culture Magic for three years which failed. And you also worked with Sony Philips much of each end to Sheba. In July of 1999, you started your own company called fuse, which was trying to create the Dell of

consumer electronics. And one of the things you tried to create was a small hard disk player and an online store for music. It also failed, you couldn't find a second round of funding. So you started looking for other companies where you can continue to work on the project. You found one a few months later, a company called Real networks was all the rage at the time, but left after only six weeks, before we move on, let's go back in time, 23 years to 1999. Most people today can't even imagine

this. But Apple was a very different company. Back then that year, Apple sold 3.5 million Macintosh computers, and had only a 2.7% market share for personal computers. And there were stories that was being generous. That yeah, there were there were stories, tons of headlines, and every business magazine, every newspaper that question whether Apple was going to make it as a company impossibly got a business.

Tony Fadell

He has many quarters, it wasn't even breakeven. It we had big debt. And it was it was going down. Michael Dell said they should pack up the company and give the value back to the shareholders.

Randall Kaplan

Can you tell us about the call you got while you were on a ski lift from a guy named John Rubinstein? And who was who he was? Why he was calling you about a top secret project? And is it true that sometimes our greatest disappointments, turn into our best opportunities?

Tony Fadell

Yeah, look, I have, you know, you have to let's start at General Magic first. So General Magic, it was four years of incredible failure. And all the listeners and viewers of this podcast should go out and look, watch that movie called General Magic the movie, it's on all the streaming platforms, but General Magic the movie, it is an incredible story about failure and resilience. And everybody should watch it because it's it's it's it's human nature. It's it's a

timeless story. And it really applies to anybody doing anything. And so I had a big failure, General Magic, that I had big failures the next six years inside of Silicon Valley. And so you would think most

people would give up. But all during that time, I kept doing the same thing, which was investing and working in my investing myself my time and working in companies who were trying to create handheld products, whether that was entertainment products or, or productivity products, whatever, because I believed that was the future. All right. And I just

stuck with it. Most people when that fails, they go to a different industry, they go wherever I just kept sticking within everybody's like Fidel, you're not you're not you're not it's all about the internet. Nobody needs these digital little things. It's not going to happen. Stop. And so in in, in 99, I wanted to set out to keep working on that. And the internet was going crazy. It was internet 1.0 Everyone's going crazy. And then in 2000, April

2000. What happened last year happened in April 2000, which was the the freaking Internet stocks tanked. Like literally 80% of the value was lost on I think it was April 12 or something 2000. And so it was a frozen, it was totally frozen, nothing was going on anywhere. And I couldn't get any more funding. And I had already been through enough failures. And it was always at the end of the

rope. And then literally, I got a call because like I said I had a long term relationship from somebody at General Magic, Alia, lusty, who worked with Jon Rubinstein, who was working at Apple, who was head of hardware at Apple, and they had lunch. And John was looking for somebody who knew how to make small handheld products. I had lunch with Ollie the day before. So Lee and I said, I said, Well, things aren't working out. I'm

trying to figure this out. The next day, he has lunch tells and John said Who do you know who and I'll he goes talk to Tony, I just had you know, he's in the middle. He's got this little company and he's been working on this stuff. And, and seven days later, last six days later, John called me up and I happened to be on a ski slope, pondering my what my next move was going to

be. Because I had already, you know, weird exhausted resources, and there were no more funding because of the, the, you know, the, the basically the frozen market for any kind of funding because of the internet collapse. And so that's how it all came together. And I was brought into I thought it was to build a PDA for Apple, because that's what I mainly was doing for most of my personal digital

assistant like a palm pilot. And Apple had just had killed the Newton and they I thought maybe that's what they wanted to do. But then they were they had iTunes and Apple was just still at that point, like $250 million in kind of revenue In cash in the bank $500 million in debt, barely break even. And the iTunes which was the way you could listen to digital music back then on a Mac was taking off and they wanted to be able to take that music instead of just putting it on CDs make your

own CDs. How do you put it on a little handheld player? Like a Walkman the next generation Walkman to then you could carry around the songs in your pocket so that iTunes wasn't about CDs anymore, but iTunes was about this, you know? Next Generation Walkman.

Randall Kaplan

So here we go with my Walkman.

Tony Fadell

There you go. That's so there's a Walkman. That's one of

Randall Kaplan

the greatest inventions of all time. You know, you couldn't you couldn't leave home without if you like music, there's a little

Tony Fadell

girls point I was always I was always they're always trying to buy one, I was always looking at him staying in my head to have one.

Randall Kaplan

You know, the yellow one was a cool with with the outside case. And I had probably

Tony Fadell

the orange headphones, the blue one with the orange.

Randall Kaplan

You talk about Apple at a time at $250 million in cash, we had started a company that was going to change the way that tech that content was sent over the net better, faster, cheaper, more reliably. And Steve Jobs somehow heard about what we're doing, sent an Eddy Cue out to Austin to try to buy some occupy when we were 10 people. Interestingly, we had no interest of course in doing that. And they ultimately we would raise a first round of funding 8.2 5 million at its 1.9 5 million pre money

valuation. And a firm in New York hedge fund private equity firm basically gave us almost double the valuation, I think 18 or 19 million pre money. It was a Hail Mary. And we went with a venture capital firm that we thought was going to offer the most value. Local firm in Boston called battery ventures that was definitely not what it is today, they had two huge homeruns, our company and one other company,

but Apple came back. And so then we raised $175 million, or sorry, we raised another 30 or $40 million, right behind that something like six weeks later, so went from 22 million, there was this one, this was 1999. And and

Tony Fadell

that was the hot money days, those were the hot hot money days, like it wasn't

Randall Kaplan

2021. Well, as we were reading, as we were raising money, long term capital management went down one of the biggest hedge funds in the world and everyone stopped, I knew the world was coming to an end. And then things picked up again. So we had this hedge fund in New York come in with something like $175 million valuation six

months later. And then some apple, which was a ton of money at the time, invested $25 million in our company at huge 10% of their cash, which is crazy, at a $250 million pre money valuation. And interestingly, you know, our company went public. It was one of these crazy rides where we filed to go public a year after the day we started the company. And then three months later, we went public on October

27th 29th 1999. And two months later, our stock closed the day before the last trading day of 2019 with a $35 billion market cap, which is greater at the time then and you'll appreciate this greater than the total combined value of Ford, Chrysler and GM combined. But ultimately that investment I mean,

Tony Fadell

I remember OChem I remember those heady, heady days it was amazing. And then what happened at the end of April of 22,000?

Randall Kaplan

Well, a couple things. First, I made a lot of people don't know this, but I'm Apple made a ton of money on the investment. And it was a huge win for them. Because it did come in at a time where the company was rumored to be going bankrupt. They had the windows lawsuit with Microsoft and they finally gone on for years. Microsoft copied the windows or the

Tony Fadell

Yeah, but then they ended that lawsuit in Microsoft invested in apple. That was the

Randall Kaplan

thing that was crazy thing, right? $240 million? I think, if I remember that correct, but it's an untold story that their investment in our company was extremely helpful for them to go on and continue to grow. And I yeah, that was kind of a cool thing to know and be a part of I didn't know if you knew the story or not, but at least I want to share with you.

Tony Fadell

I did not know that story because I didn't get there till 2001 So that was the thing, but I could imagine because I remember we did have some other share positions and other companies that were being sold to raise cash for for that like, you know, Apple was also an early investor in ARM process right, you know, all right in the UK as well. So yeah, right. Yeah, Apple did make some good. Luckily made some good moves, even if they didn't have good computers in the mid 90s. And later 90s.

Randall Kaplan

And and like you said, we lost 99.7% of our market value. So we went under $100,000,000.90 9.7. It was rumored that we were going to go under, but we had a good team, great team and I had left after that. So you're initially hired at Apple on a six week contract to research and design the iPod.

And two weeks after that Apple hired you full time to create a lead the implementation team, where you created the concept and initial design of the iPod and worked on the first generations of Apple's 18 generations the epic Apple Music Player. So here we go here for another one of my props here. This was I think, fourth or fifth generation iPod. Yeah, yeah. And it's super cool. Has my name engraved on the back of probably, oh,

Tony Fadell

you got the engraving got

Randall Kaplan

free, free, free engraving at the time,

Tony Fadell

thanks for being a customer.

Randall Kaplan

I probably bought total with my kids. 10 or 1520 of these.

Tony Fadell

You have Billy and everyone got they got another iPad, and everybody was like, go on, not another one. And then they go, I gotta get it though. And they would be happily with a smile turning over their money to get the next one.

Randall Kaplan

They're still doing it. They're still doing it with the iPhone, the air pods? I mean, it's been Apple secret one of the secrets to success. Did you know that you are changing the world forever? With this device? The iPod? I mean, a lot of the generations

Tony Fadell

to put in think about it, I'm gonna join a company that the world is going to say it's going down, right? The company's near bankrupt. Fidel, you're crazy again, why are you gonna go work at Apple? It's just about dead now. So I did it because Steve convinced me because he was really, like, really passionate about it. And he I told, you know, we had this back and forth. And I said, I know we can build this. I built them before because I had I had a track record of building

devices like it. But I said, I don't know if you're going to market it because the other products I had didn't do well, because they weren't marketed. Well, they were good products, critically, but they were not marketed and sold well. And he said, I'm going to do that. And we had a conversation. So I signed on because of that. But the other one reason is that I didn't, I didn't know it was going to be successful because I had 10 years of failure in

Silicon Valley. So I had been tempered that like, let's be hopeful that there's a thing but not know, there was because when I was at General Magic, we were told by everybody that we were going to be successful no matter what. And so I was like, you know, I had been through that. I've heard that story too many times. So at Apple, I was hopeful we would, I didn't know that we would and to actually see at that time, that was going

to change everything. It wasn't until really the third or fourth generation when the iTunes Music Store was there, the Windows Compatibility was there. And it entered the mainstream sports and, you know, sports, sports people, celebrities, actors, they were all having them in showing them off. And that's when I was like, Oh, my God, this is well beyond that and became a cultural revolution in a way. And that's where it all

happened. Because after we worked for like three or four years to tweak everything to get it right for the masses, then it just took off. And you know, you could never imagine that that was the that was the case, starting in 2001.

Randall Kaplan

So just mentioned 18 version of the iPod while you were there, there. Probably more. We talked about the iPhone. I mean, there's so many upgrades to it. I'm not even sure what the number is. Maybe there's 100 Different ones since you launched 15 years ago, but I want to talk about constant improvement about what we're doing. And it's always important to keep improving

never rest on your laurels. You tell us about Steve Jobs dropping a prototype of the iPod into the water and inserting bubbles coming out

Tony Fadell

of it. And isn't that's a total rumor that never happened. It never happened. Okay. It never happened. That didn't happen. So that is a story that got attributed to the iPod and Steve, which was really it was a Sony story about Walkman that happened and Japan on the Walkman and they put the you know, the dunked it in water. The chairman at that time, I think I can't remember exactly who it was. I think it was Sony actually. He dropped it

in water. And then he pulled it out and said look at all the water coming out of it. It is clearly there's still room in there to be you know, to come down. So that was a Walkman story that got recast as an iPod start, but that never happened.

Randall Kaplan

How important is it to constantly improve on what we're doing and not rest on your laurels. There's so many companies that have gone under, but a lot of incredibly successful companies just invest in research and development, and never rest on their laurels. How important is it?

Tony Fadell

If you are an innovator, like there's companies that are maintainers, and they like own a category, and they're the number one in the category, and they just did it, it did it, you know, they run it their own schedule, and their culture becomes lack of innovation. Like it just becomes, oh, yeah, of course, we're going to make another car. And of course, it's going to be success, because we're us,

right? They think it's just successes guaranteed, because they climbed up that that mountain years and years ago, but the culture has completely changed, and they don't know how to, you know, innovate anymore. If you're an innovator, if you're an innovator, and your company is existing, because you initially innovated, you need to continue to innovate, you can't just stop innovating. And that's innovation at all levels, operations, finance, all the different, that's sales,

marketing, all that stuff. But it also means you can't stop your foot on the gas for the innovation of the product or the service itself, you have to continue even if you're the number one in the share, you need to keep leapfrogging yourself, one, so that customer still believes in your brand, that it's an innovative cutting edge brand, since they buy it, buy the products or services, but then also that you keep the best teams, you keep the best people who want to work on

innovation. Because what happens as soon as you take your foot off the gas of innovation, those people will leave because what drives them is the passion, to innovate, to disrupt and to do new things, not just to maintain older things and just kind of go

through the motions. So the if you're an innovator and most companies, you know who are on top of the game or challengers are innovators, they need to stay keep that innovation culture throughout and always be scared, you know that there's someone in the back in there, behind them going to eat their lunch, right? So you want to

always leapfrog yourself. And that's why with 18 generations, the iPod, we kept leapfrogging ourselves because I was really worried Sony was coming for our lunch, right or another competitor was going to come for lunch. So we kept going so fast and out innovating ourselves that the competition was so dejected, they could never even catch up. Right? Because they would they would play in something. And I know this first story for sure. Because I heard this because I used to work at

Philips before Apple. And Philips was a Digi they made CD players just like Walkmans, right, and they were very successful digital at CDs, CD players and stuff like that. So they had their best audio teams working on an iPod killer. And they were like, Oh, we have the feature set to make it. And then what we would do is we would come out with ours and like three months later, and it would have maybe those features or more, and they'd have to go back to the drawing board and go, Oh,

that's not going to win. And that's not going to win. So ultimately, we also killed the team spirits and all these competitors, because they could never get ahead of us. Because we always kept staying ahead of ourselves. And so that was truly if you're going to be an innovator that's the right way because you keep your customer, you keep your products and you keep your teams at the cutting

edge of innovation. And anything less than that you're gonna lose your customers, you're gonna lose your team and you're gonna lose your product way.

Randall Kaplan

I think it's important to note I want to give this lesson to our viewers and listeners. You can be a innovator, and most people are not in the tech world. I had a Trina spear on my show. She and her partner Heather hasard, invented, reinvented the medical scrubs market, which hadn't seen a change in 60 or 70 years it was dominated by a player. They made them cool. They made them fun. And it's most businesses

are not tech companies. On a related note as a guest as On a related note, I was a guest on the Spencer lodge show recently when it's the best podcast in Dubai. And we were asking what is in some entrepreneur and I went back and said a couple things. I think as someone who takes a risk to solve a pain point and gives up something of

value. And I also made the case that a plumber at any age who leaves a plumbing agency and goes off on his own his or her own to start his own or her own plumbing company is an entrepreneur, that person Yes. I mean every company starts with one person leaving to create another company and that one person could grow into a 500 person company. What's an entrepreneur in your view? How do you define an entrepreneur?

Tony Fadell

It To Me An entrepreneur is not just someone who goes out and starts their own business. I think that is a you know somebody starting a business and their their leader whatever an entrepreneur is someone who goes into a market or creates a market and does it in a disruptive way. They like like you said the scrubs market we He went in his nest and we went disrupted the thermostat market, like that was there for 4050 years, and there was no

real innovation. I've seen people like, like, take your plumber example, they just do a better job at customer support and service and scheduling and being there on time. And the plumbing work they do is good quality, just like anyone else's, but they had a better job, and they innovated on the customer support angle. So, to me, an entrepreneur is not just somebody doing the job or building a business, it's someone who's doing it differently, to show the

differentiation. And customers appreciate that, to me, that's someone who's thinking beyond just doing the work independently, but somebody is trying to change the game. And that's what I love. That's what I think about an entrepreneur,

Randall Kaplan

you learned a lot of things from Steve Jobs, which we're going to touch on in a few minutes. And one of them is that success isn't just being first with the idea or having a great product, it's also about being able to effectively communicate the value of the solution you're delivering to your buyers, and about every single touchpoint where the consumer interacts with your brand. That means buying the product, using it, servicing it

and unboxing the product. on Apple's product, you need bazooka to get through some of it all consumer touch points where you need to look at it as much detail as you do the product. user interactions. Can you tell us about the marketing line of 1000 songs in your pocket and a Search of Excellence? How important is marketing to the success of launching a new product? And then on a related note, you are an entrepreneur and investor a

venture capitalist? I have a short attention span I've looked at I don't know how many business plans in the last 20 to 23 years, five 5000. And I always want the one liner. What's your advice to the founders who can't explain their business? And what they're doing is a one liner? And how important is it to getting meetings and explaining what you're doing when you're looking for funding.

Tony Fadell

So you need to have a story that's going to resonate with people almost in the first 30 seconds. And if you don't, you're going to lose them. So because you're trying to say to them, I want you to listen to my story. And I'm going to have a story that affects you. And it's going to give you a superpower, a painkiller that you never know, that's at least how I think of it. And so I always have to start from the pain. And it's a pain for a specific audience. So what is the pain?

And what is the painkiller for that. And so if you tell them and communicate to them a pain that they have, that is either they understand each day that they have it or that it's been habituated away. And you reawakened in a reawakening that pain, then you already have something like, Oh, I'm listening. And then you say, and here's how I'm going to solve it for you. Here's what the

painkiller is. That's the greatest hook to me, is being able to articulate that you can say all these great things I'm working with so and so and I have these investors. I don't fucking care about any of that stuff. I care about, what's the pain? What's the painkiller, and then we can get into all those other details. Stop telling me how great you are, stop, you know, all these great people we have just tell me what it is you're who it is you're solving

for, what what's the pain? And and and why does that pay need to be solved and how you're going to sell that pay. And so if you can do that, that is the perfect thing. And that's the customer touchpoint not just for an investor, but it's also a customer touch point. When people discover your brand or discover your product for the first time or that press release that goes out to launch things. You need to have that crisp as a

story. And if you can't resonate, then it means you're not working on your story enough. A nonfictional one of course, that can resonate because you don't have the customer right or the customer psyche, right? You don't understand the pain point well enough, or you don't have a painkiller. That's it's more of a vitamin than a painkiller. It's like yeah, that's nice, but I don't know if it really helps me. So you gotta you gotta be able to have all of those

things. And it's not just when they bought it or just before they bought it, but well beyond when they see the first marketing, whether that's in print or online or somebody just communicating it to them in verbally.

Randall Kaplan

Let's go back to Apple five years after you join, you're running the entire iPod division. Shortly after that you were the CO inventor or something that changed the world forever. You co created the iPhone, where you worked on the first few generations oversaw all iPhone hardware, firmware and accessories development for March 2006 to November 2008. Can you walk us through that the impetus for it and how you got involved? And when you were

inventing it? Did you ever think that it would change the world and that had the remote possibility of selling 2.2 billion units and earning $1.5 trillion in lifetime profit for Apple? And we you're alone, and you're looking out your window and reflecting in a moment of Zen to ever say to yourself, Holy fuck, I can't believe I did that.

Tony Fadell

Yeah. So first of all, it started well, before that it was like 2004, when the iPod was really taking root where the iPhone, or the precursor predecessors of it were being worked on as prototypes, and we were trying stuff. So it was a long gestation process, unlike the iPod, which was like 10, less than 10 months, whereas iPhone was two and a half years to then finally get the product you saw.

So it was a lot of morphing to get to the first product, and then more years after that, and so, so there was a lot riding on the line. But at the end of the day, it was like the iPod, the first couple of generations, we were just figuring out what the iPhone was and what people liked about it, we knew that there was a lot there. And we got a few things, you know, a lot of things right. But we didn't have

an app store. Right? We the business model was wrong about how you bought it, it wasn't available everywhere, there was all of these things that needed to get tweaked. And then it took off, it took off like crazy, you know, with apps and everything starting really, in 2010 910 is when it really took off, because he had data networks that could work well, and everything was

there. But we were just at the right time not too early and not too just slightly early, because the data networks weren't there, really. And probably because it was 2.5 G. So but do I but it was trying to solve the pain. The iPhone was really trying to solve the pain and this was

classic. In caustics, steeps, iPhone introduction was, you carry a communications device, a mobile phone with you, wherever you go, you carry a mobile entertainment device that was an iPod with you and you carried a productivity device that did let you know, spreadsheets and email and you know, web browsing and everything. And that was called a laptop. So what if you took those three things and combined it in one device, and you could

use it anywhere, right. And so we were thinking about those kinds of applications that we knew then. And then fast forward, when all the networks were prevalent, and you had the App Store, and all those things, then in 2008 910, that's when social mobile took off and

everything else. But at the time, we weren't thinking that we were thinking we were combining those devices and making it making those applications on the go wherever Internet access or whatever to make it easier and kill the pain of carrying three devices around with you, and have long battery life and not worrying about Wi Fi, you know, having Wi Fi and cellular connectivity and all

those other things in it. So that you could, you know, truly be anywhere and connected anytime to get the data or make that communications that you wanted.

Randall Kaplan

But do you ever say to yourself, I never thought it

Tony Fadell

was going to be like this, you know, you knew you knew that cell phones were going to take off. So this is the next generation cell phone for your smartphone. But to really see that it became an everything device. And it's everything for the world. Like, you know, the way it is now. And huge businesses were built off of it any at that time, you couldn't see that?

Randall Kaplan

Do you ever say to yourself and again, just going back to part of my question, looking out the window and reflecting Yeah, on the change you've made for billions of people. I mean, you're willing

Tony Fadell

to what the fuck Oh, my God, this is amazing. But then at the same time, I also think about the downsides of right. So I think about because you and I grew up, we knew what it was like to you know, not have a phone, there was only one phone in the house. And it was a landline and everybody shared it. Now everybody's got their own phone at anytime, day or

night to connect to anything. We used to have only four channels of TV now you have unlimited channels of TV, and you can watch anything you want, anytime. So society has dramatically changed since the time when we grew up in you know, we're University Michigan even. And so you don't have to think of like, this is like discovering the atom, right and splitting the atom, I can do something incredible with it. But I can also see do something

disastrous with it. And you have to ride that fine line because it's technology's neutral. It's what we choose to do with it as a society. So a lot of times you're like, oh my god, this is brought light to the world. Right? You got information, and everybody has access. And I've been into all kinds of different countries all around the world. And you can't believe how good the mobile networks are and how

cheap they are. And everybody has a smartphone, even kids in low GDP countries like no, they're not gonna have a smartphone, of course, they have a smartphone. So that's amazing that we gave people that access information. But we also could, you could do the wrong things and weaponize things and and create ads in and deep fakes and push around in, you know, fake content to program people to do

things. So that's the other that's the flip side of these incredibly powerful technologies that can really help people but they can also hurt if they're used wrong.

Randall Kaplan

I'm still wondering about the column a ski lift from Jon Rubinstein because back then, the phones were bricks. I mean, my Nokia phone was maybe six, seven inches long. It was maybe two inches wide. That thing was heavy. Where were ya?

Tony Fadell

At that time right around that time was the razor like razor was like the cool thing and that was in 2000 123 Something like that. But yeah anyway so it like you know people just cared about literally just calling people and they had a rudimentary you know rudimentary contacts book you know directory in it and then you could play Snake on it and you know maybe it did texting maybe did SMS

Randall Kaplan

thanks for listening to part one of my amazing conversation with Tony Fidel, the incredible inventor of the iPhone and Nest thermostat. Please be sure to tune in next week to part two of my awesome conversation with Tony

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