This is an AI Transcription. It’s pretty good, but please forgive any errors.
[00:00:00] Jonathan: Welcome to the Difference Engine, the show for tech founders, investors, and innovators.
[00:00:09] Paul: Hey Paul, what's coming up today? We'll be diving into the history books and extracting lessons from the category clangers. But first, NVIDIA isn't waiting around in 2025.
[00:00:23] Jonathan: It looks like Jason Huang's category innovation engine knows no bounds. NVIDIA has announced that it's going to be offering a personal AI supercomputer. Sounds like a new category to me. Indeed, it is a new category. It's a new category starting at an entry level of only 3, 000. And it's something that anybody can use in their own home or office.
[00:00:46] Paul: You know, considering that your smartphone's about 2, 000. Yep. Uh, when you buy it in the UK, it's not far off.
[00:00:53] Jonathan: It looks like a bargain and it is packed with tech. So this, this new desktop machine is, is called Digits, not entirely original, but you know, it's a name it's going to go on sale in May apparently.
And it's about the size of a small book. So just. Sit on your desktop minding its own business, but it contains an NVIDIA Superchip, and that is called the Snapple entitled GB10 Grace Blackwell, and of course, the Grace Blackwell is optimized to accelerate the computations needed to train and run. Models.
It's got 128 gigabits of unified memory and up to four terabytes of NVMe storage. Well, we don't care about all the feeds and speeds bollocks, but what we do care about is good old Jason has yet again, reframed user expectations. Well, you know, a personal AI supercomputer is definitely a new category and it's going to have, we think significant impacts on AI development, um, and particularly on accessibility.
Let's say, and it. It will release developers, at least at the outset, from the need to engage with the big tech platform.
[00:02:00] Paul: Because one thing we know is new types of platform normally brings new categories. So we've seen that with, with, uh, mobile. We saw that with the web. And now we have AI, On a chip on a machine and how do we measure a new category?
[00:02:14] Jonathan: One of the ways we measure a new category is, is this reframing user expectations? Well, I think this definitely pass is that test. And if you look at it, you know, if you look at it, it's, it's about democratization of our AI. So at a stroke, digits bring super competing power to individual developers, uh, researchers, students, whoever wants to use it, um, enabling more people to engage in it.
Advanced AI development, you know, wow.
[00:02:42] Paul: Yeah. And I think this is a year when, um, AI is going to really find its subcategories, so to speak, all the conversations we're having. And, um, the, the big rumor for where AI is going, having sorted out, um, pretty much language with the large language models is robotics.
That's, that's sort of exciting. You're going to need a whole lot of compute and it's going to have to be. Much more accessible, much more transportable, much more like this new machine. This enables
[00:03:09] Jonathan: people who understand robotics to start developing. On the desktop. Um, so you're dead right there. I think, you know, it is going to accelerate innovation.
Apparently, it can handle AI models up to 200 billion parameters, which is sort of the going rate at the moment. So faster prototyping, I guess, fine tuning. Testing of complex models, and I think that there's a form of induced demand that has that potential to hugely increase the rate of innovation in our applications.
[00:03:39] Paul: Yeah, so if you create a very desirable product, which is what we have here, that looks different and offers different capabilities to everybody else, of course, that's going to stoke curiosity, and those who like to innovate, those at the cutting edge, will want to get their hands on this thing. And inevitably.
That's going to lead to new categories. Fascinating
[00:03:58] Jonathan: also that this little gadget will enable sophisticated AI model development and the testing without the limitation or cost of the cloud. So that offers more control, convenience, and of course data privacy, um, free from the shackles of big tech.
[00:04:15] Paul: Yeah, we know that putting Technology in the hands of the democratizing, so to speak, is really useful.
If we think of all the people that we've recently interviewed, at least, um, two of our recent entrepreneurs started live with the BBC computers, um, you know, and, and the ability for them to self actualize and create things in their own time, in their own home, you know, learning at their own pace was what really accelerated their journey into.
[00:04:46] Jonathan: Yeah, just allowing them to noodle about and play. And it was that whole idea of being able to play with stuff where the innovation comes. And I think on that basis, you know, this tech will really shift power to smaller groups and independent researchers. And, you know, literally we're back to people in their bedrooms.
Essentially on the on ramp to some massive breakthroughs, uh, you know, and that's going to be all things like autonomous driving, whether it's some issues, healthcare, certainly the creative industries in huge flux at the moment, and of course, finance, um, and with very, very fast local model training and analysis going on.
[00:05:30] Paul: Decentralizing it essentially is what we're talking about here. And, you know, the, the leather jackets written again, he's literally got the thing in his hands. Yep. This is what's required to really stoke innovation.
[00:05:41] Jonathan: But it's also, it's always very easy to get excited about something you can drop on your foot, something that's really physical.
Um, but I think, um, one of the things people might have missed with this recent announcement is, um, that NVIDIA is going to be releasing several software tools for building, connecting the so called AI agents.
[00:05:58] Paul: And I think they've timed that just right because there was getting to be a bit of a swell of opinion that NVIDIA's moat was its operating system.
Yeah. Making it more accessible, you know, milk the opportunity, grab as much revenue as you can, and then open it up. It's quite a smart move.
[00:06:15] Jonathan: This is definitely hardware and software aimed at local innovation. Um, and moving things forward in whatever industry the user is choosing to do that in.
[00:06:27] Paul: Will it be available in Europe at the same time as the U.
S., or will they pull the trick that a lot of the LLMs, uh, Google, uh, et cetera, um, do, which is release it in the U. S. first?
[00:06:36] Jonathan: Yeah, it'll be released in the U. S. at the big show, of course. So, when it comes to Europe, We don't know, but a lot of people will be carrying them back in their, um, in their suitcases.
We also have to realize that we're looking at this from a category point of view. And, you know, these agents have become the latest category contender. Um, and many companies view them as a, as a way of incorporating technology in their operations to boost efficiency and to save money. And again, this is going to build a big ecosystem around NVIDIA.
[00:07:09] Paul: I mean, Enchantix is really where it's all going. The nature
[00:07:13] Jonathan: of, of this is that NVIDIA is going to, is releasing several custom versions of the Llama LLM. Um, which they've snappily called Nemotron, uh, and of course they're claiming that they're nicely tuned and optimized, you know, for following instructions and planning actions in order to carry out those agentic tasks.
And let's
[00:07:33] Paul: not forget, even though we're all, you know, enraptured with, uh, with Jensen, there are a lot of people after this game that the race is on, um, you, all of the large chip manufacturers are now going after this, uh, a lot of the large, um, uh, AI players are building chips. So, you know, I think it's about, you know, this move is perfectly timed because it's just when you thought someone was going to catch up off the go again.
Yeah.
[00:07:58] Jonathan: So I think we can see a lot of action going forward. Perfect
[00:08:00] Paul: strike,
[00:08:00] Jonathan: right? Yeah. So we know that, you know, digits represents a significant step forward. Uh, in making AI develop more accessible and efficient. We think that may lead to a more diverse and innovative AI landscape. But it is the embodiment of a new category, the personal AI supercomputer.
Now, it will be fascinating to see if it gets traction. Now, how it's developed and whether NVIDIA's competitors can catch up, as you say, Paul. Um, but it is yet another lead established by NVIDIA. But I don't think listeners should be blinded by these. Quasi consumer, maybe gimmickry, um, of the box. It's the software tools that could have the biggest, uh, total TAMs, not the novelty boxes.
So, you know, I think The novelty box
[00:08:46] Paul: doesn't hurt to, to
[00:08:47] Jonathan: plug the idea though. It certainly doesn't, but I think It's a great strike. It's a great start. We're very impressed, but I think, you know, our final point is Salesforce, not Raspberry Pi on this. Hats off to Jensen.
[00:09:03] Paul: You've got to learn to earn. So for this feature. We thought we'd do something, uh, a little bit different, and that is to delve into the history books. And what we want to do is talk about 18 or so of the previous category, losers as a way to demonstrate just how hard it is to win in a category. So take a look at some of these examples and maybe look them up, uh, in your own time.
And remember, tech is, is, is cyclical. It's very high risk. And often today's winners, uh, of which there are a few named here, were yesterday's losers.
[00:09:42] Jonathan: We both know that taking a category lead isn't easy. It requires insight, meticulous planning, timing to get it right, and probably a bit of luck in the things you Or anywhere anybody else didn't see coming.
So in the tech industry, various companies, many of whom have created and led in categories, um, have made category creating or challenging decisions that have turned out to be significant duds, um, failing not only to create new categories or grab category leadership, but sometimes costing the company significant opportunity
[00:10:15] Paul: elsewhere.
So this is when a product launch fails to create a category.
[00:10:21] Jonathan: Indeed, and we call these our category clangers and some of the most notable mighty missteps Um have happened across various tech categories Now we might start out in hardware might we?
[00:10:37] Paul: Um,
[00:10:41] Jonathan: everybody's top drawers of their desks are full of these missteps.
So one of the mightiest of this missteps I think is, was Apple's Newton PDA, personal digital assistant. Remember that in 1993, it came out, looked very, very innovative, but the problem was it launched with the basic things that you need to get right. So it's handwriting recognition was poor. Who thought that was going to be a thing?
Anybody's,
[00:11:09] Paul: anybody's tried to read my handwriting, but no, it's definitely a thing. But you can understand, right? Because like people thought writing was going to be the input, not voice.
[00:11:17] Jonathan: Yeah, yes, indeed they did. I mean, everybody thought that the keyboard was just something we'd inherited from, uh, from huge typing pools and mechanical typewriters, but no, I'm afraid it has carried on.
So it was very poor at handwriting recognition. It was also very pricey if you wanted one and it's, it's connectivity was laughable. I mean, it wasn't really connected to anything. I mean, it really was an answer looking for a problem.
[00:11:41] Paul: I was there right at the start. Actually, I went to the launch of this thing in London.
I saw Mr. Jobs on stage and, uh, the, uh, the demo failed spectacularly live in front of a ton of journalists, including myself. And, um, you know, it got reported as such, and it was downhill from there. I actually even wrote part of my MBA, uh, on the spectacular failure of this product.
[00:12:04] Jonathan: One of Apple's terrible, terrible missteps there.
Um, but you know, big, big tech is certainly not immune in hardware from, from making mistakes. I know, they can hold it. I'll give you Google Glass on the next one. Remember that? Big privacy concerns, again. Really high price. Where were the use cases? And frankly, there's something as a sheer ridiculousness about the concept, which I think pervades still in, in AR.
Well,
[00:12:30] Paul: you'd be surprised. I mean, don't forget these Ray Ban meta mashup is coming back. So I think the privacy concerns, somebody once said, um, I think it was Mr. Levy of Box, that our definition of privacy will change. And at the time I thought that was a strange, Comment. Yeah, actually, it turns out he was spot on and, um, just on Google Glass in particular, I can claim another little personal contact here that was actually launched at our former, uh, offices, which were in the Riverside Studios down just by lovely, uh, River Thames.
[00:13:04] Jonathan: And wasn't that actually John Logie Baird's original television factory? Another
[00:13:07] Paul: category was created there. John Logie Baird made televisions when televisions were not a thing that everybody had. From a factory that was, in fact, the previous incarnation of Riverside Studios, which is where Google launched Google Glass.
[00:13:19] Jonathan: Another, another lovely example of, um, sometimes the most successful companies not getting entirely right was the, uh, Samsung Galaxy Note 7. You know, and that, this, this was quite important because it was around 2016. Is
[00:13:33] Paul: that triple brand? Samsung. Galaxy note number seven. I mean, it's a lot.
[00:13:39] Jonathan: How many would you like?
[00:13:41] Paul: I prefer Apple, Newton and Google Glass, actually.
[00:13:44] Jonathan: Well, just remember that time Samsung will look at the city very, very pretty and it looked like they were going to snatch their smartphone mobile handset market, um, or the category crown at least from Apple. But do you remember in, in, in somewhat, um, prescient of, of e bikes and scooters, um, battery issues caused some of them to actually catch fire.
Cue massive recall, significant financial losses, and huge brand damage at the time. I
[00:14:17] Paul: mean, I think they were just rushing a little bit too, too fast ahead of the market and obviously trying to respond to Apple. They've been plugging away for years to try and get to the top handset manufacturer on the market.
And I think in the last few quarters, they've actually achieved that sort of wonder where Huawei is in that, to be honest. But, um, I think these days, um, you know, Samsung doesn't need to worry about Apple so much, does need to worry about Huawei and the rest of the Chinese guys. Certainly does.
[00:14:44] Jonathan: Um, but let's leave hardware for a moment and have a look at software.
And I think one of the, one of the greatest software duds came from Microsoft. I mean, that's
[00:14:53] Paul: a bit unfair. Where are we going with this? Zoom.
[00:14:55] Jonathan: Oh, okay, you know, another another misstep from Microsoft's dark days under Steve Ballmer 2006. It was soon was released to compete with the iPod, which was getting rapid traction,
[00:15:08] Paul: which in itself wasn't the wasn't the first of this type of mp3 player device.
But
[00:15:13] Jonathan: you know, as we know, they put together the ecosystem that made it all happen. And You know, if you compare it with zoom, zoom didn't have any unique features. It was really poorly marketed. I remember at the time wondering actually what it was. It wasn't quite clear that it was the alternative to the iPhone because
[00:15:29] Paul: it was marketed as a brand and not as a category.
[00:15:32] Jonathan: Well, let's not talk about Jaguar again. Um, you know, Poor, poor marketing. I thought on that, frankly, the design was pretty unappealing and of course, a non existent ecosystem.
[00:15:44] Paul: I think Microsoft does better when it sticks to the knitting and copy others, copies other good ideas more closely or buys them or buys them like a DOS Lotus one, two, three, which they competed with Excel, the iZoom thing, and, um, you know, they do really well milking franchises
And, um, you know, even these days, their version of, uh, of, you know, cloud computing, you know, which competes with AWS, et cetera, they have the best at good enough software. So what I like about it is they never want to be better. They just want to be good enough, but, um, category leaders, they ain't.
[00:16:20] Jonathan: I also think.
You know, again, it's rather Balmer era ish again, was, was, do you remember Vista? They were clearly already worrying back in 2007 that the hegemony on the desktop at some point was, was going to be challenged. Um, so in, in came this great new thing, which appeared to be a bit more visual, but of course it had high system requirements.
There was some nasty compatibility, uh, issues I seem to remember when I actually installed it. Um, and it was just absolutely full of bugs. And very, very quickly, the world word went around, um, that this was not worth investing in it. Do not load it on your computer and just wait for the next version of Windows to come out.
You know, and meanwhile, Google was watching and waiting to redefine how we use the desktop. I
[00:17:07] Paul: think it's best avoided, uh, and best forgotten except for Microsoft. Please don't inflict that on us again. Well, I think since I moved to Mac, I haven't looked back.
[00:17:16] Jonathan: Yeah, I know. And I, I'm the Microsofty around here and I recently switched to Microsoft 11.
And frankly, I'm really hoping that windows 12 is an improvement. Um, it just makes you realize how far Google has come in understanding just what the average Joe like us needs in terms of user interface. And its usability.
[00:17:35] Paul: Well, that's on you with the, with the, uh, windows fetish.
[00:17:38] Jonathan: Oh, no. Oh no. I'll learn one day.
So, um, how about internet services? They've been around long enough to see some amazing duds.
[00:17:46] Paul: Well, um, I, I was consulting, um, at this time we were working with a marketing, um, a consulting services company. We thought the world was gonna change. We were not wrong about that. We may have been wrong about with,
[00:17:57] Jonathan: with a OL merging with Time Warner.
[00:17:59] Paul: Yeah. I mean, this is when, um. Things got a bit silly. Yes. Frankly. Uh, you know, a, uh, essentially the sort of, um, a, a crap version of a BT online ramp in AOL and a really good content company that made a few missteps. Yeah. Getting together.
[00:18:16] Jonathan: They were really trying to create a web portal category leader. And the idea of a, at the time when the idea of a web portal was, was disappearing, um, but it was classic, classic, you know, 165 billion worth of somebody, somebody's money getting destroyed with cultural clashes.
You know, people hadn't realized at that time just how different tech culture was from from the culture of, say, the traditional entertainment business, you know, there were not the synergies they thought they were. And of course, the dot com bubble just just blew the whole thing up. So it was clearly a perfect storm hitting at a time when everything around them was changing.
So, you know, Poor management, poor judgment, almost
[00:19:03] Paul: moved a long, a long way from there. Another example of this would be guy hands out, taking over EMI and bringing in, you know, because back in the day, um, merging as a steel business with a railroad business was possible, but there are certain types of businesses, um, you know, content being one of them, tech being another.
It's very hard to merge these things together. It's easier now, because a lot of people have been there and done it, look at Spotify, etc. But back in the days, you know, it was super hard to do, and people worked in one industry or another. Managing
[00:19:37] Jonathan: intellectual property is a very, very difficult thing.
Difficult thing to do and it absolutely does rely on people no matter how much you want to automate it Or how much you want to cut down the cost of doing that one of my favorite stories that just Resonates as a, the biggest door you can imagine was, was Yahoo, uh, rejecting, rejecting Google, you know, in 2002, just as things were starting to build up again after the crash.
That's a quarter of a
[00:20:10] Paul: century
[00:20:11] Jonathan: ago. Yeah, but it's really, really important because the consequences are still with us today. Yahoo had the chance to buy Google for a A measly 5 billion and it turned it down. And in that moment, they missed out on the chance of becoming the category leader in a new generation of search engines.
[00:20:33] Paul: One wonders why did they not see it? Um, I think Yahoo had a brilliant business at the time, but it's, it's very hard to kill your own babies. That's the innovators dilemma, right? Yeah. Um, it's a little bit like, uh, when the record company no longer with us formally down the road called Decker, Decker said no to a little band from Liverpool called the Beatles
[00:20:52] Jonathan: or the basis that
[00:20:53] Paul: guitar groups were somehow on their way out.
Sorry, Decker. You got one wrong. Right. Moving on to the BlackBerry. My favorite
[00:20:59] Jonathan: products, loved it. We loved our BlackBerrys, that's for sure. But I mean, you have to remember that the BlackBerry was once the all conquering go to device for secure business mobile communications. It made you feel and look good.
It did, it did. You know, you were somebody in the mid teens if you had one of those. But! What did they not do that they really failed to adapt to the touchscreen revolution, which was weird because the thing we really liked about Baxby, apart from its security, was the keyboard. Keyboard is really good.
Good to you.
[00:21:30] Paul: If you've got fat fingers, it's a lot easier to do than the iPhone. I'm sure you
[00:21:34] Jonathan: share that with Um, with, with our king, um, indeed, um, I'm
[00:21:39] Paul: not, my fingers are not as regal as he.
[00:21:40] Jonathan: Remember also that the thing which BlackBerry lacked was, was the app centric ecosystem, which was going to be introduced by iOS and Android.
And that really changed the use case of our BlackBerry thought it could control
[00:21:54] Paul: all the apps on its device. And it got that wrong. Again, democratizing tech opens it up. And that's when the category started to pour out. Yeah. Um, They just didn't see that there'd be a category where apps would be freely brought into an app store.
In fact, they missed out on the, on the revenue opportunity, which, which Apple to this day takes about 30 percent tax, I believe, or everything sold through it. Um, however, this whole story, because BlackBerry created a lot of innovation, there's a great movie out there about BlackBerry, and I thoroughly recommend it, um, just to see, before things went down, things were going pretty sweetly.
[00:22:31] Jonathan: But so, we both love our bags. BlackBerrys, and you know, massive hubris let us both down, I think, on that. Um, however, I always was a, was a two handset kind of a guy. And I always had my BlackBerry and my absolutely unbustable Nokia 6310i, which never, ever dies. Ever let me down, which brings us to Nokia and their Symbian operating system, which they ultimately invested in and acquired now.
Oh, Nokia insisted that, that, that Symbian was a differentiator. When IOS and Android were gaining, gaining grounds and the reality of, of, of that is that it was one of the factors that led to the company's rapid decline from being the absolute by far category handset leader. And so as the smartphone market emerged, Symbian was found wanting.
And again, no ecosystem was really established around Symbian.
[00:23:39] Paul: The thing is, it's a bit weird. It's the innovators dilemma again, back to, uh, eating your own babies or, or, or, you know, killing your own babies. You need to do it trying to hold, you know, a hundred percent of, of, of, of nothing is a hundred percent of nothing.
You need to give away a little bit of. You know, the throttle you've got on the market a bit like we said with with Jensen's new announcement, it's liberating, it's democratizing, it's not trying to own the entire category, it's about growing the ecosystem, which grows the category, not owning all of the pie.
You know, the tragedy
[00:24:14] Jonathan: of this, of course, was was that Microsoft then thought it was a good idea to acquire Nokia just at the time, there's time that Steve Ballmer was planning his exit. So just in case anybody at the time thought he couldn't make any more bad decisions. Um, his parting shot was leaving others to flog the very dead horse.
[00:24:33] Paul: Indeed. I, I, his worst, uh, bad decision I think was not wearing a t shirt under his, uh, deodorant, uh, when he
[00:24:40] Jonathan: was on stage, but we won't go into that. So I'll be thinking about that for the rest of the day. Yeah. Yeah. Thank you very much. Um, so in order to try and cleanse my, my head from, from that particular thought, let's, let's talk about gaming.
Um, and maybe the Sega Dreamcast. Wow. Okay. I mean, we are going back there. This was launched about the end of the last century. Yeah. And it was. Ancient history at this point. But good intentions, um, may not exactly work out. And Sega was attempting to reestablish category leadership. Um, I mean, the Dreamcast was innovative, but again, the marketing was terrible and the timing with the imminent release of PlayStation 2, which did have a powerful ecosystem, that Dreamcast really didn't, just blew it.
[00:25:25] Paul: Yeah, this whole space is one where the ecosystem really matters, and it's interesting now because it's sort of, uh, end of an era, I guess, you see that the, um, you know, just recently, the console wars actually happened. Are pretty much over. It was, um, you know, everybody's moving to, to online and, uh, the excitement of the games industry being bigger than the movie industry is over.
But at the time this was this, this was the fight, right?
[00:25:52] Jonathan: Yeah. And you just got to be really careful, you know, in the games industry, just as anything else, you've, you've got to launch a product that's, um, fit for purpose. I mean, just remember way back when Atari, who were extremely dominant at the time, tried to launch ET, the extraterrestrial.
Um, You know, but in an effort to get it out with the movie and so on, they rushed development, the gameplay was really poor, and consumers just went, Don't like this at all. Remember there was, there was a video games game crash. Back in the eighties, back in the early eighties, the whole industry just went boom.
[00:26:28] Paul: And I think that's where it is now. I noticed that there's a new Chinese game. Forgive me. I can't remember which, uh, what it is, which has just been rated AAA, which is the most intense, uh, the most developed games, which has just come out. It does feel as though the innovation there, um, the ability to start new categories in that space has.
Past.
[00:26:47] Jonathan: Yeah. Well, you know, um, something, something newer social media. Well, you know, Google plus remember that, you know, launched as a rear guard action to compete with Facebook. It just never got user traction. And they just, and you know, Google at least decisively just decided to shut it down. Um, because nobody was using it.
And frankly, some security issues had started to emerge. And then, you think about MySpace, you know, the out and out category leader early on, just failed to innovate. Um, and, you know, that, Fact was really exploited by Facebook when they started to move into the market and they became the category leader and grabbed them all that Incredible value that could have been available to my space if they'd only innovated probably
[00:27:34] Paul: those two quite ancient examples brings us Quite neatly today because I'm not sure there's a lot of innovation that I'm seeing we've seen some failed attempts at innovation Remember clubhouse god.
Yes Came and
[00:27:49] Jonathan: went
[00:27:49] Paul: pretty quickly. Yeah. So that, that did cook kind of went really, really quickly. Um, in addition, we've got threads, which is seeing somewhat of a resurgence. We're told I don't know if I buy that blue sky where a lot of, um, musk refuse next have ended up, is that going to take off or, you know, has, have we got to the state of the market where.
X and linked in to a certain extent, define the category, tick tock. Will it be banned? Won't it be banned? It has the innovation. Ended in social media or is there something new that we can't see?
[00:28:22] Jonathan: Well, there's an entirely new relationship emerging between big tech and politics and you know at the moment They both they seem to be indistinguishable So I think the regulators if they want to regulate are going to have their work cut out So, you know big business versus nation states, uh should be an interesting fight going forward this year Um, and I just sort of wonder If social media's start, has had its peak and is starting in its decline.
I'm hoping there's more. I'm really hoping there's more. People may get so sick of the whole damn thing they just walk away and look for new ways to communicate. I mean, how about having an actual conversation face to face? With another human being, perhaps?
[00:28:59] Paul: Well, young people can't do that. So, oh yeah, of
[00:29:01] Jonathan: course I've forgotten
[00:29:01] Paul: about that.
Anyway, so
[00:29:03] Jonathan: let's talk about young people. Let's have a look at consumer electronics, Microsoft's kin phone. No idea what you're kin talking about. No, it was, it was a kin disaster. Um, 2010, that was. Just trying to establish a new category, the mobile design for the younger demographic. Um, it flopped spectacularly.
So, so much so, it was discontinued just two months after the launch.
[00:29:29] Paul: Well, they were late. The iPhone was out in 2007. I actually can't even remember this product, to be totally honest.
[00:29:34] Jonathan: It is absolutely brilliant. Bulmer era hubris again, poor sales, limited functionality, entirely missed the point, as you say that, you know, smartphone platforms were out there.
I mean, the iPhone had been released three or four years before. I mean,
[00:29:49] Paul: honestly, best forgotten. And honestly, I had forgotten about it. Yeah,
[00:29:54] Jonathan: it had a really weird slide out keyboard and they thought, they thought this was great. I have to believe you on that. You know, the, the problem was for the kids, the, the, the kin one just looked like a version of your parents' Blackberry.
I mean, who'd won that? Sorry. Microsoft. Another one I love is, is, is streaming services because thi this, this very recent example is, is so obscure. I mean, does anybody remember Kibby? I think that's how you pronounced it. QIBI. No blank. That actually had a ton of money put in, it was some very high profile backers, and it was gunning for the online video category crown.
Well, clearly there is a very conspicuous category leader in YouTube. It tried to differentiate itself with a short form content model, but it failed to establish subscribers because it wasn't free. It charged about 5 a month with ads, and about 8 Without ads, it just didn't deliver anything that TikTok or YouTube are already delivering.
[00:30:55] Paul: And they rely mostly on user generated content. That is how you make this model work. But it wasn't obvious. Well, maybe not. But I think
[00:31:03] Jonathan: this is the dud of category challenging duds. I mean, it took that mobile app just seven months to go from the next big thing to total failure. And it burnt up about 1.8 billion of investment.
What did they actually spend that money on? A lot of telling people how great it was gonna be, I think. Oh, okay. Advertising and nobody was interested. So, you know, Alibaba, you know, Walt Disney, Warner Media all had big holes in the pocket after that one.
[00:31:30] Paul: What were they thinking? Right. Uh. AI. Everything's successful in AI, isn't it?
No,
[00:31:35] Jonathan: it isn't. Not if you're Microsoft. Why are we picking on Microsoft? We're not. We're not. It's just I've had a lot of successes and a lot of dads at the same time. So they had a thing called TAY, T A Y A I. So it's easy to forget in the third coming of AI we're currently experiencing. Um, there's something to learn about this.
This is an object lesson in releasing a technology too early. It was an AI chatbot released on Twitter and the thing which I love about this was it quickly and frankly rather hilariously turned offensive because there were insignificant safeguards against manipulation. So this was the sweary. Chatbots.
[00:32:17] Paul: But I mean, that's where we're at today. That's like, that's the irony of it. Now X is 30, I I know, but
[00:32:23] Jonathan: you know, KBI lasted seven months. TII lasted 24
[00:32:28] Paul: hours. Wow. That's tossed so much as Strike as a . Nothing's deliver. My last one is, is sas. And this is sort of contentious. Oh, contentious. Um, because this is a live debate, software as a service.
even a category anymore. Um, we've seen some spectacular blow ups. Um, you know, the bookkeeping service went down just before the end of last year, leaving a lot of SMEs with no blimmin way to file their accounts. Disastrous, um, there's been failures in the payments sector. There's a lot of, there are a lot of software as a service companies that got high on the hog, uh, probably about 21 and now are not being able to, um, you know, meet the requirements of their funders and their investors, et cetera.
And it is so sad to see, but that's creative destruction for you. It
[00:33:15] Jonathan: absolutely is. Good old Joseph Schumpeter and that amazing idea. I mean. SAS has been hugely successful as a category, but I think we're seeing big waves of change now, and I think people need to ask, is, is that category starting to become redundant?
There are some huge questions. Particularly the assault of AI, which changes how we think about how we use software. So if I have
[00:33:37] Paul: a bit of AI, and I have, um, you know, little bits of functionality, and I can do a little bit of coding myself, why do I need to buy an entire, a, Big sass products at vast expense when I can sort of like stitch something together myself, what goes around comes around here.
So this
[00:33:54] Jonathan: is something that which we think is ongoing and we will be following it very closely. But I mean, you know, what, why do we talk about the past like this? Well, as we know, those that. Don't know the history, are doomed to repeat it. So what these failures all have tying them together is the importance of market understanding, timing, innovation, and strategic foresight.
And you have to combine those four things. The cardinal sin, Not really understanding what customers need and not reframing the offer to them so that the difference resulting in value is clearly established. And I think you have to be absolutely aware that while you are driving your category journey, competitors may also be reframing customer expectations.
And that could become an existential threat to your product. So good intelligence is crucial.
[00:34:58] Paul: We wanted to talk a little bit about Europe's place in the world. Uh, from a category perspective, there's been way, way, way, way, way, way, way too much doom and gloom recently around Europe. Um, Mostly from a lot of people who, with no respect at all, don't know what the hell they're talking about. Often because they're way too far away from where the action actually is.
Have they forgotten? I wonder where the atom was split. Where was that? Oh, that'd be Manchester, England, England, England, Europe, uh, where the first commercial computer was put together. Where was that? Oh, that'll be Manchester, England, Europe. And where the first car was commercialized by, um, Mr. Mr. Benz, um, Europe to say nothing of the first supersonic airliner.
Ah, between the French and the Brits. One of the few occasions where that worked. Yes. And where. It's a little bit contentious. Where did the original tech for Mr. Elon Musk's SpaceX business come from? Oh, that will be Germany, but I don't think we really
[00:36:00] Jonathan: want to You can watch that
[00:36:03] Paul: in the movie Oppenheimer.
Hey, what about graphing? Where was that invented? That'll be Manchester England, Europe, right? If we are to believe certain commentators, there's never been a worse time and less of a chance for Europe to produce categories than right now. Yeah. Inflation's up and the governments of the UK, France, Germany, and others have either changed or about to change.
What do we think?
[00:36:29] Jonathan: There's another big change going on as well. In another country, isn't there, at the moment? Could that have something to do with the um, the bad mouthing that seems to be going on?
[00:36:36] Paul: I would say that all of this adds up to the perfect time to create new categories. I think it does. There's been too much chat about Europe's uh, ability, or inability to create and sustain new categories.
Tech leaders and new category leaders. So we're gonna have a quick look at some of the stats and some of the chats from all great region to see if we can assess where we stand. And this is a theme we will be repeating. We certainly will throughout the year. And we'll be coming back to it and we'd love your feedback on this.
So shout out to the guys on the all in podcast for talking down Europe. We're going to talk it up. Right. Let's go. So, um, let's start at the end. What we're all doing, building category leaders and creating categories is ultimately to create growth in the economy and wealth that often, uh, is crystallized.
So we've looked at some data from our friends at sifted, uh, another great European brand. Uh, and we can see if you like the back end of the tunnel, the exit lane is slow. Um, and this has repercussions for all of us working more at the front end where the categories are designed because eventually all categories need to become investor ready if they're going to create growth and wealth.
So let's look at the deal count from, Last year, 2024, the deal counts gone right down, you know, in 2021, which was the poster year for lots of tech funding. There was 1, 366 deals completed, uh, according to sifted, uh, that year in tech. Yep. And we are at almost half that in 2024 and on a downward trajectory to 858 deals.
[00:38:14] Jonathan: One of the things we need to bear in mind there is, is that the 2021 figures were inflated by some quite strong mega deals. So if you look at that, it's 1366 deals for 1. 87. 1 billion versus 858 deals by 68. 1. 61. 8 billion. So, you know, lies down, lies and statistics. Um, there is still a lot of dealmaking going on.
There just aren't so many mega deals. Absolutely. That's the important thing. And we're
[00:38:43] Paul: on all of the, even 2024 is all above the baseline from 2020. So things have been. Picking up there. They're on a bit of a downward trajectory projection, but they are in the States to let's look at another data set.
Let's look at deal room and, um, look at where they're saying, and this is from, um, halfway through, uh, last year. So it's a June, July, where's the money going? Yeah. Where is the money going? And what do we see? Not many surprises.
[00:39:12] Jonathan: Yeah. Generative AI at the top. Unsurprisingly, you know, model making, uh, Gen i applications and then actually in fourth, which is quite interesting is electric mobility Um hydrogen behind that and industrial technology Automation mobility we're seeing two very strong clusters there where the where the money is going.
So A. I. And green mobility,
[00:39:38] Paul: depending on who you believe you do. We really think that the A. I. Um, at least the gen A. I. L. L. M. Model world is still open for European contender. Potentially, I'm sure our French colleagues would would would say that, um, there's been some missteps in electric mobility and, uh, E.
V. S. But, those things are being funded over here, and now's a great time to build out those categories. When we look at um,
[00:40:03] Jonathan: uh, electromobility, some of the, the, the issue can be laid at the door of policy makers who have not been robust enough in pushing the next wave of mobility.
[00:40:14] Paul: And of course with all the turbulence that's happening with leaders.
In Europe, then maybe that will resolve itself this year. Hopefully it'll start to resolve itself,
[00:40:22] Jonathan: but we're still seeing a healthy investment in FinTech health enterprise software as well. Um, and unsurprisingly UK, France, and Germany are still the top. Venture funded countries in Europe
[00:40:34] Paul: and that's awesome.
And let's not forget that we've got some really strong contenders in Terms of wave, which is somehow regarded as a European slash UK company lovely. Yes, mr All out of France and poolside AI we have got players that are attracting large amounts of VC and therefore we one would hope We'll get to that exit gate.
[00:40:53] Jonathan: It's a nice data coming out of the European investment fund. Isn't there as
[00:40:57] Paul: well? Yeah, this is a big one Big piece of research, something we should look at. Uh, and what we noticed here is that, um, this is, uh, a large number of, uh, VCs. So the actual funders being, um, uh, being surveyed here. And these are the guys that have to make the money for their investors.
That's 650 general
[00:41:15] Jonathan: partners here.
[00:41:16] Paul: Really, really good data, uh, nice piece of research. And we can see, and we, um, we'll post this up that in. 2022, there was a massive decline in both the optimism around the current situation that people have, which, which they were flat on, and how many people felt positive for the next 12 months.
So going into the following year, 23 on, you know, 22 percent of those. general partners said they felt positive about 23. In 23, that positivity had jumped to 52%. So half of those surveys feeling positive. And this year, it's leapt again, in 2024 to 68 percent feeling positive. About where they're going with a very,
[00:42:01] Jonathan: very strong upward trend now.
[00:42:03] Paul: So, um, just to round this off, we're going to regularly come back to the sentiment about the market as we traverse 2025 in Europe. There is an uptick. There's definitely a, uh, an uptick in sentiment, and we're going to keep a watchful eye on how the environment develops for innovative startups that are shaping up in Europe.
Um, and to be super clear, we reject the negativity of our U. S. commentator friends.
[00:42:26] Jonathan: Yep.
[00:42:27] Paul: And I think we need to quote the sage of Omaha. Well, the sage of Omaha, who is, uh, an American last time I looked. He was, yes. I do believe Omaha is in Nebraska. USA. And, uh, famously, he said, When others are greedy, Be nervous and when others are nervous, be greedy.
Best of luck in 2025 Europe.
[00:42:49] Jonathan: Thank you for listening. If you want to learn more about category design, head to becategorical. com. If you need help designing and dominating your category, then get in touch. Contact details are in the show notes.