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CHAPTERS
- 0:00 – 2:35
Intro: Taking on the Phone Giants
Steph Smith introduces Carl Pei, founder of Nothing and co-founder of OnePlus, and the difficulty of building hardware and entering the phone market. She previews the conversation about what it takes to build hardware and make tech fun again.
- •Phone market share is concentrated, with an 85% chance a US phone is from Apple or Samsung
- •Nothing has sold over one million units in just over two years and built a team of over 400
- •Carl Pei previously co-founded OnePlus
- •The Nothing phone's glyph interface uses LED lights on a transparent back
- 2:35 – 5:59
Why Hardware Is So Hard and Why Pei Is Trying
Steph asks about the market concentration in phones. Carl explains that startups have all failed in the last decade, and says he is attempting it because nobody else will. He also explains why big companies struggle with hardware while startups cannot afford to fail.
- •Big companies keep accumulating share; startups who tried in the last ten years failed
- •Pei says if his team doesn't try to take on incumbents, nobody will
- •The team feels guilty about contributing to a boring state of things
- •Larger companies can treat hardware as a side hustle and burn cash for years
- •Nothing can't afford for any product to fail
- 5:59 – 8:31
The Iceberg Model: Starting with Earbuds
Carl describes his iceberg mental model for revealing the company's ambitions gradually. Earlier smartphone startups cost factories money, so Nothing started with earbuds to prove its abilities before moving to phones.
- •Only the tip of the iceberg is shown to the market and stakeholders
- •Failed startups made manufacturers reluctant to support new ones
- •Earbuds in 2021 were an easier, fast-growing mass category to start with
- •Earbuds proved design, manufacturing and selling at scale to win over supply chain and investors
- •Pei says Nothing cannot ultimately be just a smartphone or audio company
- 8:31 – 12:44
Differentiating Through Transparent Hardware Design
Carl explains that as a startup with no resources, Nothing picked design as its first differentiator, building a coherent design language across products. Transparency is something big brands won't risk, and design alone is not a strong moat.
- •Few brands maintain a coherent design language across devices; Apple still does
- •Sony and Bang & Olufsen of the past had distinct design languages
- •Nothing landed on making all products transparent in some way
- •Niche players can take design risks that mass-market players cannot
- •Technology is the only real moat, so free cash flow must be reinvested in it
- 12:44 – 16:50
Beyond Design: Software, UX, and AI
Asked about the next phase, Carl lays out a progression from hardware design to software design, then user experience, an ecosystem of connected devices, and AI. He argues mobile UX has barely changed in decades and that devices should deliver intent, using dinner planning as an example.
- •Design is the number one reason users buy Nothing products
- •Software design differentiation is the next step, but only a slightly stronger moat
- •Mobile interaction has fundamentally not changed since the Nokia Navigator era
- •Devices should deliver intent instead of requiring many apps for a task like organizing dinner
- •Owning hardware and software gives Nothing a good position for AI, but they are in no rush
- 16:50 – 18:38
Building Interest: Vision, Track Record, and Table Stakes
Carl says there's no hack to getting people interested: it rests on his track record and a clear vision that brings people along. He cites Tesla's mission-driven communication, while noting that good products are table stakes.
- •Early interest came partly from his past track record
- •Tesla communicates beyond the next product cycle and how the world changes
- •Consumers buy into causes and missions more than individual products
- •Satisfying products are table stakes for earning belief in the future
- 18:38 – 20:51
Marketing as Arbitrage and the YouTube Experiment
Carl calls marketing arbitrage, using the early Facebook ads example. He describes Nothing's three-month YouTube experiment, where four videos passed a million views, and the idea of showing behind-the-scenes insight no other phone maker shares.
- •Early adopters of a channel benefit from low prices until big companies arrive
- •Startups need higher-ROI marketing than big companies to compete
- •Nothing is recruiting a VP of marketing
- •Four YouTube videos have passed a million views
- •Phone-maker-produced phone reviews offer a behind-the-curtain angle
- 20:51 – 23:15
Underestimating the Value Chain, Cash Flow, and Suppliers
Carl says software-background founders underestimate how many teams must work for hardware to succeed. He describes cash flow and working capital as major headaches, since suppliers demand prepayment from a company without a track record.
- •The hardware value chain spans around ten teams, and one broken link breaks everything
- •OnePlus had a big company's supply chain and working capital behind it
- •Small companies often must prepay suppliers months in advance
- •Slow sales can break cash flow and threaten payroll
- •Convincing suppliers to work with you is almost like pitching investors
- 23:15 – 24:52
Factory Troubles and Manufacturing Mistakes
Carl recounts working with the only factory willing to take Nothing, which had management issues and later shut down. Nothing deployed its own engineers on the line and designed the production process, but errors such as a wrong spring still caused earbuds that wouldn't charge.
- •The only factory willing to work with them wasn't well run
- •Nothing's engineers supervised every station on the line
- •Nothing designed the industrial, mechanical and manufacturing process for the factory to replicate
- •A spring that was sourced incorrectly led to earbuds that couldn't charge
- 24:52 – 27:24
Pandemic Chip Shortage and Supply Chain Lessons
For the first phone, the global semiconductor shortage made suppliers reluctant to serve a small company. Carl describes begging at every level, even speaking with competitors' CEOs, and names a mistake: ordering components in bulk instead of delaying decisions.
- •Big companies had guaranteed supply for some components for up to six years
- •Pei pitched everyone from execution level to board chairman, trying every angle
- •He spoke to most competitors' CEOs despite low odds of help
- •The effort caused product delays but ultimately worked
- •A key mistake was ordering in chunks instead of the minimum at the last possible time
- 27:24 – 29:12
Can Hardware Be Built Remotely?
Steph asks whether hardware can be built by remote teams. Carl says remote suits some mature companies but not Nothing, citing its young team, the difficulty of the industry, and the creative, strategic nature of the work, such as design walls and physical mock-ups.
- •Face-to-face is more efficient for building early culture and relationships
- •Mature companies with established processes may suit remote work
- •Nothing's industry is difficult enough that working together raises the odds of success
- •Creative and strategic work is harder to do remotely, as with the design team's printed walls and mock-ups
- 29:12 – 32:34
Community as Collective: Shareholders and Contributions
Carl says community and product innovation excite him most. He describes erasing the line between employee and community member, with community shareholders, an elected board observer, and user-made fonts, renders and apps, contrasting the collective with Apple's top-down approach.
- •The internet lets experts emerge anywhere in the world
- •Community members were allowed to become shareholders
- •An elected community board observer gives feedback from users
- •Users adapted the dot matrix font for other languages and built PC and Mac control apps
- •Pei contrasts the collective with Apple's command-and-control model
- 32:34 – 34:47
Finding the Breakthrough Category After Smartphones
Carl says the smartphone market is shrinking and is a place to build a stable company, not a breakthrough. Within ten years Nothing must invent a breakthrough category, likely at the intersection of hardware, software and AI, where form factor relates to utility.
- •Pei compares smartphones to Apple's PC business, with the iPod as the true breakthrough
- •The total smartphone market is decreasing, but Nothing is small with upside
- •Drones, AR/VR and Web3 may matter but haven't changed habits like the smartphone
- •The next habit-changing product is likely at the intersection of hardware, software and AI
- •Software and AI alone in a browser is too niche
- 34:47 – 39:32
Making Tech Fun Again and Closing Advice
Carl explains that wanting to bring back the magic of tech resonates with investors, partners and consumers. He recalls modding communities and Web 2.0 optimism, contrasts that with today's distrust of tech companies, and closes with advice about working at a hardware company and the reward of seeing people use your product.
- •Many tech fans remember being Apple fans and want the magic back
- •Pei recalls dumb phone modding communities and early Web 2.0 fun
- •He says people now see tech companies like old oil companies
- •He is excited about AI but says Nothing must handle survival first
- •He suggests working at a hardware company to learn the ins and outs, and finds it rewarding to see people using the product
