This Tech Founder's $1.3 Billion Company Is Taking On Apple and Samsung

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0:32Which science fiction story most resembles the future you want to build with technology? Keep walking. Keep walking. So in the movie, her main character has earbuds, has a phone in their shirt pocket with a camera that's looking at the world. They can speak to their AI assistant that's hyper-personalized to them. I figured you were hungry. Thanks. So something like that is fully doable in the next couple of years. I feel like I can say anything to you. That's nice. Today, dear listener, on Bold Names, Carl Pei, CEO of nothing. It's not a non-thing. It's an actual startup worth more than a billion dollars taking on Apple and Samsung on their own turf.

1:20Yeah, that's right, Mims. He thinks that these big tech companies are boring, that they have lost the plot when it comes to smartphones. We're also going to get into whether or not the phone really is the do-everything gadget of the future and what might come after. All that and more on today's episode with Carl Pei. From the Wall Street Journal, I'm Christopher Mims. And I'm Tim Higgins. This is Bold Names, where you'll hear from the leaders of the bold name companies featured in the Wall Street Journal. Today we ask, why is Carl Pei betting that his company, nothing, can take on the titans of the smartphone industry?

2:00I think of you and your company as kind of like the cool kids of mobile devices right now. You have the youngest demographic in terms of people who buy your devices. That means, of course, you're less well known to maybe older generations. You know, when people have never heard of you or what you do, what do you tell them nothing is? I like to say that we're a design-driven consumer tech company. We built smartphones, earbuds, headphones now as well. And we're investing a lot into the software experience. We started this company because we were bored with the status quo. I was a big Apple fan when I was a kid and bought all the early products, the first iPod, first iPhone.

2:43And I think those were the entire reason why I'm currently working in this industry. But over time, it just got more and more iterative. And we wanted to do something about it. And before starting, we actually studied everybody else who tried to make a phone company before. And in the last 10 years, nobody has been successful. And the way we saw it was that a lot of people came in through a software lens. A lot of the founders came from software backgrounds. And for hardware companies, actually, especially with smartphones, the value chain is very long. So to go from an idea to shipping a product to selling it all across the world and then to service the users, There's like so many steps in the way because you got to spend like templates at the same time to make a company like this work.

3:31And that's what we what we've accomplished, I think. And now it's finally time to do more interesting things. Give us the basics here. So where is nothing based? Where are you manufacturing your devices? And, you know, what's the state of sales? Yeah, we're based in London. We picked London for our headquarters because the thesis was that there must be a lot of creativity in London. It's a very big international city. We sell our products in 50 countries worldwide. And this year, we're approaching a billion dollars in sales. But it's just the beginning. Just the beginning. But let's go back a few years before you began nothing.

4:14You spent a lot of time in China, right? You were born in China, but you grew up in the West. You grew up in Sweden, and you went back to China as a young man right out of high school, and you started to really get into the consumer electronic space. A decade ago, you told some of our colleagues here at the Wall Street Journal that your goal was to disrupt the smartphone industry. At the time, you seemed especially focused on that. You were living out of a suitcase. Is that still the case? Are you still solely focused on disrupting the smartphone industry? I think the world of consumer technology has to evolve, and smartphones will still be a very important part of it, but it's not going to be the only thing.

4:55I moved to China in 2011 because I saw the consumer hardware smartphone industry booming there, and I was really interested in this industry. So when your colleague talked to me earlier, it was when I was a co-founder of OnePlus, a Chinese smartphone company that we built to about$3 billion in revenue in seven years. I guess we didn't completely disrupt the industry because the industry is big and$3 billion is not a huge slice of it. But yeah, super grateful to have been on that journey. So since then, the smartphone industry has evolved. It's consolidated. It reminds me of the auto industry. Honestly, I mean, you've got three companies that are dominant.

5:38Just two of them control 80 % of the market in the U.S., right? That's Apple and Samsung. You talk about having to spend 10 plates just at once just to get this company going because it's a hardware company. I mean, this is daunting. Why choose to try to disrupt an industry where these entrenched players have such an enormous moat in terms of just their huge supply chains and the huge demand for their products? um it's the only thing i know my entire career has been in this industry and you didn't know better i didn't know better yeah um i mean because even elon musk spoken like a true founder even elon musk who is like let's go to mars we can do that no problem he's like he wants he'd rather die than do his own smartphone right i mean he's talking about how hard it is i mean he said that and you're like let's do it i gotta i gotta dig up that interview.

6:32I never heard him say that, but it is pretty hard. It's a huge industry, like a billion plus phones are sold every year. And we thought that if we could just get a slice of this market to start with, then it'll be a substantial business. And to add to that, the smartphone is such an important device in our lives. We use it for multiple hours every day. And we thought that if we're able to scale a business like this, eventually there will be an opportunity to build something cool in terms of software and services as well. But we weren't really sure when we started what that would be. We just were super focused on getting those 10 plates to be able to spin and scale up the business.

7:10But now with AI accelerating at the pace we're currently seeing, we do see a lot of opportunities on the software stack as well. Before we get to AI, I'm just really curious what the doubters said to you along this journey when you're tackling such a hard problem? Oh, so much. Perhaps in the earlier years, the supply chain was even more skeptical of us than investors. And, you know, we approached a big manufacturer and they said, hey, we worked with a bunch of startups in the last 10 years. Everybody failed. We're not going to work with startups anymore. From investors' perspective, we heard a lot of things like, hey, it's cool that you can build a phone, but can you really scale it?

7:53It's cool that you scaled it in this market. Can you scale it in this other market? Breaking into the smartphone industry is hard, even for big players. After the break, how nothing has found its way in. If we're entering a huge and super mature category, we have to find a thin slice. The thinner, the better of the market and just wedge ourselves in. I don't think there would have been another way to break into this industry. Stay with us. DC politicians want to enact harmful credit card mandates that could take away your cash back and rewards points. Perks that stretch your budget and make life a little easier.

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9:00One of the things you kind of paint this really challenging situation, it's very hard to get going, is Mims just kind of talked about there are some dominant players here, right? Apple, especially here in the U.S., Samsung out there as well. And I'm just curious, what do you think your edge is there? Why would I buy a nothing phone when the iPhone works just fine? Yeah, I think the beauty about being in a super big industry, a super big category is that there's always unique needs. We're seeing a lot of our users not wanting to buy the same products as their parents. They want something different.

9:37They want something that can express their personality. And it's been a strategy, a conscious strategy that we've taken from the beginning. We shouldn't be for everyone, at least not in our earlier years. We should really be ourselves and find the people who like us. So the first thing we decided to do was to focus on design, to develop a very unique design aesthetic around transparency, around the technicality of a smartphone and consumer electronics, but also trying to infuse some fun and human warmth into the products. I mean, because you're hitting on something here, I think one of the criticisms about smartphones right now is that they all kind of look alike, right?

10:19And so how do you differentiate? For those who haven't seen one of these phones, how do you describe it?

10:30Well, I can show you. Okay, so on the phone 3, as an example, we put a secondary display on the back. It's got a bunch of useful but also not so useful features. And it's also open. Useful features being like the time or countdown. Time or having emojis for different contacts so you know when it's really important. I find that really useful. So like when your mom calls and it's like, I got to pick this one up. It's like a hard. Exactly. Yeah. And not so useful but fun features include this spin the bottle animation. Not a feature for when you're with your mom. No. And then we open it up so our community can also develop stuff for it.

11:09But every product we built has something iconic. The first earbuds, not only were they see-through, but they also had a dimple on the case like here. So you could also play around with it as a fidget spinner. I mean, if we're entering a huge and super mature category, we have to find a thin slice, the thinner the better of the market and just wedge ourselves in. And then once we're in there, we can start gradually expanding our scope. I don't think there would have been another way to break into this industry. As you say, it's super consolidated. So there's only a couple of really big players.

11:47And what that means is that the unit economics for a small company becomes really difficult. When everybody else is selling 100 million, 200 million phones, their negotiating power with the suppliers to get the cost down is way stronger than us. I mean, your high-end phone at this point costs something, what,$800? Yeah, it starts at $800. Yeah. But you must be doing something right because you just raised a bunch of money, $200 million at a valuation of, let me get this right,$1.3 billion. That's pretty impressive given the competition we're talking about. And you're raising that money. I think betting on AI helps you differentiate nothing even more.

12:29So you just launched something called Essential. What is that exactly? Essential OS is more of a vision because the smartphone OS hasn't really changed in the last... OS being operating system. If you're using the iPhone, it's iOS. If you're using Android, which is the Google operating system, could be on Samsung or all these other phones as well. Yeah, the OS hasn't really changed since I don't know how long, 20, 25 years, even before the iPhone. Today, the phones are a lot more powerful. The interfaces are a lot more beautiful. It's faster. It's more fluid than before. The cameras are great.

13:06But fundamentally, the interaction hasn't really changed. And we see a future where the smartphone or your OS knows you really well, right? Because we're all individual people. We're not the same. so everybody should be able to get their version, their most perfect version of the OS. I mean, just to be clear, you're building on top of Android. Android's your operating system. So are you thinking about at some point replacing Android or do you think there's an opportunity to create some sort of differentiation on top of Android? We're building on top of Android. We plan to continue to do so because it's a great platform to build on.

13:48Android has an open source portion of it as well that we're also leveraging. And the real benefit or the real value that Android has is that it's got a ton of apps. So I think it's a great place to start. But on top of Android, we have our own interface. And over time, we can really differentiate the interface. Because if you think about the words OS, operating system, it's basically the system that allows you to operate the device. So irrespective of what's under the hood, Android, for instance, the interface layer is what users interact with on a day-to-day basis. And I think this is where we're going to see a lot of change in the coming years.

14:28You know, one is to have a personalized interface for each and every one of us. But then secondly, it's also to automate more, right? Because today doing things on the phone is very manual. We have to have an idea. Hey, I want to have coffee with somebody. and then we have to go through all these different apps, some kind of a chat app, some maps, some review site maybe, and calendar app, Uber. There's so many steps to get a simple intention done, whereas in the future, I think we're fully technically able to just create a super seamless experience where the gap between an intention and action becomes way smaller.

15:14And we've seen this dream before. Google is certainly working on it with integrating Gemini deeper into Android. But I'm really curious if you could get specific about your particular implementation, right? This is basically I can use AI to vibe code my own little mini apps that sit on the phone alongside everything else. Is that right? Yeah, that was the first step. We call it essential apps. So I agree. Everybody's vision is similar. However, every company has their own strategy or own roadmap to get there. So for us, we recently announced Essential Apps. Basically, what it allows you to do is if you have an idea for an app, you just type it in using natural language.

15:56If it doesn't get it right the first time, you can keep prompting it until you have something you like, and then you can deploy it onto your phone. So what's a basic concrete example of an app that somebody might vibe code with just a prompt on Essential Apps? So for instance, I have to have meetings across a lot of different countries and time zones. So a simple selector to help me find time zone matches with people instead of having to go into the browser and using one of those websites. Let's say that I want to vibe code an app for Tim Higgins super fans. There's a big audience of that. Yeah.

16:33Well, outside of Tim's mom. Right. And I just say to it, hey, I want to see everything that he posts on every social channel. And every time he posts a new article on WSJ, you can't quite do that yet, right? Because you don't have all the connectors to all the APIs, all the kind of little intermediary points on the internet, right? It can also scrape things. So I've tried a similar idea, but I just prompted it to... For me, a Tim Higgins fan page? Great. Not for you, but to scrape somebody's X account. And that works, actually. So scrape just means it looks at the web page, it takes the relevant bits of content, and then it delivers it to this app.

17:17Yeah, and then it updates it at a certain frequency. So when we're thinking further out, in other words, you are going to give people a custom way to consume the internet, to interact with all of our digital services, theoretically, if you can make all those connections. Theoretically. And that's the first step, right? And today, if you generate something and you upload it to the platform, and I kind of like it, but I want to customize it, we have this idea where you can remix somebody else's work. So I like your Tim fan widget or fan app, but I wanted to make it about somebody else. I can just change it to be super personalized to me.

17:56You're more of a MIMS fan, I guess. Or a MIMS fan app. But today, it's still manual, the placement, right? I have to go and browse what kind of stuff I like and manually place it into my phone. But as we get the usage to go up, we can then start predicting, hey, you know, based on this thing we know about you, you might want these couple of apps or widgets to show up on your phone. Do you want them or not? Coming up, how does nothing fit into a future powered by AI? My thesis is that the smartphone will still be very important 10 years from now. But I also believe that in the next 10 years, there will be another class of devices that will have the same level of scale.

18:44That's next.

18:55I mean, one of the interesting things about AI, the potential of AI, is there is a belief that it will help create or help empower more super apps. There's this kind of apps where your digital life lives in them and the hardware becomes less important. So you can change among the phones that have the newest and coolest features. Are you thinking like that? Or is that a moment, a possibility here? Actually, that's interesting because I thought about it in the opposite way. So over time, hardware becomes more important. And my reasoning is that if software development costs are going to drop over time, then distributing software will become more and more difficult.

19:43So if we think about the early days of the app store, I still remember having a beer drinking app. And any app will get a ton of users back then because there were more users and apps. Today, it's already very different. Today, if you have an app, you have to pay the platforms to market the app. So when people search for apps, it shows up on the top. It's actually very expensive to acquire users. And this user acquisition cost is only going to increase over time because there's more and more people who can make apps. So the competition is going to become more and more fierce. And therefore, hardware at scale becomes a great way to pre-bundle some of these apps or the software.

20:23So therefore, I believe that hardware is only going to become more and more important. So I'm glad you mentioned hardware, because there is a lot happening in hardware, I think under the surface, you have meta and everyone working on smart glasses. Maybe you're going to have folding devices from Apple. You have other form factors, right? Joni Ive working with OpenAI. There's a lot of foment just under the surface. So I'm really curious in a world where the devices that you make now, like phones, could be superseded, at least in terms of the hype cycle. buy these other types of hardware soon. What do you make of those developments?

21:08I'm very excited about all these new developments because when we started five years ago, the industry was kind of sleepy, not much happening. And now we see all these great teams working on new ideas. And it's also a great opportunity for us to put our hat into the ring and also co-invent the future together with our ecosystem. We're well positioned to also help define what's going to be the next computing products in the future. And recently, I spent a lot of time to think about how the world will look different in 10 years from now, and what products people will use. My thesis is that the smartphone will still be very important 10 years from now.

21:54but I also believe that in the next 10 years there will be another class of devices that will have the same level of scale and the reason is simply that the smartphone is not always going to be available for us sometimes we have the phone in our pocket when we're having dinner or when we're walking on the street we don't want to hold our phones and over time, over the next few years consumers will start to realize that the more information they can feed into their, whatever we call it, operating system or AI or assistant, the better results, the more help they're going to get back. And therefore, it will give birth to other devices that can help us collect context when the phone is not available.

22:38But there's a lot of people who have this idea that, you know, you're going to wear a pendant, a pin, it could be any form factor, that's going to be, you know, as you just put it, gathering context for you, whether or not you have the phone. my take is that it's too early to tell who knows what the future is going to be we don't have a crystal ball here to to to help us foresee the future so therefore we should act fast and not spend too much money on each each product we try and then iterate quickly based on feedback so instead of spending four or five years to make a product let's figure out how to spend one year And instead of spending hundreds of millions of dollars on each product, can we do products with tens of millions instead?

23:23If we don't get it right the first time around, let's be close to our users. Let's put ourselves into the shoes of our users and talk to them, iterate the product quickly. So as you watch Apple, clearly Apple was a big influence for you. why has Apple seemingly struggled or seemingly stumbled with this moment we are in AI? Tim Cook says the iPhone will continue to be the center of digital lives, but I think investors are worried. So what's your take? Why have they stumbled? I think, first of all, we have to give Tim a lot of credit because he's built Apple into a couple trillion dollars of market cap.

24:04Not chump change, right? He's done a great job. I think once you get to a certain scale, it's harder and harder to do new things because the culture gets more and more fixed over time. And I think the current Apple culture is more of an optimization culture, for lack of a better word. And it's really hard to jump out of that mindset and do new things. And I think that's the same case for all big companies unless the founder or a very strong executive really drives something. So we've seen with Apple, with their car, with their Vision Pro, and now with AI, that it hasn't been ideal. But at the same time, we have to remember that they're also very well positioned for the future because they have so many users, such a great brand, and so much context already on all of their users because they don't just sell hardware.

25:01They have software and services. They have content. And so even if they're slow and even if they're not the first mover, I still think they're a very formidable competitor. Yeah. Just for the record here, their market cap is$3.69 trillion. So nothing to sneeze at. No. Right, right. But you said first mover, which always evokes for me the advantage that the second mover can have, right? like the second company to a given market these big companies they often rely on innovative startups like yours to go test a market and then they say hmm that seems to have worked pretty well let's use our enormous scale to go dominate it right like we're seeing that in some respects with google being a fast follower in ai versus open ai given their scale i mean what's to keep them from simply seeing what you're doing and say, okay, we'll just copy that and make a billion of them because that's what we're good at.

26:08Yeah. As we're developing these new form factors and releasing them, we're looking for PMF. PMF is product market fit. So whether this product will be adopted by or loved by consumers. But once we find PMF, we have to run really quickly because as you say, other people are also going to be looking at the space. And I think we do have a global presence. We're doing almost a billion in sales this year. It's still small compared to the bigger tech companies, but I think once we find product market fit, we can also go really hard on go-to-market and increase the sales volume of a product. Why don't people copy our current stuff?

26:48Because frankly, I think it doesn't help them. Because all these companies in our industry today, they're a mass market. They have to cater to everybody from young children to grandparents. And we cater to a very small group of users. So if they copy us, they would effectively be limiting their market share. They might shrink in size instead of growing. Carl, thank you for joining us. Thanks for having me. We reached out to Apple, which did not respond to our request for comment. And that's bold names for this week. Our producer is Alexis Green. Our video producer is Kasha Broussalyan. Michael LaValle and Jessica Fenton are our sound designers.