Carl Pei: Founder & CEO of Nothing – Reinventing Tech, Inspiring Creativity, & Building a Hardware Revolution

0:00Well, Carl, Carl Pei, it's really great to have you here today. Thank you for having me. Thank you for being here. The Stad Guy podcast at the Berkeley Hotel in London. I think it's especially fitting that we're talking to you in London today because you are one of the few London-based founders in my network, which I find to be pretty crazy because I was born and raised here. Although I don't know that many founders based in London. I'm blessed to know a lot of founders around the world, but very few based in London. Yeah, same here. I think we talked about it last time we met. The scene here just doesn't have a lot of people compared to other places.

0:44Yeah. But I love the product you're working on. Love the business. Nothing. Nothing tech. I actually was introduced to it as a customer before meeting you. I bought your Nothing One, I think they're called. No, the One. The Ear One. The Ear One. Yeah. The Ear One. The Earphones, which I still use. I actually have in my bag over there your new yellow noise cancelling ones which I also love. I mostly use the wired earphones as you know for conversation but I use those for sports and for for transit. We have the ear open. They hang on your ear so when you're running outside or when you're biking outside you can hear everything around you whilst you're wearing it.

1:22It's funny you say that. I bought them. I have them. Oh you have them? I haven't used them yet but I have them. I have all of your most of your tech except for the phone because I'm too married to Apple which we'll get into but thank you so much for being here carl it's uh really great to have you here yeah looking forward to this around the world with your host the stard guy we welcome you back to the stard guy podcast sharing stories of excellence with those in the know for those who just know so you founded nothing six years ago now uh we started at the end of 2020 so it's been like four and a half almost five years fine how's that been it's been a it's been a roller coaster ride if i'm honest um hardware is hard yeah it sounds like a cliche but it's pretty hard like especially smartphones i really wouldn't recommend anybody to do it not because i don't want competition yeah but it's just very difficult i mean when i ask my friends if they know about nothing.

2:28They say, what is nothing? Many of them know it, some of them don't. I explain it, I'd love for you to correct my definition, as an incredibly innovative and Gen Z focused tech hardware business that makes devices focused on a niche of people that are maybe fashion conscious performance focused but also love to celebrate the design of gadgets and they love design. It reminds me of the old Game Boy Advanced that was clear and see-through. The old, the first I think Mac. One of the first Macs, the first iMac that was clear shelled and also incredibly sleek in design, it looks very presentable. It puts out a statement of care and interest for design away from just the world of Apple.

3:29Is that a reasonable definition? It's a very good definition. We've actually refreshed the mission and vision because we've been running it for a couple of years and it's very close to what you just said. Great. Thank you. So our new mission is make tech fun to inspire human creativity. Love that. Because I think we both grew up in a time when tech was more inspiring. Like every new product was groundbreaking or new. And at least I felt a lot of optimism, like seeing all these improvements, not just on the hardware products, but also that was a time when social media first became a thing. Like, wow, this person I met like 10 years ago, I can reconnect with.

4:08So everything felt super optimistic. And then contrast that today, and it feels very different. The entire world has become more negative. Like the economy is not doing well in a lot of countries. People are afraid of their jobs with AI coming. They're even more afraid of their jobs and afraid of the future. We have the trade war. We have just so many things that are stressful. And at the same time, these tech companies that used to be super innovative in the past, they've all become like big corporate companies and become super boring. So that's kind of the first part, like make tech fun. um the second part to inspire human creativity for me it's about like at the end of the day i think even in the world of ai the the part that's really going to set humans apart is our creativity that's like our superpower like for me it's not just about uh art or design when we talk about creativity it's about solving problems like starting a business it's also creativity being a great software engineer it's also creativity so how can we make products that not only look nice and are fun to use but also help people be more creative help people work more efficiently and differently i think that's going to be really important in the in the next phase of our journey this new definition is it very similar to your initial desire to why you started the business?

5:41So the past one was make tech fun again. Okay, fine. Because tech had gotten boring. We need to make it fun again. Fine. I feel like now it's more fun already, so it's not again. Fine. It's just make tech fun to inspire human creativity. What were you doing when you first started the business prior? I had helped create another smartphone brand before called OnePlus. Okay, I remember that. Yeah, I was like 24 when we started that company. So you can say this is the second time, but it's still very hard. Why are there so many software businesses, app developers, and software empires, but very few hardware players in the world?

6:26I think the value chain is very long. With value chain, I mean all the different components to a business. We just have a lot of components. so it's like five companies within one company in terms of complexity like if we make an app you need some designers some product managers customer support developers i think that's it but that's only like we have those it's a very small part of our business but we also have supply chain manufacturing quality control like industrial design so hardware design software design hardware engineering software engineering like the list goes on And it's just so many plates you have to spin at the same time compared to a different type of business.

7:09I think that's why we've seen people try. In the last 10 years, there's been a few attempts. But I think they didn't approach the problem from the overall complexity of the problem. I think they looked at one or two parts of the problem. I think that's the main reason. Being able to manage complexity is pretty rare. And what made you feel excited about managing that complexity as the founder? I mean, first of all, like, I've been super excited about this category ever since I was a kid. Like, getting the first iPhone and the first iPod. I mean, the first iPhone was only available in the U.S. I grew up in Europe.

7:51I had to get somebody in the U.S. to buy it for me, like, pay a penalty fee for canceling the contract. With AT &T. with AT &T, getting it here, jailbreaking it, to be able to use a different SIM card. But it was so exciting. And my entire career has been in this industry. So if you told me to do something else, I just, I don't have experience in anything else. And I felt like, this might sound like a bit arrogant, but because so many had tried before and failed, if I didn't give it a shot, then nobody is going to change this industry because I believe that we are like my team and I were the one of the only teams that has a shot at trying this.

8:34So what did starting nothing look like? Where do you even start with the hardware business? We took a pretty different approach. I guess the fundraising part is the same for everybody but the context for me is I never had to raise money before and I remember me chatting with a co-founder before starting this company were like, raising money? That's interesting. Why would anybody give you millions of dollars at risk? Why would somebody give you money that they potentially can lose? That's so strange. It was so foreign. This was late 2020. And then we just got going. So the first thing I did was I spent some time in Stockholm, where I grew up.

9:24and I was really lucky to have a few friends in the startup ecosystem as founders. And I just went to everybody knocking on the door and asking them, what's this fundraising thing about? How do you raise money? And the ecosystem there is quite small and it's pretty open-minded. So one person introduced me to the next person. So I got to learn how multiple people in the Swedish startup ecosystem raise money. and then I could internalize like because everybody said different things so I tried to internalize that to our context and um spent a few weeks in Stockholm and raised the seven million seed well to start this business so that's kind of how we got started and then at the same time we were reaching out to suppliers to um find people to provide the components and the factories to make the products.

10:20That part didn't go very smooth at all. The fundraising was quite easy at that time. It was a seed. But the supply chain was very difficult. First, we wanted to make phones. People told us it's been tried so many times. It doesn't work for a startup. So we don't want to take this risk. We're not going to do this. And we're like, okay, let's not make smartphones. Let's try and prove ourselves through something else, which is the ear one. Yeah. Our theory back then was if we could design a pair of wireless earbuds that look very different, look very cool, and also not just that, but also manufacture and sell it at scale, then people would trust us to create a more complicated product like the phone.

11:07So the supply chain was kind of the second track. And the third track was the brand and the design language. so there I was also super lucky because I had gotten to know the teenage engineering guys in Stockholm I was in Stockholm at that time raising money and one day I just visited them in their office and had a 40-minute chat with their CEO Jesper and we shook hands and yeah we said let's make you know one of the most popular phones for the world what are some of the projects and products they worked on prior. Jesper is a legend. I think he's like a once in a generation creative. Hopefully, I really recommend you to have him on the podcast.

11:51So actually, as I was growing up in Sweden, his creative work was really impactful on me without me knowing that. Because I think he started off doing advertising. So Acne, the Swedish company, they also had a creative arm before and i think he was one of the co-founders and and leading that so i think he like a lot of the really iconic swedish advertising that you just can't forget because it's so iconic like the melody might be you know still stuck in your head that was all him well um and then i think after that he shifted to start teenage engineering and i also heard that he used to be Sweden's biggest collector for Lambos.

12:40Okay. Not anymore, but at one point in time he was. Nice. He's a very interesting person. And he came up with the entire sort of design language and palette of nothing. Yeah. Yeah, yeah. So we roughly talked about the vision. Because one thing that we talked about in the beginning is that the tech world is so influenced by Apple. Like everybody's living in Apple's shadow. Yeah. if you visit some of the other tech stores around town, they just look like Apple stores with different colors. Whenever Apple releases a new product, everybody kind of follows and shifts their design language. So the thought experiment we had was, imagine if history played out in a different way.

13:25Imagine if a different country was a superpower of today. What would the best tech company of that country look like? So let's try to forget that Apple even exists, start from scratch and try and define a new universe. So on the design track, we first started with looking at a lot of inspiration, not just from tech products, but also movies, furniture design, interior design, different retail environments. just trying to get like a mood board in place and then took that mood board and developed that into our own design language. And then we published a book internally. That was one of the first things we did.

14:10That's actually our first product. We made seven or eight copies of the book. Like a design language. Yeah, a design book. Design book. Design language plus concepts for future products. That's where we started. So I think those were kind of the main tracks. And then how did that grow into the first phone in terms of the design execution? It's very painful because the way we've approached design here is quite systematic, right? Starting with design language and then everything has to follow that same design language. That wasn't my past experience. In my past experience, we just said, you know, we need to make a phone.

14:49So just make us like 40 different variants and we'll just pick the one we like the most. so I think a lot of companies work like that. That yields in individually beautiful products, but as you go through time and you release a lot of products, there's no consistency in the design language. So then shifting to a culture where designers have the most power in the company and everybody else has to follow, like all the engineers, they just have to do whatever they design, it was very painful and very different. so that's kind of on the engineering side but then on a supply chain side it was still really really difficult because we started this company during COVID and I don't know if you remember like in 2020, 2021 there were a lot of chip shortages so we had gotten to a point where we were ready to mass produce the phone.

15:45A phone has like thousands of components in it and there was one component missing. There's a small component that connects the screen to the motherboard. It's called an IC chip. We couldn't source IC chips because there was a supply chain disruption. We went begging like everywhere. I've probably spoken to every CEO, every competitor CEO in our industry at that time. Trying to get intros, trying to beg, like thinking about angles. um you know one angle was just hey i'm just a young person with a dream like even though we're competitors should support me like i'm not going to be a threat i'm going to be a small um the team also tried from the bottom up like try to talk to the sales teams at the chip suppliers um eventually i think what happened was uh one of these chip suppliers our team approached them from the bottom from the sales team and then i got an intro to their chairman as well so we met up and i think that sandwich kind of worked fine but it was very stressful when looking at nothing and comparing it to any other hardware brand and business i find that the placement aside from just the design and the brand language is incredibly different as well because to me hardware and phones have always been about abundance of access.

17:12We are a platform for creativity and a platform for productivity and therefore we're on the busiest high streets. If you think about the Apple stores, the Microsoft stores, they've always been, we can add value to you no matter who you are. That's always been the pitch and therefore we're available on the roads, retail-wise, where everyone is. Your store, maybe you had a store next to Supreme in Soho, right? Still there. Okay, you have a store next to Supreme in Soho. I've been to that store. And that neighborhood is entirely different because I think if you shop at Supreme and you take part in skate culture, whether or not you skate, but you're part of that Soho Supreme crowd and you hang around that area, you identify in many ways as an outsider, as I don't belong on the high street.

18:00This is where I belong. This is where people understand me and share my values. And that's what resonates about nothing to me. it's people who buy into nothing

18:15want to be on the outsides of that of that core and not in the nucleus and just something as simple as the retail decision made that fairly clear to me as a consumer I'm wondering if that was the intention as a founder it just felt right it was actually quite opportunistic so we were scouting for locations and the space next to Supreme just got free okay so i'm like let's just like stop looking let's just get it because there's a huge line outside of supreme every day yeah and so if they line up outside they have to see our store all the people so then we get free exposure are you on the q side of the store i forgot or on the right side we're on the right side of supreme okay perfect yeah awesome yeah the q side yeah it's perfect has that translated into a supreme type customer becoming a nothing type customer I think if you look at our user base, there's a lot of similarities.

19:10So one, we are the youngest in the entire world in terms of like our user base for smartphones. Okay. I think our average age should be around 26 years old for our users. Okay. Samsung's average age is like 45. Wow. And they have a trend where it's kind of going up. It's actually quite dangerous if you have a brand that's getting older and older. That means the market share will decrease over time. our users are also if you ask them like why they buy the product the software is actually the number one reason for the phones and the second reason is design for the earbuds it's design number one and i think that's very similar to street culture it has as well i think lastly we also have the greatest amount of apple users switching to an android brand percentage-wise out of all the Android brands.

20:03Wow. So I think it's not a like for like, but the gut feeling is saying that it's moving towards the right direction. I am a diehard Apple user, as you know, an ex-Apple employee. What would your assumed driver for a person like me be to switch from the Apple ecosystem to nothing? For phone or for audio products? Both. Or either? Audio products is pretty simple. Like, everybody has the same white Apple AirPods. So for those who feel more individual and want to express their individuality and personality, that's why people are buying our audio products. In fact, for the audio products, the majority of the users are Apple users.

20:51So more than half are currently paired to an iPhone. Wow. For the smartphone, it's a very different story because if you're used to the Apple ecosystem, them, it's very hard to switch away. I personally feel like some of the behaviors are intentionally created to make it harder to switch. I believe as a company that's that big and that successful, they don't have to lean on these crutches. They can compete on innovation instead of trying to protect and make it harder to switch away. but now we're seeing movements in the US with the DOJ and Europe lawsuits against Apple for being anti-competitive so hopefully that could help us in the future What's your vision for Nothing?

21:46I think for now the vision is just to be the number one tech brand for, so we actually have a vision statement as well to create the leading and most loved tech company for the next generation. There's a few keywords here. Leading means market share leading. So among this target consumer, we need to have the highest market share. Like as a startup we can't be leading across the entire world with all types of people. So we got to focus on one group first. Most loved, kind of self-explanatory and next generation. So I think it's, you know, looking at our current user base, being very young, I think we really have a unique opportunity to become the number one brand here.

22:39Yeah. Super exciting. How many devices have you sold so far? I think almost 10 million. Wow. Yeah. It's a lot of people. Yeah. But very small in the context of the overall industry. Yeah, absolutely. And most of them carry your phone with no case. That I don't know. We don't have insights there. At least when I see people carrying nothing phones. It never has a case because they love to show off the back. And also the flash covers most of the back of the phone. Yeah. Right? I've also seen people with the case. And the cases, they have a cutout for the lights. The flash. Yeah. Amazing. What's the process like of making a device more featureful

23:28when many hardware manufacturers think we've reached nearly the peak of what we can pack into a device? I also felt that way, actually. Like, everybody shares the same suppliers. the same processor suppliers the same screen the same memory the same battery so it's getting hard to differentiate like whatever we have access to everybody else also has access to so that's why we've apart from the design part which we have one of the best design teams but actually design is pretty easy to copy like if apple wanted to copy our designs they could do it tomorrow you can't protect any of the design a little bit a little bit it's not super protectable but they won't do it out of a pure business reason because our design is more niche they're very mass so if they copied us they will lose market share because a lot of people wouldn't want to buy our products it's true right so um that's one benefit of being the only startup in this space like we can be very catered to a specific group of consumers whereas everybody else they're huge if they copy us they're gonna de-grow their business um so we can be very daring in terms of design whereas they can't because they have to keep delivering numbers on the software side though that's where i think there's a lot more opportunity to differentiate because frankly the software experiences haven't really changed for a very long time like even before iphones when there was like the PDAs, it's still the same, like app icons, you press the app icon, you go to the app, and then you go back to the homepage.

25:16I think there's an opportunity to fundamentally change how we use these devices. I mean, you've sold 10 million devices. The average cost of your devices is around$500. But that's like 10 million, both earbuds and phones. Fine. So then the average would probably be like 100, 200 or something like that. Fine. Yeah. what does that take as a founder and what's your personal life and balance like given the amount of sacrifice you have to to make to bring the business to where it is today um i'm pretty chill now it wasn't always the case when we just started i was so stressed out about everything like everything was a big deal for me um when we raised our first money i felt super stressed because now we're responsible for somebody else's money like if they had invested this money into the stock market they would get a certain return we need to deliver more return than that so now like i'm responsible for somebody else's finance when we hired our first employee i was also super stressed if this person joined another company they would have gotten like career growth and salary growth so now we have to deliver more than that um it got to a point where the first half year i had a like a heart problem um every 20 seconds every 20 seconds my heart would beat like really hard and i didn't know like what the case was so i went to the doctor and they gave me a machine to hang on my shoulder to monitor the heart and they just said you're stressed it's fine it will it will uh it will go away so that's kind of where it started but now i'm very chill compared to that um i think it's just about everything was so new to me uh going through it living with it and now looking back it's like a joke like why would you be stressed out about those kind of things you have much bigger problems to to deal with.

27:22So I think it just comes with time. What does it take now? Now I'm pretty, pretty relaxed and sure, like long hours, but I think it's super fun what we're doing. And this journey has ups and downs, but wouldn't it be boring if it didn't have ups and downs? Like it's kind of like watching a really fun movie right like if a movie didn't have like these mood swings it wouldn't be a good movie that's true it's true it's an optimistic way of looking at it i'm sure a lot of your friends and people who cross paths with you just randomly suggest product categories they think you should step into we've chosen to focus on two which is audio and phone why have you not been curious to tap into other product categories?

28:20I think it's because you have to, I don't know for other types of products, but for electronics, you have to really respect the category. What I mean by that is like, in the beginning we thought earbuds is easy. It's just, oh, we made phones, like that's hard and earbuds, no problem. But actually earbuds are very complicated. We found out later because you have to pack in so much in so little space. It's almost like a mini phone. It has Bluetooth. it has antennas, it has battery, it has charging. And we had to, you know, overcome a lot of engineering challenges, even for the earbuds. So we shouldn't be kind of lighthearted or just randomly go into different categories that we need to be very serious about all the categories that we enter.

29:08I think secondly, we have to think about where we're going as a company and how this product really helps us get there. Because I don't want to be in a traditional industry. I think computers are kind of like a traditional industry almost. Tablets, I don't really know what the benefit of that would be. I would rather have our next category be more futuristic than from the past. Because earbuds and smartphones are already quite established. established they've existed for many many years so instead of doing another established one i think we're at a point in our journey where we should start taking the lead in the industry we needed a couple of years just to get started get warmed up get the foundations built but i think for whatever's next we should start leading the industry because i don't think there's a lot of leadership in this industry.

30:05Yeah. On my episode with Eric Schmidt, I briefly discussed how connected I feel to my phone and that I nearly feel like a cyborg because it's literally a digital extension of myself. But my thoughts and the things I'd like to do on my phone are still bridged by my slow thumbs. Sometimes my voice, if I want to do dictation, but still the bridge from my world and my mind to the digital world is slowed down by that interaction. It can get slightly faster, but it's still limited by that physical interaction. Do you think phase two of digital products actually breaks that for the first time? By the way, we engage and transfer our thoughts and desires into the device, but also the way we might consume through a screen.

31:00yeah i think it's gonna fundamentally shift in the next couple of years i think a lot of people see the same vision we all have different strategies and different paths to get there but i think ultimately it's about creating a system that really knows you and it can be done on a phone because the phone should be the device that knows you the best because you spend the most time on it you do the most things on it so with that information about to you can almost become your digital twin knows all your preferences it knows your most important people and knows where you've been it's true um of course there's a lot of privacy issues that we have to navigate we have to give people full control over the experience what to share what not to share what to use what not to use um being able to delete data that they don't want us to have um because i think people are quite scared also about the future but if we're able to bridge those concerns, I think we can build something really, really different.

31:57So knowing you is the first part. I think secondly, today when you use a computer or a phone, it's a manual process. Like first you have to come up with an idea. Hey, I want to do this thing. And then you have to think, okay, I got to do X, Y, and Z to get that done. Different steps to get that done. And at the same time, you have a bunch of notifications coming in. Text messages and emails and whatnot. So it's super distracting. I think in the future, the ideas will come to you because it knows you. It knows you. It knows your context. It knows where you are. It knows your calendar. Do you want to do these five things?

32:35And if you want to do it, just say yes or press yes. And then instead of going through all these steps manually, we'll just do it for you. So this way, you know, people can spend more time on things they really care about and take away all, like the computer or the OS will take away a lot of the life admin or non-essential work, which I think will enable more people to be creative. So how do you think that translates into the actual hardware of the phone with things like screen size? Because in my lifetime, screens have only gotten bigger and bigger, partially for content, but also for interactions.

33:12I can do more than I ever could have on my phone now, partially because the screen is so big as well. If I have to personally do less and my phone can do more on my behalf as my agent, as my digital twin with the AI, can my screen be smaller? I would love a smaller screen. These phones feel really bulky in the pocket. But the other side of the coin is people use the phone a lot for consumption of media, entertainment, Netflix, YouTube, Instagram. So that's the balance. I think even if the phone can do a lot of things for you, theoretically, you can say it doesn't even need to have a screen, but actually people want to consume content on their devices.

33:55So I still think we're going to be in a world where the screens are relatively large. Kind of like, I guess the people who don't want the screen can go with a wearable. But they still want the screen. Like people who say they don't want the screen. I mean, all the small phones, like Apple used to have a small iPhone SE. They canceled it because nobody bought it. People say they want it, then you make it, they don't buy it. So I think sometimes, you know, when it comes to a practical purchasing decision, what consumers say they want and how they actually behave is different. Other than a nothing phone, of course, and the Apple devices that I'm very loyal to, the one phone that really got me excited over the past couple of years is this tri-folding Huawei that turns into a huge tablet.

34:41And I actually could see myself using it if I could transfer out of the Apple universe. because I could basically have my tablet with me wherever I go and just fold it into this fairly thin phone. How do you feel about folding screens? I just haven't really figured out the use case for it. So I have two use cases. I'm on my phone when I'm on the go, and when I need to write a long email, I need to use a keyboard on my laptop. When I need to write something serious and really focused, that's it. So I don't know where a tablet would fit in. I got an iPad recently because I thought I would maybe use it to watch movies on a flight.