#67 CEO and Co-Founder of Nothing, Carl Pei: Disrupting the tech hardware space

0:03Inspired by Apple and Steve Jobs and disillusioned with business school and the education system Carl Pay felt different from a young age. Motivated by this, he dropped out of university and embarked on a career in marketing and branding. However, through a long-held appreciation for good design, Carl was inevitably going to end up within a career related to hardware. Carl and his business partner formed the new venture OnePlus in 2013 and grew a real successful mobile phone empire out of Shenzhen, China, but operating globally. And more recently, he's embarked on doing it all again with another hardware venture product company, Nothing, who have this brilliant strapline of making technology fun again, which kind of says it all about the purpose and mission of the organization.

1:07Carl is a very endearing and considered personality with a clear burning desire to create world-class products and evolve how humans interact with technology. We talk about Carl's forecast for the adoption of AI, ChatGBT, and why he's not worried about the impact that AI is going to have on people's jobs in the labor market. Plus, we also talk about starting a hardware company and the mechanics and plumbing behind that and what boxes need to be ticked to take technology adoption into the mainstream. Really was a fascinating conversation. It's Carl Pei.

1:56Carl Pei, thank you so much for coming on the Tech Leaders podcast. Thank you for having me. no problem at all i've been really excited about this one we've not had a hardware guy on before can you believe that 69 shows in and we've had all software people and uh and you know and journalists and things but not many hardware there's very few of us in the world that's so true yeah that's so bizarre though isn't it why is that it's bizarre but um look so i'm really excited about unpacking this because i'm fascinated to hear about the challenges of growing the businesses you've been involved with and stuff because there's so much to think about when you're building a hardware firm I'm sure and I'm also curious about your interest in design I understand you were inspired by Steve Jobs and there's so much more as well obviously that's come out in the research so yeah really looking forward to chatting but let's start with this one Carl obviously we're a technology and business podcast what does good leadership mean to you?

2:53I think leadership means a lot of different things but if you distill it down to its core it's probably winning and what i mean by that is when you as a company win then the entire team and all your stakeholders benefit the team has fun we learn we hopefully you know make some really good impact in the world and i think the morale the morale of a team really really increases when you keep leading them to victory so i think at its core it's about winning you can be nice and have like a family-like environment in your company. But if at the end of the day, the company is not around anymore, none of that really matters.

3:36Yeah. So it's about being ruthless then, essentially. Is that what you're saying? I don't think you have to be ruthless to win, but you have to make fewer mistakes than everybody else. You have to be right more often than your competition to win over time. Yeah, that makes sense. No, I think that's absolutely right. I think you have to be motivated. You kind of have to be the most committed person in the room almost to be the leader, don't you, I think? And you have to be committed to winning, essentially. I think so. I think you need to see it as a responsibility. It's your responsibility to lead the company to victory.

4:12But I don't think you should be the most kind of committed person in the room. Of course, you are by default if you're the founder. but if you're the only one that's committed, then the company will never get anywhere. I think the entire team has to have the same level of commitment. How do you get your peers and the people around you into that way of thinking and to be as committed as you are? How do you inspire people around you? We're still working on this. I think at its core, it goes back to the company culture, but we're a very young company. We're still less than two and a half years old.

4:47so a lot of our culture is so to speak defined by war or the culture is defined by us just doing stuff and i think when you start off with a really big vision and you want to challenge some of the biggest companies and industries in the world then you do get a certain profile of people who want to be a part of that you also a different type of profile of people who don't want to be a part of that and that's fine but i think if you're really clear about what you're trying to do and what kind of people you need along the journey, then that's the first step to building that team. And then always just communicating where we're going.

5:21How's it going? Where are we going? What's the significance of that? I think that those are tools to help you along the way. Yeah, no, I completely agree. So let's rewind a little bit then, Carl. I'm keen to go back to the beginning. So I understand you were born in China, but you grew up in the US and also in Europe. Can you talk us through your formative years? And when you were a young man, what did you want to be when you grew up? Yeah, I think because I traveled a lot, we moved around a lot when I was younger. So we left China when I was four years old. And then we moved to the States. And then we moved to Stockholm, Sweden, when I was six.

5:56So and even within Sweden, our family moved around a couple of times. So I think I, in hindsight, I feel like I lacked a bit of kind of safety and security by always moving around having to make a lot of new friends and And also feeling like an outsider because I was from a different country and I was still getting used to the new culture and the new norms when I was younger. Maybe that led to kind of a sense of inadequacy that I was not as good as everybody else. And therefore, I had to kind of prove myself by doing more than everybody else. But I was quite influenced by whatever movie I was watching when I was a kid.

6:40so there was a point in time where I watched a couple of Bruce Lee movies and I really wanted to become a Kung Fu teacher. It looked really badass and then there was another time I wanted to be a policeman so there was a lot of different things I wanted to be and because I didn't know what a business person was, I didn't know what a manager was but my vision of what that was was basically somebody in a suit sitting in a really nice office corner office with their feet on the table at one point i i said okay that's also an interesting career move yeah sure back to your bruce lee days are you still into uh combat sports at all do you do that you do you watch like uh ufc and mma and stuff are you into that kind of thing uh i don't really watch sports but i like to do sports to keep healthy so i i've been training Thai boxing for a year but I'm not that good it's a very difficult thing to get good at I think isn't it yeah you grew up in the in the US then how old were you when you moved to to to Europe then Carl six six right okay so you kind of most of your formative years were spent in Sweden then yeah I suppose yeah so talk us through your I know you went to college you dropped out because it wasn't you and then you ended up basically getting a job where you're pursuing a career in marketing initially.

8:02Talk us through why you dropped out of university and why you went in the direction of marketing and branding. My parents were quite busy when I was younger and they bought me a computer and we had really high speed internet so I kind of a lot of my upbringing was on the internet. I learned a lot on the internet and many many hours I started making websites since I was 12 years old and some of those websites got pretty big i was selling advertising on my websites and so so while i was going to school i kind of had this other parallel life that none of my friends could relate to but i also had a parallel kind of friends on the internet that we we just met online other entrepreneurs and we we talked to each other on msn messenger and whatnot and i always felt this kind of when i write whenever i try to tell my friends about these things in school nobody engaged it was just like blank stares back at me yeah always felt a little bit left out like why are why isn't anybody getting me that kind of a feeling and then for uni same same theme i was doing my own kind of online business on the side while i was pursuing uni and then i was playing a lot of league of legends spent a lot of time on that didn't go to a lot of my classes but i still managed to do all my courses and then at that age i was just really arrogant as well so i i kind of said hey look this is supposed to be the best business school in sweden and i spent three years and everything we learned is from the past like macroeconomics microeconomics supply demand it's like from 100 years ago stuff that was invented in the industrial era.

9:43We're now not in the industrial era. We're in the information age. So what are we learning? And this was 2011. And I saw a couple of trends in 2011. One was if you look at the most valuable brands of the world back then, all the new brands on that list were tech companies like Microsoft, Apple, Google, Amazon. Okay, so tech companies. Tech companies created a lot of value in the last 30 40 years but we didn't learn anything about tech companies in the best business school in sweden okay second thing was e-commerce i saw this graph where every year the amount of total retail spend online versus offline online kept increasing so i think in 2011 it was about 11 or 12 or something like that so in the best business school in sweden we learned nothing about e-commerce which was going to be a big trend in the future and then also back Back then, the Chinese economy was growing really quickly, and we spent zero time talking about business opportunities or the China market.

10:46So I'm like, hey, these are like three really big shifts in how we're going to do business in the future. This is the best business school. Why didn't I learn any of this? If I really become successful in the future, should the school get any credit at all? So I'm not going to write my thesis. So that was my excuse, but I was actually just finding an excuse to play more League of Legends. right okay so you you it was a bit of activism in you but you obviously wanted to go and play league of legends but everything i've said is absolutely true though and it absolutely blows my mind i mean the education system is very much stuck in an era which doesn't exist anymore and that's not just within business that's within many you know certain subjects of course you know they it doesn't adapt and change very much you know what i mean and i think the world is changing faster and faster.

11:36Yeah. So education really needs to start iterating. The pace is picking up so that the rate of change is increasing. Yeah. And I mean, it's just like, so it's getting further away, isn't it? It's a bit like, so I mean, the labor market is a good example. So the education system is churning out people with skills and the labor market is getting further and further away within the tech sector. So the gap between graduate and industry is broadening. So yeah, it's an amazing conundrum that we're in between education and yeah I mean are you seeing that in the companies you've been involved with Carl in terms of hiring people are you seeing this this increasing sort of gap between education and industry certainly within the tech and manufacturing I'm not seeing that yet I think we're still in quite an early stage of our company life cycle and i would say in about 20 of what we do we are reinventing the way we do things so there's no existing talent on the market anyway to draw from so internally we set up a lot of experiments we have hypothesis hey we think this might be this might work so we try it and then we learn and iterate right so for that we don't need people that are super experienced but we just need smart people yeah that are structured in their thinking so going back to yourself and so i understand you uh in terms of the beginning of your career then you obviously left university you you were doing websites you were earning money off the internet then when you were in your early teens i suppose like 12 13 14 so under my under my mom's name oh really okay because you couldn't uh get paid sure yeah of course if you were underage so you were getting paid through like a paypal account or something were you is that how it worked paypal crypto that was there So no crypto.

13:20So yeah. So you did a fan website for a Chinese design company. Yeah. And you got found. You got spotted sort of thing. And then they offered you a job. Is that right? Yeah. That was actually the first Chinese smartphone company. Mazu? Yeah. They made the first smartphone in China. Oh, really? Okay. Yeah. So they were around the same time as the iPhone then. I suppose the first iPhone. Is that right? It was after the iPhone. It was heavily inspired by the iPhone. Yeah, sure. Heavily inspired. Yeah. so is that what made you or maybe catapulted you into an appreciation of good design and you know is that did that start this journey that you went on towards setting up uh one plus maybe it did but i've always been an apple fan uh for as long as i can remember yeah and i think those those products have made a much bigger impact on me when it comes to design and user experience right like I was the first kid in my school who bought the first iPod, first among my friends to get the iPhone.

14:18So I think those experiences had a much bigger impact. Like, I don't know if you remember, with the first iPod, it had this round scroll wheel. Yeah, sure, of course, yeah. Infinite scrolling. That was such a great user experience. Yeah, absolutely. But you were obviously the first one though, Carl, because you were making so much money off the internet. Your friends probably were just living off pocket money at the time. So yeah. So yeah, I definitely had a lot more gadgets than my friends. Yeah, I can imagine. Yeah, no, but I think that scrolling wheel was a game changer, wasn't it? Because up until then, it was just like this really sort of, it was just a button cursor that you would control it with, isn't it?

14:55So I think that changed the game for sure. But so, yeah, anyway, so you were working for Meizu, and then obviously you worked for a firm called Oppo, and then you met ultimately your co-founder and then set up, obviously, OnePlus. Can you talk us through that period in your life? Why did you set the company up? What problem were you trying to solve? That's the way you want to put it. And talk us through the first couple of years of that whole venture. OnePlus was started by Oppo. So I worked at Oppo and they saw a trend. And the trend was that more and more people are buying smartphones online versus purely offline.

15:30Yeah, sure. And they needed to also be online because their current business, their previous business was very traditional, very offline centric. so they started this new brand called oneplus and i was just a kid so i i was really excited about this new journey so i nagged my way into that team but that team was supposed to be focused on the china market but i nagged my way into being in charge of the international markets all the markets outside of china because there was nobody else doing it anyway so it's all upside for the company and um after launching the first product my my part of the business became two thirds of the overall company in terms of revenue.

16:11Really? Good. So the China play failed, actually, lost money, but the international side actually made money and grew much faster. So it was kind of like an accident. The original target market was China, but by accident, it became a very global brand. Right. Why do you think that was then? I wasn't running China, so I'm not going to comment on China. But for international, I think the reason why it really worked was we were the first to sell smartphones online, direct to consumer in the world. So we cut out the middleman and we could deliver a really good product at a very compelling value proposition.

16:48And then we had a lot of disruptive marketing as well. So I think that really helped. We found a way of doing marketing at a very low cost and acquiring users at a very low cost. Can you talk us through that? It'd be interesting for us to know what exactly you did to get going on a relatively modest budget. I think we did a couple of things that really worked out. So first, back then, it was very, so it was 10 years ago, smartphone brands were not supporting their devices very well in terms of software. So there were online communities that made custom software for phones to support the phones longer after the device maker stopped supporting them.

17:27So we partnered up with the biggest of these teams. They were called Synogen. They don't exist anymore. and they already had millions of fans online who are using their products on other phones. So we actually co-developed the first phone. They made the software, we made the hardware. And just by doing that partnership, we got access to all their millions of users, instant kind of brand awareness from that community. And then we sold our products on an invite-only basis, so you had to be invited to buy it. It was not designed to go viral, but it was more for like a supply chain management point of view, but it really went viral.

18:02People were reselling it on eBay for a couple hundred dollars, not the product, but the invite to be able to buy the product. And then we designed it in a way where it kind of became the tool for users to help us refer their friends to buy our product. So a lot of the user acquisition was free and driven by our existing users. Wow, that's really smart. Were you inspired by something you'd seen then, or is that something yourself and your team put together yourselves? We were inspired by Gmail and Google Glass. When Gmail came out in the beginning, it was invite only. It worked really well. Whenever I got invites for Gmail, I would tell my friends, hey, I got five more invites.

18:41Do you want this invite? It's a really good email service. Yeah. So I definitely got that kind of mindset. So when there's some scarcity, you attribute more value to it. yeah yeah for sure no that makes total sense so so look how do you start when you know in terms of starting like a creating a hardware manufacturer and a hardware company what was the sort of you know at a very high level carl i know there's a lot there's a lot to this but i'm just saying at a very high level how did you get going we did a lot we had to build a team i guess we were just selling selling to all the different stakeholders selling potential employees why this could become something one day to investors to get the capital to be able to hire people and make products to the suppliers because there's a lot of companies out there trying to make products and the suppliers have to select who they want to work with because not all of them are going to be successful.

19:34I think the most challenging thing was actually working with supply chain because for instance our first product we made earbuds the nothing ear one and we got challenged by almost everybody we met they're like hey there's so many companies out there creating headphones and audio products why would you be different how are you different and why would it be successful we just don't see it over and over again so convincing our our suppliers to work with us i would say is probably the the most important thing yeah sure for a small company young company i'm just very impressed and also very you know i find it quite strange okay carl there's not many companies like one plus out there you know what i mean it's like i look at all the handset manufacturers you got you know they're just massive global conglomerates you know you got huawei and you know google and apple and stuff like that so you know how on earth did you manage to to survive you know in the early days because it's it's a very very dog eat dog world isn't it it's a very competitive market did you have any real low points where you thought this is over i think nothing is uh at least 10 times harder than one plus and the low points are at least 10 times lower yeah sure because at one one plus we had an owner a bigger bigger corporate owning us so if we messed up there's still money that they could uh they would they could scoop in and come and save us yeah but now being an independent company if you fail you fail there's no one there's no backup there's no plan b the stakes are way higher.

21:07Yeah, no, for sure. Okay then, look, what advice do you give to young entrepreneurs about starting hardware companies then? You must come across a couple. There's not as many of them around as there are in terms of software entrepreneurs but what key pieces of advice do you give people who are starting a journey similar to what you went on with OnePlus and nothing? So I think I'm still in the early days of my journey as well but it might look like I'm successful to younger people. But I think one thing that really set me apart from my peers from a very young age was that I always shipped stuff.

21:40I always tried stuff. Yeah. Now there might be some semi-recognizable names under my belt in terms of companies I've been involved with. But the amount of projects that I shipped that were so bad and didn't work at all, there's just so many more that nobody knows about. So I think one of the biggest differences between me and other young people now that I look at it is they just think about things. They just keep it in their mind, whereas I just kept putting things out there in the world. Yeah, for sure. I noticed your Twitter profile reads, let's make tech fun again. I thought that was a really cool strap line on there.

22:21But clearly you're a little bit disillusioned about the lack of innovation within the hardware space. is that is that the case and what do you think has gone wrong yeah i was super optimistic about the future super optimistic about the the tech enabled future that would be better than the past because during my formative years we saw a lot of innovation in our industry we saw the birth of the the smartphone the iphone and all the other android phones that came after that yeah and those products just kept getting better and better every year at least in the initial years when they were just invented.

22:56And then it was also the era where the web went from Web 1 to Web 2.0. So all of a sudden, everybody could be a contributor on the Internet through blogging, through YouTube, social media. So there was just so much innovation when I was young. And I just thought that it would just continue getting better and better. But in the last couple of years, I would say 5 to 10 years, tech companies have gotten this perception of being evil. governments and consumers don't really trust them anymore. They're accused of monopolistic behavior, unfair competition. There's concerns around privacy and data, etc.

23:33So now the tech companies feel like the oil and gas companies of the past. And we're no longer inspired by tech companies. We no longer believe that the world would become a better place powered by Apple, Google, Facebook, Meta, and whatnot. So I think we should try and change that. Maybe we can change that. All these companies are huge now, especially when it comes to consumer technology. There's only Apple and Samsung, and maybe a few big Chinese brands. And these big brands, it's not in their nature to try very different things, because they already have an established business model. So if they color outside of the lines too much, they're going to lose market share.

24:20It's going to have negative impact on their business. Yeah, sure. And then there's no startup in our industry. There's no small brand because it's just the barrier to entry is so high. So there's only us. So then we can do different things because we're small. We shouldn't do the same things as the big companies because then we can't compete with them. So people ask me, you know, why are you in this really competitive industry? Sure, it's competitive, but also there's no competition. There's no competition because there's no other peer company that can be differentiated. So that's kind of how I think about it.

24:52Yeah, no, that makes a lot of sense. I think one thing I was going to, I was really keen to get your thoughts on is the evolution. Going back to hardware, the evolution of smartphones. What is the next big evolution for smartphones? Do you think we'll interact with technology in a different way to having a phone in our hand, for example? You know, like a pair of glasses instead. we won't have phones anymore we'll just have glasses or whatever i don't know contact lenses what's your thought on the evolution of a of smartphones and b of how we interact with technology on a day-to-day basis yeah i think for smartphones we're at the end of the innovation curve you know there's always very steep change in the beginning and then the change tapers off i think we're at the end um the smartphone is not going to be significantly different today than say five years from now but i think you know if you ask the bigger question is this the end of change for the way humans interact with computers yeah and then the answer is definitely no it's it's impossible to imagine that in all the foreseeable future ahead of us human computer interaction won't change or won't become more efficient and i think technology always becomes more efficient over time.

26:09You're always able to accomplish more with less time or with less money or with less effort empowered by technology. So if that's where things are going, then I would probably say that the contact lens you mentioned is more seamless than the goggles. I think long-term technology should disappear into the background. and it should enable us to become more human. It's everywhere but also nowhere to be seen, so to speak. Yeah, sure. It's so seamless. It becomes us. I mean, Elon Musk, he said on a podcast last year about how we are actually, we're all, I think someone was asking him about cyborgs and he sort of claimed we're already cyborgs because we have this external brain in our pocket all the time.

26:58And I think I just see the evolution of that becoming maybe glasses next, contact lenses after that and then potentially just it's just a chip in in our actual brains or something you know whereby we just interact the technology is literally in a supplement to our brain could be or maybe the edges between what's a human and what's a machine also start to blur yeah over time absolutely what technology innovation are you most excited about in the world right now, Kyle? I think right now, AI is a really hot topic. And everybody's talking about it, everybody's thinking about it. We're also really excited about it, because we think we are really well positioned to leverage this.

27:41The reason being that we have both hardware and software. And I think the best product experiences come when you marry hardware with software. There's a lot of teams that only have AI, but they don't really have the hardware. And hardware also gives you distribution yeah it's not only can you create more interesting um user experiences but you also have a lot of users that you can deploy it to and all those users have a lot of data that you can use to train the ai models further so that's something really exciting we're thinking about but i think it's really important to have a very clear hypothesis on a product market fit before jumping yeah absolutely let's maybe come back to ai in a minute i just want to talk about nothing first.

28:22Why did you set up nothing? Tell us a little bit about your products and your offering and what your vision is for the company. The vision is very simple. We just want to make tech fun again. So by making the best tech products that we can possibly make for the younger and the more creative consumers, we want to make tech fun again. So over time, we changed as a company. You know, the first year, 2021, we only had a pair of earphones on the market. And last year in 22, we released our first smartphone. The long-term vision is to have products that are more fun and better designed than the competition.

29:02There's always really interesting kind of interactions. Like on the phone, we have put more than 900 LED lights on the back that starts to form a new interface. so we want to enable people to use their screen less and use the back of the phone to deliver important notifications kind of in their peripheral vision so that's one of the things we're doing but long term i think we need to provide an alternative to users to apple and if you look at apple they they have hardware they have software they have services and they also have content so i think that's you know longer term where we need to be driving our business our hardware company on its own is not worth anything there's no moats there's no recurring revenue so we need to over time develop multiple revenue streams absolutely let's come back to the ai thing then that we were talking about so how do your products how are they going to utilize the development of ai to improve your products does that make sense how are you going to embed things like chat gbt or that capability into your products so i think first of all ai is already everywhere in smartphones, but the application has been quite boring.

30:13It's led to like 5 % or 10 % improvements and not disruptive improvements in terms of the user experience. So for example, the smartphone cameras are all powered by AI because the sensors are so small on the smartphone. So you need software and computational photography to fill in the blanks and make the photos better. So there's already AI, but you can't really tell that it got much better thanks to it. If we're talking about the new wave of these kind of large language models and generative AI, I think that's definitely something we could leverage, but we haven't figured out the right product market fit right now.

30:54We're building some prototypes of different products, leveraging AI that we can start testing with our community soon. but we don't know which one is going to work or not work. Maybe none of them work. What do you think about ChatGPT? I think it was one of those technologies for me, Carl, where I kind of remember exactly where I was when I first had to fiddle around with it. I can remember my heart rate going up because I thought, wow, AI is properly... I know AI is all around us but I mean, at this level, it felt like real AI had arrived. Do you know what I mean? In terms of like, this is kind of...

31:29this is a game changing stuff here you know did you have that feeling and what do you what do you see this you know what what is this triggered what's gonna where's this gonna go i had a very similar feeling um to you it felt like similar to when the first iphone came out yeah definitely i had a similar feeling when i first saw bitcoin as well but i mean those three stand out for me but But it was definitely in that league. I know that the world will change fundamentally. I know there's a lot of startups trying to find the best application of AI. I don't think anybody's found it yet. But you can see the capabilities improve so quickly.

32:11So we're also trying to think about how we can be a part of it. But we just need to test and experiment to see what really works and sticks. But I do think this is going to define this generation. Yeah, no, I think so. I think I completely agree. I mean, I think now the capability of ChatGPT is only going to get better. So I think it's now a case of APIs, plugins, getting that capability into more practical ways of accessing it. You know what I mean? So like, for example, ChatGPT being available in your Outlook or your Gmail. You know what I mean? So you can just use it as an automated response mechanism for certain things or I mean it's just it's just about availability now for that for that technology do you see what I mean do you think that's do you agree with that is that something you're thinking about in terms of your own product development it's very hard to counter human nature so all these scenarios we talked about they're productivity scenarios like it makes your work life better but I think humans are not wired like that I think humans fundamentally only care about reproduction value and dopamine definitely that's it i think yeah i think that's it so i think the products need to tap into that if the if you want the product to really really take off if it's just making your your work your work more efficient that's great but i don't i don't think it's gonna you know become a mass market product anytime soon no it's something that that i would would appeal to me but i i agree that most people probably wouldn't care so what what do you think about AI in terms of its impact on the education sector and what do you think the repercussions and the impact of that's going to be?