a16z Podcast - a16z Podcast: Pulse Check on Consumer Tech Trends 2019, CES and Beyond

Episode Date: January 17, 2019

with Benedict Evans (@benedictevans) and Steven Sinofsky (@stevesi) Every year, the Consumer Electronics Show (CES) puts the latest and greatest developments in consumer technology on display in Vegas. But beyond the excitement and the hype, what's really here -- or not here -- to stay? Will televisions roll up into tiny boxes? Will Alexa find her way into electric carving knives? Which of these new gadgets will stand the test of time?  In this episode of the a16z podcast, Benedict Evans and Steven Sinofsky share their take not only on what this year’s show had to offer, but the broader trends at play. From the evolution of the smart home and voice interfaces to the cycle of bundling and unbundling and the future of TV and entertainment, the discussion is a pulse check on where we're at. The content provided here is for informational purposes only, and does not constitute an offer or solicitation to purchase any investment solution or a recommendation to buy or sell a security; nor it is to be taken as legal, business, investment, or tax advice. In fact, none of the information in this or other content on a16z.com should be relied on in any manner as advice. Please see https://a16z.com/disclosures/ for further information. This podcast may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally as well as specific publicly traded companies. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of AH Capital Management, L.L.C. or any of its affiliates, principals, employees nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.

Hi and welcome to the A16Z podcast. Today's episode follows Benedict Evans and Steven Sinovsky's annual visit to the Consumer Electronics Show in Vegas to figure out what's hype and what's not. The episode covers everything from smart homes to the future of entertainment. Please note that the content here is for informational purposes only and should not be taken as legal business tax or investment advice. It does not constitute an offer or solicitation to purchase any investment or recommendation to buy or sell a security, fact, the content is not directed to any investor or potential investor and may not be used to evaluate or make any investment. For more details, please also see A16Z.com forward slash disclosures. Well, it's great to be here. Thanks very much. I'm Steven Sinovsky. And I'm

Benedict Evans. And we just got back for combined excess of probably 120,000 steps or two marathons. Yeah, I was just, I always think that the person who has the lowest step count at the end of the day has to buy the drinks. Right. Well, the funny part is just to tell people, we actually don't see each other at all during the show. I think we were within 100 yards of each other at some point based on what pictures we were tweeting at the same time. We were tweeting, and then also we send stuff to each other just to keep track. Like, we both discovered some booth of a company that didn't exist before, and we were really close by at that moment. But you can't find anybody you know at CES anyway. So the big thing about the Consumer Electronics Show is, like, so many people

like, oh, yay, I don't have to go this year, or, oh, it's going to be boring, or they're there, and there's like, there's nothing new. But, like, why do you even go in the first place? So I think there's kind of three or four things you see here. One of them is there will be flagship announcements of new products that you want to see, and you want to have held it and looked at it and said, well, what does this thing actually look like? I think the second thing is you see, like, a sense of, like, oh, wow, Google's having a really big push and everything has got Google Assistant in this year, or everything has a Lexington. are in. Or, oh, wow, everyone's doing curved screens. I've never seen a curved screen before. Let me go and look at some curved screens and see if I think this is interesting or not. Oh, wow. Last year, there were loads of curved screens this year. There are no curved screens at all, so that didn't work. Right. And so that whole notion of the big companies, you know, there is like, it's not a group think. It's they all are dealing with the next parts of why

you go to CES, which is these ingredients that sort of bubble up. And then they take about the same amount of time for a big company to act and they all show up with it at the same time. Part of what you're seeing is a supply chain. So whether that's the screen manufacturers, the chip companies, the mobile manufacturers, all of the underlying building blocks, all the Lego blocks. And what you're seeing here is like somebody took a shipping container of Lego blocks and dumped them on the floor and people are picking those Lego blocks up and putting to get them together and thinking, well, what could we make? How would this work? How could this get manifested in different ways? And you see that at the big companies with like cars or curved

screens or flat screens or tablets. You also see this when you go kind of into the back halls and you get away from the vast booths and you see hundreds and hundreds or even thousands of relatively small companies who are just out there pushing and hustling. And that's actually the bit kind of I personally enjoy most is just walking past and looking at hundreds and hundreds of people who are trying to make a business. And you know, you're kind of seeing the grassroots kind of the raw creativity of the tech industry bubbling up there. Yeah, it's really fascinating for you really have to understand like CES is really three shows like it's these big companies and that's where way too much focus goes because they have all the PR people they hold

all the events they gather all the press they have like a big fiber got smoke up of a car right right or a helicopter or a boat or whatever but that actually turns out to not be the interesting like the big companies are not super motivated to do announcements at the show I mean a lot was made of Apple didn't even show up and they just put up a sign but Apple's never been there Microsoft's not really there. HP doesn't really have a big booth, even though their printers and computers fill all of the electronics stores. Lenovo has just a restaurant. Dell has like a restaurant where they rent it out and put up mostly food. So the big companies are sort of there and they occupy half the space and the biggest crowd, but they're not the most interesting. And then there's

really two kinds of smaller companies. There's the ones Bennett to talk about, which is where all the energy is, like the hustle and the excitement and the like you walk past a booth and they literally just drag you back to it. I would love to see like a small French or Taiwanese indie movie set entirely in the back halls of Trade Fest. Oh yeah. And like all the small dramas of all these little stands, like all the kind of you can just see the kind of actual real people there trying to build companies. Like I walked by one and this, it was very clear. It was the owner, CEO of the company, which I could tell because the business cards had his picture on them. And like the booth, it was 10 a.m. and the booth wasn't up and operating yet. And he was giving what appeared to be his son

a really hard time. And, like, they were, like, really tense and fighting. And then later, I went and went to the website, and it really was his whole family. Like, his wife is accounting. His son is biz dev and operations. And, like, this is it. Like, this is the big bet that they're making. And then there's a third kind of booth, which is, this year, they concentrated them all

in this thing that looked to be, like, a mile long. Everybody is, it's a tent, and it's like all of the parts. It's like, do you need a hinge? Do you need a key, a keyboard? Do you need a piece of wire or a connector or a strain reliever? And those have always been part of the show. And they're there to do real deals. And if you see, like, I actually saw a couple Apple people spending a bunch of time with one of these people.

And it's interesting to see what the new things are in that tent. Absolutely. So, like, this year I'd noticed like six or seven people doing little small electric motors, which weren't there last year. Yeah, yeah. And I noticed half a dozen people doing kind of well-made and interesting cardboard packaging, like cardboard boxes to put your stuff in, which wasn't there last year. But packaging is a really interesting one. Like for years, there would be different kinds of packaging.

And so what you see is the evolution where they're finally looking at like what Apple does with packaging and what Amazon does with packaging to bring it to sort of everyone else. And like if you're this family doing a business, this is where you'll end up getting your packaging from. I mean, so I actually did it to, I took somebody from a. consumer goods company around that hall. And I was saying, okay, so you go, you buy your screen is there. You've got an injection molding company here. You've got a PCB company there. You've got a motor company here. Here are six battery companies. There's a packaging company. Here's a testing company that will get you certification. Like you can start at one end and walk out at the other end with

a complete smart speaker. Right. Right. And yet there is no one selling the speaker there and there's no interest in. And that like you mentioned batteries, that's like a really interesting thing because batteries, you can come in almost an infinite variety of sizes. So you'll walk up to one of these booths and basically there's a giant wall with like every size and shape and amperage of battery you can imagine with wires sticking out and then two people just sitting there and they're just going to take your order. And you could listen to the conversations and guy will show up and say like, uh, can I just get a sample? And they're like, no. You can have 10,000. You can order 10,000 or not. And the fest is when you see somebody with like a really creative

of like phone charger, like not the whole thing, just like a plug. Yes. And then somebody really wants like one for themselves. And it's like usually like just a person checking out. And the guy's like, no, really, you can have 100,000 and I'll give you a good deal. But that's the best. This is a thing. It's not for the tech correspondent from a mainstream newspaper to go and look at the

new thing that a consumer would buy, which is actually the funny thing. It's called the Consumer Electronics Show. You're actually not seeing the consumer bit. you're mostly mostly what you're seeing is everything that sits behind the point of the spear right and of course that's part of the reason for the show happening when it does in january because the bulk of sales of consumer electronics happen in in the quarter that just ended and so by having it now you're really gearing up for a year from now yes like at best or maybe two years from now fascinating looking at the badges of the people you see wandering around and you see somebody from like a chain of auto dealers in milwaukee he's there to buy phone covers and battery chargers, and audio upgrades for cars. Right, right. And maybe he's interested in what the future of a smart car is going to look like and what his business is going to look like in five years' time.

He's there to go and, like, spend $50,000 or $100,000 buying stuff to put in his stores in nine months. Right. But what we could do now is just sort of, let's go through, like, some categories of devices or areas that people really had a lot of focus on. I don't know, why don't we start with TV because that was a really big one? Well, we said this. So this is part of the trend. So there were 3D TVs.

3D TVs, as we all know, failed completely. Two, three years ago, every stand had lots of curved TVs. Now, curved TVs have totally disappeared except for a vast display on the outside of LG stand and gaming monitors. Gaming monitors were huge. Yes. On the other, no curved TVs. And what that tells you is nobody on Earth bought a curved TV.

On the other hand... Or a 3D1. Or 3D1. Yeah. On the other hand, what we saw really kind of a big surge this year is sort of flexible. OLED screens that can be cut to any shape. And so at one extreme, you have LG showing this fantastically cool thing, which is you've kind of got a small low box that's like a quarter of the size of a sideboard.

It almost looks like a big version of a speaker. Yeah, a speaker bar. A speaker bar. Exactly. It looks like a speaker bar. And there is a super high quality OLED screen that simply rolls up from it and turns into a big, into an enormous screen in like five seconds. It's like a Houdini levitating rug. Yeah, it's like a projection screen lowing from the ceiling. but in reverse.

Well, and actually, one of the things that I thought was funny is they didn't show it hanging from the ceiling, which would have been like a natural place to do it. And say, what this means is you will not, you know, this is going to be, I don't know how many thousands of dollars, but in two and three years' time, you will be able to buy something that's three foot long. You put it on a shelf.

When you want to watch TV, you press a button and a TV is there five seconds later. And the box is about, say, 12 inches square, which is clearly going to shrink over time as it gets, the screen gets thinner and they can roll it tighter. Exactly. So you look at this and you think, a fantastic piece based of primary science that you can roll the O-load and then the kind of

the engineering of making it work and everything else. On the other hand, the thing we talked about was the screen, the stand we were both at like five minutes apart. What if you can just have that cut to an arbitrary shape? Apple is doing this with rounded corners on the phone, but you can have it in all sorts of rounded shapes and then just place that on a product. So you could have a speaker that has a round speaker and it has a round screen wrapped around the edge of it. So screens don't have to be a flat black rectangle embedded in raw. whatever product you want. So if you're a product designer, you're making speakers, you're making a fridge, you're making cars, you're making a washing machine, anything where you want to have

some screen on it, now that screen doesn't have to be a black rectangle. It can be any arbitrary shape, it can be wrapped around any form that you want, and it can still play video just as good as a high-definition screen. And so, you know, in five years time, I have no problem imagining that this will just be everywhere. Right. This is clearly a step function in the manufacturing of screens, which for years was based on we make a size of a big giant piece of glass, and it's super crazy expensive. So we're going to cut it up in the most maximally efficient way, you know, sort of the A4, A5, B4 kind of paper thing. And now you're just going to be able to sort of custom make screens. And then, of course, the most extreme of that were these little 12 inch squares

of TV that Samsung did called The Wall, which were OLED, like, basically everybody gets like a giant sports screen. Yes. Edgeless OLED block. and you can just add them indefinitely to make a screen as big as you want. And in any aspect ratio or like a pyramid. The other interesting thing going back to the component hall was I saw a stand that was selling not OLED, just LCD screens in arbitrary shapes and sizes, which is exactly your point about optimization.

It used to be you could only get them in certain sizes. Now you can just have LCD in whatever shape and size you want. It has to be rectilinear. OLED can be in curves. Right. But LCD has to be rectilinear, but you can have it long and thin. You can have it any shape you want.

Which is also very close, it's almost a Moore's law-ish kind of thing, but as they built out all the factories for LCD, like, those are, they could either idle the factory or start to use them for like other stuff and just get more amortization and depreciation out of that investment. Yeah. So you want a letterbox, you've got a product where you want a letterbox size screen. Okay, now you can have a letterbox size screen. Or just like a very long, skinny one to go in front of a speaker bar. In the past, that was impossible. I mean, you know, you want something that's 15 inches by three inches. Okay. And in the past, you just couldn't have that because it was now, it wasn't economical. Now it's possible.

This was all the discussion about like, you know, watches and can they have round faces? Well, no, they couldn't. And next year, year after, they could all be round and it won't matter to manufacture. So we have this kind of fire hose of stuff coming out of the supply chain. And we're seeing the iteration of that. I think pretty the other interesting thing to think about is the kind of the higher level of how people are trying to put those components together and create kind of organizing layers for that. Yeah. You know, TV, the most interesting question for me is like, what is TV to begin with?

Like if you're an extreme audio person, you think of TV as the picture and then you separate that from the content. But if you're just like a normal person, you turn on the TV to watch stuff. And what's really happening is this sort of unwraping. re-bundling, unbundling, to use cliche words of the industry in terms of the content side of TV, while the TV people think that we, we as TV people, should be part of that unraveling. The TV manufacturing people. Like the Samsung's and the Sonys and the LGs of the world want to be part of that. Yeah, which is sort of a rerun of what happened with smartphones, where the smartphone,

physical manufacturers, a smartphone, thought that they should have a role in creating content and services. Right. So we're in this kind of interesting, like, intermediate point where, like, clearly we know everything is going to be on demand. And clearly, almost everything is now available on demand in some way. But you have to have 15 different apps and you have to pay for all of those 15 different apps. And we're actually having more reconfiguration now because the content companies are pulling

their stuff out of Netflix and they're pulling their stuff out of Hulu or wherever it is and creating their own kind of direct-to-consumer propositions. And so Disney's going to have its own thing and NBC is going to have its own thing. And you're going to end up with like 45 apps on your device. And that also seems very unstable. It seems remarkably unstable. And this is one where, again, like the tech crowd, I don't think is always in touch with this, because the idea of, like, you have all of this knowledge, you're immersed in all of this

discussion all day long. And certainly in Hollywood, they will be like, people in Hollywood will know what streaming service a program is on because they were part of negotiating the deal and they know about studios. But, like, everywhere else, people know some brands. Like, I want to watch CNN. Well, it turns out in this world today, that means. another app. Like, there's not another place you can get CNN. And if there's a special on CNN,

how you get there and find it. And then forget the, like, oh, everybody is talking about home organization and condo now. Like, how would you know where to find that if you were just at home and someone said, have you seen that home organization show? Like, there's just, there's no guide in this world. And so people had hoped that, you know, like an Apple TV would do that or a Roku would do that or a TiVo would do that. What's happening is all of these stations, all of these apps. Well, the incentives don't work for that.

The incentives don't work, but it's even deeper than just the incentives, I would say. Like, the incentives are just, like, who's paying. But then there's this thing where, like, Netflix has invested a massive amount in discovery. So if you don't know what you want to watch, they want to help you find something on Netflix to watch. They're

not interested in, like, helping you browse what might be on Hulu. And the same go, like, Disney is just going to want to keep feeding you more of... More Disney. More Disney, like, you know, more superheroes and more old characters and stuff. And so I just don't see this as like a viable consumer offering. Well, it's interesting as well because you have this challenge in that half of these questions are kind of Northern California, Silicon Valley questions. The other half are

Southern California, L.A., Hollywood kind of questions about what does the right structure look like and who owns that and why are they doing this rather than doing that, which are kind of questions that people, and people in Northern California tend not to understand the Southern California questions, and people in Southern California tend not to understand the Northern California questions. Right. And but you don't have like, what happened with smartphones was kind of the phone people and Apple and Apple kind of didn't understand the phone people, but it didn't matter because Apple was California versus like Texas and Seattle. Yeah, but the point is Apple just rolled over the phone people. Right, right. And what you don't yet have is kind of a critical mass in

either direction where any one of these people can roll over the other people. And so you kind of got this kind of fragmentation and confusion in the proposition. And importantly, at least now, none of the companies with the content side of it, which would sort of maybe have an opportunity to play that role of Apple, feels any external, has voiced any external commentary on like wanting to own programming that isn't theirs. Like nobody wants to do sports. Nobody wants to do news. And those are like big sources of programming.

And so I feel like we're in this very uncertain. And the thing that's making it, like, less than even satisfactory a little bit is that the TV people are playing the role of the old phone makers. And they just keep thinking that they're going to make their TVs smarter and smarter and add more software. Yeah, TV people are feature phone makers. They're not smart phone. They're not smart TVs. They're not smart TVs. Right.

And so then I like, God, you know, you're never going to have all the apps on the TV that you want. The apps that are there are going to be the old ones or the outdated ones. They have all the J2ME apps. Right. They're controlled by a TV remote, not your phone. like they're weird and so everybody made a huge deal out of Samsung watching

showing iTunes stuff and like really it was the worst way to watch iTunes that you could imagine with a Samsung remote yeah it's with a Samsung remote and then like they're basically telling you like the features that they may have like if you pause a show and you return later

it may sink it may sink I mean to me this was I mean it's funny some people looked at this and thought oh my God fundamental strategic shift by Apple that are going to decouple services from hardware, you will now be able to have all of Apple services without buying any Apple hardware, and it will be a separate standalone business

that will have some overlap with the hardware. I looked at this, and I thought, this is just Apple doing Airplay to third-party hardware. This is Apple putting QuickTime on Windows. It's Apple putting iTunes on Windows. You know, it's BD people doing what BD people do and extending kind of the halo around the core products of the hardware

and the experiences around being an Apple customer. So I didn't look at that and get excited at all. I just thought, well, yeah, that's just kind of Apple, do BD people doing BD stuff. I actually looked at it and got less than excited because, like, negative excited, if I could, because I felt like it was definitely what you said about BD people just doing these kind of deals that happen 100 times a year in the industry. But it was this idea that it would be good on the TV. And that would encourage the TV people to do more of this stuff. And I really think it would.

So you think actually this is like the Motorola iTunes phone. Yeah, I think it's like, that's a good analogy. I just think, like, if people would stop doing these deals with the TV people, maybe the TV people would build TVs that are less in my way of using my phone. But the challenge is that is asking the TV people to retreat to being manufacturers of generic black rectangles. A guy can dream. You're basically asking the TV BD people to give up and go home. Right. Well, the thing is that they need people to talk to.

Yeah. And, like, it's interesting. So I had this, like, a career conversation like five or six years ago, do I want to go and work in strategy at a big mobile operator? And I kind of looked to this and I thought it looked at their strategy and I said if I went there, I would tell them to disband the strategy team and just not do any of this stuff. And that was like, that's not going to happen. And it's the PC industry with like there's just no way you could get the PC makers to stop putting extra software on PCs. Like it's just not, there's not an option for that to exist. Like you could try and try. I tried. It's just not. So TVA's unresolved. The other thing that's unresolved is smart home. Yeah. The smart home thing is it, I would say actually that one is one where it resolved some of them. it in spectacularly amazing ways. Yeah. Some of those questions got answered. For like two of them.

Like one, alarms. Like the perimeter alarm for homes now, if you want one and need one, like I can't think of an easier product to get than you pick from a half dozen vendors where like for free or for a very small amount of money because they make it on the annuity, we'll sell you, we'll send you, you know, four door sensors, you know, smoke alarm, fire alarm, glass brake detector and in an hour you put with sticky tape you put up all these things turn on the 3G modem you know base station this is my experience in london like seven years ago except none of it used i triple e standard oh right it's the same thing some weird x10 blah blah blah or whatever you know i called up

ADT and the ADT guy Kai comes and he spends an hour walking around my house putting stuff up and he plugs something into the wall and that's it it's done right so this is an example of very specifically where there were a bunch of proprietary things that alarm companies had that were all basically not based on any standards and were just like electrical wires routed to your power source. Then they got this technology to use, you know, low energy Bluetooth and things like that. And then people came along and said, why is that secret to these expensive companies with human beings? And they made a direct consumer play. And then two years later, it's everywhere. And everyone can do it. And it's just truly amazing. Like, and then, but then it falls off a cliff.

Yeah. Because it's like, oh, I want to get a doorbell with a video camera. And then, the company you have it from doesn't have that, or I just want cameras and the company doesn't offer it, or the cameras are really hokey and they all have power bricks. There's a bunch of kind of dynamics in this stuff. I mean, one of them is the analogy I talked about earlier, which is kind of the discovery question. So you have all of these components. Basically, all of this stuff is using smartphone components. It's smartphone camera, smartphone Wi-Fi chips, smartphone CPUs, smartphone radios, smartphone Bluetooth, etc., etc. So all this stuff is there. So if you want to make a smart connected camera, now a smart

connected camera that can do people recognition or face detection. That stuff is just there off the shelf. You can buy the bits. Anyone can do this. And so now you're one of 50 on the shelf in Home Depot or you're one of five on the shelf doing the alarm. If you want to do the whole alarm, it's a bit more work. But, you know, it's basically all commodity components. So there's no kind of motor around it. Then, like, the evolution you've seen over the last like maybe three years at CES has been to look at doorlocks. Right. And so the question was, do the doorlock people learn smart, for one of a better term, quicker than people make. software door locks learn how to get the thing to market and make it at the right price and make

it durable and waterproof and all of this kind of stuff. And so it was really interesting like three years ago on one side of the hall you'd see the startup and on the other side of the hall you'd see the guys from Yale and the guys from Yale and Kickset and Schleg and they reach in their own uniforms. So one sort of they're kind of in the hoodies and the oversized jeans in the other side they're in the polyester slacks and the black poli shirt with the logo embroidered on it. And what seems to have happened is that the locks guys want because there's not really a network effect. There's not actually very much software to the lock by itself. It just has to lock and unlock based on something you do on your smartphone. And they can buy that from a chip manufacturer or a

third party and just integrate it. And they know how to make locks and they know the route to market and they can make 45 of them in different shapes and sizes and styles for different holds in the door. And do you want it classic or modern or do you want buttons or do you want this or do you want that? Like they have the whole like supply chain manufacturing process route to market thing ready. And for them to use like the Clay Christensen analogy, this is sustaining innovation. They just put a chip in the lock. And they put

a chip and a motor in the lock and they're kind of done as opposed to the, and you can see something similar in like, is your oven going to be smart? Will your oven turn off if it smells burning? Yes. Is that an opportunity for a startup? No. That's World Pool and Samsung and LG. That's oven

companies. As opposed to like the broader question of how does all of this stuff talk together and how do I say, turn off my oven and lock the door and tell me if there's anybody in there's a garage door shut? And that's where we're seeing like the connective tissue emerging, which is the Alexa, Google Assistant, Apple relaunching home kit. Like, is there connective tissue? Do you want connective tissue? What would that be? What are the aggregating layers here? And that's where we're still sort of stuff is still sort of emerging. Yeah. So the key is that the lock people just

completely didn't get disrupted. Like, it was, it's actually quite phenomenal. And, and I, just to harp on this a little bit, like, because we start-ups tend to really underestimate the route to market in the go-to-market for, like, existing sort of heavy industry. But, like, locks are complicated. You can't change the door of a house. Like, that's really expensive. So, like, to get a lock, you need to have, what size hole is it, and how thick is the door, and is it one or two? And then it has to fit in with the decor. And so just the skew proliferation alone to enter the lock market is quite a bit. Now, you then go, oh, we'll just go do new homes. And it's like, well, if you want to do new homes, it turns out, then the route to market is you have to know all the architects, and you have

to know Home Depot, and you have to know all the contractors. And you have to know all the developers. And all the developers. And like, that's really hard. It's fragmented. It's geographic. It's very, very tricky. So the lock people really did use all of their strengths, very, very effectively. So I just, I'm so impressed with it, I want to talk about it. Like, you go to Quickset, and they have like from Dumblocks all the way through to, you know, like the

connected smart lock that I can add codes and modify it from, you know, Europe while I'm on vacation. But they did a very clever thing, which is not only do they have the dimensions of like brass and chrome and stainless steel and for different doors and thicknesses, but they also have different levels of connectivity,

which a startup making connected locks would never do. And do you want to keypad. Do you just want a keypad with a nine-volt battery that lasts 10 years? Yeah. Do you want a keypad with a nine-volt battery, but also can do Bluetooth and be programmable, like have the codes programmable from your phone all the way through to varying stages of connectivity, like, will it work with other systems or it will work with only other locks in your house so you can coordinate the front door and the back door? I mean, like, very impressive, like, in the product line sense. And a lot of that as well is back to our component thing, because, of course,

they didn't build this, or they built roughly half of it. The other half is chip companies and middleware software companies who got on a plane and went to these companies. Right. So before we get to Alexa, like let me give an example of a company that did that since we now, I know the data now, because they told me, was like, was first alert smoke alarms. And they went out and acquired mesh Wi-Fi. They went and found like mesh Wi-Fi. And like, duh, they're just going to put it in the smoke alarm. Because your smoke alarm is hardwired, US code. It depends on where you live and stuff, whether or not your smoke alarms have to be hardwired or not to electricity or battery. But if you live in a place where the smoke alarms have to have

electrical wiring, like what better place than a $5 Wi-Fi chip in? Than to put mesh Wi-Fi in it. And so all of a sudden, they're like, oh my God, this is crazy. Because it turns out they were all along putting Wi-Fi in their smoke alarms anyway so that you could get alerted on your phone, like, you know, smoke alarm went off. And so they very comfortable, because, like, really nobody wants to make smoke alarms because that's, like, super easy and massive liability. Like, it's like a scary business to enter. And plus, you have to know all the fire codes all around the world.

Yeah, it's to the lock point. It's hard. There's lots to it. So, like, it's very, very interesting to see this stuff. And so then all these companies are now like, okay, we can't literally make everything. Like, where the locks, we get locks, we're good at, locks, but people want, like, when the lock is unlocked, the security camera to turn on or off or the garage door or something. And how are they going to connect them all? So then enters Alexa and

Google Voice. Yeah. And that also comes through the intermediary of their chip supplier. Right. Right. So whoever the chip supplier is, their chip supplier has done the deal with Alexa, as much as it is Schlager or Quixet has done the deal with Alexa. Right. Especially if... So it's a switch you can flip on your chip and they say, right, the chips that we're going to give you next year will have Alexa and Google. assistant and maybe home kit in them. And they might have like a jack, you know, they might have a place on the board like to plug in a microphone if you want. Yeah. Like they're, they're ready for any, any of the integration scenario. Exactly. So there's actually part of the point who is what's

the level of aggregation and the level of aggregation in a lot of smart home stuff is actually the chip vendor. It's not the hardware. Right. The hardware guys will carry on being hardware people and they own that. And now they will buy a chip. And so the insertion point is the people who sell chips to those people. It's not actually making the lock necessarily. But the problem is, and this is where it gets to, like, my view of, like, how smart should something really be and where is the right place to put the smarts, is that we really had two different approaches to enabling connectivity between all of these gadgets. One was what Apple tried with HomeKit, which was, well, we really wanted it to work, not to be rude about it, but they really wanted it to be

seamless and nice. So Apple put in a requirement that to be HomeKit, you had to do some stuff to your hardware. Well, to Benedict's point about the supply chain, that just eliminates everyone. Yeah. Nobody could actually do that. No, and so basically that and recently. So nobody implemented HomeKit. So nobody implemented HomeKit, except for, like, I have a garage door that has, like,

nine parts, and it took me four hours to get all work. So it didn't really live up to the expectations. And then the other end was, like, Alexa and Google Assistant, which was, like, it's five lines of code. Like, and then all of a sudden, your web interface is now controllable by voice. But it turns out to not enable you to do very, it's like a part. parlor trick now. Like you can say, Alexa, door, unlock my door at home, front door, you know, some sequence of... It becomes a command line. Right. So Alexa, CD colon slash front door

slash unlock slash. I really want to harp on that because I wrote that in my write-up, which is like, if we had shown up and said, like, the future of the smart home is a terminal window where you type in a very specific syntax and nine out of ten times it says wrong syntax. People would have just laughed at the homemaker. And so for some reason, the idea of saying that was viewed as like a huge breakthrough where you have to know, but you still have to know the exact syntax. You have to know exactly what you would have had to type. And said in the right order. And it's only because voice got recognition of the words you're saying got so perfect. But it didn't make the syntax any easier. And so I'm really critical of this approach

of like, which I think if you were being cynical about it, you would say this was just a race to see who could have the most number of people with logos for their voice thing on their devices. Yeah, I mean, the worst of this is you have devices that have Alexa in, but Alexa can't actually control the device. Oh, yeah. Yeah. So you've got a light that has Alexa, but you can't use Alexa to turn the light off. So it's very, very frustrating. And this is where I think that like, like, because you can sort of imagine this scenario. You have like all the marketing people saying to the product team, please do assistant, do Alexa, do home kit, do any of them that come along. And we want all the logos on our device. You can invite, imagine. You're the oven team at

LG. Right. And you can, yeah, you're the oven team at LG and it's like, we need all the logos, says marketing. And then, then the test team is like, uh, our heads are going to explode because the test matrix for all of this is ridiculous. And then like you have the engineer saying, look, each one's like five lines of code and I can do the demo. So it's great. What we're missing is somebody going like, what's the product for all of this? Like, what do we want to really accomplish? Yeah. I mean, this is, it kind of comes back to the, the VCR that is always flashing at 12. Amazon gave this number that there's 100 million devices out there with Alexa on them. They didn't say how many of them are live. They didn't say how many of them have actually

been connected to Wi-Fi and connected to Amazon. They didn't say what the usage is on those. And it feels like there's a kind of step one, Alexa has been an absolutely brilliant strategy for Amazon. They have an endpoint in maybe not 100 million homes. Tens of millions of homes have an endpoint that just wasn't there before unless you had opened a web browser on a smartphone and typed in or open the Amazon app. So they have this end point. They have this point of leverage. Right now, that might be used for unlocking the door or turning a light on.

It probably is used for doing unit conversions and timers in the kitchen and playing music. That has no strategic benefit to Amazon. And so there's actually two Amazon questions or two Google questions here is. One of them, how do you get from having lots of Alexa or assistant stuff in your home to that actually being useful and being used as opposed to it just being a VCR that flashes at 12? Like my oven has Alexa in But I've never used Alexa That is a thing today

Oh I have no idea that it had Alexa in There's like an Alexa sticker I don't even know what Alexa is The other is Okay presume for the sake of argument You get all this stuff Actually connected to Wi-Fi And talking to each other

What is the benefit to Amazon of that Do people buy stuff with that Are people more loyal to prime with that Can you use it to drive deliveries Like the delivery person can open the door And leave your parcel inside your door Because of Alexa And so, like, step two for Amazon is, like, you've got the point of leverage in, fine.

What's the lever? What are you trying to lift with this point of leverage? What are you actually doing with that end point? And, like, huge credit to Amazon and Google that they've got this thing out there and they've ridden this wave. There is kind of a second part to that, which is okay. Now what? Well, and I think there's two things that occur to me in that now what kind of thing. One is that it really is like a few lines of code to integrate.

have like a device that already had like a web enabled element to it, which you probably did because the supply chain just gave it to you and the thing was like a web server to begin with and you didn't even know. And you didn't even know. So then you're in this phase, the old smartphone phase where the platforms really kind of are pretty much the same. And in order to answer the question of why is an Alexa or why is a Google assistant or why is any of these in the home, those companies are going to end up diverging. Like Google is going to have a different set of ideas for what you can do with this device than Amazon does. And once the platform start diverging, the idea of it being five lines of code and you get both for sort of for free is going to really

change. And whether they imply more hardware constraints or more software, the idea that you work seamlessly and equivalent on both of them is really very short line, particularly because neither of them do very much. And so this is how things fade from CES. Like everybody does them. And then they are all these companies that have like R&D budgets and marketing. And they just, the first step is they stop talking about it. And then the second step is it just sort of fades away. And I think that that's a very interesting thing that when it comes to the support. And then the other one is that this really does open up the opportunity for a brand new player.

Because now that somebody is seen like, okay, there's a speaker and it could be the home hub. But it doesn't control everything and it's super hard. but this is, it could have been that home kit was too early. Yes. And that what really is needs is we need home kit now. And that if all of these makers saw home kit, they would go, well, we could join the land war of assistant versus Alexa, but nobody will ever buy our product because of that. Well, there's a sort of a, there's a point. I mean, I think we talked about this last year, which is, I mean, I think the analogy you gave was everything in the kitchen got a DC meter in the 70s and 80s.

And it turned out that everyone in Britain gets a kettle, everyone in East 80s. Asia gets a rice cooker. Everyone in America has a coffee maker. Some people have toasters. Lots of people have a microwave. Nobody has an electric carving knife. And so you're in this kind of discovery mode of which things does it make sense to get smart in. By extension, there's also a discovery of which things does it even make sense to connect. So absolutely I can get, most people will have an oven that will turn off if it smells burning. Most people, many people will probably have a door that's smart. Or a camera that recognizes people. Yeah, exactly. Many people have some combination of these things.

the more you start adding scripts and you're saying if this, then that and also this other thing and do this thing if somebody else happens, the more you've just lost 98% of the Earth's population. Well, and that's really important because the tech enthusiast crowd that goes and looks at all of these actually just thinks that scripting them and setting them up and managing them. Like I always joke with a friend of mine who loves this stuff. Like, you know, this person's nirvana is like opening up the door and saying, you know, my assistant, like, it's time to relax. And, like, the lights dim to 37%, the fireplace turns on to 15%. But you put Barry White comes on the speaker system. Like, all of this. And I'm like, good Lord, how many times do you relax exactly like that?

And he's like, oh, like one out of five, but I have like relax two, relax three, relax four. And you're like, really, like, nobody is going to do that. Bondi, you should read a spontaneous one, spontaneous two. Right, right. Exactly. Exactly. And so I just, I tend to think that we're going to see all of this fading of stuff that, like, A whole bunch of stuff was going to end up being electric carving knives.

Like, I saw a bed that you could talk to Alexa via. Well, the best one of this was somebody tweeted a toilet that said it offers the first smart, immersive experience. There's a fairly obvious jokes about immersive toilets here. Yeah. So a lot of that will fade, and it'll basically look like internet connected. This comes back to what we were saying right at the beginning, was people go and they complain, and they say, I hate this stuff, it's terrible, there's all these stupid gadgets. What we're seeing here is experimentation. and some of this will be the electric toaster and I'm sure there are people 50 years ago saying

why on earth do you need electric toaster just hold the piece of bread in front of the fire it's way easier why on earth do you need an electric kettle just put the kettle on the gas and dishwasher was my grandmother yeah my mother my grandmother didn't have a dishwasher or washing machine and actually thought that they were bad yes why would you have that and he grudgingly had a freezer yeah yeah why would you want that in hindsight it's obvious well that was make sense and that one that other one didn't make sense. What we're seeing now is all of that stuff, some of which will last, some of which won't. But you kind of have to have all of it in order to work out what will work. And it may be both completely wrong about the connectivity. And like, it will be made

seamless and smooth and it will have machine learning and it will learn what you want and it will make suggestions. And like, eventually, like, you'll walk in and the lights will kind of turn on as you walk through the home and that will just feel normal. But we're in this experimentation phase of this discovery phase at the moment. And I think that that's really important when anybody attends CES or writes about it or thinks about it to remember that by and large this is a show about experiments. That's the part that you see. Behind the scenes, it's a show about transacting business. It's somebody buying 150,000 phone charges. Right, or like a Midwest retailer with five stores picking up a new line or a new product that he or she is excited about, like for their

wholesaler, their distribution network or whatever. But still, there are fun things. So, like, we want to wrap up and each share like a couple of things that just we we couldn't help but laugh even though the people were, and never forget, these are makers, they're founders, they're entrepreneurs and they're very, very serious about what they do. Yeah, so I love the emoji power banks. So like the emoji poop power bank or the unicorn power bank. It's just, it's a, as we're saying, some of you buy batteries, you buy a charger, you buy a chip, you go to the foam rubber manufacturer who's also making all sorts of other stuff out of frame rubber that will never go to CES. You go to the packaging guy, and there you are.

You have a unicorn poop emoji charger. That reminds me of like the old like sushi USB memory stick kind of stuff. Exactly. So I had two that I have to talk about because it really is the, it's the cultural part of CES and then the founder part. The cultural part was there was a booth that had Japanese hand clapper. So this is literally like plastic hands, big red like clown hands. And they clap. And they clap in unison.

You could have 20 of them all connected by Bluetooth and they clap. And it's basically a riff on, and it's a Japanese vendor. And it's a riff on Miniki Niko and the Welcome Kitty that you see in every business. But it's really about showing appreciation or having a birthday celebration. And they talk about having carts of them that they use in restaurant. And people are just staring at it. And it was like the most amazing thing because, like, really, they have all these pictures of it being used all over Tokyo. And I was just in Tokyo when I actually had seen them at this restaurant we went to.

And so I thought that was very cute. The other one was just the reminder to me of like the entrepreneur hustle. You know, because it's like the scale of investment for a tiny company to show up at CES is insane. Hotel rooms are all jacked up. Like everything is expensive. And then you toss in an international flight. So there was one booth that had a founder and an employee from a company in Ukraine doing notebooks, like paper notebooks. With paper you can't tear.

And you write in any pen you want, but you can erase the ink later. I don't understand the utility, but I know everything about the product because the founder just saw me walk by and said, have you been to Ukraine? Let me show you the innovation in Ukraine and grab me. And I had to watch the whole demo and hear from the employee, the marketing pitch and everything because it was like the chutzpah and the hustle and all. And there's 5,000 of those, like everywhere you go. And that, you can only experience that if you just walk around and see the floor and give the people

to time and just don't walk by going, oh, never buy it, never buy it, that's dumb, never buy it. And you can't, you just can't do that because people are trying. And maybe for all we know, like, eraseable, non-terrible paper is the future of paper. Yeah, look at Mulskin, who would have thought that would be a business? Exactly, exactly. So with that, that was another year of CES. That was a long hallway we just walked down. That was definitely a long hallway, not as long as the design build hallway at CES, which is a mile long or so. All right, so thank you. This has been Stevensonovsky. Thanks.