In Search Of Excellence - Tony Fadell: Innovation Must Never Stop (Even If You’re #1) | E46

Episode Date: January 31, 2023

Tony Fadell is an amazing and successful engineer, entrepreneur, and investor. He is the father of the iPod, co-creator of the iPhone, founder and former CEO of Nest Thermostat, and the founder of Future Shape, a global investment and advisory company.In 2014, Tony Fadell was one of the Time Magazine’s 100 most influential people in the world. He is also a NY Times bestselling author with his book Build: An Unorthodox Guide to Making Things Work.It’s a true pleasure to have Tony on our show and hear how he searched and found his excellence!(00:28) IntroductionLearning from his dad about building trust in business (relationships, not transactions build trust)50% is what you know and the other 50% is who you knowWhen rejected for a job, don’t take it personally (send follow-ups, keep the line open create the conversation, ask how to improve)(10:18) Tony’s childhoodSelling eggs to neighbors as a young kid (money = freedom)Degree in Electrical Engineering and Computer Science studiesAs a sophomore, made an improved processor for Apple 2 – offered it to Apple and Apple bought it!(16:44) The value of cold calling skillsThe first job in Silicon Valley – got it through cold calling (overcome the fear of cold calling)Know how to tell your story to engage people – what value you can bring?(21:13) Is education worth it?Most people attend college in the wrong wayTony’s mantra "Do, Fail, Learn"The importance of internships (do a lot of things to know what you don’t want to do)After college, go and learn from experts(28:30) Turning disappointments into opportunitiesGeneral Magic – failed6 years in Silicon Valley of failureIn 2000 Internets stocks tanked, the market frozeCalled to work for Apple when the company was about to bankruptApple was developing a new generation of WalkmanRandall’s experience with Apple(40:25) Tony at Apple6-week contract to research and design the iPodThe importance of constant improvementInnovation must never stop, even if you’re #1 (you must be ahead your competition)(48:59) What is an entrepreneur?Someone who disrupts the marketResonate with people in the first 30 secondsStart with a pain and offer the painkiller (the development of iPhone – solved the issue of taking three devices with you)Resources Mentioned:Build: An Unorthodox Guide to Making Things Worth Making, Tony FadellNest ThermostatAppleSponsors:Sandee | Bliss: BeachesWant to Connect? Reach out to us online!Website | Instagram | LinkedIn

to find the thing that you love, you have to do a lot of things that you don't love to find the thing. So you need to try. And so what if you didn't like it and you failed at it? That's fine. You learned that that thing is you don't want to do. So now you can constrain your decision-making set smaller and smaller to find that thing. So as far as I'm concerned, you need to try and do a lot of things to figure out what you don't want to do in life. Welcome to In Search of Excellence, which is about our quest for greatness and our desire to be the very best we can be, to learn, educate, and motivate ourselves to live up to our highest potential. It's about planning for excellence and how we achieve excellence through incredibly hard

work, dedication, and perseverance. It's about believing in ourselves and the ability to overcome the many obstacles we all face on our way there. Achieving excellence is our goal and it's never easy to do. We all have different backgrounds, personalities, and surroundings. We all have different routes on how we hope and want to get there. My guest today is Tony Fidel. Tony is an incredibly successful engineer, designer, entrepreneur, and investor.

He is known as the father of the iPod, where he oversaw all iPod hardware, software, and accessories development. He is the co-creator of the iPhone, which has sold 2.2 billion units since he invented it 15 years ago, and which has generated $1.5 trillion in lifetime earnings for Apple. He is the founder and former CEO of Nest Thermostat, which sold to Google for $3.2 billion four years after he started it, and is the founder of FutureShape, a global investment and advisory firm which has coached more than 200 startups. Tony has more than 300 patents issued in his name,

and in 2014 was named one of Time Magazine's 100 most influential people in the world. In 2016, Time named the Nest Learning Thermostat, the iPod, and the iPhone as three of the most influential gadgets of all time. Tony is also the author of the best-selling book, Build, An Unorthodox Guide to Making Things Work, which was released in May of last year. Tony, it's a true pleasure to have you on my show. Welcome to In Search of Excellence.

Randall, thanks. I didn't know how long that intro was going to go. Wow, I feel very old when you do that. Thanks. We have a lot to talk about today, so let's just jump into it. I always start my podcast with our family because from the moment we're born, our family shapes our personality, our values, and the preparation for our future. You were born in the great city of Detroit. Your dad was a sales executive at Levi Strauss,

and your family had to move around a lot because of his job. When you were young, you went to 12 schools in 15 years. I want to start by talking about an important lesson you learned from your dad about sales and building trusting relationships. What did he tell you about the relationship between the two? And how did learning these lessons at a young age influence your future? And in search of excellence, how important is trust to our success? So, wow. Okay. Well, look, what my dad taught me, and this was when I was literally five, six, seven, eight years old. And I actually would go on sales calls with him. That was the time when, you know, he would actually literally take a car and in these physical samples of clothes

and go into small department stores and what have you and show them off. And I would be with him sometimes. And he would sit there and I would watch him. And he would show like different clothes. And then the buyer, who would be on the side of the store, wanted to say, oh, I want to buy that one. And he's like, look. My dad would go, look, no one's bought that one. I don't think you should buy that one.

I don't think that's going to be a hit this year. Literally, don't buy that one. If don't think that's going to be a hit this year. Literally, don't buy that one. If you want to know my opinion, buy these because these are what seems to be selling really well. This is the trend that you want to be able to use. And I was like, and then my dad and I left the meeting and I was like, dad, why'd you do that? You could have made the guy want to buy that, but you said that. He goes, look, his job is to buy buy things but it's also his job to make sure the things he buys sells and if he's buying things that aren't going to sell and i don't give him the

advice of what to to make him look great then that is not going to be a great and happy relationship i'm in this for the relationship not just a transaction that one sale, but really something that they can trust me, the buyers can trust me, that I'm going to tell them and steer them right so that they look good and that they keep their job. And the company does well, the department store or what have you does well. And he's like, you all have to be aligned. And sometimes you don't always make that sale, even though that they might want it, you're going to tell them what's the right thing to do because you want to make sure that you have a long term relationship with them. And so that is about building trust. Right. So if you just think about transactions, transactions don't build trust.

You buy and sell stocks, but doesn't mean you necessarily trust the company. If you build a relationship with the company, then you start going, oh, I want a long term. You know, I want to hold this stock long term and you learn more about the company you build a relationship and so then you can really you know you believe you trust what's going on there so that you can you feel um you know invested in it and you want to really take it to the next level so that's what he really taught me was it was about that human connection, relationships, not transactions. And that's what really propelled me into excellence further on in my life. Because I would have never gotten the job at Apple to do the iPod if I didn't have a relationship that I kept over a whole decade. of just going to lunches and meeting with a guy, Ali El-Asti, who I worked with at an early time, 10 years earlier, at General Magic. And so those are the kind of things where you learn that

relationships mean a lot. And they may not end up in any kind of exchange of value at that moment, but who knows what will happen in five or 10 years. And if they're good people, you know, you, you, you collect good people and you help them out, even if they can't help you at the time and vice versa, you never know what happens. And that's really one of the big things that I've, that I've learned in my career, which is 50% is of what you know, and your excellence of what you know, but the other 50% is the excellence of who you know and your network. Because those things come together and then you can multiply what you know with all the people who you know and trust, and then they can tell their people about you and find opportunities that way outside of yourself and your day-to-day existence. I do a ton of mentoring. I love it.

I love giving back. It's one of the purposes of my podcast to coach and inspire and make a difference. And one of the things I see, I have a summer intern program every year, 35 kids. We got about a thousand applications now. And one of the things that's very hard to teach is the value of building long-term relationships.

For example, this is a no-brainer. I'm interviewed for a job. My daughter just had a callback. She's a college, a junior at Cornell. And she got a rejection from one of the top investment banks in the country, probably in the world, a private equity firm, actually. And I said to her, the end can only be the beginning in most of the time, meaning right back. Say, all right, I'm sorry I'm not working there.

I really love my time getting to know you. And I think she had three rounds there. Write everybody a letter because the world is such a small place. We used to talk about Kevin Bacon, six degrees of separation. Now there's one degree. You've got LinkedIn and you can find anyone's contact information online. I mean, yours was a little hard again. We have a service called Lucia,

but this is not creepy, but I actually have your cell number and didn't even know you. I don't recommend people texting people when they don't get a job, but I do recommend send follow-ups and send follow-ups. And send follow-ups every year. Every year. Nobody does this. You should do things that no one else does. So what's

your advice to not only kids coming out of college, graduate school, but that person who interviewed you is going to move on and probably stay in the same business. That person you may be working with one day, and frankly, this happened to me, you may be that person's boss one day. Exactly. And so when you look and you find good people that you're talking to and that you connect with, and even if it doesn't work out, at that moment, sometimes literally, and I'm going through this right now, I met some very interesting people six months ago, and it

didn't work out for a certain reason. But now I'm calling again because the opportunity reopened because some other things happened in those six months. And I'm like, I want to talk to those people. So if you can keep that warm, that connection warm and say, no, I was really interested. And I was, you know, I believe I'm a great candidate. Maybe I have to do some other things, but I hope I'm going to be able to work with you or work with this company in the future. Keep that line open. And so it's really just about, you know, having those contacts. And remember, it's not, it's also about getting together with these people, like in a, not always about that transaction you're trying to complete of getting into the company and going

like, hey, do you know somebody at another company that I could do? Like, there's always ways of creating a conversation to keep going. And maybe they'll know some people like, oh, yeah, my friend is hiring over at this company, you should go talk to them. So there's a lot of times it's like, oh, you're not right for me. But do you know somebody who so there's always some way that you can continue the conversation and don't avoid that. And don't think that just because the rejection don't take it personally there might be another reason or maybe you just are just too you're not experienced enough yet and you say what could i do to improve that's the other thing is follow up what could i do that you saw that in my my interview that i could do to improve so the next time i do this whether it's

at your company or anywhere else what can i what have what have I, can teach me, right? Don't just take it as a rejection, but take it as a learning exercise to see what else you can do to better yourself so that, you know, the next time around, maybe you're more likely to get that and keep that connection alive. Let's talk about your childhood. As a child, you love listening to and collecting music

and you also loved engineering. You're curious about how things were built. When you were four years old, your grandfather showed you how to build things and paint things. You even worked on wiring electrical projects with him at that age. Through the years, you fixed bikes, repaired lawnmowers. You were also a caddy at a local country club. Can you tell us about the Apple IIe computer, how you invented a new processor for a successful Apple II computer in high school, got a patent on it, and sold it to a company that used your

processor? Going back a little bit before then, can you tell us how selling eggs in the third grade when you were 10 years old and the feeling of freedom it gave you at such a young age influenced your future? Well, look, I saw kids in the – I was third grade. Yeah, third grade. And I saw kids out there. They were delivering papers. They were doing whatever, and they were older than me. And I was just like, hey, these kids – and then I saw them with money, and they were like, yeah, I got money from my job.

And I'm like, what job? What's this? It was my – I knew my parents had a job, but I don't know how kids can have jobs. I'm like, okay. what's this you know it was my I knew my parents had a job but I don't know how kids could have jobs I'm like okay and then you know I saw them having fun or whatever and then they had money in their thing and they were buying whatever it is they wanted to buy and I was like I like that let me try that and so I just talked to the kids in the neighborhood and I said hey what are you doing and like oh yeah and you know there's this thing called an egg route maybe you want to do that and so literally I, I was like, egg route, what's that? And literally learned about it in like a day. And I was like, hey,

I'll try it. And so my brother and I went around the neighborhood selling eggs once a week to the neighbors. And they'd have their order, and we'd fulfill it. And I didn't know necessarily how to do change. Or I didn't think I knew how to do change. So they just gave me all the change as tip. And so my mom didn't like that. So she taught me I knew how to do change. So they just gave me all the change as tip. And so my mom didn't like that. So she taught me all about how to give change. But again, it started. And then when you have that money in your pocket, it is it's freedom. It's empowerment and saying, I can do what I want with this money. And I earned it. I was like, wow, it was a drug in a way. And it just led me to more and more experiences along the route going,

oh, I like being my own boss. And I like to be, you know, self reliant. And so I just continued from like the egg route to the paperboy to teaching computers. Like I literally would teach or set up computers and teach people computers. I was being a caddy. There was always some kind of job I always have because I wanted to be empowered to have my independence and didn't have adults telling me no. Talk about the Apple IIe, the invention. I mean, you were in the middle of high school. No, no, no. So the Apple II and stuff like that. So one is I got an Apple two plus, and that was because my grandfather, when I was a caddy,

I could only make so much money in the summer. And he said he'd double it because I really wanted a computer. So he, he, he and I worked out a deal and I worked really hard that summer as a caddy made, I don't know if that thousand dollars or $1,100. And this is in 1981, I think it was. And he doubled it. And I was able to buy an Apple II Plus, which was like $2,500 at the time, which is incredibly expensive in this day and age. And then ultimately, I fell

in love with that computer. And then when I was in college, I was in electrical engineering and computer science, a dual major at University of Michigan. Go blue. And we're going to talk about Michigan a little bit. And then I the Apple two was dying. And the reason why the Apple two was dying, my love, my first computer, right, it was dying, because it didn't have a better processor. And I met a guy in California was interning. And he said, Hey, you know, he was already building co processors, just accelerate the Apple two. And I said, Why don you know, he was already building co-processors to accelerate the Apple II. And I said, why don't we build an Apple IIe and IIgs? That was the next generation Apple II processor.

Let's go make our own. And that's what we did over a summer. So I was a sophomore in, it was my sophomore summer and literally in college with another guy. He was like, William, he was like, I think 23 or 24. And he and I put together a whole processor, did all kinds of crazy stuff to make it happen, and we even had it fabbed.

And then we showed it to Apple, and Apple actually bought some parts from us and wanted to try it out and put it in a computer and made it work, and it did work. And it made the Apple II go like eight times faster or Apple IIe or Apple IIgs eight times faster. And they were astonished. But then they canceled any new Apple IIs.

But we made a processor and I was literally under 20 years old and I had never taken a processor design class. That was actually the next semester that I got to learn what I would, like really learn what I did, you know, the quarter or two before so that was that was an amazing experience it was very tiring but it was an amazing experience to actually build your own computer chip and have it fabricated and it

worked in the computer that you love like that was just amazing when you were selling eggs and I had a hard time with this one because you grew up in Grosse Pointe and I didn't see a lot of farms there when I was growing up. But were you going door to door and knocking on people's door, hey, you want to buy some eggs? So the egg route was in Rochester, New York, really truly Pittsburgh, New York. So that was in New York and there was farms around that area. In Grosse Pointe, I was a paperboy and a caddy and all kinds of other things. But no, the egg route was not in Michigan. But did you go door-to-door selling the eggs, or was there a farm?

Yeah, door-to-door with a wagon loaded up. My brother was with me, and we would go door-to-door to each of the houses and say, how many eggs do you want? What grade did you want? And that's what it was. And we'd get the eggs from the farmer. The farmer would come off and drop a pallet of eggs. We'd pay him for the eggs, and then we'd take them and sell them.

It was wholesale price, and then we had the retail price. And that was our margin. I started essentially part of my career at Michigan, making Michigan t-shirts, going door to door, cold calling on dorms. I'd go to every door, I'd knock on the door, get kicked out by the room monitor or whatever they called that person. And I found cold calling. Yeah, the RA. I found that cold calling is one of the best skills we can have

in our career. Can you talk about the value of cold calling? Because I think a lot of people are afraid of it. They're afraid of rejection. And my dad taught me something at a very young age. And he said it in a dating context. Because you like someone who you want to date, and you're afraid she's going to say no and he said you ask a hundred women out on a date and the hot in the first 99 not making you feel so great but on the hundredth that said yes you forget about the other 99 tell me about the value of cold calling skills and what's your advice to people who have never done it and who are afraid to do it? Right.

So I'll tell you this. I wouldn't have got my first job in Silicon Valley if I wasn't cold calling literally VCs and saying, I want to work for this company in your portfolio. Because I didn't even know how to get to the company. This was before the internet. This was before LinkedIn and everything else. And so now it's so easy to cold call because you can just send a dm or something else and so i get them all the time but it's so you won't get you won't get any action if you don't ask for it right so you you're it's you know it's the it's the chance you didn't take and so you're always going to lose so

you have to understand you have to make your own opportunity people don't know who you are so you have to present yourself and you have to have that not just the cold call but you also have to understand you have to make your own opportunity people don't know who you are so you have to present yourself and you have to have that not just the cold call but you also have to have that elevator pitch to say why am i calling and why am i going to make your life better right not just i'm calling you and i need you to do this for me there's so many people that i get in dms and linkedin messages and all these things they just and emails they send me something and they say i want to talk to you about this i'm like what's in it for me right like they forget that they're trying to build a relationship they just think there's a transaction with this person that's on podcasts right like oh he'll help me just if i ask it's like no no no no you have to

just it's not it's one overcoming the fear of doing the cold call. But then the second thing is really understanding how to tell a story about why they should be talking to you and what value you can bring to them. And what painkiller in some way that you can bring to them for the pain that they have. So you have to really understand your audience. So one is getting into a conversation. And two then is really being able to tell a non-fictional story to get people to want to engage. And those two things are very critical. And that's about anything in life. But really that storytelling component, once you get that door open, or maybe even if somebody introduces you to someone, it wasn't even cold calling,

that you got to have that story there. So you have to have both. And that's a really important, those two things are very important skills you need to learn. And I know that, you know, there's these, this wisdom in, in VCs, they're like, who are your best sales? Who are your best VP of sales? It's the ones who grew up as cold callers because they understand what it takes to really make a sale and how to make you know make opportunities happen because you really want somebody with that resilience and that determine determination to say i'm going to do it just like your dad said you 100 times or 99 times and then the 100th time you feel really good about it but you got to make sure you you understand that you know and then you learn about qualification before you make the cold call, like making sure you're like in the right subset. So you, the 99 becomes nine, right. Instead of,

you know, staying a hundred. So there's all kinds of things to learn through that process of that journey to create a relationship with a potential customer. What dorm did you live in at Michigan? I, uh, I lived in East Quad. So I lived in West Quad. And as I was doing preparation for our podcast today, I figured, all right, you're a year younger than me. We're there at the same time. The CS guys didn't really, it was kind of a separate group than the board of board general. I should have never been in East Quad. I should have been up in Bursley.

I should have been up on North Campus. But there was a crazy year in terms of quotas and stuff. And my roommate and I, who I just talked to, actually, we got a special dispensation, so we got to be on main campus. Yeah. I mean, Bursley was a kiss of death, especially in the wintertimetime out way back up there. You got to take a bus to get up there. Yeah. Good luck doing anything on the weekends or evenings. Right. All right. Let's talk about education, which I think is one of the most important ingredients to our success and our future. It's probably the best investment we

can make in ourselves. You went to Grosse Pointe South High School in Grosse Pointe Farms, Michigan, and then attended the greatest school on earth, the University of Michigan, in 1991, a year later than me. You're not biased. I'm not biased. A year later than me with a BS in engineering and computer science. How important was your education to you in terms of preparing you for success, both academically and in other ways? In a search of excellence, in a world where 65% of college graduates have on average $34,000 of student debt when they graduate, which on average will take them 22 years to pay off, what value should we place on education?

Okay. We should value education, but I believe that most people go about it wrong when they decide that they're going to go to college and how they go about going to college. My years before going to college, I learned by doing, whether that was at Agrout

or doing a startup or whatever else. And so by doing, whether that was at A-Grout or, you know, doing a startup or whatever else. And so through doing, I learned where I needed to, I learned where my challenges were and what I needed to learn because of the failures that happened along the way. After doing, doing, failing, and then learning. So my mantra is do, fail, learn. And so if you're doing and you fail, then you learn the things that you should go and learn at school so most people just take a program and say oh they're teaching me everything i need to learn about this thing and then you come out and you're like oh i learned all this stuff but you never really applied it you really didn't know why you were learning it you didn't know what the real

you just say if i put one foot in front of the other and i do all these tests and everything i will know i did it the other way which is is do first, like I did the processor, then learn how to do it the right way. So I could understand what it was I was learning and had the context. And so through that, each year I would be in internships and do these things. And then I could understand what I didn't know or wanted to know more of so that when I selected my electives or the other things that I made sure I was tailoring that to the things that really resonated with me as opposed to just taking some standard set of classes that people and what interested me you know all that seems interesting but it didn't know that it would necessarily apply so if you're going

to go and take on that kind of debt and everything, make sure you understand why you're taking those classes and make sure you understand the context. And that means you need to do some of it before you actually take the classes. So you can understand, take those internships. Like, I can't tell you how many people go through pre-law or pre-med or whatever else. And then they start to take their first job between their bachelor's and their master's then all of a sudden they go i hate this job i hate this industry i'm like well why did you try that when you were like at getting out of high school or when you were a intern you could have been an intern in your freshman year so you could learn and made the

change you just wasted four years of your life now i was getting you learn stuff but it was really you didn't also build the connections the networks and everything to understand what you really want to do in a given discipline because you just went along with the program and said oh yeah that's what i want to be because you had some image of what it was and you didn't have any reality of it and so you need to know early on and iterate and get there and find and and adjust if you picked wrong that's okay but don't pick wrong four years later because you were you didn't go and do the job go Go do it early as possible. I was doing things well before college to know what it was I wanted to do in college. And then even in college, I was still adjusting because I was doing all these other startups and everything on my off time.

I mean, I, like I said, I coach a lot of interns. We have a summer program. It's a 12-week program. One of the most common issues, and my daughters, my son as well, is the anxiety the students feel. And it's mostly true. I mean, I see it with the interns because of their age, and I work with them very closely for 12 weeks. But I also do a lot of coaching for people in the workforce. The problem is the anxiety they have of not knowing what they want to do. And my advice to them is go try something that you think you're interested in. Frankly, some people don't have a choice to do that. It's a tough job market.

They didn't go to Harvard or Michigan and don't have a lot of job opportunities. You take what you can get. But my advice to them is go try something, and it all works out in the end. Does it work out in the end? Yeah, as far as I'm concerned, yes. Because what you do is to find the thing that you love, you have to do a lot of things that you don't love to find the thing. You're not going to know it until you do it and you go, oh my God.

There's sometimes, there's things that people are like, I don't know if I like that. And they try it and they go, oh my God, I love that. Because their gut reaction was, I shouldn't like this. And then they go, oh, I really like that. They find unexpected things in themselves because they're trying, right? So you need to try. And so what if you didn't like it and you failed at it? That's fine. You learned that that thing is you don't want to do. So now you can const can constrain your decision making set smaller and smaller to find that thing. So as far as I'm concerned, you need to try and do a lot of things to figure out what you don't want to do in life. Right? Like I dug in Dallas, Texas, I was digging

pools. I did it one day, and I would never do it again. I literally quit that evening one day. And that was enough. I'm not doing that. I was doing stuff in grocery stores. Quit. Like I did a lot of things and I was like, and then it learned that I didn't want to be in certain types of businesses, right? Or certain types of industries. And it also forced me to want to take more and more knowledge worker kind of things, right? So you got to do a bunch of this stuff, even if it seems like, you know, a lot of times

that's the other thing is graduates or soon to be graduates, they go, I can't take that job. That's beneath me. I'm a Harvard educated. It's like, dude, give me a freaking break. Go work with a team that you can learn from because you're not, you haven't, you don't have almost any experience. Even if you have internships, you have almost no experience and you have no network if you can go into one of these great companies small or big that have great people in it that you can go learn from think of your first job as you're getting your phd or your master's in what you're trying to do and go in at the lowest rung if that's what they're offering so you can go learn from the experts so you can

build up they're like i'm so and so-and-so and blah, blah, blah. I'm like, get the hell out of here. That's the first thing I sign that I don't want to hire that person. This episode of In Search of Excellence is brought to you by Sandy.com. S-A-N-D-E-E.com. We are a Yelp for beaches and have created the world's most comprehensive beach resource by cataloging more than 100 categories of information for every beach in the world, more than 100,000 beaches in 212 countries.

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dinner. Bliss Beaches is available for purchase on Amazon, where it has glowing reviews and a five-star rating. Get your next amazing gift and order a copy of Bliss Beaches by clicking the link in our show notes. By the way, I dug ditches for three weeks. I worked on the Weight Watchers World Headquarters on Telegraph Road. I thought it was cool. Okay, sure. I just graduated, or I guess I was going to my senior year in college. I thought it was really cool. I was a skinny, scrawny kid. I had my shirt off. I was getting tan, hanging out with the guys.

And I also bagged groceries at Kroger my senior year of high school at Country Day. By the way, we played you. I bagged at Kroger's too. They made us join the union. It took all of our money. I mean, I was making $6 an hour, and I was using it to pay my long-distance phone bill for a girlfriend I had in Michigan when I was a senior.

Let's move to post-college. You moved to Silicon Valley, worked for a spinoff of Apple called General Magic for three years, which failed. And you also worked with Sony, Philips, Matsuhiko, and Toshiba. In July of 1999, you started your own company called Fuse, which was trying to create the Dell of consumer electronics. And one of the things you tried to create was a small hard disc player in an online store for music. It also failed. You couldn't find a second round of funding, so you started looking for other companies where you could continue to work on

the project. You found one a few months later, a company called Real Networks. It was all the rage at the time, but left after only six weeks. Before we move on, let's go back in time 23 years to 1999. Most people today can't even imagine this, but Apple was a very different company back then. That year, Apple sold 3.5 million Macintosh computers and had only a 2.7% market share for personal computers. And there were stories- That was being generous. Yeah, right.

There were stories, tons of headlines in every business magazine, every newspaper that questioned whether Apple was going to make it as a company and possibly go out of business. There were many quarters. It wasn't even break even. It had a big debt and it was going down. Michael Dell said they should pack up the company and give the value back to the shareholders. Can you tell us about the call you got while you were on a ski lift from a guy named John Rubenstein. And who he was, why he was calling you about a top secret project. And is it true that sometimes our greatest disappointments turn into our best opportunities?

Yeah, look, let's start at General Magic first. So General Magic, it was four years of incredible failure and all the the listeners and viewers of this podcast should go off and look watch that movie called general magic the movie it's on all the streaming platforms but general magic the movie it is an incredible story about failure and resilience and everybody should watch it because it's it's it's it's human nature it's's a timeless story. And it really applies to anybody doing anything. And so I had a big failure at General Magic. Then I had big failures the next six years inside of Silicon Valley.

And so you would think most people would give up. which was investing and working in my investing myself, my time and working in companies who were trying to create handheld products, whether that was entertainment products or productivity products, whatever, because I believe that was the future. All right. And I just stuck with it. Most people, when they fail, they go to a different industry. They go wherever I just kept sticking with. And everybody's like, you're nuts you're nuts you're nuts it's all about the internet nobody needs these digital little things it's not going to happen stop and so in in um in 99 i wanted to set out to keep working on that and the internet was going crazy it was internet 1.0 everybody's going crazy and then in 2000, April 2000, what happened last year happened in April 2000, which was the freaking internet stocks tanked. Like literally 80% of

the value was lost on, I think it was April 12th or something, 2000. And so it was a frozen, it was totally frozen. Nothing was going on anywhere anywhere and i couldn't get any more funding and i had already been through enough failures and it was always at the end of rope and then literally i got a call because like i said i had a long-term relationship from somebody at general magic alia lusty who worked with john rumenstein and who was working at apple who was head of hardware at apple and they had lunch. And John was looking for somebody who knew how to make small handheld products. I had lunch with Ali the day before.

So Lee and I said, I said, oh, things aren't working out. I'm trying to figure this out. The next day, he has lunch, tells, and John said, who do you know who? And Ali goes, talk to Tony. I just had, you know, he's in the middle. He's got this little company. He's been working on this stuff and and and seven days later or less six days later John called me up and I happened to be on a ski slope pondering my what my next move was going to be um because I had already you know we had exhausted resources and there were no more funding because of the

the you know the the basically the frozen market for any kind more funding because of the the you know the the basically the frozen market for any kind of funding because of the internet collapse and so that's how it all came together and and uh i was brought into um i thought it was to build a pda for apple because that's what i mainly was doing for most of my you know personal digital assistant like a palm pilot and apple had just had killed the Newton. And I thought maybe that's what they wanted to do. But then they had iTunes. And Apple was just still at that point, like $250 million in cash in the bank,

$500 million in debt debt barely break even and the itunes which was the way you could listen to digital music back then on a mac was taking off and they wanted to be able to take that music instead of just putting it on cds make your own cds how do you put it on a little handheld player like a walkman the next generation walkman to then you could carry around the songs in your pocket so that iTunes wasn't about CDs anymore, but iTunes was about this next generation Walkman. So here we go with my Walkman. There you go. So there's a Walkman. That's a Walkman. One of the greatest inventions of all time. You couldn't leave home without it

if you like music. There's a little... In Grosse Pointe, I was always there, always trying to buy one. I was always looking at them, staring at them. I had to have one. The yellow one was cool with the outside case, and I had probably five or six of these. Or the blue one with the orange headphones. The blue one with the orange headphones.

That was also really good. You talk about Apple at the time at $250 million in cash. We had started a company that was going to change the way that content was sent over the net, better, faster, cheaper, more reliably. And Steve Jobs somehow heard about what we were doing, sent Eddie Q out to Boston to try to buy Akamai when we were 10 people. Interestingly, we had no interest, of course, in doing that. And they ultimately, we had raised the first round of funding, $8.25 million at a $12.95 million pre-money valuation. And a firm in New York, a hedge fund, private equity firm, basically gave us almost double the valuation, I think $18 or $19 million pre-money.

It was a Hail Mary. And we went with a venture capital firm that we thought was going to offer the most value, a local firm in Boston called Battery Ventures. That was definitely not what it is today. They had two huge home runs, our company and one other company. But Apple came back. And so then we raised $175 million. Or sorry, we raised another 30 or $40 million right behind that something like six weeks later. So we went from a $22 million post money. This was 1999.

Yeah, that was the hot money days. Those were the hot, hot money days like it was in 2021. Well, as we were raising money, long-term capital management went down. One of the biggest hedge funds in the world. And everyone stopped. The world was coming to an end. And then things picked up again. So we had this hedge fund in New York come in with something like $175 million valuation six months later. And then Apple, which was a ton of money at the time, invested $25 million in our company at huge, 10% of their cash, which is crazy, at a $250 million pre-money valuation.

And interestingly, our company went public. It was one of these crazy rides where we filed to go public a year after the day we started the company. And three months later, we went public on October 27th or 29th, 1999. Two months later, our stock closed the day before the last trading day of 2019 with a $35 billion market cap, which is greater at the time then, and you'll appreciate this, greater than the total combined value of Ford, Chrysler, and GM combined. But ultimately, that investment, I mean, I don't know if you- I remember Akima. I remember those heady, heady days. It was amazing. And then what happened at the end of April of 2000? Well, a couple of things first.

I mean, a lot of people don't know this, but Apple made a ton of money on the investment. And it was a huge win for them because it did come at a time where the company was rumored to be going bankrupt. They had the Windows lawsuit with Microsoft. And they finally had gone on for years. Microsoft had copied the Windows. Yeah, but then they ended that lawsuit and Microsoft invested in Apple. That was the thing. That was the crazy thing.

Right, $240 million, I think, if I remember that correct. But it's an untold story that their investment in our company was extremely helpful for them to go on and continue to grow. And yeah, that was kind of a cool thing to know and be a part of. Didn't know if you knew the story or not, but at least I want to share with you. I did not know that story because I didn't get there till 2001. So that was past the thing. But I could imagine because I remember we did have some other share positions in other companies that were being sold to raise cash for that. Like Apple was also an early investor in ARM processors in the UK as well. So yeah, Apple did make some good, luckily made some good moves even if they didn't have good computers in the mid-90s and later 90s.

And like you said, we lost 99.7% of our market value. So we went under $100 million. Only 99.7, huh? It was rumored that we were going to go under. But we had a good team, great team, and I had left after that. So you were initially hired at Apple on a six-week contract to research and design the iPod. And two weeks after that, Apple hired you full-time to create and lead the implementation team where you created the concept and initial design of the iPod and worked on the first generations of Apple's 18 generations of the

Apple music player. So here we go here for one of my props here. This was, I think, a fourth or fifth generation iPod. Yeah, fourth or fifth. And it's super cool. It has my name. I'm engraved on the back. Oh, you got the engraving, huh?

Got the engraving. Free engraving at the time. Thanks for being a customer. I probably bought total with my kids 10 or 15, 20 of these. And you happily, and everyone go, oh, they got another iPod. And everyone would go, oh, not another one. And then they'd go, I got to get it, though. And they would be happily with a smile turning over their money to get the

next one. They're still doing it. They're still doing it with the iPhone, the AirPods. I mean, it's been Apple's secret. One of the secrets to, uh,

success. Did, did you know that you were changing the world forever with this device, the iPod? I mean, a lot of the generation, but think about it. with this device, the iPod. I mean, a lot of the generation people watching this podcast. But think about it.

I'm going to join a company that the world is going to say it's going down, right? The company is near bankrupt. Fidel, you're crazy again. Why are you going to go work at Apple? It's just about dead now. So I did it because Steve convinced me because he was really passionate about it. And I told, you know, we had this back and back and forth and I said I know we can build this I built them before because I had I had track record of building devices like it but I said I don't know if you're going to

market it because the other products I had didn't do well because they weren't marketed well they were good products critically but they were not marketed and sold well and he said i'm gonna do that and we had a conversation so i signed on because of that but the other one reason is that i didn't i didn't know it was going to be successful because i had 10 years of failure in silicon valley so i had been tempered that like let's be hopeful that there's a thing but not not know there was. Because when I was at General Magic, we were told by everybody that we were going to be successful no matter what. And so I was like, you know, I had been through that. I heard that story too many times. So at Apple, I was hopeful we would.

I didn't know that we would. And to actually see at that time that it was going to change everything. It wasn't until really the third or fourth generation when the iTunes Music Store was there, the Windows compatibility was there, and it entered the mainstream. Sports and, you know, sports people, celebrities, actors,

they were all having them and showing them off. And that's when I was like, oh my God, this is well beyond that and became a cultural revolution in a way. And that's where it all happened because after we worked for like three or four years to tweak everything to get it right for the masses, then it just took off. And you could never imagine that that was the case starting in 2001. So you just mentioned 18 versions of the iPod while you were there. There are probably more.

We talked about the iPhone. I mean, there are so many upgrades to it. I'm not even sure what the number is. Maybe there's 100 different ones since you launched 15 years ago. But I want to talk about constant improvement about what we're doing and it's always important to keep improving never rest on your laurels can you tell us about steve jobs dropping a prototype of the ipod into the water and seeing bubbles coming out of it that is that's a total rumor that never happened it never happened okay it never happened that didn't happen so that is a story that got attributed to the ipod and steve which was really it was a sony story about walkman that happened

and japan on the walkman and they put they you know they dunked it in water the chairman at that time um i think i can't remember exactly who it was i think it was sony actually he dropped it in water and then he pulled it out and said look look at all the water coming out of it. It is clearly, there's still room in there to come down. So that was a Walkman story that got recast as an iPod story, but that never happened. How important is it to constantly improve on what we're doing and not rest on your laurels?

There's so many companies that have gone under, but a lot of incredibly successful companies just invest in research and development and never rest on their laurels. How important is it? If you are an innovator, like there's companies that are maintainers and they like own a category and they're the number one in the category and they just did it you know they they run at their own schedule and their culture becomes lack of innovation like it just becomes oh yeah of course we're going to make another car and of course it's going to be success because we're us right they think it's just success is guaranteed because they climbed up that that mountain years and years ago but the culture has completely changed and they don't know how to

innovate anymore. If you're an innovator and your company is existing because you initially innovated, you need to continue to innovate. You can't just stop innovating. And that's innovation at all levels, operations, finance, all the different, the sales, marketing, all that stuff. But it also means you can't stop your foot on the gas for the innovation of the product or the service itself you have to continue even if you're the number one in the share you need to keep leapfrogging yourself one so the customer still believes in your brand that it's an innovative cutting-edge brand so that they buy it by the products or services but then also that you keep the best teams, you keep the best people

who want to work on innovation. Because what happens as soon as you take your foot off the gas of innovation, those people will leave because what drives them is the passion to innovate, to disrupt and to do new things, not just to maintain older things and just kind of go through the motions. So if you are an innovator, and most companies who are on top of the game or challengers are innovators, they need to keep that innovation culture throughout and always be scared that there's someone in the back, behind them going to eat their lunch, right?

So you want to always leapfrog yourself. And that's why with 18 Generations of the iPod, we kept leapfrogging ourselves because I was really worried Sony was coming for our lunch, right? So you want to always leapfrog yourself. And that's why with 18 generations of the iPod, we kept leapfrogging ourselves because I was really worried Sony was coming for our lunch, right? Or another competitor was going to come for lunch. So we kept going so fast and out-innovating ourselves that the competition was so dejected they could never even catch up, right? Because they would plan something. And I know this for a story for sure because I heard this because i used to work at phillips before apple and phillips was a digital they made cd players just like walkmans right and they were very successful digital at at cds cd players and stuff like that so they had their best audio teams working on an ipod killer and they were

like oh we have the feature set to make it and then what we would do is we would come out with ours like three months later and it would have maybe those features or more. And they'd have to go back to the drawing board and go, oh, that's not going to win. And that's not going to win. So ultimately, we also killed the team spirits at all these competitors because they could never get ahead of us because we always kept staying ahead of ourselves. And so that was truly, if you're going to be an innovator, that's the right way because you keep your customer, you keep your products, and you keep your teams at the cutting edge of innovation. And anything less than that, you're going to lose your customers, you're going to lose your team,

and you're going to lose your product way. I think it's important to note, and I want to give this lesson to our viewers and listeners, you can be an innovator, and most people are not in the tech world. I had Trina Spear on my show. She and her partner, Heather Hasson, reinvented the medical scrubs market, which hadn't seen a change in 60 or 70 years. It was dominated by a player. They made them cool. They made them fun. And most businesses are not tech companies. On a related note, I was a guest on the Spencer Lodge show recently.

It's the best podcast in Dubai. And we were asking, what is an entrepreneur? And I went back and said a couple things. I think it's someone who takes a risk to solve a pain point and gives up something of value. And I also made the case that a plumber at any age who leaves a plumbing agency and goes off on his own, his or her own, to start his own or her own plumbing company is an entrepreneur. That person, every company starts with one person leaving to create another company. And that one person could grow into a 500 person company. What's an entrepreneur in your view? How do you define an entrepreneur?

To me, an entrepreneur is not just someone who goes out and starts their own business. I think that is somebody who's starting a business and they're a leader or whatever. An entrepreneur is someone who goes into a market or creates a market and does it in a disruptive way. Like you said, the scrubs market. We went in as Nest and we went and disrupted the thermostat market. That was there for 40 50 years and there was no real innovation i've seen people like let's take your plumber example they just do a better job at customer support and service and scheduling and being there on time

and the plumbing work they do is is good quality just like anyone else's but they had a better job and they innovated on the customer support angle. So to me, an entrepreneur is not just somebody doing the job or building a business. It's someone who's doing it differently to show the differentiation and customers appreciate that. To me, that's someone who's thinking beyond just doing the work independently, but somebody who's trying to change the game. And that's what I love. That's what I think about an entrepreneur. You learned a lot of things from Steve Jobs, which we're going to touch on in a few minutes. And one of them is that success isn't just being first with the idea or having a great

product. It's also about being able to effectively communicate the value of the solution you are delivering to your buyers and about every single touch point where the consumer interacts with your brand. That means buying the product, using it, servicing it, and unboxing the product. Apple's product, you need a bazooka to get through some of it. All consumer touch points where you need to look at it as much detail as you do the product user interactions. Can you tell us about the marketing line of 1,000 songs in your pocket and in search of excellence, how important is marketing to the success of launching a new product?

And then on a related note, you are an entrepreneur, an investor, a venture capitalist. I have a short attention span. I've looked at I don't know how many business plans in the last 22, 23 years, 5,000. And I always want the one-liner. What's your advice to the founders who can't explain their business and what they're doing as a one-liner? And how important is it to getting meetings and explaining what you're doing when you're looking for funding? So you need to have a story that's going to resonate with people almost in the first 30 seconds.

And if you don't, you're going to lose them. So because you're trying to say to them, I want you to listen to my story and I'm going to have a story that affects you. And it's going to give you a superpower, a painkiller that you never know. That's at least how I think of it. And so I always have to start from the pain. And it's a pain for a specific audience. So what is the pain? And what is the painkiller for that?

And so if you tell them and communicate to them a pain that they have, that is either they understand each day that they have it or that it's been habituated away and you reawaken that pain then you already have something like oh i'm listening and then you say and here's how i'm going to solve it for you here's what the painkiller is that's the greatest hook to me is being able to articulate that you can say all these great things i'm working with so and so and i have these investors i don't fucking care about any of that stuff i care about what's the pain what's the painkiller.

And then we can get into all those other details. Stop telling me how great you are. Stop, you know, all these great people we have. Just tell me what it is, who it is you're solving for, what's the pain, and why does that pain need to be solved, and how you're going to solve that pay. And so if you can do that, that is the perfect thing. And that's the customer touchpoint, not just for an investor, but it's also a customer touchpoint when people discover your brand or discover your product for the first time, or that press release that goes out to launch things. You need to have that crisp as a story. And if you can't resonate, then it means you're not working on your story enough, a non-fictional one, of course, that can resonate because you don't have the customer right or the customer psyche right. You don't understand the pain point well enough or you don't have a painkiller that's it's more of a vitamin than a painkiller. It's like, yeah, that's nice, but I don't know if it really helps me. So you've got to be able to have all of those things, and it's not just when they bought it or just before they bought it,

but well beyond when they see the first marketing, whether that's in print or online or somebody just communicating it to them verbally. Let's go back to Apple. Five years after you joined, you were running the entire iPod division. Shortly after that, you were the co-inventor of something that changed the world forever. You co-created the iPhone, where you worked on the first few generations and oversaw all iPhone hardware, firmware, and accessory development from March 2006 to November 2008.

Can you walk us through that, the imp or that it had the remote possibility of selling 2.2 billion units and earning $1.5 trillion in lifetime profit for Apple? And when you're alone and you're looking out your window and reflecting in a moment of zen, do you ever say to yourself, holy fuck, I can't believe I did that. Yeah. So first of all, it started well before that. It was like 2004 when the iPod was really taking root where the iPhone or the predecessors of it were being worked on as prototypes and we

were trying stuff. So it was a long gestation process, unlike the iPod, which was like less than 10 months, whereas iPhone was two and a half years to then, unlike the iPod, which was like less than 10 months, whereas iPhone was two and a half years to then finally get the product you saw. So it was a lot of morphing to get to the first product and then more years after that. And so there was a lot riding on the line. But at the end of the day, it was like the iPod. The first couple of generations, we were just figuring out what the iPhone was and what people liked about it. We knew that there was a lot there.

And we got a few things, you know, a lot of things right. But we didn't have an app store, right? The business model was wrong about how you bought it. It wasn't available everywhere. There was all of these things that needed to get tweaked. And then it took off. It took off like crazy, you you know with apps and everything starting really in 2010 9 10 is when it really took off because he had data networks that could work well and

everything was there but we were just at the right time not too early and not too just slightly early because the data networks weren't there really and probably because it was um 2.5 g so um but do i but it was trying to solve the pain the iphone was was trying to solve the pain. The iPhone was really trying to solve the pain. And this was classic Steve's iPhone introduction. Was you carry a communications device, a mobile phone with you wherever you go. You carry a mobile entertainment device. That was an iPod with you.

And you carried a productivity device that did, you know, spreadsheets and email and, you know, web browsing and everything. And that was called a laptop. So what if you took those three things and combined it in one device and you could use it anywhere, right? And so we were thinking about those kinds of applications that we knew then. And then fast forward when all the networks were prevalent and you had the app store and all those things. Then in 2008, nine, 10, that's when social mobile took off and everything else.

But at the time we weren't thinking that we were thinking we were combining those devices and making it, making those applications on the go, wherever internet access is, whatever to make it easier and kill the pain of carrying three devices around with you and have long battery life and not worrying about wifi, you know, having wifi and cellular connectivity and all those other things in it so that you could

you know um truly be anywhere and connect at any time to get the data or make that communications that you wanted but you ever say to yourself i never thought it was going to be like this you know you knew you knew that cell phones were going to take off. So this was the next generation cell phone or smartphone. But to really see that it became an everything device and it's everything for the world, like, you know, the way it is now. And huge businesses were built off of it. At that time, you couldn't see that. Do you ever say to yourself, and again, just going back to part of my question, looking out the window and reflecting on the change you've made for billions of people. I mean, you're well known.

Yeah, I go, what the fuck? Oh, my God, this is amazing. But then at the same time, I also think about the downsides of it, right? So I think about, because you and I grew up, we knew what it was like to not have a phone. There was only one phone in the house, it was a landline and everybody shared it. Now everybody's got their own phone at any time, day or night, to connect to anything. We used to have only four channels of TV. Now you have unlimited channels of TV and you can watch anything you want at any time.

So society has dramatically changed since the time when we grew up and we're at University of Michigan even. And so you have to think of like this is like discovering the atom right and splitting the atom i can do something incredible with it but i can also do something disastrous with it and you have to ride that fine line because this technology is neutral it's what we choose to do with it as a society so a lot of times you're like oh my god this has brought light to the world right you've got information and everybody has access. And I've been to all kinds of different countries all around the world, and you can't believe how good the mobile networks are and how cheap they are.

And everybody has a smartphone. Even kids in low GDP countries are like, no, they're not going to have a smartphone. Of course they have a smartphone. So that's amazing that we gave people that access to information but we also could you could do the wrong things and weaponize things and and and and create ads and and deep fakes and push around and uh you know um fake content to program people to do things so that's the other that's the flip side of these incredibly powerful technologies that can really help people, but they can also hurt if they're used wrong. I'm still wondering about the call in the ski lift from John Rubenstein because back then the phones were bricks.

I mean, my Nokia phone was maybe six, seven inches long. It was maybe two inches wide. That thing was heavy. Yeah, the best you had at that time, right around that time, was the Razr. The Razr was the cool thing and that was in 2001-2-3 something like that but yeah anyway so it like you know people just cared about literally just calling people and they had a rudimentary you know rudimentary uh contacts book you know directory in it and then you could play snake on it and you know maybe it in it, and then you could play Snake on it. And,

you know, maybe it did texting, maybe it did SMS. Thanks for listening to part one of my amazing conversation with Tony Fadell, the incredible inventor of the iPhone and Nest thermostat. Please be sure to tune in next week to part two of my awesome conversation with Tony.