Tony Fadell: “You can’t make an omelet without breaking eggs, “defends his record, methods

Tony Fadell brought the iPod to life at Apple Inc., ushered in the iPhone, started Nest Labs in 2010 to modernize home gadgets and sold to Google for $3.2 billion in 2014. Then he spent the last two years shaping Google’s vision of the connected future and pushing its wares deeper into consumers’ lives.

After such a meteoric rise, Fadell’s exit from the internet giant was unceremonious. Google parent Alphabet Inc. released a short statement Friday afternoon saying he will step down immediately as head of its Nest division. Both Alphabet and Fadell tried to play things amicably, but the optics aren’t great for either.

Over the past couple of months, Nest employees grumbled openly about what they see as severe problems inside the company. One engineer hopped on Reddit with a screed full of personal attacks directed toward Fadell and claims that Nest had missed sales targets, botched product upgrades and delayed future launches. Greg Duffy, founder of Dropcam, chimed in, saying he made a mistake selling the camera startup to Nest in 2014. Duffy blamed Nest’s divisive culture for an exodus of employees and claimed Dropcam’s products were much hotter than Nest’s gear.

“There is a lot that I could say about my extreme differences on management style with the current leadership at Nest, who seem to be fetishizing only the most superfluous and negative traits of their mentors,” Duffy wrote on Medium. “For the sake of the customers and for the talented employees that remain there, I hope they find a way through these struggles.”

To all the world, it looks then like Fadell left — or was pushed out — on the heels of this discord. It’s a blow for someone with a spectacular track record of producing consumer hits over the last 15 years.

As Fadell tells it, however, he began thinking about leaving Nest late last year before the public turmoil. He’s been quietly investing in about 100 companies and has felt the need to coach these startups and perhaps chase another new venture. Fadell rejects claims that Nest has hit a rough patch, saying the company’s performance remains strong. During a lengthy interview, he was cool-headed describing his tumultuous time at Google, while discussing other topics, including where Silicon Valley is headed and what excites him most. What follows is edited for clarity and brevity.

Bloomberg: The last couple of months have been unusual, with people airing very public complaints about Nest. What has been the response inside Nest?

Fadell: Our team was upset. It’s been a shock, like, “What? This doesn’t reflect our culture. This isn’t about us.” And then, you know what happens? It galvanized our team. It made them stronger.

I get so many incredible notes from the team and from people who used to work at Nest as well as people who used to work with me, going, “Look, this is just the new world. You know, you can argue all you want on the blogs, but that’s not going to get the job done.” What gets the job done is a great, strong business and great, strong customers. All that other stuff is sophomoric chatter.

Bloomberg: Did any of the critiques resonate with you? The knocks on the product delays and high turnover?

Fadell: I was at Apple. I’ve been at various other companies. This is just normal course of business, you know? Different priorities come up, different things change. So, look, everyone has their opinion. I just know that when I look at the numbers and I say we shipped four new products, when we have millions of customers, happy customers, when you look at the star ratings that’s the reality of the situation.

Do I wish I could ship more products? Sure, I wish I could. So no, I’m happy with where we’re at. It’s taken a lot of work and time to get there, but we have multiple teams up, running, highly experienced people. People can have their opinions, and I know the facts.

Bloomberg: A lot of people will look at your departure from Nest as you admitting defeat. It’s a sign that your critics were right.

Fadell: People will have their own opinions. The facts show that we shipped lots of product. We had really strong growth, revenue growth. Our customers love our products.

We have a road map. You know, people don’t see that, but we have a road map that’s really well-established and understood and teams are working on those products. We have lots of products coming and services coming.

People will say, “Oh, oh, oh, they didn’t ship enough product.” Well, guess what? We have shipped product. We shipped a lot of product. We shipped a lot of software. Oh, they’re going to say, “This business isn’t healthy.” Well, guess what? We have great revenues and great growth on the business. So, okay, what potshots do you want to take? “The products aren’t well regarded.” Well, we have more than four stars on all our products.

Bloomberg: Have you had sleepless nights over all of this?

Fadell: Of course. I’m a natural worrywart. Because I want to care. I care the design gets right. I care that our employees are doing great work and enjoying it. So I worry constantly. I worry about our family.

If you don’t have a shred of doubt in you about what you’re doing, you’re not trying hard enough. Right? You always should be checking — going, “Wait a second, I’m right on the edge. I’m really pushing really hard. Am I doing this right? Do I have some self-doubt in it?” You’ve got to have self-doubt, because if you don’t, you’re not pushing hard enough. You’re too complacent. You’re going mainstream.

Bloomberg: The internet says you might be a tyrant. Are you a tyrant?

Fadell: You can’t make an omelet without breaking eggs. That style may not be for everyone. But, you know, there are people that worked with me years ago at General Magic, and they have their kids working for me now. If it was true, it would get around like crazy. The Valley’s a small place. I’ve been here 25 years, right?

To me, it’s truly, what’s your mindset? Are you coming to work? Are you truly respecting the mission we’re on? Yes, things are going to go up and down. But because we have a true respect for the people, because they respect what we’re trying to do, we’ll get through anything together. And that’s what counts, right?

Bloomberg: What do you wish you had done differently at Nest?

Fadell: I don’t know of any regrets that I have. You can take something as a challenge or take it as a learning experience. And so for me, it’s always growth. We all make mistakes. We have to make mistakes when we learn to speak or we learn to walk or crawl. So to do what we do at the level we do it, no one’s done it before. So you’re bound to make mistakes.

Bloomberg: What was your relationship like with (Google co-Founder and Alphabet Chief Executive Officer) Larry Page over the years? What did you learn from him?

Fadell: I respect what he’s built. I respect what Larry and Sergey (Brin) have built. I’ve learned a lot from Larry, and a lot of the people that they’ve hired are just top-notch.

For me, it’s really contrasting this with Steve (Jobs), because I learned a lot from Steve about experience and marketing and product design.

With Larry in particular it was about looking out well beyond the horizon and trying to pull out that horizon you can’t see. They can jump up really high and see it well before anyone else does and try to pull it in. That is unheard of in Cupertino (Apple’s Silicon Valley headquarters) from my experience there.

To me that was an eye-opener. Every time I open up another (Google research) lab or somebody introduced me to something, I’m like, “What? You’re doing that? Oh, my God.” And it just — you know, it’s candy for my brain.

Bloomberg: What’s next for you?

Fadell: Well, I think it’s continuing what I have been doing, which is seeing things just coming out of the lab and turning them into products.

Over the past eight to 10 years I’ve been investing in companies very secretively. It’s all been confidential, and it’s been over 100 companies like that who have technologies, have incredibly just disruptive ideas that can change the world in a positive way, whether it’s in medical or it’s in consumer products or energy. In some cases I’ve been on the board. In some cases I helped them raise more funds or work on the marketing angles for them, the messaging, the product designs. And so I’m just going to continue to do that while I advise Larry and Alphabet.

Bloomberg: What types of companies are you involved with?

Fadell: Let’s talk about Phononic. They have an innovative solid-state cooling and heating solution. It’s almost like a chip. And it replaces compressors in commercial fridges, your residential fridges, also freezers. So you can get rid of those big, ugly compressors that make a lot of noise. Those are the number-one things that wear out that you have to replace. And they have chemicals in them. It’s hard to recycle.

Well, this has a solid-state thing that gives you more capacity, quiet and better temperature regulation and uses a lot less energy, too. So that company’s been going on for about four years now. I’m on the board. And now they have real shipping products, and they’re starting to take off like crazy.

There are others like Flexport, Airware, Mousera, Bump (acquired by Google) and ZEP Solar (bought by SolarCity).

Bloomberg: You see yourself becoming something of a venture capitalist then?

Fadell: No. I do it all confidentially. So I don’t want the companies to rely on my name to raise funding. I want them to rely on their skills and their wits and their great ideas to get their funding. What I’ll do is I’ll help them make connections, I’ll look at their financing pitches, look at their product pitches and help them shape them, help look at their organization.

And so I’ve been doing that all under the covers as a confidential adviser. They keep me sharp. They teach me about new technologies. They give me a way to peer over that horizon.

Bloomberg: How do you feel about the state of Silicon Valley right now?

Fadell: I think we’re getting back to normalcy on the funding. The really hot companies that have great revenues and a great story, they’re getting out-sized valuations, as they should. I think, just like what happened in ’99 and 2000, which was everyone got well ahead of themselves, and we didn’t have Sarb-Ox (Sarbanes-Oxley, stricter public-company rules) back then, so we could float them on the Street fast. Well, they can’t do that anymore, so what they’re doing is they’re using private capital to then create this kind of hype cycle.

We’ve got to return to making sure we don’t get too far ahead of ourselves and have fiscal responsibility along the route, because you never know what the funding environment’s going to be or whether you can go IPO or you have to just tough it out, and you’re going to have to take a down round or a flat round. So normalcy’s coming.

Bloomberg: How do you see yourself these days? What’s your legacy?

Fadell: I try to follow my passions, not follow the money. I’m curious, and I’ve kind of lived by my wits. So I don’t know what you’d call it. I’m part engineer, part tinkerer, part designer, part business person, part investor. I’ve learned each of these skills by doing, and it’s just worked out for me. I can’t tell you the rhyme or reason, but I’ve always trusted my gut and my intuition, and it’s usually ended up in the right area.

I don’t know why I feel this way, but between working closely with Bill Campbell, working closely with Steve Jobs and watching a lot of my mentors pass on, unfortunately, I feel like I bear this responsibility now. There’s a few of us who are keepers of that knowledge.

It’s almost our responsibility to be able to continue that way of thinking, that way of working. Expect excellence, respect excellence, drive hard, change things, don’t accept the status quo, push yourself, push the people on your team harder than they could ever imagine, and they will do more than they could have ever imagined.

That’s kind of that same thing that we have to continue to understand — that this stuff is hard. It’s not easy, and we all have to learn to do it, because it isn’t second nature, because it goes against the way your body wants to be and your mind wants to be.

 

Bloomberg