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The $3.2 Billion Man: Can Google's Newest Star Outsmart Apple?

Google is betting big on Nest CEO Tony Fadell, who helped invent the iPod and iPhone. Here, a look inside his design revolution.

Tony Fadell
Nest CEO

[Photo: Pari Dukovic]

Lounging poolside in 93-degree July heat as Daft Punk's "Get Lucky" thrums through the patio speakers, Tony Fadell takes a sip of nonalcoholic beer and sinks far enough back into his chair that his belly peeks out from under his Lacoste polo. We're in the backyard of his Woodside, California, home, not far from the tennis court, barn, and private forested driveway with a horse-crossing sign. The house itself is rather modest, a modern slice of heaven that Fadell spent five years searching for and then two years remodeling, filling its tall, white rooms with state-of-the-art technology and Art Basel–style furniture. He calls its design "classic California." A 1969 Ford Bronco, which Fadell recently restored with original parts, sits out front. He and his family moved here two and a half years ago, and the place feels lived in—a few kids' toys are splayed across the kitchen counter—but idyllic.

Yet Fadell is still sniping at his home's imperfections. "It's absolutely, utterly hideous!" Fadell growls, zeroing his attention on an ugly beige gadget glued to the outside wall that controls the pool's temperature, a small blotch that's apparently spoiling this otherwise real-life David Hockney painting. "The stupid thing was there before we got here, and it doesn't even try to blend in. It's staring at me, and somehow, I'm going to fix it," Fadell says as he continues to grimace at the plastic rectangle. His eyes then dart to his next object of scorn. "And just look at those horrible [security] cameras up there!"

Hang around Fadell and you'll hear these types of complaints all the time. They're what first drove the former Apple senior VP known for his work on the original iPod and iPhone to start Nest Labs in 2010, a company that focuses on redesigning what he and cofounder Matt Rogers label "unloved" objects of the home. Their first product, a smart thermostat that syncs with your phone and learns your usage patterns to conserve energy, won accolades for its sleek design; they followed it up last year with the Nest Protect, a smoke and carbon monoxide detector that's evolving to become just as intuitive. The products flew off the shelves at Amazon and Apple stores, and in January, Google stunned the technology industry when it agreed to acquire Nest for $3.2 billion.

Nest Protect and ThermostatPhoto: courtesy of Nest

The price tag partly explains why Fadell can afford such a lush pad in the same neighborhood where his mentor Steve Jobs once lived. But the windfall has only increased Fadell's restlessness. Even on this Friday afternoon, after an exhausting week of work, Fadell is still pointing out other areas of the home Nest could go after, rather than enjoying the fresh bruschetta his in-house chef just whipped up for us or joining his wife and kids on vacation. Fadell, who usually begins his day with a 5 a.m. run before taking his boys to school, never stops.

What excites him most about the Google deal is the company's vast resources, which will enable Nest to bring its design savvy to myriad more antiquated household products in the living room, kitchen, and bedroom—eventually linking them to create the home of the future.

The connected home has long been the fantasy of the tech world. But while Apple, Google, and Microsoft dominate PCs, mobile devices, and car consoles, and GE and Honeywell lord over household appliances, no company has successfully merged the two spaces to take over the home—despite trying for decades. "I remember going to Tomorrowland at Disneyland [as a kid], where you have this button and the food would come out and then everything would be magically cleaned," Fadell recalls. "They've been selling this same vision since the 1950s!" Nest is the one executing on that promise, by developing a platform for the home in which such disparate smart appliances as refrigerators, TVs, and lightbulbs can interact with intelligent thermostats, smoke alarms, and security cameras. With 115 million homes in the U.S., and hundreds of millions more worldwide, Nest has the potential to give Google its deepest integration yet into the lives of consumers.

But first Fadell must figure out how to splice his startup's Apple breeding with Google's DNA. In addition to Rogers, who served as Fadell's right-hand man at 1 Infinite Loop, Nest brought with it more than 100 former Apple employees. "We have a very Apple team, which is about building connected, deeply embedded, and well-designed products, while Google is about big data, machine learning, and operational efficiency," Rogers says. "Putting those together is unique—there's no company like it out there."


Tony Fadell's thermostat has been lauded for its elegant form and was added to the collection at the Cooper-Hewitt National Design Museum.Photo: Pari Dukovic

Nest became successful for what it didn't do as much as for what it did. Its services are characterized not only by minimalist user experience—a hallmark of Apple products—but also by eschewing gimmicks in favor of lasting, incremental consumer benefits, such as energy savings and safety. If Protect senses a CO leak, it will automatically communicate with the Nest thermostat and instruct it to turn off a gas furnace, a refreshingly useful (and invisible) interaction in an age when "smart home" products often equate to flashy gizmos. "Is a smartphone pet-food dispenser really what you need?" Fadell says. "We don't want to become Sharper Image or Brookstone."

When Fadell and Rogers started the company in a sloped Palo Alto garage—early employees grew annoyed that their chairs kept rolling away from their desks—their first thermostat prototype was the size of a bread box. The company studied thermostat interfaces going back to the 1950s, realizing that even the advances of touch screens in the late 1990s and early 2000s did little to improve the ancient but resilient physical-dial user interface. Whereas incumbents incorporated endless digital features, such as calendars and photos, Fadell and Rogers understood that additional icons confused consumers. Household devices are not upgraded every two years like a phone; more likely, they're replaced every 10 or 20 years. The design had to be timeless. "We thought about all kinds of crazy animations, background images, even adding a weather [app]," Rogers recalls. "But it's a thermostat: It's not supposed to cook you breakfast."

Fadell pushed his team, much as he did at Apple. His reputation is for being intense, willing to go to war with Steve Jobs and his lieutenants over the development of the first-generation iPod and iPhone, and hard on his own troops. "The kiss of death at any of these product meetings—what would send Tony over the fucking moon—was when he went around the table asking how things are going, and you said, 'Great!' " recalls one former Apple team member. "Tony would just lose his shit, because things are never going great." (When one employee failed to live up to his standards, Fadell ordered a manager to fire the employee, saying, "You gotta Glock Glock that dude," as he mimed shooting off a handgun. He was joking, but unapologetic.)

As stressful as it is to work for Fadell, though, all those former Apple employees joined him at Nest because he rewards employees when deserved and his drive for unattainable perfection brings out the best in people. "There have been times when Tony's banging his fist on the table and yelling at people and demanding excellence," says Rogers. "But at the same time, he is incredibly caring and passionate about their development. There have been moments that I've been beyond stressed, to the point of tears, and he'll sit down and say, 'Let's talk through everything that's going on.' These are the rare moments of clarity with Tony that make all the hard times worth it."

The team's collective dissatisfaction got the ther­mostat down to the size of a hockey puck by March 2011, when Fadell ran into Google cofounder Sergey Brin at the TED conference and showed him what he'd been working on. "He was like, 'Wow! Wow! Wow! Can we buy you?' " Fadell recalls. "I said, 'No, but you can invest.' " Through Google Ventures, the search giant did just that, leading Nest's second round of funding which closed that August.

By the time the Nest thermostat hit the market in October 2011, it featured clean typography and intuitive color cues to help teach users about energy consumption, as well as a motion sensor to automatically lower cooling and heating flow when no one is home. The trick, as Fadell and Rogers often remind employees, is designing products that "feel like home" rather than making them overly techy or pretentious. (Another constant refrain: "We don't want to be Apple"; Nesters feel that Apple's design is "too sterile" and not "warm" enough for home appliances.) Fadell recalls mounting early thermostat models in his hallway to evaluate them against different paint colors, shadows, and acoustics, while peppering his family with questions. "We design products that can absorb the decor like a chameleon," Rogers says. "I don't live in Philippe Starck's house. It's not all black and aluminum and steel."

The second-generation thermostat, released a year after the first, refined some of the software powering the device and proved to be a bigger hit. In January 2013, Fadell raised another $80 million from Google Ventures and Venrock, one of Apple Computer's early investors, so he could ramp up shipments, develop relationships with energy providers (which offer steep consumer rebates on the $250 thermostat because Nest reduces impact on their grids), and fend off increasing product and patent pressure from competitors like Honeywell.

Last October, Nest introduced its second product, a $129 smoke alarm, to drooling reviews, and in November, acquisition talks became more serious when Google CEO Larry Page got involved. Hesitant, Fadell and Rogers created a document full of questions and concerns, many about whether Nest would get swallowed up by the search behemoth. Days before Thanksgiving, they took the document to Page in his fourth-floor conference room at the Googleplex. "Of course you're going to have your independence," Page reassured them. "I'm tapped out. Google can only do so many things."

Eventually, Fadell and Rogers decided to go for it, and on January 13, 2014, a Google Calendar invite mysteriously appeared in Nesters' inboxes reserving a three-hour time window. Three hundred employees shuffled over to the nearby CinéArts movie theater—Nest's notoriously dumpy offices were not large enough for an auditorium—and as Her played next door, Fadell and Rogers explained their decision to a shocked audience before welcoming Page for Q&A. When an employee asked what Page thought of Nest's product road map, Page told them not to change anything. "Keep doing what you're doing, and do it as fast as you possibly can," he said.

It's no surprise that Page doesn't want Nest to change. The startup's sales were already strong enough that before the acquisition Fadell told me he could have filed to go public. And Google gained something far greater than a hot product line. "Google bought the Apple genome, and for relatively cheap," says Randy Komisar, a partner at Kleiner Perkins and a Nest investor who wasn't thrilled with the sale. "I know the economics—in a few years, Nest could've gone for $10 billion. [This acquisition] is going to change the world. Apple made a big mistake in letting Nest go to Google."


Photo: Amanda Ringstad

Though Nest has operated independently since the sale closed in February, signs of the merger are evident at Nest's headquarters. Apple artifacts from its employees' time in Cupertino may dot its offices—Fadell has a large poster by his desk of the sprinting, sledgehammer-wielding gymnast from the famous 1984 Apple ad—but Google apparel and security badges abound, and after Nest began offering free food and other Google-style amenities, employees joked that it had been "Googlified." (Fadell, a vegetarian who doesn't consume sugar or alcohol, eventually nixed unhealthy offerings and even turned down the opportunity to provide on-site massage services, thinking it would make his team too comfortable.) When a Nest employee rides by on a Google bicycle during my visit, another shouts out, "You're off brand!"

On a substantive level, too, the seeds of this Google-Apple synthesis are beginning to blossom. In June, Nest announced a $555 million acquisition of Dropcam, a polished video-monitoring system. Fadell says the deal never would've happened without Google's support (read: dollars). The purchase signaled that Nest would continue to build out its own hardware ecosystem as it expanded into more parts of the connected home. Days later, the company unveiled "Works with Nest," a developer program that lets third-party companies such as Jawbone tap into Nest's products to deliver more integrated experiences. The combined approaches—creating end-to-end hardware and software versus relying on outside partners—represent a melding of the Google-Apple design dichotomy, which Fadell says he and Page have had "very, very pointed conversations" about. "It's not a zero-sum game; there's value to both systems," Fadell says. "In this connected age, no company can stay bound to 'I'm just going to make this one piece of the puzzle.' You're seeing Samsung, Google, Apple, Amazon, and Microsoft all trying to do it. If you're just trying to package Android in a better way, you're not thinking about the entire experience. That's where the reinvention happens."

For Nest, the company's product family acts as a base layer of hardware to entice outside services to join its ecosystem. Mercedes-Benz recently launched a feature that lets your car speak to the Nest thermostat, so as you drive closer to home, it can start warming or cooling rooms. Customers can also now set up smart LED lightbulbs so they'll flash red if Protect detects smoke or carbon monoxide. "A few years ago, we were looking for the killer app for the connected home, but consumers have told us they're not interested in streaming Pandora to their refrigerator," says Brett Dibkey, a VP at Whirlpool, another Nest partner. "We won't see Jetsons-like benefits for years. It'll be a more subtle progression toward a truly conscious home." To that end, Nest is continuing to improve on its thermostat and smoke alarm, and the company also hints that an overhaul is likely for Dropcam, so it will jibe more with Nest's look and feel. Sources indicate there are a "whole bunch of services being layered out in the next year." Dropcam already offers cloud-based video recording on a subscription basis ($299 per year for 30 days of playback); expect more in this direction down the road.

By contrast, smart-home consortiums and protocols from such companies as Qualcomm and Intel feel lackluster because of their narrow approach. It's one reason why Apple, while reportedly developing its own hardware for the living room, also recently introduced HomeKit, a software framework to assist third-party developers in designing products for the home. "Apple making software that anyone can connect to is a very Google play, while Google developing beautiful hardware with Nest is a very Apple play," says Adam Sager, CEO of Canary, a Dropcam competitor that's trying to figure out its own place in this complicated ecosystem. "It's interesting to see these massive companies adopt each other's strategies to attack this space."

Life at Google, though, hasn't been without its headaches. In April, Nest pulled its Protect alarms from stores upon discovering a glitch in the product's signature feature of being able to silence a false alarm by waving it off. A month later, it had to put out a different kind of fire when a Google SEC filing indicated that the company is considering putting ads in thermostats. The tech press—which had been clutching its pearls over the prospect of Google accessing Nest's data—went haywire, blasting Nest for forgetting its Apple roots. Despite the noise, Nest fixed Protect in only a few weeks. As for the SEC filing, Rogers calls it "complete horse shit," adding that it has nothing to do with Nest's road map.


"That looks horrid!"

Tony Fadell is peeved. We're in a stuffy Nest conference room for an industrial-design review that started late, and the team leader up front can't get a word in before Fadell interrupts him with another fastball. "We're not doing that!" Fadell yells, in between bites of roasted seaweed. "You can't change that angle, dude!" Fadell has a tendency to yell, but not in anger; he's just louder than everyone else. When he's not shooting an unblinking stare at the dozen engineers and designers sitting around the table taking notes—his mouth agape, eyebrows arched, a smile of disbelief across his face—he's sliding around in his chair or jumping to the screen to jab his pinkie at another design flaw. "Whoa! Let's be clear: Is this right or not?" he replies to one employee's unsatisfying explanation. "What?! Why?! I just don't understand!"

Like a basketball coach frustrated that his star players aren't performing during crunch time, Fadell alternates between rubbing his palms against his cheeks, eyes, and shaved scalp. He's theatrical—perhaps in part due to my presence—and uses full-shouldered head turns and dramatic voices to great effect. After 50 minutes, he halts the meeting, orders a separate performance review, and asks several key leaders to stay behind to talk in private, a bad sign. "You guys better work this out because this doesn't look good," he sighs.

When Fadell and I catch up the next day, he acknowledges that it "wasn't the best meeting" and asks to talk off the record about why. But he says reviews normally go far better; indeed, I sat in a handful more and that proved true. Fadell's feistiness and relentlessness have suffused his company with a creative tension that can be felt in every Nest product, feature, and even marketing material. In a review with VP of marketing Doug Sweeny, I thought the two were going to come to blows. In fact, a meme is floating around the office comparing Fadell's style to that of the Mountain in Game of Thrones, the towering brawler known for beating his opponents to a pulp. But surviving as a startup consumer electronic brand requires just that sort of attitude.

Given the lust Nest elicits from users, why doesn't Google let Fadell design its products too? There's no doubt Google could use the help. Google's $12.5 billion acquisition of Motorola Mobility was a disaster. The company killed its Nexus Q media player before it launched. Its more promising products, such as Chrome­cast and its Nexus tablets, share no common design language and are often designed by outside firms. Even its flagship offering, Google Glass, is mocked due to its geeky form factor. "I can't do it, I can't do it, I can't do it!" a grinning Rogers told me at South by Southwest, referring to wearing the prelaunch product in public.

Some believe a major organizational shift is already under way. Earlier this summer, the tech news site The Information reported that Google had "dismantled almost all of the Android team's hardware initiatives in order to let Mr. Fadell effectively 'own' Google's consumer electronics operations."

Fadell effusively denies he's taking over Google's hardware efforts, reminding me that Nest operates independently from Google. But when I press him about whether he's just splitting hairs, pointing out that Page could funnel its hardware efforts through the Nest brand, Fadell says, "I... I... there's nothing going on! We're doing Nest things, not Google things! It wasn't like, 'I'm the CEO! Mr. Imperialist! And I'm taking over all these Android projects!' " he says, adopting a Bane-like villain's voice. "That's not what it was about!"

Randy Komisar, the Nest investor and a close friend of Fadell's, declines to go into specifics but does acknowledge that "what Google offered in terms of influence and resources was unique." He compares the dynamic to Steve Jobs visiting Xerox Parc in the late 1970s, which boasted a "disparate hodgepodge of research projects" that Jobs pulled together into beautiful consumer electronics. "Tony's in the same boat," Komisar says. "He's in a situation where he can handpick interesting stuff inside the organization and pull them into a consumer-driven product vision that Google hasn't had in the past."

According to Fadell and Rogers, Google and Nest have shared insights, but informally. They meet for two-on-ones with Page every other week. Page's reputation for what he calls "moonshot thinking" preceded him, but the Nest team didn't know it wasn't merely figurative. "He asked us, 'Can you put Nest on the moon? Like seriously, why are there no thermostats on the moon?' " Rogers recalls, laughing.

The three men kick around ideas and keep each other in check. "I'll take Larry's ideas about technology and go, 'How would that go to market? Is that really right for the market as is?' " Fadell relates. The Nest cofounders recently dropped by Google X—the skunkworks lab that develops cars and wearable devices—and were excited about what the technology could mean for their startup's future. "There may be some Google X products that could become a part of Nest when they graduate," Rogers says.

Fadell praises many of Google's innovations and hopes to build bridges there rather than burn them like he did at Apple. However much buzz has been generated over the idea that he could take over Google's hardware, Fadell argues he simply wouldn't have the time. He's too busy with Nest—at least for now. "I'm not about to go muck with things over there—that's not my role," he says. "But is it going to be like that in 10 years? I have no idea."


If you squeeze Fadell to explain why, honestly, he came to Google, he leans back in his chair, taking a moment to catch his breath and reflect. Finally he'll admit that it was because he was searching for his next mentor. The generally boisterous CEO, who has a boyish smile but the physique of a hit man, starts to sound genuinely sad. "I'm at this point in my life where . . . how do I say this?" He pauses and looks up. "I'm at this point where I've had some influential people in my life, and many of them have died." He's referring to Steve Jobs, of course, but also Phil Goldman, his mentor at General Magic, the first startup Fadell worked for, and his grandfather, who first taught him not to be afraid of electricity. "They're the ones who made a bet on me and helped me get to the point where I am today by training me, by sticking my nose in it when I was wrong, and by patting me on the back when I was right."

And Larry Page, arguably, is one of the few innovators left who Fadell could possibly justify working under. "I can learn a ton from Larry. I'm like a kid in a candy store again," he explains, regaining steam. "I might be the only person who is lucky enough to work with both Steve and Larry, and I cherish that."

"If you're wondering what pushed me over the edge [to join Google], that was it. I was selfish about it," he continues. "I gotta keep growing. Because I'm old, but I'm not that old." Fadell is 45. "I've still got a lot of years ahead of me, and I'm not just going to sit here."

Fadell stops. He notices the clock. "It's time to go," he yells, springing up. "I'm already late!" He sprints off and never looks back.

A version of this article appeared in the October 2014 issue of Fast Company magazine.

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