00:00welcome to the a 16z podcast I'm Saul
00:03Bellow Maria and I'm joined by Preity
00:05Casas ready and Benedict Evans who is
00:07just back from CES and thought this
00:09would be a good week to discuss the
00:11Internet of Things otherwise known as
00:13IOT so Benedict what do you think the
00:16state of the world is in terms of
00:17Internet of Things well it's kind of an
00:21interesting transition point I think
00:23because you saw dozens if not hundreds
00:27of people putting together packages of
00:31devices of various kinds that you can
00:33put in your home it's like you could
00:35probably buy a thousand smart doorknobs
00:37and a thousand window sensors and it's
00:40kind of at the point now where it's not
00:42really a technology question or even
00:44really necessarily a use case question
00:47it's more kind of how do you get this to
00:49market how do you explain to consumers
00:51why it might work which ones will they
00:53buy how much should they talk to each
00:55other should you just buy a burglar
00:57alarm set and the burglar alarm you'll
01:00put a vogue alarm set up and then you
01:01might don't like not do a thermostat and
01:03you might might not do a home audio
01:05system or should they be kind of on some
01:08sort of standard that all talks to each
01:09other and what are the overlaps between
01:11the things that should and shouldn't
01:12talk to each other it's all about kind
01:14of route to market and kind of market
01:16positioning and you know what do you
01:17actually put on a shelf in Home Depot
01:19yep technology's all that yeah if it
01:23feels like you know what you're talking
01:24about interoperability and standards but
01:26it really does feel like there's
01:27hundreds if not thousands of
01:29manufacturers that are building for IOT
01:31but do we really have killer use cases
01:34yet in killer applications that's a
01:35really good question I mean you
01:37mentioned that you think there's a lot
01:38of use cases but what are the
01:40transformational use cases other than
01:42locks and potentially ovens I don't see
01:46turning on a light being that
01:48transformational the way that I tend to
01:50look at this is that you know our
01:52grandparents could have told you how
01:53many electric motors say and you know
01:55there was one in the car and one in the
01:56refrigerator and one in vacuum cleaner
01:58and now this probably a dozen in your
02:00wing mirror and you've got dozens of
02:02different electrical devices in your
02:03home you didn't go out and buy
02:04electrical to electric motors you bought
02:06a blender and you bought a coffee
02:07machine and you bought you know a
02:09microwave oven and you bought
02:10another vacuum cleaner and so on and so
02:12those are the things that buying they
02:15buy a solution to a particular problem
02:17and I think quite a lot of these devices
02:19are just adding a bit more intelligence
02:21or a little bit more sense to it some of
02:23them you know make obvious sense you
02:25know some sort of intelligent thermostat
02:26seems like well that will be the world
02:28is going to be others like connected
02:30doorknobs or connected toilet flushes or
02:33all of these kinds of things they're a
02:34little bit more up in the air they may
02:36work there may not it is ultimately
02:39going to come down to how you
02:41communicate to account consumer whether
02:43you make these things work together and
02:45that is really the kind of the big kind
02:48of fuzzy question because you know you
02:50can kind of see that your TV might want
02:52to speak to your hi-fi you can kind of
02:55see that your electricity meter white
02:57want to speak to your thermostat does
03:00your burglar alarm need to speak to your
03:02thermostat well maybe and if say well
03:04how would that work and how does that
03:06translate into something you can buy in
03:08Home Depot what are the logos how do you
03:10make how do you if you make that happen
03:11is that easier or is that complicated is
03:14that something that happens as a web
03:15service as a business development deal
03:17between your power company and your
03:18alarm company or do you just buy two
03:20boxes in the store and they will just
03:22kind of work together when you like the
03:23smartphone app so that's where all the
03:25kind of seems to me that's that's where
03:27in the part of the stack where the
03:28uncertainties are it's kind of
03:29interesting you know you know people are
03:30actually buying products that they don't
03:32even realize are already connected you
03:34know with IOT connections bluetooth LE
03:36whatever the technology is you know the
03:38z-wave versus the ZigBee radio-wave
03:40technologies and but it seems like how
03:43are all of these going to work together
03:44and I think that I completely agree it's
03:46leaving consumers kind of blinded with
03:48figuring out how to how to work this
03:51together and I think what startups and
03:54companies like Samsung and LG and Google
03:56what they have to think about is
03:57providing whole solutions for consumers
03:59providing the entire smartphone or
04:02whatever a pieces of a smartphone so
04:04that they can just buy it and that's it
04:06yeah I think this is what's interesting
04:08contrasting nest on the one hand with
04:12something like home kit or the various
04:13kind of industry standards consortium
04:15because what nest is doing is they're
04:17giving you the point of nests isn't the
04:19thermostat it's the route to market and
04:20the communication it's like you buy a
04:22thermostat that's a really useful value
04:24or thing then you make a smoke detector
04:26and you make you buy a security camera
04:29and you start building out slowly around
04:32that in ways that are really clear to
04:34communicate and clear for people to
04:36understand and it's clear how they're
04:38gonna plug into everything and it just
04:40kind of works together that whether it
04:41actually does work or not it's another
04:43question but that's one strategy the
04:44other strategy is that a verb box in
04:46Home Depot has one logo on it and they
04:48all just supposedly work together but
04:50when you're actually standing in Home
04:51Depot and you're like okay I've got a
04:53Whirlpool dishwasher and I've got a
04:56burglar alarm and they both got this
04:58internet of things let go on what does
04:59that even mean why is that any kind of
05:02meaningful benefit yeah you mentioned
05:03apple's homekit and it that almost seems
05:05like like a complete head-fake i mean if
05:07you actually go to their website it's
05:08actually just a developer landing page
05:10with a couple of coming soon
05:12notifications and so it feels like Apple
05:14may have just kind of announced it you
05:16know late you know late last year and
05:17kind of gave everyone a little bit of a
05:19freeze and say okay let's wait till see
05:21what Apple's gonna come out with in
05:24health kit or even the Apple watch in
05:26terms of the wearable so it's kind of
05:28interesting like where you know if
05:29everything has to come together and work
05:32together it has to be interoperable you
05:34have to almost imagine that the two
05:37major mobile operating systems in
05:39Android and iOS will have something to
05:41say in this in this matter I think
05:43that's what I mean the the kind of the
05:45elephant in the corner here is that the
05:46smartphone may be the wrong metaphor but
05:49the smartphone is kind of the enabler
05:50for all of these things firstly because
05:51a smartphone supply chain is creating
05:53the components that everything else is
05:54using and secondly because it's it's the
05:56network connection and it's the user
05:58interface for all of these things sort
05:59of of course it's you know you don't
06:00want to have a control screen on every
06:02window log you know makes a lot more
06:04sense if all this smart lives in the
06:05smartphone and so yeah therefore the
06:07smart phone guys think that they should
06:08be controlling it but I kind of keep
06:10coming coming back to this point it's
06:12like you know what about our colleague
06:13mark made this point that Depew is the
06:15Internet of Things or suggests things
06:16connected to the Internet you know again
06:18do you buy a whole bin and some of the
06:21sort of visions of the Internet of home
06:22and the mock-ups that you see with all
06:24these things talking to each other they
06:25remind me of a sort of Westinghouse home
06:27of the future from the world fair in
06:291960 you know where there's a wall of
06:31your house that's got lots of knobs and
06:32dials on it and you pull something and
06:35and I feel like you know maybe you're
06:37you know there's going to be a lot of
06:39different overlaps here like your TV and
06:42you will talk to your smartphone yes
06:44your thermostat might talk to your
06:46electricity meter might talk to your
06:48burglar alarm nobody's home turn the
06:50power off might not your connected car
06:53might talk to your thermostat they're
06:55almost home it's 50 degrees outside
06:56minus 50 outside turn the heating on 20
06:59minutes before you get home that those
07:02kinds of age those are the kind of the
07:05interesting tension points because it's
07:07where you can you can describe a
07:09scenario where absolutely your car
07:10should talk to your thermostat but you
07:12could also describe a scenario where
07:14know the car doesn't talk to my
07:16thermostat I've just got the nest app on
07:17my phone uses geolocation to work out
07:19that I'm almost home or you know there's
07:21all these different ways that you might
07:23put that puzzle together yeah I think
07:25one big question here is like is I know
07:27I have no doubt that you know the
07:29connected home Internet of Things is
07:31definitely gonna be the future and we're
07:33gonna have a lot of technologies and
07:34applications and I think they're just
07:35like we have electrical hundreds of
07:37electric motors right right I think it's
07:40just a matter of like whether it's gonna
07:41be this year or next year or the year
07:42after like I still feel like we're you
07:44know if you think about the Gartner hype
07:45cycle I think we're probably still in
07:47the trough of disillusionment we're
07:48still crossing the chasm so to speak in
07:50terms of getting into the early majority
07:52of actually where are we gonna get the
07:54the real kind of majority of users to
07:58get excited about actually putting these
07:59things together and you know we have a
08:01you know a you know a couple of our
08:03portfolio companies for example it's
08:05just you know take for example like Home
08:06Depot has a good relationship with
08:08quirky and so when you go into Home
08:10Depot today you can actually see the
08:11connected air-conditioning unit you can
08:13see the connectedness and that and they
08:15also have their relay station that kind
08:16of is the governing remote control for
08:18some of these things so they're starting
08:20to think about the packaging to your to
08:21your nest analogy from earlier they're
08:23starting to think about packaging these
08:25things together because they realize
08:27that this is a bigger problem than they
08:28from you know than that and they and
08:30then the industry is actually leading it
08:31on because the industry if you act you
08:33if you step on to the sea at CES
08:34showroom floor it's like oh wow this is
08:37the year there's so many applications
08:39there's so many devices every
08:40manufacturer from the old guard of the
08:42new guard are developing choices so the
08:44thing that occurs to me while you're
08:45talking about this and I sort of
08:47I kind of mentioned earlier that you
08:48know it's because the smartphone supply
08:50chain is enabling this thing normally
08:51when these kinds of things arrive the
08:54way it works if you've got a really
08:55crappy product because the technology
08:57isn't ready and then you've got a
08:58slightly less crappy product and a
08:59slightly less crappy product and after
09:01about five years the technology kind of
09:03catches up with the vision of the use
09:04case what's happening with wearables and
09:07Internet of Things is it's the other way
09:09around because all the components have
09:12been created already for another
09:13industry for the smartphone industry
09:15it's like you don't have crappy Internet
09:19of Things you don't have crappy well
09:20they just they're that you know and so
09:21people who've been handed all these
09:23components and they're trying to work
09:25out what to do with them rather than
09:27having the vision of the great use case
09:28and then try and build the technology to
09:29fit it it's like you've got technology
09:31and now you're thinking well there must
09:32be something I can do with sensors in
09:35the home yeah but what I'm not quite
09:37sure you know I totally agree all the
09:39building blocks are there the sensors
09:41are there the processing units are there
09:42the communication like wireless wire
09:45technology is there it's just the use
09:47cases so something that's
09:48transformational for a consumer is what
09:51I'm looking for because I think that
09:52will kind of ignite the the IOT market
09:55it will kind of finally prove to
09:57consumers that this is here and it's
09:59ready and they want it yeah and then you
10:01can kind of sell them on these nice to
10:02have services that's right I mean you
10:04know the key use cases around IOT I
10:05think you know if you if you kind of
10:06boil it down are you know there's
10:08there's security there's convenience
10:10there's energy savings and I think
10:12there's a cost savings element which
10:13which I know that you're interested in
10:15this space in terms of like maybe
10:16there's an industrial or enterprise
10:17application here which is much more kind
10:20of ready to go and maybe blackberry for
10:22example just launched their new IOT
10:24platform and blackberry is still
10:26synonymous with enterprise and security
10:27today so I mean what are your thoughts
10:29on the industrial applications yeah I
10:31mean industrial I think it's kind of
10:32hidden in the back everyone's excited
10:34about the consumer stuff but that
10:35industrial side is also huge for example
10:38GE with their aviation they have the
10:40smart jet engines which the mechanics
10:43only don't even need to check the plane
10:44once it lands and that they just know if
10:47it needs maintenance or not that's a
10:48there's a ton of time and ton of fuel
10:50and kind of just money for aviation
10:54industry and then there's like
10:55healthcare eldercare monitoring for
11:00a huge issue because if you have
11:01something like diabetes or high blood
11:05pressure or whatever you need continuous
11:07monitoring and this kind of technology
11:08can really make differences for doctors
11:10so that's another industry that's kind
11:13of huge and I think it's already
11:15happening and I'm really excited for
11:17that to take off let me let me throw one
11:19more wrench in the equation here so I
11:21think might some people might classify
11:23Google glass as an Internet of Things
11:26device but whether it's in a wearable or
11:28augmented reality I think there are
11:30consumer as well as Enterprise
11:31enterprise applications what are your
11:34guys thoughts on like whether you know
11:36that kind of internet internet IOT
11:38device is actually gonna be able to take
11:40off well I think there's a short term in
11:42a long term question here I mean the
11:44short term it feels like Google glass is
11:46probably too limited in its capability
11:48and it's probably too intrusive in the
11:49form factor for anything other than an
11:51enterprise application and I've seen a
11:53lot of really cool Google glass
11:54enterprise applications in the consumer
11:57market it doesn't seem to work very well
11:59I think there's a kind of a longer-term
12:01story here around watches which seemed
12:04like a better way of having that ambient
12:06screen maybe then something that's kind
12:09of clamped onto your face yes a glass is
12:12something for you know professions that
12:14you don't know you're up the top of a
12:17pole right with your hands full of
12:19spanners and cables I think there's a
12:23there's a sort of a longer-term point
12:25here around you know what the kind of
12:28you know are we still going to be
12:29looking at black plastic rectangles or
12:31black cloth rectangles in ten years and
12:32you know things like glass things like
12:34watches things like magically which you
12:36know again we've invested in are
12:37interesting and they kind of point to
12:39sort of what might happen after the
12:42black dwarfs rectangle well you know
12:44we're kind of a long way away from that
12:46at the moment so so it should startups
12:48be scared of interoperability and should
12:51they wait for Google Apple Samsung etc
12:54to go and create interoperable standards
12:57for everything to work together or
12:58should they kind of blazed the trail
12:59forward and try to figure out you know
13:01is there a killer use case here I don't
13:04think I don't think they should way I
13:05think they should build their technology
13:07to be open a scalable and and I think
13:12thing already has an open platform so
13:13there's no reason to wait because
13:16consumers know it's out there they're
13:18ready for it and I think it's there it's
13:20the entrepreneurs opportunity now to
13:22take it and prove to consumer that there
13:24is a real use case for this yeah I think
13:27that's right I mean as I said the
13:28challenge is how you articulate what you
13:29should be doing with this you know it's
13:31a nest story how do you go and give
13:33consumers a really clear reason what
13:36this is what are you going to put on the
13:38shelf in Home Depot that will sell
13:40itself as you walk past it from five
13:42feet away which is that's kind of the
13:44challenge here because that's the App
13:45Store for the Internet of Things if
13:47there's only the App Store for connected
13:48home how do you actually what is your
13:51vision for something fantastically cool
13:52not well I bought a hundred and fifty
13:55senses and I put them in white plastic
13:56boxes with wireless connections here you
13:58are because that's kind of a lot of what
14:01I was seeing at CES absolutely I mean
14:03they think you know what one one person
14:06was telling me that you really need to
14:08watch the bigger manufacturers and the
14:11retailers also this year to really see
14:13if this is gonna be the year for IOT I
14:15mean if you think about Home Depot I
14:16mean their revenue is up thirty percent
14:18versus last year for a hundred billion
14:20dollar company that's that's quite
14:21remarkable actually to be thinking about
14:23it that right that way and you know they
14:26were telling me that you know in some
14:27way shape or form think this is a way
14:28for these you know big-box retailers to
14:32actually differentiate against online
14:34retailers like Amazon because they've
14:36got the historic clerks on the ground
14:38that can actually educate consumers on
14:40how to actually install and and use IOT
14:44devices in their home and so there might
14:45be a little bit of an interesting play
14:46there in terms of it like the end of the
14:48last smile in terms of getting these
14:50devices into consumers hands and that
14:53that might be something like really a
14:54good way to watch whether IOT is really
14:56gonna take off this I mean manufacturers
14:58are the ones that are know how to build
15:00products if you think about the for
15:03example the self-driving car Google
15:04Google is doing the self-driving car for
15:07its own reasons they're gonna collect a
15:09bunch of data and all that stuff that
15:11they like to do whereas like a company
15:13like BMW knows how to build cars and so
15:15if they should they should be the ones
15:17that are innovating on the self-driving
15:18car and building thinking about the
15:20Internet of Things if you think about it
15:22they're the consumers know BMW for their
15:25yeah it's really the whole connected car
15:27as part of the IOT ecosystem is a really
15:30fascinating topic I mean Google is
15:32waiting into it Apple is waiting into it
15:34again blackberry launched another
15:36platform yesterday for the car you know
15:39it's kind of interesting to see that
15:41like so many different players coming
15:42into this space I mean is this something
15:44that we're gonna see benedict like you
15:45know i think in terms of like am i gonna
15:47buy a car am i gonna buy a car because
15:49it has IOT enabled the technology well i
15:53mean the common factors have always
15:55managed to use accessories and alloy
15:56wheels and cost sunroofs and what have
15:59you as a way of differentiating a car
16:00and you know getting you to spend a
16:01thousand dollars more on something that
16:03cost him 50 bucks and I think that's
16:05certainly part of how they see this
16:06stuff clearly the kind of the dilemma
16:10that they have is that they don't want
16:12to end up being kind of
16:13disintermediation by a software provider
16:15I'm not entirely sure how real that that
16:18thread is because it's not like you know
16:20a TV set where the elemental
16:22functionality moves into the software or
16:24a smartphone where the elemental
16:25functionality moves into the software
16:26and the guy who's making everything it
16:27gets no safe car is still basically kind
16:30of about driving at least nil until
16:31we've got self-driving cars and even
16:33then you know it's all basically about
16:34how you put the bits of metal together
16:36so I don't think they're going to be
16:38squeezed out in quite the same way but I
16:40new to a point I think it's absolutely
16:42absolutely the case of that screen on
16:44the dashboard or how it talks to your
16:45phone will kind of be another piece of
16:48added value so benedict's there are so
16:51many devices on display at CES this year
16:55are we is that reality are we gonna walk
16:58back in and see that as reality well I
17:00did see the first compelling use case
17:02for a curved screen which is on a slot
17:03machine which actually made fantastic
17:06sense to me otherwise I'm there's always
17:08fraught ins always stuff that doesn't
17:10happen so you know 3d never really
17:11happened for example I think there's an
17:14oddity here as I said earlier in that
17:16generally the way it works is you have
17:18this shining vision of the wonderful
17:20thing and the technology doesn't quite
17:21live up to it for years and years and
17:22years whereas because all the stuff got
17:25made for smartphones first all the
17:27components got made for smartphones
17:28first you've got all the products and
17:30they all work it's just that you haven't
17:32really no one was really able to
17:33articulate what they should do or why
17:35you would buy them or how they would
17:36together and say you've got sort of fun
17:39vast thundering herd's piling into
17:41Fitness sensors there's like a wearable
17:43that might make some sense and you know
17:45maybe next year there won't be a single
17:46Fitness sensor and maybe next year there
17:48won't be a single selfie stick either um
17:50but then underneath that I think there's
17:52this sort of very strong logic behind
17:54some of those use cases you know the
17:57question is you know how you communicate
18:00that and how you kind of take that to
18:01market and turn that into something that
18:03you can sell to a normal person
18:05I mean IOT is is a fascinating space I
18:08think 2015 is going to be a very very
18:10interesting year for both the big
18:12incumbents as well as startups I mean
18:14ranging from the connected home
18:15connected cars industrial applications
18:17and the like and so I just wanted to
18:19thank Benedict and free the--for for
18:21being here and and we're done thank you
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