Nothing CEO Carl Pei on the Phone 2, AI, and the future of gadgets

Carl Pei has made a lot of phones. As the co-founder of OnePlus and now as the founder and CEO of Nothing, Pei has spent the last decade trying to find new and exciting ways to compete with the likes of Apple and Samsung.

His most recent attempt is the Nothing Phone 2, a $599 device that improves on the company’s Glyph interface, brings a fresh coat of paint to Android and has some big ideas about the right and wrong way to use your phone. But mostly, Pei says, the Phone 2 just needs to be a good phone. Nothing else matters if it’s not a good phone.

But Pei doesn’t plan for Nothing to be a phone company forever. The company’s long-term ambition is to change the face of the tech industry. That’s not an exaggeration. Pei has been saying for years that the gadget world is big and boring, that everyone has become obsessed with engagement and growth-hacking at the expense of actually making cool stuff that people like to use. He thinks Nothing can be better. 

Ahead of the Phone 2’s official launch, Pei sat down with me in The Vergecast’s New York City studio to talk about the new device. We also talked about his vision for the company and his thoughts on AI, foldables, VR, and much more.

The following are excerpts from our conversation, lightly edited for clarity and brevity. For more from our conversation, check out this Wednesday’s episode of The Vergecast, or watch the full interview on YouTube.

You just launched a phone, and we both have the phone sitting here — yours looks more like a Stormtrooper than mine, which is very cool — but first, I want to talk about Nothing as a thing. You launched this company a few years ago with this big, grand theory about the state of technology, and I have lots of questions about it. Maybe the easiest place to start is just: I’ve heard your mantra in a bunch of different forms, but how do you talk about it now? What does Nothing exist to do?

We’re trying to make tech more fun again. I think a lot of people can resonate with this, but personally, when I was young, I was super excited about tech. I felt really inspired both on the hardware side and the software side. When I was younger, Apple used to have these epic product launches — I grew up in Europe, so I had to stay up overnight to watch. And it was worth it because each product was such a big leap forward compared to the last one. And it just made you feel like everything was heading toward a really exciting trajectory. And it was also the time where a lot of these social media and consumer internet companies were being created. So you had a lot of innovation on hardware but also a lot of innovation on software and services.

It felt like back then, you know, 10 years ago, society as a whole was way more optimistic about where technology was going. But in the last couple of years, that sentiment, at least for me, has pretty much disappeared. And when we speak to other people, be it consumers or investors, I think it kind of resonates. So we’re thinking, like, how can we kind of get back to that original state, where things just felt like it was getting better and better, and hopefully also inspire others to be a part of this journey, be it our community or even our competitors?

I like the theory of that a lot. And there are sort of two responses I have to that idea. One is that I think one thing that has happened in the last 10 years is that all those things became super successful, to the point where now most people’s smartphones are not exciting, right? They’re appliances. And I think to some extent, that’s fine. They do a lot of things really well. They’re very successful. But we got past the point of being really excited about every single spec upgrade because they don’t matter that much.

The marginal utility is not that high.

Yeah. And I think you can have interesting debates about whether that is a total lack of imagination and innovation, or it’s just the fact that everybody got phones, we all got used to them, and that’s fine. Our phones are fridges or washing machines now.

And then I think the other thing that happened is a lot of that stuff we were really optimistic about turned out to have huge problems — some of which we should have known going in, and some of which we didn’t know going in. And so part of what I wonder is, is that era of how we felt about technology ever going to come back? Or do we just know things now that we didn’t then, and our experience has changed that forever?

I don’t think anything is forever. I think if you zoom out and look at history, history kind of ebbs and flows. So I think there will be periods in history where technology doesn’t advance that much, and there will be other periods where a lot is happening. I think we’re in one of those slow periods.

But to what you said: if you look at it from the company perspective, I think a lot of innovation happened when there were many small and medium-sized companies trying to compete with each other. And I think one of the reasons why we feel like innovation has slowed down is because a lot of these companies have won already. They became really big. They have very defined business models, very defined types of consumer, and it works. So why risk it with something new?   

At the same time, it feels like they’ve all created really strong moats, so it’s really hard for a new entrant to get in. We talked about the fact that we’re launching our second phone. There’s a bunch of people that tried to make smartphones in the last 10 years who never got around to launching their second phone —

Or their first phone! I have a lot of prototypes that never hit the market sitting in my basement somewhere.

Yeah. The barrier to entry is just way too high for smaller companies to come in. I think we’re probably one of the only smaller companies that is able to experiment and try our own ideas because we have accumulated the right type of resource competence to at least give it an honest shot.

I feel like there’s a version of Nothing where you tried to do something super different, and you ended up doing what Humane is doing with the AI pin or what Snap did with Spectacles a bunch of years ago. And you’re like, “We think we know what’s next, and we’re gonna try to build it in public and get everybody really excited and move everybody into the future.” You decided instead to go with headphones and smartphones, which I think you could argue are two of the most mature, mainstream, hard-to-crack markets that exist.

Why? If the goal is to make technology exciting again, why build those things?

I think you have to exist to be able to make things more exciting. I think of it as kind of like the Apple analogy: Apple started with computers, but computers are not what made Apple really big, right? The iPod was what made Apple really big, and then they had successes with the iPhone and other products after that. I think our entry into the smartphone industry is similar to Apple’s entry into the computer industry. It’s a mature market, but through being different, we can find our group of consumers and eventually build a business that is self-sustaining. We can make some profits, and then we can take those profits and reinvest those into imagining what a future form factor could be. 

I think we need that iPod moment in the future as well, but if we started with that really crazy idea, what if it didn’t have product-market fit? Then we don’t have an opportunity to try and create the future anymore.

It’s an interesting analogy! I do think the computer market was substantially less mature in the ’70s when Apple came in than the smartphone market is now, which I think just makes that road for you even harder in a lot of ways. And it makes me think: what is at the point right now that the MP3 market was when the iPod came out? There really isn’t one. The closest thing is maybe headsets, in the sense that some exist, but it’s pretty clear that nothing has gotten it right. But I also think we’re like several massive technical breakthroughs from being able to make “the iPod of headsets” or whatever. I don’t think the Vision Pro is that thing, even. It’s just a tricky moment, where it does feel like your only options are things we’re totally not ready for or things that may be at the other side of the curve of being super exciting to everybody.

Yeah. I think our strategy is to start with really mature categories that are big — so for smartphones, over a billion are sold every year, and for wireless headphones, over 300 million are sold every year — and try and be different there. At least carve out a niche for ourselves, and then gradually take it step by step to a more innovative part of the curve.

So you don’t have to win the phone market — you just have to get enough of the phone market to put yourself in a position to win the next thing.

I don’t think that we’re gonna be a dominating player — if we’re around in 10 years — in smartphones. I think the turning point will be a new form factor. 

Is it glasses?  

You know, I’ve been thinking a lot about software. So in 2008, the App Store was invented. I think that was the last major innovation in mobile OSes. Before the App Store, whatever features you got with the phone were the features you had throughout the entire life cycle unless you sideloaded something. After the App Store, you could basically extend your phone with infinite capability.

So I think a lot of the smart people, they went on to making apps in around 2008, and then it got to a point where people were just optimizing for time spent or trying to make whatever metric was important to them. And the major platforms, they’re bought into this because whenever the app developers make money, they also make money. So I think there’s a vested interest in not doing that much on the mobile OS side. Maybe that’s where we should be exploring what could be done. 

One of the things we’ve done with the Phone 2 is we feel like apps have gotten too powerful. Sometimes I know I have to do something work-related on my phone, so I unlock my phone, I go into TikTok or Instagram. I just wanted to scroll for like one minute to see what’s new, what notifications are important. But I actually just end up scrolling for five minutes, and then I forgot what my original task was. So we feel like apps have gotten too powerful, and with the Phone 2, we’re trying to at least give users options to take some of that power back.

You’re bringing up my favorite thing to talk about! I’ve been obsessed with this world of these dumber smartphones for forever. The Light Phone and the Punkt and this idea about, like, what if you had a phone that did all the things you needed it to but didn’t take over your entire life? I think a lot of people intellectually want that, but I think figuring out how to make the case for what amounts to “a slightly worse smartphone” is really complicated.

It is! I think it’s going against human nature. It’s really difficult. So I think we gotta start with a niche. I think there’s a certain type of consumer out there who really resonates with features like this. It’s really gonna be hard to convince the masses to adopt something like this. We’re hardwired to want to use things that are addictive. So I think it’s one step, but it’s not gonna take us to the mainstream.

You didn’t answer my question about glasses, so I’m gonna make you answer my question about glasses here at some point. But you also are in a position where you don’t have unlimited money. You’re not a trillion-dollar company that can just pour money into the metaverse until it becomes a thing — you have a small number of shots at this. I’ve talked to a lot of companies over the year who were like, “We got one hardware order wrong because it didn’t launch to as much excitement as we hoped, and it bankrupted the company, and that was it. We ended up with a warehouse full of phones and no company.” How do you square those two things? “We want to be big, we have this long roadmap, but we also have to keep being an ongoing concern.”

You have to have a dream, but you have to be very practical in reaching it. I think this business is one of the most challenging ones to build because there’s just so many things you’ve got to think about. You’ve got to think about everything from supply chain to manufacturing, to hardware engineering, software engineering, hardware design, software design, sales, marketing, distribution around the world. Marketing is different in every country. Then supporting the products, software updates, repairing the products when they’re broken. The value chain is just so long compared to if we’re just making an app.

It’s a cliche, but timing is key. So we’re trying to do the right thing at the right time and have a more patient approach.

Okay. So do you think the phone keeps being the thing for a long time? Both for you and for the world?

I think so, yeah.  

Like if you fast forward out five years from now, is the phone still the primary thing that everybody has with them all the time?

A computing device made up of a large screen with some camera capability, I think, is gonna be the dominating form factor for a long time.

People have said voice might be taking over, or immersion and virtual reality. But I think those are more like an addition to the main form factor. You can’t get the same level of utility through just audio, and it doesn’t feel that good to always be in a virtual environment. So I think this form factor will be really key, but I think maybe what happens on the OS side and the software side could change with all the improvements we’re seeing in AI today.

What does that look like a few years out? The thing I keep hearing is, how do we take your phone out of being kind of an app machine? All your device does is provide a bunch of icons that you tap on to go into individual worlds — how do we stitch it all back together in a way that makes more sense? That’s what Alexa and Google Assistant were supposed to be; that’s what everybody’s talking about with the AI chatbots. Is that where you think we’re headed?

I think so. I think everybody sees a similar kind of long-term vision, but everybody might have a different solution or hypothesis on how to get there. If we take one step back and just think about what it means to be a tech company, I think we need to either have to enable consumers to do something they weren’t able to do before or we need to enable them to do something much faster or much cheaper. Those are the guiding principles for how we evolve the OS as well.

Like, okay, it’s an app machine right now. It’s an app launcher that actually hasn’t changed since the Symbian days, right? If you want to remove that metaphor, you need to create a new metaphor that’s way more efficient than before and easy to understand and easy to use.

Do you have a theory about what that metaphor looks like? Is it just a text box? Is ChatGPT how you do everything?

I think some text, not all text. Probably some buttons because writing is still slower than just pressing something. And some augmentation via voice. I think it needs to slowly augment away the apps. Today, we’re using some really simple, mindless-scrolling apps, right? What if we wanted to accomplish more complicated tasks like 3D modeling or photo editing, or I don’t know what? It’s actually quite difficult to learn how to use these new apps. Maybe we can just tell the phone what we need to do, and it would use those apps for us without the apps even being visible in the foreground. Right. I think that could be enough utility to transition to a new metaphor.

I think everybody sees what the future needs to be, but the really tricky part is finding the right user interface that’s easy to understand and can get adoption from consumers. You know, as we scale our products into the hands of millions of consumers, we also have a shot at implementing our version to see if it sticks or not. I don’t think it’s the underlying technology that’s gonna be the most challenging part because it’s maturing. It’s gonna be the user interface.

Last thing, and then I’ll let you go. The Phone 2 is, in a lot of ways, a much better Phone 1. Is that the right path to be on in this space, to just keep getting a little better every year? Or do you think there is room for you in this industry to try something wildly different and new?

I think both. I think if you keep getting a little bit better every half a year or every year, it really compounds. 

Maybe, I don’t know. I think Apple would say that’s what they’ve been doing for the last decade, and then you show up saying everybody’s super boring. ‘Cause they all just get 10 percent better every year.

I feel like the changes between the Phone 1 and the Phone 2, and how different it is, are a lot bigger than some of these bigger companies.

Give me an example of what on there feels bigger.

I think the software looks completely different, as an example. So when we launched the Phone 1, we were only able to make stock Android stable. That’s the extent of our engineering resources. Now we can start experimenting with our own ideas, our own widgets, our own monochrome UI, etc. So I think at least that looks very different, and we have a very exciting roadmap for where to take that in the future. 

What about on the hardware front? I read a thing this morning that said Carl Pei’s reality distortion field would put Steve Jobs to shame. That was after you said you’re not into foldable phones as an idea. I’m very bullish on flip phones, personally. I’m happy to give you a long speech about why I love flip phones if you’d like, but you have not seemed all that interested in that, either. You’re, you’re still working with most people’s experience of a smartphone. What else can we add to it? Do you think there are big, new ideas to be had there?

The thing for us is every product needs to be profitable and every product needs to be a hit because we don’t have infinite resources. So foldables and flip phones are not that exciting yet. Over time, as the category matures, as the crease starts really disappearing, as apps are being tailored to this new form factor, it’s something we could consider. We’re not saying no, but I don’t think it’s the thing that’s gonna really change the paradigm. I don’t think it’s the thing that’s gonna make Android win over iOS. I don’t think it’s what’s gonna make us go from a niche smartphone maker to the next big tech company. 

We just have to build a really solid base of products and keep getting better. Hopefully we build up some cash to try and invent the next thing.