Hey people! Welcome back to Forests Over Trees, your weekly tech strategy newsletter. It’s time to zoom-out, connect dots, and (try to) predict the future.
Why is hardware impossible right now?
Have you ever been punched in the face?
I’ve gotten into a few fights (mainly with my brothers), and thankfully I haven’t taken too many face punches.
But you know what? – I recognize a face-punching when I see it.
Lately, looking at the news, all I see are hardware companies eating knuckle sandwiches.
Today, I want to discuss a few of them.
And just like when you’re car shopping and start seeing “your car” everywhere, hopefully by the end of this I won’t be the only one seeing hardware get beat up.
Ready? – cool, let’s do it.
Consumers Want More! Now!
They want more episodes to binge, more TikToks to swipe through, more of everything. And they don’t want to have to wait. Ozempic, not Peloton. Crypto, not Roth IRAs.
The average software sprint, where ideas get coded into existence and pushed into updates – takes only a few weeks. Of the Google Play Store’s top 1000 apps, 30% update at least weekly and 67% update at least monthly (source).
Is that not crazy!?
My point is this – with software things move really fast. Compare that to hardware, where things take years to design and build, and you’re left with a really hard task:
Predict what future problems and preferences users will have
Use today’s tech or invent new tech to design a hardware solution
Figure out how to mass produce it and distribute it to users
Hype it up and convince users to buy it!
Because of how quickly software innovates, we are less and less impressed with hardware, and companies struggle to sell it to us.
And I’m guilty of this too!
Tesla that can’t “fully” drive itself? Lame.
Meta “smart” glasses that only have a camera? Dumb!
So I’m not surprised when I see news like this
You with me so far? Cool. Onto the next face punch…
Threatening service revenue
There’s a movement globally known as “right to repair”. Basically, it’s a group of folks saying that they want to be able to service and fix the hardware and equipment they buy.
But believe it or not, that’s controversial.
Why? Because the companies that manufacture those devices make fat profits on service!
Think about all the times you’ve had a broken phone and take it in to get repaired. First of all, it probably cost you way more than the materials…. But also, did you take it to a repair shop, with technicians and no merchandise whatsoever? Of course not!
Phone cases and accessories probably stared longingly down at you. And if it was an Apple Store (essentially a shrine to slick looking metal devices), where you can doodle with the new pencil or try on their headphones, they were subliminally selling you on those too.
Because hardware and equipment manufacturers have made repairs costly, and pushed back on calls for change (not selling replacement parts, or making them hard to get, etc.), this movement has needed to get regulatory support to build momentum.
But now the momentum is there. In the US, four states, including New York, Minnesota, California, and Colorado, have passed laws to protect a customer’s right to repair. And in April the EU passed a similar law.
By requiring companies to provide documentation, share repair know-how, and make tools available at lower prices, right to repair is a huge threat to revenue.
Opening up to Competition
And not only do you have to let customers chip away at your margins via cheaper repairs… but you also have to let your competitors in!
Over the last few years, the EU has pressured Apple and others into allowing multiple app stores, as I’ve written about before.
And recently, they asked Apple to open-up again… for the hardware itself!
Whereas in the past, Apple wouldn’t let other apps use its NFC chip in the phone (the thing that makes the Apple Wallet work on credit card machines), now they’re having to open that up too… In January, Apple offered to let 3rd party payment providers use the chip.
Wrapping Up
We didn’t bring up AI and how that’s accelerating the “More! Now!” vibe. We didn’t bring up the trade wars and de-globalization/diversification and how that’s making supply chains look like Noah’s ark (two of everything).
But even without those, you see what I’m saying – hardware is getting punched in the face right now.
So when you see an iPad commercial that squashes instruments and rubs you the wrong way… Or you hear a rumor that Humane is looking for an exit now because their AI pin flopped…
…cut them some slack! It’s a tough time to be in hardware.
Bonus Bullets
Quote of the Week
“Success is making those who believed in you look brilliant.”
— Dharmesh Shah, Co-Founder and CTO at Hubspot
Quick News Reactions
Evidence of dispersion — Linktree is the company that let’s you put a single link in your bio, which then links to all your other socials. It’s a link within a link. Link-ception, if you will. Anyway, they’ve reached 50M users, and it struck me as as the perfect signal of where we are right now social media wise… in a word: scattered. Maybe this is just the new normal, but the Twitter implosion sent users all over the place. Maybe eventually people and platforms consolidate again, so we won’t need a list of the 20 places online I can go try to find you.
Memory in the wild — Last week, I wrote about how LLM companies hope that memory can become a moat in AI (and why I think they’re wrong). This week, Microsoft got in on the action, announcing “Recall”. It remembers everything you’ve done or seen on your computer, and connects to an AI chatbot that can tell you about it (or remind you if you forget). It sounds helpful, if not a little bit invasive. Will be interesting to see reviews and test it out.
Crypto wins in US House vote — The crypto industry has been begging for a more modern regulatory framework for years, and it seems they finally have a small win to celebrate. The vote in favor was bi-partisan (though it skewed Republican), and the law delineates juridiction between the CFTC and the SEC (who have been jockying for position and creating confusion in the process). SEC Chair Gary Gensler and President Biden have criticized the bill, so will be interesting to see if it goes much further…