My First SXSW08 session is Peter Semmelhack CEO of Bug Labs on Hardware Mashups - The Long Tail of Gadgets

- the Pizza Tail of consumer electronics

- pepperoni is hard, long tail is the cheese

- cheese == every device you have ever wanted but couldn't find

- Bug Labs inspired by Lego

- e.g. after 9/11 living in Manhattan, he wanted device that woke up ever 5 minutes and posted GPS position on a map, couldn't find it at best buy

- reason? economics

- need to sell lots of them, hits based business, no hits, out of a job

- margins are decreasing: China, Walmart

- have to: 1. come up with hit which is hard, 70% of time wrong about hits

- Nokia 30% of 2007 revenue came from products introduced in Q4, very few companies can do this, go Nokia go!

- consumers want control e.g. Tivo can control TV and pause it

- model is old i.e. throw it away and buy a device i want

- what if we could build what we wanted?

- should be able to get it and go build what you want

- how do we make 'world of atoms' behave like 'world of bits'?

- open source and open models are powerful ways to enable consumers to innovate

- with software can easily combine and innovate

- with hardware it's much more difficult: 1. electrical engineer, industrial designer, logistics genius, need to be all of these things 2. manufacturing 3. inventory 4. distribution

- hard to innovate in all these ways

- software idea is relatively frictionless, just distribute it on internet

- for hardware, need a company unlike software

- e.g. Lego Mindstorms has provided platform for me to build a robot

- buy gadget not for physical form factor but for a reason e.g. sweep floor

- looks like software i.e. standard platform to build on top of

- platform is way to innovate in physical space

- being cheese will be profitable

- Bug Labs modules have braille! some blind folks loved that, great story

- great example of GPS tracker for $2k replaced by 2 bug labs modules for $200

- can fill niche of 1000 or 10000 with Bug Labs device with software provided by community

- aggregate these niches in a way that makes sense economically

- 1000 entrepreneurs selling devices built on top of platform = millions of bucks

- future is connected = gadget nets = network of devices 'facebook of gadgets'

- will happen in 5-10 years, based on physical platform

- will be bottom up approach

- Q: could bluetooth and network take the place of hardware glue? A: application has to talk to hardware, we can innovate ourselves bottom up or wait for 'big guys'. Proprietary companies can't compete with open models.Hard to start a Microsoft type company today. Model is MySQL which was bought for 1 billion; Sun realized community is more valuable

- Q: how do you make a profit A: radical openness == want to be different, every thing is different, everything is open source on their site on March 17th when they launch, give people the appropriate tools and they will create awesome things, believe in power of community, will get more out then they put in; no licensing fee

- Q: Is early adopter market big enough? A: it's 2-3 billion market just for early adopters worldwide. look at pcs? without early adopters no innovations visicalc. trying to find a way to provide a hardware platform to build what they want! bugnet community = repository of apps 1. innovator comes up with cool device 2. somebody "consumes" it 3. can make single function device out of what i design i.e. rapid prototyping platform 4. no hard lock in to their platform can move java program to another device e.g. can't move nokia app to apple or vice versa, that's old model

- will provide service to make beautiful device after you prototyped it on the bug - they don't become orphaned still part of the community

- balance between optimization and customizability today we only have "optimized obsolete in 6 months market", there is room for another model

- Q: green framework for consumer innovation? A: cellphone with lithium batteries is a disaster. modular devices can become other devices, plastic is recyclable, no toxic paint used. is there a cost? yes, won't look like an iPhone!