The Exchanges

Q When you said supply and creativity, I don't ever put those two words together. How does that actually play out?

A Xiaomi has created this sweet spot, which no one previously thought existed in the market, where that is, is a well-designed product for cheap enough to be competitive with luxury products in its same domain. What it lets Xiaomi do is do these flash sales where they say, Look, we've got a 100,000 of the, of the, of the Hongmi, or we've got a 100,000 of the Me Too. We're going to sell those now. You have to sign up for the right to get a ticket to have a chance to buy the phone, which means Xiaomi has now used e-commerce as a way of signaling massive unmet demand. They can then take that down to Shenzhen and say, we know how many people want this phone, and we want you to give us these components at the million unit price. So they can actually squeeze costs out of the manufacturing system even before they make the phone, and they can use that money to invest in design without driving costs to the roof.

AI assessment note: “they can use that money to invest in design without driving costs”

Q When you said supply and creativity, I don't ever put those two words together. How does that actually play out?

A Xiaomi has created this sweet spot, which no one previously thought existed in the market, where that is, is a well-designed product for cheap enough to be competitive with luxury products in its same domain. What it lets Xiaomi do is do these flash sales where they say, Look, we've got a 100,000 of the, of the, of the Hongmi, or we've got a 100,000 of the Me Too. We're going to sell those now. You have to sign up for the right to get a ticket to have a chance to buy the phone, which means Xiaomi has now used e-commerce as a way of signaling massive unmet demand. They can then take that down to Shenzhen and say, we know how many people want this phone, and we want you to give us these components at the million unit price. So they can actually squeeze costs out of the manufacturing system even before they make the phone, and they can use that money to invest in design without driving costs to the roof.

AI assessment note: “squeeze costs out of the manufacturing system... use that money to invest in design”

Q use a case of Xiaomi here, we're seeing for the first time the design As well as this innovation coming out of China, like originating in China. I understand all the things happening underneath. How does a consumer know, and do they even care that they're benefiting from these innovative products? The question I was trying to get a handle on is like, does the origination of that really matter?

A The first thing the consumer cares about in the first place the innovation shows up is in price. And that ability to just inflect the cost quality curve in the direction of people who have a moderate amount of money and are willing to pay Something of a design premium. The consumer cares about that, even if they just experience it as, this thing works well, and I got it for cheap. The more complex a product is, the more the user interface is the user experience, right? That, that in fact, you know, any given smartphone is just a slab of black glass with three or four hardware buttons. Uh, everything is on the screen. And Xiaomi has invested enormously in what's called MIUI, their, their, their version of Android. And the user experiences that all the time. Blaise Jones has said that a third of the features in, in me UI have come from suggestions from users. So they are really investing in the kind of open source model of Look, it's just, it's just Android. We can't prevent these features from being, from being copied, but if we're closer to our users and do a better job of understanding and integrating, we still have a competitive advantage. So they built their own, they built their own scam database. They, they, they look at incoming phone calls. They look at incoming texts, and they tell you, you know, this, this is a scam call. There is no, there is no do not call registry i…

AI assessment note: “The first thing the consumer cares about in the first place the innovation shows up is in price.”

Q But tying back again to this original notion of this cult of Steve Jobs, I can't help but wonder, like, Apple would never do this. Or maybe they do secretly. We don't know about it. So how do we sort of reconcile what's happening with, say, like the leader, Apple? And we are talking about this larger question of who's leading innovation. What are your thoughts on that?

A So I, I'd like to question the premise that Apple's the leader. The company that Xiaomi is most like is Amazon, and when you think about the kinds of things Amazon has done to innovate, Um, you see, again, this obsession with supply chain management. You see this obsession with aggregating and then creating value from customer feedback. You see an obsession with customer experience at every part of the chain. It's interesting to be now in China for long enough that a little bit of my ability to understand the context of the U.S. is fading. And when I look back at the U.S., I think that the U.S. has been somewhat damaged by regarding Apple as our official most innovative company. Because in fact, Apple, Apple does what it does brilliantly, no question. And it's obviously, it's commercial success as a result of, you know, is the result. But in terms of practical surprises in how a company does things, you would, you would look at other companies before you would look at Apple. The competitive battle is not going to be engaged in North America. It's going to be engaged in Kenya and Mexico. That's, it's just, there's so much American centricity in the way we think about technology that we're often just unprepared for the coming global market.

AI assessment note: “I'd like to question the premise that Apple's the leader.”

Q use a case of Xiaomi here, we're seeing for the first time the design As well as this innovation coming out of China, like originating in China. I understand all the things happening underneath. How does a consumer know, and do they even care that they're benefiting from these innovative products? The question I was trying to get a handle on is like, does the origination of that really matter?

A The first thing the consumer cares about in the first place the innovation shows up is in price. And that ability to just inflect the cost quality curve in the direction of people who have a moderate amount of money and are willing to pay Something of a design premium. The consumer cares about that, even if they just experience it as, this thing works well, and I got it for cheap. The more complex a product is, the more the user interface is the user experience, right? That, that in fact, you know, any given smartphone is just a slab of black glass with three or four hardware buttons. Uh, everything is on the screen. And Xiaomi has invested enormously in what's called MIUI, their, their, their version of Android. And the user experiences that all the time. Blaise Jones has said that a third of the features in, in me UI have come from suggestions from users. So they are really investing in the kind of open source model of Look, it's just, it's just Android. We can't prevent these features from being, from being copied, but if we're closer to our users and do a better job of understanding and integrating, we still have a competitive advantage. So they built their own, they built their own scam database. They, they, they look at incoming phone calls. They look at incoming texts, and they tell you, you know, this, this is a scam call. There is no, there is no do not call registry i…

AI assessment note: “The consumer cares about that, even if they just experience it as, this thing works well”

Q But tying back again to this original notion of this cult of Steve Jobs, I can't help but wonder, like, Apple would never do this. Or maybe they do secretly. We don't know about it. So how do we sort of reconcile what's happening with, say, like the leader, Apple? And we are talking about this larger question of who's leading innovation. What are your thoughts on that?

A So I, I'd like to question the premise that Apple's the leader. The company that Xiaomi is most like is Amazon, and when you think about the kinds of things Amazon has done to innovate, Um, you see, again, this obsession with supply chain management. You see this obsession with aggregating and then creating value from customer feedback. You see an obsession with customer experience at every part of the chain. It's interesting to be now in China for long enough that a little bit of my ability to understand the context of the U.S. is fading. And when I look back at the U.S., I think that the U.S. has been somewhat damaged by regarding Apple as our official most innovative company. Because in fact, Apple, Apple does what it does brilliantly, no question. And it's obviously, it's commercial success as a result of, you know, is the result. But in terms of practical surprises in how a company does things, you would, you would look at other companies before you would look at Apple. The competitive battle is not going to be engaged in North America. It's going to be engaged in Kenya and Mexico. That's, it's just, there's so much American centricity in the way we think about technology that we're often just unprepared for the coming global market.

AI assessment note: “So I, I'd like to question the premise that Apple's the leader.”

Q Companies have been manufacturing products like smartphones in China for years. What's, what's changed? Why now?

A They bet on open source software. They bet on e-commerce. They said, you know, we're not even going to bother with the supply chain thing. We're going to ship from the warehouse. Anybody who buys a phone from us, whether it's a, you know, mom and pop vendor or an end user, we get the money, they get the phone. We don't deal with returns. And they bet enormously on social media. Every time you upgrade your operating system, you're given the ability to advertise to your friends, hey, I just upgraded me UI, right? So they have They've got their users. And as Connie said, these, these me fans, the sort of really passionate, engaged users have become their marketing base. They provide feedback. They suggest new features.

AI assessment note: “They bet on open source software. They bet on e-commerce.”

Q Companies have been manufacturing products like smartphones in China for years. What's, what's changed? Why now?

A They bet on open source software. They bet on e-commerce. They said, you know, we're not even going to bother with the supply chain thing. We're going to ship from the warehouse. Anybody who buys a phone from us, whether it's a, you know, mom and pop vendor or an end user, we get the money, they get the phone. We don't deal with returns. And they bet enormously on social media. Every time you upgrade your operating system, you're given the ability to advertise to your friends, hey, I just upgraded me UI, right? So they have They've got their users. And as Connie said, these, these me fans, the sort of really passionate, engaged users have become their marketing base. They provide feedback. They suggest new features.

AI assessment note: “They bet on open source software. They bet on e-commerce.”