Ben Thompson, a Taipei, Taiwan-based writer with a sharp understanding of consumer tech, has attracted a loyal and growing base of readers to his one-man media company, Stratechery. Thompson has also become something of a thought leader in Silicon Valley over the last year, largely because of the perspective he enjoys from his perch halfway across the world.
Last night, at a San Francisco dinner hosted by the venture firm GGV Capital, Thompson — who’s in the U.S. for an Apple event this Monday — shared some of his thoughts with investors and entrepreneurs as they sipped wine and enjoyed a series of carefully prepared Cantonese dishes.
Among the topics raised was five-year-old Xiaomi, the fast-rising Chinese company that became the top player in China’s competitive smartphone market last summer, as well as the world’s third-largest phone maker. Thompson didn’t address the long-term prospects for Xiaomi, which raised $1.1 billion in funding at a stunning $45 billion valuation in December. But he did talk at some length about why he thinks it shouldn’t be underestimated. From his comments last night, edited lightly for clarity:
“Whether [I’m ‘long Xiaomi’] is a separate question from why I think the company is interesting.
Xiaomi is very highly valued right now, but they’re a company that a lot needs to go right for them to succeed. Then again, in 2012, if you said a lot would need to go right for them to get to X by 2015 — well, a lot did go right. They’ve executed very impressively to date.
Why they’re interesting as a company is that tech companies get so caught up in scale, and the efficiencies that come with them, that they tend to treat entire markets the same. Not Apple, which has demonstrated that you can definitely segment markets, [and not Xiaomi, which has done the same].
If you view the whole world as one market, you have this view that on one end, you have people who really love technology and will spend a lot on their phone and you give them the highest end sort of thing. And [you think that at the other end of the spectrum], you have someone who just doesn’t care, who walks into the AT&T store and buys whatever they’re told to buy and they get some crappy knock-off phone or whatever it might be.
But too many tech companies treat that [latter] person the same as the person in the developing country who is also buying a cheap phone. And they’re exactly the opposite. If you’re a young person and you’re interested in technology but you don’t have much money, you’re very different from someone who will just walk into a store [with no agenda]. What Xiaomi did was treat that person [like a sophisticated buyer]. “You want something that’s super customizable that you can dig into, and we’re going to meet you at a price point that’s approachable for you.”
It’s no wonder they just obliterated these other phone companies that are offering a knock-off of last year’s model at a low price. Like, which would you rather buy? A phone from a company that’s giving you what you want, or last year’s Samsung? The low-income market is different, but it’s the same in that there are also geeks there who want something interesting there, and there are people who don’t care there. You don’t think about [customers] in terms of money. There are different segments — people who are on the super cutting edge and people who aren’t — and that’s fine as long as you don’t treat it as one monolithic kind of thing.
I kind of feel like tech in general is too much in love with scale when often what’s interesting is at the margins — identifying a niche and serving it and figuring out how to scale it later. Too many companies think about scale from day one and they end up making a mediocre product that tries to serve everyone and does it very poorly.”