Nest is a company that makes smart smoke detectors and smart thermostats. That’s neat, but that gadget business alone is not worth $3.2 billion, the price Google just paid for Nest. There are a bunch of reasons Google was willing to give Nest’s investors a 20x return on their investment, including its pool of talent. But the full scope of the most important reason of all has been absent from most of press coverage.
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Nest is Google’s first major acquisition in what will some day be a trillion-dollar market: The “internet of things.” The internet of things is a catch-all for the movement to connect every single electronic gadget we own to the internet, while also filling the world with inexpensive, always-on sensors.
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To make the internet of things happen, we’re going to have to also fill the world, and especially our homes and businesses, with hubs designed to wirelessly communicate with all those smart toasters, smart lights, etc., while also coordinating their actions.
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