Google's Nest Labs, Tesla, and the Internet of Things

The Internet of things. People are saying it's the next big revolution. Every day it's looking like Bill Gates' smart house for all is less of a dream and more of a reality. Thanks to innovators like search-giant Google   (also known for its random shots at the moon, like the self-driving Google car) and electric-car maker Tesla Motors , smart devices are taking over in areas never seen before. While there are a number of major benefits to connected products, one of the major advantages was recently highlighted by both Google and Tesla: over-the-air device updates.

Model S. Image source: Tesla Motors website.


Preventing recalls
When things are connected to the Internet, products are better. Not only do they suddenly have access to real-time information transmitted from the web via Wi-Fi, making them smarter and more useful, but they can also improve over time -- a feature that may be underappreciated. This feature of connected products will prevent thousands of recalls in the coming years.

Tesla calls these updates that improve a product with a simple download "over-the-air updates." Both Tesla and Google's recently acquired Nest have already arguably prevented recalls thanks to this new technology.

After three battery fires resulting from high-speed accidents in Tesla's Model S vehicles toward the end of 2013, the National Highway Traffic Safety Administration, or NHTSA, initiated an investigation to see whether there was a design defect.

Tesla's 17-inch touch display built in to the Model S notifies owners of software updates. Image source: Tesla Motors website.

Two of the battery fires resulted from the vehicles driving over debris on the road that punctured the batteries from beneath. Responding to consumer concern and NHTSA's investigation, Tesla sent an over-the-air update to its fleet of thousands of Model S vehicles that raised the default ground clearance of the cars' smart suspensions at highway speeds. Since the update, there were no more fires.

NHTSA recently concluded the investigation, saying there is no product defect. While Tesla announced it is retrofitting its fleet with a better armor for the battery, a move that played a role in NHTSA's decision not to force a recall, NHTSA also cited the over-the-air update as a factor in the decision.

Google's Nest also benefited from an over-the-air update this week. After discovering that there is a possibility that its motion-sensing ability to disarm the alarm with the with the wave of a hand can be activated accidentally, Nest halted sales of the device "to ensure no one buys an alarm that needs an immediate update," Nest CEO Tony Fadell said on the company website. But thanks to over-the-air updates, a recall wasn't necessary. Nest customers who have the device connected to Wi-Fi and a Nest account will receive an update that fixes the issue.

While there are undoubtedly many other benefits beyond over-the-air updates for connected devices, this is one feature that investors, in particular, can appreciate. Google's Nest and Tesla's Vehicles both benefit from a lower risk profile thanks to the ability for the companies to update products via the Internet in cases that may have previously required a physical recall.

But what's the best way to profit from this $14.4 trillion revolution?
Companies like Tesla and Google's Nest Labs have clearly illustrated that the Internet of things will play a massive role in the future. But what's the starting point for investing in this revolution? The key lies in understanding exactly how to invest in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in explosive lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 trillion industry. Click here to get the full story in this eye-opening report.

The article Google's Nest Labs, Tesla, and the Internet of Things originally appeared on Fool.com.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Google (C shares) and Tesla Motors. The Motley Fool owns shares of Google (C shares) and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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