The Boss: From Apple to Nest Labs, Always a Designer

During summers, we would return to Detroit, where my grandfather, a high school teacher and later a school superintendent, would teach my brother and me how to fix things around the house and build projects, like a soapbox racer, in his workshop.

Computers have fascinated me for as long as I can remember. In grade school, I took a summer programming class, using a mainframe computer with punch cards. My grandfather helped me buy an Apple II; he didn’t know anything about computers but recognized that, for me, it was an important tool — just like his hammers and drills. In high school, a friend and I started a small company, Quality Computers. We worked from his parents’ basement, reselling Apple II hardware and writing software.

In 1987, I entered the University of Michigan, in Ann Arbor, to study computer engineering. But my classes didn’t satisfy my interest in computers, so I founded an educational software company and another company to design computer processors for the Apple IIgs model.

After I graduated in 1991, I moved to Silicon Valley to pursue my dream job: working with General Magic, whose founders created the first Apple Macintosh. I knocked on their door until they hired me later that year. I spent four years there, developing hardware and software to create personal hand-held communications devices, including Sony’s MagicLink. In 1995, I pitched a hand-held product to the C.E.O. of Philips, the Dutch electronics giant. He hired me to build its mobile computing group to develop the Velo and Nino personal digital assistants.

Music has always been one of my passions. Philips wanted to expand in the United States, and the company named me vice president for business development to manage its digital music strategy and investments. Being a corporate guy wasn’t enough for me, so I left to start Fuse Systems, a consumer electronics company. But it foundered when the Internet bubble burst in 2001. That same year, Apple Computer hired me as a consultant in designing what would become the iPod digital music player. Computers plus music plus Apple — it was another dream gig.

Eight weeks later, I approached Steve Jobs with the initial iPod concept and was put in charge of building and leading the development team. One iPod led to another, eventually becoming 18 generations of iPods — and then three generations of the iPhone.

My wife also worked at Apple. Eventually I wanted to spend more time with our two children, and I also wanted a break. So in 2008, I stepped away as senior vice president of Apple’s iPod division and became a strategic adviser to Mr. Jobs. He was an incredible influence on how I think about bringing products to market.

After leaving Apple, we decided to build a “green” home in Lake Tahoe, Calif. While researching heating and cooling systems, I realized that the thermostat was ripe for innovation. I founded Nest Labs to build the self-programming Nest Learning Thermostat. When owners are away, sensors adjust the temperature to save energy. The thermostat has been selling in the United States and Canada for 20 months, but because the device is Wi-Fi connected, we know that it is being used in more than 80 countries.

We designed the thermostat for do-it-yourself installation, and we even include a custom screwdriver in each box. I think my grandfather would have liked that.

The Boss: From Apple to Nest Labs, Always a Designer

During summers, we would return to Detroit, where my grandfather, a high school teacher and later a school superintendent, would teach my brother and me how to fix things around the house and build projects, like a soapbox racer, in his workshop.

Computers have fascinated me for as long as I can remember. In grade school, I took a summer programming class, using a mainframe computer with punch cards. My grandfather helped me buy an Apple II; he didn’t know anything about computers but recognized that, for me, it was an important tool — just like his hammers and drills. In high school, a friend and I started a small company, Quality Computers. We worked from his parents’ basement, reselling Apple II hardware and writing software.

In 1987, I entered the University of Michigan, in Ann Arbor, to study computer engineering. But my classes didn’t satisfy my interest in computers, so I founded an educational software company and another company to design computer processors for the Apple IIgs model.

After I graduated in 1991, I moved to Silicon Valley to pursue my dream job: working with General Magic, whose founders created the first Apple Macintosh. I knocked on their door until they hired me later that year. I spent four years there, developing hardware and software to create personal hand-held communications devices, including Sony’s MagicLink. In 1995, I pitched a hand-held product to the C.E.O. of Philips, the Dutch electronics giant. He hired me to build its mobile computing group to develop the Velo and Nino personal digital assistants.

Music has always been one of my passions. Philips wanted to expand in the United States, and the company named me vice president for business development to manage its digital music strategy and investments. Being a corporate guy wasn’t enough for me, so I left to start Fuse Systems, a consumer electronics company. But it foundered when the Internet bubble burst in 2001. That same year, Apple Computer hired me as a consultant in designing what would become the iPod digital music player. Computers plus music plus Apple — it was another dream gig.

Eight weeks later, I approached Steve Jobs with the initial iPod concept and was put in charge of building and leading the development team. One iPod led to another, eventually becoming 18 generations of iPods — and then three generations of the iPhone.

My wife also worked at Apple. Eventually I wanted to spend more time with our two children, and I also wanted a break. So in 2008, I stepped away as senior vice president of Apple’s iPod division and became a strategic adviser to Mr. Jobs. He was an incredible influence on how I think about bringing products to market.

After leaving Apple, we decided to build a “green” home in Lake Tahoe, Calif. While researching heating and cooling systems, I realized that the thermostat was ripe for innovation. I founded Nest Labs to build the self-programming Nest Learning Thermostat. When owners are away, sensors adjust the temperature to save energy. The thermostat has been selling in the United States and Canada for 20 months, but because the device is Wi-Fi connected, we know that it is being used in more than 80 countries.

We designed the thermostat for do-it-yourself installation, and we even include a custom screwdriver in each box. I think my grandfather would have liked that.

Wealth Matters: Taxes Influence Investment Strategy, and Not Always for the Better

That may not be a good thing for their portfolios.

“Clients are definitely asking, because it’s a real issue in today’s environment,” Michael N. Bapis, a managing director and partner with the Bapis Group at HighTower Advisors, said. “We try to keep them focused on the goals — preserving what they have, capturing some of the upside, limiting the downside. At the end of the day, we can’t change the tax laws.”

When asked about how tax rates would affect an investment, he said his advice was almost always the same. “If it doesn’t make sense for your portfolio, then it doesn’t make sense,” he said, even if there is tax savings. “If it does make sense, regardless of the tax consequences, we’re going to put it in your portfolio.”

Last week, I looked at how the changes to the tax code were affecting how people thought about their estate plan. This week, I’m looking at how tax increases can influence people’s investing behavior.

The tax rates on investments have increased significantly from last year. Depending on a person’s income, taxes on long-term capital gains and dividends are now as high as 23.8 percent, an increase of 59 percent over last year’s rate. Taxes on investments that are held for less than a year that incur short-term capital gains tax or investments subject to income tax rates have increased for top earners by 24 percent, to 43.4 percent (with the Medicare surtax included) from 35 percent.

Those are substantial increases, but focusing on them alone can obscure a fuller analysis of risk. Investors can end up paying no taxes on an investment, but that may be because they lost money on it, or they may pay lots of taxes on a large gain that they might not have achieved otherwise. This is why advisers stress that taxes should not be the first concern when deciding whether to buy — or not buy — an investment.

If there is one investment that has been promoted as great for minimizing taxes and achieving a large gain, it is master limited partnerships. Most are involved in the transportation or storage of oil and natural gas. What makes them appealing, from a tax perspective, is that a large portion of the dividend they pay is treated as a return of principal and is not taxed.

But in the rush for one type of tax savings, investors can end up paying other taxes. Master limited partnerships with pipelines that run through several states can incur state tax bills for investors, though usually only when the income goes above a certain threshold.

The bigger tax concern generally comes when investors sell their partnerships, since the part of the dividend that was not taxed for years reduces the original price of the investment. Greg Reid, a managing director at Salient Partners and chief executive of the firm’s $18 billion master limited partnership business, said an investor who bought a partnership and sold it five to 10 years later could be faced with two types of taxes. The first is income tax, because the original purchase price would have been reduced by the amount of principal returned in the dividends. The second is capital gains tax on the increase in the value of the investment itself.

Another way to look at these partnerships is to consider the solid and increasing dividends they have paid over the last 25 years, often 6 to 7 percent.

“The baby boomers are going to need a lot of income to live,” Mr. Reid said. “M.L.P.’s are particularly great for older people who are retiring. They have a growing income stream.”

As for avoiding high taxes, the solution is to give the partnership to charity or die with it in your estate. Both may be viable options for investors in their 70s and 80s but are probably less attractive to people in their 30s.

Municipal bonds, which have long been attractive to wealthier investors because the interest they pay is not taxed by the federal government, pose a different sort of risk.

Mr. Bapis said he was concerned that investors who were not paying attention to the broader economic news were not aware of the current risks of buying an existing municipal bond. With yields on many municipal bonds extremely low — around 0.75 percent for five-year bonds and 1.74 percent for 10-year bonds, according to Bloomberg — even a small increase in their price, which would cause the yield to go down, would cause a loss of principal.