Making Connections #1: On Luxury
I am starting this newsletter to have more open, meaningful conversations about psychology, sociology, company-building and capital allocation. I'd love to hear your feedback on this first issue: hit reply and let's start a conversation.
Why I changed my mind on Luxury.
The term ‘luxury’ used to make me wince. Consumerist brands like “Gucci” and “Maserati” come to mind. Brands that make their money by convincing consumers that their logo on a product will not only make the product exceptional but also the person brandishing it.
Yet when I read Om Malik’s 2015 interview with Brunello Cucinelli, the “king of cashmere”, I lingered on his comments on the idea of luxury:
Luxury is a handcrafted good or a place that is beautiful, well-made, exclusive. It must be exclusive; otherwise it’s not luxury. It’s nearly always something beautiful, well-made, true, and also useful and fair.
It made me consider the underlying drivers of ‘luxury’ - namely quality and status signalling. They both come together.
When you take those components and apply them to modern consumers, it becomes clear why Gucci and Prada are being replaced by Outdoor Voices and Patagonia. When we derive status not from the price we pay, but from the values we align with, what constitutes luxury evolves.
The quintessential example of old-world luxury is Rolex. Their watches are “crafted from the finest raw materials and assembled with scrupulous attention to detail.” The trademark gold and silver band ensures everyone will know you’re wearing a Rolex, and how much you paid for it.
Outside of fashion, companies like Superhuman bring ‘luxury’ to software, creating a high-quality product with embedded status signalling to justify a high-end price tag.
Through speed, a clean UI, myriad shortcuts and a high-touch onboarding process, Superhuman measurably improves the daily grind of email for its customers.
The team also understands how status-hungry their target market is and embed status signalling directly in the product - from making it invitation-only in the early days to waitlists and the “Sent by Superhuman” sign-off, delivering an early buzz that drove huge demand among early users in the tech community.
Superhuman demonstrates the evolution of luxury - while it has a high price tag for an email inbox, using it also signals how highly you value productivity.
In broader society today, consumers are buying from brands that represent our beliefs and showcasing them through the clothes we wear, the cars we drive, and even the software we use.
Brands building high-quality products committed to sustainability have become the luxury brands of today because their target customers believe consuming these products is a high-status activity.
Patagonia’s accelerating growth in recent years is at least in part due to its deep commitment to sustainability (mimetic VC bros deserve some credit). Patagonia lives that commitment through activism initiatives, by inventing new materials to give its clothing enhanced durability and even repairing old clothes for you.
Which is why I changed my mind on luxury.
Humans are status-seeking monkeys, we'll organise into status hierarchies in any situation. So if you want to build a high-quality product solving a worthwhile problem for a niche set of customers, why not bake in some status signalling to help spread the word more effectively?
To apply a ‘luxury’ brand go-to-market:
Develop a tight brand narrative to communicate your brand’s values and purpose.
Bake scarcity into your product launches with limited editions and waitlists.
Establish hierarchy through Ambassador programs, so devoted fans can signal their association with your brand to their friends.
Host invite-only events for your most loyal customers.
Become a luxury brand.
Online Reading
I had a tough holiday period with friends and family getting sick. It reminded me to embrace today without worrying about the future because today is all you get. At the same time this article reminds us to hope for the future:
“Hope is an orientation, and insistence on wresting wisdom and joy from the endlessly fickle fabric of space and time.”
How Carlos Ghosn Became the World’s Most Famous Fugitive
This story needs to become a film. How Carlos Ghosn, after more than 100 days in solitary confinement and on bail facing years in jail, escaped security in Japan concealed in a large, black case.
How The 2010s Killed The Celebrity Gossip Machine
On how celebrities took control of their publicity back from the paparazzi through self-publishing in the 2010s, crafting their own story and profiting from it. In 2020 I expect to see even more celebrities founding startups with the help of experienced operators. These celebrities can get to innovation before other startups can get to distribution.
The story of a group of scientists, who for years had seen promising work smash up against unscalable walls, eventually through an unlikely series of twists of turn saw their Ebola vaccine used in the field to save lives.
Books
The Man Who Solved the Market by Gregory Zuckerman
This year I want to spend more time reading intentionally around specific topics. I’m starting with books on investing and eased in with a business biography. This is the story of Renaissance Technologies, a quant hedge fund that was using machine learning to beat the market decades before the hype.
The most obvious takeaway is the power of hiring the smartest minds and getting out of their way - Jim Simons didn't write a single line of the code, he assembled a team of extraordinary mathematicians and computer scientists, motivated them, and saw his job as making difficult decisions and raising money.
While the illiquidity of VC investing can be painful at times, Zuckerman reveals the dark side of liquidity. The constant pressure of 24-hour markets transforms previously content academics into anxious wrecks, relentlessly tick-watching futures markets.
It also reminded me of the reasons I left the trading floor. Money corrupts, taking people who loved their craft and debasing them until all they care about is keeping score. The absolute amount of compensation they're taking home each year sits in the top 0.01% of the population, but all that matters is the number relative to the person sitting next to them.
Podcasts
Andre 3000 on the Broken Record with Rick Rubin
A reminder that even the most talented and celebrated creative artists are paralysed by self-doubt.
Let’s Connect
In Real Life
We’re kicking off 2020 with an On Deck dinner in Sydney on 29th January.
We’ll invite 15-20 experienced startup operators who are openly - or secretly - looking to start their next thing or make crucial early hires.
Hit the button below to apply to join the community in Australia:
Email Me Back
Let’s keep the conversation going. Do my ideas on modern luxury reflect your experience? What did you like and dislike in Issue #1?