Premium positioning can fund a hardware company’s advantage

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 54:45

   as much as you can share that you know but i'm very interested in your philosophy behind the decisions you're making is what i'm trying to get to i think there's like a number of uh challenges obviously i think it's much more harmful for luxotica than it is for for meta i think meta needed to partner with luxotica because the meta brand i think is not something that people want to put anywhere near their face so i think um i think that meta really needed i think what's what's challenging for Luxottica is they took like the most iconic crazy high margin product and they destroyed the margin and then they associated it with Meta so like I think like that like we'll see if that pans out over like a longer period of time if that was the right brand choice uh for them but I can definitely see why Meta needed needs to camouflage their brand which

2. 55:29

   I think a lot of people don't resonate with and don't like with you know the Ray-Ban uh brand but But I think people are misreading, I think, the dynamic of what's happening when you have meta Ray-Bans on the shelf next to a regular pair of Ray-Bans and they're both about the same price, right? And it's, you know, I love to just walk into a sunglass hut or whatever and talk to them. Hey, what's going on?

3. 55:51

   What's selling? What's not? It's like, well, you can get the meta Ray-Bans that have a camera for about the same price as the regular Ray-Bans. Why don't you, you know, try it out for your upcoming vacation? I think. So that's a smart strategy if you want to move a lot of volume, but I don't know if that builds a durable business over time. And the reason why I don't know if that builds a durable business over time is if I look at successful hardware companies over a long period of time, we can look at Apple.

4. 56:13

   We could talk about Tesla, for example. Early adopter is the wrong term, but they really try to start with premium or even luxury positioning around a very passionate early adopter group that believes in their vision. right think like the tesla roadster right or the early imac or the early iphone and they build a brand by starting with those early enthusiasts who like believe right in the electrification of the world the transformation of the power uh you know the power grid how we're gonna you know move things around or in the case of apple you know a revolution in the personal computer right that everyone's been doing phones wrong and that like you know having this uh you know personal computer in your pocket you know would be really transformational and they really activate that that passionate group of enthusiasts. And then over time, they work with that really passionate

5. 57:02

   group of enthusiasts to, you know, grow into the mass market while preserving their premium positioning, which means high gross margins. Then they take those high gross margins and they reinvest in R&D, which widens their lead. And like that is the story, I think, of successful hardware companies. And I think it's very, very hard to start with a super broad-based, low margin consumer product and try to work your way into premium positioning. So I think if you look at specs and like what we've tried to do, even like your early experiences with the brand, right, we're innovative and different. And again, oriented around a group of enthusiasts and early adopters who like want to see the world differently, who want to participate in the cutting edge of technology. And I think if we're able to build the brand that way and build our own brand around

6. 57:49

   that, that will allow us to sustain, you know, our margins over time, which will allow us to reinvest, which ultimately will give us a big competitive advantage. I want to go back to wanting to control most of, like, actually building your own hardware. You said something,