OpenAI will replace a lot of software we use today. But I think there is a kind of apps that will will actually benefit from it: Luxury software. We’ve got things like fancy cars, designer clothes, and big houses. Luxury software? Not so much. But I think that’s about to change.
The perfect example might be Superhuman. I believe what makes Superhuman special is not just how quickly you can go through your inbox. When you use Superhuman, it feels like you’re using digital equivalent of a Porsche. There’s a delight in every detail. You can feel the considerate design choices. The ‘Sent from Superhuman’ signature’ is also a flex.
Let’s look at another example. Rize is a fairly expensive automatic time-tracker. It targets people who want to get the most out of every waking hour. They’ve got a big community of 4,000 on Discord. You know the crazier part? It’s made by just two people!
RIZE is a perfect example of luxury software. It makes your routine tasks fun via gamification, provides you with beautiful charts you can share for signaling, and tracks your time automatically with AI – all making it feel high-end. I see a lot of my friends in startups sharing their RIZE charts on social media. Watching them do that got me to try RIZE, and now I’m subscribed too.Most of the major tech players view these products as mere toys.
Tools like Rize have a relatively small market. And they lack moats that attract investors, like unique technology or network effects.Yet I think this is where small teams should focus on. Most people aren’t trying to build the next unicorn. They just want to make money doing what they love.
But why are we seeing luxury software become a viable business model now?
I believe it’s GPTs.
YouTube made dramatically cheaper to distribute videos to millions of people. Nowadays, people making videos just focus on creating awesome content, and YouTube takes care of the rest. This big change in how videos get out there has made a lot of content creators pretty wealthy.
A similar thing is happening to product development. GPTs are lowering the cost of building products by probably over 90%. This lets product makers target niche audience and still create a profitable business.
More people will also want luxury software. A lot of solo entrepreneurs and small teams are now hitting tens of thousands of monthly revenues. In the physical world, people buy fancier cars when they make more money. So, as we start to see more software millionaires, I bet they’ll spend more on fancy software too.
I would love to know how other members in the community think about this trend!
No.
I don’t think luxury software will or even can be a thing.
Software has vanishing marginal costs of replication.
Therefore, mass adoption of a consumer app will make way more revenue than high price low volume apps (b2b is a different story because of the ticket sizes).
But this means, mass market companies can afford better designers and better engineers and ultimately create the better product. That is why there will be no luxury software. If you pay more for a product, you want a better product. Otherwise the flex does not work and just makes you look dumb.
Additionally, most of the time, you also interact with software either alone (no one to flex to) or the other users are part of the value (a luxury instagram with no one to like your post does not make sense)
RIZE is pretty standard consumer saas pricing.
Superhuman only works because there is a subset of e-mail power users with requirements (i.e. shortcuts) that the mass market explicitly does not want (they want a clickable ui). So they found a niche with a higher willingness to pay. With the hefty pricetag, you could argue it’s luxury software, but my guess is, it’s mostly sales people and enterprise customers. And then we talk a b2b not a luxury use case. And it’s in a similar ballpark as Figma, Adobe and other b2b saas.
In the end the market dynamics of software (such as in media) inhibit the emergence of luxury software.
The only “luxury” apps I can see are such where low adoption of select people are part of the value prop. E.g. Elite Dating Apps. But here, The community rather than the software is the product.
Thanks for sharing this. It was a really insightful read and helped clear up a lot for me.
‘With the hefty pricetag, you could argue it’s luxury software, but my guess is, it’s mostly sales people and enterprise customers. And then we talk a b2b not a luxury use case. And it’s in a similar ballpark as Figma, Adobe and other b2b saas.
From what I’ve seen among my startup circles in S.Korea, Superhuman is pretty popular among the C-level executives. Superhuman has been testing a new ‘Superhuman for Sales’ feature. It looks like Superhuman is just starting to target the sales people and enterprise customers.
Can confirm. I’m a founder and operator of an agency but have a lot of projects where I have multiple emails, lots of filtering to set up, and I’m a power user (ie hotkeys are my life). Superhuman is amazing. I’ve got my partners using it and our sales director. As soon as it’s more cost friendly I’d like to upgrade a lot of others to the platform.
For what it’s worth, I turn off the Sent with Superhuman. But god damn do I love it.
I would grant you the argument that superman is somewhat of a luxury app.
However, i think these will stay fringe and exceptions and not become a big thing. Like the 1k diamond iPhone app that did nothing.
C level executives are not paying superhuman out of their own pocket, it’s a company expense. They get a lot of emails because they are in jobs that receives a lot of emails.
I work in a startup and lots of people have superhuman paid by the company because it’s easier to manage emails and just saving a couple hours a month is enough to justify the cost.
This is it
Politely disagree.
“Luxury” may be a strong word to describe such products, but “Premium” to “Ultra Premium” may be more apt labels.
There is a market for Premium software. That is, software well-made (as in darn near perfectly), best in class, and targeted at or near the top of the relevant market. Superhuman being a great example.
I agree that Rize is no where near luxury or even premium. haha. I believe lux to premium software would be charging bare minimum $50 / month, but probably something more like $100 to thousands per month. Though, also agreeing with you, the value won’t be in the software on it’s own, but in other benefits that are packaged within the product, both physical and non-physical. Non-physically, lux and premium products are typically packed with meaning, implicitly create social stratification, and relative incomparability to other products on the market.
All this can be made possible with software, though in this instance, the software is the facilitator or the means, but not the end of the story.
I think you can have luxury software, because we have luxury handbags, luxury watches, luxury perfume/cosmetics. The marginal cost of making things like cosmetics/perfume/handbags/watches are almost nothing compared to their retail prices as luxury goods.
People will pay $100/bottle for a perfume when it cost like $2 to make and distribute.
The economics of luxury goods is not about marginal cost, but about perceived value. Free software works if you have network effects and the value of the software increases with number of users like social networks. If there is little network effect, you can have a luxury niche in software just like you have with handbags/watches/perfume.
Another aspect of luxury is social status. I think this is where software falls short because people can’t easily see what software you use. Software doesn’t confer status the way handbags, watches do.
I think software can definitely have brand value. There are definitely associations with software you use. For example: Linux = hacker.
Luxury is ultimately about status and perceived value, not code/UI/usability.
But still the luxury handbag will be better than the non-luxury one. Whereas the luxury software will be worse, because the non-luxury brand can afford way more manpower to make it great. On the other hand, a luxury software company cannot afford the ad spend to increase brand perception.
The essence of the software business is the vanishing marginal cost. That is what makes the business model so great.
A luxury software essentially cuts itself out of the single most value generating market mechanism in the industry.
I don’t say luxury software is impossible. But I say that the market dynamics of the software industry are such, that the dominating players and vast majority of successful businesses (wrt. to revenue, size, cultural influence) will be mass market or specifically tailored b2b products. Not luxury goods.
If humanity has anything to do with it, they’ll still find a way to snatch failure from the jaws of success. It’s a talent.
You typed this into a device that’s not physically connected to anything, and we all can see it. Humanity is winning.
I do not see how GPT can help excellence. Rapid development of mediocre product sure, but highly polished product? You need real expertise there both in SME and UX.
Maybe it’s more like if you can outsource most of the work to GPT (even cheaper than Indians), you can use the rest of budget to polish the product.
Have anyone tried to write a full saas app with chatGPT?
It can barely do simple scripts.
Have you used gpt4 to write code?it’s shit quality 😂
I believe GPTs are significantly increasing the productivity of those experts. GPTs is kinda like having a junior dev, marketer, or designer. Now, they don’t necessarily need external funding or large teams to create and ship a highly polished product in a reasonable timeframe.
its not though. gpt just regurgitates what is on the internet in a custom way and not always well. if you want something very basic or you can continually define a task that to a small scope then gpt can usually do okay. not optimal, just okay. you really would need to already know what gpt should be giving you to save any time with it. it’s like a better google 75% of the time and that is amazing. it’s just not close to being able to replicate the engineering process for anything that has scale or complexity.
gpt just regurgitates what is on the internet in a custom way and not always well.
I must be missing how that’s different from having a junior developer, marketer or designer
How much does Rize cost?
This is AI’s peak at least for few years. Learning will be slow for few years. We are almost done with all the historical data for training.
I think you are right
My personal belief is that moats are overrated. Yes someone can invest time money and effort to steal your customers, but that’s a lot of cash. Meanwhile you can match with brand and customer loyalty and product differentiation
What kind of moat does Netflix have over Disney+? Nothing
As for “luxury software” it’s entertainment
Netflix has way more movies and TV shows than disney plus. That is a moat. You are off the mark with this example in terms of validating your argument, but I also see and somewhat agree with your point.
I agree it’s a moat but then Disney+ has a moat (Disney shows) and Netflix’s moat isn’t as strong since their licensed shows can be bought except for Netflix exclusives
If “content is king” then is all copyrighted content a moat? I think we will see that challenged by AI and licensing; it’s only a moat because customers see the value in it; if customers can replace it then it’s not a moat anymore
I like this idea. I think it would need to be something that people can show off though. People like luxury stuff to show it off.
Same with phones. I’m really surprised that luxury phones don’t seem to be much of a thing.
Have you actually used rize? The ux is pony
I use it everyday! I think it’s pretty amazing for a product built by just two people.
I worked at Superhuman. I agree with this somewhat.
What makes Superhuman so powerful is that it invokes a feeling of freedom. For those of us that manage email inboxes with 50+ new emails piling on a day, it becomes impossible to manage and cuts into other areas of our lives.
Take an executive that take off work at 6pm to see his kids and, after they go to bed, catches up on email until midnight just to not fall behind. Miserable at best.
Superhuman solved a huge problem in the market and they did it so eloquently that people started to identify with the brand. It became a bit of a secret club, one that you will certainly invite your friends to (I’ve referred over 30 people personally over the 3 years I’ve been a user. Not including during my time working there)
Couple that with the fact that Rahul is well respected in the product/startup community and wrote some viral posts on how superhuman achieved PMF, and you have recipe for a die-hard fan base.
So to put a bow on this all, I do think that Superhuman is a luxury brand (it’s $30/month for email ffs) but that alone won’t make a successful company. You have to solve a problem and then build a brand (and maybe even a cult-following!) around yourself.
Moats will dry up in this age of AI, especially after GPTs just rolled out. But brand and a vision that invokes a sense of belonging is irreplaceable.
I think people are getting tired of all the different gpts you can use. Like people are getting tired of all the different apps you need for creating a smart home. We forgot which app was for your light 1 and which app was for light 2 and what was the password? Etc.
What we need in this society is a system in which we can connect all our gpts / AI products each for helping a specific activity. Like your personal assistance.
I feel like this is a good time to plug r/homeassistant
Tell me you have no idea of software design, or AI, without telling me.
All software with decent CSS is lux software, change my mind
UX*
I love it! I have my AI ads software and my AI cold email software.
Luxury software for consumers? I’d disagree.
Luxury software for businesses? 100% agree. We’ll see MBB consulting, BB banks, FAANG, Big 4 accounting, etc. all get custom, ai-powered software similar to how many finance firms have Bloomberg now.