Eric Siu and Neil Patel debate whether brands are losing power, examining Tesla, Nike, and luxury fashion through the lens of status signaling. They explore how cheaper products challenge brand value, then shift to AI agents replacing traditional service businesses, citing a $5.5 trillion market opportunity.
Chapters
Did you hear how Chamath said that brands are going to zero?
I did not see that, but I saw it in your list.
Okay, so here's his argument. I'm going to name a couple of things here. So he's like, look, you go, you look at Tesla, you know, you look at BMW. Initially BMW was like powerful brand, right? And you look at, which is still a powerful brand, but you look at Tesla, they kind of come out of nowhere. But then what happens is what you got BYD in China, what, $5,000 for a car, $10,000 for a car, right? So his argument is that products are becoming cheaper, easier and cheaper to make, and brands that keep bringing abundance are going to win. So if you continue to drive costs down, like you look at Tesla, for example, like the Model 3s, like the costs are coming down, they're going to continue to win. But when you look at— when you look at a world where like all these things are just cheaper and cheaper to make and everyone's just copying each other, his arguments, it's harder to have that brand power stand the test of time. And so I think he did mention something about Louis, like LVMH, like Louis Vuitton, for example, not being able to stand the test of time. I think there's going to be a couple of those that do. But I do— I do see a world where it's just like if you have a better product, you know, you're just going to, you're just going to win out. So I don't think brands are going to go to zero by any means, but I do think it's going to become much more competitive and maybe there's not as much staying power as there was before.
So I disagree with him. I'm not saying I'm right or wrong, but like if you look at BMW, okay, here's a chart from 2007.
Is it 2024?
No, because it's European traded and sometimes it's hard to pull up. Overall, they're growing up and to the right. They saw a big bump from COVID It's normalizing. It's a little bit down, but overall it is up and to the right considering how old Of a business it is. And most people don't know this, BMW owns one of the most iconic luxury car brands out there, which is Rolls-Royce.
I didn't know BMW owned Rolls-Royce.
Yeah, it's owned by Rolls-Royce.
Oh, I didn't know that.
Yeah.
So you have a car that you have to take to the repair shop all the time?
You're talking about a Rolls-Royce? I don't own a Rolls-Royce.
I thought you did. No.
Oh. Yeah, I never owned a Rolls-Royce.
Oh.
Too flashy.
I know someone that does home hospice.
They probably make good money.
Well, we'll just leave it at that. Yeah.
Yeah. Oh, you're talking about the Nick Shirley stuff where people are just scamming and making free money.
Yeah, but I know people that— That sucks.
Continue people to do.
All right.
So if you look at like Louis Vuitton and Chanel, I think their brands have sustained time. They're iconic brands. They're old. I think they're over 100 years old. at least I think Louis LV is over 100 years. I don't know about Chanel.
Yeah.
But they're iconic brands. People look forward to them. People don't want their products mass-produced.
Dior.
And people will pay arm and a leg for them. And the moment things, their products go cheaper, I actually think their business goes backwards. So when Chamath says, you know, brands go to zero, I don't see Michael Jordan's brand with his Jumpman logo. Michael Jordan hasn't played basketball in a long time. Shoe brand is iconic has nothing to do with the comfort of the shoe. It's the brand on there. And I know this firsthand because when I was at his celebrity or nonprofit golf tournament or whatever in Vegas years ago, they told me that the bigger the logo, the smaller the other people's names, because they do co-partnerships and branding, the more shoes they sell. Even if it's like with Jeter or Derek Jeter or whoever else it may be. I don't just see brands going to zero. I actually see branding being the moat because people feel a certain way about a brand like Apple or Tesla or Nike or Louis Vuitton. And I think that is actually one of the most powerful moats because it's hard to build a strong brand.
Here, I'll simplify this for, for myself a little bit. Brands aren't going to zero because what Charlie Munger said this before, the thing that humans fight over is not necessarily greed, it's envy. Envy is the biggest driver with humans, right? It's very much a status game. So if we all have abundance, we need a way to show each other who's better, who's, who's what, right? Yes. It's all status-driven.
Yes, it is status-driven. Dude, I drive— yes, we do have one nice car in our family. I drive around in a Honda Odyssey. And when I go around here in Beverly Hills and people see me in a Honda Odyssey, most people don't treat me as nice.
Okay? They're kind. What do they tell you at the valet?
At the valet, they usually tell me to pull forward and then they'll take all the other cars.
Because they think you're an Uber driver. Yeah.
And then they'll be like, are you here to pick up someone? And I'm like, no. And then I'm like, I'm here to get my car valeted. I have a meeting here. And then they usually will say some remark like, it's X amount of dollars. You sure you want to valet? I'm like, yeah, it's okay. I'll valet. And Eric knows I'm not the best person at parking or parallel parking.
Or driving, period.
Yeah. So then I tend to, although I do pretty well with Odyssey. Yeah, it's also the car's not fast and it doesn't—
Maybe you learn how to drive better 'cause you have kids now.
Yeah, but either way, when I ask people in Beverly Hills, I'm like, dude, you should get an Odyssey. And people are like, are you kidding me? I won't be caught dead in that thing. I'm like, but you have kids. You're telling me you'd rather get out of your car, open up the door, have 'em get in and close the door versus just push a button and your doors slide open, they jump in, buckle themselves in, has a built-in vacuum where you can pick up their french fries or whatever they're eating, their candy or snacks. And people won't do it 'cause they're just like, It's a Honda. And I'm like, who cares if it's a Honda? And on top of that, they're like, it's a minivan. Minivans have bad branding.
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Dude, did I show you the Mercedes new minivan that's coming out?
Is it the— remember I showed you the one in Asia? Is this like a version of that? Oh, I showed you the Lexus one in Asia.
You showed me the Lexus one.
Yeah, which is nice.
Okay, but check this image out. I'm going to show you the Mercedes minivan.
Oh, wow. So Neil's showing me a fully decked out van by Mercedes that looks very tech forward.
And look at this, has reclining seats.
It's like a first class flight.
31-inch screen TV.
It's a first class flight.
It's amazing.
Yeah. How much is that?
I think it starts at $80,000 and then goes up to like $100,000. It comes out sometime next year. It's electric, $100,000 and something.
Oh, you're for sure getting it.
For the features. I tried, they're not putting— you can't put your name on the list yet. It comes out next year.
I don't think they're going to sell like hotcakes. So we're not in a good economy.
No, dude. The amount of calls. So I talked to Fletcher Jones Mercedes in Newport. They have like a Sprinter division.
Don't you have a hookup there?
I do. And I was like, how do I get it at cost? So, you know, there's nothing wrong in negotiating, but they were telling me like the amount of calls they're getting for people requesting. So then I started asking the guy questions, 'cause I was just curious. I was like, who are you getting the calls from? Men or what? Actually, I first asked, are most of the people calling for this, do they have kids or they don't have kids? He's like, everyone who's called has kids.
And it's all the women calling?
And then I said, is it men or women who are asking for this? He's like, only men. He's like, we haven't had—
Only men?
They haven't had one woman ask for the car.
Wait, why? So I don't understand.
Okay, so I started sending this to Some women, or like some of my friends, and they send it to their wives. And I asked them to send it to their wives and get their take.
Wait, you send it to women to send to their wives?
I send it to men.
Okay.
Most of my guy friends, most of my friends are guys. Almost all of them are guys. I have some female friends, but most of them are guys. And then I told them, I asked what they thought. Most of the guys thought it was legit. I told them to ask their significant other what they thought. And most of their significant others that were women said, Ugly? Is this a joke? Or, and it's still a minivan.
What?
It was usually one of those 3 things.
Seriously?
Yes.
Why?
And then the 4th one that wasn't as popular was, why not just buy an SUV?
But I have to assume all, correct me if I'm wrong here, okay? So Neil's talking to his guy friends. I'm assuming they're all successful, okay?
Correct. They're all entrepreneurs.
Which means the trophy, let's say their trophy wives, their great wives, right? They're used to nice things, right? So they probably want to have the best of the best SUV, Like, I don't know, but this is the best of the best for a minivan in the United States. So you would know more than I do. I don't know why they have an issue with minivans because I don't have an issue with minivans.
It's the branding. And it goes back to the Chamath thing, you know, brands go like, a lot of people won't get caught dead driving a minivan because it's a minivan. It doesn't matter if it's a Mercedes or a Rolls-Royce.
Okay, I see, I see, I see. The status behind driving a minivan is not cool. Got it.
It's not cool. It's just like, oh, this is, you know, a crappy person's car, whatever. I'm like, I don't believe that. I drive a minivan. I think there's nothing wrong with that.
But that's also because guys don't care about anything. You didn't care when your 40th birthday— like, my 40th birthday is coming up. I don't care. People are like, what are you gonna do? I'm like, I don't really care, right?
You don't care?
Did you care when it was yours? You didn't even mention it during the event.
That's right. My 40th birthday was— but I did eat ice cream.
Yeah, he had double ice cream.
It was free though.
Remember that?
Yeah.
So I'm just saying guys don't care about a lot of these things, right? So we just care about practicality and utility, which to us is not a status thing, but it is a status thing when we think about our technology, right? Actually, no, I just want to use it better. I just want to work better.
So I think work better is right for some people, but for me, I want the best technology devices. I don't know why.
Well, I do too, but like, so it needs to be the newest, right? This needs to be working really well and I need to have the best things.
Okay. But with your phone, okay, the last version of the iPhone works pretty much the same way as this one. Would you agree with that? So why do you really need the new one?
Well, first of all, I get these for free.
Okay. Some of the stuff you pay for, like the iPads and stuff.
Yeah, I do.
But why do you need the newest one when it works almost the same?
So no, this one is the same. So I haven't upgraded this one, but now I want the latest Mac Ultras because I want the memory for local infrastructure so I can run my company more.
Totally agree. And that's why I didn't ask you about the actual computers. Okay. But like sometimes the technology cars, you want to try different cars or whatnot. Your Tesla worked fine. You ended up getting the Porsche.
I looked that up. I haven't. So here's the thing. When I lived in Miami for 2 years, I didn't have a car. All I drove was Ubers. And when I came back, I needed a car. So that's why I have this. And then the next one will probably, depending if kids pop out or anything, I'm not saying any kids are gonna pop out, but like, I would consider a minivan.
So. Yes, I do think to some extent as guys, I think our thing, at least for you and I, is technology. Even if it doesn't make our job more efficient, sometimes we just want the new technology to play with it.
All of our, I would say all of our Most of our guy friends, they want the newest tech. They don't care about like wearing the nicest things anymore. We all just— all I wear is like athleisure. One more point I have to make on this before we, before we move on. So let me ask you a question, Neal. How many families are worth over $30 million in the United States?
Guess.
Family?
Households. Households. How many households are there in the United States? Like 60 million?
I don't know.
How many households in the US? I think it's around 60. No, I'm wrong. 133 million households. Okay, so I would guess over 30 million, 5 million, 4 million?
5 million households? 4 million.
Let's go with 4 million households. Okay, it's over 30 million.
Noah, how many households, there's 133 million households in the United States, are worth over $30 million? Just throw a number out there, it's okay.
1% of that, maybe.
1% of that. So that's like 1.3 million, right?
Yes. Okay, 600,000.
It's not as big as people think. All the things that we see on Instagram— this is from Wall Street Journal. Wow. All the big things that we see, like the flashiness on Instagram or whatever, it's just not true, right? It's a very small world. And then only a subset of that is worth over like $100 million or so. So it's a very small number.
That's much smaller than I thought.
Yeah.
We also live in a bubble here in LA.
This is a bubble. So yeah.
And a prime example of this is we were looking up cars because we watch Formula 1. They just did the Formula 1 Japan race. So we're watching it as a family.
Uh-huh.
Yep. So when we're watching the Formula 1, my wife's asking, you know, where's BMW's F1 car? I'm like, oh, they don't have one. And they're just like, they're, they're listing out car companies and they're like, where's Bentley? My, you know, and I was like, well, Bentley's VW. She's like, really? She's like, Bentley's not its own company? I'm like, no, they don't sell that many Bentleys. And we were even talking about Rolls-Royces living here in Beverly Hills. The amount of Rolls-Royces and Bentleys you see is—
All the time.
All, all the time. It's a common car, but We looked up that day how many cars Rolls-Royce sells in an annual year. You want to take a guess?
Like a couple, like 100K?
7,000.
7,000?
That's what Google said at the time.
Wow. I believe you.
Okay. How many cars does Toyota sell a year if you had to guess?
Millions.
11 million annually. They sell so many more cars. I was telling my wife, I'm like, I know you think like Rolls-Royce is a big company. Rolls-Royce, they have motors and all this, but they're different companies, right? Because the car is owned by, what is it called?
BMW.
The motors is owned by, I think, themselves. And I was telling her, I was like, when you sell 11 million cars in your Toyota, you have so much more money versus someone selling 7,000 of a car, even if it's $1 million a pop.
Well, it depends, right? Because let's look at Formula 1 for a second. If we actually break this down, because I haven't thought about this before. So you do have premium brands, you do have Aston Martin, you do have Ferrari as Formula 1 cars, Rolls-Royce, $5,000 to $6,000.
But you can't look at Aston Martin. And what was the other one?
Ferrari.
Ferrari is FIA. It's funded by a smaller company.
Who owns Aston Martin?
Who owns Aston Martin? A Canadian billionaire.
And Rolls-Royce is not owned by BMW. Yeah, owned by BMW. Yeah. All these premium ones are owned by like a big company. Bentley is VW. Yeah. Yeah.
So you know who has multiple brands? Audi is VW.
You know who has multiple brands on Formula 1? Mercedes. Like 4 teams have Mercedes at the end of it.
No, Mercedes is not.
No, because if you go McLaren, it's McLaren Mercedes at the end of it. And it's like, then you have Mercedes and then you have something else Mercedes. There's like a bunch of Mercedes.
But McLaren, I don't think uses all of Mercedes parts.
It doesn't, but they're just part of it. There's a brand at the end.
Got it.
So it's like they have multiple ones and I, you know, debatable, right? I think for Red Bull, genius move. Like they have 2 Red Bull teams. Like it's just they're always out there at the forefront of these things.
Well, most of them all have 2 cars.
Yeah. What do you mean each team?
Each team has 2 cars. Red Bull has 2 cars.
But Red Bull has 2 teams. They have a junior team and then they have the Red Bull— I forgot what it's called. It used to be called AlphaTauri and now it's just like Red Bull Racing Bulls. That's what it's called now. So they have 2 teams inside of the 2 F1 teams.
But different levels.
Different. Well, no, they're like Red Bull with Verstappen is the main one. But they do have 2 teams that are, that are in F1, which is the highest level.
Is it? Yeah, you're right. 2 teams. I thought these are Oracle Red Bull Racing.
Okay.
And Racing Bulls. Yeah, they have 2 teams. I didn't know that.
Yeah. And here's the other thing. Google sponsored McLaren. This was before McLaren started winning last year. Yeah, they've been losing a lot. The year before that. But I remember watching F1 and Google was meeting with them. Like, Google wasn't happy about the results. So even though you see them, like Google's like Gemini logo and all that and Chrome logo, like at the end of the day, even if you're advertisers, it all comes down to results. If you're not winning, they don't want to be associated with you. You know what I mean?
If you look at Ferrari, they spend so much. They have the— I think they pay Hamilton, the highest paid driver right now. And he's not winning because the car's not working the way he wants.
He's podiuming now.
He is, but he's starting to. But it took a while.
Yeah, it took a while for him to come back.
A lot of money in that quote unquote while.
Yeah. So I want to come back. I want to switch gears here and talk about the $5.5 trillion rewrite, Neal. So when you look at software, okay, it's a $0.2 trillion market. Let's just call that $200 billion. Okay. So Coatue did this report recently. Coatue is the— honestly, venture firm, but I think they do a lot of hedge fund. Yeah, hedge fund. That thing. Thank you for that. Coatue just put a number on what we're seeing at seed for 3 years. So software is a $0.2 trillion market, so 200 billion. Services as a software, $5.5 trillion, so 25x. The shift is from selling tools per seat to selling work per output. This is why the best vertical AI companies don't compete with software incumbents. They compete with expensive service providers, BPOs, and high turnover labor. At $2,000 a month, AI agent is replacing an $80K year agency, that's the new business model, right? So when you look at this, the $5.5 trillion rewrite over here, so from per seat to per output, 25x TAM expansion. So I think a lot of this is very early right now. I think a lot of us are still figuring this out, but we're seeing this more. This is not something new. I think we've seen this like a year ago, 2 years ago or so. But I think we're going to continue to see it because we're all kind of just figuring it out as we go. So what do you think?
Yeah, no, I'm with you. I think service as a software is a massive industry. Y Combinator just put something out. I think it was around 30 days ago where they're— they put a calling out for startups that are trying to automate services. So for marketing, for accounting, for—
This is like 3 months ago.
Yeah. So it was for anything out there. Sequoia and a16z has also put out stuff or letters at least, you know, 30+ days ago that break down how they think this is a much bigger category and they're looking for companies to fund in this.
I just think, Neil, here's what I honestly think. I think we're going to be just fine. I think we're going to be very happy with how work ends up. And I think there's going to be a lot more abundance for the world. So I'm excited about where things are going.
Same here.
So yeah, and I'm excited for us humanity long term. I'm just scared for some people short term. That's just how it is right now. That is it, guys. Don't forget to rate, review, and subscribe, and we'll see you tomorrow.
