mass luxury and capitalism: Vertu vs. Apple

Vertu is a luxury phone maker. They sell jewel-encrusted phones for $10,000 to $100,000.

Vertu is a successful company, but in both style and substance, the iPhone is probably the best phone you can buy. The vast majority of people who can afford a Vertu still choose to purchase an iPhone, presumably because they believe it is a better product.

The reason why reveals a deep truth about how a capitalist economy works.

In order for the iPhone to exist, consumers must spend hundreds of billions on the smartphone ecosystem, which then pays for the research and development of devices, applications, and accessories. Therefore, the iPhone can only exist if it is priced at a level that hundreds of millions of people can afford.

Vertu probably has sales of about $100 million – compared to $220 billion for Apple. It not possible for them to produce a substantially better or even comparable product given such a difference in R&D budgets.

Furthermore, Vertu only exists because Apple and Samsung created a supplier ecosystem which rapidly democratizes technological innovation. A Vertu’s hardware is almost as good as the latest iPhone or Samsung phone because the hardware ecosystem that the market leaders create is available to all participants. The same applies to the low-end of the market: you can get a substantially similar experience on a Vertu as you would on an iPhone or a $150 basic China-produced smartphone with last year’s hardware.

In a capitalist economy, entrepreneurs compete to direct capital to the creation of products which satisfy as many human values as possible. Given sufficient time for capital accumulation and technological innovation, capitalists create products that try to satisfy all values that can be satisfied by material means, and create substitute products to satisfy non-material values as well – think explosive action movies and pornography.

The larger the potential consumer base of a product, the more resources can be invested in creating and improving it. Therefore, a capitalist consumer economy tends to create affordable, mass-produced goods which cannot be substantially improved by higher-prices alternatives. Andy Warhol observed the result of this in his 1975 book “The Philosophy of Andy Warhol”:

What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.

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