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If I asked you what a diamond bra on a runway has to do with AI, you'd probably say nothing. I'd say it's the clearest picture of the future of business I've seen all year.
On Sunday in Los Angeles, Kylie Jenner made her Victoria's Secret runway debut wearing a $50 million Fantasy Bra made by Jacob & Co. It's the most valuable one ever made: 4,409 diamonds, 1,373 carats, and a 75.54-carat yellow diamond in the center. Fifteen artisans spent more than 1,000 hours putting together roughly 3,218 pieces.
Nobody is going to buy that bra. That was never the point.
Victoria's Secret is playing both ends at once.
The Fantasy Bra is one-of-a-kind craftsmanship that money can barely buy. Its real job is to sell millions of everyday bras at a mall price.
The strategy is working. Last year's show streamed more than 61 million times, drove a 60%+ lift in website traffic and converted over 15% more new customers. The company just put together its best run of comparable sales growth in four years.
One impossibly expensive object builds the dream. Massive scale pays the bills. What Victoria's Secret spent years getting wrong was everything in between.
Hormozi has been saying this for years.
Alex Hormozi describes two ways to build a business: sell something very expensive to a few people, or something very cheap to everyone. He's right, but the idea is older than he is.
In 1980, Harvard Business School professor Michael Porter wrote that companies win in one of two ways: by being the lowest-cost option, or by being different enough to charge more. Companies that try to do both end up, in his words, "stuck in the middle."
Today, most people call this the barbell. Picture the bar at the gym: all the weight sits on the two ends, and nothing sits in the middle. Nassim Taleb made the term famous in investing with his book Antifragile. His version: put most of your money somewhere extremely safe and a small slice into bets that could pay off enormously, and skip the medium-risk stuff that looks sensible but leaves you exposed without the big upside.
In business, the two weights are premium and scale. Both can work. The math breaks down when you try to do a little of each.
AI is pushing those two ends further apart than ever.
At the cheap end, the cost of intelligence is collapsing. According to Stanford's AI Index, the price of running an AI model at GPT-3.5 quality fell from $20 per million tokens to 7 cents in under two years. That's a 280x drop. When the work gets that cheap, a company can serve millions of customers for almost nothing.
At the expensive end, the things AI can't copy become worth more: human expertise, craftsmanship, taste, reputation, a name people trust. Fifteen artisans and a thousand hours. That's what the premium is for.
The middle is getting squeezed. And it's already showing up in the data.
In September, NielsenIQ and World Data Lab reported that the $1.1 trillion US consumer goods market is splitting in two. Growth is clustering at the premium end and the value end, and mainstream products are losing share. NIQ's Ramon Melgarejo said shoppers keep asking whether a product is worth it, and "products that fall in the middle are finding it harder to answer that question."
Spending is concentrating, too. Moody's Analytics estimates the top 20% of households now account for nearly 60% of consumer spending.
That's grocery aisles today. AI brings the same squeeze to services, software, agencies, consultants, coaches, and creators. If your business sits in the middle, you're too expensive to win on price and too interchangeable to charge a premium. AI is coming for both of those problems at once.
My take.
When a founder pitches me, I ask one question before almost any other: what makes someone pay more for you, or how will you serve millions for less?
If they can't answer either one, I already know where the business is headed.
Most of the businesses in trouble right now aren't bad. They're in the middle: decent product, fair price, nothing anyone would cross the street for. For a long time that was a perfectly good place to be. It isn't anymore.
So pick your position. If you're going premium, double down on what's human and hard to copy: your expertise, your relationships, your reputation. Charge for it without apologizing. If you're going for scale, use AI to strip out cost until you can serve more people for less than anyone else. Then build everything around the side you picked.
Hit reply and tell me: which end is your business building toward right now? I read every single response.
Jenny
P.S. Try this exercise this week. Write one sentence on why a customer would pay double for what you do, and one on how you could serve ten times as many people for half the price. Whichever sentence comes easier is probably your answer.
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