In the past few decades, income inequality in the United States has increased dramatically. Between 1979 and 2007, after-tax income of households in the top 1 percent of earners grew by 275%, compared to 65% for the next 19%, ~40% for the next 60%, and 18% for the bottom fifth of households.
Source: Congressional Budget Office
As this income inequality builds upon itself, the U.S. income distribution becomes more and more bimodal, with an increasingly wider gulf separating the rich and everyone else. This leads to second-degree changes that affect all of society. One is the allocation of venture funding to consumer products.
Although venture capital is relevant to less than 1% of companies, it has an outsized impact on the products and services consumed in the future. Venture capital has backed 43% of public U.S. companies since 1979, which in turn have been responsible for 82% of R&D by public U.S. companies. The venture-funded startups of today will become the most important companies tomorrow.
As such, it is important to consider what type of companies get venture funding. One of the most important factors venture capitalists look at when considering whether or not to invest in a startup is the size of the market. Given that venture capital is a home-run game, VCs are looking for, at the very least, total addressable markets of billions of dollars. In the past, products that specifically appealed to the the top 1% or even 10% were often considered too small to back. As a result, startups decided to target the middle-class with their products, and even startups working on expensive cutting-edge technology that necessitated market entry at the top had plans to eventually bring this technology down-market to the masses.
The size of a market is determined by the number of people and how much they’re willing to pay. So what happens if rich households continue accumulating income at a faster rate than the rest of the households? Considering that this rate of income accumulation will most likely be higher than rate of population growth, eventually it will turn rich households into a larger market than the middle class and poor combined. As a result, incentive mechanisms to make technologies for the masses will become gradually reduced, giving way to products that increasingly cater to the rich.
Poor markets are also at a natural disadvantage to rich markets, even if they’re both the same size. A market with 20 people each willing to spend $100,000 and another market with 2,000 people each willing to spend $1,00 might be the same size ($2 million), but catering to the high-end market is still the better choice. The marginal utility of a dollar is higher to a poor person than a rich person, and as a result the rich person is more willing to part with $1 than a poor person is. Moreover, costs incurred to convince a new customer to pay for the product are much higher than costs incurred to convince an existing customer to pay more.
In “White Flight in Networked Publics,” danah boyd emphasizes that taste and aesthetics are “two value-laden elements that are deeply entwined with race and class.” With increasing income inequality, we are starting to see the tastes and aesthetics of the rich increasingly overwhelm those of the middle-class and poor in the world of consumer tech.
Elitist design is the design of a product or system that primarily caters to the rich, allowing it to be fundamentally built on excess. This is design that is no longer constrained by efficiency, costs, or rational, first order principles. A useful framework to evaluate elitist design in consumer tech is to examine it on three levels: the market, the model, and the machine. As an example, let’s apply this to framework to Juicero.
Elitist Design #1: The Market
Juicero’s fundamental value proposition is built on a prevalent misconception amongst wealthy Americans: the health benefits of juice. This is in part the result of wellness becoming the “ultimate 21st century status symbol,” which has launched a wave of expensive health and fitness options such as cold-press juices, healing crystals, SoulCycle, and Peloton.
Unfortunately, juice isn’t actually healthy, given that most of the healthy parts of a fruit are left behind in the process of juice-making. As a result, experts emphasize that “fruit juice, even if it is freshly pressed, 100 percent juice, is little more than sugar water.”
A major study in Nutrition found that, on average, fruit juice had a sugar concentration of 45.5 grams per liter, only 4.5 grams less than the average of 50 grams per liter for sodas. Juicero’s juices are relatively heavy on sugar. Both the “Sweet Greens” and “Sweet Roots” packets include 17 grams of sugar per 8-ounce serving. In comparison, an 8-ounce serving of Coca-Cola has 26 grams of sugar.
There’s also a hidden danger to juice: it is harder to feel nourished from juice than fruit. As a result, it is very easy to binge on juice and exceed caloric and sugar intake. It is also mentally convenient to equate a unit of fruit with a glass of juice, even though a glass of juice often has more than twice the amount of calories as a piece of fruit (an orange is 45 calories whereas an eight-ounce glass of orange juice is 110 calories).
Elitist Design #2: The Model
Juicero’s ambitions weren’t only constrained to just making a more convenient juicer; it wanted to create a brand new system to provide maximum convenience, but also extract maximum profit. The result was what David Krane, the Managing Partner of GV, once described as “the most complicated business I’ve ever funded.” For context, Krane has also funded companies such as Uber, Nest, and Blue Bottle Coffee.
The Juicero business includes three warehouses, a manufacturing facility, a LEED Gold processing facility, a network of organic farms nationwide, a smartphone app, and an army of produce choppers all supporting two main money machines: the Juicero Press, and Juicero Packs.
The Juicero Press is the $399 juicer and the Juicero Packs are “breathable packs” of raw fruits and vegetables that are “triple-washed in a 35 degree Fahrenheit environment.” Once a Juicero is purchased, the consumer has to choose a subscription of Juicero Packs, with a single pack producing an 8-ounce glass of juice and costing anywhere from $4 to $8 each.
This business model allows Juicero to not only profit from the juicer, but also on a regular basis from the packs. Factoring in only the cost of the pack, an ounce of Juicero juice costs anywhere from $0.50 to $1.25 per ounce. The Washington Post found that even in the premium juice section of an upscale grocery store, there were no juices that came close to being this expensive, with the most expensive juices selling for $0.17 lower than the cheapest Juicero juice.
The packs allow Juicero to create what effectively amounts to a proprietary DRM system for juice. Every Juicero Pack has its own unique QR code that is scanned by the juicer and checked it against an online database. If there is no Wi-Fi, no QR code, if the QR code has already been used, or if the QR code is for a bag that’s expired, the Juicero Press won’t start. As a result, it does not work with non-Juicero fruits and vegetables, even if these are sliced and diced and put in used Juicero Packs. This was a deliberate choice made by Juicero after they observed that Keurig faced an issue with other companies making pods for its coffee maker.
There are also environmental concerns surrounding the Juicero system. Since one pack corresponds to one glass of juice, leftover packs and the pulp remains inside them can quickly accumulate. The pulp, usually 20% of the total plant matter, is often thrown out, although Juicero recommends turning them into “pulpsicles” and “body scrubs.”
Packs are “not recyclable by municipal methods” but can be recycled through a special process: cutting open the pack, taking out the pulp, rinsing the pack and either mailing them back to Juicero or taking them to specific recycling facilities. Pretty reasonable expectations for the same consumer they’re betting will pay $399 to not have to clean the juicer after every glass of juice.
Instead of a focus on repairing a specific part of the process, Juicero has recreated it under the guise of innovation. As noted by Steven Jackson in Rethinking Repair, “the language of innovation is generally reserved for new… bright and shiny tools, while repair tends to disappear altogether.” These bright and shiny tools, from the camera that reads the QR code to the breathable packs, are the product of a system in which “when new products are made, we hear about exciting technological innovation, which are widely seen as worth paying (more) for.”
Elitist Design #3: The Machine
Then there’s the $399 juicer, the aircraft-aluminum clad cathedral dedicated to spreading the gospel of juice. The culmination of more than two years of development by celebrity designer Yves Behar, the former president of Coca-Cola North America, 12 PhDs, 50 engineers, seven food scientists, and the creator of the Amazon Echo, this juicer has been colorfully described as “a big iPod that pees juice into a glass.”
Excess is built into every single part of this product. Doug Evans touts that “there are 400 custom parts in here.” Ben Einstein, a Partner at the hardware VC firm Bolt, has remarked that “Of the hundreds of consumer products I’ve taken apart over the years, this is easily among the top 5% on the complexity scale.”
The Juicero’s exterior face has a single button at the center of the front door for juicing. This door is “bead-blasted” and made from “aircraft-grade aluminum.” The other main exterior parts of the juicer are complex injection-molded plastic components textured to an “Apple-like glossy finish.” This aesthetic minimalism is reflective of social class preferences. As noted by Danah Boyd, design the rich regard as “clean” is often regarded by low-income consumers as “boring,” “lame,” and “elitist.”
The minimalist facade hides an overly-complex machine. Juicero has 8 large, custom-machined parts, whereas usually comparable consumer hardware products use one to two. The interior also holds a complicated array of components, including a Wi-Fi enabled microcontroller, a camera, a wireless antenna, 10 printed circuit boards, a custom-made power supply, and an LED board.
In and of itself, elitist design isn’t a bad thing. Many people genuinely enjoy using their Juiceros, even if it’s about as effective as using one’s bare hands. Elitist design is simply a reflection of the society that the design is created for. It’s representative of a growing market buoyed by the moneyed desires of the few that is fine paying a premium for an expensive product.
Some wonder whether Juicero is representative of Silicon Valley excess. It isn’t, it’s more representative of business sense. Juicero knew that it could afford to charge the market a premium for its model and machine. The problem is what this business sense reflects of societal changes. If the market for juice for the 1% has become venture-backable, what does this say about society?