Can AI Create a Luxury Brand?

Artisanal AI and unlocking the power of human creativity

Jul 30, 2023

My wife and I performed an experiment with AI this week. We used it to make a new luxury brand with a flagship handbag to compete with Hermès. I came away believing that AI has so firmly captured our imagination because it frees our imagination like never before. AI will not destroy jobs, at least in the near term. It will create profound opportunities in collaboration with humans, and we don’t fully appreciate it yet.

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Disclaimer. The Deload is a collection of my personal thoughts and ideas. My views here do not constitute investment advice. Content on the site is for educational purposes. The site does not represent the views of Deepwater Asset Management. I may reference companies in which Deepwater has an investment. See Deepwater’s full disclosures here.

Additionally, any Intelligent Indices strategies referred to in writings on The Deload represent strategies tracked as indexes that are not investable. References to these strategies is for educational purposes as I explore how AI acts as an investor.

Artisanal AI

Hermès. Louis Vuitton. Ferrari. Rolls Royce. Audemars Piguet.

Luxury brands represent the intersection of excellence, taste, and history. Each of those attributes rarely exist without the others. Persistently excellent taste results in a long history of desire and status that compounds as long as the luxury brand exists. Compounding persistence makes luxury brands great businesses.

I’ve always loved luxury brands as an investor for their irreplaceable moat of time, but I’m of the growing opinion that AI will disrupt everything. Since luxury is built around intangibles like taste and history, it would seem the luxury industry would be shielded from the disruption of AI. Is it?

Can AI disrupt the luxury industry built on the very human emotions of desire and envy? Can AI create the next Hermès?

I planned on writing this as a philosophical piece about whether machines could understand quality, taste, and design. My hypothesis was that AI could envision a product, but it might have trouble translating that to a compelling vision for a new luxury brand.

But philosophizing about AI is passé in the age of AI.

Instead of philosophizing, I put AI to the test by employing ChatGPT, Perplexity, and Midjourney to make a luxury leather goods brand. It’s Artisanal AI.

Here’s what we came up with: The Empyrea Muse.

The Empyrea Muse

ChatGPT describes the first luxury bag created by Artisanal AI:

“The Empyrea Muse is made from ethically-sourced, full-grain Italian leather, which is renowned for its durability, moisture resistance, and beautiful patina that develops over time. The lining is pure Nappa leather, representing the strength and resilience of the women who will own this bag, blended with their intricate and elegant nature.
The bag has a medium-sized, trapezoid silhouette, a nod to the classic Hermes Kelly, but with a modern twist. It features a sleek clasp made of sustainably sourced rose gold, embedded with conflict-free diamonds that sparkle subtly, catching the eye but never overtly demanding attention. The hardware, including the zippers and attachments, are also made from the same rose gold, giving the bag a warm, rich feel.
The unique contrarian element of the Empyrea Muse is its asymmetrical shoulder strap design. This choice, while perhaps unconventional, gives the bag an avant-garde aesthetic. One side of the strap is leather, matching the body, and the other is a finely woven rose gold chain. The chain is both strong and delicate, a metaphor for the modern woman.”

Each Empyrea Muse is handcrafted by a single artisan in Spain from start to finish. The Muse will retail for $10,500 with a limited first run of 99 bags. The bag measures 30cm x 22cm x 12cm (11.8" x 8.7" x 4.7"), slightly larger than an Hermes Kelly 28.

ChatGPT explains the story of the Muse and the target customer:

The Empyrea Muse is inspired by the empowered women who rise against all odds to create their own legacy. The name "Empyrea Muse" is a testament to this narrative. "Empyrea" symbolizes the highest heaven, thought to be the realm of pure fire and light, denoting the resilience, ambition, and fiery spirit of these women. "Muse"is a person or personified force who is the source of inspiration for a creative artist, tying in the AI design inspiration and the inspirational women who are our target customers.
Whether she's leading in the boardroom, creating in the studio, or making a difference in her community, every woman deserves a Muse — a source of inspiration that aligns with her aspirations and celebrates her unique journey. And that's what the Empyrea Muse is — a companion, an enabler, a symbol of her unique story.”

ChatGPT details a unique AI tie-in to the brand story — 10% of profit from the bag funds ethical development of AI:

With the Empyrea Muse, we're pioneering the fusion of luxury craftsmanship and artificial intelligence. This is only the beginning. Our vision is not just to harness the power of AI in creating exquisite, luxurious handbags, but to foster its development and use in a way that benefits the world. That's why a portion of our profits goes toward funding safe, ethical AI research and development.
Just as the muses of ancient lore inspired great works of art and science, our aim with the Empyrea Muse is to inspire a future where AI can be a partner to human creativity, facilitating more beauty, more innovation, and more progress. But we also recognize that this potential comes with responsibility.
We believe that for AI to truly enhance our lives and our world, it needs to be developed with careful attention to safety, ethics, and the well-being of all. And we're committed to contributing to that effort.
So when you carry the Empyrea Muse, you're not just making a statement of taste and elegance. You're also helping to shape a future where AI is a force for good, fueling creativity and positive change.

The Human + AI Co-pilot Era

Artisanal AI did a better job than I expected in creating a compelling luxury brand, but it took a lot of human input from my wife Leah, who works in fashion, and me.

Our iterative process flowed like this:

We prompted ChatGPT to act as an expert handbag designer to compete with Hermes and design a bag with some contrarian flare and a story that will compel a small group of wealthy people to want to buy it. ChatGPT created the idea of the trapezoidal bag with ornate details and the core of the story in its first attempt, but it missed some human nuance. For example:

Name. ChatGPT’s original name suggestion was the Empyrean Adorn. We changed Empyrean to Empyrea to sound more like a brand than an adjective. And we asked ChatGPT to come up with different names for the bag instead of adorn which felt too ornamental. Our favorites were Muse and Vanguard. Muse felt most appropriate given the inspirational theme of the bag.
Bag construction. ChatGPT first suggested the inner lining of the bag be silk, but Leah said that would be annoyingly fragile. So, we switched from a silk lining to Nappa leather per ChatGPTs suggestions.
Manufacturing. ChatGPT said the bag should be made in Italy like many other high-end bags. We wanted to be different, so we asked Perplexity to list other European countries known for fine leather work. Perplexity differs from ChatGPT in that it sources its answers. Spain was its second answer, so we chose that.
Story. ChatGPT also suggested the donation angle in its first pass at the story, but it made the donation to a general women in tech effort. That felt flat, so we prompted ChatGPT to make the story about safe AI development so it could create beautiful things with humans like the Empyrea Muse.
Taste. We had Midjourney take the description from ChatGPT to make about 50 iterations of the bag. ChatGPT had first described the interior of the bag as having an Art Deco pattern, but Midjourney applied that to the entire bag. Leah thought some of the Deco bags were cool but hard to build as a flagship $10,000 product. Her favorite Deco bag was the one below. We edited the Midjourney prompt to get to the Muse pictured above, also picked by my wife.

The experience proved Satya Nadella’s AI Co-pilot thesis: That our current AI paradigm puts humans in greater control of machine intelligence. It’s why Microsoft calls its AI efforts Co-pilot. AI as our co-pilot supercharges creative human efforts from designing a handbag to writing blogs to picking stocks. If we can describe something in words, we can do it. That’s never existed before, and that’s why AI has so firmly captured our imagination — because it frees our imagination like never before. In a few hours, my wife and I created a luxury brand with a beautiful product and a compelling story. That’s insane.

AI is a tool for human empowerment and collaboration, not replacement. At least for now.

AI can’t create without a kernel of inspiration from a human. At least for now. It doesn’t have the exquisite taste to choose a great handbag design. At least for now. And it couldn’t manage limited scale production of 99 Empyrea Muse bags on its own. At least for now.

Over time, AI will grow in capability and displace the human element, but our experience in working with Artisanal AI says it’s probably further away than we think. In the meantime, AI is our valuable co-pilot.

So, no, I don’t think Hermès has to worry about AI creating a brand that dethrones it as the world’s greatest luxury bag maker. As Leah put it: “AI can make the bag but not the desirability.”

At least for now. And maybe it’s getting closer.

ChatGPT final Empyrea Muse pitch:

The Empyrea Muse — a blend of Spanish craftsmanship, AI innovation, and ethical commitment. More than a handbag, it's your partner in shaping a future where luxury and technology unite for the good of all.

Anyone want one for $10.5k?

Intelligent Indices: ChatGPT vs the S&P 500 Update

Speaking of AI disrupting industries, I’m more certain AI will create the next great stock index that challenges the S&P 500. This one feels more certain than the next Hermès, and one could argue the S&P 500 is as powerful a brand. Maybe more powerful.

To test the hypothesis, I’m tracking a series of Intelligent Indices powered by AI vs the S&P 500 and Nasdaq 100. The flagship Intelligent SP Select (AISPS) is a custom weighted large cap index built by a committee of ChatGPT, Bard, and Claude. The aim is to provide a superior market benchmark to the S&P 500 over the long term and the definitive benchmark for AI-informed investment strategies.

YTD the S&P 500 is outperforming the AISPS by only 100 bps despite the AISPS being heavily underweight megacap tech. If we see any mean reversion to the tech leaders, which may be a likely long-run outcome, the AISPS should outperform the S&P 500.

I’ll provide weekly reminders of the progress here. You can follow all of the Intelligent Indices on Thematic.

The Deload