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Temporary Identity: Renting Digital Luxuries
Does renting convey identity as much as owning?
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The nature of luxury is to convey identity, and with it comes expense.
The offline world has adapted to the cost of luxury through a vast rental offering. From Rent the Runway to Cocoon to NetJets, many innovative companies have found ways to offer luxury goods on a rental basis. What these companies really offer is identity beyond what most of their customers could afford otherwise. Dare I use the overused, it’s identity as a service.
In many ways, identity can only be rented. Identity requires constant refreshing. It requires gaining attention through which it can convey something. A static identity is a boring identity, and a boring identity is a dead identity. In the physical world, cars and wardrobes need to be updated based on changes in trend that define the associated identity. Owners of these goods often sell the old in favor of the new. In the digital world, updating identity comes from investing social capital in conjunction with luxuries we use to represent us.
Digital luxuries are going to be the most powerful way to convey identity in the next decade as our lives increasingly orbit around our digital selves vs our physical selves. We’ve written a lot about this recently. As a result, it’s likely that digital luxury rental will emerge as a vibrant market just as physical luxury rental. Renting a Cryptopunk to use as your profile avatar would be like renting a Lamborghini for the weekend.
Differences between physical and digital rental
Digital luxuries fix many of the challenging parts of physical luxury rental. Digital goods don’t depreciate, they don’t need maintenance, don’t need authentication, and don’t need to be shipped. However, digital luxuries also add some unique challenges. If a unique digital good is used as part of one’s identity, and the renter does something socially undesirable while using that identity, he may damage the underlying value of the good for future rental. Whereas physical luxuries need to be in good physical condition to loan, digital luxuries must be in good social condition.
Another challenge likely to come from the digital luxury space is that they will be more ephemeral than physical goods. The digital world seems to move far faster than the physical. A digital good might only have some useful meaning for weeks or even days before it needs to be refreshed, whereas physical goods often carry identity qualities for far longer. Therefore, the turnover of digital luxury rental will likely be much higher than physical luxury rental.
Airbnb vs Rent the Runway
There are two potential models for enabling digital luxury rental: A rather decentralized marketplace approach that matches renters with owners (like Airbnb) or a centralized approach where a company owns a large inventory of digital luxury goods to be rented out over and over (Rent the Runway). Each model has pros and cons. The Airbnb-like marketplace would cater well to the ephemeral nature and almost certainly be able to offer greater breadth in available rentals. The latter business would cater better to high-end, established goods that last the test of time and private owners may be more reluctant to rent. The centralized model would also be better suited to managing the risks and necessary restoration if renters damage the social reputation of the digital luxury as described above.
Supply and demand effects on pricing
As a rental economy emerges for digital luxuries, it should have two opposing economic effects. The rental economy should increase demand for high-end digital luxuries by making them more affordable on a rental basis, but it should not create a concurrent increase in the supply of any given digital luxury because it would reduce the relative luxury of that good. The physical luxury rental space creates the same dynamic. If Gucci were to flood the market with Gucci bags for rental, Gucci would no longer be Gucci. Gucci may increase production slightly for the rental economy, but it’s a careful balance. Net net, the effect of a vibrant luxury rental economy should be higher prices for high-end goods given demand increasing greater than supply. The same should be true for digital luxuries.
In other words, the demand over supply balance encouraged by luxury rental should encourage the expansion of the breadth of digital luxuries, not depth. We should expect more attempts at creating digital luxuries using the three keys of art, community, and utility. Of course, great luxury brands are established over time as they withstand its tests. They are a manifestation of the Lindy Effect. There’s only one Gucci, just as there is only one Cryptopunks.