Hardware subscriptions, cognitive effects of lighting, and The Social Dilemma

Friday Brainstorm S2 E4 🧠

Hi friends,

Happy Hanukkah for those that are celebrating, and happy Friday to everyone else!

I’m going to be touching on business models in this issue, but rest assured that this won’t turn into another tech business newsletter. You don’t want that, I don’t want that, nobody wants that (unless…?). I’m narrowly interested in how the emerging neurotech industry will develop in the next couple of years, so that’s the motive.

Here’s what you can expect:

  • the case for hardware subscriptions 🔄

  • why you should think about lighting 💡

  • (podcast) the freedom of attention 💻

Let’s get into it!

The case for hardware subscriptions 🔄

I’ve recently been thinking about how the value of certain products is best conveyed by getting it in the hands of customers. This is especially true of products that create a truly novel experience, where it’s best to let the product itself do the talking — think Peloton, Slack, or Zoom.

With software, it’s fairly easy to distribute to potential customers with a free trial because there’s no cost to letting more people try out the product. With hardware, on the other hand, it’s more tricky — there are shipping costs involved and you can’t simply repackage returned hardware as new anymore.

As a result, hardware companies can’t afford to offer a true free trial experience. There is usually a customer satisfaction period within which you could return the product, but the consumer still has to pay the upfront sticker price to get their hands on it.

What if these companies adopt a Hardware-as-a-Service (HaaS) model, where customers pay for the value provided by the service, rather than the underlying hardware? This is analogous to the ubiquitous Software-as-a-Service (SaaS) model, where software is licensed on a subscription basis rather than a one-time purchase.

The HaaS model gives consumers the ability to essentially rent or lease the hardware product rather than owning it. This translates to a lower upfront cost as well as the ability to pause or terminate the subscription if you aren’t using it.

Importantly, it also makes consumers more open-minded about trying products from less established brands by reducing the barriers to experimenting with different devices, which is valuable in the post-pandemic world where the in-person store experience is much less common.

Consumer hardware startups building expensive, software-enabled devices will see a lot of upside from adopting a HaaS pricing model.

Let’s take a look at a case study: the NuraNow subscription program.

For context, Nura developed tech to analyze the acoustic dynamics of your ears and personalize the perfect sound. Until Apple released the AirMax Pro’s (at $550!), the Nuraphone was one of the most expensive headphones on the market at $400.

If you’re like me, this sounds pretty cool but I wouldn’t go so far as to outright buy it. Luckily, they have another plan where you pay only $70 up-front and then $12/month for as long as you own the nuraphone. You can cancel anytime and every 24 months, you have the option to upgrade. Importantly, you never really own the Nuraphones — if you stop paying, the device will be deactivated and you have to send it back.

This might seem counterintuitive. Why not just let people buy out their device similarly to how you could buy out a car after leasing it for a couple of years?

The assumption is that the consumer wants to own the hardware rather than the underlying service (high quality, personalized music delivery). This may seem like semantics, but there’s an important distinction here — owning a device means that you are liable for any damages or repair costs once the warranty is up. Additionally, if a new device comes out with a killer feature in a couple of years, you will have to pay the up-front cost again.

Now, this might not matter in the saturated smartphone market where, year after year, there isn’t much of a difference between models. But when it comes to emerging technology — like a VR headset, AR glasses, or an EEG headset — you probably want to upgrade often because the experience will change dramatically with every model.

Not only that, but HaaS makes for a more intentional and sustainable relationship between the consumer and the device.

Think about all the devices you have collecting dust in some drawer — I am certainly guilty of this with an iPad I bought back in March. If you’re getting consistent value out of it, then it should be worth the monthly cost. If not, just return it so that someone else can make use of it.

From the consumer perspective, you save on the difference between the amount paid so far in subscription costs and the full up-front cost of buying the device. In fact, the only time you don’t save money is when you’ve used the device for 2 - 3 years already, at which point it’s a good investment anyway since you seemingly got so much value of it.

From the hardware startup’s perspective, this is a net positive if you only have capacity to manufacture in small batch sizes and need the extra inventory. That being said, if you’re building a novel experience that people get continuous value from, then you don’t have to worry about a high churn rate.

The HaaS model also lets companies effectively build loyalty and longer customer relationships, as long as they’re consistently adding value over time — whether through new models, software updates, or both. The subscription is even more compelling when the software is a significant part of the product offering and updates can really improve the customer experience (think Tesla’s autonomous driving software upgrades).

For other examples of HaaS in action, check out Neosensory (early termination fee) and Peloton (up-front cost + subscription).

For brevity’s sake, I won’t cover the risks, costs, and pain points associated with the HaaS model but I’m hoping to do so when I turn this into a full blog post. Stay tuned!

Why you should think about lighting 💡

We’re 3 days away from the darkest day of winter — the sun sets at 4:30 these days.

Do you notice any differences in your mood or focus levels these days? Maybe you’re more lethargic towards the end of your workday, or maybe you’re not in good spirits these days. These are all symptoms that people usually associate with winter, but have you considered that it doesn’t have to be this way?

If you try to Google these questions, you end up on a website describing seasonal depression, or seasonal affective disorder (SAD — a very fitting acronym).

While some people really do suffer from SAD, the majority of people have only very mild symptoms such as feeling more tired on cloudy days. Instead of thinking about SAD as a discrete diagnosis, a better model is to look at it as a continuum of how light deprivation affects people. Ben Kuhn captured it perfectly in this graph:

“Typical indoor light levels run from 100-500 lux, which at the high end is about as bright as sunrise outdoors, and about 100x dimmer than daylight. Other than “we’ve been doing it for a while,” there seems to be no reason to expect that being in a 100x dimmer environment all day wouldn’t be awful. Indoor darkness seems to be one of those things that we don’t question only because it’s been that way forever.

If you’re like most people, you probably haven’t thought much about the indoor lighting conditions in your home. It turns out that investing in really bright lights not only helps with productivity, but also with how the cheerful a room might look.

For practical advice on how to fill your home with light that truly resembles daylight, check out the rest of Ben Kuhn's blog post.

I’ll be writing more about the cognitive effects of light in the coming weeks. As a teaser, I’m working on a project using an EEG headset to control Nanoleaf lights.

The Freedom of Attention 💻

The second episode of my new podcast, Mind Gym, was just released. I even got a real microphone this time, so no more shitty phone recordings!

We discuss the themes explored by the Netflix documentary, The Social Dilemma, and more specifically, how the rise of social media has chipped away at our ability to pay attention to the things that matter.

Ask yourself: what is technology supposed to be doing for us?

There is a deep misalignment between the goals we have for ourselves and the goals our technologies have for us. We need a new framework for talking about attention to fully understand the implications of the deep sense of distraction we all feel.

Check it out 👇

In the podcast, we draw on James Williams’ Stand Out of Our Light, which is by far the most profound book I've read on the attention crisis. To get more people to read the book, I wrote an article earlier this year where I summarized the most important ideas.

Here’s a snippet from the article:

What do you pay when you pay attention?

You pay with the everything else you could have paid attention to, but didn't. You pay with all the goals you didn't realize, all the decisions you didn't make, all the versions of you that you could have been.

You pay for those extra few Friends episodes with the sleep you didn't get and the fresh feeling you didn't have the next morning. You pay for that extra hour you spent compulsively reading about the coronavirus with the heart-to-heart talk you could have had with an anxious friend.

“We pay attention with the lives we might have lived. When we consider the opportunity costs in this wider view, the question of attention extends far beyond the next turn in your life’s GPS: it encompasses all the turns and their relations, the nature of your destination, the specific way you want to get there, why you’re going there, and also your ability to ask any of these questions in the first place.”

If you’re curious, go ahead and read the whole thing.

Fun fact: I featured this article in the first edition of Friday Brainstorm back in March. That feels soo long ago 😨. For better or for worse, it looks like I use more emojis now.

If you’ve been here since Day 1, this button will take you down memory lane. If you’re new, this button will take you to the humble beginnings of this newsletter.

Take me back to where it all started

I hope you’ve enjoyed this issue of Friday Brainstorm! What got you thinking? Anything to add? Let me know by replying to this email.

— Shamay