Updating my 2024 mental models for building and investing
“Everybody wanna be a trending rapper/Try be a longevity rapper” (Headie One)
I have always written this newsletter for myself and to that degree, this newsletter is neither a founder newsletter nor an investor newsletter but really a founder doing both founder and investor things newsletter. All that being said I don’t really talk about my investing much but to summarise: I invest directly in my circles of competence (see below) and I also invest with category experts (usually people running funds, the smaller the better) into other areas (PE, VC, credit in various forms).
This year has been an enjoyable exercise in Gandalfian wandering which has gradually converged on a description of what I’m pointing my direct investing at i.e. the pursuit of the demographically adjusted market alpha emerging from Gen Alpha and Z behaviors. This is mostly through an investment holding company, which kind of reflects my thoughts on the challenges of investing (to make money) into some of these new, weirdly-shaped spaces.
I used to write annual predictions which were fun but never all that actionable. So instead I thought I’d use the last post of the year to update some of the mental models that help me make decisions about the future. Mileage may vary given the broad readership of this newsletter, but some of you might find them interesting or provocative. To a degree, many of these are simply different ways of saying that barbelling is eating the world: either you are the biggest or you are a specialist or you are in the process of dying. This has kind of always been true but the rapid phase shifting of interest rates, Covid, AI, climate change and geopolitics have accelerated the crystallisation of this topology. Byrne Hobart has a very readable post on a similar topic and his general sense that the world is continuing to just get weirder resonates deeply.
A selection of my updated mental models:
The graph of attention saturation has intersected device saturation
From a general western consumer content perspective, we appear to be at peak saturation for both attention (time available) and device (vectors for new attention). Doug Shapiro has written elegantly on this for media and Matthew Ball has done similarly for gaming. This model leads to at least three outcomes: firstly the continued increase in marketing spending, secondly the increased strategic value of community management and thirdly the increased importance of new platforms, however unconventional (Discord, Web3, Roblox, Fortnite).
The average atomic unit of business for media will continue to get smaller
It’s entirely possible for the future to be both knowable and very difficult to invest in. Looking at both creator and Roblox ecosystems (both growing at healthy double-digits), it’s generally difficult for investors to extract value here as new builders are smaller, more capital efficient and frequently highly cashflow-generative (they don’t need your money). Logically this will open up innovative new investing models and also create outlier pricing for the few assets which have managed to scale (I enjoy reading Chris Erwin’s deal notes on creator M&A). It’s surprising there still hasn’t been a very large Roblox game deal yet but it surely can’t be far away.
The opposite of platform enshittification is also not good
Cory Doctorow’s theory of enshittification goes something like: first, platforms are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die. The opposite of enshittification is platform catfishification: first they are good to their users, then they try to entice business users but without building anything that might jeopardises the user experience, finally they compete with those business customers to claw back all the value for themselves. Then, business customers give up and take their money elsewhere.
Today’s young founders are smarter than previous cohorts
I do not have data on this so it’s a shaky model but from observations and conversations with lots of founders under 25, they appear on average to be a lot smarter than the cohorts I’ve previously seen. An alternative interpretation is that I am getting dumber which I have also not ruled out. I would be interested to see a Gen Z adjusted measure of value creation if anyone would care to share?
VC is a sentiment, not an asset class
To be clear, I’m not anti-VC. I’m an LP in a bunch of interesting venture funds and I think there are some great investors there. At the same time, I also hold the idea in my head that there are simply far too many badly priced deals done (by both investors and founders) in the name of the VC-backed startup industrial complex.
We are in the midst of a slow global economic unbundling
My very simplistic analysis of the economic anti-globalistion movement (immigration, China) is that it’s a reaction to domestic social challenges (inflation, demographics, health) which politicians would prefer not to face. Economics and political science friends will no doubt drive a fleet of trucks through that description but it still gives me some basic substrate for thinking at a decades-long level.
Every new generation has an updated definition of ‘quality’
I try and recite this incantation out loud at least once a day. While perhaps most obviously seen in the value created by YouTube and Tiktok, for anyone who doesn’t believe that crypto could get 10x bigger by market cap (and suffer similarly sized draw-downs) over the next decade, I suggest you go and spend some time with anyone under the age of twenty. The concept of Memecoin supercycles might be nuts but it doesn’t mean they won’t happen.
The most interesting things I read this year
Not necessarily published in 2024, but still the most interesting things I read over the last twelve months:
Extremely Online: The rise of the creator ecosystem is well documented but Taylor Lorenz wrote probably the most interesting and insightful history of platform relationships with this audience. The consistent patterns and the perma-presence of kids as an amplifying factor are fascinating.
Lying for Money: You can learn a lot about systems and organisations by understanding how they look for fraud. Dan Davies (who also writes an excellent newsletter) gave me the intriguing thought experiment of "If I was going to steal from my employer, how would I do it?".
The Anxious Generation: As someone who has seen more data than most on this topic, I’m pretty comfortable stating that everyone over-simplifies it and Jonathan Haidt is no exception. But you should read it and understand his arguments.
Tectonic trends in media: not a book but I’m including the presentation here as I’ve lost count of the number of times I shared Doug Shapiro’s excellent writing on the consolidation of media.
Underground Empire: a last-second addition to this list was the book which started as an essay by Henry Farrell and Abraham Newman about the weaponization of the world economy. It gave me a helpful model to think about the shift from military to economic warfare and what that might mean for the future.
Reading List for Boards: if your board isn’t helping you create more value, something’s going wrong. Chris Morton assembled some excellent reading suggestion for both founders and board members which I keep re-reading and sharing.
(btw I keep an updated Essential Reads for Founders list on Goodreads)