Will kids save the video games industry?
If you are not a video games investor, a thing you might find extremely interesting is Matthew Ball’s latest analysis on the video games sector. It almost certainly will not convert you into being a video games investor as it highlights in several hundred slides just how stuck the entire space has become. A while back, I wrote about Fortnite and the Lindy Effect, essentially the point that the most likely content platforms in five years will be those same ones which dominate today1. The video games industry has become a $200B example of this.
There are some green shoots of growth and a couple are worth mentioning here. Firstly, kids. Matthew’s slides on Roblox (which, incredibly, is now ranked as the biggest mobile game of all time by revenue) and Discord show the scale of what new trends emerging from younger generations are capable of.
A lot of people, including me, often compare Roblox to YouTube in terms of growth and ecosystem. I continue to believe that is partially helpful in understanding its long-term potential value (especially around advertising economics) but the divergence in approach to capital (YouTube had Google’s balance sheet, Roblox went public) will probably diverge that analogue more and more over time.
Whereas Roblox remains pretty rooted in Gen Alpha, Discord has a broader demographic base, encompassing Gen Z and older. The power of new generational behaviors remains pretty clear though.
I continue to believe that Discord is probably the most underestimated social platform in the west (and consequently one of the most undervalued). I should probably disclose a certain bias with that statement but in my defence it existed before I met Tom and Ben.
The other noteworthy growth opportunity in gaming is ads. Now I say that with the wry smile of a person who has, on and off over twenty years, spent a not inconsiderable amount of time trying to convince video games people that they should maybe consider the wheelbarrows of money which have instead gone to video platforms that host content about said video games. Perhaps this time is different? We shall see. The slides are very compelling and I think the math makes this outcome inevitable at some point.
Other things I have been reading
I spent the first couple of weeks in 2025 reading around management systems and the general running of companies. In the seventies, there was a large massing of technical intellect around the science of management (and to a degree, economics) until everyone got distracted by semiconductors. Makes you wonder what the counter-factual would have been. I’ve caught increasing namechecks for Stafford Beer on social platforms, which I mostly put down to Dan Davies’ influence in the world. His The Unaccountability Machine is quite a good read on the topic of cybernetics and probably near-essential reading for anyone intersecting with governments at the moment. Similarly, this post on management uses of LLMs by Henry Farrell is a very good read.
I try to be extremely selective in what I add to my Reading List for Founders. The latest version of Startup Boards really is essential reading for any founder or investor. I’m now basically forcing everyone I interact with to read it. Brad, Matt and Mahendra really did a phenomenal job.
There is an excellent profile of Michael Adex who is doing all sorts of interesting things at the intersection of rap, consumer products and talent management.
It is interesting to see increasing coverage of reversible computing as a possible future chip paradigm.
A screeching record noise sounds: something something Tiktok ban. Let’s see…