How early talent flows into emerging ecosystems and the difficulty in building for seemingly inevitable futures
I’ve long been a believer in the merging of our digital and physical worlds and have spent extensive time thinking through the various companies and projects that could emerge to capitalize on this trend over the past ~6 years or so.
On the social side, it became clear that as conversational AI began to advance we would be able to build a variety of products surrounding “AI Friends” or broader digital companions whether via text or audio synthesis to start, and likely video synthesis over time. This thesis hasn’t really played out with Hugging Face pivoting away from the concept, and the majority of other companies aiming to build more enterprise use-cases on the audio side (all paired with a lack of readiness of the technology until GPT-3 on the conversational text side). At its worst, the only signal we’ve gotten has been a Google engineer freaking out over what they thought was a sentient AI…I didn’t have that one on my bingo card.
What we did get was the emergence and proliferation of Digital Celebrities, a trend that was made famous by early movers like Hatsune Miku and Gorillaz, and re-ignited by characters like Miquela, Astro, and others in a second wave of hype that largely has disappointed due to a lack of scalability in technology to make the economics work (outside of selling NFTs and promising the world).
We now have collectively stepped back from the more “out there” ideas that require either a large amount of staff or technical excellence in automating content creation in order to achieve scalability and have moved towards the metaverse which has become a bastardized term that founders and investors alike latch onto (which by the way, also requires a large amount of staff and technical excellence).
When any term becomes buzzy you naturally get a wave of first movers that are looking to capitalize on the Cambrian explosion of attention while the barriers to entry and competition are low. For better or for worse, typically the median talent of these people is lower than existing industries as “elite” talent doesn’t move off of their corner at scale until forcibly pushed and/or more proof points emerge for a new thing to be worth the opportunity cost.
My hypothesis on this is that this space in general attracted a profile of founder that wasn’t ideal (too artistic, not enough depth of thought applied to building a big business) and slower adoption killed the industry making most startups unable to fundraise past Seed.
We saw this dynamic play out in early AR/VR ecosystems where the first participants were too early to the industry and under-equipped to deal with the lack of infrastructure, level of difficulty of development, and thus skill required to build useful and long-term valuable products. What we got instead was the emergence of a new cohort of Creative Technologists that came from the video game world (among other areas) but didn’t know how to build companies.
The Metaverse as a concept, whether we think of that as avatars, digital celebrities, digital fashion, new crypto gaming startups, or more, has followed this path fairly closely, except with far more capital at its disposal due to macro tailwinds and crypto. COVID locked everyone inside and accelerated an inevitable behavior of people bringing economies and time into digital spaces, lighting up the eyes of capitalists everywhere to bring a world where marginal cost trends to 0 and scalability of products is infinite. We just needed ~*visionaries*~ to show us the way, and shortly thereafter a million mockups and unrealistic product roadmaps were born. But where is the talent?
A high number of founding teams look like some combination of incumbent industry expert + creative, with very little technical competence, and a very plausible vision as to why the thing they want to build will exist in the future. They typically go on to hire a freelancer Creative Technologist (a role in 2019 I argued should not be an early eng hire) who has done tangential work in the space, but either hasn’t been a full time employee anywhere for years, or refuses to join full-time. They then add an engineer that was working at a middling technology company and now wants to work on something cool and interesting in a role with far more freedom and moderately comparable compensation, while being paid to learn new parts of the tech stack1.
My perpetual difficulty in believing in these concepts and teams today ultimately comes down to this chicken and egg problem of talent, where theoretical futures outpace attainable ones due to a huge talent gap.
There’s a fair argument that I’m being too harsh on the emergence of early ecosystem talent. In speaking to founders, operators, and investors who were around in the early days of startup creation for the Web, many have said similar things about the founding teams then: “There were no primitives for building companies, no blogs, and the people on the internet were just unprepared weirdos who had a vision and needed a ton of help…but they made it work.”
I’d argue this was/is true in crypto, and perhaps this is true in the metaverse, however the pace of progress and scale of entrepreneurial competition has never been more intense, and my gut tells me the maturation phases of talent migration happens far faster between industries today than it did in the past, as tech has eaten the world.
Put another way, while in 2022 the median talent bar for the given crypto-centric/decentralized metaverse play (whether that’s building the entire metaverse, or building assets/games/etc. that exist in some very unclear yet inevitably connected way) feels woefully underprepared to build a massively difficult and technical problem (relative to say, the team at Meta), by 2025 the talent bar could be materially higher, and my bet is that talent will either start companies or join newer companies versus incumbents from “last cycle”.
So what’s the point of this post?
In some ways perhaps it’s the result of everyone being shocked when I say we largely don’t invest in GameFi or The Metaverse right now after writing prolifically about adjacent areas for years. Or maybe it’s my progression as an investor, understanding that sometimes while narratives feel like an inevitability, the hardest part of being a thesis-driven investor is recognizing the time needed to let the thesis area mature, teams coalesce, and early movers fail, in order to prove your thesis correct in the long-term.
Or again, maybe I’m just becoming a jaded investor who judges talent too harshly as each year I see more of how hard it is to build a truly great company?
All are probably true, but upon reflection my main goal for writing this is to hopefully allow builders to push through the difficulty of not having proper technical competence and planning in place before starting a company during the inevitable trough of disillusionment that will come.
That said, the difficulty with inevitable things, whether it’s the metaverse or a market downturn, is that a part of us always wants to believe that we can last until the inevitability becomes a reality, outlasting the downside to capitalize on the upside. That the realization of that vision means the right people get rewarded for their early and long-held belief in something.
I’m not sure.
And to be fair, this is smart of that engineer! Many of the skillsets surrounding the metaverse feel inevitable to learn as an engineer and so why not learn them before it becomes table stakes for certain roles at companies?
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