"a sort of Dorian Gray accounting". Ha! I am definitely lifting this.
Also, the rationalist critique reminds me of the eternal "am I alpha or am I beta?" discussion. I argue [0] that you need to believe you are informed in a way other market participants are not (asymmetric, informational edge) to produce alpha. Of course this is speculative, but if you don't have edge at least (i.e. you're "just" smart), you are probably beta.
Re alpha and beta, it's interesting: I can't tell if more alpha is generated by people asking "why is everyone else wrong?" vs starting from first principles. The original value thinkers mostly talked about starting from an independent frame of reference, but maybe that's only an option when markets are incredibly inefficient and data is scarce.
In venture, since deal flow is more limited and idiosyncratic, you'd think that first principles would win vs contrarianism, but it seems like the big money there is made from figuring out why a bad-looking idea is actually good, i.e. instead of modeling an actual bad trader on the other side of the trade, you're modeling a hypothetical founder who doesn't launch a competitor.
I would also add, with respect to venture, you're often not dealing with the alpha term or beta term, but actually the error term. (Almost certainly true in entrepreneurship as well).
So presumably the discussion of alpha/beta is moot unless you have a large sample size, hence why I argue in my essay so much depends on building out that sample size (e.g. fail fast, iterate quickly, sample broadly, etc.)
1. Would Constellation Software be considered a conglomerate? I understand they only buy software companies, but having "general software management" skills doesn't sound too far removed from "general management" skills. If you've written about them before, I'd love to see the article.
2. "Why would I be special" seems like the right question. Playing basketball is a low-EV game for the general population, but high-EV for twelve-year-old Lebron James (taller than average, externally recognized for agility and athletic ability, etc). If you're not special, it's gutsy to start the company. If you were the top sales person, developer or manager at another company for five years, it's not quite so risky.
I feel like comparing streaming games to streaming music and movies is off in the sense that watching a game and playing it are almost as different as listening to a song and playing it yourself. In that sense, the game companies are as much like guitar manufacturers as they are like musicians.
For myself, I have *never once* watched a stream and thought, well, I watched that game, now I don't need to play it. To my mind, it would be like someone listening to a song and thinking, "Now that I've heard it, I don't need to try and play it on my guitar." The advent of game streaming has led to me purchasing more games, not fewer.
I totally understand the argument that streamers are profiting from a game they didn't create, but, back to the music analogies, guitar companies don't charge rockstars extra to play their guitars in front of thousands of peoples. The rockstars buy them the same as everyone else, and the guitar companies are ecstatic when someone gets famous while using their product, and then I presume they try to give them as much free stuff as possible to keep them using their product.
"a sort of Dorian Gray accounting". Ha! I am definitely lifting this.
Also, the rationalist critique reminds me of the eternal "am I alpha or am I beta?" discussion. I argue [0] that you need to believe you are informed in a way other market participants are not (asymmetric, informational edge) to produce alpha. Of course this is speculative, but if you don't have edge at least (i.e. you're "just" smart), you are probably beta.
[0] https://alexpetralia.github.io/risk/2017/11/25/the-risk-preference-payoff-matrix.html
Re alpha and beta, it's interesting: I can't tell if more alpha is generated by people asking "why is everyone else wrong?" vs starting from first principles. The original value thinkers mostly talked about starting from an independent frame of reference, but maybe that's only an option when markets are incredibly inefficient and data is scarce.
In venture, since deal flow is more limited and idiosyncratic, you'd think that first principles would win vs contrarianism, but it seems like the big money there is made from figuring out why a bad-looking idea is actually good, i.e. instead of modeling an actual bad trader on the other side of the trade, you're modeling a hypothetical founder who doesn't launch a competitor.
I would also add, with respect to venture, you're often not dealing with the alpha term or beta term, but actually the error term. (Almost certainly true in entrepreneurship as well).
So presumably the discussion of alpha/beta is moot unless you have a large sample size, hence why I argue in my essay so much depends on building out that sample size (e.g. fail fast, iterate quickly, sample broadly, etc.)
(I think my understanding is correct here..)
1. Would Constellation Software be considered a conglomerate? I understand they only buy software companies, but having "general software management" skills doesn't sound too far removed from "general management" skills. If you've written about them before, I'd love to see the article.
2. "Why would I be special" seems like the right question. Playing basketball is a low-EV game for the general population, but high-EV for twelve-year-old Lebron James (taller than average, externally recognized for agility and athletic ability, etc). If you're not special, it's gutsy to start the company. If you were the top sales person, developer or manager at another company for five years, it's not quite so risky.
PS Good choice on the new logo.
I feel like comparing streaming games to streaming music and movies is off in the sense that watching a game and playing it are almost as different as listening to a song and playing it yourself. In that sense, the game companies are as much like guitar manufacturers as they are like musicians.
For myself, I have *never once* watched a stream and thought, well, I watched that game, now I don't need to play it. To my mind, it would be like someone listening to a song and thinking, "Now that I've heard it, I don't need to try and play it on my guitar." The advent of game streaming has led to me purchasing more games, not fewer.
I totally understand the argument that streamers are profiting from a game they didn't create, but, back to the music analogies, guitar companies don't charge rockstars extra to play their guitars in front of thousands of peoples. The rockstars buy them the same as everyone else, and the guitar companies are ecstatic when someone gets famous while using their product, and then I presume they try to give them as much free stuff as possible to keep them using their product.