Founders Playbook: Lessons from Riot, Discord, & More

0:00:02 Right now, we’re in the soccer-cathode
0:00:04 in the beginning of a gaming Renaissance.
0:00:06 We’ll see gaming ultimately dominate
0:00:09 and become the primary entertainment media for the future.
0:00:14 I love the intersection of tech and art and psychology
0:00:20 and design and how they interact.
0:00:22 It’s just the coolest industry in the world.
0:00:25 Over the past few decades,
0:00:28 gaming has undergone a radical transformation.
0:00:31 From one-off experiences that came on a disk
0:00:32 to viral mobile games
0:00:36 to now intricate, seemingly never-ending online universes
0:00:38 that actually feel like they have more in common
0:00:40 with movies or social media
0:00:43 than the video games we might remember from the ’90s.
0:00:45 Esports tournaments fill stadiums,
0:00:48 games inspire major TV series,
0:00:50 and the money spent on gaming content alone
0:00:54 is five times what is spent on the movie “Box Office.”
0:00:56 So with all that said,
0:01:00 leveling up as a game company should be a breeze, right?
0:01:02 Well, it’s not that easy.
0:01:04 With intense competition, distribution challenges,
0:01:06 and high production costs,
0:01:09 gaming startups are used to playing on hard mode,
0:01:11 but they’re also pioneers of innovation,
0:01:13 leading the pack when it comes to the adoption
0:01:16 of everything from smartphones to virtual reality.
0:01:19 And these hard-won lessons offer insights
0:01:21 that can help startups across the tech industry
0:01:25 to power up and advance to the next level.
0:01:27 So that’s why we brought in some of the titans
0:01:29 of the game industry.
0:01:31 And today, you’ll hear them discuss everything
0:01:33 from the state of the gaming industry today,
0:01:35 how to survive a bare market,
0:01:37 the strategies that startups can leverage
0:01:39 to build and market products that stand out
0:01:43 in a busy crowd, and the potential impact of AI.
0:01:46 These conversations were all recorded during Speedrun,
0:01:49 A16Z’s extensive games accelerator.
0:01:52 So ready, set, game on.
0:01:55 As a reminder, the content here
0:01:57 is for informational purposes only,
0:01:59 should not be taken as legal, business, tax,
0:02:00 or investment advice,
0:02:03 or be used to evaluate any investment or security,
0:02:04 and is not directed at any investors
0:02:07 or potential investors in any A16Z fund.
0:02:09 Please note that A16Z and its affiliates
0:02:11 may also maintain investments
0:02:13 in the companies discussed in this podcast.
0:02:16 For more details, including a link to our investments,
0:02:19 please see a16z.com/disclosures.
0:02:22 (upbeat music)
0:02:28 – I’m very excited because I legitimately believe
0:02:30 that right now we’re in the suck with the third inning
0:02:31 of a game in Renaissance.
0:02:34 – That was Jonathan Lai,
0:02:38 general partner and founding investor of A16Z Games.
0:02:40 John previously worked at Riot Games,
0:02:42 where he shipped the Riot Games API
0:02:44 before the company was acquired by Tencent.
0:02:46 You might also recognize Riot
0:02:48 as the creators of League of Legends,
0:02:50 a game which sees 15 million players
0:02:52 on average every day.
0:02:55 – If you’re starting a game company,
0:02:58 there’s never been more tools and new technology
0:03:00 to help you build games.
0:03:03 There’s never been more sources of funding,
0:03:06 and there’s more players of games today than ever before.
0:03:08 There’s three founding gamers around the world,
0:03:10 like Southeast Asia, Africa, India,
0:03:13 all of these emerging markets are coming online.
0:03:13 At the same time,
0:03:15 like we have more distribution platforms
0:03:17 that are hungry for content,
0:03:19 where Netflix is getting into games.
0:03:21 I just heard that Walmart and Verizon last month
0:03:23 are like really excited about games.
0:03:26 Apple Arcade, Steam is at all time highs.
0:03:30 There’s just never been more demand for great content.
0:03:33 – Gaming has long been overlooked as an industry,
0:03:35 but it continues to evolve.
0:03:36 One of its next phase shifts
0:03:39 has been its influence on Hollywood.
0:03:40 Here’s Andrew Chen,
0:03:43 also general partner at A16Z Games.
0:03:47 – A lot of Hollywood are intensely interested
0:03:47 in the games industry,
0:03:50 because they’ve just seen in the last year,
0:03:51 not just the Mario movie,
0:03:53 not just what’s happened with Hogwarts Legacy,
0:03:55 Last of Us.
0:03:57 I’ve had a ton of meetings with everyone
0:03:59 from the team around JJ Abrams,
0:04:00 the bad robot people,
0:04:04 the Eisner family who ran Disney for many years,
0:04:05 the folks around Ridley Scott,
0:04:09 and Riot has obviously been pushing from the gaming side.
0:04:12 And it really feels like there’s a tremendous boom
0:04:15 that’s happened in the same way that Marvel
0:04:18 and the superhero franchises sort of became the core IP
0:04:21 that then unlocked basically the last,
0:04:23 I don’t know, 10 years of films.
0:04:24 What you’re really seeing
0:04:27 is just an aging out of the population
0:04:30 of folks that grew up watching two-hour movies
0:04:33 and that’s their primary method of entertainment.
0:04:34 And as that group ages out,
0:04:37 I think what we’ll see is we’ll see gaming ultimately dominate
0:04:40 and become the primary entertainment medium for the future.
0:04:44 And it’s inevitable just based on consumer watch time
0:04:45 and engagement time,
0:04:47 if you just measure it in minutes and hours
0:04:48 and monetization.
0:04:50 I think the folks on the business side
0:04:53 are starting to really understand
0:04:57 that gaming is actually larger than film, TV, books,
0:04:59 magazines, radio, combines.
0:05:03 And you can actually build and monetize your IP
0:05:04 and have daily interaction
0:05:07 in a way that you wouldn’t otherwise.
0:05:11 And it’s not just Hollywood that’s taking notice.
0:05:12 It started at Fortnum,
0:05:14 a smash hit that everyone in the globe
0:05:16 was talking about for years.
0:05:18 Right after Fortnite, you had a My Guest,
0:05:20 which almost made the pandemic livable.
0:05:22 Then you had games like Elden Green,
0:05:24 followed by Hogwarts Legacy,
0:05:26 followed by now Power World.
0:05:28 And so now it feels like every year
0:05:29 you’ll have like one or two games
0:05:32 that just like curses like the cultural fabric.
0:05:34 It just becomes this thing that everyone talks about,
0:05:37 which I find is like really amazing
0:05:40 and the sign that games has come into its own right
0:05:42 as a piece of culture.
0:05:43 If you need any convincing,
0:05:46 remember that viral dance move, Flossing?
0:05:49 Well, part of its popularity came from the ability
0:05:52 to buy it as an emote for your character in Fortnite.
0:05:54 And while this pop culture breakthrough
0:05:56 is great news for the industry,
0:05:59 every quest still has its challenges.
0:06:01 Like much of the technology sector,
0:06:03 games industry investment stalled last year,
0:06:07 following to less than a quarter of its post-pandemic peak.
0:06:09 But at least according to one industry veteran,
0:06:12 a bear market can bring its own advantages.
0:06:16 – When we were pitching what we codenamed Fellowship,
0:06:18 this open world co-op free to play game,
0:06:20 there were a lot of people who were telling us
0:06:23 like there are dozens of these, they’re so expensive,
0:06:24 no one’s going to want to fund this,
0:06:26 it’s going to be ridiculous.
0:06:28 And I think if you look at the market two years ago,
0:06:30 all that pushback was totally right.
0:06:32 – That was Steven Snow,
0:06:34 a four-time gaming studio founder
0:06:37 and one of the creators behind games like League of Legends,
0:06:41 Degen Siege and Total Annihilation.
0:06:43 – I think when you look at the market today,
0:06:46 there’s less than 10 of these product pitches still live.
0:06:49 Meaning like as the economy’s kind of gotten more condensed,
0:06:51 and I heard everybody talking earlier today
0:06:53 about how there are founders who prefer to operate
0:06:55 in a more financially constrained market
0:06:57 because it makes it kind of easier
0:06:59 to ignore a lot of the riffraff and the noise.
0:07:00 I don’t disagree with that.
0:07:03 In fact, I would say that we now find ourselves
0:07:06 in a very interesting situation where we’re one of a few,
0:07:08 whereas if three years ago we were one of so many,
0:07:10 it wasn’t worth doing.
0:07:11 – The current economic climate offers
0:07:14 another potential advantage to gaming startups
0:07:16 in the form of talent.
0:07:19 As margins narrow, we’ve seen a wave of mass layoffs
0:07:22 from major gaming studios.
0:07:23 – What’s happened to us
0:07:25 in our overall applicant pipelines
0:07:28 over the last 60 days is we are flooded.
0:07:31 We are seeing heads of studios apply
0:07:34 for like base tier leadership jobs.
0:07:36 Trust me, if you guys are not checking
0:07:38 your email inboxes right now,
0:07:39 you’re making a huge mistake.
0:07:42 Everybody’s emailing everyone trying to find a job,
0:07:43 and some of these people don’t need to.
0:07:45 They’re just looking to get out of the studio
0:07:48 that handled their, I won’t name any names,
0:07:50 but they handled their folks very poorly.
0:07:51 And so if you have cash,
0:07:54 just figure out how you wanna focus
0:07:57 because there’ll be so many people who are trying to get in.
0:08:02 – But even a market full of big name talent
0:08:04 can present its own challenges.
0:08:07 – The mistake I see so many startups make
0:08:09 is go hire that person from EA.
0:08:13 You know, go hire that person from Xbox.
0:08:17 Like they get really rude by the resume at the early stage.
0:08:19 – Aerosource Meany is an angel investor
0:08:22 and former CMO at Discord.
0:08:24 – And there are some amazing people at those two companies.
0:08:26 Don’t get me wrong, they really are,
0:08:28 but the resume alone is not what is actually gonna help you
0:08:30 be successful as a startup.
0:08:33 And you can waste a lot of time, a lot of money.
0:08:35 These people are expensive often.
0:08:39 Sometimes they’re seeking the same salary they got of Xbox.
0:08:41 And the thing is they’re probably really great
0:08:43 in those environments,
0:08:46 but when you’re a team of 10 or less, 20 or less,
0:08:49 50 or less, it’s a completely different ball game.
0:08:51 So all that amazing experience,
0:08:52 all the knowledge that they have,
0:08:54 all the skills that they have,
0:08:57 don’t necessarily apply to the early stage.
0:09:00 – Now this is just one of the ways
0:09:01 that companies are trying to stand out
0:09:04 in this sea of stiff competition.
0:09:06 And it’s truly a worldwide game.
0:09:07 Here is Jonathan Lai.
0:09:11 – Competition is seeding up in games,
0:09:14 even beyond the competition that we see here in the West.
0:09:16 Most of the Asian game companies
0:09:19 call it Meharier, Tencent, NetEase,
0:09:22 they’re actually all moving West.
0:09:24 And this has been an effort that has been going on
0:09:27 for some time, but I think it’s really accelerated recently.
0:09:31 The crackdown that China’s had in gacha boxes
0:09:34 and regulatory playtime and so on and so forth.
0:09:35 Just using the example of Meharier,
0:09:38 I think it’s opening three or four offices,
0:09:39 like hearing the West cares for my own
0:09:41 and hiring up a massive number of people.
0:09:43 And so something to think about
0:09:46 is if you are starting a game studio today
0:09:49 and having the potential to compete against developers
0:09:51 that can feel massive workforces
0:09:53 that are working around the clock
0:09:55 and have very, very deep understanding
0:10:00 of monetization, how to run free-to-play economies and so on,
0:10:03 I think it’s hard to compete with one of these larger guys,
0:10:05 just purely on our content production.
0:10:08 So the treadmill, what are the levers that you can pull
0:10:12 to basically compete against an incumbent in your space?
0:10:14 – So let’s dive into exactly that.
0:10:16 The tools and strategies that gaming companies
0:10:18 are putting into action
0:10:20 to get their products onto the leaderboard.
0:10:23 Starting with listening to fans.
0:10:25 It used to be that back in the day,
0:10:30 marketing was this combination of PR conferences and events
0:10:32 and building case studies with your customers
0:10:34 and doing field marketing.
0:10:37 And it was sort of this like very repeatable playbook,
0:10:40 like the whole industry is getting foundationally disrupted.
0:10:42 It’s shifting really towards the idea
0:10:45 of a lot of B2B founders actually,
0:10:48 instead talking directly to their audience,
0:10:50 building direct channels with their customers,
0:10:51 building in public,
0:10:55 building a sense of a buzz around the work that you’re doing.
0:10:57 And we certainly see that a ton in AI
0:11:02 where the primary hunting ground for acquiring customers,
0:11:04 for attracting funding, for recruiting employees,
0:11:08 actually has been Twitter and LinkedIn and Discord
0:11:10 and some of these other platforms.
0:11:11 And I would certainly encourage anybody
0:11:13 that’s kind of working in a B2B context
0:11:15 to really consider the same.
0:11:17 – Steven Snow learned the power of this approach
0:11:21 when him and his team at Riot stepped away from their screens
0:11:24 and set up a stall at the gaming industry’s largest convention.
0:11:28 – When League of Legends made its big announce,
0:11:31 we went to E3 and I had a booth
0:11:36 at the end of the end of a row in Kentia Hall.
0:11:37 We told our community,
0:11:39 if you want to do resume reviews, come by.
0:11:42 All we had was our community and no one knew who we were.
0:11:45 We were a 45 person studio at the time,
0:11:47 but everybody else thought we were three idiots
0:11:48 in a garage, right?
0:11:50 The day started super sad.
0:11:53 It was just me and a couple others in the booth
0:11:55 and within a few minutes, people are showing up.
0:11:57 They usually just wanted to talk about the game
0:11:58 and I was like, I’ll talk to you about the game,
0:12:01 but I have one commitment.
0:12:02 Before I talk to you about the game,
0:12:04 you have to tell me something
0:12:07 that completely sucks about League of Legends.
0:12:08 And it’s a qualitative question.
0:12:10 It doesn’t matter what their answer is,
0:12:12 I’m just gonna source with them like,
0:12:14 oh, is it a friction related to matchmaking?
0:12:15 And they might say like, oh, it takes me forever
0:12:16 to find a friend.
0:12:18 It’s like, okay, cool, is that a matchmaking problem?
0:12:19 Is that like a friend’s list problem?
0:12:21 But I’d go through and pull it all out.
0:12:26 I did it for three days straight and it was horrible.
0:12:28 And they’re just eviscerating the product right there, right?
0:12:30 Like just right in front of everybody.
0:12:31 And the whole thing I just kept doing
0:12:33 was writing down their feedback, writing it down.
0:12:35 And by the time I got back to the office
0:12:38 after that Ken Tia Hall debacle,
0:12:41 I had a punch list that was more effective
0:12:43 for the overall trajectory of League of Legends
0:12:46 than if I’d tried to sit in a room with our top designers.
0:12:48 At the end of the day, it’s not personal.
0:12:51 They are as angry and as furious
0:12:56 about the state of the game because they care.
0:12:59 Right, like that is the secret sauce right there.
0:13:01 It got to the point on League of Legends release notes,
0:13:04 I was putting in parentheses next to the big beats
0:13:07 and we would give them credit for giving us the feedback.
0:13:11 There’s another detail that’s gonna sound completely insane,
0:13:13 but when we had about 50,
0:13:18 all the way up until about 250,000 monthly active players,
0:13:21 I would meet with the top tier players
0:13:24 and it was first come, first serve in a ventrilo server.
0:13:26 It was capped at 200.
0:13:29 And I would just go every Sunday starting at 4 p.m.
0:13:33 I would just go down the line of the 199 other people
0:13:34 and ask them what sucked.
0:13:37 And that was what fed the release notes.
0:13:39 Direct user engagement can be a game changer
0:13:41 for any technology product.
0:13:44 And the team at Riot takes their player-focused approach
0:13:46 a step further by putting players
0:13:48 at the heart of everything they do.
0:13:51 Here’s Michael Chow, Steven’s former colleague at Riot.
0:13:55 – The holy grail is the customer
0:13:57 and you just obsess about the customer.
0:13:59 And when I showed up at Riot,
0:14:03 I used to call our customers users
0:14:05 because that’s what everybody in consumer technology
0:14:08 calls users, they call them users.
0:14:12 I didn’t realize how much I hated that
0:14:14 until I started calling them players.
0:14:15 And when you think of them that way
0:14:18 and you start using language like that
0:14:19 and you envision what they do
0:14:22 with the thing that you’re trying to give them,
0:14:23 it just changes everything
0:14:26 about how you can make great products.
0:14:27 And so that for me was like,
0:14:29 that was a huge inflection point,
0:14:33 is just becoming really explicitly customer obsessed.
0:14:35 You don’t make your dream game,
0:14:37 you make players dream game.
0:14:40 And I think that is a very helpful way of thinking about it.
0:14:42 I think there are basically two kinds
0:14:44 of game developers in the world.
0:14:47 There are people who are the consumer tech companies
0:14:49 who got into games.
0:14:51 Mark Pincus, who was here yesterday, was my boss.
0:14:52 I love him deeply.
0:14:53 He has passion for the gaming space,
0:14:56 but he’s not a game developer by trade.
0:15:00 He is a consumer internet technology product developer.
0:15:01 So that’s one kind.
0:15:04 And then the other kind is what I would call real games.
0:15:06 These are real game developers.
0:15:08 Both are actually really important.
0:15:10 But I think the highest level feedback
0:15:12 or suggestion I give to any of you
0:15:14 is figure out which of those two things you are
0:15:16 and then just do the other thing.
0:15:19 If you consider yourself a consumer internet tech person,
0:15:21 you think more about what is the market saying
0:15:23 and you’re thinking about the customer,
0:15:25 which is nice actually, that’s good.
0:15:28 You really need to tap into the internal part of you
0:15:31 that has very strong sense of inspiration and taste making.
0:15:33 Whatever is the product that you’re making
0:15:35 really immerse yourself in it.
0:15:37 Conversely, if you are a game developer
0:15:41 and don’t think of yourself at all as the consumer tech person,
0:15:44 you mostly go inside out from your own inspiration
0:15:47 and intuition into shipping it out into the world.
0:15:51 This is like Hideo Kojima is my least favorite example
0:15:53 of this kind of developer.
0:15:55 All he wants to do is make what he wants.
0:15:57 And if you like it, then great, but it doesn’t matter.
0:15:58 It’s about him.
0:16:00 That’s also a noble way of being,
0:16:02 but if that’s your way, do the other thing.
0:16:06 Learn to be obsessive about the customer and the market
0:16:08 and work backwards from their needs
0:16:10 rather than your own inspiration.
0:16:12 Over at Discord, Eros and his team
0:16:15 are focused on talking directly to their users as well.
0:16:17 But in their early growth stages,
0:16:19 they paid extra special attention
0:16:22 to an important subset of fans.
0:16:24 Now you’re in a world where you’ve got your first
0:16:28 100,000, 10,000, 50,000 user.
0:16:29 The question you have to ask yourselves is,
0:16:31 within those groups, who are your super fans
0:16:34 and what are you doing to encourage their behavior?
0:16:37 That’s the thing I actually think works best for growth.
0:16:40 Something we did phenomenally well at Discord.
0:16:44 If you were a Discord super fan and we saw you,
0:16:46 you knew that we saw you.
0:16:47 You just knew it.
0:16:49 You could tell that we were loving you right back.
0:16:51 And I remember Stan would always say,
0:16:52 “So Stan’s the CTO of Discord.”
0:16:54 Stan would always say,
0:16:58 “My favorite thing to do is to get out of writing code
0:17:00 “and go to PAX and talk to the people
0:17:01 “about the code I’m writing.”
0:17:04 And he loved it and he would always insist on being there
0:17:06 and ask questions and take feedback.
0:17:09 And he would whip out his phone and show some new feature
0:17:10 he was thinking about and get feedback
0:17:12 and he just really got into that.
0:17:16 And then of course, on Twitter, you know, same day,
0:17:18 someone was like, “I just spoke to Stan at Discord
0:17:20 “and he’d like show me this cool thing.”
0:17:21 And like, there was a social love
0:17:23 and then our social team would be like,
0:17:24 “Thank you so much for hanging out with us.”
0:17:28 And it was just like, just effusive sort of love feel.
0:17:30 And so the reason I say this, the reason why,
0:17:34 those people are your most important asset
0:17:37 from day zero to the end of year one,
0:17:39 your most important asset.
0:17:40 They’re the ones that are gonna tell you
0:17:43 what you’re doing right and what you’re doing wrong.
0:17:45 Probably before the world sees it
0:17:47 ’cause they’re using the product so much,
0:17:50 so intently, so passionately,
0:17:53 that they’ll know bugs that you don’t know about.
0:17:54 So embrace them.
0:17:58 – Now, there is another way to reach your super fans.
0:18:01 There’s some of the most influential people
0:18:03 in the gaming world, streamers.
0:18:08 – What we noticed was a number of streamers
0:18:09 on Twitch trying to figure out
0:18:11 how to better manage their communities.
0:18:14 It was very clear that there wasn’t a great tool for them.
0:18:15 They were patching it together
0:18:18 with everything from Ventrilo to TeamSpeak
0:18:22 to other sort of pseudo Discord-like solutions.
0:18:25 And we decided after we saw some sort of small uptick
0:18:27 from some smaller streamers,
0:18:28 to just invest in that a little bit.
0:18:30 We thought, hey, if we could show them
0:18:34 that our tool is really good at what it does,
0:18:35 we could provide them with some stuff
0:18:38 that is streamer-specific, creator-specific.
0:18:41 And we could get them to use Discord
0:18:43 while they’re gaming with their friends.
0:18:44 It will literally show the world
0:18:46 what our product is intended to do.
0:18:48 Discord was really intended for you and your 10 friends
0:18:49 to hang out.
0:18:50 It was never intended to have
0:18:51 hundreds of thousands of people on it,
0:18:53 even though that happens now.
0:18:54 The original attempt was like,
0:18:57 bring people together through games, hang out,
0:18:58 build your small community.
0:19:01 So we built a few things.
0:19:05 We helped them link their subscriber sort of status
0:19:07 to special roles in Discord automatically.
0:19:09 We handled some of the payment gateway pieces
0:19:10 related to that.
0:19:13 We just sort of made Discord a better tool for them.
0:19:15 And anyone who sort of watched Discord grow up
0:19:18 and was also watching Twitch at the time could see it.
0:19:20 It was obvious, like all the big streamers were using it.
0:19:23 And the funny thing is the first few
0:19:26 that talked about Discord, we didn’t pay them.
0:19:27 So when we met Lyric at like a TwitchCon
0:19:29 and we were just like, hey, here’s our really cool thing.
0:19:32 And like we can’t pay you, we don’t have money,
0:19:33 but we think we’ve built something cool
0:19:35 and we love just to get your feedback on our product.
0:19:36 That was the conversation.
0:19:40 A week later, he gets on stream and says,
0:19:42 this is the best built piece of software
0:19:45 for what I do that I’ve ever seen.
0:19:48 And you can just see the Lyric spike, boom, right?
0:19:52 And that was a nice way to sort of validate
0:19:54 that we should ride the Twitch rig.
0:19:56 ‘Cause there are people on that platform
0:19:57 that think the way we do,
0:19:59 which is like, let’s make great products
0:20:01 and let them speak for themselves.
0:20:04 – Clearly, player feedback is a cheat code
0:20:05 for identifying opportunities,
0:20:08 building great products and finding customers.
0:20:11 But a focus on player preferences is also key
0:20:13 to tackling one of the biggest challenges
0:20:16 in the industry, distribution.
0:20:17 Here is Michael.
0:20:20 – The industry is in a tremendous amount of flux
0:20:23 about channels for receiving your content
0:20:25 and channels for paying for your games.
0:20:27 I don’t think we know how it’s going to resolve,
0:20:29 specifically the regulatory environment.
0:20:32 The diaspora of platforms right now is pretty frustrating.
0:20:35 Like if you wanna watch a television show right now,
0:20:37 it’s your guess as to whether or not
0:20:40 it’s on Netflix or Prime or Hulu or Disney Plus,
0:20:42 which is now kind of Hulu, but not yet Hulu
0:20:46 or Crunchyroll or Peacock or whatever.
0:20:49 And I think that players don’t really want that in their games.
0:20:51 I think they’re much more discerning as players in games
0:20:53 and they’re also more religious,
0:20:55 which is why you see the divide between Steam
0:20:56 and the Epic Games Store.
0:20:59 And I think that you gotta rewind backwards
0:21:00 from what the players want.
0:21:03 – Despite players being siloed in their chosen platforms
0:21:06 and floods of content being available,
0:21:10 there may just be one major wave that could disrupt it all,
0:21:12 artificial intelligence.
0:21:14 AI is already capable of helping us write stories,
0:21:16 create artwork and build software,
0:21:19 some of the core components of game development.
0:21:22 But it also presents a host of new opportunities,
0:21:25 like more personalized narratives and custom virtual goods
0:21:27 or AI players that can help test games
0:21:30 and even tools for analyzing player activity.
0:21:31 Here is John’s take.
0:21:34 – The way we think about AI in games
0:21:37 that there’s going to be sort of two waves of innovation.
0:21:40 And so the first wave is making the same games
0:21:43 that we have today, but just faster, cheaper,
0:21:46 like at greater scale than before.
0:21:47 And I think there will be valuable companies
0:21:50 that do that and do that well.
0:21:52 But I think long-term, the incumbents
0:21:54 are actually the most likely to capture value
0:21:56 from the sort of faster, better, cheaper,
0:21:58 well, the game development.
0:21:59 And then sort of the second wave,
0:22:01 which we are even more excited about,
0:22:05 is the potential for AI to create entirely new markets.
0:22:07 And so this is like new types of gameplay experiences,
0:22:09 new social experiences involved in the agents,
0:22:11 new types of genres that use AI
0:22:14 as part of its core game that we haven’t seen yet.
0:22:16 And I think ultimately, like you can create
0:22:18 the most value here because if you’re successful,
0:22:21 you’re bringing in net new players, right?
0:22:23 Like you’re not trying to cannibalize call of duty
0:22:24 or leave legends and say,
0:22:26 “Hey, like come over here and play this game instead.”
0:22:28 You’re actually appealing potentially
0:22:31 to the people who don’t self-identify as gamers today,
0:22:34 but they might see something, say character AI,
0:22:37 say, “Hey, that’s actually really compelling.”
0:22:38 And so I think that’s the long-term promise
0:22:41 of AI and gaming that we’re very excited about.
0:22:42 – And we probably have no conception
0:22:44 of the innovation that’s on our doorstep.
0:22:48 – People often talk about how if you knew
0:22:51 that cars were gonna be invented,
0:22:54 you could extrapolate that gas stations would be a thing,
0:22:56 right, because that’s kind of the first order.
0:22:58 And by the way, you know, in a world of like horses,
0:23:00 like, yeah, you need stopping stations for your horse
0:23:01 to have water or whatever, so you’re like,
0:23:03 “Okay, well, a car is kind of like that.”
0:23:06 It is really, really hard to go from that
0:23:09 and saying, you know, Walmart can exist because of the car.
0:23:11 You know, where a city like LA can exist
0:23:13 because it really is something that the urban sprawl
0:23:16 kind of requires, you know, the invention of a car to support.
0:23:20 That’s the second degree aspect I think is really difficult.
0:23:23 I think that is why a lot of what we can imagine
0:23:26 is just taking things that exist today
0:23:28 and just doing it a little bit better.
0:23:30 But the reality is I think we’re gonna see people compete
0:23:32 in a bunch of different avenues
0:23:34 that they wouldn’t have previously.
0:23:37 You know, maybe when it turns out that we decide
0:23:40 as a country we’re gonna have Trump be Biden again,
0:23:43 somebody that evening is gonna spin up like a meme game
0:23:45 and people are gonna play it for like 30 minutes
0:23:47 that evening and then they’re gonna throw it away.
0:23:49 But it was instantly easy to build.
0:23:50 Today you talk about markets.
0:23:53 You say, “Oh, well, I’m gonna build this experience.”
0:23:57 And it’s got to address a market of millions of gamers
0:23:59 and that’s the only way we would possibly do it.
0:24:01 Well, you know, again, if it’s super easy,
0:24:03 the same way that you would make a little meme
0:24:05 to make fun of someone in your office
0:24:06 or whatever not that we’d ever do that,
0:24:09 then maybe you would build a little game
0:24:11 that’s for an audience of 20 people
0:24:14 that’s just a free-for-all, you know, like thing
0:24:16 of what the A16Z partners, like, you know,
0:24:19 shooting at each other, maybe that would be fun.
0:24:21 – When it comes to AI and gaming,
0:24:23 there’s still a lot of uncertainty,
0:24:25 but the gaming community has always been quick
0:24:28 to embrace new tools and new technologies.
0:24:30 So given his track record, other industries
0:24:32 would be smart to learn from these pioneers.
0:24:38 – The game industry is this really special force within tech
0:24:43 because you look at how the PC came into the consumer
0:24:47 household, how GPUs came to be, how 3D came to be,
0:24:49 how VR is happening right now.
0:24:52 The games industry has really been this sort of like
0:24:56 alpha nerd, kind of early adopter set of technologies
0:24:59 that then comes to actually ultimately revolutionize
0:25:01 the rest of the tech industry.
0:25:05 – All right, that’s all for now.
0:25:07 Whether you’re building directly in games or not,
0:25:09 I’ll be quick to remind you that the industry
0:25:11 has long been on the frontier.
0:25:12 And we hope this gives you a glimpse
0:25:15 into how they’re solving some universal challenges
0:25:17 and progressing to the next level.
0:25:22 If you liked this episode, if you made it this far,
0:25:25 help us grow the show, share with a friend,
0:25:27 or if you’re feeling really ambitious,
0:25:32 you can leave us a review at ratethispodcast.com/asiccisi.
0:25:35 You know, candidly producing a podcast
0:25:38 can sometimes feel like you’re just talking into a void.
0:25:39 And so if you did like this episode,
0:25:41 if you liked any of our episodes,
0:25:44 please let us know, we’ll see you next time.
0:25:47 (upbeat music)
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