Five Reflections Since Co-Founding Naavik

foreign [Music] gaming podcast where it is our mission to explore the business and future of video games we bring together the industry's brightest Builders investors and thinkers to keep a full sun current events dissect emerging Trends and games share Lessons Learned and have a great time this podcast is also part of novik's growing ecosystem which ranges from free and premium research to Consulting and advisory services for more information visit www.navic.com now let's jump into the episode hi everyone I'm your host Aaron Bush and today's episode will be a little different the scheduling gods have had a mind of their own lately I've had a couple interviews get pushed around but instead of having no episode today I thought it would be fun to take a moment and reflect on some of what I have

learned since co-founding novik so today it'll just be me and my mic and I'm going to focus on five Reflections and try not to get to self-indulgent about it in truth I could call out 50 or more but I really want to drill down into what's moved me the most what I think could be interesting to you and what will I hope leave some small amount of impacts on this industry that we all love so that's the plan but before diving into reflection number one I think it's worth setting some context most of you don't know novik's lore and nor should you but my Genesis story with novik began four years ago four years ago I didn't work in the games industry I didn't even know anyone in the games industry I worked in finance at a company called The Motley Fool where I built and managed investment products and ran investment portfolios it was a great company I loved my work and I was

really good at my job but I still had other passions and I really wanted to create something of my own so I looked at the Venn diagram of my two favorite passions studying businesses and video games and decided hey you know what let's do something about this no grand plan no strategy no monetization I'll just write about the intersection of those two passions purely for the fun of it and see where it goes and that's when Master The Meta was born Master of the meta was a newsletter the precursor to today's novik digest in which every week I by myself would conduct research about the games industry and write about what I learned I was one of the very early writers on sub stack and for several months was largely writing to myself after all I didn't know anyone in the games industry and the people in my investing circles didn't care all that much about video games either but the email list surely but slowly started to

grow then I met Manu whereas I was a one-man content operation Manu was let's call it a 1.5 man concern resulting operation under a brand named you guessed it novik monu discovered me through an investing podcast of all places then stumbled across Master The Meta and then after determining I wasn't a total idiot decided to reach out at the time I had no idea whatsoever he would turn into my co-founder or that my hobby would even turn into a business I was just relieved that this super knowledgeable guy about making video games actually thought my content was good he suggested that we collaborate on an essay and then the snowball began to compound every week I'd look at our email list and be ecstatic about seeing prominent gaming leaders and companies I was interested in actually subscribing

to learn about what I had to say the audience grew Bonnie's Consulting inbound grew we slowly began adding writers and consultants and by the time my suggested that we officially join forces and start a real company it was an easy yes from my end now that sounds like a serendipitous origin story and in many ways it is but the whole time I couldn't help but think in the back of my mind why me why would all of these people choose to read my thinking someone who's never made a video game or run a video game business I felt like an imposter and often still do even as I'm talking right now and that brings me to reflection number one which is imposter syndrome is the real imposter not you after lots of worrying about saying something stupid or embarrassing myself

in front of an audience I deeply admired it finally hit me all of us are just trying to figure it out that's why these people subscribed we're all doing our best to keep up with this crazy world we're in learn new things and create new value for this industry We Love In The World At Large after all anyone who is trying something new creating something new building a better future that doesn't exist today they're all imposters they're all imposters because when you do something new there is no road map to follow Tim Sweeney for example didn't pop out of the womb knowing how to build game engines or conduct legal battles against the world's largest company Bobby Connick didn't wake up one day suddenly knowing how to sell a company for multiple tens of billions of dollars we're all imposters but if we're all imposters then really none of us are and if that's true then the best thing all of us can do is to continue building and

trying new things share our ideas and live a more interesting life that's how the world advances that's how the video game industry advances so yes I am a total imposter but the moment I stopped feeling like one something will be wrong because it means I've stopped learning stopped creating and stop trying new things so I'm just going to keep learning in public novik is going to keep charging forward and you know what you should too I also learned that apart from putting in the hard work the best way to fight imposter syndrome is to band together after all no matter how hard I work I will never know everything you know or be good at all the things you are and no matter how hard you work you can't learn all that I know but if we work together then we can create something bigger than the both of us if the imposters group up then we can teach each other be more helpful to more

people and leave an even larger impact that's why novik has evolved to become so focused on open research we have three other hosts an ongoing stream of guests several newsletter writers and a whole crew of consultants and researchers because the more we work together battle tester ideas get feedback in public dream up the future and move in a unified Direction the larger our impacts on the industry can and will be and if one little nobody imposter like me can go from knowing no one in writing completely to myself to working alongside this amazing team and having a company that genuinely helps so many amazing people games and companies then you my friend can move mountains so that was reflection number one imposter syndrome is the real imposter not you let's move on to reflection number two which really is a reiteration of Warren Buffett's one of Warren

Buffett's most famous quotes quote I am a better investor because I am a businessman and a better businessman because I am an investor I come from investing circles right and I'll always be an investor at my core and this is one of those quotes that personally gets really annoyingly hand-waved around after all duh of course if you live both sides as an investor and as a business person you're going to learn from both but then I lived it after going from investor to first time entrepreneur my appreciation for the depth of this quote grew tenfold because no longer does it feel like a hand wavy quote from Captain Obvious but rather now a humbling acceptance with many many granular takeaways since starting a business I learned about registering in different states about setting up health benefits

about working on bookkeeping platforms about hiring internationally about managing all sorts of contracts sales Cycles customer feedback and the list goes on and on but most importantly I learned to be more empathetic when I was an employee working for my last business I always was friendly with and appreciated everyone in different roles the finance team the HR team the legal team Tech Team but I didn't truly internalize and understand the work they do and the daily challenges and obstacles that they face I never fully will but my empathy and understanding from being in their shoes and now at least some small ways makes me even more appreciative and respectful of those who are great at those functions and make everyone else's lives easier as a result it's also a reminder that companies really are above all webs of people and

relationships who make every little thing happen and more broadly these companies are webs of people across employees suppliers customers shareholders and communities who all at their best should want nothing less than a win-win for everyone that's conscious capitalism business done from a standpoint of empathy and win wins and good times and bad so what the heck does that have to do with Warren Buffett's quote I am a better investor because I am a businessman and a better businessman because I am an investor it sounds like a tangent but now when I put my investor hat on I look at other companies whether early stage or public markets and my depth of knowledge greater empathy for people and recognition of leaders who focus on win wins has grown and that means I hopefully should be making better judgments as a result so if you are an investor I recommend getting your hands dirty it doesn't have to be a full

business but only by unleashing some creativity and building ideally with others can you truly grow your empathy in understanding of other builders so that's one thing I've learned and on the flip side more Founders and Executives I think should play their hand at investing having true skin in the game with other individual companies even if you don't think you'd be a great investor or have a ton of time to carve out for it the lessons learned from studying other businesses seeing what works and doesn't learning from other builders and building your internal web of pattern recognition will only help you better understand your market and provide more Nuance behind your decision making as a business leader too of course I'm not perfect so don't take this Soliloquy ass preaching or that I'm sitting on my high horse I really am not and am humbled by reality every single

day but I see the growth being an investor has made me a better businessman and now being a businessman is making me a better investor and there's no reason that can't be you as well this all brings me to reflection number three in the games industry there's not enough learning from other Industries I love the games industry so much and in many ways it is unique and special and on The Cutting Edge but it's also in many circles kind of an echo chamber I've noticed RAF Coster the Legendary game designer whom I've interviewed on this podcast last year made the point that a huge part of what makes him effective is his Relentless curiosity and widespread study of everything psychology economics music Etc so I know there are some incredible game creators learning and being inspired Beyond just

other games and entertainment and everybody works differently and thinks differently but for this point I really want to focus on the business side which is where I actually have some experience whereas many video games and related Technologies truly are on The Cutting Edge and creating things that were not possible before the businesses behind them rarely are so novel and that's not a dis it's natural shareholder-backed companies as entities have structurally been around for hundreds of years but what it means is that for business people it's far more possible to study and implement the best of what other people have already figured out and the best of what others have already figured out is very often in other Industries and from other time periods for example do you want to improve at Capital allocation then read books like The Outsiders and lessons from the Titans

and study companies like Berkshire Hathaway The Washington Post Capital Cities TCI and Teledyne do you want to know where big companies historically stumbled well then study General Electric United Fruit and General Motors are you as a games company a regular acquirer of other businesses well if so then you should probably study the best in the world at acquiring like constellation software transdime and danaher and if the industry is changing around you then you should probably study others who went through change too read The innovator's Dilemma a really internalized the Gartner hype cycle and learn how companies like Intel and Netflix upended their businesses to create something bigger and better as the industry changed around them of course that's not an exhaustive list of examples I would bore the heck out of you if I went on but those are companies from wide-ranging Industries right newspapers cable Aerospace Parts software manufacturing and on and on

that you can truly learn from as a business person and the nature of navigating evolving Industries surviving economic Cycles building competitive advantages maximizing value creation building teams and processes that scale and Thrive and so much more can be learned from everywhere but what I've seen our industry isn't really looking I know other widespread Learners are out there but I'm always surprised by how narrowly focused many people in this industry are at least if it comes from what we see shared publicly and I think we all can level up and create businesses of even more impacts when the public discourse sharing of insights and just the discussion amongst investment and executive teams widens and incorporates the best of what other people have already figured out we'll try to do that at novik but it would be even better to all do it together okay let's move on to my final two

Reflections which are more about where the industry is going next reflection number four is that the age of efficiency is just beginning and it's going to have really interesting Ripple effects on our industry in the next few years now I don't know about you but I joined the games industry during a period of abundance money was easily raised valuations were Sky High m a was active in competitive companies were expanding their road maps and no one could seem to do any wrong it was the Roaring 20s all over again until it wasn't and as we all know issues did start to eventually Sprout up player engagement mean reverted after covid higher interest rates made money more expensive and Apple's new ATT policies fundamentally changed the unit economics of the largest slice of the games industry and when you have major changes like that Ripple effects do

ensue inflation happens money Titans valuations fall and when company is redid their forecasts and budgets they realize that their teams were often too bloated so of course over the past several months we've sadly seen layoffs and game closures accelerate affecting big and small companies alike but here's the thing the sea change is only just the beginning for more reason than one and let's start with the obvious first even though many companies have already pulled back it usually happens in in more than one way for example EA unity and even a company like meta have all conducted multiple rounds of layoffs and there are glaring examples like Ubisoft above all that have failed to make the right but hard decisions regarding financial responsibility and tighten their focus and budgets and on the startup side especially we've clearly seen a pullback in valuations and fundraising but what

we haven't yet seen is the Ripple effects of such for example series C funding all around Venture not just games it's all but dried up web 3 gaming funding is a fraction of its previous highs and when those companies go back to the table needing more funding many of them are going to be in really difficult spots and that's going to lead to several value destructive down rounds and even companies going under that fail to raise money so perhaps unfortunately I think there are major shoes left to drop but this conversation about efficiency and financial Fitness is so much bigger than managing employee counts or the Ripple effects of startup funding which is why I want to talk about it what what we're starting to see more of as well is a renewed focus on Roi all across the industry specifically on returns on

invested capital in big companies and you know many of the biggest Publishers have in recent years done a pretty good job of keeping an eye on maintaining High rois even at the expense of not taking risk but other companies that were the previous High Flyers are starting to follow suit in that mindset as well so take for example embracer or still fraud these companies were serial acquirers whose growth engines have have largely sputtered out over the past year and in many cases they did make some questionable decisions with capital when chasing deals when markets were roaring at their Highs but both of those companies have naturally slowed down also facing organic growth headwinds and over the past couple quarters have made it clear to investors that they are increasingly enforcing higher levels of Roi and their internal decision making such as green lighting new games and I don't intend to fully harp on these

specific companies but I think it's indicative of a broader Trend in an era when money is once again more expensive and the market is more scrupulous more companies are going to raise their standards and work to get more from less and that's actually a really good thing the last piece of this I want to quickly hit on is AI and in my opinion AI is the real deal and unlike other trends like mobile which brought to life a new platform or web 3 even which leverages new tech to make new game designs possible AI is a trend that will impact the full value chain and cost structure of most companies it enables individual contributors to also do more with less and their own jobs do you see the pattern at a time when companies are focused on achieving more with less a new technology has also emerged that could take that to the next level all at

the same time now I don't know exactly what AI will unleash I don't think anyone does and that's outside the scope of this discussion but what seems increasingly obvious by the day is that it will become an extremely powerful tool in many forms across game making and back office functions that will provide enormous efficiency boost time wise and financially and that's going to be a major value unlock for companies of all types sure it might displace some jobs but it will also create many jobs and enable individuals to be more valuable it will both lower barriers to entry for creators and enable the biggest AAA game developers to create even bigger and better experiences with better tools like many incredible Technologies before it in subways it will change the world but humanity and our beloved games industry will adapt and learn to work with it and create even more value in the process so bottom

line despite all of the noise that's destined to unfold in the coming weeks months and years it's quite clear that the age of efficiency is upon us financially and technologically it won't stay forever for economic Cycles are well Cycles but the next few years should be very exciting as a result and with that let's move on to our final topic reflection number five and I'll keep this one short so that we can wrap up soon but but really part of what attracted me to the games industry wasn't just the fact that it is large and growing but rather the fact that new trends and platforms have historically with minor exceptions not replaced what came before but instead have built on top of previous paradigms consoles built on top of PC mobile built on top of those and even something like VR on the

fringes today perhaps in the long run can build on top of everything else our industry's culture is more additive than it is subtractive or disruptive and I think that beautiful fact sometimes gets lost you'll hear a commentary all the time that might indicate the opposite like how Mega Publishers are purely focused on their biggest IPS at the expense of everything else or how web3 gaming just competes for the same users or how Ai and ugc could gain share and still jobs from those at big companies and you know what sure there are little kernels of Truth and all those concerns but it misses the forest for the trees reflection number five in a nutshell is that we are building an and Industry not an ore industry whereas most Industries are or Industries like how most people don't need phones and cameras or Amazon and bookstores the games industry is so special because most every major

movement going on has the potential to be additive web 3 gaming for example is additive because it unlocks a wider creative surface area and dramatically increases the ltvs of dedicated fans we'll have off chain and on-chain games not one or the other ugc is additive because democratizing game development will lead to more games targeting more people and it will motivate younger generations to spend even more time in games we'll live in a world with more great ugc and AAA games not a world with just ugc or AAA games AI is counter-intuitively additive because it will enable people in companies to become more productive than they've ever been and work together to create even more incredible experiences in making games and companies we will have great people and AI working together not just great people or Ai and

there's no shortage of opportunities to go around for these combinations to attack cloud gaming thing is additive because it enables players to play their favorite games and places they couldn't before we'll have consoles and cloud gaming not consoles or cloud gaming and I could go on yes these Trends are across various parts of their maturity curves and hold radically different levels of upside and sure it's not to say that all future Trends will forever be additive but there is no denying the fact that this industry is still net additive and being an and Industry not in ore industry is a really big under-appreciated deal in my opinion because despite change there is opportunity everywhere when an industry is additive it means that all of our work individually is also additive personally as a co-founder of a consulting firm that's great news because it means there will be more and

more companies to help but it should be exciting for you too because you will also have so many opportunities to evolve and help create new value and new ways in spark a lot of fun for a lot of people in the process so that's it five Reflections since co-founding novik no more no less number one imposter syndrome is the real imposter not you number two we can all become better business people because we're investors and better investors because we're business people number three there's not enough learning from other Industries but we can all level up by widening our views together number four the age of efficiency is upon us perhaps controversially in exciting ways and lastly number five the games industry's additive culture being an and Industry not an ore industry is bound to continue creating more opportunity

upside and fun if you made it this far I deeply appreciate you it was fun and healthy for me to put my thoughts together like this and I hope even just a piece of it was helpful or interesting to you of course this is my list it's my Reflections it's personal and I know that you whatever you do enter around gaming you also have amazing reflections of your own and that's what makes our community so special and so in closing in fact I'd love to hear your Reflections and potentially share them with the rest of the podcast because we really can all learn together so wherever you're hearing this feel free to leave a comment or even better shoot us a note to our mailbag at podcastnavic.com I'd love to know what your biggest Reflections are since joining the games industry or even your largest Reflections as an onlooker if that applies to you and with that I'll wrap up right here I promise these types of episodes are very rare like 1 in 200 rare but thank you so much for listening

this has been a lot fun and with that I'll catch you next time if you enjoyed today's episode whether on YouTube or your favorite podcast app make sure to like subscribe comment or give a five star review and if you want to reach out or provide feedback shoot us a note at podcast navic dot Co or find us on Twitter and Linkedin plus if you want to learn more about what novik has to offer make sure to check out our website www.navic.com there you can sign up for the number one games industry newsletter navic digest level up your insights with our premium research platform navic Pro or contact us to learn about our wide-ranging Consulting and advisory Services again that is www.navic.com thanks for listening and we'll catch you in the next episode