James Dillard: Welcome to The Browser -- my name is James and we’re going to be doing what we’re calling Browser Bets: we’re going to go through a couple of different areas that are within Sebastian’s expertise, what he’s interested in and cares about, and we’re going to try to make three bets about the future that we can look back on at some point in time, say, “Hey, that happened,” or no, it didn’t.
Just to set the tone, this is all in good fun. We will celebrate if we’re correct and if we’re not correct we will laugh. The future is really hard to predict.
Let me introduce Sebastian a little bit" Sebastian is currently a venture capitalist, a venture partner at BITKRAFT Ventures. He was the VP of eSports for the Houston Rockets, one of the first e-sports executive in the NBA, and is one of the most knowledgeable people in the world when it comes to applying analytics or sabermetrics to e-sports. In addition to being an investor and a competitor, he’s also an entrepreneur. Anything else I missed Sebastian that you would like to highlight about …?
Sebastian Park: Yeah. I mean – I love plugging things. You can find me online at sebastianpark.com, or you could follow me on Twitter at Seb Park. But no, I think you got me pretty well in there. Just a lucky guy who got some working game in e-sports and now with Infinite Canvas in user generated gaming too.
James Dillard: Well, I’m sure we will be talking a little bit more about that. What’s the first kind of area or trend that you’re interested in making a prediction of?
Sebastian Park: I think the first thing that’s always worth mentioning whenever we talk about predictions. Like it’s a true for this episode and for future episodes: it’s just really hard to make good predictions, right? I love Philip Tetlock's Superforecasting. I think that’s a really great book. It’s something that I read a ton when I was doing more theoretical work and it’s just like teaching people to be honest with their assumptions and honest with their projection and realized that seeing 2 years into the future is really hard. And so, I try to avoid making predictions 5 years into the future. That would be something that I think a lot about.
Bet 1: The future of NFTs
And I think the thing that’s top of mind for a lot of people in the world right now are NFTs and a lot of what I’ve had the good fortune of being able to work on is just digital memorabilia NFTs and digital property, which I think is sort of a fun area to think about.
James Dillard: Let’s go a little bit deeper then.
Sebastian Park: Yeah. It’s interesting. I mean I think to take a step back again, one of the things that I think a lot about and sort of that gave me my own education in NFTs and sort of digital memorabilia was I worked for a company called Namecheap, the domain registrar for a while and there’s this really smart dude there, his name is Teddy Worcester, @teddy on Twitter. He is by far one of the best domainers in the world, and his mind for how digital assets have value is always a fun mind to pick.
And so, I think a lot about how we’ve started especially in the millennial and now the Gen Z generation the valuing of digital goods. And so, if you have a domain name, you already have a digital asset. I own SebastianPark.com. James, you probably own some version of your name dot com, right?
And so, those are digital assets. And you value them. Other people can go to your website. They can download copies of your website. But at the end of the day, it’s still your website and it’s something that it is your presence on the internet. And I think that’s a good way to start thinking about NFTs and digital memorabilia and digital goods.
And so, the progress from there to gaming and you see that people are valuing digital items in games themselves. We’ve seen this for decades now where people are buying gold in World of Warcraft. People are buying items in Diablo II in like the mid-2000s on eBay. We are seeing digital keys being transferred to one another.
And so really, NFT in its current iteration is just like the next evolution of people starting to understand and value digital goods. And in its current form, it’s attached to blockchain. It’s attached to things with a lot of liquidity and so that’s why we are seeing all these interesting headlines. But I think the underlying value of whether or not this current implementation of NFTs is the correct implementation. It’s just digital items, digital goods have value, ergo, people are willing to pay for them.
James Dillard: Yeah. Yeah. I think I can go with you that far. I definitely see CryptoKitties which in a way I think sort of like was an NFT before NFT, like those made sense to me because it was like, oh, OK, they are unique, they are fun, people are more than willing to buy something that makes them happy. And some of the other digital – when somebody buys in Fortnite something to make their character look different, I’m like, “Yeah, I get it.” Right?
Sebastian Park: Right.
James Dillard: They’re cool. I think where I start to get a little – where I just don’t understand is when the dollar amounts get past a certain point. It feels like we’re now out of this is a purchase of impulse and it makes me feel good and into this is an asset class.
And it’s speculative and that’s where I – you brought up the domain example, these domains have some – they stick in your brain, right? SebastianPark.com is easy for me to predict and it always points somewhere. So you’re not – it’s not the code that is hosted on the site that you own. You own the pointer, right?
Sebastian Park: Sure. Yeah.
James Dillard: Do you think there will be a similar – is it the pointer that you’re buying in the NFT case or is it something bigger?
Sebastian Park: It’s interesting. I think NFTs present a hard problem for this bit. And so, one of the things I’ve taken to do recently is just separate the current iterations of NFTs from digital memorabilia. I certainly think that there is going to be a future and there already is a future where we value digital goods. And I think we can all wrap around our heads around that.
And if that’s the case by the way, I actually don’t think price is the eliminator in terms of whether something is speculative or not. We all have different willingness to spend. Like my mental model, I play a lot of poker in my spare time and my mental model of like entering a $1000 event is that that’s a low buy-in event for the World Series of Poker because they have $10,000, $5,000, $100,000 buy-in events. But for someone else, that might be a very high buy-in because they are used to playing $10 a game, right?
James Dillard: Right. Right.
Sebastian Park: So I think similarly, the dollar amount is not as big of an issue as I think where are the platforms to show off this content? Where is the Fortnite World where you can show off your skin? Where is the digital “metaverse” where you now are able to display this asset you own? That’s where I think we got the asset classes. There are certainly free ports out there. There are lots of people who trade art and bottles of wine and whiskey where they never touched it and it’s just an underlying securitized asset against money that they borrowing and then using. That I think is a possible outcome for some of these NFTs.
But certainly, I think the other part is just do people get enjoyment and value from them? There is a series of projects called NFP so like they are the profile pics you’re probably seeing on Twitter and Instagram of usually apes and toads and cats and all that.
James Dillard: It’s definitely a style.
Sebastian Park: Right. And that’s a form of display. It’s sort of interesting to see that. If you had to ask me a question a couple of months ago like, where do you showcase these things? Well, it’s probably the case that the reason why some of the things have the most value are these profile pics because there is a clear community/socially acceptable way to showcase your “art piece.”
My former boss, Daryl Morey, has a bored ape that I think is $250,000 now that he bought for like 2 grand way back when, and he showcases it prominently on his Twitter at this point still.
James Dillard: Yup. Yup.
Sebastian Park: Great for him. Good place to show it and you start seeing things – hearing stories about like how Alexis Ohanian is buying a bored ape for Serena Williams for her birthday. That type of social interaction and where people have agreed that this is a socially acceptable way to display your art generates value for the underlying asset there in a way that we may not see for some of these other NFT projects but it’s – at the end of the day, it’s like, “Hey, can you showcase this? Is there a way for it to be seen?” And if so, then the underlying thing has value.
James Dillard: Makes sense. It sounds like you’re pretty bullish on NFT. What’s your – do you have a bet in mind here or your predictions?
Sebastian Park: Yeah. I’m bullish on NFTs – I’m bullish on NFT gaming in particularly. I’m actually – I think there’s going to be a lot of really interesting stuff that happens with the intersection of digital goods and games themselves. My bet right now though which is probably like a really stupid bet in the perspective of like it should be obvious to a lot of people is that the current iteration of NFTs that we see today with the exception of I would say one to maybe two projects of anything that is generated today will mostly have died out in two years.
And so, my hard core bet is just like, hey, actually, these are early days. We are going to have one or two projects that are going to sustain themselves in 2023, 2024. But in reality, the projects that are going to take a lot of the wind and really propel digital memorabilia and digital goods forward will be projects that haven’t come out yet.
James Dillard: I didn’t see that coming at all. [Laughs]
Sebastian Park: Right. Right.
James Dillard: I love that bet. OK. Let me ask a clarifying question, and this will show my ignorance. Is a project the piece of art or is there a project like the – at what level is project?
Sebastian Park: Yeah, sure. So like an art block or an NFT project, so for example, let’s just use Cool Cats as an example. Cool Cats is a project where they implemented thousands of these different cats all in the same collection on NFTs. Axie Infinity is another project although it’s a really big and awesome game project where they – Axie Infinity is – Sky Mavis made this game. It’s a little bit like Pokemon where you have three NFT Pokemon called Axies and they battle each other. They are going to fight each other.
It remains to be seen. In each of these categories, almost certainly, the vast majority of them will die out. I think it’s just like – it’s always the case that there are a lot of network effects here, there’s a lot of approval value at the top, a lot of exponential growth. And so, it’s unlikely that in the NFP category, there are going to be 10 winners, right? At most there can only be one or two.
James Dillard: Yeah.
Sebastian Park: And so I would imagine we fast forward two, three years from now, you will see a winner in the Pokemon trading card game as version of Axie type games. You will see a winner in the fighting games version of that. You will see a winner in the free to play version of this. And similar in the profile side, you will see specific winners on the artplus. You will see specific winners on profile pics. So, sort of a hard take because it means there are going to be a lot of losers as well I would imagine.
James Dillard: No, this is great. And given your enthusiasm in the space, it’s like – it’s such a zag. I love it. So, OK. So how will we know if this came to be? So you’re saying, yeah, let’s keep to the point where we can write it down.
Sebastian Park: Yeah, sure. So I would say if we were to go on like Etherscan or OpenSea or one of these products and then just check volume, like trading volume of underlying assets and hold volume, my expectation is that if you compare that page today, let’s take a screenshot of those pages, and then compare it to what they hold and asset values are in like let’s say, end of year 2023, I would imagined there’s only one project, maybe two projects in each category from this current batch that are around two years from now.
James Dillard: Awesome. OK.
Sebastian Park: They will still be around because these are digital assets. There’s no like – no one is going around burning them to the ground, right?
James Dillard: Yeah. Yeah. Yeah. No, I think that that’s – yeah, that’s where I’m trying to kind of like figure out how to draw the line which – because I think what you’re saying is that like the meaningful – the ones that are going to have meaningful asset value in, it’s 2021 now, and we could say 2023 or early 2024 if you want, are going to be created closer to the – like within a year event, not now like the ones that are at the top of the list now are going to have faded in prominence.
Sebastian Park: Right. One or two of them are still probably be on the top 10 but the vast majority of them will have disappeared, even the top 25. And so, we will see instead projects that are created from like, I can remember recording in October 2021, so projects made from this point onwards overtake the ones that are there currently. And traditional ebb and flow of technology and the flow of creation like usually newer projects have accounted for failures of the previous project and iterated on top of them to be bigger and better going forward, which is not to say that those things would not necessarily have value. That’s the other thing that I think is probably worth it mentioning, right?
It’s not that the asset, let’s say, one project has 100 NFTs and they all work so it’s 100th project, let’s say. That’s not to say that that project is going to disappear. It’s that like a 100th might not even break the top 500 of projects two years from now. That’s another way that a project might lose value. It’s less that the project has disappeared. It’s more that the project is no longer in the same realm of size because of how much the space has grown.
James Dillard: I love it. So this is actually – what sounds like a bear bet on NFTs is actually a bull bet.
Sebastian Park: Yeah.
James Dillard: And you’re like – OK. So what I think we could do is this. I’m looking at the OpenSea, like 30-day volume page now. And what I think we can do is grab – maybe if you’re up for this, we can grab like the top, I don’t know 25, or you let me know where you want to put it. I don’t want to…
Sebastian Park: Yeah, 25 is fine, I mean you can, like I think you do 50 it going to be better, like I just – it just seems very hard. There are so many projects having come out, they’re going to destroy the ones that are currently existing, so.
James Dillard: Got it. So we’ll say no more than two in the top 50 in October 2023? Is that – does that sound right?
Sebastian Park: Yeah, seems reasonable to me.
James Dillard: All right. Ah, I’ll be a good sport.
Sebastian Park: Let’s see how wrong I’ll be.
James Dillard: I’ll give you good sport. I’ll take the other side. I’ll say that – I’ll say more than two. And I think the reason is… I think my, you know, because it’s interesting. I agree, actually, with all your thinking. But I think it’s interesting to think about ways that this could go wrong. And I think it’s going to be – there’s going to be enough communities that are going to kind of keep it vibrant, and there’s not going to be – I think a true web 3.0 enthusiasts would say, the old way, where you just have these kind of platforms that kind of take all the mindshare is passing away, and we’re going to have a return, maybe like an earlier version of the internet where there were more winners. And so I’ll let that hopeful version be my rationale to allow me to take the other side of that.
Sebastian Park:I’m with you. I think the other way it happens would be if these NFT projects, in particular, have really strong founders, and really strong operators. If they’re operating, and they’re like really winning and like using their scale, that’s going to be awesome. I actually think one of the fun things to think about right now is that unlike in previous projects, and previous art projects, or previous like tech projects, where you raise capital, you build capital, and then that’s your balance sheet to make things work until you make money. One of these projects are raising these large treasuries, which are liquid.
And so, in theory, if you have one of the biggest projects on NFT’s right now, you will also have millions of dollars deployed. In M&A, millions of dollars deployed in operating spend. You can pay people in liquid cash, as opposed to in like casting stock that doesn’t last for 10 years, right? Or doesn’t like liquidate in 10 years. I think that’s a completely underrated part of these projects. And I think probably the biggest way I’ll be wrong.
James Dillard: And so we have our first bet. I’m going to pause a little bit and ask you a couple questions about yourself. And I actually want to start with something that you just said right at the end there around talent identification, because I know that you did a lot of work in sabermetrics for Esports.
Sebastian Park: Yeah.
James Dillard:If I could ask you first to like explain to our audience a little bit what sabermetrics for Esports is, and then I have a couple of questions about what that’s like.
Sebastian Park:Yeah, sure. So I mean, I think the great Bill James in baseball, and also my former boss, Daryl Morey, in basketball of MoreyBall, there are been a lot of movements in traditional sports, in football, American football, baseball, basketball, that too apply analytics, apply a structured numerical approach to understanding if someone is good or bad at the sport or game you’re looking at. And so at the end of the day, if you have a structured approach that has something that resembles analytics, that is sabermetrics, in my mind, right?
And for Esports, what we saw was Esports was growing and still is growing rapidly. And we were paying hundreds of thousands and millions of dollars to these players, and we just weren’t achieving our goals, right? And people weren’t achieving their goals. Everyone was having a larger and larger budget, and the different teams are winning and losing and whatnot. So our take was, hey, how can we be slightly smarter and there are a lot of smart people picking players right now? How can we be slightly smarter to pick better players for cheaper or how to generate better expected value towards the goals we have?
And so, to that extent, that sabermetrics or just even like data analytics for Esports is the structure analysis of players, the structure analysis of acquiring players, signing players, and hopefully also developing players.
James Dillard:Got it. So what has your experience assessing Esports players taught you about picking talent as a venture capitalist?
Sebastian Park:Honestly, that we know nothing. Like, I think that’s like the best thing it’s taught me is just write down what you do, write down like – like the feedback cycle in Esports is so much faster as it is and basketball and baseball, right? Like, you can pick a player and you can have pretty good data on how they practice if you’re tracking that data, and how they play in months, right?
The venture feedback loop cycle seems to be about 10 years. I mean, blockchains is a bit faster, but still early days, I think it’s really fast. And so, certainly I think that’s something that I think about a lot in terms of how that’s helping. Really, it’s just try and collect as much data, be as unbiased as possible. And the best way to be unbiased is like state your priors, right? And so, it’s a lot of – before you go in, you write down why you believe, why you believe what you believe, and put weightings on them. And that’s something we did a lot with our scouts as well as our evaluators. It’s like, “Hey, put weightings beyond it before you jump in and start watching footage.” And the footage comparative in venture would be like start drilling down into founders and sort of the product itself, right? If you had your priors, you can then like, see how it’s changing.
One big difference, I would say between venture and Esports, though, right, is in Esports, you have a set budget and then same thing in the NBA and same thing in MLB and other sports, whether that budget set by a collective bargaining agreement or by your ownership is up to you, but – or up to the ownership really to people who were writing the checks. But you have a set budget, and so your constraint is how do I deploy capital or deploy resources within that budget and maximize our return? It’s very zero-sum in that way. And your wins cause losses for other people.
Venture doesn’t seem to be that way. As far as I can tell, there’s a lot more liquidity out there. And so you’re not as constrained in terms of bet sizing. And two, more importantly, just because one company wins doesn’t mean the opposing company loses right?
Sebastian Park:Like, that I think is something that we think so much in these conflict-based terms that we have to remember is take a step back and be like, “Actually, when I’m talking about NFT projects, for example, who wins and who loses – it’s easy for us to say they lost but if you have a million ETH project, you’re not in the top 50, that’s not a loss, that means you just did very well, just happen to not be in the topic.
James Dillard:Right. I like it. I like it. OK. One other kind of similar question along these lines, so, you mentioned a little bit of the history of sabermetrics. It comes out of baseball, and then moves into basketball. These are both sports that have, relatively long histories and are pretty similar over the course of those histories. And then you apply to Esports where just because these are game franchises that are tied to like gaming hardware, have like shorter life cycles, what was it– what’s it like kind of taking an analytical approach that has… like I know a little bit about baseball sabermetrics, and one of the cool things is you can sort of, you can conceptually say, how would a pitcher today have performed against… or how does a batter today compare against Babe Ruth, right?
Like you have a chain, an unbroken chain to go back and ask. You can’t really do that in the same way in Esports. Or am I thinking about the problem wrong? Like…
Sebastian Park:No, I mean, I think that’s correct. And by the way, the answer is anyone today has been crushed, anyone with Babe Ruth’s era just as a function of relative ability, we’ve just gotten stronger and better and faster over the years. And so it makes for a really easy comparison in that sense.
One thing I will say is that, yes, in terms of evaluating our players, it’s very hard. But I want to take a step back, which I’ve said now for the third time, if anyone is counting, and talk more about like sports sabermetrics. People think sports don’t change, right? I think that’s like a part of the human side guys. So these are – this is the same sport play today as its played 100 years ago. And people are very upset by change.
But if you actually look at the cadence in which these rules change over time, and how the rules are enforced, these games patch or update a lot, right? So, the NFL updates pretty dramatically every year, right? Like, everything from how pass interference is applied, to changes still line, to targeting, to how these schemes work, are changes to the game itself, right?
In baseball, they added that weird extra innings second base rule, they’re changing the slide rules, they change review, the implementation of instant replay has fundamentally changed how people slide and therefore should change your assessment on how good or bad a person’s base running is, right? There are all these changes that happen in the game, and so they’re not as consistent. And again, we're really looking for comparative metrics against the field. Right?
And so, we know Mookie Betts is good at baseball, less because we think he would have beat up on Babe Ruth and he would have for what it’s worth but more because he is that much better than every other person who’s playing right field right now and base right now.
And so, in Esports, that made for the high level deep insight that you see in sabermetrics in baseball and NBA are there. But in terms of low level stuff, my god, there’s a lot of really awesome stuff there. So for example, one really easy one that we’ve looked at a ton was, hey, if a person is performing really well on a certain number of characters, and really poorly on not other number of characters. And then when those characters are back into being valuable characters he’s performing well again. Well, that’s a pretty good guidance that it’s not this person is a 500 player, but that they’re like a really good on these lists of characters player and not so good on these lists of characters player, right? If a player is very good in specific structures in terms of winning and losing…
James Dillard:Yeah, yeah.
Sebastian Park:Can you – like, is that valuable for you to know? How unlucky was a player? I think that luck factor was super interesting as well. And so, we spend a lot of time in terms of pricing where a lot of people overvalue wins and losses, right, which makes sense. That’s level zero of analysis is if someone is winning, they’re a winner, if someone’s losing their loser. And it’s a low hanging fruit, but just ignore the wins and losses and just cut up the footage of the game, ignoring score, only showing the items they have, and where they are in length. And then just show them two different people and be like, “Hey, who’s winning this battle? Who’s winning this…” and just start tabulating that information. That will give you a pretty good sense of low level with how a person is doing against other people with that information. And then from there, you build on top of that with another layer.
Bet 2: The future of the Creator Economy
James Dillard:OK. Let’s dive into our second topic area. What do you – what’s the second thing you’re interested in to – in making a bet on?
Sebastian Park: Yeah, I think this is sort of related but I’m a huge believer right now and I’ve been thinking a lot about this recently in communities. And I think of it sort of like an offshoot of what we talked about before, where a lot of my friends and colleagues at venture are still betting on platforms, because platforms are quintessentially the things at one web 2.0.
And I certainly think communities might be, if not will be, the things that will win web 3.0. And we’re starting to see this a lot right now. Where – so, an example of community versus a platform is like Roblox is a platform but the community on Roblox would be like, Adopt Me! is a community. It’s a game. There are a lot of people who play the game, they love the game, they are a community. So that that would be an example there. I guess the example in writing would be like the New York Times is a platform. Mr. Wells is a community, like he has an audience like community in and of itself. So…
James Dillard:So what’s the distinction between a platform and community? Is it based on passion of the followers, or is it based on the ability to contribute? Like how do I think about – how do I think about the difference between those?
Sebastian Park:Yeah, it’s really hard. I think certainly the – it’s one of those things where when you see it, you feel like you know, but it’s harder to break down. And so the way I’ve been doing it recently has been, is there an influential, like lightning rod, in which people are built around, right? And that’s a community, right? And so, are people reading so and so’s content because of who they are, and how they interact with each other, and identifying as members of that collective? If so, that’s a community. And so, if you are a fan of Taylor Swift or Olivia Rodrigo, you are communities of Taylor Swift fans and Olivia Rodrigo fans, right?
Similarly, a platform would be something like Twitch or… New York Times is a weird example because they have…
Sebastian Park:YouTube I think is a better example where they’re more agnostic to who is on their platform, like who’s using their tools, and more concerned about bringing as many people on to their bids and the connections that are a little bit weaker. So weak tie between the platform and technology underlying the platform and the people involved, as opposed to the sort of the stronger tie of the communities of being like, “Hey, I identify with this person as part of their community.”
That’s – it’s still a work in progress, to be honest with you. But certainly, I think the best way to describe it would just be in example form where I believe that the Dota 2 community as a game is more valuable long-term in terms of how they operate than Valve and Steam are to those people. If Dota 2 today move from – I mean Valve owns Dota that’s a bad example. But if they moved from Valve to epic game store, right? I would imagine the players of Dota 2 will move with them from Valve to Epic Games Store. Right? I would imagine the players of Dota 2 will move with them from Valve to Epic Games Store.
Sebastian Park:And then if from there to some other platform. And so, that I think is something where I think about as community, so it’s like, hey, like you’re agnostic to where you’re playing or where you’re consuming content and care more about the people you’re consuming or playing.
James Dillard:Yeah, OK. So, let me tease this out a little bit. So you would say in the next kind of iteration, we should be thinking about like, who are the – like the Taylor Swift’s or like these kind of like creators that are going to generate this connection such that it really doesn’t, you know, if someone’s music isn’t available on Spotify, they’ll go to Apple Music. They can kind of port their audience from one to another. Is that the…
Sebastian Park:Yeah, yeah. I think the music example is really interesting in that regard. So, Spotify obviously has a large market share right now in the world.
Sebastian Park:And if you’re not on Spotify like Taylor Swift wasn’t for a number of years, does that matter? And as it turns like, if you’re a Taylor Swift fan, well, you just aren’t listening to Taylor Swift’s music on Spotify as much. And I think our focus on the investment as well as the growth side historically has been, we care a lot about Spotify. We care a lot about TIDAL and Apple Music.
And my personal thinking that I’ve been still working through is that the communities that underlie Taylor Swift and underlie Olivia Rodrigo and these other communities are going to be the ones that people can make investments into. They’re going to become like an investment asset class. And more importantly, they’re going to start growing in a way that they have more power and leverage against the platforms themselves, because they can move in between platforms.
James Dillard:Got it. Fascinating. Yeah, it sort of blurs, right? Because you’ve got – on one hand, you’ve got like, maybe the like, the major social platforms, the Facebooks, YouTubes of the world, that clearly – that have their fans. They may have people that love them. But definitely have sort of a, like, a platform relationship with consumers on one end and creators maybe on the other end. Then you’ve got the like, I don’t know, I mean, Ethereum sort of to me sort of like seems to kind of like bridge the worlds, right?
James Dillard:Because it’s got Vitalik, the founder, but then has a, like a community that’s trying to make it work. To me, that’s what I think makes Ethereum the most – it’s the most interesting thing about Ethereum is this community that wants to see it work and makes it better and has to some extent, like co-ownership in that, right?
And then there’s maybe on kind of the like Olivia Rodrigo example where Oliver Rodrigo has people that are fans – and so you’re kind of bet is that actually the place that we’re going to want to be in the next 10 to 15 years is actually in this far section where it’s like, are you – it doesn’t really matter that Olivia Rodrigo doesn’t really kind of own the connection point to her fans. It’s that people really love her is what matters.
Sebastian Park:Yeah. And I think it’s Olivia Rodrigo, I certainly think that we’re starting to see the creator economy already, right like, which is basically a creator economy. But if you believe that economies for creators exists, then suddenly their communities should matter a ton. It’s Discord Servers, its – I mean, Substack, Ghost, all these platforms that allow you to moderate and run your communities.
But then also those communities then taking their heavy bats and going through from one platform to another, and really pushing their own agendas to get them – to get what they want, right? So let’s say, Olivia Rodrigo’s fans really want a platform where you can do micro-tipping, right? Like it’s somehow or for some reason or some way, it’s important fact to Olivia Rodrigo and therefore, her fans care about it. And now we’re like, we're going to prioritize a platform that has micro-tipping, right? And so then everyone needs to implement it well, in order to appease or in order to work with this massive community.
And certainly, in so far as there’s a ton of communities out there in different sub sites of the quote-unquote metaverse, then the ability to like take your audience and take a community and bring them to each different platform, depending on whether you’re quote-unquote “a good citizen of a good country to be in" is incredibly valuable.
James Dillard:Are you are you saying you’d rather be the person that can take their community on to the metaverse than the person who creates the metaverse layer?
Sebastian Park:Yeah, I would say so.
Sebastian Park:Yeah, in part, because I think the metaverse layer – and this might be like a bad take, but I certainly think that Ready Player One has warped people’s opinions about the metaverse layer, like people assume that everyone has been worked together hand in hand and that they’re going to have these like treatises where they agree, like Facebook and Netflix and Amazon and Roblox…
James Dillard:Oh, that there’s going to be one metaverse, yeah.
Sebastian Park:…and Facebook is going to work together to be one metaverse. In reality, I just can’t see a world where human nature allows for that to happen. Like we still have countries, right? Like the UK just left the EU, right, like a couple years ago, right?
Sebastian Park:And so, almost certainly in my mind what’s going to happen is that they’re going to have these creations of independent platforms on the metaverse layer. There’s not going to be a winner-take-all there. There’s going to be a lot of different communities that you know, a piece sort of 13 to 16-year-old demo or to the 25 to 28-year-old demo or to maybe even like very niche demos, like rock climbers who love California and stuff like that, right?
James Dillard:No, I love this. I love this. I mean, I sort of feel like in some ways with social networks, we’re living the era that we were in with TV when it was like three – you had kind of like three channels and we’re moving towards like the cable world.
Where it’s like, you know, there’s like Twitter has its sort of following and Snapchat has its following and Pinterest, and the more of these that arrive with like passionate fan bases, the more kind of – as long as they can kind of create businesses on top of them and survive, then there’s sort of an opportunity to like channel surf, if you will. And then that sort of takes away power from like the biggest ones. Then you have like an opportunity to create a layer on top of them for – advertisers would be the obvious example.
Sebastian Park: If the metaverse or the web 3.0 era goes the same direction as the previous platforms, then yeah, we really should be betting on who’s going to become Facebook, right? Like, but I just don’t think that’s going to be the case. And perhaps…
James Dillard:OK. Let’s figure how to make this bet. I love this.
Sebastian Park:It’s just one of those – it’s hard for me to say exactly, I would say if there are –if one platform has the… oh so, here’s a good example. In the game publishing realm, the two winning – the two winning engines right now that are publicly available are unit and– Unity and Unreal Engine by Epic Games. Right?
Sebastian Park: And on mobile, it’s the App Store for Apple, and it’s the App Store for Google. Right? And so, if we’re, in two years, in situation where there’s clearly a duopoly of two main places where everyone is building on top of, then I think I’m clearly wrong, right? Like, but outside of that, I want to – I think this is one of those bets where I want to be like, “Yeah, I’ll take everything else.” Right? Like if there’s – if it’s like, OK you know… it’s Immutable, and it’s a Solana, and it’s Manticore, and it’s Roblox, and it’s Facebook, inexplicably and Discord and everything else.
James Dillard:Sure, sure.
Sebastian Park: Then I think we’ve come to the point where we’re at like a nice stable state where the platforms will be dispersed, and then we’ll see a lot of the community start to take power.
James Dillard:I feel like – so I’m going to take the other side of this for sure. I feel like two years is not long enough for this behavior to change. But I feel like I have to offer you odds. I feel like that that, like, I have to give you some sweetener here. So we’ll do…
Sebastian Park:Well, it’s interesting, right? Because I don’t know if you do, because I think our current state is what I’m describing, though, right? Like, I think right now we’re moving in that direction already. Right? And so…
James Dillard:Interesting, OK. If you’re happy with it.
Sebastian Park:Yeah, no, I mean so… So James, like one thing I would say is like, if you were to – if you were to describe web 3.0 and sort of the different platforms on there right now, how many platforms can you name?
James Dillard:So I agree that that web 3.0 is not – is super fragmented. I think that we’re unlikely two years from now, even if web 3.0 grows fantastically, it will be less than 20% of people’s mind share. It’ll be the – just because I think like, there’s not going to be a mobile operating system, or web 3.0 mobile operating system in two years.
James Dillard:That’s what you would need in order to kind of like break up that. And so I’m willing to entertain the idea that web 3.0 is going to be more fragmented than web 2.0.
Sebastian Park:I’m very interested. I think two years is the sweet spot where I’m like, OK, like, I can sort of see two years ahead, I can sort of see there’ll be a lot of players buying to win, and there won’t be a winner quite yet.
James Dillard:I don’t know. I like – I love this as a bet. So what we’ll do is we’ll take a look at the – I’m just going to repeat this back, make sure we got it. We’re going to look at non-mobile gaming and mobile gaming. And if we have more than – basically, if we’re still in a situation in two years, October of 2023, where we have a duopoly in both, then you lose the bet. And if we have a non-duopoly, then you win the bet.
Sebastian Park:Oh, yeah, I’m going to clarify. I’m going to lose this bet like 100% of time, right? Just like…
James Dillard:I offered you odds and you said no.
Sebastian Park:No, no, no. I’m fine with being wrong about this. Because I think the question is less about the current existing ecosystems, right? And just to clarify, it’s like it’s less about Apple and Google or Unity and Unreal. I think those are solidified ecosystems. Why I think it’s interesting is more the web 3.0 and the metaverse and as that develops, will those be fragmented still two years from now? And I think the answer is yes, fair. I think the…
James Dillard:Oh, I would 100% agree with you on that. Yeah.
Sebastian Park:Right. And so the question I think is like, are we going to see in two years time? What does the trend line look like? Does the trend line look like it’s consolidated? Or, does the trend line look like it continue to fragment more? And I think that’s I think a better way to define this specific bet. The mobile example is a little bit misleading, I think because it’s so…
James Dillard:No, I missed you there. But I think this is interesting. OK. So I think I’d still take the other side of that. How are we going to define these like metaverse set?
Sebastian Park:Yeah, it’s interesting. I would imagine. Like, I would say, you set – you set like an arbitrary valuation line, right? Like, hey, company’s worth this amount. And then I think we have to set it like a how many companies that – or platforms are above that live versus below that line? Or maybe that line is a unicorn line, adjusted for inflation for two years, maybe that line is…
James Dillard:I think that’s good. So like web 3.0 companies, web 3.0 unicorns, are there going to be more of them like platform unicorn?
Sebastian Park:Web 3.0 platform unicorns, are they going to be more – more or fewer than set number above and unicorn being a billion dollar USD valuation or above?
James Dillard:Yeah. Now, what if we did… so I think there likely will be more unicorns just because I think the space is growing.
Sebastian Park:Yeah, I think that is not so hard but…
James Dillard:But what if we did like the – so, of the unicorns, will there be – will platforms – will there be consolidation or not?
Sebastian Park:Yeah, yeah.
James Dillard:Does that make sense? So like the whole space could grow at time but the fragmentation could continue to be.
Sebastian Park:Right. Right. So, of like the top 10, does any one or two own more than 30% or 40% then I would lose. And if they’re – if like the biggest one is like 29%, 30%, or 30% is a push, I guess, but like one or two are 30% or lower then I think that’s sufficient amount of fragmentation.
James Dillard:Perfect. Yeah, I’ll take 30 or higher for the top, the top one. And you take 30% or lower.
Sebastian Park:30 or lower.
James Dillard:And awesome.
Sebastian Park:We’ll push at 30. We’ll see.
James Dillard:We have a great disagreement about what a web 3.0…
Sebastian Park:Yeah, I know it’s something really fun.
James Dillard:I’ve been interviewing with people you’ve been using the term web, if that’s still a marketing term.
Sebastian Park: Yeah, we might need to check in six months from now and see if it’s still a marketing term.
James Dillard:I love it. OK. I’m going to – I’m going to ask you a couple questions about yourself. So, before we head into the next round, so you – while you were an undergrad at Yale, you specialized in cognitive science with an emphasis in making decisions with imperfect information. What mental models do you rely on to make decisions when there’s imperfect information? What are your favorite ones?
Sebastian Park:Bayesian updating, by far is probably the best one to use. Certainly, that’s I think, probably the only one that’s probably worth mentioning any moment. And let’s just say like, if you have to do one thing is just Bayesian update, the best layman’s way to describe that is take information you have, give it a weighting. So like how much you believe in it right now. And then you get more information, depending on how much information you have, you update consistently and continually. And that’ll help you improve your confidence interval. Oh, I guess confidence interval is probably the second one. Just being honest about confidence interval, right? I have a lot of strong opinions weakly held, right? And so, I think that’s probably a better way to be than a lot of weak opinion.
James Dillard:What’s the biggest thing you learned working with them from Daryl Morey?
Sebastian Park:You know, actually, randomly the thing that I learned the most from Daryl and Tad, Tad Brown was the CEO of Rockets at the time. They’re actually both with the Philadelphia 76ers now. Tad is now the CEO there. Was just management? I think the thing that’s underreported about both of those guys, and Daryl probably gets more reporting done on him. So underreport about him is people think that they’re just very good analytical decision makers, and they are. But the thing that they’re actually really good at is articulating their decisions and managing people, like being a really good leader of people and explain to people that “Hey, I – this is why we’re making this bet. This is how it’s going to be right. This is going to be wrong. This is how you can improve as well.” and then going from there.
James Dillard:And then I saw – I think, I don’t know if it’s in one of your bios, or maybe it’s in our pre-conversation that you’re – so you’re an immigrant. Your family – you are from Korea or your family is from Korea?
Sebastian Park:No, my family is from Korea. I was fortunately born in Los Angeles.
James Dillard:What do you think the biggest difference in cultures is between Korean culture and US culture around how bets are made? Because you have some understanding of both, what do you think that the cultures can learn from each other?
Sebastian Park:Yeah, it’s a really interesting question because one of my favorite things about the States is that I identify purely as an American, in part, because I grew up here, I went to the educational system here. I developed all my work habits here, right?
And so, one thing I’ve seen in Korean decision making, which I think is pretty interesting is just an emphasis on – they have a really strong belief in success and sort of like provide people opportunity and I think there’s a lot of Confucian values there. And so they give a lot of value to equality of opportunity, go forth and then win, right, and then and be good at what you do. I think in the States we have begun to de-emphasize a little bit but just the equality of opportunity bit. And so for us, as Americans, one thing is like, “Hey, let’s work more in America to improve quality of opportunity for everyone so that everyone has opportunity to take their shot and go, right?
In Korea, I would say for Korea’s side is, is I also hope you understand like, you know, equality of opportunity, if it’s just test taking or if it’s just these systems that create BTS or create some of these shows. That’s a very much determined model of success. Determined model of success, obviously people love it from in music, obviously, I’ve lived in sports. I’ve been very lucky to do well in the Esports ecosystem. It may not be great for a country long-term to have a determined model of success embedded in their ecosystem. It’s unclear though, right?
I mean, it’s sort of funny I’ve been thinking a lot about South Korea’s success over the last 20 years as they’ve gone from a G200 country to a G12 country or something like that.
James Dillard:Yes. Great. Exceptional.
Sebastian Park:And until like at some point I said, “Can you really mess with success?” Like you’ve built a community behind it like seems reasonable there. I think that stuff is so interesting to analyze. I certainly benefit a ton from being in this, I would say like third community of people who have like multiple cultures, in my decision making that’s been a ton of fun. And it’s something that I wish more people had.
It’s so interesting because I – having grown up as a minority in the United States have a very different world view than for example a Director Bong who was the – Director Bong who’s the Director of Parasite. In his communities, he has always been the majority man, right? He’s been in the majority ethnically in South Korea and been the majority as a guy in South Korea in a very traditionally more patriarchal society. Whereas, growing up in LA and then living in Houston, and some other cities around the country in Nebraska, Oklahoma, Nevada, et cetera like I’ve been in minority more often so that’s impacted my view of the world, right? And I find understanding that to be an interesting part of making decisions as well.
James Dillard:In what way?
Sebastian Park:Oh, so I mean, I think in particular this might be a little more racially tinged and I care to say, but like, there is this opinion for example, when someone says something racist against Shohei Otani, for example. Shohei is like “I don’t care. It’s not that big of a deal for me.” And everyone is, “Hey, Shohei say it’s not a big deal for him let’s move on, right?” And a part of me agrees with that because like the person was the one who was offended, but Shohei has grown up being the big man on campus in Japan. He’s Japanese by ethnicity. He’s Japanese by birth. He’s Japanese by all the way until he came to US to play baseball for the Angels, right? And so, his worldview is shaped for being in the majority throughout his entire life.
And so, it’s much easier I think culturally to say “Hey, like, this is not – like this is a microaggression really, more so than a straight racist comments. And so therefore, it’s easier for him to be like, “Hey, this doesn’t matter as much.” as compared to for example, women of color from minority communities in the United States like – not a lot more for that community because they are underrepresented because they haven’t been out there. And so, I’ve been thinking a lot about how that affects our decision making and sort of – and it certainly affects mine whether I wanted to or not.
James Dillard:Yeah, totally. Totally. Well, thank you for sharing that.
Sebastian Park:Of course, anytime. It’s one of the things I think about a lot and it’s always just healthy because I’m a very proud American and I love America and so therefore I feel a deep responsibility for like the sins of our nation, right? Like the sin of slavery, the sort of the original sin of how we’ve treated people over hundreds of years United States. Whereas like, I’m not sure if I feel the same responsibility for South Korea’s sins, right? Like as a country, they’ve obviously done bad things as have all countries, right? And so, I don’t know if I feel the same amount responsibilities for their mistakes as I do for America’s.
James Dillard:Totally makes sense. Let’s make a third bet.
Sebastian Park:Let’s do it.
Bet 3: The future of user-generated content and UGC gaming
James Dillard:We’ve gotten really deep, let’s lighten it up a little bit. What’s the third area that you want to bet on?
Sebastian Park: Yeah, I mean, I would say this is probably the one I’m thinking the most about right now. And so, the best for last is just user-generated content, and in particular, user-generated gaming. I’ve been very fortunate. My co-founder, Tal, and I created Infinite Canvas, which is a publisher for user-generated gaming worlds, so mostly Roblox, Fortnite Creative, Minecraft, Sandbox, Manticore, et cetera. And it’s been really cool to see this, like see change of people just making cool stuff and how that fundamentally changes our consumption habits and how people are consuming.
I certainly think that we’ve already seen happen in video. And my – and so, I’ll change up a bit and start with my bet and then we’ll go into a little bit more details there. My bet is that I think user-generated gaming, like small groups of traders making games are going to be something and be like, oh, I think, maybe 40% to 50% of gaming revenues in the next two, two-and-a-half years and that I think it’s going to be pretty transformational. I’m actually more competent, saying five years, but that’s BS, right? Because if you say five years, all I’m admitting to is saying, I don’t know what’s going to happen next two years. I don’t think what’s going to happen next two years. That sounds I’m just picking an arbitrary amount of time. In the future, that’s hard to judge, right? Because I …
James Dillard:I think you should free yourself from the two-year guideline. I think one thing I heard you say, in I think one of your interviews at the Sloan Analytics Conference was like, I forget exactly how you say it, but the gist of it was like, it was like, “Just because this is hard I don’t want us to say that we can’t do it.” Right?
Sebastian Park:Right. Right.
James Dillard:I sort of I think there is… Yeah, I understand why we would set it to your timeline. It’s much, much easier to get crisp. But like many decisions aren’t relevant to your timeline and a five-year timeline is interesting. And you were talking about the time cycle for making bets on companies being 10 years, right? So I think that really – I would, you know, it’s your bet but I would allow you to extend it to five years, if you’d like.
Sebastian Park:If you’re allowing me to do it, I’m going to take it and run with it. I’ll say by 2030, which is, you know, closer to 10 years than five years, I think by 2030, we’ll see probably the same fragmentation in gaming that we do in video. Where in video, the comp– like the vast majority of video today, 99.9% of all video footage is made by independent creators.
Sebastian Park:Just by sheer numbers game. And so, I think similarly, in 10 years time, so in about 2030, the vast majority of gaming minutes consumed, like people playing games will be made by independent creators, as opposed to AAA Studios.
James Dillard:I love that one. It would be super interesting to see if it’s a platform that makes that possible. Or if it’s, you know, and I actually wonder how far away we are from that today. I mean, if you’re looking at mobile gaming minutes, which are probably the majority of minutes I guess we have a lot of non-indies in there for sure.
James Dillard: I mean Fortnite is crushing it.
Sebastian Park:Game Supercell, these guys are crushing it right now. I certainly think Roblox, Fortnite created these new thing content platforms from all these kids. And I say kids lovingly, there actually are most– a lot of them are under 18. So I think – but I would say like, pretty definitively, I think this is probably the surest that I have, right, and I don’t think it’s close, right? I certainly think 99.9% of all consumed gaming things in 10 years will be from user-generated games.
Sebastian Park:Now to say that, by the way, I want to be clear, though, for anyone who’s listening who thinks that I’m foretelling the death of Activision Blizzard, or EA or any of those guys, right? Just because most video is done by independent creators today it doesn’t mean that like movies have disappeared, or TV shows have disappear, right? There’s still a huge economic disparity in terms of how money that Squid Game made than what this video will make, right? With all due respect, of course.
James Dillard:Yeah, yeah, yeah.
Sebastian Park:Right? And so, I certainly think that’s one of those, like fun dichotomies, where like, yeah, like the money is going to be far more equivalent. But in terms of video content creation, user-generated content, now it’s like about gaming, it’s going to be like, 99.9 of it.
James Dillard:And we’re probably already at a spot where like 99.9% of the games created are from independent creators. It’s just that most of those games are getting no play – no play.
Sebastian Park:Right. Especially compared to just like, the sheer number of hours Candy Crush consumes.
Sebastian Park: Right. Like, you have to – it would have to be a lot – and by the way, like, if Candy Crush was made by two people, I would count Candy Crush as like independent game that was created and then even if they eventually hire more people.
James Dillard:Right, right. It would seem like you – to like make this work, what you would need. And I think there are trends in this direction, but like, basically companies that enable you to be this type of independent creator. Because I think I know the YouTube creator world a little bit and I think what you see is at the top, they start to become businesses, you know, we still think of them as kind of independent creators but they hire team. They start to look a lot more like a studio. OK. So we just need to find a data source that that we can agree on here. How are we going to – do you have any ideas on how to…
Sebastian Park:This bet is going to be so hard to do in part because, one, I’m certainly going to be right, and I think you probably agree with me if I had to guess. But two, more importantly, the best and most granular data source probably doesn’t exist right now.
Sebastian Park:Right? Like, the most granular data source will be – the person who invents the most granular data source is probably 12. Right? Like they’re probably 12 right now, in about six years time or five years time, they’re going to like be applying for university and decided on a whim just to pull a bunch of API together and create like a dope data source. And so, that’s going to be you as a judge.
I think what’s going to be interesting to watch those over the coming years, is just to see the trend lines. I think Roblox is growth, I think they – in their 10-Q Roblox has a lot of information about it. Manticore has a lot of information about it. Fortnite Creative has a lot information about it. And we’ll start seeing just a sheer number of consumed hours. And then we can compare that to like the Steam numbers, right? Because Steam has pretty great numbers in terms of how many people are playing how many hours. And so, we’ll just like, go through every game and then compare those two.
James Dillard:Got it. Well, so what if we did this? Because this might make it a little bit easier to tell the difference is like, five years in the future, you can kind of pick the like UGC gaming platform. If that – if the biggest one has more hours of play time than the top Studio game. You know what I mean?
Sebastian Park:Yeah. I hear you, my concern is that that is a hedge against my second bet. So it’s like, I wonder…
James Dillard:It moves it more a little bit in your direction, but I think it’s little bit easier for us to assess.
Sebastian Park:Right, Right. No, it moves it hugely in my direction, I just – I sort of think that the best way to do it and maybe someone out there who’s watching or listening will have a better idea and so you can set the terms. We have 10 years to figure it out. I’m totally fine leaving it open for the community to tell us the best way to judge this. I’d imagine there’s going to be something like Steam charts that’s invented in five years. It will be like “Yeah, that’s clearly the solution.” Because it compares like Fortnite games to Roblox games to Minecraft games, et cetera.
James Dillard:We’ll have to have you on our independent video platform site in three years to update this conversation in a Bayesian way.
Sebastian Park:Right, right, right. It’ll be – it’s like Substack to Ghost, Ghost to Spectre, I guess or something like that.
James Dillard:Right, exactly. Thank you so much, Sebastian, for joining us, being the inaugural Browser bet’s guest. Do you have anything that you’d like to plug or tell people about before we wrap up?
Sebastian Park:Yeah, I mean, I would just say if you have any ideas or you see something really cool, please send them my way. I’ve been very fortunate. This is a trick my friend Kevin, Kevin Clock uses where he just tells people, “Hey, if you have an interesting data source or information, just send it to me, please.” And so, I’m going to send it out as well, “My DMs are open, if you have an interesting data source or project you’re looking at, could you send it to me? I would love to read it.”
James Dillard:Awesome. What’s your Twitter handle again?
Sebastian Park:Oh, it’s @SebPark. And I’ll also plug The Browser. I love The Browser. It’s really the best source for a cont– I mean, if you’re already watching this, then you’re probably already subscribed, so it’s like that selection bias. But if somehow this breaks out The Browser, The Browser is a great place to read about stuff that like you’re not following. I think that inter like discipline reading and content consumption is super valuable, because that’s how you create some interesting ideas.
James Dillard:Totally. Totally. Well, we’d love to hear from you in the audience. If you have a bet, we’d love to hear what you think about our bets. Leave it in the comments below. And if we like what we see maybe we’ll pull it on the show and we’ll definitely have to have Sebastian back to check up on his bets.
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