Introducing the TriplePoint Video Game Index: GAMER

How is the video game industry doing? This is a common question that underlies much of the business and trade industry press. Individual stocks’ quarterly reports give meaningful anecdotes, but there is not one good benchmark to provide the capital markets’ answer to that question over time. Until now.

Introducing the TriplePoint Video Game Index. It launched today, April 26th, 2021 for investing professionals on the Bloomberg Terminal (ticker: GAMER). Within a few weeks the data should be commonly available on public investing information sites such as Yahoo! Finance and Google Finance under the same ticker. (EDIT 4/27/21: GAMER is now available on Google Finance.)

Continue reading Introducing the TriplePoint Video Game Index: GAMER

Lend Me Your Ears: A Guide to Selecting Podcasts

Management theorist Peter Drucker wrote many tips on how executives should obtain knowledge. Here’s one tip from his book The Effective Executive:

“The first thing to know is whether you are a reader or a listener. Far too few people even know that there are readers and listeners and that people are rarely both. Even fewer know which of the two they themselves are.”

President Kennedy was a reader, President Johnson a listener. Drucker contends the passage of administrations was fraught with problems since the aides who managed the transition — trained to convey information in written form — didn’t get through to the listening-oriented Johnson.

Consider your coworkers. It’s probably good to know which type they are. If you convey to someone multiple times “I emailed you” or “I told you,” perhaps it’s time to flip the method. You’ll likely have to conform to what works best for them.

But what works best for you in gathering knowledge? How should you choose what to read or listen to? Listeners are at a disadvantage. Continue reading Lend Me Your Ears: A Guide to Selecting Podcasts

Imitation, Hoaxes, and Halo

It’s said that imitation is the sincerest form of flattery. We don’t feel especially flattered, in this instance, though – you may have seen a hoax circulating recently, suggesting TriplePoint is a part of the Halo 4 review campaign, and making unprofessional demands of journalists.

We don’t represent Halo, nor do we represent Microsoft, and nobody named “Terry Graves” has ever worked at TriplePoint, either now or at any time in the past. The image of the letter, allegedly sent from our offices, demanding that reporters award Halo 4 a certain score, is a fabrication. It’s not even a very good one – reporters can only reach us between 9-5? C’mon.

Kudos and thanks to all of our friends in the industry who immediately spotted this hoax for what it was, and for having our backs. We’re looking forward to playing Halo 4 along with everyone else.

Why Isn’t Instagram at Least as Evil as Zynga?

Instagram selling for $1 billion dollars generated surprise, and envy.

Perhaps people can understand a strategic rationale for Facebook buying it, or competitive impulse, but the befuddlement remains.  You can hear the suppressed snicker coming from the mainstream business prairie: they weren’t making money, but hey, for the team itself, hooray!  Everyone agrees they’re really nice young men, who network and took risks.  They are poster boys for the Stanford-Silicon Valley axis.

Would people feel the same way about Instagram as a company if they did make money from their users?

They could insert an ad, spam your friends, or give you a premium upgrade only if you filled out a survey. They would share in Zynga’s original sin. There are other reasons Zynga may or may not be evil — options cancellations, labor practices and the like — but it is unlikely these are abnormal and surely the case that they are examined intensely only in the wake of their basic game philosophy of, and success from, compulsion loop design.  “Copying” is the other charge, but widespread in the industry, and goes back to the dawn of video game time.

Imagine an alternate history where Zynga relied on the capital markets instead of their user base to monetize. Imagine they sold for $1 billion just on the promise of how a user base could be monetized rather than how they actually did monetize. Zynga monetizes now, Instagram monetizes later, and by a different corporate entity.  Anyone that believes “Zynga is evil” must also hold that the corporate shower of riches on Instagram is even more nefarious. Their user base was “hooked” on beauty instead of compulsion loops, only to be revealed ultimately as corporate assets, passively awaiting their harvesting by Facebook.

When Shay Pierce of OMGPOP turned down the offer to join Zynga, he went out in a blaze of Gamasutra glory.  He warned:

When an entity exists in an ecosystem, and acts within that ecosystem in a way that is short-sighted, behaving in a way that is actively destructive to the healthy functioning of that ecosystem and the other entities in it (including, in the long term, themselves) — yes, I believe that that is evil. And I believe that Zynga does exactly that.

A “good” company is one which provides goods or services of real value in exchange for a fair price. A good game company recognizes that its developers are the ones who create that value, and treats them as valuable, especially if they are good at what they do. It follows practices that are sustainable. And it ensures that, at the end of the day, the world is a little better for having their goods and services.

An evil company is trying to get rich quick, and has no regard for the harm they’re doing along the way. It’s not making things of value, it’s chasing a gold rush.

This evil company moving fast on an acquisition was taking very normal preventative steps for their intellectual property. But the game Shay made and “loves,” Connectrode, was in jeopardy, or so he thought.  A game whose video is self-described as an “Addictive” “evolution” of Bejewelled, Mario, and so forth.  In other words, Zynga, just not as successful.  Even the art form of the haughty public resignation letter was an iteration on something that had been just been done two weeks before.

What are the PR lessons from the respective public responses to the startling ascendancy of these two different companies?  The strategy for public positioning of companies needs to take two powerful psychological biases into effect: anchoring and confirmation. One creator of addictive iterative games calls Zynga evil and it is uncritically accepted and propagated. NimbleBit’s Tiny Tower rips off Corporation Inc. only to have Zynga do the same to them, but is lauded for their sarcastic lob.

While a private company, Zynga was transparent to the point of being cavalier about their culture, aims, and monetization.  That could have originated out of Silicon Valley philosophy, carelessness, or speed.  Whatever the reason, no effective or persistent defense was made about the value that they were bringing to bear.  The fact of the matter is, Zynga games are fun too: objectively so.  Fun in the very elemental sense.  They are friendly, brightly colored, and not too taxing.

Is this worse than any other form of consumer entertainment product that isn’t a labored indie film?  “Gamerz” protest too much and play these games in bespoke fashion. Yup we’re just doing it for research. For our kids. To see what’s happening in the industry.  Let me see just how stupid…level 10 is.

Cow Clicker is a nice shot at Farmville — it’s also a shot at Skyrim?

Skyrim is so much higher quality but, quick, what is the literary quality of these place names: Eastmarch, White Run, Dragon Bridge, Winterhold.  Quality is a difference of degree rather than type. In each game you customize, click, and level up, with a different number of dimensions and more bloodshed than in Castleville.  Obsessed with communicating their corporate growth, Zynga never made it OK to like or admire their games as a product.  The financial prospects Zynga demonstrated saved the game industry from a normal console transition downturn.  There is no Kabam, Kixeye, Funzio, Crowdstar, and so on without Zynga.

Don’t flash your headlights in urban areas.  Al Gore claimed to have invented the internet.  Zynga is evil.  People look uncritically for confirmation of their beliefs.

Take two casual photographs: Mark Pincus is photographed in Vanity Fair, lord of all he surveys, from his condo.  He’s already rich.

The most smug photo I can find of the Instagram guys is still that they’re jus’ brogrammers, in some class B office space, maybe fresh from hacking:

We can not help but interpret these photos with information we already know.  Imagine the positions were reversed: the above photograph was of a photo filter CEO.  Beautiful city, shaded to orange.  Below, the punk manipulators of lonely middle America.  Don’t the smiles look a bit more cocky, the office more ominously clinical?

The lessons between Instagram and Zynga, both dazzling and great companies with different public perceptions:

1) Companies should zealousy discuss the value they are bringing to the world.  Discuss the vision that inspires the product line, not just the anecdote behind the corporate name (though that humanization is probably Zynga’s most effective consumer media message.)  Failure to do so opens interpretation to lowest common denominator possibilities – you’re just in it for the money.

2) Companies — but more particularly, the people creating them — should not talk about the financial benefits they have subsequently reaped or were going to reap.  Descriptions that someone is now “rich” are hard to latch onto, be envious of and tear apart.  Specific dollar figures are easy to.  (See any public executive officer compensation report.)  Rare is the response of a Paul Graham to any quantification of income inequality.  This works in reverse too. Simply saying one is charitable has minimal effect.  Giving away half of your income is tangible: even if you’re not giving it to old Skype employees.

3) Transparency is only effective if complete, and properly segmented. There is no such thing as complete information. If your transparency is simply “shocking revelation” (or even tongue-in-cheek revelation, or whimsical attention-getting revelation) it will be pulled out of context.  Zynga was transparent, Instagram was not but Zynga didn’t win any points from the blogosphere or the professional community for it.  When in conversations you need to know the motivations of the reporter (/analyst/blogger/customer.)

4) When monetizing something that had previously been free (or uncluttered), you have perilous waters ahead.  Success with many customers will mean failure with others.  You may risk backlash.  Proper messaging about the changes need to be done in advance, not in response.

Communications plans should incorporate strategies for success as well as failure. Aim for transparency but support it with a clear narrative.  Journalists start out wanting to like you. They want to see a company succeed; to talk about the transformations made possible by technology, and see the local kid do good.  Zynga was once that kid, just like David Morin’s might be today – and at a crossroads. Are they a visionary networker or cynical monetizer?

 “A few weeks before f8, Morin had coffee with Mark Pincus, the erstwhile founder of, co-owner of the sixdegrees social networking patent, and early investor in Facebook.  Pincus told Morin excitedly that he intended to build a poker application for the new platform.  “It won’t work,” Morin asserted dourly.  “Games aren’t viral.” Pincus went ahead and launched Texas HoldEm Poker on Facebook, starting a company called Zynga, which was headed for huge success.” –David Kirkpatrick, The Facebook Effect

When pushed, most entrepreneurs will confess their jealousy for this early insight. It is easier to discount the visionary as evil, that they are somehow winning through unfair play. “Zynga is evil” might be the Phiten necklace of the videogame industry: Something objectively not especially true but a (consoling) motivator, at least until the Zynga buyout offer comes around.



Hacker Wars: Understanding Joseph Menn’s Scions of IRC

Financial Times technology reporter Joseph Menn has written a captivating account of “The Hunt for the New Crime Lords that are Bringing Down the Internet” in Fatal System Error (Public Affairs, 2010).  “Cybercrime” is something that for now rings as more terrifying to the imagination than it has yet to be in practice.  With some minimal consideration of what programs one installs or what emails one answers and making sure your anti-virus software is up to date, it’s pretty unlikely an individual is going to be a victim of it.  Identity theft, one of the more frequent and noxious strains possible from Cybercrime, still largely originates from stealing unshredded documents in the trash or (physical) mailbox.  When it does happen electronically, such as the four-million strong theft at Hannaford Supermarkets, only 1800 false charges were subsequently made on the stolen credit cards.

But the book’s publication in late January is aptly timed, coinciding with what appears to have been a possibly Chinese state-sponsored or state-condoned attack on Google.  The possibility of cyberwarfare is considerably more threatening and to date, an unknown unknown in possible scope.

Menn covers the first half of the book largely through the lens of Barrett Lyon, a Californian networking whiz kid and Andrew Crocker, a detective who was working for Britain’s National High Tech Crime Unit (NHTCU, now the Serious Organized Crime Agency SOCA.)  Lyon and Crocker unweave the Russian hacker networks who had lead an attack on a variety of online betting organizations.

The perils of playing to movie casting (Shia LeBouf as Lyon, Tom Hanks with an English accent as Crocker?) are mostly avoided while gossipy nuggets are served up.  It is claimed on p. 41 alone  “actor Bruce Willis, Barrett learned, had lost millions of dollars [in sports betting]” and

As Darren Rennick explained it to Barrett, sports starts often bet against themselves.  Then Mickey would adjust the line on the odds and secretly bet the same way as the athlete at other, unsuspecting sportsbooks.

Hearsay often gets exploited exhaustively in other quickly written narratives such as those by Ben Mezrich (“The Accidential Billionaires” or “Bringing Down the House.”)  Menn demands more of the reader here.  He spends the lion share of the remaining work painstakingly explicating the very opaque (including to themselves?) cybercrime networks.    Some prosecutions are successful, other identities (King Arthur, Bra1n) never even traced to real people.   This gets to be tough sledding with the plethora of rapidly introduced names and only cursory explications of technical tactics our protagonists are using.  It would have been enhanced by more graphical illustrations of the interconnections and leavened by a picture or two.   Still it is the most authoritative picture of the subject yet, even if the subject matter is necessarily makes the portrait pointillist.

The final thirty pages or so are a litany of global cyber crime issues and public policy recommendations.  Though building from the Lyon/Crocker narrative, this serves best as an armature for a future work detailing the escapades between nations.  Most interestingly, Russia’s relationship to Estonia, Georgia, Chenya, and Kyrgyzstan for example.  But it has a bit of a rushed feeling (Kyrgystan “stun[s] the U.S.” by withdrawing airbase rights arguably because of a cyberattack, but the endnote immediately amends it to say the decision was reversed.)  This section would have been best served as a separate book on public policy by someone with a Washington beat.

More tantalizing would have been a comparison between Barrett and Napster founder Shawn Fanning (his last company Rupture was  client of TriplePoint and I was an investor in it) whom Menn also devoted a 2003 book-length treatment in All the Rave.  All, including the villains of Fatal System Error, are IRC veterans.   Amidst the prescriptions for public policy changes in at the end of the book an obvious missing one would be greater economic development for the great young programming minds of Eastern Europe (or a more liberal immigration policy!)  At what point in economic development does the “nationalism” exhibited by the young Russians and Chinese give away to the more libertarian, company-forming mindset of a Lyon or Fanning?  What early influences in one’s IRC experience stir one to hacking for its own sake, profiteering, nationalism, or company-building?  When nations do clash will our hackers serve their country?

Malcolm Gladwell has recently written that entrepreneurship is nothing like the lauded Buccaneering, risk-embracing ethos celebrated in Silicon Valley.  He claims it is a carefully calculated approach to a sure thing.  The cyber frontier wars whether against ex-KGB agents or the Music industry waged by the prodigious talents covered in Menn’s works are the ultimate riposte to that.  Lyon is on his third company as of publication, Fanning swung and missed twice before Rupture’s success.   But channeling their energy into a written vessel of understanding will probably require a novel instead of the byzantine excavations that non-fiction requires.  Still, to get a proper grounding in this increasingly influential world, Fatal System Error is an essential start.

The Decade Gaming Will Tilt (Further) East

The gaming world in the united states has very few large- or medium-capitalization companies that specialize in video games.   Waves of consolidation (Maxis, Broderbund) or bankruptcy (3DO, Acclaim) has swept out many of the historic publicly traded videogame companies as capitalism’s creative destruction did not spare gamers.   Much of the US-based gaming market capitalization is effectively part of Microsoft. But with only 1.9 of Microsoft’s 12.9 billion in revenues coming from the Entertainment and Devices division in the last reported quarter, and an even smaller percentage of operating profit (312 million of 4.48 billion) it is arguable after many earlier years of losses whether this was a worthwhile extension of shareholder capital.   Other sections of the videogame industry are submerged into entertainment conglomerates.  There, alas, they are financially black sheep.   Even occasional large hits such as Beatles Rock Band compete against intellectual property  siblings, “are negative for margins” and Viacom hopes to break-even on it based on the holiday results.   The division-level picture is worse — Disney Interactive is “still in the investment phase”: losing $295 million last quarter.   When the combined results of Disney and Microsoft’s gaming divisions are more or less a wash, there’s a problem in the maturation of the industry.  The occasional frenzy whipped up by bankers that there is about to be a wave of consolidations by the entertainment conglomerates of the game distributors shrivels under the glare of these green eye shades.

Continue reading The Decade Gaming Will Tilt (Further) East

i/o Ventures, a Garden of Seed Stage Companies Coming Soon

The virtues of coming to Silicon Valley are obvious: proximity to all sorts of talent, capital, and exposure to cutting-edge ideas.   If one agrees with that, the logic holds more strongly the closer that proximity is.   Four well known angel investors and founders are going to test that proposition with i/o Ventures, announced yesterday.   Tech teams in their earliest stage of existence who are accepted into the program, will have the benefit of the expertise of a wide-ranging group of successful entrepreneurs and angel investors, delivered regularly and in person at a cool startup space on Valencia in the Mission.   The coolness of the space is only as cool as the people in it, and knowing the founders of the program, they will keep it chill.  Feedback is something that practitioners of lean startup ethos can get once their product is live, but have a hard time doing on the ideas themselves before they go out into the world.  i/o Ventures’ program solves that by having experienced, friendly people bring together like-minded individuals (on very reasonable pre-money terms: $25,000 for 1/8th of your company.  Congratulations!  Your idea and team are worth $175,000!)

I suspect this will evolve to be neither the scale of idealab, nor as loose as Y Combinator, but something closer to Bloomsbury or other groups whose lineage is the intellectual salon — a socially and professionally coherent group of individuals who share a mission, in this case an entrepreneurial one.   I’ve been to a number of the events Paul Bragiel, a cofounder of i/o (and CEO of Lefora, which I am an investor in), and the groups he gets together are invariably illuminating professionals who are a lot of fun.   TriplePoint is happy to provide pr advice for i/o companies that want it, and will be a bit jealous of the exciting cauldron they’ll be a part of.

Programmers with a dream?  Apply Now! Best of luck, Paul & co.

i/o Ventures' space

i/o Ventures preconstruction space

Peter Drucker, Calling the Housing Crash

peterdruckerThe Drucker Institute at Claremont McKenna will be celebrating the 100th birthday of famed management writer Peter Drucker on November 19.  TriplePoint is a Drucker fanboy, most notably The Practice of Management (1953) which still has many lessons to teach, and The Effective Executive (1966, revised numerous times.)  These works have focused on scientific management.

His Management Challenges for the 21st Century might even be better.  It is certainly among most distinct of his works.   It focuses more on social trends that will affect management.  Most notably, the opening chapters cover the implications of a falling birthrate in the western world.  He reminds us that:

…trends in the distribution of disposable income that go to a certain product category or service category tend, once established, to persist for long periods of time.  They are usually impervious even to the business cycle. (p. 51)

With the declining birthrate, there are massive demographic implications are towards a society obsessed with retirement.  This is even responsible, he argues, for an increased emphasis on shareholder-centric views of the corporation in the last part of the century.  (Equity shares being the principal means of establishing retirement income for the middle class, the maximization of profit becomes paramount when in conflict with other social or personnel obligations traditionally seen as a corporate role by mid-century.)

Financial services companies he writes (presciently in 1999, those halcyon financial times) have nevertheless misread their share of disposable income

[The world’s fastest growing…industry] has been Financial Services-but Financial Services the like of which did not exist at any earlier time, that is, retail services to provide an affluent, aging population in the developed countries with financial products to provide retirement income…This new growth industry is, however, quite diferent from the traditional financial industry as the “corporate banker”, a J.P. Morgan for instance, a Citibank or a Goldman Sachs…They only saw that “finance” takes a larger–a much larger — share of the disposable income in the developed countries.  But actually the share of these traditional financial services-major corporate loans {etc} is not growing.  As a result the traditional financial giants have greatly overexpanded worldwide.  And as their legitimate corporate business became less and less profitable…these corporate giants…have increasingly resorted to “trading for their own account,” that is, to outright speculation, so as to support their swollen overheads…[this] has only one – but an absolutely certain outcome: catastrophic losses. (p. 56)

As a prediction this couldn’t have been more spot on.  As macroeconomic attributions for what caused the financial implosion of the last two years proliferate (persistence of low interest rates, political pressures on housing) it serves as a good reminder that there still was a managerial misread in the use of capital, driven by a mega trend that arguably hasn’t been mentioned in other analyses.   Even today, investment banks are aggressively trading for their own accounts, “doing God’s work.” Mutual funds and insurance companies who are really capitalizing on this trend do not.

There are lessons here for the gaming industry.  A company’s industry can be in a great growth curve, but if misreading the appetites and shifts within that curve (the second derivative so to speak) you can wind up rather bloated and inefficient, resorting to ever-more desperate gambits to keep the enterprise afloat.  This often comes in the form of repeatedly overpriced acquisitions.

Rest in Peace, Rannie Yoo

Our dearest friend and co-worker, Rannie Yoo.

I’m sad to note that Rannie passed away Sunday afternoon. She was philosophic in the last few weeks, happy with the love her friends, family and new husband David Reid had shown her in the last year. Born in Korea, she was raised mostly in Southern California and was a graduate of UC Berkeley in Asian Studies in 1998. She started working with Erica in 1999 and of course has been with us since the company’s inception in 2002. She will always be in spirit.

Sweet but persistent, Rannie was flowering personally and professionally when in November she mentioned she was going to the dentist’s office for what was then thought to be a toothache. As the news got worse over the months she redoubled her efforts to fight the aggressive cancer valiantly, even cheerfully. Even last week she sent a few CDs of music as a gift to our kids and was making plans for family members she supported. She was deeply touched by everyone’s support, and said she had no regrets, fear, or any more pain.

She said she had joy at having had a great career in an industry she loved, and found the love of her life David who was magnificent through this turmoil. Rannie enjoyed among many other things games, anime, tennis and reading. But I will mostly remember Rannie for her love of people who enjoyed these things. She invariably found the best in people and would befriend the most shy of wallflowers. She had a great sense of humor — though it was lopsided: she would never tease anyone and always rush to the teased’s defense. She told Erica she was going to haunt us. “Oh, not in a scary way, but look out for a pair of sneakers in the oven so you’ll know I’m there.”

A memorial service is likely planned for later this week. She would excitedly do her “happy dance” to celebrate small victories in the office, and I suspect she would want us to celebrate her life in with the same ebullience.

Rest in Peace, Rannie. We miss you.



Bobos, Patio Guy and New Trends in PR Staffing

Read together, two recent works on white collar living would suggest there’s been a bifurcation of the white collar class, geographically and demographically.   Richard Florida’s Who’s Your City takes as its  archetype of economic drive the bourgeois boheman, or “bobo” (a term coined somewhat sardonically by David Brooks’ 2001′ Bobos in Paradise.)  The Bobo sips lattes, went to an elite school, and really doesn’t want to live much outside of cities like San Francisco or New York.  Peter Kilborn’s Next Stop, Reloville surveys the managerial class.  They embody Patio Guy — mostly suburban men who drink beer, good excel and watch a lot of college football after graduating from often their state universities and are willing to regularly relocate in order to advance up the Fortune 500 food chain.

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Innovation Peer Pressures


Could the geographic proximity of Twitter to Facebook and vice-versa be hurting each other’s development as they shadowbox over how users update status?

A good deal of modern American upbringing is teaching awareness of (and mostly resistance to) peer pressure.   Fiction has no shortage of such tales, and in quantitative Asch Conformity Experiments we know it’s real: people appear to deliberately trump their judgments to give wrong answers more in conformity with what others have answered before.   Peer pressure can of course have its benefits.  One is production itself — to keep up with the Joneses; it is a solvent to the instinct for resting on ones laurels, and almost a synonym for creative destruction.  The downside is conformity, keeping up with the Heathers.

I think it was either Paul Graham or Eric Ries (or someone else?  Let me know!) who said start ups shouldn’t live in San Francisco because you spend too much time going to parties listening to other people’s business plans.  This was expressed as a concern for the time waste, but I think the greater peril is the subtle gravity it effects on ones own business plan.   Ironically, the further away companies are from the center of the activity mass,  the more innovative I’ve found their product to be.  There is some selection bias in my sample, but even so, these far-flung companies tend to be less confident about the absolute prospects of their product.

Continue reading Innovation Peer Pressures