Changing the shape of the playing field: Content and the attention economy
Update: Following reader feedback, I have added two diagrams at the end of this post to visualise the concept. Enjoy.
I tweeted last month about the proliferation of content and storytelling roles in venture capital, after Andreessen Horowitz (a16z) went into media publishing with Future. I think that ability to propagate a viewpoint at scale is a new function in financial markets, and it is a big deal. The world is rapidly becoming an attention economy. The ability to exercise “soft power”, change the shape of the playing field, and perpetuate your own interests (and those of your network) will emerge as a superpower over the next ten years.
In the past, media outlets dominated financial discourse. These were vaguely independent and approximately concerned with the truth. This was a gated relationship where a handful of outlets would gather stories that were “important” and send them out to the world.
The other main disseminators of financial narratives were what I’ll call “intermediaries” which ran the gamut from brokers, advisors, fund managers, sell-side analysts and so on. These people manufacture and propagate financial narratives to facilitate their business of distributing products and attracting clients.
The Internet Changed Everything
So far, the primary impact of the internet has been to amplify those types of relationships. Powerful outlets distribute to a larger audience and intermediaries intermediate, but to more people.
In the past ten years, individuals have been increasingly able to amplify and propagate their own views into the marketplace. This is the podcast, Instagram, Reddit, Twitter. The noise in the marketplace has increased massively.
Entities that are amplified, benefit. This is revenue, employment, validation – deal flow, stock price, regulation.
The issue today is not how to reach a large audience. That problem has been solved by the internet. The real issue now is finding the signal, or creating one powerful enough that people will follow it.
The challenge now is how to find someone that cares. It’s how to create a message that spreads and sways large groups of people. And, more importantly, how to find enough people that care about you in great enough number that it makes a difference to you. It’s 1000 true fans, but for companies.
Anyone that has watched markets over the past five to seven years has seen the rise of the narrative as a tool of influence. Raise capital, attract investors, avoid regulation. In fact, it has been two or three years since I even heard an investor describe a company as a “story stock”, although there are more story stocks than ever. That in itself is telling, because the narrative has become the norm.
So. The world has shifted. The issue now is not propagating the message, it’s finding someone who cares. Do you see where this is going?
Warren Buffett is the world’s greatest propagator of narratives. He has a cult following of millions of people that quote his every word. Did you know that you can’t make a baby in one month by getting nine women pregnant?
He is a leader for generations of investors who all wanted to be Just Like Warren. While perhaps one of the world’s greatest domain-specific talents, Buffett is hugely underrated for building this network of narrative propagation & signalling in the pre-internet world, and it might be one of the most overlooked tools of his success. The Neckar Value newsletter wrote more about this here.
Buffett spent a whole career actively changing the shape of the playing field (to his own significant benefit), but modern venture capital and company executives have taken the Hero model to new heights.
In the Hero model, we have an “Important Person” propagating a view. Electric cars, bitcoin, drugs that cure rare diseases, proposals to split up companies.
In the course of engaging in certain activities and pursuing these interests publicly, certain people are noticed. They go on CNBC, or Twitter, or podcasts, get a following. In doing this, they amplify themselves and create the ability to have themselves Taken Seriously. An audience becomes prepared to listen to them.
In activism, you can create presentations and sway shareholders and management to your way of thinking. Or, you can write short reports and make the stock price go down. In VC, you can attract investors, clients, partners, and attention. For this post we might think of attention as “an intangible asset that attracts a consistent, but randomly timed, future stream of investors, clients, partners, and more attention” but that is a concept best explored elsewhere.
The Hero model works very well, especially in the internet era, but is still limited. It is limited by the person. Warren Buffett is finite. Ben Horowitz is finite. There is only so much time in the day, and most people appeal to only a certain subset of a total population.
Do you see where this is going?
If all of the above is true, we arrive at the need to create a capability. The capability to propagate a message, in an organized and targeted way, that finds its target audience and is amplifiable beyond the human limitations of a single person or small group of people.
In the hyper-targetable world we live in, this is no longer the model of a PR firm putting out press releases. This is content that is immediately relevant to you, in your pocket, every hour, perfectly tailored, that you CHOOSE to consume.
Of course, this capability already exists in the form of social networks. Advertisers buy your eyeballs.
It does not exist in public or private markets – yet. With some exceptions, most entities do not have the ability to effectively promulgate a message, at scale, to the whole population digitally.
(Yes, this is conceptually very similar to the metaverse. No, it is not the metaverse. This is happening already and will proceed irrespective of augmented reality.)
What a16z and others are doing is creating the capability to spread influence to every corner of the internet. It is both reaching and signalling an audience (people who care about these interests) and expanding the audience (finding new people who can be convinced to care).
If you are looking at this and saying “oh this is just about making the stock price go up” or “stockbrokers sell stories to clients every day” you are not getting it. This is about using soft power to set agendas, direct conversations, and channel influence to the advantage of one’s own network.
There is undoubtedly an element of price setting involved, because asset managers take a % of asset value in fees. In private assets you don’t need to convince a whole market; you only need to attract a small number of incremental buyers or sellers in order to find a new holding or increase the value of an existing one. These are “few to few” relationships that work extremely well with the Hero model.
Intriguingly, the only way to properly exit a mega-billion dollar company at the “right” valuation (noting where VC valuations sit) is to offload it to someone else, namely public investors. Do you see why finding an audience is so much more important than just price setting per se? On a long enough timeline, all large VC-backed companies are destined for public markets.
The attention economy
So, there is undoubtedly a direct commercial element to narrative control, especially for large VC and large corporations. However, like my friend said recently – when money is free, something else becomes the currency. The world is becoming an attention economy.
The ability to attract, direct, control, and influence that attention will be essential for survival, and absolutely critical for the survival of ecosystems, like those represented by venture capital.
It’s not about direct impacts like “I hire one writer and they find one new investor and the stock price goes up by $1”. It’s about changing the shape of the playing field.
Sway influence your way to perpetuate your own interests and those of your network, and ensure survival and prosperity. a16z Operating Partner (Marketing) Margit Wennmachers said outright that while traffic is a success metric, the organisation is also focused on “whether the targeted audience is ‘sending us around’ or ‘talking about the topics we raise’”.
Last month I said the nature of markets is changing. Actually, it’s already changed, and these are the natural consequences of those changes. It’s the creation and mechanisation of industrial-scale media to shape the playing field in favour of the participants. Marketing, but for networks.
That is what this is all about. And you are going to see this narrative propagation capability being built absolutely everywhere in the next few years.
Food for thought.
Thanks for reading.
I have no financial interest in, or relationship with, any of the people or companies mentioned in this article. This is a disclosure and not a recommendation.
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