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🤯 Abundance changes everything

A year ago, I predicted the world was shifting into an era of unprecedented abundance. It's happening

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AI is pushing us into an “age of abundance,” upending how we make money

A year ago, I predicted the world was shifting into an era of unprecedented abundance. This week, Hollywood titan Tyler Perry halted construction of a billion-dollar studio after seeing a few AI-generated videos. He saw the future, and it doesn't look like the empires of the past.

Or does it?

A NEW AGE OF ABUNDANCE

The same day Tyler Perry “raised the alarm” about AI, the all star VC firm a16z sent out a newsletter describing how AI will usher in “a new age of abundance.”

Fun fact: long time fv/ readers read that same prediction from this very newsletter 10 months ago.

a16z’s thesis is based on a clear motivation: that there’s money to be made from this new era.

Zoom out: a16z knows a thing or two about making money from new technology. They’re the largest venture capital firm in the world. The a in a16z is Marc Andreessen who was the co author of the world’s first web browser, and co founded Netscape, the web’s first giant firm. 

He was also an early investor in Facebook, GitHub, Pinterest, and Twitter, and his firm has also backed some of tech’s largest-ever winners like Airbnb, Slack, Instacart, Postmates, plus Robin Hood, Wise and Coinbase.

In other words, these folks know what they are talking about when it comes to making money from technology.

And yet. 

One thing that I think a16z could be clearer about when talking about how “today’s luxuries” will become “tomorrow’s commodities” (as they put it) is just how very, very difficult (not impossible) it is to make money when stuff is so abundant that it’s free:

10 months ago, I wrote about generative AI in the context of “economic goods”:

If you want to see a new Star Wars movie or series, for example, only Disney can make it for you. But generative AI is upending that equation.

Today, if you really want a new Star Wars, you can pretty much make your own with generative AI. ChatGPT can generate the script for you. Midjourney can make the cover art. And then you can bring (a version of) it to life using text to animation AI tools, which are totally a thing.

It’s not a stretch to imagine text to hyperrealistic video soon becoming a thing too, perhaps before the year is even out.

This is the foreshock of an historic, society-changing, economic earthquake.

The mainshock is going to move most media, most of human knowledge, and many, many, many services —including complex, problem solving ones— from an era of scarcity to an era of complete abundance.

We think of scarcity as a synonym for “rare,” but it’s more nuanced that that.

According to economists, “scarcity” happens when there’s only a finite amount of both human and non-human resources out there that can create “economic goods.” (That’s just fancy economics speak for stuff that can be sold.)

But zoom out: generative AI is a theoretically infinite, non-human resource that can create infinite (heretofore) economic goods.

Stay with me here.

According to the economists, if scarcity no longer exists, then an infinite amount of goods can be produced, and human wants could be fully satisfied Awesome!

But if scarcity no longer exists, “economic goods” (aka stuff that can be sold) will disappear with it. That’s not necessarily awesome.

Pre AI, there weren’t a whole lot of examples of human- or machine-made things that were so abundant that they’re free.

But there was one big one: information.

Zoom out: Throughout most of human history, knowledge and ideas were bound to either word-of-mouth (the village elder around the campfire) or physical distribution (scrolls and, later, printed newsletters and books). This bottleneck made them scarce. 

The telegraph, then radio, telephony, television, and (obviously) the Internet all fundamentally altered the economics of information: the marginal cost of both producing and distributing an additional copy of most types of information (and entertainment) became practically zero.

^^ This fact seriously disrupted traditional publishing and music businesses 20-30 years ago. 

So what happens now that the cost of originating a brand new digital song or e book is approaching zero (thanks to AI)? 

Well, what I wrote 10 months ago. That we’re about to enter a completely unprecedented moment, a “post scarcity economy”:

A lot of goods (like art, music, literature, and movies) and a lot of services (like copywriting, legal analysis, tax preparation, and medical diagnoses) that provide a lot of livelihoods are all about to be produced in great abundance, with minimal human labor.

A world where all of those (previously) economic goods are available cheaply or even freely, is totally uncharted territory. Like it or not, we’re all entering it.

NOW WHAT?

Bottom line: if your digital goods or services are going to remain economic (sellable), they’d better be really novel or otherwise really excellent, or they’d better come with some sort of additional, not-easily-replicable service or experience.

Welcome to the age of abundance.

I’m not sure that we humans have ever lived through a time where so many previously economic goods were so quickly made so abundant.

So, what’s been happening in the 10 months since I wrote that?

Online media companies aren’t doing too well. Just this week, BuzzFeed (stock down some 99% from its high just over a year ago) sold the hip hop and sneaker site Complex for just ⅓ of what BuzzFeed paid for it two years ago. Embarrassingly, Complex by itself sold for 3x what the stock market says Complex-plus-BuzzFeed is worth.

That same week, Vice said they were shutting down their digital content/journalism operations (vice.com) to focus on their film and tv production business, Vice Studios.

Speaking of studios, some really, really big projects are in serious flux. As mentioned at the start of this piece, just a couple of days ago, the billionaire entertainment super producer Tyler Perry announced that he was pausing construction of a nearly US$1b Hollywood-style film and television studio in Atlanta because of the curated collection of clips that he’d seen that were generated by OpenAI’s text-prompt-to-full-motion-video generating engine, Sora.

Think about that for a sec: A billion dollar studio years in the making, and Tyler pressed pause after seeing 10 online videos.

And yet. Corporate earnings from firms like Meta and Microsoft are through the roof —and so are layoffs, as more and more firms are realizing they can do more with less.

“THE DEAL” HAS ENTERED THE CHAT

Don’t get me wrong, a16z is absolutely right: there is money to be made here.

Their play: a relatively small number of firms will make a relatively humongous amount of money by selling the rest of us the tools to make the stuff (see ChatGPT, Runway, and Sora). 

But I think for most of us, the play is a distribution and infrastructure one, not a content creation one. 

See, as information/content becomes abundant, attention becomes the new scarce resource.

That’s been the case for a minute now. Gen AI just super charges things.

This is good news for marketing people. On a micro/individual level, there will be money to be made by charging creators for branding and marketing their uneconomic goods to wider audiences in an attempt to make them economic. 

However, on a macro/bigger picture level, the serious money will be made by consolidating / curating / distributing all of those uneconomic goods in order to sell the eyeballs watching them to advertisers. (“The Deal” will never die!)

Repeat: Assuming your name is not Sam Altman, Satya Nadella, or Jensen Huang, the way to make money in the age of abundance will come from inventing creative ways to market and sell the things that are about to be super abundant (micro level: marketing pros, marketing agencies), or packaging up all that free stuff, providing it to people, and selling advertisers the chance to sponsor that value exchange (macro level: social networks).

AGE OF ABUNDANCE? OR SCARCITY? 

Marketers, take heart. My core argument is that formerly economic goods are losing their value in this age of abundance, while attention becomes scarcer than ever. That means that your skills will never be in more demand. Things are about to be all about the sizzle, and not the steak, like never before.

More:

Tyler Perry puts US$800m studio expansion on hold after seeing OpenAI’s Sora: “Jobs are going to be lost” »»

The Abundance Agenda, from a16z consumer »»

Corporate Ozempic, by Prof. G »»

Written by Jon Kallus. Thanks for reading.