![]() ![]() ![]() Capital abundance often leads to undisciplined and ineffective capital allocation. Capital scarcity creates a forcing function for disciplined and effective capital allocation. That said, the internet has brought this dynamic to MANY more sectors of the economy, and its next iteration (the metaverse) will extend it to even more.Ĥ.There's a reason Warren Buffet called Tom Murphy and Dan Burke of Capital Cities the best capital allocation team of all-time - they were playing on a field tilted in their advantage. People sometimes forget, but this dynamic also existed before the internet: the media business (both content and distribution) was perhaps the best and most consistent industry of the 20th century from a Return on Capital perspective. ![]() Fortnite skins - you have the potentially to do very, very well. Anytime you can sell something for a significant price that costs you little/nothing to create incremental copies of - e.g.Zero (or low) marginal cost businesses are special opportunities. And perhaps most importantly they monetize via ongoing subscription and virtual economy revenue that aligns with actual user engagement, vs one-time upfront fees on boxed software.ģ. Battle Royale), but then adapt and scale elastically when they strike a rich vein. They can be designed to address initially small or niche-seeming use cases and desires (e.g. Much like SaaS apps, GaaS experiences can be built by small teams with a creative insight, in a capital-light fashion on open, best-in-class infrastructure that's cheap to rent (Unreal Engine or Unity)."Games as a Service" (embodied by titles like Fortnite, Roblox, Minecraft, League of Legends and Honor of Kings, etc) is a revolution that's unlocking value on the same order of magnitude that SaaS did for software. Epic's two-part business model of the Unreal Engine plus Fortnite (and other games and experiences) is like AWS plus Amazon's consumer facing businesses: not only do they create and sell the infrastructure that powers a whole industry, but as their own "first and best" customers they can use its features most effectively and inform their own future roadmap of what to build.Ģ.The best companies sell jeans, pickaxes AND find more gold than anyone else. Great companies sell jeans and pickaxes to everyone who pans. New! We're codifying our own Playbook notes and takeaways from each episode, and posting them here in the show notes and on our website. If you want more Acquired and the tools + resources to become the best founder, operator or investor you can be, join our LP Program for access to our LP Show, the LP community on Slack and Zoom, and our new Book Club live sessions with authors like Hamilton Helmer of 7 Powers and Will Thorndike of The Outsiders. We tell the "epic" story of a plucky game developer from Cary, NC (by way of Potomac, MD) which, after bootstrapping for its first 22 years, has morphed into an $18b juggernaut that may become the most important technology company for the next evolution of the internet.Īnd oh yeah, its founder, CEO and controlling shareholder? He's beholden to no one and cares more about land conservation than money, has the firepower of China's biggest internet giant behind him, and is willing to fight to the death with Apple, Google and anyone else who doesn't support his vision of an open and equal-opportunity internet future. ![]() The Complete History and Strategy of Epic Games ![]()
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