Andreessen Horowitz is Betting on the Passion Economy

Thank you for riding shotgun with me here in the #vanlife of podcast writing. This week we’ll park at Sandhill Rd and unroll the shade.

Venture capital behemoth Andreessen Horowitz (A16Z) is a devilishly astute observer of human behavior. Recently they noticed that creative people believe deeply in their potential for success, influence, and fame, and they will make decisions—both small and large—to unlock it.

They call the trend of people trying to build fame and fortune on their talents the passion economy and claim it’s the future of work. As part of a new media investment strategy, they are investing millions in businesses that accelerate the transition of people from working for larger media companies to being totally independent. Together, these businesses comprise the “creator stack.”

This tweet thread from former A16Z partner Li Jin lays out their vision of many independent creators working for themselves in clear-eyed detail.

And if you really want to go deep, here’s an entire episode of the A16Z podcast on this topic with Jin and Patreon Cofounder Sam Yam. It’s full of optimism for creator potential and lacking any serious analysis of what happens to the passion economy at scale.

The companies of the “creator stack” are taking the media world by storm. They hardly need to market themselves as word-of-mouth and traditional press are doing the job for them. This week the New York Times ran what amounts to a full page ad for Substack given that it starts with eye-popping figures like half million dollar contracts for indie writers, and we left the tab to start a Substack before finishing the article.

And why wouldn’t we? What other options are there? The vanishingly small set of opportunities available from traditional media companies to be paid vanishingly small amounts are forcing creators’ hands.

So with nowhere else to turn, sexy new software starts to look pretty good. You’re reading this damn newsletter on Substack. I love well-crafted software, and I admit to not always looking to see who the investors are before jumping in with a new tool. Take Descript for example.

Wait, Descript? What’s wrong with Descript? For one, they are sitting on a fat A16Z investment. On top of that, their founder Andrew Mason founded Groupon which was the bane of many small businesses around the world for a few years, so he knows from experience how not to turn a blind eye to customer pain and how to grow a company faster than can be done while retaining a healthy culture.

As of right now, Mason’s Descript is staying in its lane as a valuable creative tool and not a monetization platform. But broadly, they’re obviously part of the “creator stack.”

And as part of A16Z’s portfolio, Descript certainly adds leverage to the overall “platforming” of media that A16Z is trying to accomplish. By “platforming” I mean moving all media creation to independent creators, and removing all the “expensive baggage” that oversight, editorial vision, and institutions create. In place of that baggage is slick software with modest platform fees.

In the case of Substack, it’s a mere 10% of your total revenue as an independent writer. Of course the platform owner (A16Z) makes vastly more money than platform participants by miles, but let’s focus on the opportunities for creators, right? You get to keep 90% of your success and 100% of your failure! That’s platforming.

It shouldn’t be surprising that venture capitalists love platforming because it’s a page right out of their own playbook. The way venture capital works is that it expects a huge percentage of the companies it invests in to fail but a tiny handful to succeed so big that the failures are washed away by the riches of the one or two successes. And VCs understand that despite the nearly certain failure, entrepreneurs abound.

We already have a full generation of America’s best and brightest (including me!) that jumped at the opportunity to be tech entrepreneurs despite the high likelihood of failure for a fraction of the salary and benefits earned by our big company working counterparts from earlier generations.

Now it’s creators’ turn. If only 1% of Substack’s writers end up being successful, that’s fine for the platform owners as long as they are wildly successful. Everyone else has a gig waiting for them driving groceries for Instacart (another A16Z company). The other nice thing about platforming from A16Z’s perspective is that churn is money. Did you fail at being a Substack writer? That’s ok, they still got 10% of whatever you made while you gave it your best.

(Quick side note about how I’ve kept the focus on A16Z as the owners and not the founders in the “creator stack.” A16Z would prefer we keep the focus on the entrepreneurs. They want to remain in the background with significant ownership, influence, and upside but out of the line of sight of accountability.)

What can we do about A16Z’s corralling of all the sexy new media companies? I honestly don’t know if there’s much we can do. With Substack, we can certainly point out, loudly, that removing editorial oversight, economies of scale, and built-in audiences isn’t going to make a bunch of well-paid writers any more than removing regulatory oversight and wage-based employment made a bunch of well-paid Lyft (an A16Z company) drivers.

With Clubhouse we can point out, loudly, that it’s not going to stay free forever, so then when they do “monetize”, what will the product be? (Hint: it’s listener data and creators’ content.)

And finally with Descript, we can approach with caution. I’m not going to tell you they haven’t made some really good software. Their tools and tutorials are head-turning. But let’s wait and see what other companies pop up that are ready to compete with them that have a better source of capital. Also, whenever we recommend them, maybe we can mention their investors (A16Z) and wrinkle our noses like there’s a fart in the air.

If you’re as motivated as me, you can look at your own toolset. I’m going to look into moving this newsletter over to Ghost because they have the same business model as Timber: make great software, sell that software for money with a classic SaaS business model. NOT make great software with investor money and then collect rents off of users’ content. Platforms may say they’re charging for distribution and monetization, but those aren’t hard problems on the internet. Certainly not worth a percentage of your top line revenue.

But those signing bonuses! I think we could be on our way to a classic “how it started/how it’s going” meme in new media.

I’d love to be wrong and for people to resist the pull of the “creator stack.” I’d love it if we pushed up our collective nerd glasses and said, “Oh hell yeah, when it comes to technology, open protocols create more opportunity than closed systems even if they might be less efficient!” I’d love for us all to knowingly say, “Totally, and podcasting became great because of RSS, and the web became great because of HTTP!”

In the meantime, even if new media goes deeper into the pit of platforming and thousands of hopeful people don’t emerge famous and well-paid, it’s a big world. Enough people will get it, understand how value works, and make good choices about what software they use and where they put their content. We will make a little self-sustaining group and make livings telling stories without lining Marc and Ben’s pockets.

—Jon Christensen