The Power Law Of Attention (Looking Back On 2022, Ahead To 2023)
As an unofficial tradition, I attempt to “look back” on the previous year in technology startups and tease out the big themes. Looking back on 2022, I’ll admit I found it harder to step back from the noise of work and family life, to zoom out and take stock of what happened, and to put it into a few words.
I will remember 2022 as the year where “The Power Law Of Attention” dominated our reality in the tech startup world.
In venture capital, early-stage private portfolios lucky enough to generate a return often see the distribution of outcomes form what is popularly-referred to as “The Power Law.” You can read about it elsewhere, but in a nutshell, the rule says the biggest return will be so big it will cover all losses. Put another way, early-stage investors build portfolios with the hope that one (or more) company will be that elusive Power Law winner, driving returns and profits for the fund’s investors.
But this isn’t the only Power Law in our world. Another version of this law that’s been on my mind is what can be called “The Power Law of Attention.” I started thinking about “The Attention Economy” after many years of reading Albert Wenger’s outstanding blog. Albert predicted years ago (in 2015, my lord) that the global economy would transition with a severe dislocation. He writes in 2015:
There have been two fundamental scarcities in human history and we are now moving on to the third attention). Each time the scarcity shifted, due to a new technology, we had a massive dislocation. So yes, this time is the same, scarcity is shifting again and with it we are experiencing another such massive dislocation.
If you haven’t yet, you should subscribe to Albert’s blog. But back to this post… in 2022, it felt like for the first time, the attention economy ruled what tech startup events became the talk of the town. As I reviewed all the major events in this ecosystem in 2022, there were a few that felt like supernovas, true outlier events that were either so big, so consequential, or both, that other notable events or advances in technology and networks didn’t bubble up to our collective consciousness — more on this at the end.
Those of us in the startup tech world, we know what the big stories were — The macro economy went through a drastic regime change (see: Druckenmiller, Howard Marks, etc.). Elon overpaid for Twitter, where the startup tech world convenes, but then went on to lose $200B in net worth in one calendar year. Artificial intelligence was unleashed into the world by a 7yr old startup, right to our fingertips, and it felt like that time 15 years ago when a company in Cupertino put technology at our fingertips. There was another multibillion dollar tech startup acquisition in the face of a falling market. In the less consequential world of venture capital, we saw hedge and crossover funds largely leave the market, we saw unprecedented fraud in what felt like (and hopefully still is) a promising new technology, and we saw an exciting change in leadership at the world’s most successful startup accelerator.
There are countless other big stories from 2022, no doubt. There were too many for me to review, read, and list here. And, there are bright spots, and spots for hope. As someone who naturally defaults to overly analytical thinking, which is prone to pessimism, I’ve spent the past few months building a thematic framework in my head for what the next decade could be like, and to transform the analytical approach into one of opportunity-seeking. The first steps in that process are for me to write about those more, which I now have the energy to do. And my ultimate goal is that in the sharing of those thoughts, they will be further refined and, if I’m lucky, will land on the doorstep of someone out there who shares a similar worldview.
It is not just startup founders who have to look back on 2022 and adapt. Everyone in the tech startup ecosystem needs to adapt. Everyone needs to re-examine their swing. I am trying to rebuild my swing and forgot most of what I’ve learned the past decade. Trying to re-learn. As torrential rains return to the Bay Area, more and more friends are moving back to the Bay Area, despite the region’s clear troubles. More and more layoffs will occur, upending lives but also forcing those to create new opportunities. Somewhere out there is the next Mike Arrington and MG Siegler, hosting meet-ups and writing up a blog or tweetstorm about a cool demo he or she saw. Somewhere out there is a recently laid off tech employee who finally had the inadvertent push to focus on his or her side project, which starts to take off. Somewhere out there are his or her ex-colleagues who will give that person startup capital. Despite its myriad (worsening), the Bay Area does remain the one place I know of where the generational historical culture has been to reinvest proceeds back into the ground in the form of startup investing.
Luckily for our country, that is now happening in other places, too. In the hurricane of change that will unfold in 2023, this is what I’m most excited by. A decade ago, sitting here, I hadn’t made my first investment yet. No one would give me a chance to write a check. I wasn’t a parent yet. The world was finite and time was infinite. A decade later, now things have flipped — time is now finite, but the world is infinite. The flow of interesting people starting companies is going to be incredible to watch, and I am ultimately grateful for the last decade (including 2022), I am grateful for getting to meet folks who will take on a risk and do things that I could never do, and I’m grateful for the chance to have a front-row seat to what a friend describes as “The Greatest Show on Earth.”
The market may have dried up trillions of dollars of capital, but the last decade of social media, lockdowns, and other forces have sapped our attention. There is still lots of money for new ventures out there, but there is much less attention. In this new world of Power Law forces, I will look back at 2022 as a fundamental reset of everything, I’ll discard 80% of what I have learned, and I’ll lean into that feeling 10 years ago, when the future was unwritten, and I got the chance to meet and work with some of the most creative people in the world — new people who are building the next things that will sprout after the rains wash away. That prospect gives me great excitement and great hope.