The Meme Economy
The Evolution of Interest
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A Return To Storytelling
It's unclear to me why I return so often to the idea of storytelling, but it's a lot. I specifically wrote about the storytelling of investing, and have expanded on the idea in terms of dependencies, intellectual honesty, company storytelling, learning to dream, and the size of markets.
But if I had to put it into one idea it's this: storytelling is more important than reality, because every aspect of reality is a story.
And I think the reason I return to this so often is because it represents another key idea that I keep coming back to, and that is best described in a quote by F. Scott Fitzgerald:
“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function."
The world is filled with nuance. And I'm trying to balance these two, seemingly, opposed ideas. (1) Factual reality is important, and (2) most of reality is dictated by what people decide to believe. On the one hand, I agree with the idea that many people have drifted away from having an inherent respect for demonstrable facts. Ricky Gervais has a whole bit about this idea of the respect for facts:
"[Social media] is where this ridiculous notion became stable that it was more important to be popular than right. In this post-truth era people don't care about the argument. They don't look at the argument. They say 'whose saying the argument?' We've always had, 'my opinion is worth as much as your opinion.' But now we've got 'my opinion is worth as much as your facts.' You can have your own opinions but you can't have your own facts."
And I agree with that. I think there is far too little critical thinking and healthy argument. I think this is true on both sides. I don't think any one political party is the "party of science," I think everyone is bad at thinking critically about reality. Both "woke liberals" and "enraged conservatives" struggle to engage with nuanced facts.
But I don't think it's as simple as "people just need to believe science." Because "facts" are as nuanced as "beliefs." They all depend on the time and amount of information.
In September 2020, early during COVID lockdowns, Joe Rogan talked about the theory that the coronavirus was created in a lab. People were outraged by the unfounded conspiracy theory. In June 2021, Jon Stewart talked about the same theory on The Late Show, and people sort of chuckled and said, "ah... I'm not sure about that." Then, in February 2023, more official organizations started to acknowledge that there may be some credibility to the "coronavirus lab theory."
I realize a lot of these examples are political, and I'm not trying to articulate any position I have in either direction. Instead, what I'm trying to articulate is the immense nuance that exists between "facts" and "reality." What's more, the claim that we, as human beings, have fallen away from a society that respects science, and devolved into a society that only focuses on opinion, I think its unhistorical (is that a word?)
I always come back to this quote from Yuval Harari:
”There are no gods in the universe, no nations, no money, no human rights, no laws, and no justice outside the common imagination of human beings. Whether or not something is true doesn’t impact whether you believe it.”
The truth is, there's never been a time when humans defaulted to believing in "science," and "facts" because neither are stable things. Both the ascension and (possible) fall of mankind will likely all come down to story time. Instead, we’re defaulting to the very human drive to believe in stories. So instead of arguing about which story is true, we would do better to step back and understand the stories we tell. Because, whether you like it or not, the world runs on stories. Enter the meme economy.
Silicon Valley Bank: The Meme Heard Round The World
In case you've been living under a rock (or have a healthy separation from the world of Twitter, tech startups, and banking), the failure of Silicon Valley Bank is the latest in a long line of memes that shook the earth (at least the earth living in this particular bubble.)
I have no interest in explaining what happened with SVB, a lot of people have done that much more effectively than I can. Instead, what I keep coming back to was how intense an example this is of the meme economy. This is being called the first social-media induced bank run. Reality didn't necessarily matter as much as what a specific group of people decided to believe. Here's one explanation of the outcome:
"Some lay blame at the feet of the Federal Reserve’s aggressive interest rate hiking regime. Others say the bank failed to manage risk properly. Anonymous employees at the bank say the firm would have been fine had it not spooked depositors by publicly revealing its struggles.
They’re likely all a little bit right. While interest rates and risk management are mathematical explanations of how the bank got into hot water in the first place, what ultimately did in SVB was a bank run — a rush among depositors to withdraw their money. The phenomenon depends more on behavioral psychology than financial reality.
'A social contagion happens. It comes down to our herd mentality, our tribal brain,' says Brad Klontz, a certified financial planner and financial psychology professor at Creighton University. 'It’s like a mass delusion that becomes a reality. We create our own crises.'"
And where does that panic come from? Bad storytelling. Two tweets really personified this from me: (1) what was the story that the bank told and investors heard? And (2) what was the story that VCs and startup founders heard?
SVB's Storytelling
Most people agree that SVB's biggest mistake was their awful storytelling (other than… you know… being bad at bank stuff). In effect, SVB found themselves with a rough financial picture (low interest-yielding assets flowing in, high-interest rate liabilities flowing out). So what did they do?
"Hey everyone, don't worry about it at all. Not a big deal, but we do have to sell a chunk of our assets at a massive loss. Zero worries though, very hakuna matata. Btw, on an unrelated note we also have to raise $500M in the next few days. Zero stress."
The best explanation for this dynamic came from Lulu Cheng Meservey, the EVP of Corporate Affairs at Activision (helping them tell stories to hopefully get acquired by Microsoft), and previously at Substack, literally in the business of storytelling.
As people have been exposed to more and more stories, whether from the government, brands, employers, investors, co-workers, partners, friends, or celebrities, people have had to grow more discerning about the stories they believe.
I think this is one reason why, weirdly enough, the percentage of people who say they've had a problem with a product or service has doubled since 1976, and increasingly those wronged consumers are seeking "revenge."
Brands tell a story. If people buy into that story, they have expectations for that product or service. If that product or service doesn't deliver, they feel extra wrong because in a world crammed full of different narratives, they chose to believe the story that brand was telling. And when it didn't work out, they felt lied to.
When an organization starts telling a story that people don't believe, their radar is immediately triggered and they start to feel skeptical or anxious. And in a world powered by memes, anxiety will spread like wildfire.
VC's Storytelling
So on one side of the table, you have SVB telling a really crappy story that no one believes. What about the other side of the bank run (i.e. the runners.) Most agree that much of the panic came from some VCs telling their portfolio companies to pull their money out of SVB. You can debate the responsibility that those VCs have for causing a bank run, but that's another conversation.
The bigger question is, what story did these people believe? Evan Armstrong articulated the potential domino effect pretty well based on the information flows around tech folks and how it could very well have led to the SVB panic:
The Speed of the Internet
If we take a step back, we realize that these stories aren't necessarily new. Bank runs have history all the way back to the 1600's, so why is something nearly as old as banking all that noteworthy? Because the speed is unprecedented.
In a follow up post to Evan's tweet about the stories VCs were buying into, Evan Armstrong talks about this same idea of how incredible the speed of this whole thing happened:
"To me, the most remarkable part of this whole experience has been the speed at which it happened. It went from a small group of insiders sending emails to their portfolio companies to $45B in outflows in less than a day. The speed of the crash is something I didn’t know was possible for an institution that was regulated and of this size. We are looking at secrets being used at the speed of the internet."
And the speed was, in fact, unprecedented.
In one day, SVB had $42B of withdrawals. The largest bank run before that had 40% of that volume, and the run was spread across 10 days, not 1. What's more, in 2008 the technology distribution was much lower. Advances both in social media, and in digital banking, are dramatically higher.
ProfessorStam on Twitter has a great thread where they break down what they're terming "social media risk," as something that hasn't been on most banks radar but is very much a reality. Some key points from his thread:
Check out the whole thread, it's worth the read. The TLDR for me is remembering that, while the internet didn't create the meme economy, it has certainly accelerated it. Organization and individuals, big and small, can't afford to ignore the meme economy. Instead, they need to better understand it. And not just how to manipulate everyone (there's plenty of that going around), but to understand the nuance and implications of the meme economy.
Harnessing The Human Zeitgeist
For better, or for worse, the ability to capture the human zeitgeist is proving to be one of the most powerful business capabilities anyone can have. Many people simplify this idea as "the attention economy", but I think that misses the mark.
Thanks to some prompting from my friend Nikita Singareddy, I dug into the origin of the word "meme" a little more than I expected to. Here's some context from ChatGPT on its history as a word:
"The word 'meme' was coined by the evolutionary biologist Richard Dawkins in his 1976 book "The Selfish Gene." In the book, he introduced the concept of a "meme" as a unit of cultural transmission, similar to how genes transmit biological traits. Dawkins defined a meme as "an idea, behavior, or style that spreads from person to person within a culture." Since then, the term has become widely used in popular culture to refer to various viral trends, jokes, and internet phenomena.
The root of the word 'meme' comes from the Greek word "mimeme," which means "that which is imitated." Richard Dawkins chose the word "meme" as a neologism based on the similarity between the way cultural information is transmitted and the way genes are transmitted through reproduction. The idea is that just as genes are subject to natural selection, memes can also compete and evolve within a culture, with the most successful ones being the ones that spread the most widely. So, in essence, the root of the word "meme" reflects its original meaning as an element of cultural imitation and transmission."
Memes can be as simple as the most interesting man in the world, or Sad Keanu. But to assume that they're just funny internet weirdisms is to miss the most relevant and important cultural artifact we have in the age of the internet. Memes are the most effectively atomized forms of communication that we've come up with in a world of high-speed information transfer.
Memes are not only for communication (i.e. read only), they can also be mechanisms of execution (i.e. read and write). One of the best examples of this has been articulated by Walter Isaacson across a number of different biographies. Most famously, the term has been applied to explain the impact that Steve Jobs had on those he worked with:
“In Chapter Three of Steve Jobs, biographer Walter Isaacson states that around 1972, while Jobs was attending Reed College, Robert Friedland "taught Steve the reality distortion field." The RDF was said by Andy Hertzfeld to be Steve Jobs' ability to convince himself, and others around him, to believe almost anything with a mix of charm, charisma, bravado, hyperbole, marketing, appeasement and persistence. It was said to distort his co-workers' sense of proportion and scales of difficulties and to make them believe that whatever impossible task he had at hand was possible."
Isaacson elaborated this way:
"The reality distortion field was a confounding mélange of a charismatic rhetorical style, indomitable will, and eagerness to bend any fact to fit the purpose at hand."
Here again you have this conflict between narrative and reality. But, in many way, people who have successfully bent the facts to their own purposes, often have done it in favor of bending reality itself and changing the world around them. Visakan Veerasamy refers to this application of memeified reality distortion as "deviance."
"Once you have succeeded at some kind of deviant shit (e.g. distorting reality) your ontology is permanently corrupted. You can never again trust anyone else. In 2007, Elon Musk went to Russia to negotiate with some ex-generals to buy missiles to launch a rocket and try and land it again. And all his friends were like, 'Elon, this is a stupid idea.' And he was like, 'I'm gonna do it.' And he did it. I'm not saying these are [necessarily] good people. I'm saying think about what it feels like to have everyone in your life tell you that something can't be done, and then you do it."
What Does This Mean For Venture Capital?
I've written before about how Elon Musk often talks all the time about first principles. Here's how he describes it:
"It is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, like the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to."
This is how I commented on it:
"Before you can get into the problems that need to be solved you have to be confident that everyone is meeting your initial expectation. Once you're confident everyone is focused on finding the best ideas regardless of hierarchy (first principles) then you don't have to stop and evaluate every single decision that gets made.
But unfortunately, we can’t usually make that assumption. I don't think anyone approaches anything from first principles nearly as often as they should. Nuance is lost because people find themselves arguing on a branch of a branch of a branch on Elon’s tree of fundamentals. But the problem with waging war on the tiniest branch is you inevitably fall out of the tree.
In the world of venture capital and company building, I think one thing that we're going to have to deal with more is this evolution from cottage industry to the mainstream. People talk a lot about this dynamic in venture capital, but it's true of building tech companies writ large. We've entered the mainstream, and there is one important thing that changes dramatically when you go from niche to norm: everyone is paying attention to your story.
One of Packy McCormick's early pieces was called "Business Is The New Sports." In it, he shared an insight that has really stuck with me:
"We treat our favorite companies more like our favorite teams, and our favorite business leaders more like our favorite athletes -- with all of the passion, frustration, and booing that implies."
This is how I commented on it when I read the piece last year for the first time:
"The amount of consumer interest in business isn't just an interesting observation. It changes the way the "game" of business is played. Whether its how a valuation is determined (see "Meme Stocks") or how your marketing campaign just needs one meme-able moment and it’s nearly free. Companies have to adjust to the level of scrutiny and interest from the outside world. People become invested in the stories and then they become invested in how the game is played.”
The world of company building, and all the participants involved, need to wake up and acknowledge that their inclusion in the broader human narrative is much more apparent. The memes are not just coming from internally, they're coming externally. And that narrative can shape the reality of how the future of technology comes together, for better or for worse.
What I'm Reading
Well, as you can see I'm already terrible at this, missing my goal after the first week. It is, however, indicative of why I can't give up. I didn't get to read a lot for fun last week, so nothing made it into my post. Once again this week, I've found very little time to do reading outside work and my specific writing for the week. But I'm going to stick with it. Here's a few pieces I really enjoyed working in this week.
Planning for AGI and beyond by Sam Altman at OpenAI
The Enchanted Notebook by Packy McCormick
Peter Thiel's Religion by David Perell
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Andrey Mir recently wrote a piece at Discourse that you might like. The 2nd half where he talks about the shift in communication from literacy to “digital orality” is very interesting and hints as to why, although humans remain story-focused, our ability to parse them may be degrading.
https://www.discoursemagazine.com/culture-and-society/2023/03/16/malinformation-and-the-wrong-truth/
you have a great story here! congrats