In this video, we will explore the concept of antifragility and how it applies to the video games industry and more importantly how it can help in shaping the future of video games. But first, what is Antifragility? Before answering that we would like to remind you to subscribe if you want to stay updated with our newest videos.
Back to Antifragility. There are things that benefit from shocks; they flourish and expand when exposed to volatility, randomness, chaos, and stressors. These things are called antifragile. The term antifragile is coined by the American Lebanese author Nassim Nicholas Taleb, in his book by the same name. Think of it as the exact opposite of fragile. Now, most of you would say that the opposite of fragile is robust, resilient, and strong but just like minus is the opposite of plus and not zero; Concave is the opposite of the convex and not flat; Antifragility is the opposite of fragility and not robust. If a fragile object must be kept away from randomness and stressors, by definition the exact opposite of that should be an object that wants stressors and randomness, so antifragility goes one step beyond robustness.
To use an analogy to explain the phenomena, think of Hydra, a nine-headed serpent-like monster. It was said that if you cut off one of Hydra’s heads, two more would grow back. Hydra invites stressors and thrives in them. In the real world think of our muscles and the phenomena of overcompensation when we train. At a cellular level we destroy our muscular cells and put them under stress but through that our body overcompensates for the loss and makes our muscles grow stronger. Our muscles, just like Hydra, are antifragile: they thrive under stress.
Now it’s important to distinguish between a system and the subunits of that system. Our muscular system is antifragile and increases through stress, while the subunit of that system, the cells, are fragile and die under stress. The same thing applies to our economies, the fragility of every startup is necessary for the economy to be antifragile. Restaurants are fragile as they compete with each other, but the collective industry is antifragile. Imagine, if each individual restaurant was strong and stable, then the industry as a whole would stagnate and weaken.
So maybe it’s important for the Part to be fragile in order for the system to be antifragile. Nature has an efficient and simple way to create antifragile systems: trial and error. It creates multiple bodies with a limited lifespan. Each time one of these bodies faces its end it transfers information to the next generation in the form of genes, whether the genes are good or bad. Through this method, the gene pool as a whole becomes stronger. So, there is no need for mother nature and the gene pool to prepare for the worst-case scenario. Let it come and the system will adapt. Every airplane crash makes airplanes in general safer. We learn each time from our mistakes and keep on improving them as a result of what we learn from the crashes. Black Boxes work as the gene code that moves on to the next generations of airplanes which makes the system, in general, antifragile by benefiting from the stress that affects individual subunits.
While I was reading Taleb’s book on antifragility, I was thinking of video games as a perfect example to demonstrate the antifragility concept in industries. The video game industry as a whole is antifragile but the same cannot be said about individual companies. THQ, Midway, Atari, 3DO, Westwood Studios, and very recently Telltale Games are the fragile subunits that pay the price in order for the industry to be antifragile. Every year we hear about a studio closure, a Publisher who goes bust, layoffs, and canceled projects but the video games market has never been bigger. Consumers spend more money on games than ever before. People are playing on the trains, on planes, on beaches and even in bed.
We see many developers who start new projects with the hope of selling them later on in the app store, PlayStation store, or on google play. While their courage and risk-taking are among the best things that have ever happened to our industry, I’m afraid that some are mistaking the antifragility of the industry as a whole for the fragility of the subunit.
I want to shift the focus now from antifragility at an industry level to antifragility at a developer level. There is one Game developer in particular that I want to highlight as antifragile: it’s Sony Interactive Entertainment. I have a lot of respect for their approach of investing in multiple smaller risks and when some of these projects go south, the system as a whole becomes more antifragile. Shuhei Yoshida, the President of Sony’s Worldwide Studios, mentioned during his panel at Gamelab in Barcelona that only four out of every 10 projects they do are profitable, but these profitable projects make enough to cover all the losses of the other projects.
It’s this approach that helps them to discover ideas that prove to be excellent and it’s only through this method games like Uncharted, The Last of Us, Horizon, Heavy Rain, and The Amazing Spiderman were created. By having multiple smaller risks, the company works exactly like muscle cells. They might die at an individual level, but they make the system as a whole stronger. Let’s not forget that only a decade ago Sony had none of the big games franchises it has now. Sony is using the same approach as nature of trial and error. I think every studio owned by Sony should put a sign on their doors that says: “What kills me makes the others stronger”. Now some of you may think that I’m calling for blind risk-taking. No, I’m only calling for the fragmentation of risk and creating antifragility where possible. Let the risk be embraced but only at the subunit level.
Of course, some studios owned by Sony went out of business and closed. like Evolution Studios, Incognito, Zipper interactive, and Game republic but this is the price fragile units pay in order for the whole organization to be antifragile. Their contributions are not worthless, and their demise, like airplane crashes, helped the system to learn and to become more antifragile. Sony Santa Monica’s masterpiece “God of War” came after a canceled space game project and staff layoffs: That is Antifragility in action. Remember: What kills me makes the others stronger.
On the other hand, look at what looks like a big, stable, and strong gaming company: Activision Blizzard. It has a market cap of 59 Billion but it’s the last company I would describe as antifragile. It only invests in franchises that are already established and rarely takes risks with individual games.
That’s the opposite of antifragility. The individual subunits are strong and robust. From Call of Duty, World of Warcraft to Diablo, all are established names. But at an organization level, they might not be able to adapt to any unforeseen paradigm shift in the industry. Just like Nokia, who in less than a decade lost its market share of 49% and went to zero. Or Kodak, who owned the whole imaging industry but, unlike Hydra, when one of its heads was cut off nothing grew back. The examples are abundant: Blockbuster, Yahoo, Blackberry Motion, Myspace, Atari, and many others who all have one thing in common: The lack of antifragility. Fragment the risk across multiple smaller subunits and let the system thrive in the face of unforeseen changes. It will adapt and evolve and with the right dose of antifragility, it might even end up thriving and shaping the course of an industry.
No wonder it’s smaller studios who experimented and succeeded with the battle royal system and not the big dinosaur publishers. Epic decided to take a small controlled risk by changing its Fortnite game into a free to play the game with the battle royal formula. The rest is history ….and antifragility.
Jeff Bezos of Amazon is using the same Principles with his company. They run multiple projects in all directions and they only need a couple of them to become successful. No one is pointing at their failure in establishing a good mobile phone as evidence of the failure of the company as a whole. The fragility of the subunits in Amazon is actually their strength.
On the other hand, Activision is a static company in a dynamic industry. It might be the leader today but what about tomorrow? Will it even exist? In his book Adapt, Tim Harford mentions that many scholars and businessmen want to understand why some, apparently capable, companies find themselves wiped out by a sudden shift in the competitive landscape.
The group led by Clayton Christensen from Harvard concluded that it isn’t cutting-edge technology that tends to destroy market leaders. It is stubbornness in sticking with old big customers and the fear of losing them if alternative solutions are adopted that might not represent a lot of value to the current best customers. In the late 70s, leading disk-drive manufacturers were making their products better and better for their main customer base of large corporations and banks with room-sized computers. To these customers, a new generation of physically smaller drives – with much less storage – was of no interest. But these new drives touched a new market for desk-size computers.
Eventually, the smaller drives became more advanced, provided bigger capacities and even the mainstream customers began to buy them. By that stage, the established manufacturers were desperately far behind. Only a few years ago no one was talking about or predicting the rise and dominance of Battle Royale multiplayer online games. It transformed Fortnite from a game with close to a million players into a phenomenon with hundreds of millions of players. Activision and Electronic Arts are like the older disk-drive manufacturers, trying to catch up with the shift in the market but it’s the antifragility of the system that could’ve made it easier for them to adapt and take multiple risks at the subunit level.
Activision might dodge a bullet this time by trying to implement the battle royal system in their call of duty game but how long will Activision survive if multiple paradigm shifts hit the industry? One thing for sure, it’s going to be a long time before we rely less on predicting and embrace antifragility as the tool to navigate the future. I think it’s going to be a long, long time…
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