The Old is Dying

A conversation with Li Jin on the Web3 cooldown and contemplating the way forward for the Creator Economy

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Today we bring you an honest conversation between Li Jin and Anna Dorothea Ker on the Web3 cooldown and the way forward for the Creator Economy

Li Jin is a Co-Founder and General Partner at Variant, and led the firm's investments in Lens, Sound.xyz, Magic Eden, Shibuya and others. Prior to Variant, Li was founder at Atelier, a VC firm investing in the Creator Economy and future of work, and a consumer investor partner at Andreessen Horowitz.

Anna is a writer and editor at Narrative Agency.

Enjoy :)

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The Old is Dying

Anna-Dorothea Ker interviews Li Jin.

At the dawn of the decade, Web3 – the blockchain-based, crypto-powered next iteration of the internet – was heralded as the panacea to the failings of Web2, replacing busting open the old guard of gate-kept platforms, redistributing value based on merit and empowering an altogether more equitable internet. Instead of being the product of Web2’s attention economy, we’d benefit from the product of our labor under Web3’s Creator Economy.

Then in 2022, a perfect storm of political, economic and cultural dynamics caused temperatures to plunge on crypto, freezing over the outlook on Web3’s potential. From a vantage point of cautious optimism, Variant Co-Founder and General Partner Li Jin – who the New York Times called the “investor guru for creators” – revisits her 2021 co-authored thesis on “The Web3 Renaissance: A Golden Age for Content” to take stock of the internet’s growing pains, retracing disproven assumptions and contributing factors to reflect on where we go from here.

ADK —
Web2’s “original sin”, as you quote from Marc Andreessen, was its lack of payment infrastructure, which caused the internet to be largely monetized through advertising that captured users’ attention, not their dollars – creating the “attention economy”. In Web2’s later years, however, we’ve seen platforms leveraging the advertising economy towards creator monetization – e.g. Patreon, OnlyFans, Substack, X (formerly known as Twitter) creator payouts. To what extent does this shift signal a redemption?

LJ —
The Creator Economy as a whole has gone through lots of ups and downs – from being a category that was extremely hyped to now experiencing this trough of disillusionment. My retrospective on it is not necessarily that the start-up builders targeting it were misguided, or that we were irrationally exuberant about it as a whole. We can undoubtedly say that creators continue to proliferate, they continue to exercise an outsized influence on culture and on media. But the sad reality is that a lot of the start-ups and funding into that sector were targeted at the existence of a middle class of creators, and to date, the middle class just does not exist in the Creator Economy. 

You can even broaden that statement to say that the middle class does not exist as a whole in the US economy, but honing in on the Creator Economy, it's just the fact of the matter that creators on the internet follow this power law distribution.

Any start-up that is trying to support the middle class in terms of offering monetization tools or SAAS tools to help them do their jobs better faces a very low ceiling in terms of their potential market, because there aren’t that many creators who have the potential to make a full-time living online or who have the disposable income to be able to spend on technology and tools. 

There's been a lot of coverage about how the Creator Economy was overblown or the Creator Economy is dead. I think that's missing the point. The Creator Economy exists, but its middle class does not, and I think that's a huge loss to all of us. 

Part of the reason why I was initially drawn to web3 is because of the new business models it offered and its new ability to introduce digital scarcity. The leap from there is that if you could reintroduce digital scarcity, if you could introduce new, almost programmable, monetization models, then the options for creators expands and there could be a middle class of creators that benefits by taking advantage of those tools for the first time ever. 

My retrospective on the [Web3 Renaissance] now is that we've seen that happen at a small scale. We've seen the playbook being implemented by a small number of very early-adopter, pioneering creators. There are definitely creators who have followed all of the things I've outlined to a tee and have seen success, but it’s still really early in terms of this being a well-trod path.

ADK —
What’s accounting for these trajectories? Put another way, what are the barriers between our current moment and a flourishing Creator Economy?

LJ —
I used to be much more of a technological determinist, where I believed that the course of history would play out according to what was technologically possible, and that technology shapes our world in a strong way. I've come to appreciate that culture actually plays such a large role in shaping our world. The ways in which people decide to use technology – what they decide to build and whether or not they decide to adopt it – is a result of culture. 

So the major impediment to this vision of the Web3 creator economy renaissance that I laid out is all of the cultural atmospherics around Web3 that have plagued the space since the last bull run, where there has been a lot of negativity among creators, among users surrounding crypto and NFTs. 

There have been a number of disappointing events that have happened in Web3, ranging from your run-of-the-mill kind of project that rocks its holders all the way up to major implosions like FTX. All of those events in totality create this trust or goodwill debt that we have to repay. 

It's almost like a hole that we have to dig ourselves out of before we can kind of be on a baseline level and competitive with other Web2 offerings out there. That impedes a lot of artists and creators from being willing to give it a shot. I think there's a lot of cultural baggage associated with crypto. Culture sits upstream of technology, and can't be separated from how it gets adopted.

ADK —
Circling back to the disappearance of the middle class in the digital creative context – this seems  like something that's larger than both culture and tools, but affects them both. To what extent is this shift a symptom of our current political and economic moment?

LJ —
People have said, Maybe the Creator Economy is just not meant to have a middle class. Maybe it's a type of activity that is meant to be extremely rare to achieve success in, and not everyone should be a creator. I find it rather dark and discouraging to assume that that has to be the case. 

Pre-digital platforms, pre-industrialization, we had a world where many more artisans and craftspeople existed. The absence of mass distribution mechanisms kept anyone from attaining superstar status and enabled a broader distribution of success.

I think you could say that maybe people always wanted to consume content from a select number of individuals and now it's just newly possible to actually do that because of the internet. But we haven't tried it any other way. We haven't actually attempted to build algorithms that favor lesser-known creators. 

First of all, we exist in a world in which we're basically using three major dominant social platforms. And those dominant social platforms have built discovery algorithms that are heavily skewed towards showing you what other people like, what your friends like, what's going viral. They privilege pre-existing success and followership. We haven't really tried anything else. 

So to just say that the Creator Economy middle class can't exist seems rather fatalistic, because it's very much an output of the way that discovery platforms have been designed. Discovery platforms, I should say, sit upstream of the Creator Economy, because they determine who sees what, what content we consume, what we're even exposed to, what we like – so when we're talking about the distribution of creator success, it very much flows from the decisions that these platforms make. 

ADK —
Where do you see the greatest promise in moving towards Web 3's principles of decentralization and equitable distribution", either in terms of specific projects or trajectories?

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