00:00:35 How Matthew got started in the video game industry?
00:03:58 How the video game industry has evolved since Matthew started?
00:15:43 How video game studios elect plans for a new game?
00:21:06 How much revenue is there in video games really? Is the demographics of users changing?
00:30:23 Given the addictive potential of video games – should we emphasize the skills users learn from video games more?
00:53:49 Will we live in an ‘all simulated’ world? Is that a good or bad thing?

Matthew Karch is the CEO and co-founder of Saber Interactive (now part of Embracer).

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Torsten Jacobi: Hey, your claim to fame is you started Saber Interactive, one of the bigger video games studios out there. And you guys also worked on the yellow franchise. A lot of people know that. Maybe you can tell us a little bit how you got into the industry in the first place. I research and I know you studied law. How did you get started with a video game production company?

Mathew Karch: I would say it was more happenstance than anything else. I was practicing law after I graduated from Penn, University of Pennsylvania. And I got to remember when that was now. I think it was all the way back in, God, I was 90 dating myself, 96. And I went and I didn’t want to practice for a large law firm. So I kind of went and I hung my own shingle. And I worked primarily with Russian speaking clients. I learned Russian when I was in college. And I thought it would be cool to use my language skills, which to me, always seem more fascinating than the practice of law. And so I started a small, call it a boutique firm, call it what you want to call it. I didn’t know what I was doing. I just knew that I needed to do something to support myself. So I started a small practice, not far from Coney Island or Brighton Beach, which is where all the Russian community was. And I think a lot of them still are to this day. And I practiced for, I don’t know, it was maybe no more than a year and a half, before a client came into my office and introduced himself. As someone who just moved to the country, who was looking for some assistance or some guidance on some immigration questions, and was in the video game space and had a PhD in computational geometry and applied math, had written his own game engine, which is basically a piece of software that enables for the development of and the rendering of video games. And we became fast friends. I said, I like what you’re doing better than what I’m doing. And I kind of quit my day job and went to Borders Books and Barnes & Noble, bought a bunch of books on game design and started a company with my partner, who was from St. Petersburg in Russia. And from there, we went and hired some of his old partners or, I guess, some old employees that he had worked with when he was living in Russia. And we created a small game called Will Rock, which was a little first person shooter game where you fight mythological creatures. And we were kind of copying a game that was popular at the time called Serious Sam. But the game looked great because we had really good engineers and some really good artists that we had hired. And Ubisoft, which is a large publicly traded video game company based out of Paris, liked it and ended up giving us a shot. So they signed up the game. And we ended up selling a decent number of copies of it and it led to our next project, which ultimately led to bigger and better things. So by the time all was said and done, we had multiple products under development and we were making a significant number of games. And it’s been 20 years. So it’s been a while since then, for sure.

Torsten Jacobi: It sounds fascinating. And most entrepreneurial journeys, seemingly today, are you try to break into a world that’s full of competition. There’s so much already out there. And there’s literally on the marketing side, it seems to be the most saturated. When I talk to people here in the valley, it’s rare that you break into and something that’s completely open ground where there’s not a lot of people working on that similar project already. But video games is one of those things a lot of entrepreneurs wouldn’t touch, right? Because it is the problem that you have to, that the capital investment at least now seems to be huge. And then you need to have some decent distribution.

Mathew Karch: Well, yes and no. I mean, I would say certainly when I got into games, it was a lot more expensive, in some respects, to break in than it is now. I mean, while games have continued to evolve, and if you want to create a really AAA high end experience, you are going to have to spend considerable sums of money to make it. The barrier of entry is actually, in some respects, gone down. And let me explain why. When I started, there was no such thing as digital distribution in video games. And so you needed to have a significant amount of capital to actually get your games to market. And so the expensive part of making a game was having the disks printed and having the distribution networks to get it into Target and Walmart and Costco and GameStop and Best Buy or wherever. And a bunch of other retail establishments which no longer exist. And so the lion’s share of development was not about the development, rather, but about the distribution angle. And games themselves, I wouldn’t say they were cheap to make, but they were significantly cheaper. And the reason for that is because when a computer can’t render high definition artwork, you can cheapen out and use low definition artwork, which makes it low resolution artwork, which makes it cheaper to make a game, right? So that’s why many mobile games cost less, for example, than a premium console with high NPC games, because at least on the development side, because it doesn’t require quite the same A skill set or B high end artwork to display on the screen to make the game actually look good and to make itself. So over time, what’s happened is retail has become less and less important, which meant that you no longer need those significant investments in retail and to buy, you know, X million numbers of copies of a game and bring it to market and take the risk that you’re never going to be able to sell them. Because now digital distribution has enabled you to basically sell a game in real time and just to pay a small portion on average 30% of the moment to the platform holder. But the games themselves have become much more expensive to create. So and the reason for that is primarily because we’re approaching an ever increasing, you know, demand for, you know, for realism, because our the latest round of consoles and PCs will support a higher degree of realism and people expected, you know, but having said that, it’s not, you know, graphics are not the end all be all the video games. And and there are a lot of games that come out that that aren’t graphically beautiful that that didn’t cost, you know, $200 million to make or $100 million to make or whatever that might be, that look great and play great. We have a game called Valheim, which is not not part of my my division of embracer. So I’m the CEO of Sabre. Sabre was acquired by an embracer group in Stockholm. And Stockholm has multiple game development companies. And one of them is a company called Coffee Stain, which is publishing this game Valheim, which has sold over 7 million copies in the last couple of months. That game is really nice. But budget was for development was low. It was very low. And visually, it’s fine. I mean, but really, it’s not about the visuals in that case, it’s about the gameplay. And so it’s not always the case that the visuals are the most important thing. But if you are Activision or EA, and you are trying to position yourself as a developer, a publisher of AAA product, you can’t help but fight that fight. But when you are when you’re a company like mine, or many of the companies within my parent company and bracer, you can focus more on the mid cap type of experience where you can really focus on gameplay and mechanics and what gamers like over graphics. That doesn’t mean that we don’t put our games that are nice graphically, but it also means that you don’t necessarily need to do that. But having said that, I mean, there are other reasons that game development costs have gone down. And one of them is because of the availability of really solid engines, game engines, which enable for the rapid creation of games that wasn’t really possible years ago. So for example, Epic, one of my favorite companies actually that we work very closely with has the Unreal Engine. And Unreal makes it really easy to develop games, not that not that it makes it cheap, you still need to develop behind artwork. But to get a game up and running with Unreal is a lot easier than not having a third party engine that you have your disposal. Same thing with Unity. It’s another solid engine, better, I would say, for mobile product. Whereas Unreal was better for console and PC premium types of products. But so generally speaking, you can make games that are inexpensive. And there are a lot of developers out there that are trying to make games. But when you think of games, normally you’re thinking of the calls of duty or call of duties and the halos of the world, which are expensive to make. But we do games like that, but we try to create games that are across the spectrum and that appeal to audiences who aren’t as concerned with graphics. And where we can actually produce a game for five, six, seven million dollars or less in some cases, and in some cases more and make a big return on it. So I think one of the reasons to answer your question as fully as I possibly can, go ahead.

Torsten Jacobi: Yes, yes. I’m always fascinated by the movie industry. And one thing that I think is often not taken seriously is the writing, the dialogue, the screenplay, because it isn’t as important. So the graphics have gotten more important, the distribution has gotten more important, and it seems to be made for an audience that doesn’t pay a lot of attention. It has other things going on, but wants like a basic narrative to play out over and over again. And that’s what the movie industry responded to, it seems. But still, it seems when I see how it’s made, there’s so much effort involved. There’s so many people behind the cameras that make that actually work, and there’s still the editing going on. So it’s a monumental effort, it seems, in terms of coordination as project management. And then it still costs, what, 50 million dollars or 100 million dollars. And I don’t have enough, I don’t know anything about how to make an actual game. How many people, you said just five million dollars, how many people are actually involved, and how long does it take? Is it a six month effort, 50 people, and a few designers, a few coders? How do I imagine making an actual game from scratch?

Mathew Karch: So look, five million would certainly be on the low end. I would say the average game is considerably more than that, but there are very small games that people enjoy, people enjoy, that can be done for even less than five million, right? And then there’s games that are triple A. When I say triple A, triple A usually means, I don’t even necessarily think triple A means quality anymore. I think triple A just means how big of a production the game was, right? You could have movies that cost 200 million dollars to make that a garbage, and you can have games that are 200 million dollars to make that a garbage. And you can have games that cost a million to make, or an indie movie that costs a small amount of money to make, and they can be great. But generally speaking, games require a significant or relatively significant staff to create a compelling experience. You need engineers, obviously, meaning software engineers who understand the code. If you have multiplayer components to your game, you need to have multiplayer engineers to create basically or help to craft the online experience on the technical side. You need game designers. These are the people that actually think up the levels of the games and think up the actual gameplay loops. You need level designers. These are the people that work closely with the game designers to create levels which illustrate exactly what the designer has in his mind, right, or her mind. And then you need artists. You need artists who can create the environments. You need artists who can create the individual characters. And then you need animators. These are people who actually take these characters and bring them to life. You need AI programmers which take these characters and actually make them seem intelligent. You need, I don’t want to offend anybody by missing them, you need texture artists who are basically the artists that paint the models in the environments. And then you have special effects artists and sound engineers and musicians and voiceover actors and motion capture, you know, actors. And then you need producers who are responsible for making sure that all of this happens. And then you need guys like me who are on the business side who can make sure the game could actually get the market and be sold. And then you need quality assurance. You need the QA teams who can actually play the games and make sure that they’re free of bugs and not something that you’re going to annoy people more than it’s going to entertain them. So I mean, and so just by mentioning each of those, some people wear multiple hats. There are teams where there’s five, six, seven people who are artists and engineers or designers and artists. But generally speaking, you know, the game developed is becoming more and more specialized like anything else. And so if you want to create a great experience with amazing animations, you really want somebody who just animates, right? If you want some beautiful artwork, you want to have somebody who’s done it many times before. And so it’s a production. I mean, is it as big of a production as films? Generally speaking, not. I mean, sometimes it is. Obviously, you’ve heard of games with huge budgets. But really, it’s a more confined experience, I would say. And there’s also just, as a side note, it’s a very international experience, right? Games are made in Croatia and Italy and China and Russia just as they are in California or New York or Austin or anywhere else. And obviously, it’s less expensive in certain territories than others. And there really is no union for games or something like there is in the film space. So you don’t have to necessarily worry not that, you know, not that we don’t take care of our people. But, you know, unions generally make things more expensive. And we don’t have that as a something else that we need to deal with currently. If you ask me whether or not I’m opposed to unionizing game developers, I’m fine with it. If they feel their interests need to be protected that way, we try to do as best as we can to make sure that our team is happy. And we feel that a healthy competition is probably the best way to keep your employees happy. And we’ve really made that one of our focal points at our company.

Torsten Jacobi: When you think about a new title, how does this decision process work? It’s people pitching your ideas. I would think of a Hollywood comparison is pitching your scripts and pitching your ideas. And then you eventually let it brew a little bit and you get closer to that decision point. Or is it you really incubate those ideas, your head on budgets and people have some time to play with this until it’s a full blown demo, you can actually make a decision over.

Mathew Karch: You know, in every company, it’s different in Sabre. Generally speaking, for the first 20 years or so of our history, I would say, shouldn’t say 20, because we’ve only been around that for 20. So probably the first 18 years, usually I would be the one coming up with the concept that would say, hey, I think we should run with something like this. So let’s go get a license for it. So in our case, for example, we released a game called World War Z, which was based off of the Brad Pitt movie that was written by Max. The book was written by Max Brooks. There was a very, very popular game called Let For Dead that people loved. It was a four person cooperative game where you battled zombies. And it sold extraordinarily well. But there was no competition for it. And there was no one didn’t seem like there was any intention by Valve, who was the creator and publisher of the game, to come out with another version of it in the future. And so I said, hey, I think there’s a market opportunity here for a four person co op zombie shooter. And we can either go out and we can find our own license and may create our own license, you know, zombie world and open and spend a lot of money on marketing and see if it works. Or we can go to the marketplace and see if there’s any licenses that we think would fit what we want to do. And it just so turned out that World War Z was available. There was some initial skepticism about the film before it came out and we actually did really, really well. And so as an independent developer, we had an opportunity to grab the license at a reasonable for a reasonable amount of money. And we created a game which was in some respects similar to Left 4 Dead. And the game just, you know, did exceedingly well. Another example is I I have a I have a friend who lives in the New York area who is an executive at the NBA. And I happened to have been at his wife’s birthday party. I was and a member of a dad band. I play guitar. And after the party, maybe I had a drink or two more than I should have. I came up to him and I said, you know, I really want to make an NBA basketball game. And he goes, sure, come into the office, we’ll try to figure out if we can get you a license if you have the right pitch. I didn’t have any pitch. I didn’t have any idea what I wanted to do. But I went into the office and I thought about it on the way. And I’m like, you know, there hasn’t been an NBA Jam game in a long time. And so when I went in there and they showed interest in working on a new game, I pitched them a game called NBA Playgrounds, which was basically like an arcade style NBA game. And we we ended up making that game and doing extremely well with it. And it was basically just because of a chance back, you know, backyard party that I had at at an NBA executive’s house. So in our case, you know, the games have basically been cultivated either by by me or by members of our team with specific ideas and, you know, an experimentation on gameplay mechanics or looking for market opportunities where we thought they existed. But for many, it’s, you know, it’s there’s a pitch process, right. And so when we started out in the in the game space, we would come up with the concepts, we would pitch them to publishers and the publishers that they liked them would sign them up and then they would, you know, give us a royalty and pay us the development fee to make the games. We ended up almost never seeing royalty because it are counting. But that was that was really when when we were on the pitching side and not on the side where we were being pitched. Now that we’ve been acquired and we have substantial resources at our disposal to fund third party development, we’re starting to look at some pitches. We’re starting to do a little bit more of that because there are independent developers with fantastic ideas that don’t have the resources to get those game ideas done. And I would say Saber and Embracer generally is probably better positioned and more interested in finding these teams and these products than almost anybody else in the industry. I hadn’t sold a game to a top five AAA publicly traded game company in a decade. And the reason was because they’re just not interested in anything other than massive, massive, massive titles, which is why you’re seeing games like Valheim come out of Embracer or Fortnite come out of Epic. Because a lot of that risk is taken in that kind of mid market space. And the biggest players don’t aren’t interested in those risks. They’re really just interested in creating a product that they know is already going to sell because they’ve released five or six or seven previous versions of it.

Torsten Jacobi: Kind of sounds like Hollywood. Yeah. Well, we have these big movie franchises that seem to be going on forever. Everyone kind of is bored to death by them, but they still sell well because the stars are in it, right? And in between we have the indie productions that are often you can see it’s too low budget. It’s not as enjoyable for what we are used to at least. And in between this is where the innovation sometimes happens or maybe often happens. Can you give us an idea of the market size that video games have become? It seems like there’s billions, the amount of billions grows by the year. And maybe also what the audience is typically like because we all think this is typically 99% male dominated.

Mathew Karch: So the stats are interesting and I’m looking at them all the time. And frankly, I have to go back and look and see what the actual numbers are right now. But it is in the tens of billions of dollars. I just don’t know the exact number. But the demographics are an interesting conversation because if you ask somebody, oh, what is a game again? What are game revenues? I do remember it’s about 60% mobile and 40% PC and console. But what does that mean 60% mobile? I don’t really know what that means, right? Because when you’re thinking about gamers, you’re not thinking about mobile gamers. Probably you’re thinking about people sitting at their computer, sitting at their console, their Xbox or PlayStation or their Switch and playing games. So is playing Blackjack on your phone? Are you a gamer? Yes, you are. You are a gamer, right? And certainly there’s a vast, I mean, the 60% really comes from, I think, the revenues that are generated. But I don’t think that necessarily speaks to margins, right? I mean, I think that mobile games, generally, they’re cheaper to make, generally, but the costs of user acquisitions are exceedingly high and most mobile games fail. And so I don’t really have a really good grasp. We have divisions within our company that do mobile that can speak much more intelligently on this topic. Our focus has always been on the PC console space. And so really, I can only speak to that space with any degree of intelligence. And in that space, I can tell you, it is male dominated. And it skews younger, but younger is, you know, a relative term now, right? Because I’m going to be 50 years old in October. And I played games when I was a kid, right? I mean, I played in television and Coleego Vision and Atari. And so, and I still play, I don’t play as much as I used to, to be perfectly honest, I don’t know if I’m supposed to say that, but, you know, I, but that’s really been the audience. And that’s the audience that that games are created for. And so I think the reason that, and I believe this to be true, that games are typically a male dominated space are because most of the developers are male and our company, you know, we’re making a very, very active effort to find, to find female, you know, developers, and to recruit female developers. And we’re having a lot of success doing that, but it’s been a challenge. And but the more female developers we have, the more games we’ll be able to make that are actually, you know, that appeal to the female demographic. So what I think happens is you have young males making games, and they’re making games for themselves. And so that’s the reason I think we’re kind of stuck a little bit in this cycle, so to speak, because, because it’s just because of the reasons that I stated, I think it’s just, you know, that that’s that’s the way this industry has basically progressed. And I think, you know, I don’t really, I can’t really explain to you why that’s the case, why, you know, but, but if you look at, if you look at it, it’s mostly shooting games and that are popular in the console and PC space and, and sports games. And those are typically, you know, things that are geared towards male players. But I think that’s going to change. And I hope it’s going to change because there’s a huge market out there that we are not exploring. And just like, you know, China opened up for video games, and all of a sudden there was billions and billions of dollars of potential revenue out there. I think if we start to produce games for, for segments of, of, you know, of the populace that are that are underrepresented or that aren’t being developed, or I think we’re, we’re going to just continue to expand on our market. And generally speaking, the market is growing year to year. I mean, certainly quarantine and staying at home accelerated the number of players that are playing video games. But I, you know, I think that number is not, is not, you know, moving in reverse right now. I think we’ve basically accelerated our growth relative to Hollywood. And I think that, you know, people, younger people specifically are more interested in playing games and going to movie theaters. And so I think that it’s just been a natural progression. I remember when we started this business, we were kind of like, you know, the ugly stepchild, nobody wanted us anywhere near, you know, oh, you make video games, we don’t care about that, we care about Hollywood. And I would say we’re now finding that Hollywood is courting us in a way which is, it’s, I don’t know if I’d call it sweet revenge, but it’s kind of cool. So I don’t know if I really answered your question, or if I went on off on a tangent there, but I wanted to give you a little bit of perspective from, from, from where I sit.

Torsten Jacobi: I think both are very interesting, fascinating to me. And I see the, the, this, this gender divide, so to speak, in the video game industry, I found it interesting that, you know, I have two children, I have a daughter and a son, both were interested in more or less the same thing when they were younger. And now my son plays a lot of video games and my daughter would never touch them. She’s zero interested in it. And she plays it once. She’s like, okay, why would I ever do this? It makes no sense for my son. It’s very addictive. So this wasn’t for myself, right? So there seems to be something going on in puberty that men seem to be, boys seem to be very curious about the world out there. They assimilate the world out there. They want to see how the world works. Even if it’s a simulated world, it doesn’t have to be a real one. You don’t want to be killed by some animals, but you want to, more increasingly more difficult games that you want to play. And that seems to be very much of interest in the times of games that we have. So I, I, I agree with you. It might not stay that way. It might change completely. But so far the games, the simulated realities we created, they seem to be in that sense would be, would be resemble in video games, where there’s action involved and there is usually death involved or some kind of danger involved. And we have to like become a hero for a moment, right? That seems to be really appealing to boys for girls. Not so much. It’s a, it’s a, it happens, but it’s relatively rare. There might be an equivalent as a girl video game too. I don’t know if this happen will ever happen.

Mathew Karch: Look, I, I agree with you. I have, I have a son and I have two daughters and my daughters don’t play and my son plays all the time. I mean, he sits up until two or three in the morning playing with his buddies, you know, on his headphone and we hear him and we got to tell him to keep us, to keep it down because we want to sleep, you know, uh.

Torsten Jacobi: I know the feeling, I know the feeling. It’s very, pretty programmed, right? We think we are in control of our minds, not as a kid, maybe less, but you know, as an, as an, as an adolescent, we think we’re in control of our actions. We’re totally not. We are influenced by something that produces 99% of our daily occupation, what we actually do that we’ve never put into our minds. Yes. Not consciously.

Mathew Karch: Absolutely. But look, I think there’s a lot of this goes back to the point that I had made earlier, which is I think our industry needs to do a better job of courting women to create games. I think women would, would, would are, are much better candidates to create games that would appeal to women than men are, right? Uh, you know, uh, I, I still struggle to understand my daughters, right? So maybe, maybe, I don’t know. Think about the chefs, right? So all this, you would think typically the role of men earlier in, in, in, in the human society was to provide food to cook, right? That’s also, that’s very common. But when you look at the chefs that are famous celebrity chefs, they’re all male. So they seem to understand cooking better. I don’t know what’s going on there, or maybe they have just better marketing. You know, uh, it’s a deep conversation for us to have. I know, I know, there’s no easy answers. Look, we have, we have, uh, very, very talented women that work in our company. Um, you know, actually not many are on the design side. And I think that may be the reason that our, that our games are skewed more male. Um, but I, um, I look at, you know, I think obviously the society, our society generally has been male dominated. Um, uh, and, um, I think we’re ignoring a huge segment of the market by not, you know, trying to, to, to figure out why, why it is that my, that our sons will play video games and our daughters won’t, right? Because everyone likes to be entertained. We’re just probably not providing the right entertainment, uh, you know, uh, for, for particular audiences. So I mean, obviously that’s the generalization, but I, I, I think, I think that it just makes sense to me.

Torsten Jacobi: Well, I think it’s, it speaks to this wider debate. When, um, when we are very concerned about the addictive qualities of video games, I, I felt that myself when I was really into video games, it was very difficult for me to stop it. And it really dominated my life for a couple of years. And then I was, I was done with it. And I’m like, okay, I’m done with it. I still love playing, but I always felt that this is something that was very hard for me to control. And then on the other hand, we also know that a lot of skills, abstract thinking skills, and, um, also the way you, you, you are in a 3d environment, all these skills are perfectly simulated and learned from these simulations from computer games. So you are seeing the industry and you have a certain interest there. What is your, from, from a personal view, what do you feel is, are these two things, are they, they’re balancing each other out? We should be more careful with the addictive potential.

Mathew Karch: Well, you know, that’s a, that’s an interesting question. Um, most of the games that Saber has made over the years, um, have been premium games where you buy the game, you play it, and then you put it away. The model, the marketing model or the model generally has shifted to one which is, um, which encourages repeat business, which encourages games as a service where people continue to play. Um, and some games have come across as, I think you might call predatory in that respect and that they’re always, um, trying to encourage that addiction. And there’s no question in my mind that there’s a lot of games out there that have made a ton of money because of those addictive qualities. Um, I, you know, I, you know, when I was, when we were looking to sell our, our company, um, there was, uh, we ultimately sold to Embracer because we thought that Embracer had a better grasp and understanding of, um, of our business because they’re in our business than anybody else. Um, and that they were, you know, genuinely concerned about a lot of the issues that we’re talking about, whether it’s diversification, whether it’s environment, whether it’s, um, whether it’s predatory practices in terms of games. Um, but you know, it’s a balance and it’s a hard balance that to strike when you’re actually in the business of making money by selling this product. Right. And so, um, I, I did look at two, um, uh, we did talk to some private equity groups as well who were interested in investing in our company. And one of the groups in particular was specifically concerned about the predatory nature of games. And it’s not something that I had really ever thought of, uh, actually, because I, you know, from our perspective, it was like, wow, we can get somebody that, you know, there’s a name for people who spend that much money on games. We call them whales, right? That’s what we call people who spend a lot of money on games, right? They’re the big spenders and you’re always looking for those big spenders, right? That’s, um, and so that’s always kind of the holy grail of these games, get people to go and do it. And so you got to balance those things. I mean, it’s, it’s, it’s hard, right? When you’re, when you’re is removed and when you’re removed from it and you don’t realize, okay, these are the people that are spending this money, maybe they spent their last dime, right? If you don’t think about it in those terms, then really you don’t have a problem with it because you’ve distanced yourself from it. Um, so, uh, you know, obviously, you know, we don’t make games for, for, for, for small kids who, um, who could potentially take their parents, you know, you know, uh, uh, earnings or their parents credit card and spend a lot of money. Our games are geared towards people who are older. And so we got to hope, we kind of hope those people are more, uh, more responsible. Um, and you know, uh, whether, whether they are or they’re not, I guess, you know, ultimately, I don’t think that we’ve heard of significant problems with, with addiction. There are certainly people who spend way too much time in front of their computer playing games. And we don’t think that’s healthy, obviously. Um, but we also think that, you know, we’re in a business where we’re not, um, you know, we don’t, at least in my business, we, we haven’t really depicted realistic graphic violence unless you can’t fight zombies. Um, you know, we do lots of sports games and we do some vehicle simulation games. And so we try to be responsible in as many areas as we possibly can. And we certainly try to give back. Um, but by the same token, we can’t, we don’t want to create games that people don’t buy or that people are willing to spend money on. And so there’s, there’s a little bit of a balance here, but if this would have become a bigger issue for us, I think that we would probably have to find different economic models. I mean, I guess the real question is the issue, the addiction in terms of the number of hours that people flying, or is the addiction more about how much money they’re spending? Um, or is it, or is it both? So, but as those problems come up and as we hear about them, we don’t ignore them, we don’t brush them under the rug. We try to tackle them.

Yeah. I mean, it’s a, it’s a difficult problem because on one hand, obviously what makes it addictive is a, is a positive quality. There’s something positive that we are entertained, right? It’s kind of, you can say the same thing about, but chemical drugs, they, they allow us to escape reality. And often, and I learned this from Jordan Peterson, is these drugs are harmful, but they’re typically less harmful than the alternative, which is often suicide or just extreme depression. So there is a gradual decline. And, and obviously when you think of video games, they’re not as on that same level of harm that say chemical drug could be, right? That some, some methamphetamine can kill you. The fentanyl can kill you really quickly. So we’re not talking about the same level of addiction. I think we have to keep that also in perspective. Or coffee makes it very addictive that I get headaches a day later if I don’t drink coffee and we don’t worry about it at all. So I think both are important, but I think it’s, it’s this, we, we always have this fear that, that our children basically get, get swooped away into this other reality and they will never come back, right? They don’t learn the life skills anymore, so to speak. They don’t learn how to interact in the social environment because they’re driven into this relatively lonely or maybe not lonely, but it’s certainly not at the same kind of communication, the same kind of social interaction. And they kind of go there for 10 years and then they hopefully come back. But as parents, we always feel like, whoa, that’s some long time to wait and, you know, hope for the best. And look, I, I agree with what you’re saying, but I, I really feel, and I can say this as a parent, that really it’s, it’s mobile devices that are, that are the primary culprit and social media is the primary culprit. And the ways in which our, our, our children communicate is the primary culprit because when I wanted to ask a girl on a date, I had to go to the wall phone and, and dial the number, you know, and sneak into my room with a long cord and make that phone call and, and, you know, put myself out there likely to get rejected, but that’s what I had to do. And today, you know, if you like somebody’s, you know, Instagram posts, whatever, they’re going to get a clue that you like them right then and there. And, you know, you can send a text message or there’s a million other ways to communicate, which are less direct. And I think that as a result of that, people lose their ability to actually actively and normally socialize. I think we’ve basically taken that out of, out of, you know, people’s hands. Maybe my example isn’t particularly, you know, cogent, but, but for me, it works, you know, I feel like, you know, when you no longer, you know, you probably had this experience because I certainly have someone does something that really upsets you and you write this long email and it’s a nasty email. And then you take a deep breath and hopefully you don’t send it, right? Because it’s so easy to do that. If you picked up the phone and called somebody you would never, ever say what you were going to say in that email, right? So I know I’m getting off the topic but I think this is all kind of related. I think that it’s, we spend too much time on our devices and our devices or our primarily form, our primary form of socialization, even in the video game space, right? I mean, my son plays Fortnite all the time and he talks to his buddies through Fortnite, right? I mean, that’s a, so, you know, I tell my son all the time, get out and play ball, you know, go hang out with your friends, sit in the same room as them. I mean, how many times have you seen your kids sitting in the same rooms and they’re on the phone and look with other kids, right? They’re all on their phone. So, and I’m guilty of that too, frankly. Well, I’m not saying there’s an easy way out. It’s just, we can look at it and I’m actually not worried about it because what happens is we’ve seen these layers of extra communication that give you more choice to reject people without actually rejecting them. It’s something that people want. When you’re VC, you’re really happy that you now have Twitter inside of email because you don’t have to go through all these emails anymore to find that one page that’s of interest, right? So, you have Twitter that’s self qualifying. So, you always set another layer between what’s out there, the entropy and what you consider really relevant. So, that will only mushroom. I don’t think there will ever be that we go back into our cave and talk to each other. I mean, ideally yes, but I think the incentives are really heavily on the other side. And I think as long as all kinds of entertainment, I think if they don’t drive us into chemical issues, the abuse of substances, and even those, I think if we don’t learn how to cope with them on that one hand, there isn’t much we can do. The human brain is so malleable, that’s so adaptable. If we are not ready to cope with all these kinds of social media, with all these kinds of entertaining devices, that’s all fault, right? That’s our brain not reacting to this new environment. And how are we going to change that when we merge with machines in a couple of years? We have even more options, right? So, there is no way back, I think, unless you really say you want to live like the Irish people, but it’s tough when you really have to have a lot of conviction to keep even your children in that same community, because they want to see what’s on the outside, right? And their couriers, why should they stay in that community that doesn’t have access to the technology? It’s a really difficult pitch. Yeah, no, I absolutely agree with you. I will say as a side note, you mentioned Twitter. To me, Twitter is the lowest of the low. It’s one form communication. One way communication, which is responsible for more, it’s just people giving their opinion without the willingness to listen to somebody else’s response, and they’re doing it by standing up on a stage. I can’t stand it. I think that… But some of them are valuable. I’m with you, Matthew, but it’s 99% completely useless, and they’re harmful. I agree. But there is 1% that’s useful. Just assume that, right? Or maybe it’s not even true. Maybe it’s even lower. But if you had an algorithm and a selective view on those, 1% is selective, then you don’t care about the 99%. Yeah, but most people don’t have that ability. I can’t filter out. I mean, it either frustrates me or it frustrates me more. I mean, sometimes I look at some of these, obviously, you don’t have to go much further than Trump to see somebody who should probably have tweeted a little bit less, but I kind of feel the same way about guys who are smart, like Elon Musk. Sometimes you just say, you know what? Better not to say anything. I mean, maybe he’s going to get himself into trouble by driving up or down the price of a particular security, or maybe he’s going to say something which ultimately is harmful or is misinterpreted because it’s taken out of context or because the context is tiny. And so I don’t know. That’s a side discussion, but you always want for dialogue. I know. I find that really interesting because a lot of people say, well, because what happened now the last 10 years, people take the quiet part that they wouldn’t say, right? They wouldn’t talk behind your back, but they take that quiet part of a conversation and they put it out there on a big display and they say, oh, this is harmful, right? I don’t have my safe space anymore. And to one point, I agree with that. But on the other hand, I don’t see a world where hiding information, where putting information at silos is a good idea. I do strongly believe that this free speech paradigm that the U.S. had, and I think we’re overdoing it maybe temporarily, but in the long term, I think we’re still underdoing it. We have to get all these things out so it can be evaluated by other people, by machines, by whatever we want. But this is the source of incredible growth and specialization and productivity growth if we can get these things fixed. And I think we’re overreacting, but we haven’t seen the light of it. There’s so much more that will come to the light of day. And I think this is a good thing, even if it’s shocking to us, right? Where are we even in this simulation in the first place? Look, I certainly don’t have all the answers, right? I mean, I think that ultimately time will tell whether or not which things are good and which things for us have been harmful. Personally, I feel like people talk about video games and talk about how it’s harmful. Should we curtail information because it’s potentially harmful? And it is. I see this with Twitter too. It puts me in an emotional tailspin for half an hour before I come back and I can kind of stable myself. It does happen. But is that Twitter’s fault or is that information? Is it just our ignorance that we’ve been developing for hundreds of thousands of years and finally we can fight our own ignorance? That’s how it feels to me as closer to the truth. I mean, you might be right. But I think that the problem is that for the same reason people write the emails and then erase them. People write their tweets or whatever you want to call them. And they just they’re just amplifying the worst or the best or whatever it might be of what they’re feeling. And later on, they regret doing it. But once it’s out there, it’s out there and there’s no turning back. So I much prefer speaking to somebody one on one than to stand on a soapbox and say something which I might regret to the entire world and then have to explain myself. And I bit my tongue quite a few times over the years. Well, I’m honestly, I’m not sure what to do with it. I mean, I don’t appreciate Twitter much because I feel it’s a really good conversation and you get very weird feedback. But on the other hand, feel like all these little bits of information. Yes, there’s 99% nonsense. If you just generate a little bit of extra information that hasn’t been brought to the light of day, I think we’re all into something. And so we go from one platform to the next, right? Facebook gave us a little bit of that and then Twitter. And I mean, it’s all seemed like why is it still around? And it’s still around because it seems to fill a basic human need that we are these information foragers. And as more as we can get, we’ll take it even if it puts us into really strange rabbit holes and might actually harm us. We can’t help ourselves. And I think our anyone who comes after us will be better at this. We have this problem because we are in this arc of human development and has served us well so far. But it’s gone into some really, when we look at first and second world where it’s gone off into some really, really dangerous areas, but we somehow recovered from all this. That’s quite amazing. I think we will also go for that challenge. We’ll see. I think I totally appreciate the 1% being good, but the question is, what about the other 99%? If we do more harm than good ultimately, I don’t know. I think Twitter is just about everybody has an opinion and everyone wants their opinion known. And because everybody has an opinion and they’re all more valid, everyone’s opinion is as valid as anybody else’s opinion. I don’t think we should be having just let me put it this way. Every time an athlete or an actor gives me their opinion on politics, I just roll my eyes because I don’t care what they have to say. Even if I agree with them, they’re just one person out of no, that’s not meant to apply that I might not learn something interesting from what they have to say. But I think that oftentimes this all becomes just inflammatory and causes a lot more harm than it does good. But anyway, that’s not a video game conversation. I wanted to hit you with another easy question. Let’s make it a little more related to video games. So video games, a lot of people say, and that’s where the original argument came from. If you live in a simulation, if this whole universe simulation, and here’s the thinking is, that’s how it was explained easily after the white paper came out, when we have this extreme desire to assimilate everything we can, because that’s our neocortex that makes us better in the real situation. So if we go out to hunt an animal, if we can simulate that, our chances of surviving hunting that animal is probably much higher. Now we do video games before we did all kinds of board games. So we run simulations all the time and our children, in fact, they take longer and longer to get to that stage where we consider them mature enough to play with the real world. They run through endless amounts of simulations, case studies, we call them in universities and colleges. So it makes a lot of sense to think, well, if we have the strong desire of assimilation, that seems to be any intelligent being would have that problem. So why don’t we just simulate more and more? We simulate a whole planet, planetary system, when we go to Mars, you have to tower form it, right? So we basically change the whole thing, what’s going on on Mars, the whole planet will be terraformed and we go further and further out. And sooner or later we’re going to just assimilate the whole universe. When they look back on their lives, have the misfortune of not having done anything too crazy or too exciting or too interesting. And I think that video games before, I don’t know if this is really going to answer your question or not, I think for video games and movies and books and other forms of entertainment are an escape from that basically maybe it’s a drab reality or maybe it’s just boring or maybe it’s actually not boring and they need an escape from something which is a little bit too exciting or too extreme in one way or the other. And so I love the idea of ever increasing realism and simulation. I think, you know, I’m fascinated by VR. I love it. I love being immersed in virtual worlds, VR worlds. My brother is actually working with some cool guys out in, they’re in LA, I think was in LA and I think was in San Francisco on some haptic devices for haptic and input devices for VR which are going to make the experience that more immersive so you can feel and see your hands when you’re in these worlds. And I would love to see more advanced versions of simulations because I think those simulations also ultimately benefit us in the real world. I mean, just as an example, I decided last year, last July, that I couldn’t sit home for one more day when we were all sitting home and I decided to go out and become a pilot. And so, you know, fortunately for me, I’m in the financial position where I can, you know, spend the money on lessons and I bought myself an airplane and I hired an instructor and I went out there and I learned how to fly. But now I’m spending a lot of time because I’ve gotten my private license on a simulation. That’s where I am now because I need to learn how to fly and get an instrument rating. And the best way to fly is to learn your instrument rating is not to spend, you know, $300, $400, $500 an hour flying your plane to repeat the same tasks over and over and over again. It’s using a simulation. And that simulation has been very beneficial to me because now I’m learning how to get my instrument rating without having to actually fly the plane. And, you know, but there are simulations which really do even more than that. I mean, if you look at the latest flight simulator that Microsoft put out, that was put out by friends of mine who work at a company called Sobo in Bordeaux, France. And it’s incredible to me what they’ve been able to accomplish. They’ve really done an amazing job of simulating what it’s like to fly. And for people that will never have that ability, people that will never be able to fly their own plane or have a fear of flying their own plane, when you play flight simulator, you can take off from San Francisco and you can land in Miami. And it will feel pretty real. And once VR is added to the mix and once we, you know, as we continue to enhance our graphical immersion and our sounds and the haptics that come along with better input and output devices, I think you’re going to find that simulation has really had the potential, in some respects, as sad as it might sound to replace travel just in the way, you know, iMessage or WhatsApp has replaced getting on a phone call, right? And so, but I think in some respects that’s not necessarily a bad thing. And I think simulation experiences could also ultimately be social. You can meet other people in this simulated world. In this simulated world, you know, I would love, I would love to be, you know, I’d love to have to be a blonde hair blue eyed guy, but I’m not, right? But in this simulated world, I can be, right? So I don’t think there’s anything wrong with it. I think we role play. I think entertainment is all about role playing. It’s just about degrees of immersion. So generally speaking, I think we’re moving in a direction where there are going to be virtual persistent, very highly immersive worlds that, that people can spend most of their lives in if they want to, as long as they remember on occasion to eat, you know, but I don’t, but I don’t necessarily see a problem with that. But, but I’m sure there are people a lot smarter than I am who see a lot of problems with it. Well, it sounds like you’re ready for the matrix. You feel like that’s where we should go, right? Listen, I have, I have a pretty interesting life. I travel the world. I, you know, I fly my own plane. I meet great, cool people. But if you told me I could, you know, spend a few nights at home traveling to Mars or somewhere else, I’d happily do it, you know? Yeah. No, I’m, I see that argument because we obviously we see this with video games, what we see in a video game or any kind of simulated the game, it’s better than our reality for, as you say, because it’s more interesting, less interesting, whatever it is, it gets us out there and it’s like reading a book. Like, that’s, that also gives us the same, same ability. But if, if it one day becomes better than the real thing, and I, we don’t have a ton of examples for this yet, but I think we will get there pretty soon. Why do the real thing if the simulation is, you know, a fraction of the cost, and it does pretty much everything what we want. That’s, I think it’s going to become a confounding issue to the next generation. Yeah, look, I, I think you’re right. And I don’t, you know, is it bad? I don’t know if it’s bad, right? I don’t know if it, I mean, I can tell you. It’s safer, right? Simulator flying is much safer than actual plane flying. Yeah. And if you get to where you want to go and you’re happy with where you’ve gotten in your virtual world, then obviously a problem with it, I guess. But, you know, but we’re still very far away from, from, from simulated experiences being equal to real experiences. I think we’ll get there. But, you know, there’s nothing like the real thing still. So, you know, but, but, but for a lot of people who don’t have that experience, you know, I don’t, I don’t see why, I don’t see why not. I mean, it makes me think of, what was the movie? Total Recall? Is that what it was? I can’t remember what it was. It was Arnold Schwarzenegger, right? Yeah, wasn’t that, wasn’t that the one, was that simulated or was that not simulated? I can’t even write. I think he couldn’t tell. They put memories in his brain. He couldn’t tell. Yeah, it was a problem, right? So we’ll have that problem right soon, I guess. That was very prophetic. It’s, it’s, you know, it gets hard to, we’ll be used to have these verified sources of truth and now we have so much information that the truth, obviously, we don’t know what the truth is anymore because we can’t associate that information with necessarily with the source. If he puts an effort into it, but most unconscious thoughts, we don’t really know. And so we already have this, this, we are losing that ability to really, to really distinguish what, what is kind of an alternated simulated truth. What is the real truth? Maybe there’s, maybe there’s several words of the truth. Anyways, anyways, but the accepted society version of truth, it’s comes hard to tell. And I think that’s why we do all these, these flip flops with certain opinions. We started with COVID where the flip flopped on both political sides, for instance, all the time. And then we saw that the most trendy issues, they go from 100 degrees in this direction to this side, because nobody really can tell the truth and nobody really knows for a while until it calms down a little bit. So it’s maybe, maybe simulations will, I don’t know if they help us to, you know, philosophers had that idea that there is this one version of truth that you can, you can get to. That’s like a socrates argument, right? So he, he, he makes that argument about his own immortality, because the soul must be different than the body. And he, he figured out that way. And he kind of convinces himself just before his death and fatal. And so he convinces himself. And that’s what I’m trying to say is all these simulations might, might be able to convince ourselves of a reality that doesn’t actually exist. That’s like the danger in this, right? So kind of we, we, we play grand theft auto and we know it’s not true, but we play it anyways. And then we repeat the same learned behavior in real life. And I think that’s what a lot of people are concerned of is that these simulations kind of, the common sense goes completely out the window. Once you lose that traction, what is simulation? What’s real? Look, you know, I’ve, I’ve heard that obviously in this space that I’m in, you know, especially with a lot of games, being shooter games, being told that, well, if you’re shooting a game, you’re going to want to shoot in real life. I don’t think that’s ever actually been proven to be right. In fact, I think that there have been studies and I don’t want to, I did some research on this years ago because, because these are questions that were asked of me and I believe that there are, there’s no proven correlation between the two. You know, but, but either, it doesn’t mean that it doesn’t exist. It just means that I, that I think that the probabilities of something like that are low. But the flip side is there are people who have actually been able to land airplanes in emergency situations because they’ve landed them on a flight simulator. And so, and there are, and my understanding is that, you know, that people are better, people who are good at video games become better surgeons because they have better hand eye coordination. So, although that’s not exactly a simulation question, that’s more of just a hand eye coordination question. And so, I think that from every experience, you’re going to have, you’re going to have new and unique types of outcomes that, that, that a result. So, a lot, like you said, there’s goodness band that comes out of everything. Yeah, that’s very nice, Matthew. I think that’s a good way, good to end the podcast. Thanks, thanks a lot for coming on. That was awesome. Thanks for sharing your opinions and your experience. Well, thank you for having me. It was fun. I had different, I have to say it was different. Absolutely. I hope we get to do this again. Matthew, all the best. Thank you.