In this interview, game veteran Gabe Leydon argues that when an industry obsesses over 'design' and 'user experience,' it signals innovation is dead—like polishing a teleporter you can't build. He looks for 'broken but still exploding' products, like early NFTs and DeFi, betting they'll get huge once fixed. Key mentions: Fortnite (a virtual concert made $70M), Ethereum (called a 'world factory' but maybe not the final winner), and Chinese games like Genshin Impact (their design style is winning).
This episode of Invest Like the Best features Gabe Leydon, co-founder of MZ (Machine Zone), discussing the design of digital economies, game psychology, and investment opportunities. The core argument is that excellent design may signal the exhaustion of innovation, while "flawed but thriving" produ
Gabe Leydon, co-founder and former CEO of Machine Zone (MZ), is a 20-year veteran of game design. The central thesis of this issue: Design is a signal of innovation exhaustion, not a sign of prosperity. Leydon argues that when the industry shifts from "building things" to "making things feel better," it indicates we have run out of truly new ideas—and that products which are "flawed yet still experiencing explosive growth" represent the best investment opportunities.
Gabe Leydon argues that when an entire industry begins to emphasize "design" and "user experience," it precisely indicates that innovation has reached its end.
Leydon uses an analogy to illustrate his point: if the teleporter were invented, even if it were "as big as an arena, covered in slime, and stinking to high heaven," people would line up to use it. Only when you cannot build the teleporter do you start figuring out how to make it "look better" or "feel more pleasant." Leydon notes: "Five years ago, everyone was talking about 'delighting users'—delighting, because we ran out of ideas, so the only thing left is to make you feel a little better."
He links this phenomenon to Neil Postman's Amusing Ourselves to Death—Huxley's future is more accurate than Orwell's. Leydon believes that the futurism of the 1960s and 1970s (flying cars, skyscrapers, space colonization) gave rise to a monetary illusion of "unlimited optimism," but innovation failed to keep pace with expectations. "When innovation growth did not match expectations, everything shifted to the design phase, and then to the gamification phase."
Key Data: Leydon observes that Silicon Valley has been in the "design phase" for about 10 years.
Leydon argues that the underlying mechanism of game addiction (and "gamification" in a broader sense) is a combination of three elements: variable outcomes, frequency, and sense of control—rather than "flow."
Leydon explains: "The human brain is wired to learn; it cannot get stuck in a 'learning state.' When these three elements combine, they cause the brain to malfunction—it starts inventing patterns on its own." He cites the example of the "stop button" on slot machines, which serves no actual function, yet players firmly believe it works. This is the "sense of control"—not real control, but the feeling of control.
He further distinguishes between two styles of game design:
Leydon's self-created anonymous message wall mechanism: Players can leave anonymous messages on the message walls of rival guilds, showing only the source guild, not the individual. This forces guild leaders to constantly "purge" members to find traitors, sparking conflicts that last for years. "It took a day to build, but it created chaos we could never have predicted."
Hero capture and rename mechanism: If your hero is captured by an enemy, the captor can pay to force a name change; you also have to pay to change it back. Leydon says: "Money makes the game surreal—money itself is a feature, not for buying things, but for humiliation."
Leydon defines “heroic consumption” as: you buy something extremely selfish for yourself, but everyone around you benefits from it—and you let them believe you bought it for them.
He uses a restaurant analogy: one person eating a $2,000 dinner feels terrible; 20 people eating a $2,000 dinner feels great. But the ideal scenario is: you spend $2,000 to buy a “golden ham” for yourself, while the other 20 people eat for free—you get what you want, and they thank you.
Leydon points out that the digital world is a natural breeding ground for this model: “Everything in the digital world is fake, and ‘fake’ is precisely its greatest advantage. You can create any scenario, with the only limit being imagination.”
Key data: Relying solely on “experiences” (non-tradable, non-resalable virtual items), the free-to-play gaming industry already generates $80 billion in annual revenue. Leydon believes that once these items become tradable and speculative, this figure could grow tenfold or more.
Leydon argues that NFTs are a natural extension of in-app purchases (IAP)—only with the security model shifting from "game company servers" to "Ethereum."
He looks back at history: MZ was the first gaming company on Apple's platform to adopt IAP. "Revenue shot up 700% overnight." The core of IAP's success was "monopoly"—game companies had complete control over the supply and security of virtual items. NFTs extend this capability to everyone: "Now every person on Earth has the same monetization power as a game company."
Leydon predicts:
Key data point: Travis Scott's virtual concert in Fortnite generated $70 million in revenue—something he couldn't achieve at any physical venue.
Leydon's prediction: The next decade will see "hundreds of social media billionaires." "Gen X and above will be disgusted, but that's the reality."
Leydon proposes a counterintuitive investment principle: seek out products or sectors that are "completely broken yet still experiencing explosive growth"—because once they are fixed, they will become even larger.
He cites examples:
Leydon warns: "You always hear VCs say 'crypto needs good UI'—please, stop it. It's still in the innovation phase; it doesn't need UI. If one day crypto can only compete on UI, it's over."
Falsification condition: Leydon acknowledges that the MySpace vs Facebook example shows that "broken but growing" companies may also fail to fix themselves. So "you have to be an entrepreneur to understand this risk."
| Position | Analyst Stance | Key Data |
|---|---|---|
| Fortnite (Epic Games) | Positive case | Travis Scott virtual concert revenue of $70 million |
| Blau (Musician) | Positive case | Sold $11 million worth of MP3s via NFT within hours |
| Chinese games (Genshin Impact, etc.) | Bullish on design model | Currently the world's largest game; Chinese style "is winning" |
| US games (Fortnite, etc.) | Neutral, constrained by "arcade tradition" | Relies on cosmetic purchases, less effective than Chinese direct item sales |
| Ethereum | Bullish | Viewed as "world factory," but acknowledges it may not be the ultimate winner |
| Gary Vee's NFT project | Positive case | Enhanced NFT value by adjusting centralized services (increasing meeting frequency) |
1. “Design is a sign of innovation exhaustion” (Gabe Leydon) — When an industry starts emphasizing “delighting users” and “user experience,” it means there are no truly new ideas left. A teleporter doesn’t need to look good; design is only needed when you can’t build a teleporter.
2. Three elements of addiction: variable outcome × frequency × sense of control (Gabe Leydon) — Not “flow.” When the human brain gets stuck in a learning state, it fabricates patterns on its own (e.g., a lucky rabbit’s foot). The “stop button” on a slot machine is a perfect example of the sense of control — it does nothing, but players firmly believe it works.
3. “Heroic consumption” = extreme selfishness + group gifting (Gabe Leydon) — You buy something extremely selfish for yourself, but everyone around you benefits from it and thinks you did it for them. The digital world is the natural soil for this model.
4. NFTs are the ultimate evolution of IAP and will reshape all industries (Gabe Leydon) — The security model shifts from “game company servers” to “Ethereum,” giving everyone the monetization capability of a game company. 100% profit margins, impossible to resist.
5. “Broken but still growing” is the best investment signal (Gabe Leydon) — Early App Store, current DeFi, current NFTs are all examples. When it gets fixed, it becomes bigger. Falsification condition: MySpace could not fix itself.
6. Chinese game design models will dominate the world (Gabe Leydon) — China lacks the baggage of “arcade tradition” (e.g., Street Fighter emphasizing practice and competition), making it more direct, more focused, and better adapted to the internet era. Genshin Impact is proof.
7. “Players love your game more than you do” (Gabe Leydon) — Developers can never truly understand players’ fervor. The key is not to make players like what you like, but to observe what they are doing and “play into it.”
8. We need AI more than we think (Gabe Leydon) — Innovation is slowing not because of unwillingness, but because “IQ has hit its limit.” The futurism of the 1960s-70s created the illusion of infinite money printing, but innovation did not keep up. Gamification is a symptom, not a cure.