New Generation's Jonathan Arena on the Future of E-commerce

Here's a comprehensive summary of the YouTube video transcript:

Key Concepts

• Golden Thread: The foundational story of a founder that underpins a successful enterprise.
• Minus One Journey: The period before a company or venture officially launches, often involving foundational work and ideation.
• Product Designer: A role that encompasses visual design, interaction design, and product thinking, pioneered by companies like Facebook.
• AI Native Startup: A company built from the ground up with artificial intelligence at its core.
• Open Web vs. Closed Source: Philosophical approaches to technology development, with the open web emphasizing accessibility and collaboration.
• E-commerce Website Primitive: The fundamental structure and components of an online store, which is seen as ripe for disruption by AI.
• Generative Interface: A user interface that can dynamically create and adapt content and layout based on user input and AI.
• AI Design System: A framework for using LLMs to guide the visual design and brand expression of AI-generated interfaces.
• Sensibility vs. Taste: The distinction between making contextually appropriate decisions (sensibility) versus purely subjective preferences (taste) in design and technology.
• Primitves (in AI/Commerce): Foundational building blocks or concepts that will shape future digital experiences, such as residual self-image or smart product data.
• South Park Commons (SPC): A community and founder fellowship that provides support and feedback for early-stage startups.

Summary

This discussion features Jonathan Rea, a South Park Commons founder fellow and co-founder of New Generation, sharing his journey and insights into building an AI-native e-commerce startup. The conversation delves into his unique background, the evolution of design in the age of AI, and the future of online commerce.

Jonathan Rea's Background and the "Golden Thread"

The conversation begins by establishing Jonathan Rea's unique educational path, holding an undergraduate degree from RISD (Rhode Island School of Design) and an MBA from Harvard. He was instrumental in creating Harvard's annual design conference, now in its 13th year. His entrepreneurial spirit was evident early on, starting with graphic design skills to gain free access to concerts and events.

Rea recounts his early ventures, including building snowboard websites and operating a makeshift repair center for friends in his parents' garage. This led to him writing to ski and snowboard companies, which responded by sending him posters, stickers, and swag, effectively sponsoring his "shop." He realized the power of graphic design to create a sense of legitimacy, even fabricating parking passes for a Rhode Island State Beach to avoid expensive parking fees. He also details printing a press pass for the US Open of Snowboarding, which allowed him to access the event and meet Shawn White, reinforcing his belief in the ability to "just do things."

The Intersection of Design and Business

Rea's academic journey highlights a deliberate effort to bridge the perceived gap between design and business. He found his MBA experience at Harvard, graduating in 2019 (originally with the class of 2014), to be a "lonely" but valuable experience as the sole designer in a large cohort. He fundamentally refutes the idea of an "invisible partition" between design and business, viewing entrepreneurship as the natural intersection of these disciplines. He sees the design process, moving from "minus one to zero," as analogous to founding a company.

Professional Experience and the Path to New Generation

Rea describes his career as a "mixtape" of choices, driven by a "search for complexity" and an interest in "hardware" and "new interfaces." His experience at Meta (Facebook) involved working on forward-looking devices, including at "building 8," the innovation lab, and later at Cruise, designing interfaces for self-driving autonomous vehicles. He sought out roles that involved designing new interfaces where established patterns didn't exist. This quest to "change and manipulate the way in which people interact with hardware, with systems, with commerce" directly informs his current venture.

The "Minus One Journey" and Co-founder Dynamics

While the idea of entrepreneurship was present during his MBA, it solidified later. Rea had an earlier entrepreneurial attempt in 2013 with a search-based product for the cultural arts, incubated out of RISD's IAB. This venture, though unsuccessful, provided valuable lessons and led him to Facebook to work on Graph Search. He spent four and a half years at Facebook, learning to think like a "product builder, not just a designer." He emphasizes the "full stack designer" role at Facebook, which integrated visual design, interaction design, and crucial "product thinking" (asking "why build this?", scalability, and business implications).

The decision to start New Generation was driven by a confluence of "people and timing." After a decade in big tech, he felt the "opportunity slipping away." He met his co-founder, Adam, through graduate school connections. Their dynamic is characterized by balanced skill sets and a shared philosophy. They discovered their alignment through extensive conversations, with Adam's background in philosophy and economics complementing Rea's design and technical expertise. They quickly aligned on the "brand of the open web" and their philosophies around AI's impact.

New Generation: Disrupting E-commerce with AI

New Generation aims to create "every brand's first AI storefront." Rea identifies the current e-commerce website architecture as "rigid, immovable objects that are not intelligent." He likens them to "stupid websites" that are about to be disrupted by flexible, intelligent AI protocols. The core problem they address is the static nature of existing e-commerce templates (e.g., Squarespace, Shopify), which offer a generic experience.

New Generation makes product catalogs "smart with AI" and overlays a "generative interface" that tailors the shopper journey to each customer in real-time. This allows for natural language search, similar to ChatGPT, to build a personalized web page for the user. Brands experience pain with the operating expense and manual merchandising of their rigid product catalogs. On the front end, existing e-commerce sites suffer from shopper friction, making it difficult to find specific items.

Navigating Brand Expectations and the "Messy Middle"

Rea acknowledges that brands invest heavily in their existing websites and shopper funnels. To address this, New Generation offers an "AI storefront" hosted on a subdomain (e.g., ai.brand.com). This allows for experimentation and drives incremental traffic without disrupting the core business. This approach is described as an "easy angle of attack" for brands, acting as an "experimentation machine" that addresses their concerns about AI and the changing internet traffic landscape.

The "messy middle" of the consumer funnel, which is currently a "black box," is seen as an opportunity for AI. Instead of just logging clicks, brands can gain "brand intelligence" by having conversations with customers, understanding what's being generated for them, and seeing what products are merchandised. This data is "an order of magnitude more valuable" for brands, providing proprietary knowledge and interaction insights.

The Evolving Role of Designers in AI Startups

Rea highlights that the skills required for designers in AI-native startups are evolving. He emphasizes the need for a "very technical founding designer" who can "code switch between UI and front-end product building" and act as an engineering partner. This is crucial for building "living, breathing interfaces that are morphing all the time," moving away from static designs and traditional design systems. He notes that their founding designer, Nick, is "prototype native," often building live prototypes directly rather than starting in Figma.

For founders, Rea advises getting a co-founder and "actual technical people to build with." While AI tools can accelerate prototyping, building a "commercial scale product" requires real infrastructure. He also stresses the importance of joining communities like SPC for support and opportunities.

The Future of Design Education and Commerce

Rea, a board member at RISD, believes design education needs to adapt. He advocates for integrating "product design in the most general generous sense" into the curriculum, recognizing that interfaces and AI interfaces are the "materials and mediums of our time." He sees a need for a department focused on this, distinct from traditional graphic and industrial design.

Regarding the future of commerce, Rea believes websites will not disappear but will evolve. Traffic patterns may change, with "agents going to websites instead of people." He sees this as a new stakeholder requiring a different interface. While commodity purchases might be automated, people will still enjoy shopping, discovering, and evaluating. The content of websites will need to go to LLM interfaces, allowing brands to express themselves and merchandise products within platforms like ChatGPT. He likens New Generation's role to "a plaid for product data," providing the intelligence layer for brands to render these limitless front-end experiences, whether on their own websites or within other platforms.

Key Technical Hurdles and Future Primitives

The biggest technical hurdle for New Generation is achieving "deterministic experiences" in a fluid AI environment. This involves orchestrating multiple LLMs for text generation, image generation, product selection, and prompt rewriting to ensure a cohesive and high-quality output that "passes the sniff test."

Future primitives in commerce are seen as endless, including generative video and images, VR experiences, and the ability to transfer context objects from chat interactions to AI pages. The goal is for brands to not care where the purchase happens, as long as they retain customer understanding and aren't disintermediated by platforms.

Conclusion and Advice for Aspiring Entrepreneurs

Rea likens the current AI landscape to 2011, a period of significant innovation in mobile and video. He urges aspiring entrepreneurs, especially designers, to "put yourself on the batter box" and leverage the 10x speed of experimentation and building that AI enables. He emphasizes the need for co-founders and technical partners, the value of community support, and the importance of embracing the evolving role of design in an AI-native world. The core of New Generation's offering is to transform static e-commerce into intelligent, personalized experiences powered by AI.