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pkg_resources does its work by reading in metadata about a python package saved in egg-info files. Regular installs of ansible (python setup.py install) will create the egg-info but for hacking on ansible from a checkout we need to generate egg-info so that the pkg_resources calls in ansible-vault and ansible-playbook can get the information. hacking/env-setup is the way that we tell people to setup their dev environment so script creation of the egg-info there.