“What important truth do few people agree with you on?” Peter Thiel offers up ideas on how to start and build a successful tech company- build something 10x better, start with a small market and dominate, and aim to build a monopoly business. I particularly enjoyed his description of the differences between definite/indefinite optimism/pessimism, and the implications culture have on your worldview. Definitely worth a read if you work in the tech industry.
“What important truth do few people agree with you on?”
We need new technology or we will die
What valuable company is nobody building?
Build a monopoly business
All failed companies fail to escape competition
Traditional career would have changed life for the worse
Characteristics: Proprietary tech, network effects, economies of scale, branding
1. Proprietary Tech - 10x better than others. Build something totally new. Better design.
2. Network Effects - More value as more people join. Need to get the first people to join. Usually such small initial markets that they seems to not be a opportunity at all.
3. Economies of Scale - Marginal cost per person served is ~0.
4. Branding - Apple.
- Start with a tiny market, and dominate
- Small group of people who are unserved, grow through adjacent market capture
- Don’t disrupt: create something new
- Be the last mover- moving first doesn’t mean anything if you get immediately supplanted. Having staying power is the real goal.
Act with conviction- we plan too little
- Indefinite pessimist: things are going to get worse, in a way that can’t be known. (EU)
- Definite pessimist: things are going to get worse, but you can prepare. (China)
- Indefinite optimist: the future will be better, but don’t know how. Rearrange existing things. (1982+)
- Definite optimist: future is better than the present if you plan and work to do so. Big plans and visions. (1920s-70s western world)
Finance epitomizes indefinite optimism- this is how to make money, if you have no idea how to create value.
The world is dominated by power law. Invest only in things that can win more than everything else combined. Portfolio approach is for suckers. In a power law world, focus on finding the “one most important thing” (company, career, market, etc). Doesn’t necessarily mean starting a company.
Secrets- does the world have any left? Yes, but most of society thinks no. Easy vs Hard vs Impossible problems. “If everything to be done has been, might as well become a barista.” Four social trends: incrementalism, risk-aversion (and fear of isolation/failure), complacency, flatness (competitiveness/globalization). No cults- because we only believe in conventional ideas
Two kind of Secrets: Natural & People Secrets Human Nutrition is a potential field
Thiel’s law - startups messed up in their foundations cannot be fixed. Board of 3, max of 5. Pick your founder carefully. Everyone is a full-timer, in-person, with stock. Pay your founder, but never more than $150k. Set an example of highest or lowest salary. Keep equity secret. Always keep creating- if you’re not creating, you’re dying.
Questions every company should ask
1. Can you create breakthrough tech (10x better), instead of something incremental?
2. Is now the right time?
3. Is this a potential monopoly? Big share of small market?
4. Do you have the right team?
5. How do you deliver/sell your product?
6. Is your position defensible a decade from now?
7. Have you identified a unique opportunity that others don’t see?