Peter Thiel has pedigree. Billionaire, one of the Paypal founders, CEO of Palantir. Worked with Elon Musk and Reid Hoffman. When he talks, as a start up you should probably listen.
No progression since 70s
His starting point is that we have not progressed much since the ‘70s. With the exception of IT and the internet, not much has happened. He is disappointed. We should be living on the moon by now. Since the 70’s most changes have been mostly iterative.
He links that to the different sentiment across the globe.
An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. This describes Europe since the early 1970s, when the continent succumbed to undirected bureaucratic drift.
A definite pessimist believes the future can be known, but since it will be bleak, he must prepare for it. China is probably the most definitely pessimistic place in the world today.
To a definite optimist, the future will be better than the present if he plans and works to make it better. This is the one he likes.
To an indefinite optimist, the future will be better, but he doesn’t know how exactly, so he won’t make any specific plans.
His book is a plea to people to take control, use their heads and stop being a lottery ticket. You need to play smart. Become a definite optimist.
What should you do?
First of all you should plan. Indefinite is not an excuse for not planning. A business with a good definite plan will always be underrated in a world where people see the future as random.
You should not apply lean
Forget about lean. Lean is code for “unplanned.” You should know what your business will do. Trying things out, “iterate,” and treat entrepreneurship as agnostic experimentation is a bad, bad idea.
Forget “minimum viable products”—ever since Jobs started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others.
Focus on next practice
Today’s “best practices” lead to dead ends; the best paths are new and untried. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. Incremental advances and improving on the competition is useless. It is not sustainable.
Create a monopoly
What valuable company is nobody building? It is the key question. Why step into a crowded space? If you want to create and capture lasting value, don’t build an undifferentiated commodity business. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. You want to build a monopoly.
Monopoly is the condition of every successful business. All failed companies are the same: they failed to escape competition. To crate an economy you need to be 10 times better, you have to be able to control or create a niche, you have to create a brand and you need to be able to scale.
And that is the key message of the book. Step away from the red ocean into the blue ocean. Focus on being unique.
His other pieces of advice
- Take a long term perspective
- Become a master of your trade
- Work only with people you know and like
- Create a cult culture with a focus on purpose and full buy in by all
- Never outsource recruitment
- Focus, focus, focus
- Ignore selling at you peril, it is not only about the product
- Only have 3 people on your board
- Don’t hire tech entrepreneurs that wears a suit
- Focus on durability, not growth
- Friction kills
- Focus on one channel
- Give each person on your team just one thing to do
- Design is important
His golden rule
The total net profit that you earn on average over the course of your relationship with a customer (Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC).
The start up checklist
- The engineering question: Can you create breakthrough technology instead of incremental improvements?
- The Timing Question: Is now the right time to start your particular business?
- The Monopoly Question: Are you starting with a big share of a small market?
- The People Question: Do you have the right team?
- The Distribution Question: Do you have a way to not just create but deliver your product?
- The Durability Question: Will your market position be defensible 10 and 20 years into the future?
- The Secret Question: Have you identified a unique opportunity that others don’t see?
The rally cry for entrepreneurs
Our task today is to find singular ways to create the new things that will make the future not just different, but better—to go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future.
Become a definite optimist!