Peter Thiel has been one of the smartest thinkers in my opinion over the last 2 decades.
He formed Paypal with the PayPal mafia, which solved the problem that buyers and sellers had of sending money over the internet, he saw the future success of Facebook and was an early backer, he started the data analytics company Palantir, and he made lots of numerous investments with his venture capital firm.
This book is a short and simple read, and it gives good insight into his thinking process. Some great ideas I learned are that there are 2 kinds of secrets (nature and people), and companies who actually have monopolies try and hide their market share and companies that have perfect competition over exaggerate to the public how little competition they have.
The first step to thinking clearly is to question what we think we know about the past.
[On the Dot Com mania,] “Legions of people decamped from their well-paying jobs to found or join startups. One 40-something grad student that I knew was running six different companies in 1999. (Usually, it’s considered weird to be a 40-year old graduate student. Usually, its considered insane to start a half dozen companies at once. But in the late 90’s, people could believe that was a winning combination) everybody should have known that the mania was unsustainable; the most ‘successful’ companies seems to embrace a sort of anti-business model where they lost money as they grew. But it’s hard to blame people for dancing when the music was playing; irrationality was rational given that appending “.com” to your name could double your value overnight.”
One acquaintance told me how he had planned an IPO from his living room before he’d even incorporated his company – and he didn’t think that was weird. In this kind of environment, acting sanely meant to seem eccentric. At least Paypal had a suitably grand mission – the kind that post bubble skeptics would later describe as grandiose: we wanted to create a new internet currency to replace the US dollar.
Pg 17-19 - "Paypal Mania" -Peter Thiel recounts his Paypal experiences
Monopolists like Google try and hide their monopoly to avoid audits, scrutiny, and political lawsuits (Microsoft). Perfect competition companies over exaggerate their competitive landscape and make it seem like they have much more monopolistic bargaining power then they really do.
In an indefinite world, people actually prefer unlimited optionality; money is more valuable than anything you could possibly do with it. Only in a definite future is money a means to an end, not the end itself.
In 1928, Scottish scientist Alexander Fleming found that a mysterious antibacterial fungus had grown on a petri dish he’d forgotten to cover in his laboratory: he discovered penicillin by accident.
You are not a lottery ticket: We have to find our way back to a definite future, and the Western world needs nothing short of a cultural revolution to do it. Where to start? John Rawls will need to be displaced in philosophy departments. Malcom Gladwell must be persuaded to change his theories. And pollsters have to be driven from politics. But the philosophy professors and the Gladwells of the world are set in their ways, to say nothing of our politicians. It’s extremely hard to make changes in those crowded fields, even with brains and good intentions. A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket.
In 1906, economist Vilfredo Pareto discovered what became the “Pareto Principle” or the 80-20 rule, when he noticed that 20% of the people owned 80% of the land in Italy – a phenomenon that he found just as natural as the fact that 20% of the peapods in his garden produced 80% of the peas. This extraordinarily stark pattern, in which a small few radically outstrip all rivals, surrounds us everywhere in the natural and social world. The most destructive earthquakes are many times more powerful than all smaller earthquakes combined. The biggest cities dwarf all mere towns put together. And monopoly businesses capture more value than millions of undifferentiated competitors. Whatever Einstein did or didn’t say, the power law – so named because of exponential equations describe severely unequal distributions – is the law of the universe. It defines our surroundings so completely that we usually don’t even see it.
Every individual is unavoidably an investor, too. When you choose a career, you act on your belief that kind of work you do will be valuable decades from now.
What important truth do very few people agree with you on?
There are two kinds of secrets: secrets of nature and secrets about people. Natural secrets exist all around us; to find them, one must study some undiscovered aspect of the physical world. Secrets about people are different: they are things that people don’t know about themselves or things they hide because they don’t want others to know. So when thinking about what kind of company to build, there are two distinct questions to ask: What secrets is nature not telling you? What secrets are people not telling you?
If you think something hard is impossible, you’ll never even start trying to achieve it. Belief in secrets is an effective truth. The actual truth is that there are many more secrets left to din, but they will yield only to relentless searchers. There is more to do in science, medicine, engineering, and in technology.
Whenever an entrepreneur asks me to invest in his company, I ask him how much he intends to pay himself. A company does better the less it pays the CEO – that’s one of the single clearest patterns I’ve noticed from investing in hundreds of cases of startups. In no case should a CEO of an early state, venture backed startup receive more than $150,000 per year in salary. It doesn’t matter if he got used to making much more than that at Google or if he has a large mortgage and hefty private tuition bills.
A company does better the less it pays the CEO – that’s one of the single clearest patterns I’ve noticed from investing in hundreds of startups. In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary. It doesn’t matter if he got used to making much more than that at Google or if he has a large mortgage and hefty private school tuition bills. If a CEO collects $300,000 per year, he risks becoming more like a politician than a founder.
Bob Dylan has said that he who is not busy being born is busy dying. If he’s right, being born doesn’t happen at just one moment – you might even continue to do it somehow, poetically at least. The founding moment of a company, however, really does happen just once: Only at the very start do you have the opportunity to set the rules that will align people toward the creation of value in the future. The most valuable kind of company maintains an openness to invention that is most characteristic of beginnings. This leads to a second, less obvious understanding of the founding: It lasts as long as a company is creating new things and it ends when creation stops. If you get the founding moment right, you can do more than create a valuable company: you can steer its distant future toward the creation of new things instead of the stewardship of inherited success. You might even extend its founding indefinitely.
It's easy to resist the most obvious sales pitches, so we entertain a false confidence in our own independence of mind. Bu advertising doesn’t exist to make you buy a product right away; it exists to embed subtle impressions that will drive sales later. Any who can’t acknowledge its likely effect on himself ids doubly deceived.
Most clean tech companies crashed because they neglected one or more of the seven questions that every business s must answer: 1) The engineering question – can you create breakthrough tech instead of incremental improvements? 2) The timing question – Is now the right time to start your particular business? 3) The monopoly question – Are you starting with a big share of a small market? 4) The people question – Do you have the right team? 5) The distribution question – Do you have a way to not just create but deliver your product? 6) The durability question – Will your market position be defensible 10 and 20 years into the future? 7) The secret question – Have you identified a unique opportunity that others don’t see?
Pg 166-169 - Peter Thiel's thoughts on what made Tesla successful
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.
A valuable business must start by finding a niche and dominating a small market. Facebook started as a service for just one university campus before it spread to other schools and then the entire world. Finding small markets for energy solutions will be tricky – you could aim to replace diesel as a power source for remote islands, or maybe build modular reactors for quick deployment at military installations in hostile territories. Paradoxically, the challenge for the entrepreneurs who will create Energy 2.0 is to think small.