Peter Thiel, the co-founder of PayPal, spoke in conjunction with the release of his new book Zero to One last week at Columbia University. As an investor and entrepreneur, Thiel based the book on a course he taught at his alma mater, Stanford. Lucky for us, he pretty much gave the Cliff Notes of his book, which came out in the middle of September. But we suggest you read it anyway (we don’t want to hear any of those excuses about how you couldn’t “find the book” or the bookstore “didn’t have it yet.” We’re past that now.)
While not for everyone, Thiel calls himself “contrarian,” peeking into his libertarian ideals to tell you a lot about the way investors think.
For now, here are some takeaways from his recent talk at Columbia, in a list format. (It’s also free with no ads, which CliffsNotes doesn’t even offer.)
1. If you didn’t create Google, you aren’t going to
“I think that all the sort of ‘great moments’ of innovation in technology and business only happen once,” said Thiel at Columbia. (like the airplane, Google, the iPhone)
Today’s Larry Page isn’t working on a search engine and Steve Job’s counterpart isn’t working on personal computer, says Thiel, who writes about huge, singular achievements and what we can learn from them, rather than how we can copy them, to become as successful as possible. Thiel doesn’t sugarcoat the process to success and he doesn’t think there’s a formula.
Whether you think you’re the next Bill Gates, an entrepreneur with hundreds of ideas, or even if you are a small business owner with humbler plans, Thiel’s go big or go home, capitalistic and futuristic thinking can challenge long-known business ideas, which could help you see your business in a new light.
Thiel believes success comes from being different. And this attitude may have been what prompted him to say this on TV, but hey, whatever he’s doing must work. He co-founded PayPal in 1998 and sold it to eBay four years later, co-founded Palantir Technologies, an advanced data service that governments use, and now manages Founders Fund, a Silicon Valley venture capital fund.
2. Monopolize the market for true success (Teddy Roosevelt’s shaking in his grave at this one)
Remember what you learned in Econ 101 about perfect competition and supply and demand? If you can’t remember because you never actually went to class, it’s your lucky day – Thiel teaches a different lesson.
Thiel thinks every entrepreneur’s goal should be to create and become a new monopoly. Capitalists make money by being anti-competition. People with monopolies don’t want to admit it, and those who don’t have one pretend they have a larger hold on the market than they do. For example, he said, a new restaurant in New York City might have false confidence by believing they’re one-of-a kind and therefore, there is no competition. Not true.
Investors want to invest in businesses that have the potential to make lots and lots of money. Which is what a monopoly is.
Obviously, it’s no easy feat to be number 1 in a market, Rockefeller didn’t take over the oil industry in a day . . . and just the game of Monopoly could last an entire day. You need a unique selling point that makes customers prefer you to the competition. Thiel’s secrets to the competitive advantage – technology no one can replicate, solve a hard problem or enlist a distribution or marketing strategy to scale quickly.
Thiel says it’s OK to start as a big fish in a small pond and become a monopoly in a small market. Just look at Facebook … wait, not pics of your drunk friends, but the company itself. Investors in Boston wouldn’t invest in Facebook, he said, which had a majority share of the college market, probably because they weren’t familiar with the whole college thing anymore. But it worked and became successful because it was scalable.
Inside scoop – Thiel said in his meeting with Zuckerberg and Sean Parker, Parker did most of the talking and Zuckerberg was pretty quiet. Not surprising. It ended with Thiel as their first outside investor, giving the guys half a million. Likes for all and hope for big fish. Of course, it helps if your pond is Harvard.
3. Be original
Entrepreneurs aren’t the type of people to follow the beaten path – you, your concerned family and the baristas next door to your apartment already know this. Thiel gives this notion 2 thumbs up. He believes conformity is crowded and stagnant.
OK, but let’s back up a sec. Before becoming a billionaire entrepreneur and investor, Thiel played it safe. He went to Stanford undergrad and Stanford Law and became a lawyer. He had a “quarter-life crisis” in his 20s, quit law, started a million-dollar company and is now a top investor. Good choices. And with that stuff under his belt, he’s entitled to go about denouncing social norms and touting his contrarian ideas.
One is that he thinks the fact that many CEOs have Asperger’s tendencies, says something about our society. Because they don’t have natural social cues, they don’t think twice about pursuing crazy ideas. People who are socially adapted would be discouraged and uncomfortable to go off-roading; opting instead for a safer path.
Thiel supports those who do their own thing and puts his money where his metaphorical middle finger to society is. His foundation gives grants to brilliant college kids if they leave college to work on a business idea. Winners are usually like Thiel and have potentially life-changing ideas with superior technology.
So if you say you’re working on the next Uber that’s kind of also like FourSquare with better Facebook connections . . . Thiel would cut you off and say:
4. Work on something no one understands or something no one else is working on
Many startups intersect existing monopolies and even use other company’s names to describe what they do. Yes, everyone loves a good mashup (These are fun), but Thiel argues for creating something new.
He likes to ask, “What great company is nobody starting?” Better yet, “Tell me something that’s true that almost nobody agrees with you on.”
Thiel believes we’re perversely hardwired to join crowds, which in business, means working on something that everyone else is. Crowds are crawling with competition, he says.
Instead, he said we need to answer life’s “mysteries” – things we write off as unsolvable or figure someone else will solve for us.
“The people who believe that there are secrets, who believe that there are things to discover, are the people that go look for them and will find them,” said Thiel in his speech. “The people who believe that there are none, that everything’s already been solved, will not even try.”
So one takeaway here is to work on something new, difficult and seemingly unsolvable that can be a life-changing idea. And then Thiel might invest.
While being different is a way to stand out, remember the risk is that you could scare off regular investors (If you haven’t noticed, Thiel’s a bit of an outlier). In his speech, Thiel said people told him his investment in SpaceX was stupid, but being the visionary he is, he saw the underlying business potential.
And while there may be room for imitators and improvers (and imposters) – Pepsi came after Coke, Android after iPhone, Spotify after Pandora, MailChimp after ConstantContact – those founders simply won’t be funded by Thiel.
Thiel also expects you to answer the problem better (read: differently) than anyone else, that is, if you want to monopolize your market.
10% off may be good enough to get you into a store, but 10% better won’t make those people your customers. You’ve got to do 5 to 10 times better. Especially because people don’t like to change what they’re already doing unless they know it can dramatically improve their lives. People were used to shopping at stores for books, but then Amazon came along offering 10 times (that’s an X, not a +) more books than bookstores. PayPal took a process that previously touched dozens of people, companies and days and made it sub-second.
No matter what the idea, pitch it the right way. In his book, he contradicts the notion that a product is more important than sales, and says his rule is “sales matters just as much as product.” Learn how to sell yourself (… no, not like that, dirty boy).
When pitching, target investors you think will have an interest in you based on their history and personality type. Learn as much as you can about them before you talk to them. If they wrote a book, read it. If they’re on TV, watch them. If they own a restaurant, eat at it. And practice a pitch that will make them get you and want to invest in you.
5. Technology + Globalization = The Future
Who remembers the last time they used a graph with an x and y axis? Try to, here we go.
In a graph for the world’s progress, Thiel says technology accounts for vertical growth and would be on the y-axis because it is taking an idea from zero to one (This is that moment when you listen to an entire album and get to the line where you realize why that’s the album’s title. Satisfying, right?). Globalization is the process of replicating something that works, and belongs on the x-axis for growth, and growth is “n” because there’s no limit.
6. Thiel wants you to stop getting older
Well, he just wants people to research aging. His interests are in energy and biomedical research. He also doesn’t approve of all those restrictions.
“The polio vaccination wouldn’t be approved today,” he said at Columbia.
7. Every good speaker ends with relationship advice
Thiel likes to hire friends or people he could see as potential pals. He also suggests
working with someone you’ve known for a long time that shares your vision. When he
hears that the co-founders of a business just met a few weeks ago at a coffee shop, he commented, “Sounds like, ‘I just got married to the first person I met in Vegas.’”
As for romantic relationships, I’d love to hear Thiel’s thoughts on the saturated dating app market, and maybe hear him say the word “Tindr” with a straight face. Unfortunately, he didn’t go there.
So we’ve handed you the CliffsNotes of Zero to One. And though there’s no movie version, an actor does portray Thiel for about 30 seconds in The Social Network.
Seriously though, if you’re starting or considering starting a company, read his book. It’s light on fluff – Thiel gets right to the point (maybe I should take a page out of his book…) and challenges some traditionally-held conventions. It challenges your thinking, forcing you to look at your business in ways you wouldn’t have before. And not only is Zero to One short-ish, but it will look good sitting on your shelf when Mom comes over to fold your laundry.