Cap Digital - Rencontre avec Peter Thiel

[Applause] [Music] Sharpedo dear Peter little French before newsom to stress on away she she kept digital the word visit alakazoom the legitimately Mothma say the zero doesn't president's defense astanga in the totally gift news organs from capita is greatly honored to welcome you today and extends you the warmest welcomes from our board and represented now our president's defense Tigana and all the team from capital here thanks also to Laguna 4 and the team metallicity so chocolate s thanks to Sheila from 10 from the magazine challenge of all the help as well Peter Budetti see she will fill yourself at home here since 2006 and during the past 10 years cap digital the biggest truster for digital transformation in Europe helped and supported its 1000 members Peter you are an investor and an entrepreneur and always proud and pleased to remember that upon entrepreneur is a French word invented by John battosai Peter first gained attention for for his attempt to replace the dollar by starting people which did not achieve that ultimate goal but did change the way payments worked in the world after bringing people to black and then selling it to eBay he has become known as a down of PayPal mafia his ex collects became also successful SpaceX leaked in YouTube to say the least in 2004 Peter you created piloncillo technologies you know want to identify and support the next generation of technology companies and some of them are here I think so well it's no time to hear your Peter and be sure that here in France and in capital we do love and share your revolutionary ideas yep thank you thank you so much for having me I thought I'd make some brief comments and then try to leave as much time as possible for questions and answers and make it as interactive as possible one of the challenges in writing a book about entrepreneurship and teaching about entrepreneurship about startups is that I I always think that there's no formula if I told you this is the formula these are the steps you must follow then that would almost be a sign but there was something very wrong with it and it's because I think every moment in the history of business happens only once the next Mark Zuckerberg will not be starting a social networking site the next Bill Gates will not be starting an operating system the next Larry Page will not be starting a search engine and so if you are just copying these people you're in some ways not learning from them at all and so it's the challenges in some ways then becomes what can one say about this topic at all it's everything is unique everything's new but what can you say with any more rigor and and so the approach that I try to take is an indirect approach I try to ask these somewhat contrarian indirect questions to get the reader get the entrepreneur to think in new fresh ways and I think that's that's one of the ways to get started and so the contrarian intellectual question I always like to ask even as an interview question is tell me something that is true that almost nobody agrees with you are and this turns out to be a shockingly difficult question for people to answer and it's it's not so much because you have to be really brilliant because I think almost everybody has some answer to the squash everybody knows some things that are true that not very many people agree with you on but it is a it is a psychologically or socially awkward question to answer because a good answer is one but the person who's asked the question won't agree with it so if you say things like our school system doesn't work our politics are bad those of all maybe true answers but they're not very interesting everybody agrees with them the good answers are ones that people do not agree with and are therefore going to somehow be quite a bit more uncomfortable the business version of this question is what sort of a great business is nobody starting and and this again is often a much more uncomfortable question answer because because we always are more comfortable with things that ready than done lots of people are doing it we're doing the same thing as everybody else and and that can of course work whereas it's something totally different why would you think that works white that makes sense you run into all those kinds of questions so I want to I want to give a three or so of my answers those questions things I believe to be true that very few people growth beyond and use this sort of a starting point for our conversation and the first one is is this very provocative one on this idea of unique businesses itself so the extreme formulation I think that most people think that capitalism and competition sort of are synonyms they mean the same thing I believe that capitalism and competition are antonyms they mean opposites capitalist to someone who's in the business of accumulating capital a world of perfect competition is a world where all the capital is competed away and so if you are starting a business if you're an entrepreneur early investor early employee you always want to be in a monopoly now we can sort of debate when monopolies are good for society or bad for society but from the inside you always want to be in a monopoly you want to be doing something that's unique that nobody else is doing where there's no competition at all and then if you want to have crazy competition you should just open a restaurant it's an absolutely terrible idea there is a terrible especially terrible idea places like Paris or San Francisco where I live it doesn't stop many many people from doing it and there's almost almost this inverse relationship with where the worst the idea is and more people do it and in many cases and and if we sort of this is a very basic truth but it's it's very odd why this is not understood and why people don't understand the sort of basic economic principle and I think I think the first part is that you have to also says people always tell themselves lies about how intense the competition is and so look if you take the example of a monopoly let's say you are you are Google it's had no competition in search since 2002 it's had a monopoly in search it's making crazy amounts of profits for the last 13 14 years and rhetorically if you are the CEO of Google you will you will not say it will not go on television and say we have a monopoly that's bigger than the monopoly Microsoft ever had in the 1990s and the margins are even higher etc etc and what you will say instead is you know we're not really a search engine we're this much much bigger bigger thing called technology and in technology there's competition everywhere we have to compete with Apple's Android phone and Facebook and Amazon and it's just enormous everything's changing everything's even incredibly competitive in technology and no we're not the monopoly the government is looking for so that's what you have to say as a CEO no no I technically I have sort of this conspiracy theory of who I think the top five people that the company understands something what I told you and then the other thirty thousand below them have no idea why the business works and they sort of think it's because the free sushi or the lava lamps or all the benefits and they don't understand that it's because of the extraordinary micro economics of the business and now on the other end of the spectrum if you were to leave today's talk you know I I don't believe anything Peter said I mean go open that restaurant to prove them wrong and and then if you try to open a restaurant try to get some people to invest in your restaurant they'll tell you well I don't invest in a restaurant it's a bad business and then you'll sit you'll say but this is going to be it's one of a kind it's a unique restaurant it will be the only British Nepalese fusion cuisine in Paris there will be nothing like it no competition at all and and so if your monopoly you exaggerate the scale of your market to hide the monopoly if you are an intense competition you narrow the scale of your market to make it tiny and pretend that you're not competing but what the the question you always need to ask is not the rhetorical one of you exaggerate the size or diminish the size but what is the truth what is what is really going on and so I think um I think there's always this sort of context where these things get very distorted and this is why I think this question of competition and monopoly end up being you know very very under explored but I think there's another pervert somewhat perverse reason why we don't think about monopoly question as much I think we are in many ways perversely attractive to competition because when you compete with the way our education system works you compete in school you win things and then when you win things you you get to compete again and for for more things we believe the things you're repeating for are the things that really matter and you know competition does have the benefit that when you compete you get better at that once you're competing on so if you're in high school and you spend five hours a day in a swimming pool swimming on a swim team you will get to be a better swimmer and you beat the other kids at swimming and so the competition does make you better at what you're competing on it just comes at this price that maybe you're losing sight of everything else and you forget about whether what you're doing makes any sense or it matters is valuable or anything like that and the the sort of autobiographical participles I you know I grew up in Northern California and it was sort of a insanely tracked kind of a thing I remember ready eighth grade junior high school my yearbook one of my friends wrote in I know that you will get into Stanford University in four years but one of the u.s. elite universities four years later I got into Stanford I went to Stanford then four years after that I got to Stanford Law School graduate school in the United States it's sort of you sort of win these competitions when you win the competition you get to meet again and again and again and then sort of in my mid-20s I ended up at a prestigious law firm in Manhattan and it was one of these very strange places where from the outside everybody wanted to get in and on the inside everybody wanted to get out I left I left after seven months and three days to be precise and one of the people down the hall from me I said you know as I was leaving it was good to see you leave I had no idea it was possible not to escape from Alcatraz and of course you know all you had to do was go out the front door not go back so was not quite like a prison like Alcatraz but but it was it was hard but psychologically it was some very hard for people to leave because their identity their sense of who they were was defined by all the competitions they had one you know one after the other over the years and so I think so I think there is this very uh there's this very strange way where we get caught up in these things we thought we need to you know always be very careful about it there's um they've done these you know one of the few other perspectives from this a competition monopoly dynamic um one of the things you're always told in business school is you want to go after markets that are very big but I think you want to go after markets we get to a large share and that often means if you're starting one though after a small market Facebook started with 10,000 students at Harvard University was a market that was so small you couldn't have even written a business plan people so that's ridiculous too tiny it's not interesting and you went from zero to sixty percent market share in ten days that was a good start and then they sort of built it out in concentric circles PayPal we started with power sellers on eBay like thirty thousand power sellers in late 99 early 2000 we got to thirty percent market share after about three months again a very good start and then on the other side if you have these giant markets that people talk about that's always sort of a very very dangerous sign there's uh the clean tech investing in Silicon Valley it's a bit of a clean tech bubble 2005 to 2008 there's a lot that went wrong with the clean tech companies but one pattern was that every presentation started with the first slide said we're in this enormous market it's very very big it's called energy its measured in hundreds of billions or trillions of dollars if huge numbers if you have a fraction of a fraction of that market we have a valuable market and and then it turned out that you had just insane levels of competition you have a thin-film solar panel company you've got to compete with nine other thin-film solar panel companies and there were 90 other solar panel companies and the windmills nor the fracking and there was a Chinese manufacturing and you know if you're sort of a tiny fish in a very big ocean that's always a bad place to be and so I think you end up with this very counterintuitive a question on the on the market on the market size there is is of course there is of course also uh something about the one of the questions I always get asked to these kinds of consciousness what are some of the themes I see for the future or trends I see where the future of technology is going I always really dislike that question you know not a prophet I can't tell you what's gonna happen it gives for a very banal answers like be more people using cellphones in five years or something like that that doesn't really tell you anything whatsoever but the but the kind of thought that I've come to is that every stated trend is overrated so if you hear this is a trend that's already a little bit exaggerated so in Silicon Valley there's a trend around educational software companies healthcare IT software they're overrated trends there's a big trend around SAS enterprise software very overrated if you hear the words big data cloud computing maybe artificial intelligence you need to just run away as fast as you and you need to think that's fraud just run away and and the reason you should be nervous about the buzzwords is that when you hear these buzzwords they are a towel they're an indication like in poker that someone's bluffing and there's nothing on nothing actually there so if you sort of imagine an elevator pitch for a company we in a whole series of buzz words we are building we're building a mobile platform for SAS Enterprise businesses to bring big data to the cloud that's exactly what we're doing and might be a good business my certainly my pattern is that the buzzwords tell you that it's undifferentiated because once these categories exist there's sort of many many people in the categories many people who are doing them and you and the thing that the categories obscure is always what's unique what's differentiated what makes things one-of-a-kind and so I think a lot of the best businesses I've encountered over the last decade or so tend to be ones where where the categories don't even exist or maybe they're miss category so Facebook we've been called a social network and you know had me on other social networking sites before Facebook but I would argue that was not that's not really the correct category Facebook's really about real identity it's the first one which you had real identity let's say Google was a search engine but it was really the first machine powered search so uh so we have the great businesses are unique categories they're mislabeled categories and and that's sort of the the challenge that one you know that one always needs to needs to sort out you know this this whole there's always a sort of whole question of the conformity in thinking tonight that I'm always pushing against and you know the rhetorical way I always like to put this with it already you know already in the time of Shakespeare in English the word eight meant both primate and to imitate and so there is something very deep in human nature where we're we learned by copying we've learned by imitating one another that's how we get ideas about language our parents that's how we cultures transmitted but but in this sort of business context that's also where you get clones of clones of clones of clones and and sort of a lot of extremely sterile competition and I've often thought there's there's a very strange phenomenon with Silicon Valley where many of the very talented founders seem to be suffering from a mild form of Asperger's I seem to be sort of socially somewhat a little bit maladapted and I think I always contrast this with with people going to business school in the United States and he was a two-year MBA program typically in the United States and if you're talking about a typical person who goes to the Business School is someone who's very extroverted talkative they talk to other people they have no real ideas of their own not very many convictions we should do this experiment and we take all these people with no convictions but we're very talkative you put them into a hothouse environment put them in the same place for two years and they talked to one another for two years as to what they're going to do next with their lives and they've done these studies at Harvard Business School where they found that the largest group of the people always ends up doing the wrong thing so you know in 1989 everybody wanted to work at Harvard Business School everywhere work for Michael Milken the junk bond Keynes was just you know one or two years before everything blew up he went to jail they were never really interested in technology 99 2000 everyone from Harvard Business School sort of descended on Silicon Valley in a sense timed at the end of the dot-com bubble perfectly you know you know last decade it was sort of real estate or things like that and so and so that so that even though it's just so I think we have to when we see that there are sort of a lot of these founders were slightly socially maladapted all these strange ways I always think need to turn that around as a critique of our society and we need to ask the question what is it about our society that is so screwed up that a normal person who's able to talk to other people is able to communicate well is that a disadvantage because you will be talked out of all of your interesting original creative ideas before they're even fully formed they'll pick up on all these social cues you're looking at people and look at you a little bit funny you say well you know yeah maybe I won't do that I think up but just go back to opening that restaurant yeah that makes sense you just open that restaurant and so I do think I do think this question about innovation always runs into these very deep deep social dynamics let me end with one so much bigger picture thought on the future of globalization technology in the 21st century one of the one of the sort of diagrams I thought in 0 to 1 it is is this idea that there are that you know in a good 21st century we need both globalization and technological progress but I think these are two words that are often used to mean similar things but I think they're very different and I always draw globalization on the x-axis it's going from 1 to N it is copying things that work and is horizontal or extensive growth and then I draw a technology on the y-axis it's going from 0 to 1 doing new things intensive or vertical growth and and if we sort of think about the history of the last 200 years in the Western world there were periods of globalization and periods of technology so they don't necessarily overlap 19th century 1815 to 1914 was a period of tremendous globalization and tremendous technological progress in all sorts of dimensions after 1914 World War one starts globalization goes in Reverse there's less trade countries become less connected to one another but technology continues to progress very rapidly in many ways and then I would argue in 1971 maybe the Kissinger trip to China globalization begins again and the last 40 45 years have been a period of very rapid globalization and somewhat more limited technological progress centered mostly on computers internet IT software the world of bets and less technological progress for the sort that would happen 1950s and 1960s you know Rockets Concorde supersonic planes Green Revolution agriculture biotechnology so there's been sort of we've had some progress the last 40 years but it's a narrow progress around computers IT things like this so so we've had in the 20th century last hundred years we had first a period of Technology and no globalization and then we had a period of globalization and limited technology and this the shift is I think we see this in many different forms it's you know it's certainly it's um it's reflected and I think I think that even though we always talk about how there's a ferocious amount of Technology change and things are happening all the time I think there is not that much happening outside of the digital realm so the cell phones that distract us from our environment also distract us from the many ways which our environments are strangely old San Francisco or Paris Subway's are very old the buildings are old and there's this narrow place we've had progress many other ones were not or if you the culture in our society I think is deeply anti technological and I always just say all you have to do is just watch the movies that come out of Hollywood almost every movie that portrays technology is dystopian destructive it shows technology that doesn't work that kills people that destroys the planet it's a terminator with robots running around it's avatar metal disaster it's Elysium you know I watched it was a gravity movie a few years ago where they want so this space station everything went wrong and you were so happy to be back on a muddy tropical primitive island somewhere and I think that's I'm not blaming Hollywood for this I think Hollywood just reflects the the culture which is deeply anti technological and we also have this reflected we also have this reflected in the way we talk about our world today we're in the 50s and 60s geopolitically you would have only spoken of a first world and a third world the first world was the progressing advancing world the third world was sort of decoupled and permanently in in trouble so that was a pro technology but not a globalization kind of dichotomy today we would speak about the developed countries and the developing countries the developing countries are the countries that are copying the developed world so this is a when you speak of developed developing this is a pro globalization dichotomy it's about convergence it's about the world becoming more and more alike as the developing countries copied the developed world and converge with it but it is also implicitly an anti technological description because when we say that those of us living in the United States or in France when we say that we live in the developed world we are saying implicitly that we're living in that part of the world that has been developed where there's nothing new to do where everything has been done in the past and where the younger generation should have lower expectations than their parents and I think this is a conception of our society that we should very powerfully resist and that we should we need to find a way to go back to the future and so I will end with the contrarian question that I think does not get asked enough but we should ask more how can we go about developing our so-called developing world thank you very much thank you thank you very much good so so how is your trip so far your your opinion trip good it's always uh always uh it's always you always it's always very interesting you get to get to exchange views of people and also it's different ways there is you know I know I'm always we always tempted to be negative on you know certain trends and things that are they're not working but it is always very encouraged how many people are actually interested there's there isn't there is a sense that we need a new way to get back to the future that I that I find up in France in Europe you know all over the world what's your view on the both business and political environment here in Europe right now well it's always it's always hard to say what what's what's uh you know what's really going on certainly the headlines in the newspapers are generally more pessimistic there certainly are you know I'm always something I always tend to think that we would be better off we had somewhat fewer regulations and we're able to it would be easier to start businesses and and so on and so forth but I I do think I do think there's more of an openness to this now than there would have been ten years ago so so even though in absolute terms I think it's still very hard I think in relative terms I think those are I think the trends may be going in the right way so you have a few against entrepreneurs in the room today what would be your advice a piece of advice that you could give these are one of the things they should do things that you should never review well it's there are many things you should never do so it's always like it's always it's easy to do the negative right so always I can say it can do this shouldn't do that shouldn't do this the the positive formula I think it's always harder because you know if I gave you the full positive form you I already tell you everything you should do anything a great business and I would just do it myself or something but you know i I've often people sometimes ask me you know what are my criteria for investing and I don't think there's no formula at the head of sort of give it a little bit of a fake formula I always say there's three parts it's the people it's the technology it's the business strategy come on all three so business I just had to get monopoly technology is why are you doing something that's unique and the people question it was it's never about the individual level of talent you assume people are reasonably talented it's always a question how well do they work together because what's very different about a business from an academic setting academic setting is purely individual or writing is purely individual it's just you against the whole world in the business it's more like a team and and it's less structure than a sports teams you know build different roles we don't know if the game is that we're playing but the question is how well do people on that that team get along and so I often like asking the prehistory question when did when did you um when did all of you come together a bad answer is oh we met a week ago at a business networking function and we just want to start a company it doesn't really matter what that's invested in things like that and I try not to do that anymore and then a good answer is more like we've been friends for three four years one of us is on the business side one's a little more the technology side we're sort of I think a long prehistory is is often is often a good pattern you know one of the things that's always very hard one of the reasons it's always very hard to evaluate companies is that they're not they're never it's very rare that you can just evaluate them on their own so it's not like like if your time you know we have a we have a ecommerce site to sell foie gras and it's and and we're exporting it all over the world so that's that's what we're doing and and you know the the context now you know the reason to be skeptical where the context you have to you have to get to is what are other people doing how many other people are doing this and so you cannot evaluate that business like just looking at the people their business plan and and the you know the stated strategy to really evaluate it you have to actually know what everybody else is doing too and this is I think this is why the kind of Shark Tank teen this sort of TV shows we have these pitches they're incredibly misleading because they suggest that you can just evaluate the business on its own and it's always the broader context when when I invested in Facebook in mid-2004 you know a people OFF ask oh what what did Zuckerberg say why were you so press to the meeting and you know well he was he was nineteen years old he was shy he didn't really talk much at all you know the service was growing we had done our homework but my friend Reed Reed Hoffman and I had spent a year looking at social networking sites and we were going to invest no matter what happened in that meeting and so it's always you're always in this sort of much bigger context and it's a it's very critical to try to have an understanding of that so you mentioned a team building something very special happened about two years ago in Valley you guys founded in their startups in Silicon Valley seven of those are now valued over billion dollars what happened specifically I mean you're just brilliant people or was there something else yeah it's it's always um it's always hard to say exactly what worked and why and he was the bigger versions question about Silicon Valley why do things work in Silicon Valley and what can you have you copy Silicon Valley or or not speculate speculate on that I you know we had we had a very talented group of people 2002 when paper was acquired by eBay in retrospect was a pretty good time to start new companies or that many people doing it there was there was there were some very good friendships that been forged at PayPal though I think were were the basis of accounting ablation subsequent companies but you know what one variable that I always like to stress is that PayPal was it was hard it was sort of a lot that went almost wrong we had an issue with eBay we this with Visa and MasterCard and there were government regulators and the marketing channels the Russian mob did was trying to steal all the money and so there were sort of a lot of different challenges that you had and so the big lesson that you learned on one level King had gone through that three four years later was you can build a great company but it's quite hard um this is strangely not the lesson that you learn in most companies so if you're in a startup that fails the lesson you learn is you can't build a great company so next time we'll try something less ambitious so and this is by the way what I always think that it's somewhat problematic to be in a failed start and the sort of celebration of failure that often happens in Silicon Valley is a little bit misleading so I think that the failure always has a fairly high cost that it exact on people and if you fail there's nothing you can learn from it and the most important thing you do if you fail is just to find a way to move on as quickly as possible and and try to ignore whatever happened but then on the other end of the spectrum if you're an ace if you're at a company where everything just works incredibly well which i think might have been true Microsoft or maybe Google we're just you know you hit on something it's and it just seems to work automatically but people who come out of those companies have also learned very little about startups and so if you look at the history of Microsoft or Google even though on I mean I think on paper very talented people they produced are fewer great companies because somehow they were an environment where they really did not learn much at all about startups so you know I think I think this PayPal had about 200 for about 200 people of tiny actors on the engineering product businesses there so relatively small team and of those 200 you got 7 billion dollar-plus companies in the next 13 14 years Google probably has 20,000 people like that and I think it's produced fewer than seven companies so and so I think it's it's not there at least as talented as the people we had at Facebook if you evaluate them on a credential basis or IQs or something like that but but but I think it was just they were in this context where you learned really the wrong classes so you're still the dreaming of flying cars well I I still look I still I still think that we would be well off if we made progress in in many many different directions I we've a tag line on our on our venture capital website where it says they promised us flying cars all we got was 140 characters it always gets interpreted as this anti Twitter comment and I don't think it's fair though to critique Twitter specifically Twitter still is a very valuable company developed a new communication channel but but I do think that if our civilization is going to be taken to the next level we need to have innovation in in many different domains and not just in IT also in ideally and a lot of other things it makes sense for people to focus on IT this is what's been working the best for the last 3040 years three quarters about the capital at founders fund still gets put into IT related businesses internet software mobile internet so you know I'm not trying to fight that trend I think that is that is still the big trend and it makes a lot of sense at the same time I would say that from the point of view of our society it would be good if we figured out more ways to innovate in the world of atoms as well energy materials science biotech medical devices maybe transportation so there's sort of a lot of other areas where it would be good to figure out ways to innovate it's often hard to get the microeconomics to work because of its it's something about IT where it's easier to get to monopoly and there's something about many of these other areas where it's harder even though I think it would be very good for society okay maybe we could take a few questions from the audience hi I'm just wondering to compare to the United States do you think that France understands how much technology matters because it seems that we're a little bit behind we have no such thing as the Silicon Valley well it's it's um you know I'm not let me let me start by saying I'm not sure anybody is that far behind in the world today you can get access to information you can get to the frontier you know relatively easily you know when when Mark Zuckerberg started Facebook and he was 19 years old he was a sophomore in college and the critique he heard in Boston was you're too young you're still far behind in your education you finish your education how do you possibly start things you haven't learned everything that you need to learn and I think the reality was that the frontier that there actually are things that you could do where the frontier is not that far away there certainly are domains and disciplines where you have to study or work for many years or the frontiers very far ways string theory physics person you have to undergraduate graduate school postdoctoral it's like 20 years before you get to someplace where you can do things in the area of software specifically you know I don't think that's true you know in general and so I think the frontier is not that far away there certainly are advantages Silicon Valley has had over the years our network of facts capital you know the history of groups of people but there also there also may be disadvantages and so you know today I would say the disadvantage in Silicon Valley it's gotten very expensive you know a one-bedroom apartment in San Francisco costs $4,000 a month the office rents are prohibitive they're sort of the competition between companies for talent has become so intense that if your company gets into even a little bit of trouble everybody leaves and that's not the not the healthiest environment which to build a business so so I think 10 years ago I would have argued that the positives of network effects in Silicon Valley were absolutely dominant today I think it's a much more much more of a mixed story I gave a talk on a Stanford University campus in 2005 sort of panel discussion and and the the title of the panel was where will we find the next Google there like a search problem to find a company that's like the search engine this is very important search problems $100,000,000 search problems with my investor or employee where do you find it and the the answer I gave at the time was I think it's within five miles of this room eight kilometers within eight kilometers of the room and yes so much for where it is but you have despite looking within eight kilometers behind it and I think in retrospect one could argue that the next Google was Facebook which was about two kilometers from that room now if I had to give the same talk today I think I think it's not a 50% chance that it's within eight kilometers I'd say it's maybe a 30% chance that it's within 80 kilometers you know so it's still a lot that's happening but I think it's going to be much more much more distributed and and the places I would look in the decade ahead are I would look everywhere in the world but I would look I would look at all over the developed world because I think it's in France in Germany Scandinavia UK maybe Japan Korea us these are the countries where there's a need for technological innovation if you're in Nigeria you're in it India maybe there's gonna be innovation it doesn't it's not as important you know you know those countries you can have a lot of progress just by copying you will not have progress in France or the u.s. if we just copy and so so so I would be looking at at Israel I'm looking at those parts of the world for poor innovation I think it's going to be somewhat more distributed Peter can you just explain out you you develop in terms of customer acquisition PayPal in term of you mentioned you at first you you were focused on the 200 best sellers on on eBay and how did you get them it was through sales force or marketing and after what was a step after and what do you recommend in terms of mix of sales and marketing to acquire a large number of company for your [Music] you know at the time that was a very crazy way to do it maybe it still is very crazy and so that it seemed like a crazy way to do we managed to break through I would say I'm again there's no categorical answer I do think the question of distribution is always the hardest questions in these businesses it's always the one people underestimate the most and you can always think of a start-up or a technology business it's a combination of technology and the communication of technologies you have this technology and you are explaining to people why it works years ago I was someone said I have a great new anti-spam technology to prevent spam and your email and it's like well hope it works or not you have to figure out some way to convince people that it works and you can't do it by talking to them like you're talking to me it's too inefficient if you talk to everybody in one person at a time and so how can you convince people of your anti-spam technology without spamming people and and there's you know this is sort of the sort of the general problem is that there's an enormous amount of clutter out there it's very very difficult to break through my you know one one general framework I that I tend to think is you know you can even do viral marketing you can do marketing you can do sales we hire salespeople it's a higher price point you can hire you know more expensive salespeople it's a very very high price point you can do business partnerships with bigger companies so all these different channels for distribution as a general matter I think what's worked for companies when companies succeed you just need to get one to work just get one to work that that's enough and normally you don't have resources for more than one so it's you want to try to figure out which of these can work and then put put all the effort and that one that one particular channel one of the patterns I often get is you know you know you have a presentation this is more the revenue model slide but it also works for distribution and a company says you know we're doing we have this we have this big we have this big new media site with lots of traffic and we're gonna make money in one of the following five ways a through advertising B through subscriptions C by ecommerce D by data mining and selling things to doctors and you know sort of like we have ABCDE all these different options the the list of options is a sign that you don't know what you're doing because it's much better to say we're just gonna do make money by a because that suggests that you've really thought through the one option that's that's going to work and so the superset is actually it's again a it's again a sign that you don't know what's going on so that's that's why I think often true of the revenue model same thing is true of distribution so if you say we're gonna we're gonna get people to use our product by radio advertising and television advertising we can do internet advertising we're gonna we're aware and have people those are the clown outfits running around Paris and we're going to also have billboards on subways and then we are going to and then we are going to have a lottery prize that everybody will participate in and then there's going to be viral word-of-mouth marketing we're gonna do all of those things pattern is you don't know what there's no reason to think any of them are working and the fact that you're doing so many different ones it's telling me that you don't think any one of them in particular is going to work hey hi Peter here thanks for being here first I have two questions about competition so the first thing you told us about your experience of going to Stanford and graduate school then the law firm and how the competition kind of didn't make sense so the first question is how is the new system better like just the startup ecosystem isn't it the most competitive echo system ever and instead of being judged by academics you're judged by VCS and business end rolls and you're going to gain attention in networking events and blah blah blah so it's super competitive so how is it is it better has it changed in any way and the second question is on the company level you say a monopoly is is good so cabs had a monopoly and now uber has disrupted the monopoly and is trying to be the new monopoly so how do you judge how do you choose between two monopolies is it because it's a government monopoly is it because it's a global or local monopoly so these are two questions all right two big questions there um so let me see there's um there's certainly um a way in which the startup ecosystem can be come just as sterile and stupidly competitive as the various tracked educational systems in our society and so and and so I think the thing the the pattern that I always resist is if there's excess homogeneous age it's if everyone's trying to do the same thing and so I was talking that you know a friend of mine a few years ago and I was asking him so you know what do you want to be doing in five years ten years time it was like oh it's very close you know it's very clear in five years I'm going to be an entrepreneur I think that's always a terrible answer because that's even though it's a French word it's it's it's it's it's like saying I want to be rich I want to be famous it's too abstract and and so if if your goal is to get a graduate degree or to be a startup CEO that's again it's too abstract and that's sort of and on that level can very much be the same mistake and then I think but I do think the you know at its best the the business formation context is one where the challenge is to differentiate very powerfully what are you doing that other people are not doing and you're not you know you can choose to do something where it's the exact same thing so we're gonna sell dog food on the internet and there are 20 other e-commerce sites that are selling dog food this was one of the themes the 90s tech bubble ders pets calm and pet Opia there were like 20 of these dog foods selling sites and that was that was the hyper competitive hyper mimetic a runaway imitation runaway competition did not work but I think you always choose to do something very different and I think that's somewhat harder to do in our educational system where you're you know you're the structure just is to pressure you to compete in that way so stars can be like that I don't think they have to be you know I think on the on the question of when is a I I think on the inside you always want to have a monopoly so if you're a cab driver medallion you want to keep it if you're if you're Ober you have its emerging monopolies definitely you like to have that to the the there's a different question from the outside from the point of view of society what monopolies are good what monopolies are bad and we have we treat them very differently you know we have antitrust laws against bad monopolies where the monopoly is sort of like a rent collector or it's like a tax collector at a bridge we just collect a toll I say I think certainly a lot of the telecom companies cable companies sometimes feel like they're close to bad monopolies post office how he was it's kind of a bad monopoly and then and then we also have laws to protect good monopolies with patents intellectual property because if you don't get a monopoly in your ideas they will be stolen too easily and somehow not enough will be rewarded so there's always from the social perspective it's always this it's a very tricky question when are the monopolies you know one of the monopolies good one are they when are they bad I think I think that you know this is good I think in a dynamic world you do new things and it creates new value so you'd say Apple had a monopoly on smart phones for a number of years but this was not a bad monopoly where it created artificial scarcity because before Apple there were no smartphones at all that worked so it was actually creating so this was a dynamic thing wasn't it so in a dynamic world I think the monopolies can be good in a static world over time they become like rent collectors and and bad and and so it's always a little bit of a judgment which which it is I would say you know on the uber versus cab driver dynamic you know one of the reasons by the way that the fight is so intense is that they're not as differentiated as they would like to be so this is uh and this is this is why I think the I'm investor in Airbnb and this is what I still think Airbnb is he's gonna have fewer regulatory challenges than uber because the regulatory challenges always come from the intense competition where the competitors then want to be protected or existing when I quasi monopolies want to protect it and that's what gets the regulatory piece going so you could say Airbnb is somewhat threatening to hotels but it's just very different so it's only it's it's only indirectly really competing with hotels it's mostly just doing something very new whereas whereas uber is sort of a much more much more zero-sum competitive dynamic and that's why you know whatever you think of the regulations here in Paris or elsewhere it feels very natural to me that uber is the sort of company that will end up having far more regulatory challenges that have been a company like Airbnb I Peter I'm selfish co-founder and CEO of Lydia we a mobile payment company based out of France we believe that mobile payment should replace cash not contactless cards at McDonald's checkout today we have about 300,000 user in France and adding a new thousand user every day we focus on college campuses where we having presence in over 180 of them and we change basically the way people play on that campuses and exchange money with each other in about two months we have a half the campus using our system we raised three million about and one and a half year ago and we know raising and you around the financing so my question is going to be pretty personal would you give me five minutes for pitch always a loser I'm always really bad at answering these questions on the spot here but no it's again I I can't um I can't evaluate anything based on a three-minute description or even a 30-minute description I can't because the the Kansai as I was just in my talk the kinds of questions I would have to know more about are what are other people doing what are the barriers you know all sorts of things like this so I'd have to sort of understand the whole context in ways that I I don't don't remotely understand I I would say one of the one of the challenges with payments companies since is and I think this is true of many other things but it's um I always think it's unusually true even more true of payments in many other areas is its back to the distribution question how do you get people to use your product and you need to have something that's dramatically better for some set of people so that some early people start start using it so it needs to be like a very big Delta for some set of people and and one of the problems with payments or with many other areas is that we have systems that exist that are not great we often have systems our society they work but they don't work well they're okay they're not very good and we can envision systems that would work much better but these systems that would work but there's no natural transition to go from the bad system of today to the very good system of tomorrow because the very good system of tomorrow is there's no single person who has an incredibly urgent need to adopt it and and so the question is always where is you know who are the small subset of people where there's a very steep gradient so when PayPal started because we're gonna be the new world currency replace the dollar maybe there's what's wrong with the dollar printed by money it's Fiat it's it's dirty it's I'm hygienic you get diseases when you touch money though all these things I could say where it's a bad thing and if we got rid of the dollar we could get too much better world very hard to transition you know it's like it you know I'm gonna give you a chicken in and I'm gonna give you this I'm gonna give you a new piece of paper and you give me all your cash doesn't quite work you know so getting the transition to work really really hard what we did succeed at PayPal was not a new kind of currency but a new payment system and it was on a very narrow place where you had these power sellers on eBay who couldn't accept credit cards and so in the u.s. they still had to use cheques it was incredibly backwards more backwards than anything you had in Europe took them seven to ten days and then if you could do something faster you could get those people to adopt it I don't think you could have built PayPal in Europe in the late nineties because people in at least in certain parts because people weren't using cheques and so the payment systems are actually more developed and so paradoxically that meant you couldn't come up with something that was enough of an improvement to to bring people to adopt something new so I think there's always this question where is the subset of the subset of the users where the intensity is so great the pain is so great the need for it is so great adopted and want you to always avoid these kinds of systems where it's sort of it's it's a tiny benefit for a billion people hi my name is Alena Alec I'm a co-founder and CEO at started productivity app called time joy I've been out of Silicon Valley for a few months so since you're I think just came back from there I'm just wondering so I read only news a lot about the bubble bursting and the bloodbath that's happening there now layoffs and valuations going down so I'm just was wondering to get your perspective on what's happening really there and how that might affect what's going to happen with the funding investor environment in Europe thank you well let's see I think that I you know that the thing that I've said I think that bubbles our psychosocial phenomena that the bubbles happen when the public gets involved so we had a bubble in the late 90s when you had a lot of tech IPOs we had a housing bubble in the 2000s where everybody was frantically trying to buy a house I'm not sure that there is a bubble in Silicon Valley today for the simple reason that the public at large has not been involved you know in 1999 there were 300 tech companies that had IPOs in Silicon Valley I think in 2015 it was something like 15 or 20 companies maybe so the companies are staying private much longer and it is not a dynamic that's pulled in that that you know that that's sort of pulled in the whole society in the way in which the dot-com bubble in the late 90s or the housing bubble in the 2000s did now I think it's possible there are distortions you know you know I said you know I think there are some bubbles we have in our society I often talk about the education bubble I think that's what's gone wrong there I think there is probably some sort of bubble around government debt and the money printing there's a bubble with these very strange negative interest rates that you have Europe and and and and these sort of quantitative easing bubbles do actually affect everybody including Silicon Valley so I think it's um it's possible if there's a distortion in valuations there's going to be some sort of correction in the in the months and years ahead but I think I think that it's a mistake to see it as somehow centered on Silicon Valley this time I think if it's centered anywhere it's centered on the European Central Bank the Federal Reserve or the various central banks that have been printing money like crazy at the center of the distortion is something like government bonds rather than startup equities you know the thing I the thing I the the line I had over the last five six years is that I thought the two big macroeconomic trends were that our governments were fighting a war on cash because they were printing money and they were fighting a war on credit because they were regulating the banks more and more the two wars in many ways cancel each other out so it's a self-contradictory war the war on cash you print money and the worn bank a credit says the banks can't do anything with the money that you printed and so the two wars sort of cancel out we don't get too much inflation because they have this canceling effect but as an investor I thought you want to be very far away from cash and very far away from credit because that's where those are the things that are getting destroyed so you don't want to be in the bank you don't want to have you don't want to have all your money in cash and and investing in startups has been you know adventure capital as an asset class I would argue is something that's been very far from cash and very far from credit so I think it so even I don't think it's immune to the QE bubble I think one could argue that's about as far away as you can get from from what I think the real bubble is [Applause] you you

Channel: Cap Digital

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Keywords: peter thiel, thiel, cap digital, paypal, keynote

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Length: 65min 53sec (3953 seconds)

Published: Tue Oct 15 2019