Peter Thiel: Going from Zero to One

in teaching entrepreneurship or writing about entrepreneurship it's it's there's a big challenge in it because I think there is no single formula as you can tell from the last few speakers it's always a very very different story and I think every moment in the history of business every moment the history of technology happens only once the next Mark Zuckerberg will not be building a social networking site the next Larry Page will not be building a search engine the next Bill Gates will not be building an operating system company if you're copying these people in some sense you're not learning from them and and this is why I think there is no science to business science starts with the number two it starts with things that are repeatable and experimentally verifiable in one way or another whereas I think you know every great company is one-of-a-kind and and the question how do you get from zero to one and so the starting point for my book zero to one is that is this sort of anti formulaic approach to take this a question of singularity and uniqueness very as the central question on and I try to get it through a variety of sort of contrarian questions what great business is nobody building tell me something that's true that nobody agrees with you on these are often quite hard questions to answer because we think it's hard to come with some new truth or it's often requires courage because you often have to go against conventional wisdom in one way or another I want to maybe share two or three of these uh contrarian truth that I believe that people generally don't understand other and I have my book 0 to 1 is a whole set of these things things that I believe to be true that most people do not agree with me on a first first big truth that comes right out of this this idea of unique businesses I think that um all if you're as founder or entrepreneur what you want to aim for is monopoly you want to aim to build a company that is one-of-a-kind and that it's so far differentiated from the competition that it's not even competing and I think this is the conventional wisdoms always the capitalism and competition are somehow synonyms I believe they're antonyms a capitalist is someone who's in the business of accumulating capital a world of perfect competition is a world where all the profits are competed away if you want to compete like crazy then you should just open a restaurant in Chicago and and and I think the the great companies like Google so the paradigm example I use has had no serious competition in search since 2002 when it definitively distance itself from Yahoo and Microsoft and as a result it's been generating enormous cash flows for the last 12 years I sort of get at this up you know I think I think that I think there are some two different reasons this monopoly and competition idea is not understood one is somewhat intellectual because the people who have monopolies don't talk about it they pretend not to have monopolies for reasons that I will leave to your imagination and the people who don't have monopolies um pretend to have something unique about their business because otherwise nobody would invest or give them any money and so and the way you do this is if you have a monopoly like Google you will pretend that you are in a much much larger market so you will never as Google talked about the search business and say we have a 66% share of the search market and we're much more dominant than Microsoft ever was with the operating system market in the 1990s you will instead say that we are a technology company and technologies this vast space where we're competing with Apple on iPhones and we're competing with Facebook on social and we're going to build a self-driving cars we're competing with all the car companies in Detroit and there's just competition everywhere and so it sort of gets obscured by making the market appear to be bigger than it really is and then conversely if you were to listen to my talk today and run out of here and decide you had to start a restaurant immediately um and you were you would Don and you talked to various investors and they'd say well I don't want to invest in a restaurant because I know they all go out of business I will lose all my money you will tell them some idiosyncratic story where this is a one-of-a-kind restaurant it's completely unique and very different from all the others is the only British Nepalese fusion cuisine within in downtown Chicago on and so this or this fictional story that gets told the other way and so I think that because of these uh distortions that people tell about their businesses I think this uh this monopoly question ends up being very very underappreciated and and and we sort of under waited as a variable intellectually but I think there's also sort of a second reason that this is not understood that well you know I sort of uh you know the opening line of Anna Karenina is that all happy families are alike all unhappy families are unhappy in their own special way and I think the opposite is true of business I think all happy companies are different because they came up it figured out some way to radically differentiate themselves and escape from competition all unhappy companies are alike because they fail to escape the essential sameness that is competition the chapter in my book entitled all happy companies are different God exerted by the wall street journal and they retitled it a little bit more provocatively with the title competition is for losers and and we and the reason this is such a provocative title is because we always think that the losers are the people who can't compete effectively enough the losers are the people who are slow on the swim team in high school the losers are the people whose grades or test scores aren't quite good enough to get into the the right universities or something like that and so the idea that somehow competition itself is something that we are perversely attracted to is is very counterintuitive and yet I want to suggest that that there is always this incredible poll that competition has on us the sort of the autobiographical anecdote of my book when I was a teenager in my 20s and the advice I'd give my younger self was incredibly driven by these sort of competitive dynamics my 8th grade junior high school yearbook one of my friends said I know you're going to make it into Stanford and four years and I sure enough I got into Stanford four years later then went to Stanford Law School and then ended up at a big law firm on Wall Street is one of those places where from the outside everybody was trying to get in on the inside everybody was trying to get out when I went up when I when I left after seven months and three days one of the one of the people down the hall from me told me it was reassuring to see me leave he had no idea was possible to escape from Alcatraz and of course all you had to do was go out the front door but but it was it was psychologically hard for people to do this because um their identity was so wrapped up in the competition's they had one the people they had beaten along the way that they could not even imagine doing anything different and and so I think this is and this is why I think competition is always this very two-edged thing when you compete ferociously you will get better at that which you're competing on but you will always narrow your focus to beating the people around you and and it often comes at this very high price of losing sight of what is more important or perhaps more valuable um and so I you know I think there's this very strange phenomenon in Silicon Valley where where a lot of the most talented start stars lot of great startups seem to be run by people are suffering from a mild form of Asperger's and I think I think we need to always turn this fact around and view this as an indictment of our whole society because what does it say about our society what anyone who does not suffer from all Asperger's who is socially well adapted will be talked out of all of their original creative ideas before they are even fully formed who will sense this is a little bit too weird that's a little bit strange that sounds a little bit crazy people are looking at me in a weird way and I think this is this is something that we must all realize is sort of a deeply endemic problem they've done these studies at Harvard Business School which I think you can often think of the Business School student as a Profile in anti Asperger's a sort of very extroverted often have no real convictions and and you have sort of a hothouse environment which you put all these people for two years and at the at the end of the two year process they've also talked to each other and they've concluded they should all try to catch the last wave and it's invariably a pretty bad idea in 1989 they all wanted to work for Michael Milken just a year or two before he went to jail you know they were never interested in tech or Silicon Valley except for 99 2000 when they time the dot-com bubble implosion perfectly and then sort of 2005 207 it was all housing and private equity and and things like that and and it's it's easy in some ways to make fun of people in business school or people who sort of conventionally tracked but I think we we should recognize that we're all very prone to this you know the already in the time of Shakespeare the word eight meant both primate and to imitate and there is something very deep in human nature that is imitative it's how it has a lot of good things that's how language gets learned by kids it's how culture gets transmitted in our society but it also can lead to sort of a lot of insane behavior lead to the madness of crowds to bubbles to to sort of mass delusions of one sort or another and and I think it can and I think it's you know advertising you always think of we always tell ourselves that were not that prone to this and I think that's something I'd encourage all of us to rethink you know we always think of advertising is something that just afflicts other people that never afflicts ourselves I think this is very far from the case and so and so the monopoly competition is not just this intellectual failure it's also this thing where you have a tiny door where everyone's trying to rush through and there may be around the corner a vast and a secret gate that no one's taking and you should always find the secret path and go ahead and take that to other quick thoughts on to other quick ideas on things that I believe to be true that most people um don't agree with me on I think there are many answers this question what is true that people don't agree with me on and most and most of us actually don't think there are that many answers left we think that all these answers have been discovered and I sort of give a trichotomy in my book of conventions which are truths everybody already knows the other end there are mysteries which are truths that we can't figure that nobody in this world can figure out and there are things that are in-between that are hard it takes a lot of work but if you apply yourself you could figure those out and I call those secrets and I think there are many secrets left now there are certain areas where it's not that promising to look so you know if you were growing up in the 17th or 18th century there were some empty spaces on the map and you can become an explorer and discover some more secrets about geography or in the 19th century we're still some empty spaces left on the periodic table of elements and you could go into chemistry and discover some some things in basic chemistry and so I think geography basic chemistry these are areas that have been fully explored these are areas where you're not going to find any secrets these are not promising areas where you will discover a new truth that no one else knows or and that can become the basis for a great insight or great business but I think most areas are not like this and I think that there are many directions we can go in where the frontier is still surprisingly closed this certainly has been an enormous amount of ideas and businesses that have been discovered in this IT space for the last 40 years and there's no reason to think that's going to stop around computers internet mobile internet software there are many things people find the ideas are often they always seem shockingly simple in retrospect they're they're pretty hard ex-ante you know when we came up pay pal with combining email with money you know that was a secret it was not an easy thing to figure out no one else in the world had figured it out but it was you know far from impossible to do and you know once we came up with the idea we thought well it's you know it's amazing no one's thought of this yet we have to really execute fast before before anyone catches up and and and so I think there are many things there many secrets like this that are left to be discovered and we see this with all the new business that emerged in these areas I actually think that we should try to find some in a number of other areas as I think that everything from biotech to space technologies all sorts of other areas of technology I think have been somewhat under explored in recent decades and that it would be it would be good if the cone of progress we're not just this narrow cone around computers in the world of bits but we're expanded to include the world of atoms in many many other ways so second idea is there are many many secrets left for us to discover third on third idea that I'll end on and that is the basic dichotomy in my book I think I think for us to have a successful 21st century we're going to have to have both globalization and technological innovation and I think these are two very different modes of progress on and people often use these words interchangeably and I think that's always a big mistake I draw a globalization always on an x axis I describe it as copying things that work going from 1 to n horizontal or extensive growth China is the paradigm of globalization today and to first approximation what China needs do in the next 20 years is just copy everything that's working in the West or maybe skip a few steps but who execute against that the people in China will be much better off in the decades ahead and then I always draw technology on the y-axis I described it as vertical or intensive growth doing new things going from zero to one and and and we can sort of see that this big difference in globalization technology if we think about the history of the last 200 years there have been periods of globalization there have been periods of technology the 19th century was a period of both from 1815 to 1914 you had tremendous technological progress and tremendous amounts of globalization taking place after 1914 you know with world wars communism all sorts of other events globalization sort of went in Reverse the world became a much more disunited much more fragmented sort of a place but technology continued to go at a ferocious pace and I would argue since maybe about 1971 when Kissinger went to China and globalization restarted began in ferocious rate the last 40-plus years technology has been going a little bit more slowly where it's been as everybody's had a narrow focus on computers and a little bit less of other things the last century unlike the 19th century has been a period where we first had lots of technology but no globalization and we've now had a more recent period where we've had lots of globalization but only limited technological progress and this change is reflected in a very different way in which we talk about today's world in the in the 1950s or 1960s we would have described the world as being divided between the first world and the third world the first world was that part of the world that saw relentless accelerating technological progress the third world was that part of the world that was permanently stuck permanently screwed up in one way or another so no globalization but lots of technology today we would divide the world into the developed and developing nations the developing nations are those that are copying the developed world and and so this developed developing dichotomies a pro globalization dichotomy it's sort of a convergence theory of history where the entire world will become more and more homogeneous as globalization continues apace but it is also implicitly an anti technological dichotomy because when we say that we're living in the developed world we are implicitly saying that we're living in that part of the world where nothing new is going to be done where things are finished they're complete and we can expect decades of stagnation and sclerosis and the younger generation should expect to have a lower living standard than their parents and we have sort of this rather bleak view of the future and I think we should not accept that sort of a label we should not accept this idea that we're living in the developed world and so I will I will end by saying that I think we should always return to the very contrarian question how can we go about developing the developed world thank you very much

Channel: Chicago Ideas

Views: 558,558

Keywords: PayPal (Venture Funded Company), Facebook (Award-Winning Work), Investment (Industry), Venture Capital (Industry)

Id: rFZrL1RiuVI

Length: 17min 52sec (1072 seconds)

Published: Fri Jan 30 2015