Peter Thiel vs. the Conformists

%22peter thiel%22 Logistic Curve

The best problems to work on are often the ones nobody else even tries to solve. — Peter Thiel

In this time of accelerating change, the question for business is, “What’s the next big thing?” And most companies look about to see what the successful ones are doing and copy it. This, though, is a recipe for obscurity.

Or so declares Peter Thiel in his book Zero to One, a #1 New York Times bestseller that has generated loud buzz among thought leaders of the Internet Age. Thiel and his team launched PayPal; then he sunk money into a tiny start-up called Facebook; later, he founded Palantir Technologies, which sells big-data analytics to governments and corporations; he runs a venture-capital firm or two, plus a couple of charitable foundations; today he’s worth zillions. His “PayPal Mafia” went on to start Tesla Motors, SpaceX, YouTube, Yelp, LinkedIn, and others. When Thiel talks, people listen.

Zero to One spells out seven areas where start-ups must excel:

Secrets: “Have you identified a unique opportunity that others don’t see?” This is the essence of Thiel’s argument. Your basic task is to think deeply in areas overlooked by the market. In your favor: most people don’t dare swim against the current, while most great fortunes are made by those who take the plunge.

Technology: “It is better to risk boldness than triviality.” Thiel urges you to develop something ten times better — a game changer that people will climb over each other to get, something that helps you obtain a monopoly in your market.

Team: “What important truth do very few people agree with you on?” Thiel asks this of every prospective employee. He searches for brilliant people who think for themselves, play well together, love what they’re doing, and can present that effectively to clients. A founder, meanwhile, should be given free rein, despite inevitable eccentricities that crop up in this type of person, as it is the founder’s vision that focuses the team on creating the company’s success.

Monopoly: “Competitive markets destroy profits.” There is no money, and no glory, in competing against other companies by selling the same product, even if it’s somewhat better — you end up vending commoditized items with no profit margin. “A valuable business must start by finding a small niche and dominating a small market. . . . Paradoxically, the challenge for the entrepreneurs . . . is to think small.” Take your 10x improvement to a targeted niche whose members truly appreciate what you’re selling. From there, you can scale up and network your new monopoly to larger customer bases when people flock to your design.

Timing: Think carefully about when to launch. Economic conditions, fashions, and government activity can help or hinder, and it’s foolish not to plan accordingly.

Distribution: “Sales matter just as much as product.” Thiel chides start-up nerds for neglecting marketing. Each product requires a different approach: costly items need high-touch customer service, while inexpensive ones benefit from media campaigns. Again, innovative thinking is the rule. (He praises Tesla Motors for solving a distribution dilemma by controlling its own showrooms.) Thiel also believes branding is critical to good outcomes and a part of effective communication with customers — another thing nerds overlook.

Durability: “What will stop China from wiping out my business?” Your ideas must stand the test of time. Quarterly reports just don’t get it, and resting on one’s laurels is a path to bankruptcy.

“The essential first step is to think for yourself.” — Peter Thiel

Late in the book, Thiel ponders the various paths to humanity’s future, and though he won’t predict paradise or disaster, he insists we must not simply wait for it to arrive but instead create the future we want.

PayPal overcame critical security threats by developing a partnership between big-data computing and expert human pattern recognition. Thus Thiel is a big fan of such collaborations — he recommends using computer systems that do deep data searches and flag interesting bits for people to evaluate. In this way, companies can blend the inherent cognitive strengths of humans and machines into their production.

Which brings me to my only major criticism of the book — namely, that Thiel thinks computers will be inherently limited for decades to come, and that we’ll need inspired human input for the foreseeable future. “Actionable insights,” he believes, “can only come from a human analyst (or the kind of generalized artificial intelligence that exists only in science fiction.)” This is undoubtedly true — for now. But Thiel argues that totally superior machine intelligence is a far-off dream: “Even if strong AI is a real possibility rather than an imponderable mystery, it won’t happen anytime soon: replacement by computers is a worry for the 22nd century.”

And yet … and yet … Recently a super-computer defeated the world champion of Go, a board game widely considered the most complex of all, more challenging even than chess (a game also recently mastered by computers). As well, medicine and the arts and other fields are beginning to yield to digital simulations of human insight. Computers aren’t quite there yet, but they’re working hard on it.

So again, Thiel is probably right — for now. But very likely he underestimates the advent of the moment when computers consistently outperform our last undefeated mental power. 

The end of human cognitive dominance will be a moment in history hard for us to accept, much less transcend. We may (if I’m right) or may not (if Thiel is right) be the last generation of great entrepreneurs before intelligent machines take over all our work for us. What will be our purpose when machines can outperform us in all respects, including our vaunted mental abilities?

In the meantime, Thiel’s suggestions should stand us in good stead — especially to combine big data with human judgment as businesses invent the next great innovations. Let’s not miss out on that adventure.

Every time we create something new, we go from 0 to 1. — Peter Thiel

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UPDATE: Y Combinator prez Sam Altman on how to do a startup




Published by

Jim Hull

Jim Hull graduated from UC Santa Cruz with a degree in philosophy, then spent ten years as a lecture-demonstrator in the performing arts, including tours and TV appearances. More recently, Jim has produced research, copywriting, and editing for numerous clients. He also has published two books: the set of essays ARE HUMANS OBSOLETE? and a novel, THE VAMPIRE IN FREE FALL. Jim teaches classes in current events and music at The Braille Institute in Los Angeles. He applies his unique perspective to create surprising, compelling solutions to difficult problems. Jim thinks the world would work better if people spent less time dominating each other and more time working alongside those with different viewpoints to resolve the challenges we all face. CONTACT JIM: ...

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