By Peter Thiel
Every moment in business only happens once. The next Bill Gates will not create another operating system. Every time we create something new, we go from 0 to 1. The art of creation is singular. Preface
Technology matters: Without technological change, if China doubles its energy production over the next two decades it will also double its air pollution. 9
Don’t try to create a new market prematurely. Improve on existing competition. 20
Focus on product, not sales. If your product requires advertising or salespeople to sell it, it is not good enough. Tech is primarily about product development, not distribution. 21
All Rhodes Scholars had a great future in their past. Opportunity costs are enormous. 37
Twitter traded at a premium because investors assumed it could generate cash flow in the future. Growth Company. 44
Proprietary Technology must be at least 10 times better than its closest substitute in some important dimension to lead to a read monopolistic advantage. 48
Network effects can be powerful but you will never reap them unless your product is valuable to its very first users when a network is necessarily small. 50
Economies of scale – A good startup should have the potential for great scale built into its first design (such as an online business). 51
Any big market is a bad choice since it is already being served by competing companies. When entrepreneurs want to get 1% of a 100bn market that is a red flag. A large market will lack a good starting point or it will be so open to competition (like fitness) that it will be very hard to reach even 1%. Cut throat competition means your profits will be zero. 54
Don’t Disrupt. Don’t try to directly challenge any large competitor. 57
“Shallow men believe in luck, believe in circumstance…strong men believe in cause and effect.” – Ralph Waldo Emerson 60
The Finance Industry epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth. 70
When a big company offers to acquire a smaller company/startup, it always offers too much or too little; founders only sell when they have no more concrete visions for the company, in which case the acquirer overpaid. Definite founders with robust plans don’t sell, which means the offer wasn’t high enough. 80
Vifredo Pareto – The Pareto Principle or the 80/20 rule. 20% of the people owned 80% of the land in Italy. 83
Spray and pray approach to investing usually produces an entire portfolio of flops with no hits at all. This is because venture returns don’t follow a normal distribution overall. A small handful of companies usually radically outperform all others. (500 startups?) 85
“It doesn’t matter what you do as long as you do it well”. This phase is completely false. It DOES matter what you do. You should focus relentlessly on something you are good at doing, but before you do that you must think hard whether it is viable in the future. 91
From an early age we are taught that the right way to proceed is to take one very small step at a time, day by day, grade by grade. If you overachieve and end up learning something that’s not on the test, you don’t receive credit for it. But if just do what you are told you receive an A. This is called Incrementalism. 97
Risk aversion (fear of failure), complacency (you got into an Ivy you are set for life) , and flatness (if we have a good idea we discard it cause we think that someone else in this huge world would have already thought of it) are all impediments to our success. 98
If you come up with a good idea, who do you tell? Whoever you need to and no more. In practice, there’s always a golden mean between telling nobody and telling everybody – and that’s a company. 106
Thiel’s Law: A startup messed up at its foundation cannot be fixed. 107
Founders should share a prehistory before they start a company together, otherwise they are rolling the dice. 109
The problem with high cash compensation is that it teaches workers to claim value from the company as it already exists instead of investing their time to create new value in the future. A cash bonus is slightly better as it is contingent on a job well done. 114
Equity is a powerful tool due to its limitations. Anyone who prefers owning a part of your company to being paid in cash reveals a preference for long term commitment and increasing value in the future. It is the best way to keep everyone’s interests aligned. 116