Peter Thiel (Facebook Board of Directors) – Successful Businesses are Based on Secrets | WIRED (Sep 2014)


Chapters

00:01:53 Identifying Value in Uniqueness
00:03:54 Understanding Competition and Monopoly in Capitalism
00:10:33 Discovering Secrets: The Path to Innovation
00:14:57 Globalization and Technology: Two Vectors of Progress
00:21:03 From Big Markets to Small: Strategies for Tech Success
00:31:23 Elements of Successful Entrepreneurship
00:33:59 Understanding Silicon Valley Success and its Reproducibility
00:36:01 Innovation, Artificial Intelligence, and Globalization: Thiel's Perspectives on the Future
00:41:44 Confronting Aging and Mortality: Pushing Boundaries in Modern Science
00:45:11 Government Hindrance of Frontier Technology
00:52:09 Lessons from Not Investing in Facebook's Series B Round
01:00:15 Global Innovation Trends and Opportunities
01:04:03 Exploring the Complex Dynamics of Innovation and Investment in Tech Startups
01:07:47 Universities' Corrupt System and the Future of Education

Abstract

Peter Thiel’s Contrarian Perspective on Business, Technology, and Society

Embracing Uniqueness and Avoiding Competition in Business

In the field of entrepreneurship and business success, Peter Thiel stands out with his unconventional wisdom. He critiques traditional business strategies that often emulate pseudo-scientific formulas or war stories. Thiel’s philosophy revolves around the importance of uniqueness and distinctiveness. He argues that successful companies are those that carve out their monopolies, avoiding the pitfalls of cutthroat competition. For Thiel, capitalism and competition are antonyms; the latter being a characteristic of less profitable industries. He underlines the value of doing something unprecedented and offering a product that is unparalleled, thereby creating a monopoly-like situation with minimal competition.

Thiel criticizes the traditional methods of teaching and writing about entrepreneurship, such as relying on war stories of past successful businesses or using pseudo-scientific business books with formulas and steps for success. He believes these approaches are not relevant to those starting new businesses because historical moments in business and technology are unique.

Thiel’s book emphasizes the importance of focusing on what makes successful companies unique and different, rather than following the crowd or imitating others.

Questioning Competitive Dynamics and Seeking Secrets

Thiel’s approach challenges the conventional pursuit of competitive dynamics. He urges individuals to reflect on their motivations for engaging in competitive activities, distinguishing between genuine interests and prestige-driven actions. He also emphasizes the importance of uncovering “secrets” or truths beyond conventional wisdom, which are key to business success. His philosophy extends to various fields, advocating for innovation not just in the digital field but also in the physical world. Thiel believes that a mindset open to the possibility of discovery is crucial for progress.

Thiel believes there are many “secrets” left to be discovered, which are hard but possible truths that lie at the core of great businesses and drive innovation. He challenges the notion that all truths have already been discovered and that there’s nothing left to explore.

Thiel emphasizes the importance of challenging conventional views and assumptions, and being willing to explore new possibilities. He believes there are still intermediate-level secrets that can be unlocked through focused research and thinking.

Globalization Versus Technology

Thiel differentiates between globalization (horizontal growth) and technology (vertical progress). He observes that while the 20th century experienced periods of both, the shift from the mid-20th century to the present reflects a change in terminology from “first world” and “third world” to “developed” and “developing” worlds. He challenges the notion of living in a fully developed world, advocating for continuous technological advancement.

Globalization involves copying things that work, while technology involves doing new things. The 19th century saw both globalization and technological progress, but the 20th century has been characterized by periods of globalization without technology and vice versa.

The shift from the 50s and 60s today is in the way we talk about the world. The developing-developed dichotomy is pro-globalization but implicitly anti-technological. We should resist the idea that we’re living in the developed world and accept the challenge of developing the developed world.

Thiel shares PayPal’s exploration of cryptocurrencies and encryption technology as an example of a secret they pursued. Even though they didn’t succeed in building a new digital currency, the process deepened their understanding of payment systems and inspired innovation.

Thiel believes that the government’s hostility towards science and technology hinders progress in these fields. He views the government’s involvement in science and technology as ineffective and outdated. Thiel thinks that the government should focus on not obstructing scientific progress rather than trying to promote it.

Thiel expresses concern about the politicization of scientific funding, which he believes favors consensus projects over innovative and unconventional research. He criticizes the funding process, suggesting that it rewards researchers skilled in grant writing rather than those with groundbreaking ideas.

Thiel mentions Gresham’s Law in the context of scientific funding, implying that the ease of securing funding for conventional projects discourages eccentric and innovative scientists. He observes that this dynamic leads to the decline of eccentric scientists, who are often the source of groundbreaking discoveries.

Views on Data Privacy, Facebook, and Market Disruption

Addressing the topic of data privacy and Facebook’s dominance, Thiel acknowledges the complexities of privacy issues while asserting the value Facebook has created. He criticizes the overuse of the term “disruption,” suggesting a focus on creating new markets. Thiel also delves into the challenges of establishing a new currency, referencing the limitations of Bitcoin and emphasizing the importance of a large network effect.

Peter Thiel prefers Facebook’s data ownership to government control, emphasizing the value and connectivity brought by the platform. However, he acknowledges the importance of privacy debates and the need for clear boundaries.

Thiel criticizes the overused buzzword “disruption” and argues for building new markets rather than breaking existing ones. He emphasizes the challenges of creating a new currency like Bitcoin due to the need for a large network effect.

Thiel highlights the importance of team dynamics and cohesiveness in successful tech ventures. He emphasizes the need for strong working relationships among team members to avoid internal conflicts that can lead to failure.

Thiel observes a correlation between mild forms of Asperger’s and success in tech businesses. He suggests that society’s emphasis on social adaptation may stifle original and creative ideas, leading to missed opportunities.

Thiel emphasizes the importance of focusing on small initial markets to achieve monopoly status. He warns against targeting large markets initially, as it leads to intense competition and the need to overcome numerous competitors.

Thiel criticizes the approach of many cleantech companies that target vast markets, making it difficult to establish dominance. He suggests that focusing on niche markets and specific technologies would have been a better strategy.

Characteristics of Successful Entrepreneurs and the Role of Asperger’s

Thiel identifies key factors for entrepreneurial success, including teamwork, innovative ideas, and strong interpersonal relationships. He also observes a correlation between mild forms of Asperger’s and success in tech, suggesting that societal norms may inhibit original ideas.

The current bubble exists in government, particularly in printing money and purchasing government bonds.

Investing in illiquid tech stocks is a strategy to hide from the government bubble.

Lessons from Silicon Valley and the Future of AI

Thiel discusses Silicon Valley’s unique advantages and challenges, cautioning against attempts to replicate its success. He addresses concerns about AI and job loss, emphasizing the complementary nature of computers and humans. Thiel also touches on technology’s role in addressing aging, expressing a moral imperative to combat death.

Peter Thiel suggests looking beyond Silicon Valley to find areas with specific advantages for innovation. London’s financial expertise makes it ideal for financial technology innovation.

Thiel describes DeepMind’s work as a “Manhattan project” for AI, aiming to create computers as intelligent as humans. He emphasizes the political implications of such an achievement, likening it to an alien encounter.

Thiel dismisses the concern that AI will replace jobs in the near term. He considers the fear of technology as a cultural bias against science and technological advancements.

Thiel sees computers and humans as fundamentally different and complementary, rather than substitutable. He believes globalization poses a greater challenge to the middle class than technology.

Thiel acknowledges the significant advancements in life expectancy over the last 150 years. He highlights the steady increase in life expectancy, with each day of survival adding five or six hours to the overall life span.

Government’s Role in Scientific Progress and Thiel’s Investment Strategies

Thiel criticizes government involvement in scientific progress, arguing that it hinders innovation by favoring consensus over groundbreaking research. He shares his investment strategies, including his focus on founder-led companies and skepticism about current tech valuations. Thiel also reflects on missed investment opportunities, emphasizing the importance of recognizing momentum and value.

Thiel missed out on investing in YouTube, Zynga, and Facebook’s Series B round.

Thiel passed on the Series B round due to its high valuation, underestimating the company’s momentum and growth potential.

Steep up rounds often indicate undervaluation because investors underestimate the momentum and changes within the company.

Thiel corrected his mistake by investing in Facebook’s Series C round, despite its high valuation, recognizing the company’s ongoing momentum.

Thiel attributes Facebook’s success to its founder-led approach, which emphasizes innovation and the development of new products in the social networking space.

Thiel views Rocket Internet as a globalization play, where it copies successful business models and implements them in different parts of the world.

Inspiration, Innovation, and Education

Thiel finds inspiration in reading, meeting new people, and exploring different places. He predicts the next wave of innovation to emerge from developed countries. Regarding Facebook’s role in innovation, he suggests exploring how data can be used to promote societal progress. Thiel’s investment in Facebook, influenced by his and Reid Hoffman’s research, reflects his belief in the potential of social networking. Lastly, Thiel offers a critical view of the current education system, advocating for a more diverse and individualized approach.

Thiel finds inspiration from reading, meeting new people, and visiting different places.

Thiel finds inspiration from the talented individuals he works with. The dynamism of the tech scene motivates him despite potential pessimism about societal trends. The indomitability of the human spirit is a powerful force in Silicon Valley and beyond.

Japan is an intriguing location for innovation due to necessity and advanced infrastructure. Cultural norms may hinder the formation of small companies, leading to innovation within larger organizations. Japan’s status as the world’s third-largest economy makes it a significant player.

Thiel’s investments primarily remain in the United States. International investments are made based on strong recommendations and connections. Thiel has invested in the UK, Europe, Israel, Australia, and New Zealand.

Thiel believes Asperger’s can contribute to innovation. Facebook’s data collection and curation of social experiences may reward socializing behavior. The challenge lies in using this data to promote innovation and societal advancement, rather than merely reinforcing existing patterns.

Peter Thiel believes society discourages unconventional ideas, leading to a lack of creativity and innovation. He emphasizes that this problem is prevalent in society, not just in specific companies like Facebook. Thiel highlights the need to overcome this challenge collectively rather than blaming a single entity.

Thiel, along with his friend Reid Hoffman, had extensively researched the social networking space before investing in Facebook. Their decision to invest was based on their research and not solely on the meeting with Mark Zuckerberg. Thiel expresses curiosity as to why no one in Boston invested in Facebook between February and August 2004, despite its potential. He speculates that competitive dynamics and personal annoyance towards Zuckerberg’s success may have influenced investors’ decisions.

Thiel stresses the significance of secrets in driving innovation and technological advancements. He believes that education should focus on teaching students how to think critically, question conventional wisdom, and discover secrets. Thiel advocates for a curriculum that emphasizes problem-solving and encourages students to explore unconventional ideas.

Thiel is intrigued by the potential of MOOCs (Massive Open Online Courses) in facilitating education and opening up opportunities for learners. He sees MOOCs as a tool that can break down traditional barriers to education and provide access to knowledge for a wider audience. Thiel views MOOCs as a means to empower individuals with the skills and knowledge necessary to drive innovation and progress.

Peter Thiel criticizes the current education system as corrupt and characterized by an education bubble, resulting in a trillion dollars of student debt in the US. He argues that this debt has been used to pay for lies about the value of the education received.

Thiel believes that the current unitary tracking system, where elite colleges are seen as the only path to success, is anomalous. He compares the current state of universities to the Catholic Church in 1514, suggesting that they are monolithic and inflexible in their approach to teaching. Thiel predicts radical changes for universities, with a more heterogeneous and diverse future where people’s career paths are not limited to a single, standardized system.

Thiel’s fellowship for young entrepreneurs is not intended to suggest that everyone should become an entrepreneur. He emphasizes that there is no one-size-fits-all approach and that the future will be more diverse in terms of people’s pursuits.

Thiel’s message, similar to that of 16th-century reformers, is that individuals must work out their salvation on their own, without relying solely on traditional institutions like universities. He believes that this message, while uncomfortable, is the truth and offers a path to a more personalized and meaningful education.

Conclusion

Peter Thiel’s views on science and technology progress center around the limited role of government, the negative impact of politicized funding, the need for unconventional research, the importance of reopening frontiers, and the distinction between specific successes and general failures in technological advancements.


Notes by: datagram