Peter Thiel (Facebook Board of Directors) – DealBook Conference (Jun 2019)
Chapters
00:00:00 Founders' Passion and Long-Term Vision in Tech Industry
Facebook’s Decision Against Yahoo’s Acquisition: Yahoo offered to buy Facebook for a billion dollars in July 2006, tempting its investors with a seemingly lucrative financial deal. Mark Zuckerberg, Facebook’s founder, hesitated to sell, believing in the company’s undervalued new product features and potential for growth. Peter Thiel, a Facebook board member, supported Zuckerberg’s decision, emphasizing the founder’s perspective and passion for the company’s mission.
Twitter’s Resistance to Facebook’s Acquisition Attempts: Facebook made multiple attempts to acquire Twitter, offering $700 million at one point. Twitter’s founders, including Ev Williams, Jack Dorsey, and Biz Stone, were reluctant to sell, driven by their passion and obsession for the company. Chris Sacca, an investor and advisor to Twitter, highlighted the significance of founder-led companies’ motivations, which often go beyond pure economic value.
Founder-Led vs. Professional CEO-Led Companies: Peter Thiel contrasted founder-led companies with professional CEO-led companies in terms of decision-making. Founder-led companies prioritize long-term vision and passion, while professional CEOs may focus more on short-term financial gains. Thiel emphasized that small decisions can lead to vastly different outcomes, making the distinction between these two types of leadership crucial.
00:04:15 Assessing Mission-Oriented Founders for Startup Investment
Peter Thiel’s Investment Philosophy: Focuses on companies with a strong sense of mission. Believes that the people behind the company are as important as the ideas and technology. Prefers companies that are mission-oriented and have a clear counterfactual sense of mission.
Chris Sacca’s Investment Philosophy: Less thematic and more people-driven. Looks for founders who believe in the inevitability of their company’s success. Uses regression analysis to identify common traits among successful founders.
Traits of Successful Founders: Use simple future tense when talking about their company’s success. Are calm and confident in their ability to succeed. Are willing to take risks and persevere in the face of challenges.
Examples of Successful Founders:
Elon Musk (SpaceX) Kevin Sistrom (Instagram) Travis Kalanick (Uber)
00:07:50 Why Extreme Personalities Succeed in Business
Defining Successful Founders: Founders and entrepreneurs who achieve extraordinary success often possess extreme personalities and behaviors that set them apart from the norm. These individuals may be perceived as unbalanced, weird, and even obnoxious, challenging traditional notions of what constitutes a “good” or “normal” person.
Investment Implications: Investors often misprice companies led by extreme personalities due to emotional reactions and discomfort with their unconventional traits. This systematic mispricing creates opportunities for savvy investors who can recognize the potential of these founders and their ventures.
Good vs. Great Leaders: The question of whether a good person can also be a great leader is often framed too negatively, leading to misconceptions about successful founders. While these founders may not be universally good or evil, they are often portrayed as more evil than they truly are.
Founders’ Decisiveness and Impatience: Successful founders tend to be decisive and impatient, qualities that can rub people the wrong way and create conflict. Their decisiveness allows them to move quickly and take risks, while their impatience drives them to push boundaries and achieve ambitious goals.
Inspiring Despite Shortcomings: Despite their unconventional traits and behaviors, successful founders often inspire others with their vision, mission, and unwavering belief in their endeavors. This ability to inspire others, even in the face of shortcomings, is a key factor in their success.
00:11:55 Gender Discrimination and Challenges for Women in Silicon Valley
The Underrepresentation of Women in Tech: Chris Sacca highlights the lack of diversity in leadership positions in tech companies, particularly the absence of women. He emphasizes the disconnect between the user base and the decision-makers, using Twitter as an example.
The Success of Women-Led Companies: Sacca shares his experience with StyleSeat, a successful company led by a woman, emphasizing the positive aspects of working in such an environment. He notes that women-led companies tend to have more patient discussions, reasoned decisions, and less drama.
The Importance of Women Founders: Peter Thiel agrees with Sacca, emphasizing the need to address the issue at the founder level. He believes that having more successful women founders will set powerful role models and drive change.
The Cultural Barriers: Sacca discusses the cultural factors that contribute to gender discrimination in tech. He points out the lack of financial literacy education for girls and the gender stereotypes perpetuated by media and popular culture.
The Role of Language: Sacca identifies a linguistic barrier that affects women in tech. He explains that the Silicon Valley accent and the tendency to end sentences on an upbeat can be perceived as condescending when used by women.
The Need for Change: Sacca emphasizes the importance of starting at the grassroots level to change the culture. He encourages teaching girls financial literacy and challenging gender stereotypes. He calls for a shift in the language used in tech to make it more inclusive.
Conclusion: Chris Sacca and Peter Thiel discuss the gender discrimination problem in Silicon Valley, highlighting the underrepresentation of women in leadership positions and the cultural barriers that contribute to it. They emphasize the need to address the issue at the founder level and to create a more inclusive environment through education and language awareness.
00:16:36 Understanding Tech Bubbles and Ethical Challenges in Silicon Valley
Tech Bubble: Peter Thiel believes that the current tech industry valuation is high, but not at the level of the 1999-2000 dot-com bubble. He emphasizes that the public’s involvement in the market is a key indicator of a bubble, and right now, the public is not actively involved in the tech sector. Thiel identifies the money printing and government bonds as potential areas of a bubble, rather than the private tech world.
Uber’s Valuation: Thiel clarifies that he never stated Uber is overvalued, but he did say that Uber is more overvalued compared to Airbnb, making Airbnb a better investment. He acknowledges that Uber has been aggressive in its approach and has pushed the boundaries of ethical behavior. Chris Sacca, an early investor in Uber, regrets not targeting the lower-priced market segment sooner, as Uber faced legal challenges and ceased-and-desisted orders. Sacca believes that Uber’s current aggressive stance is a reaction to the corruption and opposition they faced from incumbents and politicians.
Compensation in Silicon Valley: The segment ends with a brief mention of Thiel’s previous stance on moderate compensation for employees in Silicon Valley.
High Compensation in Silicon Valley: Peter Thiel highlights the difference in compensation between public companies and startups. In startups, high compensation can be a red flag, as it might indicate misalignment with investors’ interests. In later-stage companies, however, high compensation may be justified due to the scale, leverage, and institutional knowledge of top executives. Chris Sacca agrees, emphasizing the importance of retaining talented individuals with high leverage and institutional knowledge.
Case Study: Sundar Pichai and Google: Sacca mentions a rumored incident where Twitter tried to poach Sundar Pichai, but Google reportedly paid him $200 million in cash to stay. This move demonstrates the value Google placed on Pichai’s leadership and expertise, and it ultimately benefited the company.
Disparity in Pay and Incentive Structures: Sacca advocates for more disparity in pay for the most talented individuals, recognizing their exceptional value. He believes incentivizing franchise players is crucial for companies’ success.
Crowdfunding and the JOBS Act: A question is raised about the potential of crowdfunding and disruptive technology to revolutionize capital deployment. Thiel and Sacca briefly discuss the JOBS Act and the small but growing space for crowdfunding. They acknowledge that crowdfunding is not limited to high-profile cases like the Oculus Rift’s Kickstarter campaign.
00:24:33 Understanding Investment Trends in the Era of Crowdfunding and Venture Capital
Venture Capital and Crowdfunding: Peter Thiel believes unique investments can still be found in the large and inefficient venture capital market. Chris Sacca, a Kickstarter investor, sees crowdfunding as a patronage model for pre-selling products and prototyping but worries about the lack of information and due diligence for crowd investors. Sacca emphasizes the impact professional investors have on company outcomes, highlighting the importance of quality over quantity in funding.
Potential Bubble in Startup Investing: Sacca expresses concern about a potential bubble in startup investing due to the frenzy of crowdfunding. He recalls the dot-com bubble in 2000 and warns against overbidding on fundamentally good companies.
The Value of Quality Investors: Sacca believes investors should value the impact of experienced investors like Bill Gurley, who can significantly influence a company’s outcome. He suggests a “quality factor” that differentiates the impact of skilled investors from casual crowd investors.
Me Too Companies and the Importance of Subtle Differences: Peter Thiel cautions against labeling companies as “Me Too” too quickly. Thiel cites examples like LinkedIn and Google, which were initially perceived as Me Too companies but later proved to be highly successful. He emphasizes the significance of recognizing subtle differences that can make a big impact in these contexts.
The Rising Cost of College: Thiel predicts that college costs will continue to rise until alternatives emerge that offer comparable educational and signaling value. Sacca expresses concern about the unidimensionality of some computer science students due to the rigorous curriculum, leading to a lack of broader life experiences. He emphasizes the importance of a liberal arts education and diverse experiences for personal and cultural growth.
Abstract
Navigating the Evolving Landscape of Tech Industry: Key Insights from Twitter, Facebook, Uber, and Beyond
In a dynamic exploration of the tech industry’s pivotal moments and trends, this article delves into Twitter’s symbolic shift from “Favorite” to “Heart”, Yahoo’s billion-dollar bid for Facebook, and the intricate dance of acquisition between Facebook and Twitter. These stories serve as a backdrop to broader discussions on investment philosophies, the traits of successful founders, gender disparities in Silicon Valley, and the nuanced perspectives on crowdfunding, compensation, and the future of education. This comprehensive analysis not only highlights key business decisions and cultural shifts but also sheds light on the ethos and challenges of the tech world, drawing from the experiences and views of industry giants like Peter Thiel, Chris Sacca, and leaders of mission-driven companies like SpaceX.
Main Body:
Twitter’s Iconic Change: The Heart over the Star
Twitter’s transition from the “favorite” star to the heart icon reflects a strategic move towards more accessible and universal engagement, similar to Facebook’s simplified reaction system. This change underscores the evolving nature of user interactions on social platforms.
Yahoo’s Missed Opportunity with Facebook
Founder-Led Company and Professional CEO-Led Company Distinction:
In July 2006, Yahoo offered to buy Facebook for a billion dollars. Facebook’s founder, Mark Zuckerberg, hesitated to sell, believing in the company’s undervalued new product features and potential for growth. Peter Thiel, a Facebook board member, supported Zuckerberg’s decision, emphasizing the founder’s perspective and passion for the company’s mission.
Yahoo’s decision to offer a billion dollars for Facebook in 2006 marked a pivotal moment. Mark Zuckerberg’s decision to decline the offer was a testament to their belief in the company’s potential and marked a defining difference in the mindset between founder-led and professionally managed companies.
Additionally, it highlighted the importance of founders’ passion and belief in their companies’ missions, as opposed to solely focusing on economic value.
Facebook’s Failed Attempt to Acquire Twitter
Founder-Led Company and Professional CEO-Led Company Distinction:
Facebook made multiple attempts to acquire Twitter, offering $700 million at one point. Twitter’s founders, including Ev Williams, Jack Dorsey, and Biz Stone, were reluctant to sell, driven by their passion and obsession for the company. Chris Sacca, an investor and advisor to Twitter, highlighted the significance of founder-led companies’ motivations, which often go beyond pure economic value.
Facebook’s interest in acquiring Twitter and the latter’s decision to remain independent highlighted the emotional investment and long-term vision of Twitter’s founders, reinforcing the significance of founder passion in guiding company trajectories.
The Mission-Driven Approach in Tech Investments
Peter Thiel’s Investment Philosophy:
Peter Thiel’s investment philosophy focuses on companies with a strong sense of mission. He believes that the people behind the company are as important as the ideas and technology. Thiel prefers companies that are mission-oriented and have a clear counterfactual sense of mission.
The investment strategies focusing on mission-oriented companies, as exemplified by SpaceX’s ambitious goal to colonize Mars, underline the importance of a strong sense of purpose in attracting top talent and achieving groundbreaking success.
Insights on Successful Founders
Traits of Successful Founders:
Chris Sacca’s investment philosophy is less thematic and more people-driven. He looks for founders who believe in the inevitability of their company’s success. Sacca uses regression analysis to identify common traits among successful founders.
Elon Musk (SpaceX)
Kevin Systrom (Instagram)
Travis Kalanick (Uber)
The characteristics of successful founders, as seen in figures like Kevin Systrom and Travis Kalanick, reveal a pattern of unwavering belief in their vision and a unique blend of confidence and competitiveness.
Gender Disparity in Silicon Valley
The gender imbalance in tech leadership, particularly in companies like Twitter, highlights the need for greater diversity. The success of female-led ventures like StyleSeat indicates the untapped potential of diverse leadership in the tech industry.
Furthermore, the underrepresentation of women in tech, particularly in leadership positions, is a significant issue. Chris Sacca highlights this disparity, emphasizing the disconnect between the user base and decision-makers, which can be seen in companies like Twitter. Sacca shares his experience with StyleSeat, a successful company led by a woman, noting the positive aspects of working in such an environment, including more patient discussions, reasoned decisions, and less drama. Peter Thiel agrees with Sacca, emphasizing the need to address the issue at the founder level. He believes that having more successful women founders will set powerful role models and drive change. Sacca discusses the cultural factors that contribute to gender discrimination in tech, pointing out the lack of financial literacy education for girls and the gender stereotypes perpetuated by media and popular culture. He also identifies a linguistic barrier that affects women in tech, explaining that the Silicon Valley accent and the tendency to end sentences on an upbeat can be perceived as condescending when used by women. To address these challenges, Sacca emphasizes the importance of starting at the grassroots level to change the culture, encouraging teaching girls financial literacy and challenging gender stereotypes. He also calls for a shift in the language used in tech to make it more inclusive.
Silicon Valley Compensation and Startup Culture
The compensation philosophy in Silicon Valley, contrasting moderate pay in startups with high rewards in established companies like Google, reflects the differing incentive structures and their impact on talent retention and company growth.
The difference in compensation between public companies and startups is notable, according to Peter Thiel. In startups, high compensation can be a red flag, as it might indicate misalignment with investors’ interests. However, in later-stage companies, high compensation may be justified due to the scale, leverage, and institutional knowledge of top executives. Chris Sacca agrees, emphasizing the importance of retaining talented individuals with high leverage and institutional knowledge. Sacca mentions a rumored incident where Twitter tried to poach Sundar Pichai, but Google reportedly paid him $200 million in cash to stay. This move demonstrates the value Google placed on Pichai’s leadership and expertise, and it ultimately benefited the company. Sacca advocates for more disparity in pay for the most talented individuals, recognizing their exceptional value. He believes incentivizing franchise players is crucial for companies’ success.
Crowdfunding’s Impact on Traditional Investment
The emergence of crowdfunding as a disruptive force in capital deployment challenges the status quo of venture capital and Wall Street. While offering new opportunities, it also raises concerns about the risks for individual investors and the value of professional investment expertise.
Moreover, crowdfunding and disruptive technology have the potential to revolutionize capital deployment. Peter Thiel and Chris Sacca briefly discuss the JOBS Act and the small but growing space for crowdfunding. They acknowledge that crowdfunding is not limited to high-profile cases like the Oculus Rift’s Kickstarter campaign.
The Future of Education and its Role in Tech
Predictions about the rising cost of college and the need for innovative, accessible alternatives highlight the ongoing debate about the value of traditional versus new forms of education in shaping the tech industry’s future talent.
The tech industry, marked by pivotal decisions like Facebook’s refusal of Yahoo’s offer and Twitter’s branding evolution, is continuously shaped by the visions of its leaders. While mission-driven investments and the distinct traits of founders like Kalanick and Systrom play a crucial role, challenges such as gender disparity and the evolving nature of crowdfunding and education remain key concerns. Silicon Valley’s compensation strategies and the debate over the future of education underscore the complexity of navigating the tech landscape. This comprehensive analysis, weaving together diverse perspectives and historic moments, paints a vivid picture of an industry at the forefront of innovation and change, yet grappling with its own set of unique challenges and opportunities.
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