Decision Making
The Contrarian Question
What important truth do very few people agree with you on? The filter that decides what is worth building.
the rarity of independent thinking and the courage required to pursue it
Co-founder of PayPal and Palantir, author of Zero to One
Peter Thiel founded and ran PayPal and wrote Zero to One. The goal, he argues, is to be so innovative and differentiated that you get a monopoly. In AI, his question as an investor is who will have the monopoly and the pricing power. He also holds that we've been in an era of relative tech stagnation for 40 or 50 years, with progress in bits and slow progress in atoms.
a16z 01:36 02:44 41:35 All-In 20:26 26:24 27:35 28:01
Decision Making
What important truth do very few people agree with you on? The filter that decides what is worth building.
the rarity of independent thinking and the courage required to pursue it
Peter Thiel
holds that intelligent design beats Darwinism, and that iterating at random does not get you from zero to one. The answer comes first.
is the counterweight: the fastest way to learn what is true is to ship something ugly and watch what happens.
Zero to One vs One to N
Going from Zero to One means creating something entirely new -- true vertical progress. Going from One to N means copying or incrementally improving what already exists…
Four Quadrants of the Future (Definite/Indefinite Optimism/Pessimism)
Views on the future fall into four quadrants along two axes: Optimistic vs Pessimistic, and Definite vs Indefinite. Thiel argues that the best entrepreneurs are Definite…
Zero to One (2014); CS183: Startup - Class 13, Stanford (2012)
Competition Is for Losers (Monopoly Framework)
Capitalism and competition are opposites. Capitalism is about the accumulation of capital; perfect competition destroys all profits. Every successful business is a…
Zero to One (2014); CS183: Startup - Class 5, Stanford (2012); Wall Street Journal essay (2014)
Proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.
When evaluating whether a startup's technology can create a durable monopoly. Anything less than 10x will be perceived as marginal improvement and hard to sell in a…
Only invest in companies that have the potential to return the value of the entire fund. Because this rule is so restrictive, there can be no other rules.
Venture capital portfolio construction and investment decisions. The power law means a single investment must be capable of returning the whole fund.
CS183: Startup - Class 7, Stanford (2012)
Start with a very small market and monopolize it, then expand into adjacent markets in concentric circles.
Market entry strategy for new startups. A startup should dominate a niche before expanding. Facebook started at Harvard, Amazon started with books, PayPal started with…
If a company describes its market as the intersection of multiple small niches (e.g., 'the only British food restaurant in Palo Alto'), it is probably a non-monopolist exaggerating its uniqueness and operating in a brutally competitive space.
Evaluating how companies describe their market position. Non-monopolists make their market sound small and unique; monopolists make their market sound large and…
If a company describes its market as the union of several large markets (e.g., 'technology company' or 'advertising company'), it is probably a monopolist disguising its dominance.
Evaluating how companies describe their market position. Google calls itself a technology company, not a search monopoly.
If a candidate cannot articulate a single genuinely unpopular belief when asked 'What important truth do very few people agree with you on?', they are probably too conventional, too political, or too lacking in self-awareness for a leadership role.
Hiring and evaluating candidates for independent thinking ability. The inability to be contrarian is a red flag for innovation capacity.
Every great company is built on a secret -- an important truth that most people do not know or believe.
If a business opportunity is obvious to everyone, it will attract intense competition. Only by building on a truth others have not yet recognized can you create…
The most contrarian thing of all is not to oppose the crowd but to think for yourself.
Being contrarian for its own sake is just as reactive as following the crowd. True independent thinking means reasoning from first principles rather than either…
Brilliant thinking is rare, but courage is in even shorter supply than genius.
Many people can think clearly enough to identify contrarian truths, but few have the courage to act on them. The constraint on innovation is not intelligence but the…