Peter Thiel is brilliant. Blake did an amazing job with these notes. Sent from my iPad
On Nov 24, 2012, at 14:26, [email protected] wrote: > > > > > > > > Forbes > > > 6/07/2012 @ 12:49PM |55,671 views > Ten Lessons from Peter Thiel's Class On Startups > > Guest post written by Stanford Law student Blake Masters. > > This spring, legendary Silicon Valley entrepreneur and venture capitalist > Peter Thiel taught a class at Stanford University called Computer Science > 183: Startup. Back in March, before the course had started, Thiel made a bold > declaration: “If I do my job right, this is the last class you’ll ever have > to take.” > > He did his job right. It is the last class I’ll ever take. > > I’m not dropping out—something Thiel had suggested that more > entrepreneurially-minded young people should consider. But I am graduating > from law school next week and cofounding Amicus Labs, a legal tech company. > > I’ve been blogging my class notes for the past 10 weeks. Thiel’s lectures and > the subsequent discussions with guest speakers (a veritable who’s who of > Silicon Valley from LinkedIn CEO Reid Hoffman to Netscape cofounder Marc > Andreessen to PayPal co-founder Max Levchin) made for fascinating study. In > some sense, summarizing the material does it injustice—as Thiel acknowledged, > the course itself only scratched the surface of possible analysis and > discussion–but here are 10 of the key lessons in condensed form. > > 1. Globalization is not (all there is to) progress. > > Technology, to our great detriment, is the forgotten side of the coin. > > Globalization basically means copying things that work. “Developing” > countries copy 19th century railroads and 20th century plumbing. There is no > innovation; you go from 1 to n. Technology, by contrast, involves doing new > things. True technology companies—Facebook, Palantir, SpaceX—involve going > from 0 to 1. > > People focus too much on the 1 to n of globalization and not enough on > technology. But to be great, you have to do something new and important. All > great companies solved the 0 to 1 problem in unique ways. All failed > companies somehow botched it. > > 2. It is better to be right than to be contrarian. > > But being contrarian is very often a good heuristic for finding what is right. > > There is usually little value to be found where there is unanimity. Value > tends to be hidden. The key question is: What important truth do very few > people agree with you on? The business version of this is: What valuable > company is nobody building? A certain degree of contrarianism is embedded in > these questions. Wrestling with them can lead to important truths. > > 3. Secrets exist. > > People don’t really believe in secrets anymore. But secrets exist. It’s just > a matter of learning how to find them. > > Risk aversion and complacency discourage people from thinking about secrets. > Existing conventions are much more comfortable. But secret truths can be > incredibly valuable. Importantly, they are discoverable; by definition, any > answers to the questions in Lesson 2 above are secrets. Perhaps the biggest > secret of all is that there are many more secrets in the world that are > waiting to be found. The question of how many secrets exist in our world is > roughly equivalent to how many startups people should start. From a business > perspective, then, there are many great companies that could still be—indeed, > are waiting to be—started. > > 4. Capitalism and competition are antonyms, not synonyms. > > Capitalism is about building wealth. But in perfect competition, nobody > actually makes any money; all economic profits are competed away. > > Competition is overrated. In practice it is quite destructive and should be > avoided wherever possible. Much better than fighting for scraps in existing > markets is to create and own new ones. Sometimes you have to fight. When you > do, you should win. But conflict tends to be romanticized, and people tend to > get sucked in. It is worthwhile to think about how to run away from the > fighting and build a monopoly business instead. > > 5. People lie. > > We are biased to think that things are as they appear. Very often, that’s not > true. Everybody thinks that advertising works on other people, not on them. > But that cannot actually be true for everybody. Sales is all around us, all > the time. And it tends to work best when it is hidden. > > Sometimes people lie to themselves. Sometimes they lie to others. “This > product sells itself” is most likely a sales pitch; “This product is so > mediocre that it takes great salespeople to sell it” doesn’t have the same > ring to it. > > People tend to overlook the importance of sales and distribution. But getting > distribution right is absolutely crucial; most companies fail because of > distribution problems, not technology problems. And to understand > distribution, one must understand the theatre that is sales. > > 6. Much of life is a power law. > > The default assumption is that things are normally distributed. Sometimes > that’s true. But very often it is not. Very often things follow a power-law > distribution. This can be counterintuitive and uncomfortable to think about. > > Startup outcomes are one example. They tend to be very bimodal. Some > companies succeed wildly. Most fail and go to zero. Accordingly, portfolio > approaches and hedging tend to fail. Finding the company that falls on the > right tail of the distribution is absolutely crucial. Venture capitalists who > don’t realize this lose money. Entrepreneurs or employees who don’t realize > this end up doing the wrong things. > > 7. A bad plan is better than no plan. A good plan is even better. > > Today, people have resigned to indeterminacy Thinking about the future—let > alone forming beliefs about it—is seen as crazy. The future, people seem to > believe, is essentially random. > > It didn’t always used to be this way. In centuries and decades past, chance > was seen as something to dominate. People could forge their own luck. > Calculation reigned supreme. People had grand visions. > > We have since shifted to a more probabilistic, statistical perspective. > Indeterminacy abounds. Young people take a portfolio approach to their > resumes, adding new lines each year but never taking a meaningful swing at > something big. But playing it safe has serious costs (and, apart from those, > it may not be as safe as it is perceived to be). To be great, you must take a > swing at something. You must have a plan. Not planning for the future is, > quite literally, resigning your fate to chance. > > 8. Foundations matter. > > Thiel’s Law: A startup messed up at its foundation cannot be fixed. > > Beginnings are special. They are qualitatively different than what comes > after. You can change things at the founding that you’re forever stuck with > afterward. > > Getting your foundations right isn’t sufficient for success, but it is > certainly necessary. Founding mistakes will amplify and destroy companies > from within. Companies usually fail when some internal conflict blows up. > From the outside, it may appear that external competitive forces were the > cause. But very often, mismanagement or a founding mistake is the true > culprit. Founders must think carefully about keeping people’s motivations and > incentives aligned. Otherwise, a startup is essentially doomed from the > start. [ Killing motivation is another major factor ; when motivation is > destroyed then there cannot be any kind of worthwhile result. --BR comment ] > > 9. Founders are different. > > > > Most traits are probably normally distributed. Most people are average. > Founders are not. Founders’ traits seem to have an inverse normal > distribution to them. Founders are at the extremes on both ends: they are > extreme insiders and extreme outsiders, disagreeable and charismatic, > infamous and famous. > > Whether the inverse distribution is fact, fiction, or some combination of > both, it seems to map well onto most founder figures, from Steve Jobs to Lady > Gaga. And this is nothing new; Achilles was strong and perfect, except for > his flaw that made him weak. Howard Hughes was on track to go down as the > greatest entrepreneur of the 20th century, yet he suffered a bizarre 30-year > fall from grace. > > Unpacking exactly how or why founders are different is difficult. But > different they are. That is as dangerous for them as it is empowering. People > victimize founders. A founder’s primary task is, in some sense, to > perpetually extend the founding moment and thereby indefinitely delay his > execution. > > 10. Find a frontier and go for it. > > I’ll quote from my notes on Thiel’s final lecture: > > There is something importantly singular about each new thing. There is a mini > singularity whenever you start a company or make a key life decision. In a > very real sense, the life of every person is a singularity. > > The obvious question is what you should do with your singularity. The obvious > answer, unfortunately, has been to follow the well-trodden path. You are > constantly encouraged to play it safe and be conventional. The future, we are > told, is just probabilities and statistics. You are a statistic. > > But the obvious answer is wrong. That is selling yourself short. There are > still many large white spaces on the map of human knowledge. You can go > discover them. So do it. Get out there and fill in the blank spaces. Every > single moment is a possibility to go to these new places and explore them. > > There is perhaps no specific time that is necessarily right to start your > company or start your life. But some times and some moments seem more > auspicious than others. Now is such a moment. If we don’t take charge and > usher in the future—if you don’t take charge of your life—there is the sense > that no one else will. > > -- > Centroids: The Center of the Radical Centrist Community > <[email protected]> > Google Group: http://groups.google.com/group/RadicalCentrism > Radical Centrism website and blog: http://RadicalCentrism.org -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org
