Peter Thiel: Going from Zero to One

in uh teaching entrepreneurship or writing about entrepreneurship uh it's it's there's a big challenge in it because I think there is uh no single formula as you could tell from the last few speakers it's it's always a very very different story um and I think every moment in the history of business every moment in the history of Technology happens only once the next uh Mark Zuckerberg will not be building a social networking site the next Larry Page will not be building a search engine the next Bill Gates will not be building an operating system company

if you're copying these people in some sense you're not learning from them um and and this is why I think there is no science to business uh science starts with the number two it starts with things that are repeatable and uh you know experimentally verifiable in one way or another whereas I think um uh you know um every great company is one of a kind and and the question how do you get from 0 to one um and and so the starting point from my book 0 to1 is that is this sort of anti- formulaic

approach it's to take this uh question of Singularity and uniqueness uh very um as as the central question um and I try to get at it through a variety of sort of contrarian questions um what great business is nobody building tell me something that's true that nobody agrees with you on these are often quite hard questions to answer because we think it's hard to come with some new truth or it's it often requires courage because you often have to go against conventional wisdom in one way or another um I want to maybe share uh two

or three of these uh contrarian truths that I believe that people um generally don't understand that and I have my book 0 to1 uh is a whole set of these things things that I believe to be true that most people do not agree with me on uh first uh first big truth that comes right out of this uh this idea of uh of uh unique businesses I think that um all if you're a founder or entrepreneur what you want to aim for is Monopoly you want to aim to build a company that is oneof a

kind uh and that it's so far um differentiated from the competition that it's not even competing um and um and I think this is the conventional wisdom is always that capitalism and competition are somehow synonyms I believe they're antonyms a capitalist is someone who's in the business of accumulating capital a world of perfect compet comptition is a world where all the profits are competed away if you want to compete like crazy um then you should just open a restaurant in Chicago um and um and uh and I think the the great companies like uh Google

sort of the Paradigm example I use has had no serious competition in search since 2002 when it definitively distanced itself from Yahoo and Microsoft and as a result it's been generating enormous cash flows for the last 12 years um I I sort of get at this uh you know I think I think that uh I think there are sort of two different reasons this Monopoly and competition idea is not understood one is somewhat intellectual because the people who have monopolies don't talk about it they pretend not to have monopolies for reasons that I will leave

to your imagination um and uh the people who don't have monopolies um pretend to have something unique about their business because uh otherwise nobody would invest or give them any money and so um and the way you do this is if you have a monopoly like Google you will pretend that you in a much much larger market so you will never as Google talk about the search business and say we have a 66% share of the search Market uh and we're much more dominant than Microsoft ever was with the operating system Market in the 1990s

you will instead um say that we are a technology company and technology is this vast space where we're competing with apple on iPhones and we're competing with Facebook on social and we're you know going to build a self-driving cars and we're competing with all the car companies in Detroit and there's just competition everywhere and so it sort of gets obscured by making the market uh um appear to be bigger than it really is and then conversely if you uh were to listen to my talk today and run out of here and decide you had to

start a restaurant immediately um and you were you would um and you talk to various investors and they'd say well I don't want to invest in a restaurant because I know they all go out of business I will lose all my money um you will tell them some idiosyncratic story where this is a one-of-a-kind restaurant it's completely uh unique and very different from all the others is the only um British nepales Fusion Cuisine within um um in in um downtown Chicago um and so there's sort of this fictional story that gets told the other way

and so I think that um because of these uh um distortions that people tell about their businesses um I think this uh this Monopoly question ends up being very very underappreciated and uh and and sort of underweighted um as a variable intellectually but I think there's also sort of a second reason that this is not understood that well uh you know I I sort of uh you know the opening line of Anna kenina is that all happy families are alike all unhappy families are unhappy in their own special way uh and I think the opposite

is true of business I think all happy companies are different because they came up they figured out some way to radically differentiate themselves and escape from competition all unhappy companies are alike because they fail to escape the essential sameness that is competition uh the chapter in my book entitled all happy companies are different got excerted by The Wall Street Journal and they retitled it um a little bit more provocatively with a title uh competition is for losers and um and the and and the reason this is such a uh provocative title is because we always

think that the losers are the people who can't compete effectively enough the losers are the people who are slow on the swim team in high school the losers are the people whose grades or test scores aren't quite good enough to get into the the right universities or something like that and so the idea that somehow competition itself um um is something that we are perversely attracted to um is is is is is very counterintuitive and yet I want to suggest that uh that uh there is always this uh incredible pull that competition has on us

uh the sort of the aut graphical anecdote in my book um when I was a teenager in my 20s and the advice I'd given my younger self was incredibly um driven by these sort of competitive Dynamics my e8th grade Junior High School yearbook one of my friends said I know you're going to make it into Stanford in in four years and I sure enough I got into Stanford four years later uh then went to Stanford Law School uh and then ended up at a big Law Firm on on on Wall Street uh it was one

of those places where from the outside everybody was trying to get in on the inside everybody was trying to get out when um when when I when I left after 7 months and 3 days um one of the one of the people down the hall from me uh told me it was reassuring to see me leave he had no idea it was possible to escape from Alcatraz um and of course all all you had to do was go out the front door but but it was it was psychologically hard for people to do this because

um their identity was so wrapped up in the competitions they had won the people they had beaten along along the way that they could not even imagine doing anything different and and so I think this is and this is why I think competition is always this very two-edged thing uh when you compete ferociously you will get better at that which you're competing on but you will always narrow your focus to beating the people around you and uh and it often comes at this very high price of uh losing sight of what is U more important

or perhaps more valuable um and so I you know I think there's this uh this very strange phenomenon in Silicon Valley where uh where a lot of the most uh talented uh start startups a lot of the great startups seem to be run by people who are suffering from a mild form of Aspergers and I think I think we need to always turn this fact around and uh view this as an indictment of our whole society because what does it say about our society when anyone who does not suffer from Asbergers who is socially well

adapted will be talked out of all of their original creative ideas before they are even fully formed who will sense this is a little bit too weird that's a little bit strange that sounds a little bit crazy people are looking at me in a weird way um and I think this is uh this is something that we must all uh realize is is sort of a deeply endemic problem they've done these studies at Harvard Business School which I think you can often think of the business school student as a profile in anti- Asbergers they're sort

of very extroverted often have no real convictions um and um and um and you have sort of a hot house environment in which you put all these people for two years and at the uh at the end of the two-year process they've all sort of talked to each other and they've concluded they should all try to catch the last wave and it's invariably a pretty bad idea in 1989 they all wanted to work for Michael milin just a year or two before he went to jail um you know they were never interested in Tech or

Silicon Valley except for 99 2000 when they timed the bubble implosion perfectly um and then sort of 2005 to 07 it was all housing and private equity and and things like that um and um and it's it's easy in some ways to to make fun of people in business school or people who are sort of conventionally tracked but I think we we should recognize that we're all very prone to this you know um already in the time of Shakespeare the word ape meant both primate and to imitate and there is something very deep in human

nature that is imitative it's how it's has a lot of good things it's how language gets learned by kids it's how culture gets transmitted in our society uh but it also can lead to sort of a lot of insane Behavior it can lead to The Madness of crowds to Bubbles to to sort of mass delusions of one sort or another and um and I think it can um uh and I think it's you know advertising we always think of we always tell ourselves that we're not that uh prone to this and I think that's something

I'd encourage all of us to rethink you know we always think of advertising as something that just afflicts other people that never afflicts ourselves um I think this is very far from the case and so uh and so the Monopoly competition is not just this intellectual failure it's also this thing where um you have a tiny door where everyone's trying to rush through uh and there may be around the corner a vast and a Secret Gate that no one's taking and you should always find the secret path and and and go ahead and take that

two other quick uh thoughts on two other quick ideas on things that I believe to be true that most people um don't agree with me on uh I think there are many answers to this question what is true that people don't agree with on um and most and most of us actually don't think there are that many answers left uh we think that all these answers have been discovered and I sort of give a trichotomy in my book of conventions which are truths everybody already knows the other end there are Mysteries which are truths that

we can't uh figure that nobody in this world can figure out and there are things that are in between that are hard it takes a lot of work but if you apply yourself you could figure those out and I call those secrets and I think there are many uh Secrets left now there's certain areas where it's not that promising to look so you know if you were growing up in the 17th or 18th century there were some empty spaces on the map and you could become an Explorer and discover some more secrets about geography or

in the 19th century there were still some empty spaces left on the periodic table of elements and you could go into chemistry and discover some some uh things in in basic chemistry and so I think geography basic chemistry these are areas that have been fully explored these are areas where you're not going to find any secrets these are not promising areas where you will discover a new truth that no one else uh knows or uh and that can become the basis for um a great Insight or or a great business um but I think most

areas are not like this um uh and I think that um there are many directions we can go in where the frontier is still uh surprisingly close uh there certainly has been an enormous amount of of uh um ideas and businesses that have been discovered in this it space for the last 40 years and uh there's no reason to think that's going to stop uh around computers internet mobile internet software there are um many things people find the ideas are often uh they always seem shockingly simple in retrospect they're they're pretty hard Exane you know

when we came up at PayPal with combining email with money um you know that was a secret it was not an easy thing to to figure out no one else in the world had figured it out um but it was you know far from impossible to do uh and you know once we came up with the idea we thought it's you know it's amazing no one's thought of this yet we have to really execute fast before uh before anyone uh catches up and and um and so I think there are many things uh there are

many Secrets uh like this that are left to be discovered uh and we see this with all the new businesses that emerge in these areas I I'm I actually think that we should uh um try to find some in a number of other areas uh so I think that everything from biotech to um space Technologies uh all sorts of other areas of Technology um I think have been somewhat underexplored in recent decades and that it would be U it would be good if the uh cone of progress were not just this narrow cone around uh

computers and the world of bits but we're expanded uh to include the world of atoms in in many uh many other ways so second idea is there are many many Secrets uh left for us to discover third um third idea that I'll I'll end on uh and this is uh the basic dichotomy in my book I think I think for us to have a successful 21st century we're going to have to have uh both globalization and technological innovation and I think these are two very different modes of progress um um and people often use these

words interchangeably and I think that's always a big mistake I draw globalization always on an xaxis I describe it as copying things that work um going from one to n um horizontal or extensive growth uh China is the Paradigm of globalization today and uh to First approximation what China needs to do in the next 20 years is just copy everything that's working in the west you can maybe skip a few steps but if it executes against that the people in China will be uh much better off in the decades ahead and then I always draw

technology on the Y AIS I describe it as vertical or intensive growth um doing new things going from zero to one um and um and and we can sort of see this big difference between globalization and Technology if we think about the history of the last 200 years years there have been periods of globalization there have been periods of Technology the 19th century was a period of both from 1815 to 1914 you had tremendous uh uh technological progress and tremendous amounts of globalization taking place after 1914 um you know with world wars communism all sorts

of other uh events um globalization uh sort of went in Reverse um the world became a much more disunited much more fragmented sort of a place um but technology continued to go at a ferocious pace and I would argue since maybe about 1971 when Kissinger went to China uh and uh globalization uh restarted it began uh in at a ferocious rate the last 40 plus years uh technology has been going a little bit more slowly where it's been as I already said a narrow focus on computers and a little bit less of other things for

the last century unlike the 19th century has been a period where we first had um lots of Technology but no globalization and we've now had a more recent period where we've had lots of globalization but um only limited technological progress and this change is reflected in a very different way in which we talk about today's world in the um in the 1950s or 1960s we would have described the world as being divided between the first world and the third world the first world was that part of the world that saw uh Relentless accelerating technological progress

the third world was is that part of the world that was uh permanently stuck permanently screwed up in one way or another um so no globalization but lots of technology today we would uh divide the world into the developed and developing nations the developing nations are those that are copying the developed world uh and um and so this develop developing dichotomy is a PR globalization dichotomy um it's sort of a Convergence Theory of History where the entire world will become more and more homogeneous as globalization continues a pace but it is also implicitly an anti-technological

dichotomy because when we say that we're living in the developed world we are implicitly saying that we're living in that part of the world where nothing new is going to be done where things are finished they're complete um and we can expect uh Decades of uh stagnation and sclerosis and the younger generation should expect to have a lower living standard than their parents and uh we have sort of this rather Bleak view of the future and I think we should not accept that sort of a label we should not accept this idea that we're living

in the developed world and so I will I will end by saying that I think we should always return to the very contrarian question um how can we go about developing the developed world thank you very much