How To Build The Next Billion Dollar Startup | Forbes
Summary
TLDRIn this insightful discussion, the speaker emphasizes the importance of originality and differentiation in entrepreneurship, arguing against formulaic approaches to building businesses. He stresses the value of creating monopolies through unique ideas and products, rather than competing in saturated markets. The conversation touches on the significance of passion, long-term vision, and the pursuit of meaningful problems over the mere pursuit of wealth or fame. The speaker also critiques the 'Lean Startup' methodology, advocating for a focus on creating a great product from the outset.
Takeaways
- 😀 Peter Thiel co-founded PayPal at the age of 30 and was an early investor in Facebook and other innovative companies.
- 🚀 Thiel emphasizes the uniqueness of successful businesses, arguing that there's no straightforward formula for creating them.
- 🤔 He questions the Lean Startup approach, suggesting that having a great product is more important than rapid iteration.
- 🌟 Thiel advocates for creating monopolies, meaning being the only one in the world doing what you're doing.
- 🧠 He believes that great businesses are often based on unique ideas or solutions to problems that others haven't addressed.
- 🏆 Thiel suggests that entrepreneurship should be driven by passion for solving important problems, not just the desire to be rich or famous.
- 💡 He encourages thinking differently and avoiding the trap of imitation, which can lead to 'Madness of crowds' and bubble-like behavior.
- 📚 Thiel criticizes the current education and career trajectory, which he sees as a random walk rather than a directed path.
- 🤝 He stresses the importance of choosing the right co-founder, ideally someone you have a history with and trust.
- 💼 Thiel reflects on his own career path, noting that success can come from taking unconventional routes and following one's passion.
Q & A
At what age did Peter Thiel co-found PayPal?
-Peter Thiel co-founded PayPal when he was around 30 years old.
What was Peter Thiel's role in Facebook's early days?
-Peter Thiel was the first outside investor in Facebook.
How does Peter Thiel view the concept of competition in business?
-Peter Thiel believes there are only two types of businesses: those in crazy competition and one-of-a-kind businesses that are monopolies.
What does Peter Thiel think is the key to creating a successful business?
-Peter Thiel emphasizes the need for differentiation, suggesting that successful businesses should be unique and the only ones doing what they are doing.
Why does Peter Thiel advise against following a formulaic approach to starting businesses?
-Peter Thiel argues that every moment in business history is unique, and thus, there is no straightforward formula for success because great businesses are one-of-a-kind.
What does Peter Thiel suggest entrepreneurs focus on when starting a business?
-Peter Thiel suggests entrepreneurs should focus on building a monopoly by being the only person in the world doing what they are doing.
How does Peter Thiel feel about the Lean Startup approach?
-Peter Thiel criticizes the Lean Startup approach, advocating for having a great product first and then iterating and optimizing it.
What does Peter Thiel believe is the role of luck in business success?
-Peter Thiel thinks that luck is often overemphasized, and he suggests that hard work and planning are more important than relying on chance.
Why did Mark Zuckerberg decide to reject Yahoo's billion-dollar offer for Facebook in 2006?
-Mark Zuckerberg rejected Yahoo's offer because he believed Facebook had plans to build products that Yahoo was not valuing properly, and he was passionate about the existing business.
What does Peter Thiel consider when identifying a meaningful business venture?
-Peter Thiel considers a business meaningful if it is working on a problem that would not be solved if the business did not exist, and if it is the only entity of its kind addressing that problem.
What advice does Peter Thiel give about choosing co-founders for a startup?
-Peter Thiel advises against starting a business with strangers and suggests it is better to work with people you know well, as the prehistory and relationship of the founders can significantly impact the success of the venture.
Outlines
🚀 Entrepreneurship and Unique Business Ideas
The speaker begins by humorously addressing the age-old entrepreneurs in the room, then transitions into a discussion about his own entrepreneurial journey, including his involvement with PayPal and other significant investments. He emphasizes the importance of thinking differently and challenges the audience to consider what unique insights they possess that others might disagree with. The speaker stresses the uniqueness of successful businesses, arguing against the idea of a one-size-fits-all approach to entrepreneurship. He advocates for the creation of monopolies, where a business is the only one of its kind, and discusses the importance of differentiation in the market. He also touches on the passion and economic interests of entrepreneurs and the need to think twice before starting certain types of businesses.
🤔 The Role of Imitation and the Lean Startup Model
In this paragraph, the speaker delves into the concept of imitation and its impact on societal behavior, including the tendency to follow the crowd, which can lead to irrational actions. He critiques the Lean Startup approach, which encourages rapid prototyping and iteration, arguing instead for the importance of having a great product from the outset. The speaker also discusses the need for long-term planning and the importance of having a vision for the future of a business. He suggests that a well-reasoned plan, even if it's wrong, is better than no plan at all and criticizes the prevalent short-term focus in society and business, advocating for a more strategic and future-oriented mindset.
🎓 The Pitfalls of Credentialism and the Value of Passion
The speaker reflects on his own educational and professional journey, questioning the value of following a conventional path to success. He discusses the concept of credentialism and its drawbacks, suggesting that it can lead to a loss of sight of what is truly valuable and meaningful. The speaker argues for the importance of passion in one's work and the pursuit of unique, meaningful endeavors rather than simply competing in established markets. He also touches on the significance of working on problems that would otherwise go unsolved, emphasizing the counterfactual value of one's work and the importance of being irreplaceable in one's field.
🤝 Choosing the Right Co-founder and the Power of Persistence
In this final paragraph, the speaker discusses the importance of selecting the right co-founder for a startup, suggesting that it's better to partner with people you know well rather than strangers. He shares insights from his own experiences, including the early days of Facebook and the decision to reject a billion-dollar offer from Yahoo. The speaker highlights Mark Zuckerberg's vision and the importance of planning for future products that were not yet valued by potential acquirers. He also emphasizes the significance of the 'prehistory' of a founding team, suggesting that a shared history and vision are crucial for successful partnerships.
Mindmap
Keywords
💡Monopoly
💡Differentiation
💡Zero to One
💡Pseudo-scientific formula
💡Competition
💡Passion
💡Lean Startup
💡Imitation
💡Resume Building
💡Luck
💡Counterfactual
Highlights
Peter Thiel co-founded PayPal at the age of 30, emphasizing the importance of starting impactful businesses at a young age.
Thiel was the first outside investor in Facebook, illustrating his ability to identify transformative opportunities.
Palladium, a big data play by Thiel, was instrumental in aiding the search for Osama Bin Laden, showcasing the power of data in solving complex problems.
Investment in SpaceX by Thiel highlights his vision for businesses that can have a universal impact.
Thiel argues against formulaic approaches to business, advocating for unique and one-of-a-kind business models.
The necessity for differentiation in business is a central theme, with Thiel advising entrepreneurs to create monopolies in their niche.
Thiel criticizes the Lean Startup approach, suggesting that having a great product is more important than rapid iteration.
He emphasizes the importance of long-term planning and vision in business, advising entrepreneurs to think 5 to 10 years ahead.
Thiel discusses the societal problem of overemphasizing competition and credentials over passion and meaningful work.
The idea that success is often about working on problems that no one else is addressing is a key point made by Thiel.
Thiel shares his perspective on the importance of having a plan, even if it's not perfect, over having no plan at all.
He reflects on the role of luck in success, suggesting that hard work and planning can create opportunities where luck may seem to play a part.
Thiel talks about the importance of picking the right co-founder, emphasizing the value of shared history and understanding.
Mark Zuckerberg's decision to reject Yahoo's billion-dollar offer at the age of 22 is highlighted as a pivotal moment in Facebook's history.
Thiel discusses the concept of 'secrets' in business, which are problems that are unsolved or ideas that are not yet widely accepted.
The conversation touches on the importance of working on something meaningful, rather than just pursuing wealth or fame.
Thiel shares his thoughts on the education system, suggesting that it often leads to a 'random walk' approach to career planning.
He reflects on his own career path, from attending Stanford to working at a prestigious law firm, questioning the value of conventional success.
Thiel emphasizes the value of working on unique problems, suggesting that if you're not working on them, they won't get solved.
Transcripts
what better way to get started under 307
than having two 40y olds talk to you
right but uh in fact um Peter was once
one of you guys he was uh I don't know
how old were you when you found
co-founded PayPal uh 30 31 30 okay
didn't quite make the cut uh but I would
not have made the cut changed money with
PayPal uh was the first outside investor
in Facebook which we know changed the
world uh back paler which is I I believe
they helped find Osama Bin Laden as a
big data play
um and in invested in uh SpaceX so that
could change the universe and the Galaxy
um my first question for you though and
this ties into the ideas in the book uh
which is very much about thinking
differently and is is
um what's the one thing they shouldn't
listen to you about you make you have
this great question in the book what is
the one thing that you know to be true
that most people would disagree with you
yeah so what what is that I'm sure
there's a lot of things people shouldn't
listen to me about they probably should
listen to me about fashion advice or
they shouldn't listen about um all sorts
of things I I don't know that much about
um and I I do think um even with respect
to starting businesses or uh in
technology so let's even focusing
narrowly on technology startups um the
uh the substance of what uh what people
do is uh is always um is always unique
and different uh I think every moment in
the history of business happens only
once
the next Mark Zuckerberg won't be
starting a social networking site the
next Bill Gates won't start an operating
system um you know the next Elon Musk
won't start a Tesla electric car company
um and uh and so and so there and and so
I I what I what I always push back on uh
really strongly is that there's some
kind of straightforward formula because
we're always looking for some sort of
pseudo scientific formula um you know
science starts with number two with
things that are sort of experimentally
repeatable but U but great businesses is
are 0o to one it's it's they're always
oneof a kind and so there there is
always this anti- formulaic quality um
and that's why um that's why I don't
have like there are a lot of specific
things I can't give advice on the um the
the the the one theme that I always come
back to though that that comes out of
this anti- formula formula out of this
one-of-a-kind nature of of great
businesses is uh is this need for
differentiation what are you doing that
nobody else is doing what ideas do you
have that nobody else has what great
business are you working on that no one
else is working on and um and and the
and you know the the the the business
idea that I come out of it from is that
uh if you're a founder or an
entrepreneur um you should always aim to
build a monopoly where you're the only
person in the world doing what you're
doing um and I I I often think this is a
little bit extreme but that there are
really are only two kinds of businesses
in this world there are businesses that
are in Crazy competition and there are
one-of-a-kind businesses that are
monopolies but there's something there's
something I mean you you've been in and
among Silicon Valley for so many years
and some people criticize Silicon Valley
for having this this capsule like
thinking where everything has to be you
know a gajillion dollar company and
which you know we love those companies
they're great but everywhere else in the
country people are starting restaurants
and starting you know Warehouse
companies distribution companies that
aren't going to be multi-billion dollar
companies but they're really for those
people that's their passion and they're
excited about it so the idea how do how
do you make sure the ideas in in your
book don't discourage them from at least
having some economic interest in what
they're doing well um well I actually
think you should think twice before
starting certain types of businesses so
I think um there are probably too many
bad businesses getting started and not
enough good ones so that's it's um you
know I I don't think there's I don't
think there's anything about
entrepreneurship per se that is um that
is is good you know I was talking to one
of my friends a few years ago I was
asking him what do you want to be doing
in 5 or 10 years oh it's really clear I
want to be an entrepreneur that's like
saying I want to be rich I want to be
famous um and I I don't think uh I don't
think those are those are good things
being rich and famous um they're not
good as direct goals like if if you if
you have that as your sole goal you're
unlikely to I think really uh really
succeed and so I think you become an
entrepreneur because you're working on
an important problem nobody else is
working on I think you should start a
business if you have uh something if
you're if you're working on a problem
that otherwise would not get solved
without having a lot of you know you
know World Experience how do you
identify that which needs to be done it
certainly is my uh claim that I think
there are many um many of these sort of
Secrets which I Define just as problems
that you can solve that no one else has
solved yet or um ideas that are just
sort of at the at the boundary so I
think there are a lot of these uh things
that exist and I think it's always some
combination of um something that's an
important problem and often um often
there's some reason people have a blind
spot around it or aren't aren't thinking
about it so I think there's always I
always like to get it from both a sort
of a foundational level which is some
you know maybe some substantive area
that you're really passionate about and
um and this sort of psychological love
of why why is this something that so
many people are missing in one way or or
another you know the word already in the
time of Shakespeare the word ape meant
both primate and to imitate and and you
know we uh imitation plays an enormous
role it's how we learn language as kids
it's how culture gets transmitted but it
also leads to a lot of insane Behavior
it leads to sort of The Madness of
crowds it leads to bubble-like uh
Behavior which we've seen many in our
society in recent decades and so um and
so I think this um challenge not to just
reflexively imitate and to think for
yourself is um it's um it's always very
trivial to say and it's always um quite
hard to to actually do do um and and you
also take issue with the way a lot of
young companies run there's there's a
there's been a big fat or Trend uh an
approach uh of Lean Startup I mean uh
where you you know small teams put out
the quickest product you can get a look
at get the market to look at it fix it
as you go uh everyone's doing that you
think that's wrong I think um you know I
think that uh I think there definitely
are things that one can iterate on but
the the core thing is to have a great
product and then you can always improve
and and iterate on that in all sorts of
ways and I think you know I think um
even in in the tech industry um uh
what's striking is how um weak on a
quantitative basis so many of the
successful companies were it was just
they had a great product and then years
later they were able to optimize it in
all sorts of all sorts of ways um
whereas if you're just trying to
optimize and you don't have a great
product um I think that uh that rarely
Works um I think it's always worth
asking you know where you're going to go
with this business um and so I think
we're always focused on very shorttime
Horizons because you have to you know
figure out a way to get through the next
month the next quarter um you know how
do you get some customers how do you how
do you track but it's it's always worth
thinking ahead you know 5 to 10 years
you know why will this be a really
valuable business in 5 to 10 years and
um you know how's the competitive
landscape going to develop how's
technology going to develop how's the
world going to develop um these are hard
questions to answer but I think um I
think I think I think the uh the great
entrepreneurs that I know always have
some perspective on it and it might be
wrong but it's just this is what's going
to happen and then it's sort of well
reasoned and and so you have a you have
a plan and you know it's uh when I when
I was playing chess uh you know in
junior high school one of the early
lessons I learned was a bad plan is
still always better than no plan at all
right and so you know have a plan you
can always change it but don't uh don't
just pretend that uh that you have no
clue about what's going to happen and
that everything about the future is
random if you if you sort of say that
everything's random and out of your
control that's that's that's the way you
set yourself up for failure right you
talk about that as like even as a
society problem in America today like we
we are a nation of optimists but without
a definite idea of where we're going
unlike say you know maybe 50 years ago
or well it's it's you know it's it's
it's it's the way it's the way the whole
education system works you know you you
build a resume with you know a wide uh
variety of activities and then uh you go
to college you get some General Degree
and then uh it's supposed to lead to
various uh jobs that lead to other jobs
and it's sort of this this random walk
we sort of figure out what to do
do your fure so I do think I do think we
over the of luck we we exaggerate the
role of luck in our future I've I've
said you know I think luck is like an
atheistic word for God where when we we
attribute too much to luck we um we stop
think we we could be thinking a little
bit more so you think it's is it the old
hard work you make your own luck that
that old that I like that okay so this
whole idea of well well because go back
to because most people in this room you
know did all the right things they went
to good schools they had good
extracurriculars they were you know
captain of the debate team whatever you
know a little bit everything that's the
wrong approach people should be the most
incredible tuba player ever or no no not
necessarily uh but I think I I I think
you should be doing something you're
passionate about so the question is
always you know when I give my younger
self advice you know would I still go to
Stanford would I still go to Stanford
law school um possibly but I think a lot
more about why I was doing it was it is
it just uh you know and I I was on this
super trct career myself I ended up at a
big law firm in New York uh you my
eighth grade Junior High School year
book one of my friends wrote and I know
you're going to get into Stanford in
four years so I went to Stanford four
years later went to Stanford law school
ended up at a big law firm in uh in New
York where on the outside everybody
wanted to get in on the inside everybody
wanted to get out um when I left after 7
months and 3 days um one one of the one
of the people down the hall from me said
it was you know really reassuring to see
that it was possible to escape from
Alcatraz which you know all and all you
had to do was really just go out the
front door but um but so much of um our
identity gets wrapped up in the
competitions we win and um that um and
when when you compete um and I think a
lot of the credentialing resume building
is this sort of competition when you
compete you do get better at what you're
competing at and if you take lots of SAT
test prep classes you'll get a better
score on the SAT um and when you compete
you get better at beating people on the
narrow things you need to beat them on
but um but you often it often comes at
this very high price of of losing sight
of what's uh what's truly valuable and
important and meaningful which
is well I think passion well there's
sort of all sorts of other there all
sorts of things that that could be that
but but I think um I think it often the
the I think it often ends up being uh
something that's a little bit off the
beaten path because uh so I think um you
know there's there's obviously Financial
version where you get to be have a
monopoly like business the there's a the
meaningful version I think is always
counterfactual where if you weren't
doing this um would you know it's great
to be working on problems where if you
weren't working on them nobody else
would do them you know if you're working
at the fourth online pet food company
the 10th th film solar panel company the
1,000th restaurant in Philadelphia
There's a sense that if you weren't
doing it someone else would um you know
if you're working at uh at at something
where it's the only thing of its kind in
the world that's very meaningful if if
we weren't if and it could be for-profit
nonprofit all sorts of context if we
weren't doing this this problem would
absolutely not be tackled I think that's
the kind of that that's what's that's
what's meaningful whereas when you're
competing you're ready by definition um
number two at least in a category did
did this did this whole when you first
met Mark Zuckerberg did this all this I
mean looking in hindsight did he
encapsulate all the things you're
talking about was was he doing this
because no one else was doing it he was
doing it because he was passionate about
it was he doing because he had an
awesome product well he was he was
incredibly passionate about it um it was
uh you know there always because it was
the Winkle boss's idea you know that
right uh I looked into that that's well
you you you know that the that their
their dad was a plaintiff's lawyer so we
have to get like some of the details
right in these stories but um but I
think that um I think that uh there
there often are category broad
categories where you can say you can say
there have been social networks before
um you know my friend Reed Hoffman
starting LinkedIn started a company 1997
called social net so they already had
the name in the company seven years
before Facebook now their idea was that
uh you'd basically have this uh this
sort of alternate virtual reality where
um you know maybe I'd be a cat and you'd
be a dog and we'd interact in cyberspace
and we'd have these different rules of
how we' conduct ourselves um and so the
and I think Facebook was the first one
that actually cracked real identity was
um was at its core about um about real
people um in a way that um none of the
others quite succeeded even even my
space was more it started sort of in Los
Angeles it was about people pretending
to be someone other than who they are
which is what people do in Los Angeles
um and um you know Facebook started at
Harvard where it was it was sort of
basically um trying to get a map of of
real identity so I think it was the
first one to really crack that problem
and you know and and Zuckerberg was you
know very passionate about it I always I
always say that the uh the most
important moment in the history of the
company was in um 2006 in July of' 06
when Yahoo offered us a billion dollars
Zuckerberg was 22 at the time he owned a
quarter of the company um it was just a
college site we had maybe 35 million in
revenues no profits and so we had a
board meeting three of us met uh Monday
morning Zuckerberg starts the meeting
off saying well this is the formality
obviously we're going to turn this down
and myself Jim Brier the two investors
on the board both said you know we
should probably talk about this a little
bit more and um and so it ended up being
not a 10-minute it ended being like a
six- hour long conversation but it was
sort of all about like well Mark you'd
make a quarter of a billion dollars
there's a lot you could do with this
money um and it was well I don't know
what i' do with the money I would just
start another social networking site but
um but I kind of like the one I have so
why would I get rid of it and um and at
the end of the day the the the key the
key point that uh that Mark made was
that there were a whole set of products
that Facebook was still planning to
build so not just iterating uh that it
was planning to build that surely Yahoo
was not valuing properly and um and he
was he was right I mean these the future
is never valued right in these things
when and when you talk about important
moments in the lives of because a lot of
people here are starting companies or
Ventures with people they either maybe
know or don't know that well you talk
about in the book about the the
importance of picking the right founder
the right person to go in with and it's
not usually the one you might think is
the right person well I think it's um I
think it's generally uh good much better
to do it with people you know well you
can sort of there's some debates about
whether it's good to do it with your
best friends or not but um but I think
it's generally a bad idea to do it with
people you don't know at all so you know
sort of I always like asking people the
prehistory question what um you know how
did the two or three people founded a
company how did how did you meet how did
how did it come together the um the bad
answer is we met at a social network at
a networking function a week ago and
decided to start a company because we
both wanted to be entrepreneurs um good
answer is something like um you know
we've we've been talking about this for
a number of years thinking about in one
way or another and uh and sort of uh
pull it together
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