How To Build The Next Billion Dollar Startup | Forbes

Summary

In 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

00:00

🚀 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.

05:02

🤔 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.

10:04

🎓 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.

15:06

🤝 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.

Keywords

💡Monopoly

A monopoly refers to a market condition in which one company controls the supply of a particular product or service. In the context of the video, the speaker emphasizes the importance of creating a business that operates as a monopoly, meaning it is unique and does not face direct competition. This is illustrated by the speaker's suggestion that entrepreneurs should aim to be the only ones in the world doing what they are doing, as it allows for greater control over the market and pricing power.

💡Differentiation

Differentiation in business refers to the process of making a product or service distinct from its competitors. The video underscores the need for entrepreneurs to differentiate their ventures by doing something unique that no one else is doing. This concept is central to the discussion on how to create successful businesses that stand out in a competitive market, as differentiation can lead to a competitive advantage.

💡Zero to One

The term 'Zero to One' is used to describe the creation of something new and innovative, as opposed to incremental improvements or imitations. The speaker in the video argues against the idea of formulaic approaches to starting businesses and instead promotes the concept of 'Zero to One' innovation, where entrepreneurs create entirely new categories of products or services that did not exist before.

💡Pseudo-scientific formula

A pseudo-scientific formula in the context of the video refers to the false belief that there is a predictable, repeatable method for creating successful businesses. The speaker criticizes this idea, suggesting that great businesses are not created through formulaic approaches but through unique, one-of-a-kind innovations that cannot be replicated.

💡Competition

Competition in the video is discussed as the opposite of creating a monopoly. The speaker suggests that businesses that are in 'Crazy competition' are not ideal because they are constantly fighting for market share and are not able to control their own destiny. Instead, the speaker advocates for creating businesses that are unique and face little to no competition.

💡Passion

Passion is highlighted in the video as a key driver for entrepreneurship. The speaker suggests that one should pursue entrepreneurship not just for the sake of being an entrepreneur, but because they are passionate about solving a problem that nobody else is addressing. This passion is seen as a critical factor in driving innovation and perseverance in the face of challenges.

💡Lean Startup

The Lean Startup is a methodology that encourages the creation of a minimum viable product (MVP) and then iterating based on customer feedback. The speaker in the video expresses skepticism about this approach, arguing that it is more important to have a great product from the outset rather than focusing solely on quick iteration and optimization.

💡Imitation

Imitation is discussed in the video as a common behavior that can lead to a lack of innovation. The speaker points out that while imitation is a natural part of learning and cultural transmission, it can also result in 'The Madness of crowds' and a lack of original thought. The video encourages entrepreneurs to avoid simply imitating others and to think independently.

💡Resume Building

Resume building in the video is criticized as a process that can lead individuals to focus on accumulating credentials and experiences rather than pursuing their true passions. The speaker suggests that this approach can result in a 'random walk' through life without a clear direction or purpose, and instead advocates for a more purposeful and passion-driven approach to career and business decisions.

💡Luck

Luck is discussed in the video as a factor that is often overemphasized in discussions of success. The speaker argues that attributing success to luck can lead to a lack of strategic thinking and planning. Instead, the speaker suggests that success is more often the result of deliberate actions and planning, and that entrepreneurs should focus on creating their own luck through thoughtful decision-making.

💡Counterfactual

A counterfactual is a hypothetical scenario that explores what would happen if a certain action were taken or not taken. In the video, the speaker uses the term to emphasize the importance of working on problems that would not be addressed if the entrepreneur was not involved. This concept is tied to the idea of creating meaningful work that has a significant impact on the world.

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