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Lecture 5, How to Start a Startup: Peter Thiel

startupclass.samaltman.com

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Re: Lecture 5, How to Start a Startup: Peter Thiel

#4

Post by levlandau »

I agree with the overall sentiment expressed in Thiel's monopoly theory. However, it seems like the whole problem is defining the market in the first place. We can define search, ecommerce and payments as part of larger markets and/or as fields which had many startups "competing" with each other. The ultimate winner ended up being a startup which was "10X" better on some dimension and thus blew past its "competition". The fact that successful startups start with a small niche seems orthogonal to whether or not "competitors" exist or whether the true market size is large. Even with this realization, it's not always obvious whether something is "10X" better than the existing alternatives. This is especially true when you aren't building something that can be easily measured along some dimension like speed e.g. a social network. Knowing that a network with real identity is 10X better than myspace is something that seems obvious in hindsight but would probably have been hard to justify to critics as enough of a difference to classify it as a startup that wasn't "competing" with Myspace, hi5 etc. dhouston is also on the record for saying VCs kept reminding him that there were thousands of "sharing and sync" startups when he decided to make Dropbox. Making a product that "just worked" was enough to render all "competition" irrelevant for years.

So what are we are left with? I think Thiel's advice boils down to:--> Do something that you have a strong intuition is >= 10X the existing alternatives. There is always competition because you cannot invent a new need and people are fulfilling their needs with something. However you can make the competition completely irrelevant by doing something so good that it is practically new and you'd do better not to go about your day to day with competition as your driving force.

Re: Lecture 5, How to Start a Startup: Peter Thiel

#5

Post by staunch »

Companies like Facebook and Google are definitely not the last companies in their markets. Being in a monopoly position does not grant you magic protection from competitors. It probably even hurts more than it helps in the long term. Google and Facebook have not radically innovated since their inceptions. Google is still essentially a better AltaVista/Hotmail and Facebook is still essentially a better MySpace. And yet changes every day in the world make radically new approaches possible.

Zuckerberg did not pay $1 billion for Instagram and then $19 billion for WhatsApp because he wanted to. He did it because he believed they had a shot at replacing Facebook (and so did they).

Even Apple had to fight for its position with smart phones, which it practically invented. If Apple hadn't poured resources into keeping iPhone ahead of Android it would be absolutely dead today. Their monopoly began expiring the day it came into existence.

You either acquire and kill the competition or innovate and beat them in the market. Either way your monopoly doesn't protect you.

Re: Lecture 5, How to Start a Startup: Peter Thiel

#6

Post by csallen »

staunch wrote: post #5

Companies like Facebook and Google are definitely not the last companies in their markets. Being in a monopoly position does not grant you magic protection from competitors. It probably even hurts more than it helps in the long term. Google and Facebook have not radically innovated since their inceptions. Google is still essentially a better AltaVista/Hotmail and Facebook is still essentially a better MySpace. And ye…

>> "It probably even hurts more than it helps in the long term."

Compared to what? Big companies and monopolies die eventually, yes, but they pretty much outlast smaller companies and startups by definition.

Being big gives you the power of scale. You can simply afford to spend more resources building moats around your business than your smaller competitors can. If someone built a better Google.com today, I'd still be checking my Gmail and using an Android phone daily, plus Google would be in a much better position to play catchup than AltaVista et al were.

Re: Lecture 5, How to Start a Startup: Peter Thiel

#7

Post by staunch »

csallen wrote: post #6
staunch wrote: post #5

Companies like Facebook and Google are definitely not the last companies in their markets. Being in a monopoly position does not grant you magic protection from competitors. It probably even hurts more than it helps in the long term. Google and Facebook have not radically innovated since their inceptions. Google is still essentially a better AltaVista/Hotmail and Facebook is still essentially a better MySpace. And ye…

>> "It probably even hurts more than it helps in the long term." Compared to what? Big companies and monopolies die eventually, yes, but they pretty much outlast smaller companies and startups by definition. Being big gives you the power of scale. You can simply afford to spend more resources building moats around your business than your smaller competitors can. If someone built a better Google.com today, I'd still b…

Compared to not having a monopoly. Google has built up a massive empire using their monopoly profits to subsidize every new business they've built. They lose money to give away products and services that users wouldn't pay for. It's a house of cards resting on a single point of failure. It wouldn't survive laying off most of its staff, which it would have to if it lost its search revenue.

Companies that have always had to sing for their supper are much stronger. Apple is the best example. They constantly make new products that result in new sources of money.

Re: Lecture 5, How to Start a Startup: Peter Thiel

#8

Post by betadreamer »

I enjoyed the lecture, but I somewhat disagree with the scientist statement about how Y is close to 0. I think X is the one that is 0 because when the scientist makes an invention the market is so new that there is no market yet. Within this low market the Y value will be high because that is the only thing that exist in it.

Am I the only one who thinks this way? or am i misunderstanding his statement. It could just be a different side of the same coin.

Re: Lecture 5, How to Start a Startup: Peter Thiel

#9

Post by betadreamer »

staunch wrote: post #5

Companies like Facebook and Google are definitely not the last companies in their markets. Being in a monopoly position does not grant you magic protection from competitors. It probably even hurts more than it helps in the long term. Google and Facebook have not radically innovated since their inceptions. Google is still essentially a better AltaVista/Hotmail and Facebook is still essentially a better MySpace. And ye…

I agree with your points. The biggest point is that they will be the last one standing in that market. After reading your comment I came to the conclusion that in the technology world you either dominate or be replaced.
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