Peter Thiel's advice about monopoly is hugely similar to the point Porter makes in his first book, Competitive Strategy. On the first chapter of his book, Porter clearly states that a business located in an industry with strong competitive forces will have lower margins. He even uses the airline industry example on his HBR article, in the 80's (actually, I'm not sure if it is in his first article, or the one from 2008 in which he revisits the topic 20 years later. Either way, is an old idea in the business world)
It is, in a way, a very old idea in the business world.
The value of Thiel's way of stating it (very, very boldly and controversially) is that it makes people in the startup world actually listen to it. And that's a very good thing
The only problem I see, on the other hand, is the unnecessary bashing of economists. Economists, normally, analyse a market from the point of view of the "public interest". With this perspective in mind, self-perpetuating monopolies are almost always a bad thing (unless you believe in such things as centralized planning and dictatorships).
Lecture 5, How to Start a Startup: Peter Thiel
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Re: Lecture 5, How to Start a Startup: Peter Thiel
#12Companies 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…
Instagram was worth $1 billon to Facebook in April 2012. WhatsApp is worth $22 billion in cash and stock to Facebook in October 2014. A lot can change in two and a half years, including relative valuations.
Re: Lecture 5, How to Start a Startup: Peter Thiel
#13Peter Thiel's advice about monopoly is hugely similar to the point Porter makes in his first book, Competitive Strategy. On the first chapter of his book, Porter clearly states that a business located in an industry with strong competitive forces will have lower margins. He even uses the airline industry example on his HBR article, in the 80's (actually, I'm not sure if it is in his first article, or the one from 200…
>>Economists, normally, analyse a market from the point of view of the "public interest". With this perspective in mind, self-perpetuating monopolies are almost always a bad thing (unless you believe in such things as centralized planning and dictatorships).
Yes. The full saying is, "competition is good... for the customer." It almost always results in reduced prices and better service. It's obviously never good for businesses, since they have to work harder to win and retain customers.
Re: Lecture 5, How to Start a Startup: Peter Thiel
#14"I'm personally quite skeptical of all the Lean Startup methodology, I think the really great companies did something of a quantum improvement that really differentiated them from everybody else. They typically did not do massive customer surveys. The people who ran these companies would often, not always, have mild forms of Asperger's, so they were not actually that influenced, not that easily deterred by what other people thought or told them to do. I do think we're way too focused on iteration as a modality and not enough trying to have a virtual ESP link with the public and figuring it out ourselves."
Glad to finally see this confirmed by someone who knows what he's talking about.
Re: Lecture 5, How to Start a Startup: Peter Thiel
#15Very good lecture! So.. basically, start small and try to turn into a monopoly
Maintaining a monopoly, or even just a dominant share of a market, requires what Warren Buffet likes to call a "moat", some crucial advantage that makes it difficult to compete with you.
Re: Lecture 5, How to Start a Startup: Peter Thiel
#16"I'm personally quite skeptical of all the Lean Startup methodology, I think the really great companies did something of a quantum improvement that really differentiated them from everybody else. They typically did not do massive customer surveys. The people who ran these companies would often, not always, have mild forms of Asperger's, so they were not actually that influenced, not that easily deterred by what other…
Almost nobody in this industry has "mild forms of Asperger's." That canard is used far too often, and far too often as an excuse for something much more simple: these people are socially indifferent, to be polite. Some of them are merely socially inept, but others (many? most?) are, to be quite vulgar about it, simply assholes.
Re: Lecture 5, How to Start a Startup: Peter Thiel
#17Interesting point about market size. If it's true that companies often lie to themselves about their market, what can they do to identify their real market? Is there an objective measure or is it purely subjective?
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Re: Lecture 5, How to Start a Startup: Peter Thiel
#18"I'm personally quite skeptical of all the Lean Startup methodology, I think the really great companies did something of a quantum improvement that really differentiated them from everybody else. They typically did not do massive customer surveys. The people who ran these companies would often, not always, have mild forms of Asperger's, so they were not actually that influenced, not that easily deterred by what other…
Almost nobody in this industry has "mild forms of Asperger's." That canard is used far too often, and far too often as an excuse for something much more simple: these people are socially indifferent, to be polite. Some of them are merely socially inept, but others (many? most?) are, to be quite vulgar about it, simply assholes.
That's, like, not even the fourth most point of that quote.
Re: Lecture 5, How to Start a Startup: Peter Thiel
#19Peter Thiel's advice about monopoly is hugely similar to the point Porter makes in his first book, Competitive Strategy. On the first chapter of his book, Porter clearly states that a business located in an industry with strong competitive forces will have lower margins. He even uses the airline industry example on his HBR article, in the 80's (actually, I'm not sure if it is in his first article, or the one from 200…
> Economists, normally, analyse a market from the point of view of the "public interest". With this perspective in mind, self-perpetuating monopolies are almost always a bad thing (unless you believe in such things as centralized planning and dictatorships).
Okay, but the more famous economists are usually at the more famous universities which tend to have large endowments and tend to want to get high returns and often do this by investing in VCs who look for monopolies that can return money enough to pay for the professors of economics!
Actually, whatever gets taught or suggested in the classrooms, it's both common and easy enough for the high end universities to look for and like students who are wealthy or relatively likely to become wealthy and make significant donations back to the university -- no joke. Or, universities are not against monopolies everywhere on campus!
Re: Lecture 5, How to Start a Startup: Peter Thiel
#20This is a question asked to Steve Jobs when he released the iphone:
Reporter: "Why in the world would Apple jump into the handset market with so many competitors and players?"
Steve: "One of the biggest motivations for working so hard for a few years to make a great product, is you want one yourself and we use all the handsets out there and boy is it frustrating, it's really frustrating, its a category that needs to be reinvented, needs to be made not only more powerful but much easier to use and so we thought we could contribute something and we don't mind the fact that there's other good companies making products out there. The fact is 1 billion handsets were sold in 2006 & if we get just 1% market share, thats 10million units."
I don't know why but i always remember the guy from pinterest talk, when he spoke about going over a year and just having around 13000 users. I also remember a blog post by someone who actually spoke to him about his idea and didn't like it. How many of todays VC's, incubators & entrepreneurs would stick around for 2yrs to see if an idea will get traction?
Then for some reason i always think about Kevin Rose's milk which had a couple hundred thousand users in just around 3 months and he shut it down. I noticed he has started with the same concept again. Personally i think you cant point a finger at either side as it is hard to stick with a slow growth business and also hard to accept defeat. I think that you just have to be believe so much that your way is the right way and make the world understand that, just the way Steve Jobs did with the iphone in a competitive market.