Peter Thiel Zero To One Review

[Joseph]

3. Economies of scale. Also pretty straightforward, and especially obvious for software companies. Since the marginal cost of a unit of software is near-zero, your cost per unit is the cost of building the software divided by the number of customers. If you have twice as many customers as your nearest competitor, you can charge half as much money (or make twice as much profit), and so keep gathering more customers in a virtuous cycle.

Thiel relates this to the decline of cults (see these two essays fleshing out the phenomenon). Although cults may not be desirable, they are the failure mode of individuals and small groups trying to throw off conventional wisdom and discover profound new ways of looking at the world. Have we lost our cults because we no longer fail at this task, or because we no longer attempt it at all?

The modern skepticism about secrets and reasoning implies a similar skepticism about planning. If the argument against multi-step reasoning is right, then a mildly Internet-famous scene from Harry Potter And The Methods Of Rationality is right too:

Father had told Draco about the Rule of Three, which was that any plot which required more than three different things to happen would never work in real life. Father had further explained that since only a fool would attempt a plot that was as complicated as possible, the real limit was two.

At no point does anyone in the chain know what to do with money in the real economy. But in an indefinite world, people actually prefer indefinite optionality; money is more valuable than anything you could possibly do with it. Only in a definite future is money a means to an end, not the end itself.

Also, different philosophies work for different situations. The virtues of feudalism are more relevant to a sprawling medieval empire than to modern Denmark. Indefinite liberalism seems suited to a country where in fact nobody agrees on anything; one with deep religious and racial divisions, caught in the grip of a smoldering culture war. If nobody can agree on what the good is, then refereeing everybody as they pursue their own private versions of the good might be the best you can maange.

The book begins and ends with a celebration of contrarianism. Contrarians are the only people who will ever be able to violate the EMH. Not every weird thing nobody else is doing will earn you a billion dollars, but every billion-dollar plan has to involve a weird thing nobody else is doing.

Thiel describes how his venture capital firm would auto-reject anyone who came in wearing a suit. He explains this was a cultural indicator: MBAs wear suits, techies dress casually, and the best tech companies are built by techies coming out of tech culture. This all seems reasonable enough.

Another part of the answer must be that when everyone is competing on weirdness, the winners will be the people who are actually weird. The people who unavoidably do weird things because they are constitutionally weird people. There is a certain degree to which an ordinary person can relax constraints on their behavior and act and think in a weirder way than they ordinarily would. After that, you actually have to just be a strange kind of guy.

The lesson for business is that we need founders. If anything, we should be more tolerant of founders who seem strange or extreme; we need unusual individuals to lead companies beyond mere incrementalism.

Or be the best at insider dealing, have the best connections to people with inside information, or find a way to use regulatory arbitrage (or even collude to capture regulators) to take advantage of sloth-like governments and abuse people with less education than you.

Whenever I was in intro economics, they told me that agriculture is one of the few industries that really approximates perfect competition as described in our textbooks. It makes sense for all the other industries. Perfect competition is by definition not economically profitable. Why do that when you could do something else that has more potential for profit like being in a tech startup?

This might be the movement that capitalism is always headed towards. Not more competitive industries, but less as companies try to find some little thing they can exploit to become incredibly profitable and swamp any possible industry that resembles perfect competition.

Plenty of industries are highly competitive, but are far enough back in the supply chain that the end-user never notices them.
Transistors, 1.4301 (304 in freedom units) sheet, M8 hex nuts, most things one might order 10,000 of from China etc.

I think this is the fundamental underpinning of the culture wars. We have no plans that enable us to invest in ways that result in actual valuable stuff (engineering), so we instead invest in ways of bidding up the value of the stuff we have (finance).

I came here to point out the same thing. Yes, it is generally accepted in mainstream economics that perfect competition does not really exist and that normal firms have some market power (market powrer is sometimes called monopoly power). Even in highly competitive industries like restaurants, where market power mostly comes from location or branding. But Thiel is right that it is usually better to work in less competitive industries and that business innovation is often motivated by attempts to increase market power. It is however not very original point.

Theurgy: perhaps this is might have been the starting material for a better or at least different understanding of psychology. Possibly a lot of the contemporary interest in Buddhism and Buddhism-derived things is trying to fill that gap; trying to import from a distant mystical tradition rather than transforming a home-grown one.

For an example which should be familiar to you, think about drug patents. It takes years and hundreds of millions of dollars to shepherd a lead compound through the FDA approval process to the point that you can prescribe it to your patients without being sued. Why do pharma companies go through all that instead of closing their doors and opening Indian restaurants? Because, if they manage to get a drug patent, they can recoup their losses and then some by making monopoly profits until their patent runs out.

Indefinite liberalism seems suited to a country where in fact nobody agrees on anything; one with deep religious and racial divisions, caught in the grip of a smoldering culture war. If nobody can agree on what the good is, then refereeing everybody as they pursue their own private versions of the good might be the best you can manage.

But is that a sensible goal? I realize there are some who manage to consistently produce successes, Jobs was one, Thiel may be another. Musk, perhaps. (Who else, btw?) But for most people, a good bit of luck is needed, in addition to a lot of hard work and talent. Why not just go to med school or law school or something, have a great time at college, and go on to a secure and comfortable life?

I think this is also a myth, google gives me 660,000 restaurants in the US, tons of people open up and run successful restaurants. You get a high failure rate among people trying to launch the hip new place in New York, but they are aiming for something super specific.

The sort of competition where someone can only out-compete you by offering something much better is still very different from the sort where someone can out-compete you by a small improvement, or by offering the same but cheaper.

At the same time that MySpace was in business Facebook was also barely used by anyone over 25. It grew into that market as people who used it graduated and got jobs and intermingled with older professionals.

I think network effects always have to be present in addition to one of the three other factors. Once you already big, network effects are sufficient to help you keep extracting outsize profits, but to get that big in the first place, you need technology, a secret, or economies of scale.

In terms of ancap solutions, the obvious one is for property owners to own the roads which are required to access their property, generally as part owners of an organization which manages those roads for them, or at the very least to have contractual rights with the road-owning organization for a travel easement.

The apparent contradiction with monopolies goes away when you consider who the book is written for. If you are the entrepreneur who creates a monopolistic company, your market position is good FOR YOU. Obviously, the public will be better off when your business becomes a commodity, with cheap prices and lots of options. At that point, the entrepreneur should have jumped ship to start something new, which certainly feels like the way people like Elon Musk run their lives. Focusing all your energies on being the CEO of a successful company is a lame 1 -> N job. Better to start something new with the potential to be a monopoly, like the Boring company, and leave 1 -> N to the bean counters.

He then set about calculating the entire orbit of Mars, using the geometrical rate law and assuming an egg-shaped ovoid orbit. After approximately 40 failed attempts, in early 1605 he at last hit upon the idea of an ellipse, which he had previously assumed to be too simple a solution for earlier astronomers to have overlooked.

The fact that these things sound obviously ironic when said by a normal person, but become revered as profound revelations when said by Thiel is a testament to the culture of celebrity worship that pervades society at large and the Silicon Valley in particular.

As has been well documented elsewhere, Denton lost the five-count lawsuit in a Florida courtroom and was slapped with a $140 million verdict. Gawker Media had no choice but to file for bankruptcy; its carcass was sold to the highest bidder.

c80f0f1006