Doing what we know takes us from 1 to n, but creating something new we go from 0 to 1.
The single most powerful pattern Thiel said he noticed in successful people is that they find value in unexpected places, and do this by thinking about business from first principles instead of formulas.
This is something Thiel asks during job interviews. What important truth do very few people agree with you on?
It is intellectually difficult because the knowledge we’re taught in school is by definition agreed upon, so taking a counter stance is psychologically difficult because it will be unpopular. Brilliant thinking is rare, but courage is in even shorter supply than genius.
People commonly answer by saying things like the education system is broken and needs to be fixed. It might be true but a lot of people agree already.
A good answer takes this form: Most people believe in X but the truth is the opposite of X. Dan Pink does a great job of this in his Ted Talk on what motivates employees.
Answering the contrarian question is important to understand the future. The future will of course look different than today. For those in 30’s and above, smartphones are the ‘future’ we may have seen as kids.
To understand the future means we need to understand the present, and contrarian questions are different ways of understanding the present.
This is Thiel’s answer to the contrarian question:
My own answer to the contrarian question is that most people think the future of the world will be defined by globalization, but the truth is that technology matters more. Without technological change, if China doubles its energy production over the next two decades, it will also double its air pollution. If every one of India’s hundreds of millions of households were to live the way Americans already do— using only today’s tools— the result would be environmentally catastrophic. Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalization without new technology is unsustainable.
If you can identify a delusional popular belief, you can find what lies hidden behind it – the contrarian truth. Conventional beliefs only ever come to appear arbitrary and wrong in retrospect. When one collapses, we call the old belief a bubble.
To think clearly means to question what we think we know about the past. The most contrarian thing of all is not just to oppose the crowd, but to think for yourself.
Competition is an Ideology, Create a Monopoly Instead
Higher education is a place where smart people get stuck in fierce rivalries with other smart people over careers like investment banking and management consulting. We spend hundreds of thousands of dollars and countless hours turning into conformists.
Thiel talks about how competition ruined Google and Microsoft. They competed over everything – Windows vs. Chrome, Bing vs. Google, Office vs Docs, and so on. Meanwhile, Apple came in and overtook them. In 3 years Google and Microsoft went from each being more valuable than Apple to their combined market cap being lower than Apple’s.
Rivalry causes us to overemphasize old opportunities and keep copying what worked in the past.
The key is to recognize competition as a destructive force instead of a sign of value.
When you escape competition, you have a monopoly. This is elaborated on in detail in the book Blue Ocean Strategy.
To have a monopoly, you need proprietary technology. A good example is Google’s search algorithm. No one can copy it, but it also has to be 10x better than its next closest competitor to have a real advantage. You also need brand, scale, and an effect of being very valuable to your initial market of users.
To build a monopoly, choose a target market you can monopolize, dominate that niche, and then scale up. He says to avoid the temptation to compete, or “disrupt,” as has become famous now.
Don’t worry about being the first mover, it is much better to be the last mover – to make the last great development in a specific market. That is what lets you enjoy a monopoly of profits in the long term.
To play chess while everyone else is playing checkers means having a big vision of the end game in mind. When apple introduced the iPod, people saw it as a cool thing for Macintosh users. Steve Jobs had planned it to be the first of a new generation of portable post-PC devices, but that secret was invisible to most people.
Empower people, Don’t Make Them Obsolete
The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.
We look at computers as replacing people but Thiel says to take a different approach. They are complementary. For example LinkedIn didn’t replace recruiters, and if it had, it wouldnt be the huge business it is today. Instead they transformed how recruiters did their jobs – they can search and filter candidates, immediately see their backgrounds, and also give professionals a way to manage their personal brands.
Computers can find patterns that elude humans, but they dont know how to compare patterns from different sources or how to interpret complex behaviors. Actionable insights can only come from a human analyst.