Peter Thiel and the recipe for innovation

Thiel

Peter Thiel, chess master by age 21, a doctorate in law by age 25, and founder of $1.5 billion company, PayPal at age 35 has helped to create some of the most successful businesses, in the world.

The first team Thiel created is known in Silicon Valley as the “PayPal Mafia" because the majority of his team went on to start and invest in world-dominating companies such as;

  • SpaceX
  • Tesla Motors
  • LinkedIn
  • YouTube
  • Yelp
  • Yammer
  • Palantir

Today all seven of these companies are worth more than $1 billion each. Needless to say, Thiel knows a thing or two, about creating successful businesses so, it's no surprise that his book, "Zero To One", on how to grow a business masterpiece, is a New York Times #1 bestseller. Here are four reasons why;

1) The ultimate innovation recipe; Zero to One

Thiel argues the greatest leaps in innovation are vertical, not horizontal. Doing what we already know how to do (i.e horizontal progress) takes the world from 1 to n, you are simply adding more of something familiar. However, on the other hand, when you do something new (i.e vertical progress) you take the world from n to 1. This is the exact formula Thiel seeks to create in every new enterprise. Theil argues that the champions of tomorrow, will not win by competing in an existing marketplace. Instead, they escape competition altogether, because their business is brand new and that is the recipe for success.

2) Success comes from monopoly not competition

The problem with competition is that your own success is constantly dependant on your competitors. You have to fight hard to survive and keep up to date. If you offer affordable products, with low margins, then you probably can't focus on properly renumerating your employees. You have to focus on every saving every efficiency. It's a constant battle.

A monopoly like Google, for example, is different. As it doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products, and its wider social impact. Google is the ideal kind of business that is successful enough to take ethics seriously without jeopardizing its own existence. It's not just great for marketing but great for all of those involved - employees and employers, alike. In business, money is either an important thing or it is everything. Monopolists can afford to think about things other than making money; non-monopolists can’t.

In Theil's view competition forces businesses to be so focused on the present margins that it can’t possibly plan for a long-term future. The only one thing that can allow a business to transcend the daily savage struggle for survival is monopoly profits.

3) Competition closes our creativity

Theil argues that people can be so obsessed with competition, that they focus on what has worked in the past in an unhealthy manner, without searching for future opportunities. Businesses start to rely on competitors for their own advancement, meaning they lose sight of their own purpose and why the business was created in the first place.

Creative monopolists, however, never lose sight of their original business purpose. Their success is defined by the value they are constantly adding to their market. They give customers more choice by adding entirely new categories of benefits to the world. Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making the world a better place.

4) Slow and steady can win the innovation race

Many think that to win at innovation you've got to be the first entrant to the market. this can be true in some cases, and if it's done well you can capture significant market share while competitors scramble to get started. However, Theil argues that moving first is a tactic, not a goal. What really matters is creating consistent cash flows in the future, so being the first mover doesn’t give any benefits if someone else can come along and unseat you. It’s much better to be the last mover – that is, to make the last great development, in a specific market and enjoy years or even decades of monopoly profits - because you have done it the best way possible.

Zero to One is full of counterintuitive insights that will help your thinking and build the foundations for a world-changing enterprise. These are just the top four insights we believe to be the most monumental, however, the book has plenty more.

 

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