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Chapter Two of Peter Thiel's New Book
I asked Peter if I could post some of his new book on HN. Here is Chapter Two, which I think will be interesting to people here.
Party Like It’s 1999
Our contrarian question—What important truth do very few people agree with you on?—is difficult to answer directly. It may be easier to start with a preliminary: what does everybody agree on? “Madness is rare in individuals—but in groups, parties, nations, and ages it is the rule,” Nietzsche wrote (before he went mad). If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.
Consider an elementary proposition: companies exist to make money, not to lose it. This should be obvious to any thinking person. But it wasn’t so obvious to many in the late1990s, when no loss was too big to be described as an investment in an even bigger, brighter future. The conventional wisdom of the “New Economy” accepted page views as a more authoritative, forward‐looking financial metric than something as pedestrian as profit.
Conventional beliefs only ever come to appear arbitrary and wrong in retrospect; whenever one collapses, we call the old belief a bubble. But the distortions caused by bubbles don’t disappear when they pop. The internet bubble of the ’90s was the biggest of the last eight decades, and the lessons learned afterward define and distort almost all thinking about technology today. The first step to thinking clearly is to question what we think we know about the past.
A Quick History of the ’90s
The 1990s have a good image. We tend to remember them as a prosperous, optimistic decade that happened to end with the internet boom and bust. But many of those years were not as cheerful as our nostalgia holds. We’ve long since forgotten the global
context for the 18 months of dot‐com mania at decade’s end.
CONTINUE HERE: http://pastebin.com/NuxLFmW4
- sama 12y agoclickable: http://pastebin.com/NuxLFmW4 http://pastebin.com/NuxLFmW4
- nicklovescode 12y agoWhat is the benefit of not allowing links in a post? Is it a purposeful decision or or is it just that no one has bothered to implement it.
- arscan 12y ago> Don't abuse the text field in the submission form to add commentary to links. The text field is for starting discussions. If you're submitting a link, put it in the url field. If you want to add initial commentary on the link, write a blog post about it and submit that instead. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html You aren't supposed to use the text field for submissions that are really links. I assume links in the text field aren't clickable to discourage this behavior.
- gojomo 12y agoWhen allowed, some then stop submitting primary links, and instead wrap even more commentary around the (now in-text) link than is possible in an editorialized headline. This also effectively reserves for the submitter a permanent "top comment".
- minimaxir 12y agoAnother excerpt was posted on Business Insider: http://www.businessinsider.com/peter-thiel-how-to-create-innovative-companies-2014-9 http://www.businessinsider.com/peter-thiel-how-to-create-inn...
- icpmacdo 12y agoAwesome I really want to read this book but it is sadly over 30$ up here in Canada.
- tomek_zemla 12y agoCDN $16.99 Kindle Edition. Note that there are free Kindle readers for pretty much all platforms, even the in browser Web one if you don't have anything else. Also... should appear shortly in public/university libraries.
- seeingfurther 12y agoTry the Amazon audio book for ~$18?
- dharma1 12y agoI couldn't find it on Audible? (UK)
- onedev 12y agoIt's probably worth it.
- icpmacdo 12y agoProbably, I'll likely buy it soon.
- guiomie 12y agoIt was also hard to find for my case (in Canada)
- deleted 12y ago[deleted]
- porter 12y agoMy god man, this guy just put everything he knows about startups into a book. Years of hard-earned experience wrapped up in a neat little package just for you. And all for only $30. If you get just one insight out of this book it will pay for itself a thousand times over. Stop complaining about the price and just buy it.
- rcamera 12y agoThank you for talking to Peter and sharing this. For those interested in more, Blake (the co-author from the book) took Peter Thiel's CS183 class in Stanford, and has class notes freely available on his blog (the notes generated the idea for the book, from my understanding): http://blakemasters.com/peter-thiels-cs183-startup http://blakemasters.com/peter-thiels-cs183-startup I highly recommend the book.
- csdrane 12y agoI wait with bated breath that this will be more than just a recapitulation of Blake's existing notes.
- rattray 12y agoTime to exhale. Thiel has publicly stated that this is largely a recapitulation of Blake's existing notes. Just better-organized and refined. If you want free, his notes will be fine. Personally, having followed along with the notes, I'm planning to get the book as well.
- Anderkent 12y ago> Consider an elementary proposition: companies exist to make money, not to lose it. I'm not sure I agree with that proposition, at least in the general form in which it's stated. Yes, the objective of any particular company is to make money. But is that why companies exist? We support the concept of a company, build laws and systems that allow one to be created. And clearly the reason we have those laws and system isn't so that the company can make money. So the instrumental goal of a company is to make money, but the terminal value of companies existing is something different. Perhaps it's that they help us collaborate on issues that outscale any particular mind (though in that we have to be mindful of the Moloch [1] and keep in mind that corporations think in alien ways [2])... If so, corporations exist to solve human issues primarily; and making money is only a measure of how successful they are at that. 1: http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ 2: http://www.antipope.org/charlie/blog-static/2010/12/invaders-from-mars.html http://www.antipope.org/charlie/blog-static/2010/12/invaders...
- cotsuka 12y agoThat's an organization or club, not a company.
- Anderkent 12y agoWell, a company is a type of an organisation, isn't it. A club is usually focused on providing value to their members, rather than the world at large; I'm not sure how it's similar.
- jamesk_au 12y agoThe members of a company are generally its owners or shareholders, and the company exists to carry out its objects - if the objects of the company are commercial, that usually means providing a return to shareholders. But the point made by Thiel was not meant to be some existential musing on the purpose of companies generally. The proposition that "companies exist to make money, not lose it" is "elementary" because he is there referring only to companies with commercial objects. In other words, 'for profit' companies exist to make money, and at least for those companies it is a mistake to focus on other metrics to the exclusion of profit. As for the historical relationship between the development of company law and commerce, a good place to start would be the history of limited liability companies and corporations (in the UK, US and elsewhere) and the effect of limiting liability on entrepreneurship.
- deleted 12y ago[deleted]
- staunch 12y agoVCs in the dot com bubble were not confused about whether companies should make money or not. VCs knew exactly what they were doing: making money for themselves. They were raking in millions by pumping up companies and dumping them on the public market. A classic ponzi scheme. Eventually the public market realized what was going on and the party stopped.
- nerfhammer 12y agoa pump-and-dump scheme is not a ponzi scheme
- staunch 12y agoFair enough. I knew it was wrong when I said it but I said it anyway!
- clairity 12y agothe yc app has a form of this as one of it's questions: "what do you understand about your business that other companies in it just don't get?" one of thiel's general business examples is "capitalism and competition are opposites". although his point is sound (business schools explicitly teach you to look for ways to avoid/eliminate competition), his definition of capitalism is a bit distorted to make this phrase work. capitalism is a decentralized economic system for deploying capital efficiently based on supply and demand, not simply for accumulating/concentrating capital (which is how thiel sees it).
- jlangenauer 12y ago"Efficiently", in this case, means deploying capital where it will accumulate the most profit. Not where it does the most good, or solves the most pressing or important problems.
- clairity 12y agoat a game theoretic level of you vs. the competition, that's true. you're trying to maximize profit because profit is used as a proxy for solving the most pressing problems (or desires) of a set of people (i don't believe profit is a perfect proxy, but that's another discussion). but if you want a stable and efficient economic (and political) system, you want capital to continuously flow through the system, not accumulate.
- uladzislau 12y agoThe course (CS183) which this book is based on was outstanding and the authors claim that they extended and improved on the course. I'm looking forward to the book.
- eXpl0it3r 12y agoCan someone explain to the people that don't understand who "Peter Thiel" is and what this new book is about? I hope, I don't offend anyone by not knowing, I usually just use Hacker News to get some News articles and am not too much involved with YC and the whole community behind HN...
- gorkemyurt 12y agoFacebook made him really rich http://money.cnn.com/2012/08/20/technology/facebook-peter-thiel/ http://money.cnn.com/2012/08/20/technology/facebook-peter-th...
- jey 12y agoHe was already really rich (see: PayPal).
- skizm 12y agoDamn he sold all those shares at the bottom of the dip. $19 - $20... facebook is now at $74. His shares would be worth more than $3.5 billion now if he held on to them. Of course the market could behave differently if he holds, but still fun to imagine.
- staunch 12y agoHe also managed a $8 billion dollar hedge fund that failed spectacularly. http://en.wikipedia.org/wiki/Clarium_Capital http://en.wikipedia.org/wiki/Clarium_Capital
- eruditely 12y agoSo what? It's a few big ones that matter. Why all this negativity?
- staunch 12y agoHe claimed to know things about the economy and raised $8 billion to capitalize on his ideas. Turns out he was full of shit. He had no idea what he was doing and lost huge amounts of money over years. He wasn't just bad he was arrogantly clueless. Now he's claiming to know things about the economy again.
- olalonde 12y ago"Our contrarian question—What important truth do very few people agree with you on?—is difficult to answer directly." Didn't this question originate from Peter himself? I recall he claimed so in an interview from Pando but I can't find the link.
- wmf 12y agoIt sounds very much like an Edge question but it's not. http://edge.org/annual-questions http://edge.org/annual-questions
- foobarqux 12y agoDid you actually try or that some kind of weird figure of speech? It's the very first result on Youtube for "Pando Thiel", 6 minutes in. http://youtu.be/p6taTMa4nls?t=5m44s http://youtu.be/p6taTMa4nls?t=5m44s
- olalonde 12y agoI didn't try... was on my mobile phone and crappy 2g connection. Thanks for linking :) I'm a big fan of Peter Thiel, hope my comment didn't come across as negative.
- samirmenon 12y ago"Conventional beliefs only ever come to appear arbitrary and wrong in retrospect; whenever one collapses, we call the old belief a bubble." I couldn't help but feel that, in 10 years, Silicon Valley's current bubble (which Peter Thiel buys into) will seem this way.
- adventured 12y agoThiel goes so far as to reference Twitter in a recent article as an example of how the eyeballs / users / etc. type metrics aren't always wrong (he also used Facebook). Which falls flat when you consider that Twitter has proven itself to be anything but a successful business the past seven years or so. It's currently bleeding money at an epic rate, and if you assume a $30 to $35 billion market cap, there is almost no scenario in which it can ever justify that by earning a profit (even if revenue were profit today, they'd still be fairly valued; best case scenario possible is in ten years they're worth about what they are now, assuming non-stop growth and that they eventually have a $5b sales / $1.xb profit business)). On the downside of this stock market bubble, when cash is harder to come by, Twitter is still bleeding out, and their growth trails off, the company is worth maybe 15% of what it's currently trading for. Thiel will of course no longer be discussing Twitter as a good example at that point (he'll then stick to only Facebook as the example).
- graycat 12y agoIt seems to me that Peter describes a lot of mistakes and then proposes mostly some new ones. After the initial dust settles, what we want is a valuable, defensible, first good or a much better, must have and not just nice to have solution to a problem where such a solution can be the crucial, nearly sufficient means of a valuable new company. Okay, now for the lesson: However we come up with such a solution, we have to evaluate it. Well, we can look around just a little and see that some parts of our society are very good at technical evaluations of such solutions. With everything else being assumed, a successful technical evaluation is supposed to be able to remove about all doubt about the business success. E.g., the ideal solution would be a one pill, safe, effective, cheap cure for any cancer. Big company? Sure. Done. And we should expect such solutions in other areas. In particular, we are able to plan, propose, and have evaluated just on paper solutions for major problems. Examples: Hoover Dam. The new World Trade Center. The Erie Canal. Powered, controlled flight as the Wright brothers were on the way to Kitty Hawk. The SR-71. GPS. Many more. Evaluated just on paper, and then executed as planned. Sand Hill Road needs to be able to do much the same, and that is much of what Peter is missing. Instead of such solid history of project evaluation, Peter goes off on various emotional reactions to various irrational flights of triviality in various headlines, etc. Peter, friendly advice: Learn how to evaluate research results and their applications to valuable, practical projects. E.g., borrow from evaluations of GPS, the SR-71, Hoover Dam, etc.
- tlb 12y agoI highly recommend the whole book. The biggest danger with this line of thinking is picking a straw man version of what everyone else believes. Or of underestimating the difference between belief and execution. In this case, few sophisticated investors truly believed that page views were the ultimate metric. But those were one of the few publicly available metrics you could compare between websites. Their problem was in execution (getting better engagement and monetization metrics) rather than mistaken beliefs. Straw men are common in startup pitches: "Our software will be powerful and easy to use", as if their competitors had a different goal. So before proceeding on the assumption that everyone else believes something silly, think hard about reasons why it might only appear that way.
- iand 12y agoI haven't read the book but I'm interested in other people's opinions on how much predictive power is in his ideas. It's clear he, like many other entrepreneur writers, has presented something with good descriptive power. He can describe why something was a good investment or why something else failed, but does he provide any kind of framework for predicting success?
- analog31 12y agoI wish I remember who said this: If you could predict business success correctly 51% of the time, and acted on your findings, you'd soon be the richest person ever.
- quartzmo 12y agoThanks for the excerpt. It's not long, but I enjoyed the writing, it's crisp, fast-paced, and covers a lot of ground. (I imagine Peter's lectures to be similar!) This gave me the confidence to order the book.