Chapter Two of Peter Thiel's New Book

[sama]

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

[tlb]

I 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.

[Anderkent]

> 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/

2: http://www.antipope.org/charlie/blog-static/2010/12/invaders...

[amirmc]

You might like to look up work on the Theory of the Firm, as to why companies exist. I'm not suggesting it's the answer but I did find it interesting.

http://en.wikipedia.org/wiki/Theory_of_the_firm

[cubetime]

I model people's motivations (and systems made out of their motivations, to a lesser extent) as tangly, illegible, time-varying weighted directed graphs of weighted goals, where none of the nodes seems to actually persistently have indegree == 0 or outdegree == 0. The use of "terminal" and "instrumental" here isn't very clear to me. [http://lesswrong.com/lw/l3/thou_art_godshatter/]

But, to me, "company" usually means something like "an organization with higher-level goals that include selling things to customers and making money for its other stakeholders". When that's not the case, I think of words like "charity", "non-profit", and "club".

[Dwolb]

In one line of reasoning, money is a proxy for happiness (I'd rather change this to value... but this doesn't matter because this example is so distilled). So, companies exist to make people happy. This works by providing a good or service that makes a customer happy in exchange for money, which the company can then use to give to employees and shareholders so they can be happy too. Since the company creates a profit, happiness generation can be sustained for multiple parties well into the future.

[cotsuka]

That's an organization or club, not a company.

[rcamera]

Thank 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

I highly recommend the book.

[csdrane]

I wait with bated breath that this will be more than just a recapitulation of Blake's existing notes.

[staunch]

VCs 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]

a pump-and-dump scheme is not a ponzi scheme

[graycat]

It 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.

[sama]

clickable: http://pastebin.com/NuxLFmW4

[nicklovescode]

What 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.

[minimaxir]

Another excerpt was posted on Business Insider: http://www.businessinsider.com/peter-thiel-how-to-create-inn...

[clairity]

the 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).

[samirmenon]

"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.

[iand]

I 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]

I 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.

[olalonde]

"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.

[foobarqux]

Did 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

[wmf]

It sounds very much like an Edge question but it's not. http://edge.org/annual-questions

[quartzmo]

Thanks 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.

[uladzislau]

The 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]

Can 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...

[Multics]

Also, he tends to be contrarian in his posture towards investments. For example, he's backed anti-ageing research[1], which is obviously viable, but seen by many as oddball.

He was the first outside investor in Facebook[2]...

And perhaps most well known for co-founding PayPal with Elon Musk and Max Levchin.

There's a ton of vids with him being interviewed on YouTube, if you want the gist of the guy.

I've bookmarked this one for later. A Conversation with Peter Thiel and Niall Ferguson[3]. (Niall Ferguson has done some fine work, as well)

[1] http://en.wikipedia.org/wiki/Peter_Thiel#Anti-aging_research [2] In the intro section: http://en.wikipedia.org/wiki/Peter_Thiel [3] https://www.youtube.com/watch?v=exfbmY7mg8s

[dawayne]

Peter Thiel co-founded PayPal. The book is based on a class about startups he taught at Stanford.

[pbreit]

Not offensive, just lame. Google or Wikipedia would answer your question in 30 seconds.

[vixin]

Private link: https://en.wikipedia.org/wiki/Peter_Thiel

[Axsuul]

Among other things, the lead investor character on HBO's Silicon Valley is said to be based on Peter Thiel.

[icebraining]

Here's the IAmA he did recently: http://www.reddit.com/r/IAmA/comments/2g4g95/peter_thiel_tec...

[gorkemyurt]

Facebook made him really rich http://money.cnn.com/2012/08/20/technology/facebook-peter-th...

[conectorx]

Plus, he is in the Billderberg Group...just sayin' don't hate

[icpmacdo]

Awesome I really want to read this book but it is sadly over 30$ up here in Canada.

[porter]

My 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.

[tomek_zemla]

CDN $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.

[itazula]

2106 yen in a bookstore in Tokyo, not including tax. A little less than 20 USD.

[guiomie]

It was also hard to find for my case (in Canada)

[seeingfurther]

Try the Amazon audio book for ~$18?

[dpweb]

Audible man, free trial

[onedev]

It's probably worth it.