Peter Thiel, the author of "Zero to One"
2015/2/17 @ Taipei Taiwan
Part 1 - Speech content
I think one of the big challenges about teaching and writing about entrepreneurship is there isn’t a real formula, the next Mark Zuckerberg will not be starting a social networking company, the next Larry Page will not be starting a search engine, the next Bill Gates will not be starting an operating system. So if you copy these people, you're in some sense not learning from them. Science always starts with number 2, it starts with experiments you can repeat, things you can do over and over again, but there's something about business, where the history of technology, where everything important is singular, every moment happens only once, every discovery happens only once in history. So there's no scientific formula for describing how one builds a great company, or how one invents the next thing. So one of the challenges is if there's no formula, no science of entrepreneurship, what can one say it all, say we have something new or something different, this is the big challenge of teaching or writing about this topic. So I tried to approach it somewhat indirectly by asking a set of contrarian questions, to get people think, the business question is "what great company that nobody is starting?", the intellectual question, which is always a very good interview question to ask people is "tell me something that is true, but very few people agree with you on". This is always a shockingly hard question for people to answer, because they've been taught that all the things that are true are things everybody agrees on, everybody already knows to be true, so we think you got to be really brilliant to come up something new that no one has figured out, but it’s also difficult because of the social context of interview, where if you give the correct answer to the question in some sense is the answer that interviewer would not want to hear, you come up with some answer like "our political system doesn't work very well", or "the education system needs to be reformed", there are all conventional answers, answers that everyone understands to be true, but the really good answers are the ones people will not agree with you on. I think we're living in a world in which courage is much shorter-supplied than genius. So I want to offer a few of the answers that I come up with to this question, things I believed to be true that people do not agree with me on. I start with the general business answer, most people believed that capitalism and competition are somehow the same thing, they are synonymous, I believe the capitalism and competition are antonyms, a capitalist of someone who's in the business accumulating capital, a world of perfect competition is a world with profits are all competed away, so if you're starting a business, if you're investing a business, or being an early employee of a business, you want the company to be in monopoly, you want to be doing something so different and so much better than anybody else in the world, that is no competition at all. If you're in a business doing the same thing as everybody else, that's always a really bad idea, example of a bad sort of business is opening a restaurant, you want to compete like crazy, you don't want to make any money, you should just open a restaurant, the chances are you'll go out of business in a few years, even if you somehow survived, its going to be very marginal, because there are so many other people doing the exact same thing, and competing with you very closely.
The example I gave in my book, of a successful monopoly company in technology, is company like Google, where on the search technology, they definitely distant themselves from Yahoo and Microsoft back in 2002, they have effectively almost no competition in the US and much of rest of the world for the last 13 years, so it’s been an enormously profitable business. This monopoly idea ends up been understood very poorly for a variety reasons, one I think the people who have monopolies don't talk about it, if you're running Google, you do not talk about search engine, where you have huge market share, and generating 98% of your income, and instead, talk about Google as a technology company, an incredibly broad space called "technology", and you're competing with Apple, Facebook, Amazon, you're building a self-driving car, competing with car companies in Detroit and elsewhere in the world, there's tech competition everywhere, and no, you're not the monopoly that government is looking for. So if you're a monopolist, you always understate this monopoly, you're doing this by exaggerating the size of the market you're in. On the other end of the spectrum, if you decide to leave today's talk and say I'm going to really open a restaurant, you'll quickly running into various problems, people wouldn't want to invest in, it’s not a very good business to start, then you'll try to fictionalize a story like to be the only Napoli restaurant in Taipei, so you give a unique fictional story where you describe in much narrower terms, but of course, it’s just a restaurant, and it will be incredibly competitive at the end of the day.
This monopoly-competition framework leads me to think about these approaches to businesses in very different ways, we're often told in business school or elsewhere that you want to go after for a very big market, but I think the critical thing you want to do is to get the large market share. In monopoly, doesn't necessarily to have a big market, but a large share, large percentage of a market, and so if you're starting a company, you often want to go after a small market, take over those markets, and expand from there. When Paypal started, we went after power sellers on eBay, which is about 20,000 power sellers, they needed a new payment solution, and we got from 0 to 35-40% of market share in the first 3 months, which is a very good auspicious start. Facebook, started with students of Harvard University, a market of 12,000 people, and it went from 0 to 60% market share in the first 10 days, again, very auspicious start, and it grew to concentric circles from there. The company that go after super big market typically encounter a lot of unexpected competition, I think a lot of things went wrong in the clean technology companies in the US in the last decade. One characteristic mistake they make was the market was simply too big, every PowerPoint presentation that one saw in clean-tech companies, it will start with the slide where they would say "we're in this market called energy, and the market measured in the size of hundreds of billions or trillion of dollars", and if you're going after a market that's trillion of dollars big, you're a minnow, small fish in a giant ocean, there's just going to be crazy competition everywhere, so you'll be competing with 10 film solar panel companies, you have to beat other 9 thin film solar panel companies, then you have to beat the next 90 solar panel companies, then you have to beat wind-power companies, then you have the fracking industry in the US came out from nowhere, cheap Chinese manufacturers came out of nowhere, so there's competition everywhere, and it's super difficult to get to sort of monopoly, a profit position.
But I think there's a second reason this monopoly idea is very poorly understood, its more psychological or sociological, I think we're often trained to compete, I have this line in my book, the opening sentence of Anna Karenina is "all happy families are alike, all unhappy families are unhappy in their own special way", and I suggest the opposite is true for businesses, "all happy companies are different, because they found something unique to do, all unhappy companies are alike, because they failed to escape the essential sameness, that is competition". When Wall Street Journal excerpted a chapter in my book, entitled "All happy companies are different", they re-titled the chapter name from "All happy companies are different" to "Competition is for losers", which has sort of very punchy feel to it, because we always think losers are people who are not good at competition, the losers are people whose grades are not good enough, who aren't quite strong enough to be on the athletic team, and somehow the losers are people not competing, we don't tend to think that maybe the people who're too addicted and too good at competition, that somehow in a trap where they end up losing in one way or another. The autobiographical part of this book, when I grow up in California and there's this incredibly competitive, incredibly tracked environment in one way of another, in my 8th grade of junior high school yearbook, one of my friends wrote in "I know you will get in Stanford university in 4 years", 4 years later I got into Stanford university, got good grades, and I went to Stanford law school, then I ended up at this prestigious big law firm in New York city, and it was super competitive, every time you won a competition, you got to the next level of the tournament you got to compete again, this law firm is one of these places where from outside, everybody wanted to get in, from the inside, everybody wanted to get out. When I left after 7 months and 3 days, one of the people down the hall from it said it was reassurance to see I left, because he has no idea that is possible to escape from alcatraz, the prison in California, of course, all you have to do is go out of the front door and not to come back, but psychologically, it was very very hard for people to do, because so much of our identities in the sense of self and self-work was wrapped up in all these competitions, that they have won over time. It’s very challenging and always very difficult, for every super intense competition, I think it’s often something we should be very careful of, very skeptical of.
Henry Kissinger had this line describing his fellow professor at Harvard university where he said "the battle of academia are so ferocious, because the stakes were so small", people are fighting each other like crazy, but over nothing at all, on one level, it sounds like the definition of insanity, remember you should fight people crazy for something that matters, so it sound like very insane context, but it also describes the logic of situation where when you can't differentiate when things are somehow interchangeable all the same, you end up with extremely ferocious competition even though what's in stake are less and less, even if you win, there's someone just behind you, willing to replace you or substitute for you. We always tend to think of conflict arising because there are differences between people, but I think it’s always the opposite, I think conflict happens when two people want the same thing, if two people want totally different things, there's no problem, there's no conflict, when two people want the same job, the same promotion, want to work on the same project, want to get elected to the same political office, that's the formula for enormous conflict. If you're a crazy boss, and just want to get people working for you, to fight each other for no reason at all, the formula for doing this is to tell two of your employees do the exact same job, you tell them "your job is to design a website", "and that's your job as well", that's the formula for people to get into conflict, so I think one of the great challenges, if you want reduce conflicts in business, always make sure people's role were well-defined, well-differentiated, and the start-up, or at early stage company, the roles are very fluid, a lot changes, you have to be very careful to avoid getting people into conflicts in one way of another. At Paypal, the head of the product had this line he liked to use, where it said the "product is the single seamless hole", for everything company does is linked to the product, which on one level was somewhat true, but the other level the product team was the center of the conflict with everybody else in the company, so it has conflict with customer service, conflict with fraud, conflict with everybody, because when you say the product is everything, you end up by definition putting yourself in conflict with everybody else in an organization.
One of the questions I get asked a lot, is about trends of technology, where is technology going, what are the kinds of things we should be working on, in the years ahead. I always dislike this question, because I think I'm not a prophet, I can't foretell what's going to happen, you're always tempted to give very silly answers, very benial answers like there'll be more cel phone used in 5 years, or something like that, which is not that interesting, but the general answer that I come up with, is I believe all trends are exaggerated, every trend that people said and talked about is something you should question, so in Silicon Valley, there's a lot buzz words, educational software, health care IT software, all these are somwhat overrated, even more so, Saas, software as a service, enterprise software, very overrated, if you hear the words "big data", "cloud computing", you should run away as fast as you can, and think those as fraud, of something like that is going on, the reason you should be always skeptical about the trends and buzzwords, is that the buzzwords are telling you that business aren't differentiated, it’s like the game of poker, it’s like a tick telling you're bluffing, when you use a buzzword, its telling people that the company is somehow not doing something unique, or differentiated, so you have a company that described in a whole litany of buzzwords, this is something you'll always be skeptical of, so if it’s like "we're building a mobile platform for Saas businesses in the cloud", the whole litany of buzzwords, in this pattern recognition, you know they're not differentiated, there's nothing new here, it’s just the same as everything else. So whenever a "Nth" company in a “category”, that's a bad sign, you don't want to be the 4th online pet food company, you don't want to be the 10th thin film solar panel company, you probably don't want to be the 1,000th restaurant in Taipei. The company that are correspondingly underrated, are the ones don't fit in the pre-existing categories, they're doing something that doesn't quite get easily explained. We're investors of Airbnb for example, which get sometimes labeled as sharing economy, it’s really this very unique company, its offering a cheaper way to travel, to stay at people houses, much less expensive than hotels, they are a new kind of service doing something different, one of a kind, and because it doesn't fit into any of our pre-existing categories, its somehow ends up being very underrated as a service. So I think you always want to be looking for things that have that sort of constellation, can sometimes be quite challenging, cause often company will just describe themselves in terms of exsting categories even when there's something they're doing is very new, so one of the challenge is always to figure out what is really going on. Google in the late 90s described themselve as a search engine, people would said its a bad idea, there were already so many search engines and and why do you need another one, but the real differentiation was it was the first company to figured out machine-powered search with the computers do the searching rather than human, the pagerank, the algorithm, things like that, was the real differentiator. If you label Google as just a search engine, you somewhat miss out on something very essential.
In a similar way when Facebook was labeled as a social networking site in 2004, it was certainly not the first company described as social networking, one of my good friend Reid Hoffman who started LinkedIn later, in the 90s, he started a company back in 1997, called "Social Net", he already had the name of social networking in the name of the company, as far back as 1997, his thoery was you have this strange world in cyberspace, you have totally different persona, maybe one person be a cat, somebody else be a dog, and you have to figure out how to interact with each other in cyberspace, and people weren't really that interested in that, so perhaps what's valuable was not the social networking in the abstract, or networking in the abstract, but its building the real relationship with real people, and the critical thing that Facebook solved was not social networking, but was real identity, how to get people to portray themselves as they really are on the internet, and that was very difficult problem to solve, Facebook was the first one to do that, and that turns out to be quite valuable, so it’s always this question of "what is unique", "what could we've done that's new and quite valuable".
Let me end with one thing I believed to be true, that's a little bigger picture about our world, I think if the 21st century is going to be a successful century, it will involve both globalization and technology, I always describe these two things as very different things, to draw globalization on the x-axis, it is copying things that work going from 1 to N, extensive horizontal growth, I think technology on the y-axis, doing new things, going from 0 to 1, vertical or intensive progress. If we think over the last few centuries, there have been periods of globalization, and periods of technology, they don't precisely overlap. In 19th century, 1815 to 1914, was a period of a lot globalization, a lot of technological progress, 1914 world war 1 starts, globalization goes to adverse, there's less trade, parts of the world become communists, sort of separated from the rest of the world, the world becomes far more fragmented, even though technological progress continues very rapidly for many decades, and since early 1970s, I would argue that we had globalizations come back, at the very fast rate over the last 40 years, but there's been somewhat less technological progress, there's been a lot in information technology, computers, internet, mobile internet, somewhat less in many other areas that people would've described technological of 50s and 60s, there's somewhat less progress in energy, transportation, space-travel, the green revolution, agricultures of 50s and 60s, it has decelerated some, biotech, medical devices, there's some progress, but its again, somewhat limited in the last 40 years, so the 19th century was both globalization and technology, the 20th century, the first part was technology but no globalization, and the second, that last 40-year period, we had a lot of globalization, but somewhat limited progress in technology, mostly centered on computers.
In cultural terms, I often say this but people don't always agree with me, I think we live in a world, a culture of the west, US, western Europe, which are extremely hostile to science and technology, the easiest way to see this is just look all the movies that get produced, the science fiction movies always show technology that does not work, it kills people, destroy the world, it doesn't function, it’s terrible one way or the other, and the future in science fiction is combination of all these terrible movies, Matrix, or Avatars, or Elysium, the Terminators movie were robots going around killing people, I watched the Gravity movie over a year ago, there's a space station where everything went wrong, and you'll never wanted to go to the outer space after watching that movie, you want to back on earth, on some muddy island somewhere, and I'm not blaming Hollywood for this, I think Hollywood just reflects a lot of fears that our society has about technology and innovation, but we're living in a world where pro-technology, pro-science side is a minority, is a very counter-culture minority, that somehow go against the dominance of strand in our culture. If you want to describe this in a geopolitical terms, in the 1950s and 1960s, people would divide the world into the "first world" and "third world", in the first world, we have an accelerating technological progress, the third world were permanently screwed up and broken one way or another, so it was pro-technology, more skeptical on globalization. Today, we divide the world into "developed" and "developing" world, where the developing countries are copying the developed world, so it’s a convergence of globalization for the world becoming more and more alike, and its converging, but it’s also a implicitly anti-technological description, because when we said we are living in a developed world, as in US, Western Europe, or Japan, or Taiwan, what we're implicitly saying is we live in that part of the world which is done, finished, where nothing new is going to happen, all the progress and discoveries belong to the past, where the younger generation should reduce the expectation for the future, I think this is the conception of our world that we should very powerfully resist, so I think we should always try to come back to ask the question, how can we go about developing on so called "developed world".
Thank you very much.
Part 2 - Q & A
Q1. How do I know my idea is valid for pursuing a start-up, not just a crazy thing?
Thiel: Well, that's a very broad question, obviously on some level, it’s like a trillion dollar question, if I can answer to that question correctly every time, it'll be worth infinite amount. I think it’s the combination you want to do, you want to do something that's valuable and other people are not doing, if you get that combination right, you'll have a very valuable business. Most common mistake is you either do things very similar with other people are doing, so somehow poorly differentiated, or no one else is doing it, but there's a good reason, because it’s just a bad idea? Sometimes you'll have technologically intensive things, where would be valuable but you can't build it, so it’s too complicated, or can't actually be done.
I think the starting point is "is it valuable" and "nobody else is doing it", one important thing is try to be very honest with yourself assessing that, so most of the times, people starting a company often are very optimistic, they ignore certain problems, it's probably good to ignore some problems, you don't want to be talked out of things by people right away, but at the end of the day, you have to try to be as objective in assessing these things as possible, then you need to figure out these unique problems to solve. Paypal had this new idea of linking money with email, it didn't seem that complicated at the time we had it, it's something surprising no one has thought of, so we rolled out and it cooked extremely fast, because there's risk of people copying it, it turned out a lot more complicated than sounded, because there's a lot of fraud involved, people had warned us about the fraud early on. Summer of 99, few months before we launched the product, one of the former executive form Visa told me how would you deal with all the frauds, and I said Paypal is a such friendly name, only good people would use it, and there will be no fraud, sort of concluded that he's just been working for Visa too long, he's just a very negative person, but it turned the fraud problem was very big and we had to solve it. I think you can't always figure out everything in advance, but you want to try to understand all these dynamics as well as you possibly can. There's certain subset of technology companies where you can be very valuable but it only work if you do something that's better than anybody in the world, in some sense, if you're semi-conductor company or disc drive manufacturer, the competition is global, so you have to be the best in the world at what you're doing. Its surely not good enough to be the best in Taipei, the best in Taiwan, the best in East Asia, you have to actually think about how to get to the best in the world, and that often is not easy to do.
Q2. Will it be better to have some working experience in some company before we do start-ups?
Thiel: I often got asked for this version of question like "I like to be an entrepreneur, but not right away, work for 5-7 years first in the company, I'll learn something, then I will start a business". Its true there are certain kind of things about management, or sales, or various other areas that you will learn in a business context, but the critical thing to start a new business is whatever you're doing is new, and that's something by definition that you will not learn. If you have a successful business, where often matters the far most is you have one really good idea, that you're executing on really well, even if you got all the other processes to be not that good, you can still be a successful company, whereas if you get every process to work perfectly, you know exactly how to hire people, how to manage people, timecards, everybody is there, many hours of week, but you don't know what you're doing, that's often much less good, so there are a lot of Silicon Valley startups are quite badly-managed as companies go, a lot of chaos, a lot of people who don't quite know what they are doing, they make a lot of mistakes, but the company still succeed at the end of the day, because they figured out something very unique one way or another. Example I often give, a company both quite bad as a corporation, but quite successful is Twitter, where its horribly mismanaged company, the whole thing is very chaotic, people don't work very much, all sort of things are badly wrong, but they had this one idea that just worked, so its a company worth 25 billion dollars, that's what matters a great deal. If you would've opened a restaurant, by contrast, you have to make sure everything is done really efficiently, you can’t spend too much money on the food, you have to make sure the food get delivered very quickly, the kitchen is efficient, everything super efficient, and if you don't run it really well, you're out of business, so I think there's that sort of contrast.
One thing I do noticed when people said they will start a business in 5 or 10 years, this rarely happens, because what happened in practice even though you have more experiences, maybe a little more of financial cushion, in practice people end up with more obligations, more ways they have to spend money, when I worked at the big law firm in New York, it was one of these places people made a lot of money, and they saved none of it. So it’s just more money people made, the more they spend, they were in this context where all these professional people around them, they were all spending almost as much as they were making, so in some strange way, theoretically people can save a lot of money than doing something else, but in practice, they were spending all, and sort of trapped, so I think there's no particular moment that's the exact right one to start a company, if you have a really good idea, you should do it sooner rather than later, on the other hand, if you have a really bad idea, waiting 5 years won't make the idea better, so there's not time that's really perfect.
Q3. Let's talk more about "Thiel Fellowship", why do they have to drop out of school?
Thiel: "Drop-out" is a very strong word, the term we always use is "stop-out", which you take 2 years off, all the universities in the US will always let you go back, because in practice, they are competitively evaluated by how many of the students graduated, so if you're not very happy with the program, but you already joined it, you can always go back. The first class was the year of 2011 to 2012, 24 students, at least 5 or 6 ended up going back to college, but the other 18 or 19 ended up either starting successful companies, or somehow get involved with Silicon Valley ecosystem one way of another. I think the basic idea starting a successful business is a pretty full-time undertaking, its generally very hard to do it while you're a college student, so if you're studying in college and working 10-15 hours a week on the side, on some sort of company, that's generally not enough to get really started, even Bill Gates, Mark Zuckerberg, started Microsoft, Facebook, they ended up…uhm you know, they didn't think they were dropping out, they thought they were stopping out of Harvard, even though they have not yet gone back, but they can still go back..
Host: For those of you who wanted to start up right now, how do you tell your parents you want to stop-out?
Thiel: That's always the biggest problem by far.
Q4. Is there certain qualities for entrepreneurs?
Thiel: It's always little bit hard to reduce too much, but I think there are a lot of qualities that almost contradictory, somehow it gets combined in just the right way, I think it’s very good to have people who are both quite stubborn, will not easily give up, and people who are also willing to listen from other people, so if you're very stubborn, you don't listen to anybody, you're likely to do something that's bad idea, then you'll go out of business, if you're too easily influenced, you're not stubborn at all, you'll be talked out of your company. So a very good combination is to be somewhat stubborn, but also quite open-minded, listening to people, getting good feedback as you go along.
I would say one dynamic that's very different from university context with the start-ups, is in university context, it’s always purely individualistic, it’s you against everybody else, you're just all by yourself, against everybody else, and in most start-ups, in most companies, are more than one person, so it’s actually more of a team, so one of the critical question is "how well do the people work together", you can have a lot of very talented, very creative, very brilliant, very hard-working people, but if they are not able to work well with one another, that's a very big problem. I think one of most common source of failure, is not external, someone ousts to beat your company, its internally, people don't get along, then things start to break down, so I often like to focus on the "team dynamics" in these companies, if there are a few people starting a company, I like to ask the prehistory questions, "what were you doing before you started the company", "how long you've known each other", a bad answer is something like "we met a week ago at networking event for entrepreneurs, we decided to team up and start a company, doesn't matter what, we just want to start a company", a good answer is "we've been friends for 3 or 4 years, one of us is on business side, one is on technical side, and we've been thinking about this for a long time", that's just maybe the relationship is stronger, and you do have lot of ups and downs when you do business, it’s a roller-coaster, you don't want things to blow up when you are at the low point.
Q5. How to pick the start-up team, what are the criteria to pick partners?
Thiel: Maybe based on extreme analogy, but It's like you getting married, how to get married to the right person, hopefully by no precise formula, it’s probably bad if you don't know the person at all, if you go to Las Vegas, you marry the first person you meet at slot machine, you might hit the jackpot, but the chances are that's a very bad idea, I think in a similar way, a lot of different teams, start-up co-founders, a lot of things can work, but I think it works the best if you've known the person for some time, if you have both somethings in common, and in some way you are complementary, that's always the goog thing, you agree on common vision, work company should do, there are complementary skills, so there's some natural division of labor between the two of you, or three of you, whatever the founding member there is.
Q6. You talked about higher education quite a lot, if you can, what would you do to change the higher education today?
Thiel: The US context is a little bit different from many other places, in the US, the cost of university education had steadily gone up at the rate much faster than inflation, since 1980, the college cost gone up by 400% after inflation, faster than anything else, faster than health care, energy, housing, so one of the reasons there's a lot of questions being asked about the values of the university system in the US, because it costs so much, students graduate from college with 100,000 dollars in debt, that raised a lot more questions, than when you graduate with no debt at all, as in the case 50 or 60 years ago. I said there's something like bubbles around education, housing bubbles, dot-com bubbles in 90, I think today we have something like an education bubble, where people believed, the parents believed, the younger generation believed, that education is the be-all and end-all, it’s what you absolutely need to succeed, it’s certainly in most cases you're better off getting a university degree than not getting one, there are a lot of cracks in our society that you don't want to fall through, but when people think that college degree is simply the answer to everything in your life, that’s sort of you are abdicating thinking about the future. People ask me if I had to think again, do I still go to Stanford, I'll probably would still go to Stanford, because I didn't have any strong idea of what else to do, but if I have to do something over, I would think a lot harder about what I wanted to do after Stanford. There was certain element that If you get into a very top university, and you think you're set for life, one of my friend got into Yale university, the Dean welcome him in coming to the class of sort of Ivy League school in the US, and the Dean said "Congratulations, you got into Yale, you're set for life." my friend thought I'm only 17 years old, it seems like little bit early to be set for life. So I think university can be a good thing, but it’s always very dangerous to think this is the be-all and end-all. One of the challenges in the US and much of the rest of the world, after 2008, after the financial crisis, there's a sense that tracks don't work as well, the works of all these formulas and all these automatic things that one can do for many decades, that worked quite will, and more and more of the sense that's not the right way to do things, and this is course the universityes are quite good at, they are good at putting you on a track, if we're in a society tracks work less well, people need to second guess that. I do not have an alternative system to replace the universities with, we have to actually move away from this idea that some single system that everyone should do, everybody should compete in, instead we should try to figure out how can people with different abilities, different interests, learn to do different kind of things, I think the future will be much more varied, far more and wider range of different kinds of things people will be doing.
Q7. Do you think the flipped classroom or MOOCs will make the system better?
Thiel: I think definitely there are a series of technological innovations that are happening around education, the MOOCs had ran into a problem that's quite difficult to work with the universities, a lot of universities don't necessarily want to give cheaper degrees to other people, it ends up with very complicated how to reform the system from within, its set in certain way, but I think at margins, all these things will change, pricing, pressure, more need for alternatives, I think the main thing that's slowing down to reform is the lack of imagination, people cannot imagine anything else will work, that's why more and more pressure to do the exact same thing, getting into the same top universities, going on the same tracks, even as these things work less and less well. One of the analogies I used in the US, I think the universities are in a crisis similar to the Catholic church around 1500, where you have this priestly class, professorial class, it was charging people more and more, with these indulgences, universities are like atheistic church, you'll be saved if you get a diploma from college, if you do not get a diploma, you'll go to hell. "You go to Yale, or you go to jail". I think in future, I'm not trying to replace it with some alternate, single universal church, I think it'll be much more range of different things, like what happened in Christianity in 16th centuries, where people have to work out how to save themselves, not within institutions, but have to work on their own, which is very disturbing, we would like the institution to save us, but I don't think that will be the future.
Q8. We have many young entrepreneurs in Taiwan, but no ecosystem like in Silicon Valley, how do we connect to the more resourceful world?
Thiel: I think it’s always a quite challenge for entrepreneurs, even a very big challenge in Silicon Valley, there are many different things, you need to figure out a way to convince people to join your team, typically you have to get investors to invest in, provide you with capital, even in SIlicon Valley when we started Paypal, its incredibly hard to raise the initial money, we raised the first half million dollars in February 1999, we had a few more financing rounds, we had a much larger financing round in March of 2000, 13 months later, we raised 100 million, raising the first 500,000 was much harder than raising the 100 million 13 months later, you met with all these individuals, investors, I remember there was one in a Chinese restaurant, where investors said I have no idea whether to give you money, I just look at what fortune cookie says, the fortune cookie of course says something optimistic, but they still didn't give us any money, so it’s always incredibly hard to get things jump-started, this is a problem, in the US people think you have to go to Silicon Valley, and in Silicon Valley all these people trying do it, this is always one of the core challenges. Technology or innovation always involved with combination of the innovation of the technology and the communication of the technology, you have to somehow do both, this is why scientists won't go very long, because scientists believed the idea that science stands on its own, they've made some great discoveries, and the world would come rushing to their door, to give them money or something like this, it’s never quite that straightforward, you somehow have to find the right way to explain to people and communicate with what you're doing. I do think Silicon Valley has a little bit advantage, because you have this network effects, this sort of concentration of talents, capital, experiences that helped over the years, but I don't think Silicon Valley is the only place that one can start a company, and there are some disadvantages, it’s got to be very expensive, office space, rents are expensive, hiring people is very expensive, it’s easier to get capital, but cost a lot more to do things, this is the big challenge Silicon Valley has. I think the network effects that helped Silicon Valley can also become negative, when you have an ecosystem where everyone talking to everybody else all the time, this can also lead to hurt mentality, to bubble, where the thinking become too liming-like or too derivative, so there are some aspects in Silicon Valley that are very much like that as well. In the very beginning of these things, is both the time of maximum freedom, when you start a company, you have freedom to figure out who are you doing with, what you're doing, what market you're going after, you have enormous freedom when you start, but it’s also one of the most frightening times, because it’s so hard to convince people that is real. My friend Reid Hoffman often said "when you start a company, it’s something fictional, something that is not yet existed, and you have to convince a lot of people that is real, before it exists, if you are able to convince enough people, then it’s going to be real, then they will buy into it, then it becomes real". So it’s this somewhat mysterious bootstrapping process.
Q9. Any good points to convince you, what do you want to hear if somebody pitches to you?
Thiel: Well, that's a very dangerous question to answer, if you were to answer that, then you'll hear 20 pitches using those points, that ends up being quite counterproductive, I'm not certain you can process a good pitch in 30 seconds or 1 minute, where someone quickly tells you something, you can often tell its a bad idea, but if it's a good idea, much harder to tell. the thing I normally recommend, is I got recommendation from someone, you want to spend like half hour to an hour, try to at least understand what the business is about, what's going on, the 5-10 seconds elevator pitch is not really going to work at the end of the day. There are these various start-up television shows, there's one in US called "Shark Tank", we have all these contestants, you sort of get the sense that is all about coming out of some clever, dramatic pitch, I always want to stress substance over process, its true you have to communicate it, you have to explain it, but what really matters by the end of the day, it’s you have something substantive that matters. There are some ways typically can get that through, if you want a process to pitching me, find someone I trust, have them making introduction, and I'll listen to you.
Q10. Is there any entrepreneurs that you admire or respect?
Thiel: I certainly admire tremendously a lot of people I've worked with over the years, I think Mark Zuckerberg, I've known him since he was 19 years old, just started Facebook, he was already impressive at the time, he has this combination of very hard-working, very focused, thinks about Facebook company non-stop, you can have conversation with him on many different levels, on one level the details of product, questions about the market, the competition with other companies, how other countries are doing, the bigger picture question about how the future world looks like, in 10 or 20 years, so I think there's something about good entrepreneurs, have this interdisciplinary aspect where he's good at whole range of different things, everything from the product, engineering, management, marketing, to maybe even where the world is going in 10-15 years, you got some well-informed views you combine them in a good way. I'm very close to a lot of my former colleagues from Paypal, who went on to start a variety of companies.
Elon Musk has certainly been very inspiring, starting both Tesla and Space X, there's an unusual businesses in that, they're not in the information technology areas, so which is very inspiring because he's sort of shown its possible to start some very new companies in these areas that people thought were fully established. Elon is very charismatic, very inspiring, I remember talking to him in 2008, for the Tesla business he just get started, working for few years but still years before they sell their first car. I asked him "when was the last successful car company started in United States?", and his answer was the "last successful car company was Jeep in 1941", so there have been no new car company in 67 years, as in 2008, and Elon's version was "it was about time for a new car company", even though most people would say wow for some reason its just impossible, you should never try to do that. I think there is a set of entrepreneurs who are very charismatic, who are able to convince you a future that looks very different from the present, that's often very powerful, you have to get a lots coordination, you have to get all these pieces in the right way, get people to work on it, get investors to invest on it, you have to get the public to buy it, and coordinating and getting all these pieces lined up, so this charismatic element, where you sort of paint a picture, tell a story what the future is going to look like, that's so compelling, then to motivate people to work on it, and it becomes a self-fulfilling prophecy. You can determine the future if you have a view on how to make it happen. It’s hard to predict the future in the abstract, but you may predict the future if you can tell people what you're going to succeed in doing.
Q11. Have you ever experienced any setback or failure, and how do you deal with that?
Thiel: There are certainly many things that I succeed and failed at over the years, it’s always misleading to categorize as uniform success one way or another. It’s often hard to know exactly how to process with failure at the time. One of the most prestigious things you can do in law school in US, is to get clerkship from the US supreme court where you work for one year as intern, for the supreme court of United States, there were 9 justices, they each pick 4 people, they interviewed 8, I got interviews with 2 of the justices so I figured if they pick half the people then I have a good chance to get in, but I failed to get neither one, I was around 25 years old at the time, so I was just absolutely devastating, it’s the one last credential I need to completely set my legal career if I get it, and years later, about a decade later, one of my friends who coached me through this interviewing process, we haven't talked in long time, but we re-connected, Pauls' first question was not "how are you doing Peter" or "its great to talk to you", his first question was "so, Peter, aren't you glad you didn’t get that Supreme Court clerkship?" So the meaning of failure has completely changed, we both knew if I would've got in, I would have a successful but much conventional career, so I think failures are always a tricky thing, it’s always very devastating when it happens, but its often hard to know what it means. In the start-up or entrepreneurial context, I do think failures are very overrated, one of the commonplace thing people said in Silicon Valley "you're free to fail", "its ok to fail", its true on some level, if you fail, you start again, try again, but I think in practice, when people failed, it ends up with quite damaging, you end up being very discouraged, you're less optimistic about what you can do in the future, its often the case you don't learn that much from failures, when you fail something, it’s possible you fail for any one of many different reasons, maybe the idea was bad, maybe the people you worked with didn't get along, its often a combination of many different factors, so there's a lot to be said for really trying to avoid failures, I think there's a limited amount that one can learn from it, when you fail, when things go wrong, the important thing is not to dwell on failure, not to obsess about what you could done differently, if you can answer this interview question just a little bit differently, you would've got this position or something like that, I think one of the most important thing to do when you encounter failure is to not to give up, is to move on to do other things, not to obsess or dwell on it.
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