Peter Thiel’s Formula For Success in Business

Illustration by Maria Fonseca

Peter Thiel is one of the most successful business people of recent years. Widely known as an American entrepreneur, venture capitalist, philanthropist and hedge fund manager, Thiel cofounded PayPal, and was Facebook’s first outside investor, which transformed him into a billionaire when the company went public. Peter also helped launch Palantir Technologies, an analytical software company, and serves as the chairman of that company’s board. Thiel is considered an interesting thinker, even though controversial at times. For the past years Thiel has been proactively giving advice to entrepreneurs about the best ways to achieve success in business. In 2012, Thiel taught a class at Stanford University. The class was attended by a student, Blake Masters, that took valuable notes, and these led to the publication of his book, Zero to One, that compiles all his ideas on how to successfully develop a business. The book revolves around a main idea:

“All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.”

The first of Thiel’s ideas on business is that business books are not always particularly helpful. This is because many people use business books to copy their ideas rather than to learn from them. As Thiel puts it:

“Every moment in business happens only once.”

This comment is partly attributable to the fact that while science allows experimentation and verification of what is successful, business does not. There are way too many variables, making it hard for people to model themselves on someone else with the idea of being a great entrepreneur. As Thiel sees it, there is no formula for entrepreneurship. This can make it problematic for some to be able to succeed.

Peter Thiel argues that there are two very important themes for progress within the world today. Globalisation is one of these. Globalisation focuses on horizontal growth, and fundamentally involves copying things that already work. Technology is the other theme and this is innovative, with a focus on doing completely new things. This type of progress is vertical in nature. However, one theme that can be seen today is that the developing world copies the developed world in terms of technology. It is argued by Thiel that it is necessary to ask the question of how we can keep developing the developed world so that we are continually making progress.

One area that Thiel discusses in depth in providing recommendations for how to succeed in business is looking at competition and monopolies. He points out that if a company has a monopoly it will usually argue that it does not since it does not want to get regulated by the government. For companies that do not have a monopoly they want to show how their business is unique and special, sort of trying to show that they do have a monopoly. This is a very strange state of affairs. As a result it is argued that a company that is unique has a monopoly and that all businesses strive to be in this position so that they are effective competitors. Those that are monopolies have the possibility of making mistakes in other areas as well.

It is also argued that for both investors and employees the best place to be is inside a monopoly. Monopolies can on occasion be bad, and it is explained that this happens when no one is challenging the existing state of affairs. However, where there is lots of innovation and progress in society a variety of monopolies can be created. For example, Apple has created a number of different monopolies. While monopolies do exist and are not particularly healthy in some industries, in the software industry monopolies are not considered to be particularly problematic.

The end goal of businesses is explained by Thiel to be that businesses should shoot for being the last mover in a market where they have created a good run of success for themselves that lasts between 20 and 30 years. It is also necessary to be first. Businesses have to do something unique that succeeds. Then they have to scale up very rapidly so that other organisations do not have a chance to get on board by copying it. The example provided is Google. While Google was not the first search engine that the world ever saw, it was the first to include page rank. One problem that some businesses create for themselves is aiming for markets that are too big. It is better, it is argued, to focus on smaller, niche markets where there is a greater chance of attracting an audience and achieving success.

Thiel certainly has a lot of wise words to add on the subject of succeeding in business. They may well be worth reflecting on as they have certainly been helpful in driving the man’s own success. In 2015, Thiel went back to Stanford to Share Business Tips from “Zero to One” once again. His talk was recorded and can be seen on YouTube.