I’m on a contrarian kick right now.
Peter Thiel recently released a book titled “Zero to One” about “Monopoly Theory”, in which he postulates that “If you’re starting a company, you always want to aim for monopoly, and you want to always avoid competition,” and I want to convince you that this, like most business talk, is false and useless doctrine.
- Peter argues that if you’re going to try to start a business, you should try to start a monopoly, like Google or Facebook or Microsoft.
- In the first pages of the book, he states that if you’re going to start a monopoly, you can’t copy other businesses, because the guys that started Google, Facebook, and Microsoft didn’t copy anyone. He gave a presentation at Stanford titled “Competition is for Losers” with the same idea.
This is a garbage heap. Here’s why:
1. “Start a monopoly” is probably the most useless piece of business advice I’ve heard so far. Of course it would be great to start a monopoly. But did anyone who has ever started one begin by thinking “I’m going to start a monopoly”?
- Facebook – Mark Zuckerberg said in an interview with Paul Graham, “I was working on this Facebook thing for Harvard, and I really was excited about it because I wanted to use it, but at the same time I thought that, over time, someone would definitely go built a version of this for the world. But it wasn’t going to be us, it was going to be Microsoft, or someone who built software for hundreds of millions of people.” (9:57 – 10:37)
- Google – originally the founders’ big aspiration was to build Google and then sell it for $1M.
- Microsoft – Bill Gates said in an interview, “we were very focused on the here and now… We never thought how big we’d be.”
2. None of these companies started in a competition-free environment.
- Facebook – anyone remember Myspace?
- Google – there were already at least 13 major search engines when Google launched (Yahoo, AltaVista, AskJeeves, etc.).
- Microsoft – plenty of software companies existed at the time.
These companies became monopolies over the years by making smart decisions, but not one of them began with that goal in mind.
Peter’s “build a monopoly” talk is the kind of advice that wastes a lot of peoples’ time, because it sounds great – owning a monopoly would be great, duh – but it’s completely unactionable. And it’s not true! The people who have been able to achieve monopoly status weren’t trying to early on, all they were trying to do was make something great.
So thanks for adding more logs to the already huge bonfire of useless business talk, Peter Thiel. I bet you’ve successfully persuaded thousands of people to waste significant time and money following advice that has never worked for anyone. Iatrogenesis at its finest.
So what are we to do? What model do successful businesses follow? Here’s a pattern I’m beginning to notice more and more:
- Someone wanted something.
- They built it.
- They offered it to other people.
That’s a model that seems to work pretty often.