September 18, 2014, 2:36pm EDT | Updated: September 18, 2014, 2:46pm EDT

5 brain-twisting lessons from Peter Thiel book

By Teresa Novellino

Upstart Business Journal Entrepreneurs & Enterprises Editor

Source: http://upstart.bizjournals.com/resources/author/2014/09/18/5-brain-twisting-lessons-from-peter-thiel-book.HTML

• 

  Peter Thiel

  Peter Thiel spoke at Columbia Business School in New York City Wednesday night, about why entrepreneurs should try to establish monopolies and uncover secrets. It was the first book tour stop for the public on his new book, "Zero to One: Notes on Startups, or How to Build the Future."
  Bloomberg/David Paul Morris

The UpTake: Peter Thiel doesn’t think like other entrepreneurs, and he wears the “contrarian” label with pride. But while the PayPal cofounder and venture capitalist’s genius cannot be cloned—at least not yet—he’s out with a new book to help you channel his thoughts on monopoly, secrets and market domination.

For Peter Thiel, it clearly isn’t enough to have innovative ideas that lead to creating companies like PayPal and Palantir Technologies. He’s also given thought to how innovative business ideas come about, and these self-described “contrarian” ideas are laid out in his new book Zero to One: Notes on Startups or How to Build the Future.

Co-written with Blake Masters, the book is based upon his lectures in a class that he taught at his alma mater, Stanford University. (Insert irony here, because Thiel is the same entrepreneur who through his foundation encourages would-be college students to become Thiel fellows in his 20 under 20 program and start businesses instead.)

Thiel has already begun his media marathon to promote this book and his own ideas (seean interview he did with our colleague Cromwell Schubarth at our sibling publication the Silicon Valley Business Journal), hisReddit Ask Me Anything session, and his claims that the executive team at Twitter smokes way too much weed to manage effectively.

But last night marked the official book tour kickoff as he spoke to budding entrepreneurs atColumbia Business School, followed by a Q and A session with Columbia journalism school graduate Shane Snow, a cofounder himself of the media startup Contently .

Here are some of the highlights:

Don’t be a copycat: Part of knowing what type of business to go into is knowing which types to avoid. In Thiel’s estimation, business ventures in areas in which great ideas and innovations have already taken place are finished. “All of the great innovations in business and technology happen once,” Thiel said. That’s why the “next Mark Zuckerberg” for example won’t be building a social network. While Facebook built and dominated in social media, companies like Airbnb and eBay did the same in their markets, so he says better to stay away. “I basically focus on the question of what great companies nobody has started,” Thiel says. He’s especially fond of people whose ideas sound crazy to most people, like those of his PayPal cofounder Elon Musk who is determined to see humans live on Mars in his lifetime and has said that he personally wants to die on Mars, “just not on impact.” One of Thiel's favorite questions for entrepreneurs: “Tell me something that’s true that almost nobody agrees with you on.” As a “contrarian investor,” who started the Founders Fund in San Francisco, Thiel doesn’t want to pile onto the same company as other venture capital firms, but seeks out the markets that no one else is investing in. The classic example: he was an early investor in Facebook, which was ignored at the time by Boston VCs.

Win at monopoly:“The wisdom of the crowd” has some budding entrepreneurs moving into areas where the competition is steep, assuming that their idea will win and that capitalism and competition go hand in hand. Thiel says they do not. “The goal of every entrepreneur who starts a company is to create and build a new monopoly,” Thiel said. “If you want to have a successful company, you should have a monopoly.” The example he gives isGoogle, with its lock on search. “A company like Google is extremely capitalistic, and it’s had no real competition in search since it definitively distanced itself from Yahoo andMicrosoft,” he said. While Google can also point to other businesses like its Android platform, self-driving cars, Google Glass and more, he suggests these are ways to make its core business and market seem more diverse and its company less a monopoly than it actually is. He suggests companies that are actually monopolies deny that they are, while companies that are not monopolies do the opposite, insisting that they have no competitors.

Small markets rule: While the above advice might sound like an indication to go after larger markets, Thiel says he likes to see startups go after smaller markets. Monopoly just means having the greatest market share in any given market. “Either have a technology advantage that’s big enough that people can’t copy it, or have some distribution plan that you scale rapidly,” Thiel said.

Pursue secrets: Thiel likens starting a business to discovering a secret, but to do so you have to believe that secrets still exist.“You have conventional things that everyone understands, mysteries that no one does, and secrets that people try to figure it out,” Thiel said. A common and disheartening mistake is to think “there are no secrets left, everything has been found.” Those who believe there are secrets are those “who will look for things to discover and will find them. And the people who don’t, wont’ even try. That’s at the core of what drives many of these startups.”

Work with friends or potential ones: Considered the “don” of the PayPal mafia, Thiel says that he and cofounder Max Levchin assembled a group of other co-founders who knew each other either from Stanford or the University of Illinois. Their idea was to create a company “where some incredibly strong friendships were formed.” They hired not necessarily only friends but people “we thought, we could be friends with.” The reason? To avoid the sort of cut-throat competitive atmosphere Thiel experienced when he worked for a New York law firm for less than a year. “One of the things I didn’t like was all the people around me were structurally hostile. Of the 80 people who came in, only five would make partner,” he recalled. “Way before the external competitors destroy you, it’s the internal people that don’t get along,” he says. By contrast the PayPal founding team, had “a good prehistory," plus an idea they had been "thinking about for a long time.”