Jeremy Abroad

Peter Thiel - Competition is for Losers (Summary)

March 23, 2017

This is my quick summary of Peter Thiel’s video: Competition is for Losers with Peter Thiel (How to Start a Startup 2014: 5). Here is the annotated text version

The most important business idea that people don’t understand is that there are two kinds of businesses:

  1. Monopolies
  2. Businesses that are perfectly competitive

Shockingly little in between

  • Competition is for “losers”, ie. avoid competition and become a monopoly.

    • Monopolies are the best business, and most highly profitable businesses are monopolies
    • Monopolies lie and claim to not be monopolies, by expanding what they consider their market (Google owns 66.4% of search engine market, but considers itself an “advertising company” or “tech company” to make it seem like less of a monopoly)
    • Companies in competitive markets lie and claim to be monopolies - unique and special (eg. restaurants)
Company Cash ($ billions) Gross Margin
Apple 98 40%
Microsoft 52 78%
Google 45 65%
Amazon 10 14%
  • A business creates X dollars of value and captures Y% of X
  • X and Y are independent variables. eg. airlines, solar have low Y, while Google has high Y
  • the scientists never make any money. They’re always deluded into thinking that they live in a just universe that will reward them for their work and for their inventions.
  • eg. The railroads were incredibly valuable, they mostly just went bankrupt because there was too much competition.

Characteristics of Monopoly

  • Proprietary Technology
  • Network Effects
  • Economies of Scale
  • Branding

We have a tendency to view increased competition as validation (eg. B-school students trying to be like Mike Milken in 1999, Silicon Valley in 2000, housing and private equity in 2005-7).

Jeremy Bernier

Written by Jeremy Bernier who left the NYC rat race to travel the world, work remotely, and find the meaning of life.