I just watched a video on Peter Thiel’s talk pertaining to his book – Zero to One (click here).
In his talk, he mentioned about this question – Tell me something that you think is true but which almost everyone else think is not. He also raised the question that good companies operate in a monopoly eg. All happy companies are different while all unhappy companies are similar – trapped in a vicious cycle of competition.
He talked about how he started off the normal way – an “A” type student who went to Stanford and studied law and then worked in a law firm and was later glad that he left the firm. He said something like “Law is something which everyone outside wants to get in, while everyone inside wants to get out”. He cautioned that we are too preoccupied with competing with the person next to us – something we can get very good at. We get trapped in a competitive cycle. However, the truly great companies or people focus on building something that is different (eg. creating a break-through, monopoly, offering to a world that has not yet exist).
When I reflect on my past student life, and how our school system is structured. I can see a tinge of truth in that. Even when we leave our school and university, we are again trapped in this rat race, to compete against our peers or colleagues and in a larger context, against competitors from other similar companies. We are so focused on competing that most of the time, we don’t stop and question why we are doing these things in the first place.
Remind me of the joke about the Capitalist and the simple fishing villager. If I remember correctly, it goes something like this:
A Capitalist went to a remote island and met a simple man in a small fishing village lazing by the shore next to his small sampan, watching his children play in the water. The Capitalist whom just left the helicopter, all decked in his smart expensive suit and sleek briefcase looked at that man and asked: “Sir, wouldn’t you want to upgrade your fishing equipment and boat?”. The man lazily raised his head and asked “Why? For what?”. The Capitalist quickly said: “Why to increase the amount of fish you can catch”. Again the villager looked up and asked: ” Why? For what?” The Capitalist quickly reasoned: ” Well with better equipment and boat you will be more efficient. You can easily have more fish than others. And with that, more money”. Again the villager asked: ” Why? For What? The Capitalist this time a bit fustrated by the man’s ignorance said: ” With more money, you can buy more equipment, boats, land and a bigger house. You cn rent the equipment and boats out, grow crops etc. Set up a business. Very soon your neighbours will be working for you. You will be one of the richest man here”. Again the villager asked: “Why? For What?” This time the Capitalist is at the brink of losing his patience, unable to comprehend why the villager is so dim witted. He quickly said: “With that wealth, you need not worry and can sit by the beach, watch your children play and simply watch the world go by”. At this time the villager smiled and said: “Why go through all that trouble when I am already doing that now?”
Warren Buffet in one of his speech joked about how a young man told him that he worked in a particular job because it would look good in his resume and that it will help him in advancung his career. Warren in his reply said that he felt that this sound like saving sex for old age, and advised people to do what they are passionate about.
“There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?” Warren Buffett
Peter Thiel is a well known entrepreneur. In 1998 Thiel co-founded PayPal, an online payments system, with Max Levchin. Peter has made early-stage investments in numerous startups (personally or through his venture capital fund), including Booktrack, Slide, LinkedIn,Friendster, Rapleaf, Geni.com, Yammer, Yelp, Inc., Powerset, Practice Fusion, MetaMed, Vator, Palantir Technologies, IronPort, Votizen, Asana, Big Think, Caplinked, Quora,Rypple, TransferWise, Nanotronics Imaging, Stripe, and Legendary Entertainment. Slide, LinkedIn, Geni.com, and Yammer were founded by Thiel’s former colleagues at PayPal: Slide by Levchin, Linkedin by Reid Hoffman, Yelp by Jeremy Stoppelman, and Geni.com and Yammer by David Sacks.
He operates in a world that is very prone to failure. I see him as the extreme contrarian. He started off his talk by saying that in the 1900s there are still white unknown places on the map, and empty boxes in the Periodic Table – and people then could still make discoveries. Today the IT is one sector that innovations can still be made.
Although, I see similarities between him and the well known value investors like Warren Buffett, Charlie Munger, Peter Lynch – all contrarian by nature, all like companies operating within a monopoly or oligopoly, however, the depth of risk he takes on is much more.
Then again, for a layman like me he would appear so. However, when he was asked about his experience when he first met Facebook founder Mark Zuckerberg, he mentioned that prior to meeting Mark, he has already studied extensively the social network model / business and already came prepared to invest (even before knowing Mark). So perhaps in line with what Peter Lynch has mentioned before – to invest only in what you know, or as what Warren Buffet (some has say that the way Warren invests is like how a girl would invest – read here) would say – invest within your circle of competence – this might appear applicable.
I think the word ‘Risk’ can be seen in many different light. We face ‘risks’ everyday in fact. From the moment we cross the road, to taking a shower etc – anything could be a potential for disaster to happen. And as investors, we do not know when is the next major crash going to be. So unless you live in a plastic bubble, holed up within a bomb shelter… risks are everywhere, no matter how small they are. However, what we ought not to do is to not find out more about something that we deem as having potential. To take calculated risks. To read as much as we can on the subject. Like what Charlie Munger used to say – to learn something new each day before we go to bed. The word – investing in what you know can be a restrictive phrase (for lazy people who just don’t want to know more).
“[Always] know much more about the stock I’m buying than the man who’s selling does.” Irving Kahn
Well, we do not need to know a little about everything, but rather more on a few particular things. For instance, Charlie Munger’s grandfather managed to corner the shoe button market (read here). Basically he just knew more than anyone about one small thing and he was able to make a lot of money.
Munger’s grandfather had managed to corner the market on shoe buttons back around 1900. The grandfather exercised a virtual monopoly over their production and sale. Emboldened by his business acumen, the old man grew to believe that he not only knew more than anyone about shoe buttons but that he knew more than anyone about anything—and he preached and proclaimed at length on such. Munger and Buffett named the syndrome the Shoe Button Complex, and they encountered it frequently in their dealings with successful business practitioners.
Actually there is this web-site in Singapore that connects Entrepreneurs with Angel Investors and vice versa (click here). I had great fun reading up on their various business pitches / ideas. I guess many of these start-ups would not survive but well it doesn’t stop me from finding the one thing that I think is true but which almost everyone else think is not.