Peter Thiel, Paul Graham and 5 Great Quotes from “Zero To One”

When asked what made Paul Graham distinct, Patrick Collison compared him to Peter Thiel. He says they are both men who “look at the world sideways” and “see it differently from everybody else”. While I knew this was likely true, I always wondered why Peter Thiel was the first name that came to mind and why the uniqueness of perspective was what stood out to Patrick.

The property that stands out the most to me about Paul Graham is his ability to express really deep insights in very simple and concise metaphors. These metaphors, often geometric and visual, make the physicist inside of me giddy.

Take this excerpt from “How to Get Startup Ideas”

Imagine a graph whose x axis represents all the people who might want what you’re making and whose y axis represents how much they want it. If you invert the scale on the y axis, you can envision companies as holes. Google is an immense crater: hundreds of millions of people use it, and they need it a lot. A startup just starting out can’t expect to excavate that much volume. So you have two choices about the shape of hole you start with. You can either dig a hole that’s broad but shallow, or one that’s narrow and deep, like a well.

or this one from “Startup Investing Trends”

Imagine the obelisk of investors that corresponds to the obelisk of startups. As it widens out into a pyramid to match the startup pyramid, all the contents are adhering to the top, leaving a vacuum at the bottom.

He calls startups “holes”! This is the same thing physicists call the absence of an electron. It’s the same ability to name things based on an intuition about them rearing its head.

Paul Graham’s writing is littered with many insights like this laid out so crisply that you can see inside his mind. Many times there’s an insight that took me days of independent thinking to arrive at and I see it said in passing in a PG essay. [1]

On reading Peter Thiel’s excellent new book Zero To One, it became clear to me why someone who knows Peter Thiel and Paul Graham would find them similar. For me what makes them similar is a brilliant ability to distill rich insights into pithy and often geometric form. Not to belabor the point but Peter Thiel is famous for his 2X2 Matrix approach to describing all the things ☺ and his book is littered with cute graphs and… yes… 2X2 matrices.

I will go through 5 quotes that struck me as insightful and densely packed.

Non monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets

This is a rather neat observation. As a practical matter, if you are a founder and you find yourself quoting multiple “customer segments” and multiple “markets” as your stomping grounds you are very likely doomed. The reason is that the number of competitors is proportional to the number of markets and types of customers you choose to service and, as Thiel stresses in the book, competition drives profits to zero. I thought this was an elegant way of making this point.

Monopolists disguise their monopoly by framing their market as the union of several large markets

In contrast, a company like Google calls itself a “technology company” working on search, email, mobile, cars etc (i.e. its market is a union of several large markets). The reason is that, as a monopoly squeezing out all of the profits in its main market (search advertising), it’s unwise to attract attention and hence competition or anti-monopoly regulations.

Look around you, if you don’t see any salesperson, you’re the salesperson

This is so good. Basically Thiel is saying that distribution is underrated and sales is anything but unimportant. Sales is so essential that if you happen to not have a salesperson because you are a fancy engineer you better get off your butt and start selling as that automatically becomes your role.

People compete for jobs and for resources; computers compete for neither

This is Thiel’s contribution to the “Robots eat the jobs” debate. Thiel holds that humans are tool makers and users and that computers are simply another tool for humans. Companies win by betting on the augmentation of human ability and not by trying to eradicate humans. He cites PayPal and Palantir as examples. At PayPal, fraud was only successfully solved when Max Levchin’s algorithms were paired with human analysts and Palantir merely strives to make it easy for human analysts to deduce patterns from disparate data sources — not to deduce the patterns automatically.

I think this is an interesting and differentiated take on the argument but it ultimately shifts the goal post farther out into the future. What I mean is that in Thiel’s world robots still eat the jobs. Analysts need to be trained to use Palantir, for example, and whatever new product entrepreneur’s cook up along the axis of “Man-Machine Symbiosis”.

Humans who fail to pick up whatever literacy is needed to be successful with the tools we build will be displaced. There’s only one inescapable conclusion — as robots eat away at (old) jobs the need to educate people to take on the new jobs rises.

The facts that a large portion of the labor force will need skills we haven’t even imagined and that our education systems are so bad are the real sources of concern. Maybe education itself is something machines can help us provide at scale.

Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future

This is another gem. Much like PG’s gems, it’s very visual. You just can’t help but imagine yourself as an ancient and it’s so obvious that the world would look strange and fresh to you. You would see all the plants because there were no roads with cars all over the place, you would see all the animals and understand their secrets. Importantly you would be standing at the frontiers of human knowledge since you are one of the first people to actually know anything. This is key. To create anything new, we have to stand at the frontiers of knowledge — we have to be a special kind of domain expert such that anything we do even by accident is new and in a sense obvious to us[2]. We only go from zero to one when we stand at this frontier and walk forward in a way that is obvious to us and not to others.

Thanks for checking this out. You can follow me on Twitter @levandreessen

Refs.

[1] The one i’m thinking of is the intuition for why not all startups that could be started have been started at any given point in time. I don’t remember the name of this essay. It’d be awesome if you could point me to it.

[2] Incidentally PG also hits on the same point in “How to get startup ideas”