Lessons from the PayPal Mafia.
What do you get when you combine 13 men 30-year-old men in silicon valley? The biggest online payments company to IPO at 1billion Paypal now worth over 100billion and valued more than double it’s parent company. What do you get when these men leave Paypal? One of the most valuable networks in Silicon Valley and the world: the Paypal Mafia. Going on to lead some of the biggest companies today like Tesla, LinkedIn, Yelp and Youtube.
The chances of your company being a unicorn (+$billion evaluation) are 0.001%, but for the people in this circle, it’s almost 50%.
Let’s take a look at the Peter Thiel who was CEO of Paypal, made the most investments, started Palantir Technologies, and bought a 10% share in Facebook for 500k. Created Founded Founders Fund which made investments in Airbnb, Lyft, SpaceX. He might know a thing or two about startups, so here’s some key takeaways from his book Zero to and my observations.
You sit down in an interview with Peter, and he asks you “What important truth do very few people agree with you on?”
You’ll likely say something that is true that everyone already agrees on like our education system is broken, or you’ll pick a side in a common debate like religion causes conflict.
You’ll quickly realize you don’t think differently than most people. In school and in society we’re fed the same knowledge, and many people lose their ability to think for themselves or even seek out unpopular thinking in fear of social suicide.
“Brilliant thinking is rare, but courage is in even shorter supply than genius.”
Instead, we should start by looking at what most people already agree on, then building evidence that “Most people believe in x, but the truth is the opposite of x.”
Thiel has his fair share of haters, one for speaking openly about his political views, and two his views on monopolies > competition.
If no other companies survive, because one company is doing something so much better than everyone else. That’s a good thing. Peter’s known for his frequent comparison of Google with a local restaurant business.
This truth is hidden by the fact that most monopolies pretend they don’t have a monopoly to avoid regulation, while smaller companies make themselves seem like a monopoly, by making them seem unique in their markets.
While Google is the clear monopoly of search engines but it doesn’t call itself a search engine company, instead it calls itself a tech company or an advertising company. Consumer tech is an over 2 trillion dollar market in the US, Google owns a tiny fraction of it. From these angles, Google goes from a fish in a bowl to a fish in the sea.
A restaurant in Chicago is one of over eight thousand others. They brand themselves as a niche; eg the only traditional Italian bakery downtown that serves breakfast. They try to make their fishbowls as small as possible.
Capitalism and competition shouldn’t be synonyms but antonyms, capitalism brings money in, competition distributes money. This is great for society because in order to beat out current monopolies new companies would need be doing something a hell of a lot better than Google.
We’re taught there’s safety in crowds, if everyone’s flaunting to a business, then there must be something valuable there. But being in these competitive markets means someone’s just X% away from beating you out. If you’re a one of a kind company you’re a monopoly, it takes something 10x to beat you out.
The world is making progress with globalization, but not all progress is equal. Most companies are copying things that work or making 10% improvements. This can be described as horizontal progress, going from 1 → n. While few companies are creating something new or undiscovered something 10x; vertical progress or going from 0 →1.
“Vertical progress is harder to imagine because it requires doing something nobody else has ever done. If you take one typewriter and build 100, you have made horizontal progress. If you have a typewriter and build a word processor, you have made vertical progress.”
Many people believe globalization is what we should strive for, but without technology, it’s unsustainable. If everyone in developing countries copied the same lifestyles we have in North America we’d be depleted of resources. Technology can close the gaps globalization can’t alone.
One of the reasons people copy things that have worked in the past is because they think everything worth wile has already been discovered.
But Thiel says it best “Every moment in business happens only once. The next Bill Gates will not start an operating system. The next Larry Page won’t make a search engine. And the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them.”
Don’t copy people’s innovations you can only get 10% better type of innovation if u want 10x innovation, learn from them.
If want to create something that has never been done before you have to start questions your assumptions of the present.
“PayPal will give citizens worldwide more direct control over their currencies than they ever had before.” In hindsight Thiel was true, but in 1999 this was something to scoff at because it was completely different than his reality.
Leveraging technology is the best way we can have an impact. Thiel asks us “What is a great internet business that nobodies building?”
Most people reach for 2 two things, either things that are impossible or things that are easy. For example, as of right now there is no way to determine which religion is the best, which year the world will end, these are non-falsifiable statements, yet so many people debate these topics. They’re impossible.
Then there are easy things, taking a conventional path, solving problems people have already solved, making preexisting things better again horizontal growth.
There’s a sweet spot in the middle of hard problems. Most people aren’t focused here because they think there’s smarter people who can solve these problems. But what’s scary is most of us think this about one another, few people actually take initiative to become them. The world’s waiting on the “next Elon Musk” to solve its problems instead of trying to generate more of them.
Key takeaways 🔑
- New Technology gets us from 0 →1(vertical growth), globalization copying thing that work takes us from 0 →n (horizontal growth)
- Leverage network effects and the power of technology ask “What is a great internet business that nobodies building?”
- Monopolies > Competition, monopolies pretend not to be monopolies and competitive markets pretend to have monopolies
- Have the courage to think differently than others. When answering “What important truth do very few people agree with you on?” use “Most people believe in x, but the truth is the opposite of x.”
- Spend time doing hard things, not the impossible or easy because too many people are already doing these.