Competition is for Losers (talk by Peter Thiel)

Original

• Businesses create X$ of value and capture Y% of it. Those are independent variables and you need both to be fairly high for a very successful business.
• Competition and monopoly have their pros and cons but generally it's hard to have a profitable business in a very competitive markets.
• Actual difference between businesses in competitive markets and monopolies is greater than perceived because it's better for both to be seen as being somewhere in the middle.
  • If you look like a monopoly, the regulators will come after you.
  • If you look like just another company in a huge competitive market, it's hard to raise money.
  • The narratives get tailored to make the market look bigger or smaller.
  • We can ask: what is their main cash cow (or cash cows) and what are its competitors? Then we immediately see that Google is a monopoly in online search and "the only English restaurant in Palo Alto" is just another restaurant.
• Easy way to start as a monopoly is to find a small underserved niche and make a superior product for it. Ideally you want to be able to grow your target market in steps as you grow and gain ability to dominate bigger markets.
• In tech every moment happens only once. Unique businesses capture some unique advantage that can't really be replicated. Competitors would need to be qualitatively different to succeed, and that's what you're looking for.
• Moat tools:
  • Proprietary tech, IP,
  • Network effects,
  • Branding (although I don't like to only depend on branding),
  • Economies of scale (software is very good at this),
• You want to have a lasting advantage. Often it's not the first mover, but the last mover that gets it.
• Growth rates are overrated, durability is underrated. You want to do the last breakthrough, to be the last man standing, so it's important to understand the endgame well.
• Some recipes:
  • Verically integrated complex monopolies (e.g. Ford, Standard Oil, Tesla).
  • Software, because you can grow very fast.
• Competition:
  • Losers are not the ones who can't compete, it's the ones who do compete. The winners just avoid competition altogether.

From Q/A:

• We're too focused on iteration instead of fundamental breakthroughs.
• The tendency to see competition as validation is deep, so asperger people have an advantage.