Competition is For Losers

For the next 12 weeks I’m going to be creating a set of blog entries for a series of videos I’ll be watching as part of “How to Start a Startup” which is a program hosted by CoLabJax and put on by TheBunkerJax.

If you want to watch the video to follow along, check it out here on YouTube: Competition is for Losers presented by Peter Thiel

Peter Thiel is a pretty remarkable guy, and he’s worth a few billion dollars. He’s got some great books out there like:

Very good reading, put them on your reading list today.

Now lets talk about why competition is for losers.

Thiel talks about his view that there are only two kinds of businesses, ones that are perfectly competitive, and ones that own a monopoly. This is a section of the video that you will probably have to watch a few times to really understand what he’s talking about. In a very round-about manner, Peter is talking about market positioning and fit. He touches on the way that companies frame themselves against their competitive landscape to define their relationship to the rest of the market. Depending on the goal of the presenter, they can frame their company as perfectly competitive, or monopolistic, which requires a deeper dive to really determine what the truth is. His position is that competitive companies don’t make any money, and successful companies have some level of monopoly.

He goes on to talk about the importance of picking a specific niche, conquering it, and then expanding outward. The goal here is to achieve some level of monopoly in every sector you reach into, so if you control your reach you can systematically gain / retain monopoly as you expand into new frontiers. Large markets mean numerous competition, so keep your markets small and focused, and try to define their size with your positioning.

I love his comment of “If you copy these famous people, you’ll never learn from them”

This is something I’ve stressed off and on to people that cling dogmatically to the success stories of the big internet companies. These are great things to read, and there’s tons of wisdom to be gained from their successes and failures, but it’s important to realize a few things:

You are not them

We are the sum of our experiences, connections, and upbringing. The things one person accomplished are not directly transferable to other people simply because you are different people. Thiel touches on his own ‘success fast track’ from growing up in high achiever household through Stanford, into a great law firm. This sort of story happens over and over if you dig into the success stories of the big tech companies. There’s a thread of privilege, networking, and happenstance that simply cannot be replicated by the average person, and it’s import to realize that it’s okay that it took you a little longer to make it, you’re building your own ladder as you go, you didn’t have it handed to you. It doesn’t make you any less remarkable.

Your company is not their company

In the same way that we’re all our own little unique snowflakes, our companies are even more so, as they are just big snowballs filled with snowflakes. The people that make up your company are incredibly important (TEAMS!) But the timing is incredibly important as well. If this wasn’t the case, it would be impossible to ever gain a true competitive edge. The important thing is to find the formula that works for your people, in your circumstances, and exploit the hell out of it.

All that being said, these are still great stories and books to read. Those who do not know history are dooms to repeat it, which is why I stress looking at peoples mistakes more than their failures, because there’s a lot more good stuff to be gleaned from them.

Peter’s points about where the bulk of your real revenue comes from in your projections are really subtle and important as well. Starting companies is not a quick way to riches unless lightening strikes (Screw those Instagram guys!), which it probably wont for you. You have to create a lot of value to your users up front, with the knowledge that it could be 5-10 years before you’re really in the sweet spot of getting value back out of the company yourself. The truly valuable companies are the ones that out-last the others. You don’t always need to be first, or maybe even the best, you just have to the last.