Investing Lessons from Peter Thiel

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Entrepreneurs are essentially Investors with Zero diversification, and many of Thiel's ideas are applicable to Value Investing as well.

Zero to One

Given below is a curated list of the most insightful quotes from Peter Thiel's brilliant book — Zero to One: Notes on Startups, or How to Build the Future (non-referral link).

Since Entrepreneurship is essentially Investing with Zero diversification, many of the points below are applicable to Value Investing as well; and have been linked to relevant articles where applicable.

On Entrepreneurship

“The power law is not just important to investors; rather, it’s important to everybody because everybody is an investor. An entrepreneur makes a major investment just by spending her time working on a startup.”

On Investing

“First, only invest in companies that have the potential to return the value of the entire fund.”

“Investors who understand the power law make as few investments as possible.”

“The existence of financial bubbles shows that markets can have extraordinary inefficiencies.”

On Group-Think

"“Madness is rare in individuals—but in groups, parties, nations, and ages it is the rule,” Nietzsche wrote (before he went mad). If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.”

“What important truth do very few people agree with you on?”

“All failed companies are the same: they failed to escape competition.”

“That doesn’t mean the opposite ideas are automatically true: you can’t escape the madness of crowds by dogmatically rejecting them. Instead ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes? The most contrarian thing of all is not to oppose the crowd but to think for yourself.”

The last is very similar to Graham's own explanation:

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."

Benjamin Graham, Chapter 20: “Margin of Safety” as the Central Concept of Investment, The Intelligent Investor.

On Tactics

“Most of a tech company’s value will come at least 10 to 15 years in the future.”

“The road doesn’t have to be infinite after all. Take the hidden paths.”

“If you’re deciding whether to bring someone on board, the decision is binary. Ken Kesey was right: you’re either on the bus or off the bus.”

“Unless you have perfectly conventional beliefs, it’s rarely a good idea to tell everybody everything that you know.”

Reasons To Start Up

“In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work (if this describes your company, you should quit now).”

“The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.”

“The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.”

“The best projects are likely to be overlooked, not trumpeted by a crowd; the best problems to work on are often the ones nobody else even tries to solve.”

“If you’re less sensitive to social cues, you’re less likely to do the same things as everyone else around you.”

Focus Points

“You’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product.”

“The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.”

On Fighting

“Anyone would fight for things that matter; true heroes take their personal honor so seriously they will fight for things that don’t matter. This twisted logic is part of human nature, but it’s disastrous in business.”

“Sometimes you do have to fight. Where that’s true, you should fight and win.”

“The most valuable companies in the future won’t ask what problems can be solved with computers alone. Instead, they’ll ask: how can computers help humans solve hard problems? ... As we find new ways to use computers, they won’t just get better at the kinds of things people already do; they’ll help us to do what was previously unimaginable.”

Videos

Going from Zero to One

In his talk below on Going from Zero to One, Thiel asserts that the idea consists essentially of three contrarian points.

1. Aim for a monopoly (winners don't compete).

2. Take the secret gate (there are many).

3. The developed world isn't developing.

Competition is for Losers

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Peter Thiel's book, _Zero to One: Notes on Startups, or How to Build the Future_, presents key insights on entrepreneurship and investing, emphasizing that entrepreneurs are investors with zero diversification. Thiel highlights the importance of the power law, suggesting that successful investments can yield significant returns, and advocates for making fewer, more impactful investments. He warns against groupthink, encouraging individuals to think independently and identify contrarian truths. Thiel also discusses the long-term value of tech companies, the necessity of effective sales strategies, and the importance of uncovering hidden secrets that drive successful businesses. He argues that the most valuable companies will empower people rather than replace them, and that innovation often lies in overlooked problems. Thiel's perspective aligns with value investing principles, stressing the need for sound reasoning and data-driven decisions. He concludes that future companies will leverage technology to enhance human capabilities, rather than solely relying on computers. Overall, Thiel's insights challenge conventional wisdom and encourage a unique approach to entrepreneurship and investment.