ok so what we're going to do now, we can move on to the first keynote speaker of the
day and what's gonna happen here we're going to have (we're going to have) Peter Thiel come up on stage.
He is a well-known investor and
entrepreneur and he's going to give about a
15 to 20 minute presentation about the
about FinTech and the future of
technology, then after that, we're going
to have a Bloomberg West
anchor and Emily Chang come up on stage and going to have a a lively discussion
about about the internet so those of you
who don't know don't know Peter he is
really is really the original FinTech
disrupted in many ways he was the CEO
and co-founder of PayPal and after
taking power paid PayPal public and
selling it to eBay then selling it on
eBay he has become known as the dawn of
the PayPal mafia since so many useful
the former is former PayPal colleagues
have since gone on to start many
successful companies companies like
SpaceX Tesla LinkedIn you jus yell and
Peter himself started Palantir
technologies ADATA analytics company
that makes choose the national security
and global finance in 2004 he was the
first outside made the first outside
investment in Facebook and he continues
to serve on the Board of Directors there
today as a partner at the Founders Fund
ended his own investing he works to
identify and support the next generation
of technology companies in this space he
has made investments in so far I
on deck in Avant and insist finance is
also started the teal foundation and a
20 under 20 till fellowship helping to
ignites a debate on the differences that
might exist between learning and
schooling he's also the author of the
number-one York Times bestselling book
021 notes on startups or how to build
the future
ladies and gentlemen please join me in
welcoming to the lenders stage
entrepreneur and investor Peter Thiel
thank you so many different topics for
us to talk about today but was under
tremendous challenges in our writing
about entrepreneurship in speaking about
it is that there is no simple formula
decide if I were to give a formula of
these are the steps you're supposed to
follow and you do these six things then
you will succeed you would almost
necessarily know that it's it's somehow
incorrect and so i in talking about
talking about these topics I thought and
tried to approach it somewhat in drug
what are some contrarian questions what
are some businesses that are some things
that are true that people don't believe
what are some businesses nobody is
building and there's certain answers
they will keep coming back to talk about
some of those in and try to bring them
to bear on on the on the FinTech context
that that you're all I think about is a
single answer that I always give that's
overwhelming very important truth I
saying is that I think there are always
two first approximation two kinds of
businesses there are companies that
compete and their companies that don't
are companies that compete like crazy
don't make money companies that don't
compete do something unique that very
strongly differentiated
very profitable they are called by their
known as monopolies even though the
people who run them are generally well
advised not to call them that you want
to compete like crazy you should just
leave the conference and try to open a
restaurant in San Francisco there are a
lot of people doing that it is not and
it is a is extremely competitive but it
is not very capitalistic in the sense
that capitalism is about the
accumulation of capital and you will not
accumulate capital by by opening a
restaurant and so on and so on
the question of how to how to go about
you know there's certain types of
features these are monopolies businesses
tend to have you know the other one of
the critical things is that you often
have to identify it gives you
perspective so different from the
standard perspective so one of the
standard venture capital questions as
always what's the size of the market and
we want to go after really big markets
are often told the total addressable
market the town was supposed to be very
big whereas you know from a monopoly
perspective the thing that really
matters is not that you have a trillion
dollar restaurant market or some sort of
super big market but that you have a
large market share and poor start of
that often means that you have to start
with a very small market because you
quickly want to get to a big share and
that's how you can then then expand
PayPal PayPal's initial market and we
started in 1999 wanted and we are
focusing very quickly on a power sellers
on ebay for about twenty thousand of
them and you could go from 0 to 30 or 40
percent market share in the first three
to four months which was a very
auspicious start and I think something
like that has been has been true of many
of the successful attack consumer
Internet companies in in in recent
decades they started with markets that
were very small they took over those
markets and then they sort of gradually
built it out in concentric circles and
and if you look at the kinds of things
that went badly wrong in Silicon Valley
like the cleantech experiment from serb
2005 to 2008 these were characterized by
enormously big markets where the
PowerPoint presentation started with
people saying well we have markets that
are measured in
hundreds of billions of dollars are
trillions of dollars and if we have a
fraction of a fraction of the party
we're going to have a very successful
business and then it turned out that if
you're just sort of let me know when a
vast ocean are you have nothing but
incredible amount of competition that
it's basically you know you're thin film
solar panel company had to beat the
other 99 from solar panel companies need
to be the other ninety solar panel
companies and used to be the windmills
in the fractures and the Chinese
manufacturers and and this is always a
terrible place to be
you don't want to be sort of Minoan a
vast ocean one of the one of the
questions that I always get asked in a
related sort of context is what are some
of the trends and technology what are
things that are happening and always
disliked this question because I'm not a
prophet I can't tell you what trends are
happening place think it had to say
something systemic it is that almost all
trans R overrated that if you hear a
trend by the time you've heard the trend
it's somehow already that waves already
pastor it's it's way too much for
consensus thing you know trending words
and sorting Valley transit in recent
years have been educational software you
know health care I T
there's been a trend around cloud
computing big data
SAS Enterprise in a big data cloud
computing I often think you need to
think fraud and run away as fast as you
possibly can and if you sort of had a
startup that was pitched as a
concatenation of these buzzwords you
know we're building a mobile platform
for South enterprises to bring big data
to the cloud that's what we're doing
you know the the my pattern recognition
on this and perhaps it's a really good
company I should spend a lot of time
talking to them but the pattern
recognition is that the buzzwords are at
El like and poker the people are
bluffing and that the businesses in fact
not very well differentiated and it's
just one of many of a kind
the categories are well defined and and
when you tap into these well defined
categories you you often are are doing
this already very poorly differentiated
and so the great companies in many ways
I think have been in a category of one
where are the challenges the people
starting them have is that you don't
even have quite the right words to
describe it or it's it's often because
there are no natural categories for for
things that happen to see these are some
of the kinds of things that I have
looked at all why you know it's
certainly in in evaluating startups you
always look at the technology and the
people but I think I think it off and
also is quite valuable to think about
the the business strategy and women
implies these are these kinds of lessons
to the end Turk contacts time I think
there's sort of a few things i wanna
maybe draw out on on on this is a
starting point of contact obviously is a
very big theme it's there's always a
risk that it's something of a buzzword
it's a very it's a very natural thing in
a way since you know money finance
source of naturally thought of as zeros
and ones as digital kinds of goods and
services for natural mapping between
center and a lot of I T internet
consumer technologies of of recent years
and there is of course of course also
dealing with a second that's fairly
lucrative in some sense you know one of
the you know one of what I started
working in New York
in the nineties on one of the thought
was always that made more money the
closer you were to the money and so
people worked on trading desks and banks
made more money than the investment
bankers investment bankers made more
than the lawyers and the lawyers made
more than the doctors and so if you were
sort of a professional was somehow
closer to to the money you were
naturally it was easier to just keep
some of it for yourself and and there is
something about pintuck that the strip
taps into that so and then of course we
have we have a lot of the existing
industries sclerotic and kind of broken
and not very innovative and so there
seems to be coping I do think so there's
this macro story around Frontech that's
that's extremely extremely powerful but
what I want to challenge people your
days is to always I think a lot more on
the on the on the micro level on this
question of specific differentiation and
and you know what what can be done that
other people cannot sort of quickly
clone copy and you know or are you just
really opening a restaurant where in
Fort sounds like very exotic and it's
the only not police British fusion
cuisine it's really just a restaurant
and people will sort of Comput quickly
in one way or another because because
this question of sort of monopoly
pricing power it's not just something
that you have to sort of a brief moment
in time the really good businesses
somehow are able to stand for quite a
long time so that often looking for on
the on the 10th oxide is trying to find
some sort of a narrative story of how
one will build a sustainable business
with with with with the sort of most of
the sort of depends ability and the
challenges why it won't get copied
quickly by other other people in in due
course there are certainly
a number of different different angles
to to to do this
1911 kind of an approach and this is
this always I think the a challenging
question in an inventor is if you have a
powerfully differentiated technology
that's that's really dramatically better
than what anybody else has I believe
that can always be a powerful
differentiator I think one of the
challenges is that this is actually
quite uncommon and so so it's sort of an
and so I often I often think that you
know when you talk to people in startups
you want often ask the questions they're
not comfortable answering so if you're
talking to a scientist starting a
biotech startup you want to ask business
questions because they wanted to hide
behind the science and in a winter
context the uncomfortable questions are
often the technology questions where's
the tech is it just isn't just a website
with us and marketing engine attached on
and and so so one set of questions on
that can be powerful in differentiating
is if there really is a dramatically
better technology than exists elsewhere
and then I think very often in the
absence of that the questions come down
to figure out ways to to scale things
very quickly and his house
have the sort of very differentiated
differentiated market place and and the
challenge with questions then result of
all around is the market is the market
nearly enough to find is it is it
something that you can take over and
dependable way is really cost too much
to market a series of questions around
us on when when I started up a bell and
social hardly even draw lessons from any
of these businesses because because
you're sort of particular moment in time
this particular constellation and we
sort of around the summer of ninety nine
that we stumbled on this idea
of linking money with which email which
was which was clearly was clearly an
interesting very innovative addy idea
email as sort of a basic application if
you could somehow
discount centric systems where you links
money to it that was that seemed like a
very natural kind of a thing to do it
also did not seem like that
technologically great breakthrough so
even though it was ready
56 years into the internet and nobody
had thought of it yet you know once we
have thought about it there was this
question why couldn't somebody else copy
it really quickly and turn and and we
sort of ended up backing into was on was
this was the spur osha Slee rapid
marketing strategy where it was no in
fact it's not going to be that
defensible and so we have to compensate
by just spending money like crazy and
marketing absolutely breakneck pace we
are we launch the product in October of
1999 which started with the twenty-four
people on our office as the first
customers and then we decided well we
have to just accelerated as fast as
possible give everybody $10 to sign up
and get $10 more if they refer someone
else to sign up so it's a $20 per user
acquisition costs the question whether
any of the users will be any good
whatsoever and we were able to get it to
grow at sort of this very happy
exponential rate of seven to 10 percent
had a compounding so we sort of got a
thousand users by mid-november 99 you
got to 12,000 by December 31st ninety
nine hundred thousand by February 3rd
2010 of course there were no revenues or
anything so justice exponentially
growing costs curb by by early early
March of 2000 we had about combined with
alliance company which I was doing the
same thing with four walks down the
street from a simpleton fifty-fifty
merger
mosques company and then we had the
combined company said fifteen million
dollars in the bank and the burn rate
because the exponential growth was
approaching sort of 10 million a month
and then you know we we we succeeded in
raising a lot more capital the marketing
kept going
we should start dialing it back and then
it turned out that there was in fact a
very hard technological problem there's
an enormous amount of fraud on the
Internet at that point of time and so
and actually most of the competitors
most the banks that want parallel
products were actually in some ways too
scared to launch anything because they
thought all the money we get stolen and
so we had some time to figure out how to
solve the fraud to build more
technological dependability and over
time some of the network of facts in a
sort of payment system Cape Town and so
i think there's often something like
that the PayPal thing in some ways was
was a very crazy story never quite know
what what precise losses 1 draw at least
had powerful vision it was it was very
differentiated even and you know we we
were honest with ourselves that it was
not necessarily a massively sustainable
advantage email money link is a great
insight and we had we had a captain
capitalize on it has aggressively and
quickly as we could and I think that I
think these are the kinds of things that
one has to think about in in many of
these these printer businesses invest in
a number of them over over the years and
the the challengers are very often on
their many that are quite good and have
a dynamic that's somewhat similar to
PayPal where it's a really good idea can
be copied fairly quickly and so you have
to sort of aggressively raise capital
for the business
are somewhat diluted our processes you
as you scale the business and and
rapidly ramped up and and anything one
can do on incremental improving the
business model if you make it less
deluded if there are ways to scale it
quickly in a non diluted way that's both
very unusual and very powerful when you
can when you can pull that off that's
that's incredibly important so so so we
sort of looked at all these are trying
to pull these are all these different
things together I think that I think
that I think one of the one of the areas
and pintuck that just people are a
little bit too nervous about perhaps is
is the specter of regulation and so we
always have these was always a bias to
try to do things in in the most
unregulated way the certain travel a lot
of the investments we did it was truly
awesome the PayPal history originally
had the said you were going to build the
first the first cell phone bank the
first mobile bank in the world and and
then our CFO have to foot stack of
paperwork to fill out to start a bank
and convinced us that we really didn't
want to start a bank after all and we
should just just going to somewhat
thinner payments business and i think
that that was perhaps the right thing in
99 2000 I i have come to wonder whether
there are a number of these somewhat
regulated industries that are actually
if you can go through some of the hoops
it may be worth it because so many
people are discouraged on both on the
entrepreneur side and of course also on
the Investor side here in Silicon Valley
is almost allergic reaction to anything
that's regulated and so if you if you go
into one of these are partially
regulated industries it can be a slower
but if you get through some of the hoops
this can be this can be a fairly fairly
decisive advantage and then I think the
other question that's always
important one is the initial monopoly
the initial technology having a view on
on the overall market place and I think
the overall the other one that's always
a very important one is this question of
the endgame is it sustainable how how
does this work in the long run when I
went through exercise and PayPal in
early 2001 we've been in business
strongly 27 months and sort of the
discounted cash flow analysis of the
business which is always a little bit of
a fictitious exercise but but we looked
at a very high growth rate very high
discount rate and almost all the value
was in the terminal value we concluded
that 75 80% of the value of our business
came from cash flows in years 2010 2011
and beyond as a 2001 and I that's
something like that is true of every
single company represented in this room
is that three-quarters or more of the
value your business will come from cash
flows in 10 years from now on the future
2026 and beyond this is just a math
that's just the discounted cash flow
math equation and this is extremely
counterintuitive because everything you
think about is well how do we grow over
the next few months next quarter
the next year and I don't want to
minimize or diminish these questions but
but the the the real value question is
not are you the first mover are you the
next mover the really valuable companies
are the last mover incident last
companies that end up defining the
category as Google last search engine
Microsoft the last operating system the
last hopefully penthouse the last sort
of the email payments company to a
rebuild its the last company in a field
that often defines you want to be first
to get a jump start and even more
importantly San and it's not a word you
wanna be the first mover and you want to
be the last movie
and so thinking about this question of
how the advantage build sustainably over
over the long run is a very important
kind of questions will see these are
just some of the sort of some of the
sort of questions that I i tender tender
like zeroing in on you know it's it's
often the answer always somewhat
speculative its involves story that you
tell about how the future looks how how
things are going to work out its not
empirical we don't have time to know
whether it's going to work or not by the
time your house and you know the
business ready is succeeded or is out of
business and so it's sort of a very
analytical exercise and how how coherent
is it
applause was do you think we think the
story makes sense and and and can work
but should just put on these kinds of
questions are you can get to an
incredibly very good chance of the of
the coherence of a strategy being very
powerfully differentiating between many
different ones you know the title today
was developing the developed world which
has brought a rumor that I always try to
put everything under that that I think
that as the 21st century progresses we
can have a progress through
globalization to copy and things that
work and through technology through
doing new things often try to
differentiate these very strong we were
always draw globalization on X axis
horizontal technology on a yr access
it's a vertical and and I think that I
think we should always keep in mind the
sort of vertical intensive doing new
things as a way to open new markets and
create new products the globalization
narrative was very powerful from the
seventies to have peaked in 2007 and I
think since the 2008 crisis we're living
in a world where
where I think once again there's a sense
that there needs to be more innovation
doing your things things have gotten
very unbalanced people were too focused
on globalization not enough on
technology was already embedded in the
language we use described the world we
divided the world into the developed and
developing worlds that barry dichotomy
is a dichotomy that's pro globalization
its convergence the developing world is
that part of the world thats copying the
developed world and converging but it's
also an anti technological dichotomy
because when we say that the you s
Western Europe other countries like that
are in the developed world where
implicitly saying that were not part of
the world where nothing news gonna
happen with things are done finished
nothing new will happen I think that's a
bias that we need to very strongly
resist and and you know that the banks
the big banks that many of us or
indirectly competing with all hopefully
not to directly but indirectly on they
were geared to globalization like crazy
they forgot about technology they forgot
about doing new things they have
internal politics that preclude them
from doing new things for the same
reason banks couldn't do something as
simple as a linking email with money in
1999 they're they're they're culturally
and politically geared against
innovation and that why that's why
should never underestimate how big an
opening there really is and how would
you get back to answer i think is a very
contrary question of how to go about
developing our so-called developed world
thank you very much
