Summary Peter Thiel - Competition Is For Losers - Stanford CS 183B Autumn Quarter 2014-2015 - YouTube (Youtube) www.youtube.com
7,261 words - YouTube video - View YouTube video
Peter Thiel Hi Alright. Good afternoon. Today's speaker is Peter Thiel. Peter was
Sam the founder of Paypal and Pal and founder funds and is invested in most of the tech companies in in Silicon Valley. Mh. And he's going to talk about strategy and competition... You for coming, Dear. Awesome.
Sam Thanks. Sam, thanks for inviting me. Thanks for for having me. I I sort of have a... Thank I have a single e day fix that I'm completely obsessed with in on on the business side, which is that if you're starting a company, If you're the founder, entrepreneurs starting a company, you always want to aim from monopoly and and that and you want to always avoid competition.
Sam And so hence, competition is for losers, something we'll be talking about today. I'd to I'd like to start by saying something about the the the basic idea of when you start 1 of these companies, how you go about creating value. And there's this question what makes a business valuable. And want I want suggest that there's basically a very simple very simple formula that you have a valuable company, if 2 things are true. Number 1 that it creates x dollars of value for the world and number 2 that you capture y percent of x.
Sam And And the critical thing that that I think people always miss in the sort of analysis is that x and y. Are completely independent variables. And so x can be very big, y can be very small, x can be of intermediate size and if y is is reasonably big, you can still get a very big business. So to create a valuable company, you have to basically both create something of value and capture some fraction of the value of what you've created. And sort of just to just to illustrate this is a as a contrast.
Sam There's... If you sort of compare the Us airline industry, with a company like Google on search. If you sort of measure by the size of these industries, you could you could say that airlines are still more important than search. If you just measure, say, by revenues. There's a 195000000000 dollars in domestic revenues in 2002 12, Google had just north of 50000000000.
Sam And so... And certainly, sort of on some intuitive level, if you said You're given a choice and said, well, do you want to get rid of air all air travel or do you want get rid of your ability to use search engines. The intuition would be that air travel is, something that's more important than search. And this is of course, just the domestic numbers You looked at this globally. Airlines are much much bigger something than Search than Google is.
Sam But the profit margins are quite a bit less you know they were marginally profitable in 20 12. I think the entire 100 year history of the airline industry, the cumulative profits in the U. S have been approximately 0. Companies make money, they episodic go bankrupt they get recap and you sort of cycle and repeat. And this is reflected in you know, the combined market capitalization of the of the airline industries maybe something of the U.
Sam S. Airline industry something like a quarter that of Google. So so you have you have a search engine much much smaller than than air travel, but much more valuable. And I think this reflects these very different valuations on x and y. So you, if we look at perfect competition, You know, there are sort of...
Sam There's are some pros and cons, the world of perfect competition. On a high level, It's always this is what you study in e econ 1. It's always it's easy to model, which I think is why e econ professors like talking about perfect competition it somehow is efficient, especially in a world where things are static because you have all the consumer surplus gets captured by everybody. And politically, it's what what we're what we're told is good in our society that you want to have competition and this is somehow a good thing. Of course, there are lot of negatives.
Sam It's generally not that good if you're you're you're involved in anything that's hyper competitive because you often don't make my come back to this a little bit later. So I think at 1 end of the spectrum, you have industries that are perfectly competitive. And at the other end of the spectrum, you have things that I would say are mono and and, they're much stable, longer term businesses, you have more capital. And if you get... Creative monopoly for inventing something new.
Sam I think it's symptomatic of having created something something really valuable. And so I do think this the sort of the the extreme binary view of the world I always articulate is that there are exactly 2 kinds of businesses in this world. You there businesses that are perfectly competitive and there are businesses that are mono monopoly. And there's shockingly little that is in between. And this dichotomy is not understood very well because people are constantly lying about the nature of the businesses they're in.
Sam And this is why this is in my mind, this is the most important... It's not necessarily the most important thing in business, but I it's the most important business idea that people don't understand. There are just these 2 kinds of businesses. And so let me say a little bit about the lies that people tell. And so you basically that The basic...
Sam If you sort of imagine that there was a spectrum of companies from perfect competition to monopoly. The apparent differences are quite small because the people who have mono monopoly pretend not to. They will basically say, you know, and it's because you don't want to get regulated by the government, you don't want the government to come after to you. So you will never say that you have monopoly. So anyone who has a monopoly, will pretend that they're in incredible competition.
Sam And on the other end of the spectrum, if you are incredibly competitive, and if you're in some sort of business where you will never make any money. You'll be tempted to tell a lie that goes in the other direction where you will say that you're doing something unique that is somehow less competitive than it looks, because because you want you will want to differentiate, you wanna to try to track capital or something like that. So if the mono pretend not, Thiel non pretend to have mono monopoly. The apparent difference is very small whereas the real difference I I submit is is actually quite big. And so there's this...
Sam Distortion that happens because of the lies people tell about their businesses and the lies are sort of in these these opposite direction. Let me let me drill a little bit down further on the way these lies work. And so the The the basic lie you tell as a non monopoly is that we're in a very small market. The basic lie you tell monopoly is that the market you're in is much bigger than it looks. And so and so typically, you want to Thiel this in sort of set Thiel terms, you could say that a monopoly tells a lie where you...
Sam Describe your business as the union of these vastly different markets and the non monopoly describes it as the intersection, so that In effect, if if you're a non, you will rhetoric describe your market as super small, You're the only person in that market. If you have monopoly, you will describe it as super big and and there's lots of competition in it. So some examples of how this how this works in practice. So I always use restaurants as the example of a terrible business. And there's always, you, sort of ideas, you know, capitalism and competition are anton, capital some accumulates capital, a world of perfect competition as a world where all the capital gets competed away.
Sam So you're opening a restaurant business, no 1 wants to invest. Because you just lose money. So you have to tell some idiosyncratic narrative and you'll say something like, well, we're the only British food restaurant in Palo alto. So it's British Palo alto. And of course, that's too small a market because people may be able to drive all the way to Mountain View or even Men Park.
Sam And there probably are no people who eat nothing but British food, at least no people are still alive. And so so that is that's that's a sort of a pic fictitious narrow market. There's there's sort of a Hollywood version of this where the way movies always get pitched is, you know, okay, it's like a college football star, you know, joins an elite group of hackers to to catch the shark that kills his friend. Sorry. And so that's now that is a movie that has not yet been made.
Sam But but the question is is is that the right category or is the correct category? It's just another movie. In which case, you know, there are lots of those. It's super competitive, incredibly hard to make money. No 1 ever makes money in Hollywood doing movies or it's really, really hard.
Sam And so you always have this question about does the intersection does is it real? Does it make sense? Does it have value that want should to ask? And of course, there are startup up versions of this where you and the sort of the really bad versions, you just take a whole series of buzz word, sharing mobile social apps, you combine them and you have some kind of narrative and whether or not that's a real business or not is is is it's generally a bad sign. So it's almost as pattern recognition and when you have this rhetoric of this sort of intersections, it generally does not work, the something of somewhere, is really mostly just the nothing of nowhere in it's like the Stanford of North Dakota.
Sam 1 of a kind, but it's not Stanford. So let's look at the opposite. The opposite lie is if you are let's say, the the search company that's down street from here and has about a happy 66 percent market share. And you know, it's completely dominant in the search market Google has not almost never describes itself as a search engine these days. And instead, it it describes itself in all these different ways.
Sam So it sometimes says it's an advertising company. So if it was search, you say, wow, it's like, it has this huge market share that's really, really crazy. It's like an incredible monopoly. It's much bigger than it's much a much more robust monopoly than Microsoft ever had in the nineties. Maybe that's why it's making so much money.
Sam But if you if you say it's an advertising market, You could say well, there's search advertising is 17000000000, and that's part of online advertising, which is much bigger. And then, you know, all Us advertising is bigger. And then by the time you get to global advertising, that's close to 500000000000. And so you're... Talking about 3.5 percent so a tiny part of this much larger market.
Sam Or if you don't want to be an advertising company, you can always say that you're a technology company. And so sorry. Let me see. And so and so and the technology market is something like a 1000000000000 dollar market. And the narrative that you tell is Google in the technology market, while we're competing with all the car companies with our self driving cars.
Sam We're competing with Apple, on Tvs and iphones, technology we're competing with Facebook. We're competing with Microsoft on on office products. We're competing with Amazon and cloud services. And so we are in this giant technology market where there's competition in every direction you look and no we're not the monopoly, the government's looking for. And we should not get regulated in any way whatsoever.
Sam And so I think 1 has to always be super aware that there are these these very powerful incentives to distort the nature of these markets 1 way or the other. So the the evidence of narrow markets in the tech industry is is if you basically just If you look at sort of the some of the big tech companies Apple, Google, Microsoft, Amazon, they just they've just been building up cash, for year after year and you have these incredibly high profit margins. And I I would say that the that 1 of the reasons the tech industry in the Us has been has been so successful financially is because it's prone to creating all these monopoly like businesses. And that's that's... And it's reflected by the fact that these companies just accumulate so much cash.
Sam They don't even know what what to do with it beyond a certain point. And so so say let me say a few things about how how to build a monopoly. And I think I think the 1 of the sort of very counter ideas that comes out of this monopoly thread is that you want us to go after small markets. If you're a startup, you know, you want to get to monopoly. You're starting a new company, you want to get to monopoly, monopoly you have a large share of a market.
Sam How do you get to a large share of a market, you start with a really small market and you take over that whole market. And then And then over time you find ways to expand that market in in concentric circles. And the thing that's always a big mistake, is going after a giant market on on day 1, because that's typically evidence that that you somehow haven't defined the categories correctly that... And it's... It normally means that there's going to be too much competition in 1 way or another.
Sam And so I think almost all the successful companies in Silicon Valley had some model of starting with small markets and expanding. And you know, If you take Amazon, you start with you start with, you know, just a bookstore. We have all the books in the world. So it's it's a it's a it's a better bookstore than anybody else has in the world when it starts in the nineties, It's online, There's things you can do, You can't do before. And then you gradually expand into all sorts of different forms of e commerce and other things beyond that.
Sam You know, ebay, you start with pe dispensers, you move on to beanie babies and eventually, it's it's all these different options for all these sorts of different goods. And and what was very counterintuitive about what's very counterintuitive about many of these companies is, they often start with markets that are so small that people don't think they don't think that they're valuable at all when you get started. The Paypal version of this was was we started with power sellers on ebay, which was about 20000 people. When we first saw this happening in December of 99, January 2000 right after we launched. There was a sense that these were all it was such a small market.
Sam It was signed terrible We thought these were terrible customers to have. It's just people selling junk on the Internet, Why in the world do we want to be going after this market. But but you know, you there was a way to get a product that was much better for everybody in that market, you could and we got to something like 25, 30 percent, know market penetration in 2 or 3 months and you've got some walk in, you got brand recognition and you're able to build the business from there. So I always think these very small markets are quite underrated. The Facebook version of this I always give is that The initial market at Facebook was 10000 people at Harvard, it went from 0 to 60 percent market share in 10 days.
Sam That was a very au special start. The way this gets analyzed in business schools is always that's ridiculous, it's such a small market, It can't have any value at all. And so I think the business school analysis of Facebook early on or of Paypal early on or ebay early on. And is that the markets were perhaps so small as to have almost no value. And they would have had little value had they stayed small, but it turned out there were ways to them grow them concentric and that's what made them so valuable.
Sam Now, I think the opposite version of this is always where you have super big markets. And and I... There's so much so many different things that went wrong with all the clean tech companies in the last decade, but 183B 1 theme that ran through almost all of them was they all started with masks of markets. And every clean tech Powerpoint presentation that 1 saw in the years 2005 to 2008, which was sort of the clean tech bubble in Silicon Valley, of started with we're in the energy market, we're in a market that's measured in hundreds of billions or trillions of dollars. And then you once you're sort of a min in a vast ocean.
Sam That's not a good place to be. That means that you have tons of competitors and you don't even know who all the competitors are. And so you want be you know you want to be a 1 of a kind company where it's the only 1 in a small ecosystem. You don't want to be the fourth online pet food company. You don't want to be the tenth thin film solar panel company.
Sam You don't want to be the hundred restaurant in Palo alto. Your restaurant industry is a trillion dollar industry. So if you do a market size analysis, you include restaurants are a fantastic business to go into. And it's often large markets large existing markets typically mean that you have tons of competition, very, very hard to differentiate. So the first very counterintuitive, into idea is to go after small markets, often markets that are so small, people don't even notice them They don't think they make sense that's where you got a foothold.
Sam And then and then if those markets are able to expand, you can scale into a big monopoly business. A second sort of there's sort of several different characteristics of these monopoly businesses. That I like to focus on and there's probably no sort of single formula to it. And I always think that that in technology, there's always a sense that you know, the history of technology such that every every moment happens only once. And so, you know the next mark Zuckerberg won't build social network, the next the next Larry Page won't be building a search in the next Bill gates when we're building an operating system.
Sam And if you're copying these people, you're not learning from them. But it's it's... And so there is always these very unique businesses that are doing something that's not been done before, end up end up having the potential to be a monopoly. If you're, you know, Thiel the opening the opening line in Ana that all happy companies sorry, all happy families, all happy families are alike, all unhappy families are unhappy in their own special way. And the opposite is true in business where I think all happy companies are different because they're doing something very unique, all unhappy companies are alike because they...
Sam Fail to escape the essential same that is competition. And so so 183B 1 sort of characteristic of a monopoly technology company is some sort of proprietary technology. My sort of crazy, somewhat arbitrary rule of thumb is you want to have a technology that's an order of magnitude better than the next best thing. So Amazon had over 10 times as many books, Mean it's maybe not that high tech, but you figure out a way to sell 10 times as many books in an efficient online way. You know, Paypal, the alternative for Paypal was using was using checks to send money on ebay took 7 to 10 days to clear, Paypal could do it more than 10 times as fast.
Sam So you want to have some sort of very very powerful improvement in some order maybe an order of magnitude improvement on some key dimension. Of course, you know if you... As you actually come with something totally new. It's it's it's just like an infinite improvement. So I would say the the iphone was the first smartphone that worked.
Sam And so that's that's like maybe maybe not infinite, but it's sort of definitely an ordered magnitude or more of an improvement. So I think the technology is designed to give you a massive delta over over the next the next best thing. I I think there often are network effects that can kick in that really help. The thing that's very... And these these lead to monopoly over time.
Sam The thing that's very tricky about network effects is they're often they're often very hard to get started. And so so even though everyone understands how valuable they are, there's always this incredibly tricky question, why is it valuable to the first person who's doing something? Economies of scale. If you got something with very high fixed costs, very low marginal costs. That's typically a monopoly like business.
Sam And then and then there's this thing of branding, which is sort of like just this idea that gets large in people's brains. I I never quite understand how branding works. So I never invest in companies which just about branding but it is, I think a real phenomenon that that creates real value. I think 1 of the things I'm gonna to come back this a little bit towards the end. But 1 of Thiel things that's very striking is that software businesses are often or for some reason very good at some of these things.
Sam They're especially good at the economies of scale part because the marginal cost of software 0, And so if you get something that works in software, it's often significantly better than the existing solution. And then you have these tremendous economies of scale and you can scale fairly quickly. So even if the market starts small, you can grow your business quickly enough to stay stay at the same size as the growing market and maintain the sort of monopoly power Now the critical thing about these monopoly is is it's not enough to have a monopoly for just a moment. The critical thing is to have 1 that lasts over time. And so, you, silicon valley is always the sort of idea that you want to be the first mover, And I always think it's it's in some ways, the better framing is you want to be the last mover.
Sam You want to be the last company in a category. Those are the ones that are really valuable. Microsoft was the last operating system, at least for many decades. Google is the last search engine. Facebook will be valuable if it turns out to be the last social networking site.
Sam And 183B 1 way to think of this last mover value is this idea that most of the value in these companies exist far in the future. If you do sort of a discounted cash flow analysis of a business You look at you have sort of all these profit streams, you have a growth rate, the growth rate much higher than the discount rate. And so most of the value exists far in the future. I did I did this exercise at Paypal in March of 2001. We've been in business for about 27 months.
Sam And And we sort of had, the growth rate was 100 percent a year. We're were discounting future cash flows by about 30 percent and it turned out that about 3 quarters of the value of the business as of 2001 came from cash flows in years 02:11 and beyond. And and whenever you do the math on any of these tech companies, you get to an answer that's something like that. So if you are trying to analyze any of the tech companies in Silicon Valley, Airbnb, Twitter, Facebook, any emerging Internet companies, all the ones in Y Comb, The math tells you that 3 quarters, 80 85 percent of the value is coming from cash flows in years 20 24 and beyond. It's very, very far in the future.
Sam And so 1 of the things that we always over value in Silicon Valley is growth rates and we under value durability because growth is something you can measure in the here now, and you can always track that very precisely The question of whether a company still gonna to be around a decade from now. That's actually would would dominates the value equation, and that's sort of as a much more qualitative sort of a thing. And so if we went back to this idea of these characteristics of monopoly, proprietary technology, network effects, economies of scale. You can think of these these characteristics as ones that existed at a moment in time, where you capture a market and take it over. But you also want to think about are these things going to last over time.
Sam And so there's a time dimension to all these characteristics So network effects often have a great time element where as the network scales, the network effects actually get more robust. And so if you have a network effect business, that's 1 that can become a bigger and stronger monopoly over time. Proprietary technology is always a little bit of a tricky 1. So you want something that's ordered magnitude better than the state of the art in the world today. And that's how you get people's attention.
Sam That's how you initially break through. But then you don't want to be super seated by somebody else. So there are all these areas of innovation where there was tremendous innovation, but no 1 made any money. So, you know, describe manufacturing in the 183B eighties. You could you could do a better...
Sam Build a better describe than anybody else. You could take over the whole world and 2 years later, someone else would come along and replace yours. And the course of 15 years, you got vastly improved disk drives. So had great benefit to consumers, but it didn't actually help the people who started these companies. And so there's always this question about having a huge breakthrough in technology, but then also being able to say, explain why yours will be the last breakthrough or at least the last breakthrough for a long time or will you make a breakthrough?
Sam And then you can keep improving on it at a quick enough pace that no 1 can ever catch up. So if you have a structure of structure of the future where there's a lot of innovation and other people will come up with new things in the thing you're working on. That's great for society. It's actually not that good for your business typically. And then economies of scale we talked about.
Sam So So I think anyway, I think this last mover thing is very critical. Always tempted, you know, I don't wanna to overdo the chess analog, but, you know the... So First mover in chest is someone who plays white. White is about a 1 third of a upon advantage. So there's a small advantage going first.
Sam You wanna to be the last mover who who wins the game and so those the Cap blanca World Champion chess champion Casablanca line, you must begin by studying the game. And and I do think that's... Why I wouldn't say it's the only thing you should study, I think this the sort of perspective of asking these questions, why will this still be the leading company 10:15, 20 years from now is a is a really critical 1 to to try to think through. Let let me sort of I wanna to sort of go in 2 slightly other directions with this monopoly versus competition idea. And I so I think this is the central idea in my mind for business for starting business for thinking about them.
Sam And there are some very interesting perspectives, I think it gives on whole on the whole history of innovation and technology and science because you we've lived through we've lived through, you 253 hundred years of incredible technological progress in, you know, many, many different domains, you know, steam engine, to railways to telephones, refrigeration, household appliances, you know, the computer revolution, aviation, all sorts of different areas of technological innovation. And then there's sort of analogous thing that we can say about science, where we've lived through centuries of of enormous amounts of innovation in science as well. And the thing that I think people always miss when they think about these things is that because x and y are independent variables. Some of these things can be extremely valuable, innovations, but the people who invent them who come up with them do not get rewarded for this. And and certainly, you go back to you need to create x dollars in value, you capture y percent of x.
Sam I would suggest that the history of science has generally been 1 where y is 0 percent. Across the board, the scientists never make any money. They're always diluted into thinking that they live in a just universe that will reward them for their work and for their inventions. And this is probably the fundamental delusion that that scientists tend to suffer from. In our society.
Sam And even in technology, there are sort of many different areas of technology where where there were great innovations that created tremendous value for society. But people did not did not actually capture that much of the the value. And so I think there is a sort of whole history of science and technology that can be told from the perspective of how much value was actually captured. And and certainly, there our entire sectors where people didn't capture anything. So you...
Sam You're the smartest physicists of the twentieth century you come up with special relativity. You come up with general relativity, you don't get to be a billionaire. You don't even get to be a millionaire. It just it just somehow doesn't work that way. The railroads incredibly valuable, most just went bankrupt because it was too much competition.
Sam Wright brothers, you fly the first plane, you don't make any money. And so I think there is sort of a structure to these industries that's very important. And I think the thing that's actually rare are the success cases. And Most... So it's actually we really think about the history in this in this 02:50 year sweep.
Sam It's why is almost always 0 percent. Always 0 in science. It's almost always in technology and so it's very rare where people made money. You, Thiel early the late eighteenth early nineteenth century, the first Thiel revolution was the textile mills, you the steam engine you sort of automated things, and you had these relentless improvements that people improved efficiency of textile factories of manufacturing generally at a clip of 5 percent to 7 percent every year, year after year decade after decade. You had 60 70 years of tremendous improvement from 17 80 to 18 50.
Sam But even in 18 50, most of the wealth in Britain was still held by the landed democracy. The workers didn't you know, the workers didn't make that much. The capitalist didn't make that much either. It was all competed away. Were hundreds of people running textile factories, it was an industry that just the structure of the competition prevented people from from making any money.
Sam And so I think there are in my mind, there are probably are only 2 broad categories in the entire history the last 250 years. Where people have actually come up with new things and made money doing so. 1 is these sort of vertically integrated complex mono monopoly, which people did build in the second industrial revolution at the end of the nineteenth and started the twentieth century And so this is like ford. It was the vertically integrated oil companies like standard oil. And what these vertically integrated anomalies typically required was this very complex coordination, You got a lot of pieces to fit together in just the right way.
Sam When you assembled it, you had a a tremendous advantage. This is actually done surprisingly little today. So I think this is sort of a business form that when people can pull it off, is very valuable. It's typically fairly capital intensive. We live sort of in in a culture where it's very hard to get people to buy into anything that's super complicated and takes very long to build.
Sam But I when I sort of think about my colleague, Elon musk from Paypal success with Tesla and Spacex. I think the key to these companies was the complex vertically integrated monopoly structure they had. So if you sort of look at Tesla or spacex? If you ask, you know, was there sort of a single breakthrough? They certainly innovated.
Sam On a log of dimensions, I don't think there was a single 10 x breakthrough and battery storage or you maybe working on some things on rocket tree, but they hadn't There was no sort of single massive breakthrough, but was really impressive was integrating all these pieces together. And and doing it in a way that was more vertically integrated than most of their competitors. So Tesla, you also integrated the card distributors, so they wouldn't steal all the money is has happened with the rest of the car industry in the Us. Or Spacex, you basically pulled in all the subcontractors where most of the large aerospace companies have single source sub subcontractors that are able to sort of charge monopoly profits and make it very hard for the integrated aerospace companies to make money. And so vertical integration I think is sort of a very under explored modality of technological progress that people would do well look at more.
Sam And then I think there is something about software itself. That's very, very powerful. Software has these incredible economies of scale, these low marginal costs. And there is something about the world of bits as opposed to the world of atoms where you can often get very fast adoption. And the fast adoption is critical to capturing and taking over markets because even if you have a small market, if the adoption rate is too slow, there'll be enough...
Sam Time for other people to enter that market and compete with you, whereas if you have a small to mid sized market and have a fast adoption rate, you can take over this market. And so And so I think this is 1 of the reasons Silicon Valley has done so well and why software has been of this phenomenal industry. And what I what I would... Suggest what I would want to leave you with is, there are sort of these different rationalization, people give for why certain things work and why certain things don't work. And I think these rationalization always obscure this question of I'm creating x dollars in value and capturing y percent of x.
Sam So the science rationalization we're always told is that the scientists aren't interested in making money. They're doing it for charitable reasons and that you're not a good scientist if you're motivated by money, and I'm not even saying people should always be motivated by money or something like this. But I I think we should we should be a little bit more critical of this as a rationalization we should ask? Is this a rationalization to obscure the fact that y equals 0 percent and the scientists are operating in this in this sort of world, where all the all the innovation is effectively competed away and they can't capture any of it directly. And then the software distortion that often happens is because people are making such a vast fortunes and software, we infer that this is the most valuable thing in the world being done full stop.
Sam And so if people at Twitter make billions of dollars, it must be Thiel Twitter is worth far more than anything Einstein did. And what that sort of rationalization tends to obscure is again that x and y, independent variables. And are these businesses where you capture a lot of x and there others where you don't. And so and so I do think the history of innovation has been this this history where the micro economics, the structure of these industries has mattered a tremendous amount. And when And there is sort of this the story where some people have made vast fortunes because they were in industries with the right structure and other people made nothing at all because they were in these sort of very competitive things, and we shouldn't just rationalize that way.
Sam Things think worth understanding this better. And then finally, let me come back to this this this sort of overarching theme for this talk this competition is for losers idea, which is always this provocative way to title things, because we always think of the losers, as the people who are not good at competing. We think of the losers as the people who are slow on the sports on the track team in high school or who do a little bit less well on the standardized tests and don't get into the right schools. And so we always think of losers as people who can't compete And I want us to really rethink and and rev reevaluate this and consider whether it's possible that competition itself. Is off that we're sort of...
Sam It's not just the case that we don't understand this monopoly competition d dichotomy intellectually. So there's sort been talking about why you wouldn't understand it intellectually because people lie about it. It's distorted. We've all these the history of innovation, rationalize what's happened in all these very, very strange ways. But I think it's more than just an intellectual blind spot.
Sam I think it's also a psychological blind spot where we find ourselves in very, very attracted to competition in 1 form or another. We find it reassuring if other people do things the word 8 already in the time of Shakespeare meant both primate and imitate, and there is something about human nature that's deeply mime, imitate, ape like, sheep like, lemon like c like, and it's this very, very problematic thing that we need to always think through and try to overcome. And there is always this question about competition as a form of validation where we go for things that lots of other people are going for. And it's not there is wisdom and crowds. It's not when lots of people are trying to do something, that that's proof of it being valuable.
Sam I think it's when lots of people are trying to do something, that that is often that is often proof of insanity. Are there are 20000 people a year who move to Los Angeles to become movie stars, about 20 of them make it. I think the Olympics are a little bit better because you have a, you can sort of figure out pretty quickly whether you're good or not. So it's there's a little bit less... Of a dead weight loss to society.
Sam You know, you know, you're you're the sort of educational experience at a place the the pre stanford educational experience, there's always sort of a non competitive characterization. I think most of the people in this room had machine guns. That were competing with people with bows and arrows. So it wasn't exactly a parallel competition when you were in junior high school in high school. There's always a question.
Sam Does the tournament make sense as you keep going. And this is And so there is always this question if people go on to grad school or post post doctor education, does the intensity the competition really makes sense. There's the... The classic Henry Kissing line that describing his fellow faculty at Harvard that the The battles were so ferocious because the stakes were so small, sc sort of academia. And you sort of think on 1 level, this is a description of insanity, you know, why would people fight like crazy when the stakes are so small, but it's also I think simply a function of the logic of the situation?
Sam When it's really hard to differentiate yourself from other people. When the differences are... When the objective differences really are small, then you have to compete ferocious to maintain a difference of 1 sort or another that's often more imaginary than real. There's always sort of the personal version of this that I I tell where I was sort of a hyper hyper tracked. I...
Sam You know, my eighth grade junior high school year book when my friends wrote it, you know, I know we'll get into Stanford in 4 years as as a sophomore, sort of when does go into Stanford 4 years later, then end of high school went to Stanford law school, ended up at a big law firm in New York where from the outside everybody wanted to get in on the inside, everybody wanted to leave, And and you had... And it was this very strange dynamic where after I sort of realized this was maybe not the best idea. And Left after 7 months and 3 days. You know, 1 of the people down the hall from me told me, it's really reassuring see Leave Peter, I had no idea that it was possible to escape from a alcatraz, which, of course, all you had to do was go out the front door and not come back. To But so much of people's identities got wrapped up in winning these competitions.
Sam That they somehow lost sight of what was important what was valuable. You know, competition does make you better at whatever it is that you're competing on, because when you're competing, you're comparing yourself with the people around you, you're figuring out how do I beat the people next to me, how do I do somewhat better? At whatever it is they're doing. And you will get better at that thing. I'm not I'm not questioning that.
Sam