9 Highlights from Peter Thiel’s Startup Class Notes

I spent 4 hours reading through Blake Master’s notes from Peter Thiel’s startup class.

First, HUGE thanks to Blake for writing such detailed and thoughtful notes. After reading them, I *almost* felt like I was in the class, and I learned a TON in a short period of time.

In the spirit of being more mindful about what I consume & learn, here are some of my biggest takeaways:

1. True innovation is going from 0 to 1, not 1 to n. Google’s search technology was a 0 to 1 problem. They had to create something completely new, with relatively few precedents or comparables. The numerous Groupon clones are solving 1 to n problems, since the core product innovation has been accomplished.

Maybe we focus so much on going from 1 to n because that’s easier to do. There’s little doubt that going from 0 to 1 is qualitatively different, and almost always harder, than copying something n times. And even trying to achieve vertical, 0 to 1 progress presents the challenge of exceptionalism; any founder or inventor doing something new must wonder: am I sane? Or am I crazy?

Anyone on a mission tends to want to go from 0 to 1. You can only do that if you’re surrounded by others to want to go from 0 to 1.

2. Great companies create meaningful value that lasts, and they (ideally) capture a lot of that value.

Great companies do three things. First, they create value. Second, they are lasting or permanent in a meaningful way. Finally, they capture at least some of the value they create.

Consider great tech companies. Most have one decisive advantage—such as economies of scale or uniquely low production costs—that make them at least monopoly-esque in some important way. A drug company, for instance, might secure patent protection for a certain drug, thus enabling it to charge more than its costs of production. The really valuable businesses are monopoly businesses. They are the last movers who create value that can be sustained over time instead of being eroded away by competitive forces.

3. Start with a small, or new, market; dominate it; then expand to adjacent markets and grow larger over time

First, you want to find, create, or discover a new market. Second, you monopolize that market. Then you figure out how to expand that monopoly over time.

Markets that are too big are bad for all the reasons discussed above; it’s hard to get a handle on them and they are usually too competitive to make money.

The best kind of business is thus one where you can tell a compelling story about the future. The stories will all be different, but they take the same form: find a small target market, become the best in the world at serving it, take over immediately adjacent markets, widen the aperture of what you’re doing, and capture more and more. Once the operation is quite large, some combination of network effects, technology, scale advantages, or even brand should make it very hard for others to follow. That is the recipe for building valuable businesses.

4. Founders, and founding moments, are crucial to a company’s long-term success

The insight that foundings are crucial is what is behind the Founders Fund name. Founders and founding moments are very important in determining what comes next for a given business. If you focus on the founding and get it right, you have a chance. If you don’t, you’ll be lucky at best, and probably not even that.

The ideal is the combination of high trust people with a structure that provides a high degree of alignment. People trust each other and together create a good culture. But there’s good structure to it, too. People are rowing in the same direction, and not by accident.

5. Power law dynamics and exponential things are more common, and more powerful, than we think. For VCs to make money, a single investment must return the fund. Remember this when you’re pitching!!

If you look at Founders Fund’s 2005 fund, the best investment ended up being worth about as much as all the rest combined. And the investment in the second best company was about as valuable as number three through the rest. This same dynamic generally held true throughout the fund. This is the power law distribution in practice. To a first approximation, a VC portfolio will only make money if your best company investment ends up being worth more than your whole fund.

Despite being rooted in middle school math, exponential thinking is hard. We live in a world where we normally don’t experience anything exponentially. Our general life experience is pretty linear. We vastly underestimate exponential things. If you backtest Founders Fund’s portfolios, one heuristic that’s worked shockingly well is that you should always exercise your pro rata participation rights whenever a smart VC was leading a portfolio company’s up round. Conversely, the test showed that you should never increase your investment on a flat or down round.

6. Distribution is vastly underestimated among startup success factors. Build it and they will not come. CLV > CAC

But for whatever reason, people do not get distribution. They tend to overlook it. It is the single topic whose importance people understand least. Even if you have an incredibly fantastic product, you still have to get it out to people. The engineering bias blinds people to this simple fact. The conventional thinking is that great products sell themselves; if you have great product, it will inevitably reach consumers. But nothing is further from the truth.

It is very likely that one channel is optimal. Most businesses actually get zero distribution channels to work. Poor distribution—not product—is the number one cause of failure. If you can get even a single distribution channel to work, you have great business. If you try for several but don’t nail one, you’re finished.

Distribution isn’t just about getting your product to users. It’s also about selling your company to employees and investors. The familiar anti-distribution theory is: the product is so good it sells itself. That, again, is simply wrong.

7. What’s your secret?

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

What great company is no one starting?

The focus should be on the secrets that matter: the big secrets that are true.

8. Are you a pessimist or optimist? Do you view the world as determinate or indeterminate? SUCH a powerful framework…

If you believe that the future is fundamentally indeterminate, you would stress diversification. This is true whether you’re optimistic or pessimistic. And indeed, chasing optionality seems to be what most everybody does. People go to junior high and then high school. They do all sorts of activities and join lots of clubs along the way. They basically spend 10 years building a diverse resume. They are preparing for a completely unknowable future. Whatever winds up happening, the diversely prepared can find something in their resume to build on.

In a strange way, China falls squarely in the determinate pessimistic quadrant. It is the opposite of the U.S.’s optimistic indeterminacy.

But the indeterminate future is somehow one in which probability and statistics are the dominant modality for making sense of the world. Bell curves and random walks define what the future is going to look like. The standard pedagogical argument is that high schools should get rid of calculus and replace it with statistics, which is really important and actually useful. There has been a powerful shift toward the idea that statistical ways of thinking are going to drive the future.

9. Great people throughout history have been both extreme insiders and extreme outsiders. Things go great (ie, you’re the King) until they don’t (ie, you get killed). Some analogues with startup founders

The dynamic might work like this. People start out being different. They are nurtured to develop their already somewhat extreme traits. Those traits become more important, and they learn to exaggerate them. Others perceive that inflated importance and exaggerate in turn. The founders thus end up being even more different than they were before. And we cycle and repeat.

And we’ll end with a powerful excerpt from Abe Lincoln:

The question then is, Can that gratification be found in supporting and maintaining an edifice that has been erected by others? Most certainly it cannot. Many great and good men, sufficiently qualified for any task they should undertake, may ever be found whose ambition would aspire to nothing beyond a seat in Congress, a gubernatorial or a presidential chair; but such belong not to the family of the lion or the tribe of the eagle. What! think you these places would satisfy an Alexander, a Caesar, or a Napoleon? Never! Towering genius disdains a beaten path. It seeks regions hitherto unexplored. It sees no distinction in adding story to story upon the monuments of fame erected to the memory of others. It denies that it is glory enough to serve under any chief. It scorns to tread in the footsteps of any predecessor, however illustrious. It thirsts and burns for distinction; and if possible, it will have it, whether at the expense of emancipating slaves or enslaving freemen. Is it unreasonable, then, to expect that some man possessed of the loftiest genius, coupled with ambition sufficient to push it to its utmost stretch, will at some time spring up among us?

Hope you enjoyed these snippets. Read the full notes on Blake’s site.

The Good Life: Lessons from Rick Warren’s The Purpose-Driven Life

The Purpose-Driven Life
The Purpose-Driven Life

Too lazy, don’t want to read: download my 3-page PDF guide to Rick Warren’s The Purpose-Driven Life.

I’m trying something new, so bear with me :)

I’ve had to work hard for good grades and good jobs, endure pain to become and stay healthy, and experience heartbreak and disappointment in the search for love and loyal friends.

But none of these struggles comes close to the challenge of finding a deep-rooted sense of purpose and meaning in my life.

In particular, each time I make more money or hit a new career milestone, I feel more emptiness, not less.

If these things don’t give me a sense of purpose, meaning, and fulfillment, then what the hell is it all for?

I admire people that continue to fight the good fight day in and day out, who invest sweat, tears, and risk their own reputations to make a big dent on the world.

People like Mother Teresa or MLK Jr. or Mahatma Gandhi. And millions who are unknown and unappreciated. Those who have gone FAR BEYOND the pursuit of simple, material goals into the realm of legacy. Those who are true believers, working on true problems, investing their entire lives to do so. I would love to join their ranks.

That’s what I plan to explore in 2013. As a first step, I will read a TON of great books, from religious texts (like The Bible) to major philosophical works (like Nietzsche’s The Will to Power) to canonical Western literature (like Paradise Lost).

From these books, I’ll share insights, conclusions, and questions from history’s greatest thinkers and doers on finding purpose, meaning, and fulfillment. My goal is to provide some answers, and probably more questions, to living what Aristotle calls “eudemonia”, or simply, “the good life”.

Here is my first “Good Life” guide, from Rick Warren’s The Purpose-Driven Life, one of the greatest spiritual self-help books of all time (30mm copies sold since 2007!). Please note, I am not Christian, but I believe there is an ENORMOUS amount that we can learn from religious texts and thinkers.

It’s a 3-page PDF, free to download and share. Here’s the link to view it as a read-only Google Doc (for some reason, “Download as PDF” did not preserve the images’ quality). In it, I cover the following topics:

  • Why I chose this book
  • The book’s main themes and takeaways
  • Important life lessons that can be pulled from it
  • How I plan to apply these lessons to my life
  • Questions for you to ponder
  • Random related and unrelated (but inspirational) readings

As this is my first “Good Life” guide, I humbly ask for any and all feedback, advice, thoughts. I plan to write a LOT of these – I need your help to make them the best resources they can be.

Thanks and enjoy!

PS. Here are some great quotes from the book (as I mentioned before, I’m a huge fan of quotes):

Right now you may be driven by a problem, a pressure, or a deadline. You may be driven by a painful memory, a haunting fear, or an unconscious belief. There are hundreds of circumstances, values, and emotions that can drive your life.

Possessions only provide temporary happiness. Because things do not change, we eventually become bored with them and then want a newer, bigger, better version.

The most common myth about money is that having more will make me more secure. It won’t. Wealth can be lost instantly through a variety of uncontrollable factors.

Hope is as essential to your life as air and water. You need hope to cope. Dr. Bernie Siegel found he could predict which of his cancer patients would go into remission by asking, “Do you want to live to be one hundred?” Those with a deep sense of life purpose answered yes and were the ones most likely to survive. Hope comes from having a purpose.

Henry David Thoreau observed that people live lives of “quiet desperation,” but today a better description is aimless distraction.

Stop trying to do it all. Do less. Prune away even good activities and do only what matters most.

When you live in light of eternity, your values change. You use your time and money more wisely. You place a higher premium on relationships and character instead of fame or wealth or achievements or even fun.

The most damaging aspect of contemporary living is short-term thinking. To make the most of your life, you must keep the vision of eternity continually in your mind and the value of it in your heart.

When you understand that life is a test, you realize that nothing is insignificant in your life. Even the smallest incident has significance for your character development. Every day is an important day, and every second is a growth opportunity to deepen your character, to develop your love, or to depend on God.

First, compared with eternity, life is extremely brief. Second, earth is only a temporary residence. You won’t be here long, so don’t get too attached.

Where is the glory of God? Just look around. Everything created by God reflects his glory in some way. We see it everywhere, from the most microscopic form of life to the vast Milky Way, from sunsets and stars to storms and seasons. Creation reveals our Creator’s glory. You can learn a lot about God’s character just by looking around. Through nature we learn that God is powerful, that he enjoys variety, loves beauty, is organized, and is wise and creative.

David DeAngelo’s 77 Laws of Success (and 13 that I bolded)

David DeAngelo is a well-known dating guru who was at the forefront of the recent pickup artist (PUA) craze.

He has this program called 77 laws of success with women & dating which I heard about from a friend, and so being a huge fan of life advice lists, I did some Googling and found an (almost) complete set of David’s 77 laws. So with special thanks to ebookee.com and its anonymous contributor, here are the ones I found bold-worthy.

4. Evict your inner Wussy

8. Failure is a made up thing, don’t apply meaning to failure

10. Evolve constantly and consciously – always seek the next level

14. Stop giving approval to get it

19. Travel – if you’re not regularly leaving your bubble you are limiting yourself

24. Never whine or complain

30. Prove to yourself over and over that you can cope with “rejection”

34. Develop your awareness – notice everything you see

36. Become unbelievably honest and direct when you need to

57. Learn how to tell an interesting story about anything

66. Engage her emotions and her body, not so much her mind

68. Convince yourself that what is going to happen is going to be unbelievably fun and convince her of it

72. Always have 3 female friends around you who are similar to the ones you’d like to meet

10 of my favorite quotes

I put together this page to share the best quotes/parables/anecdotes/stories/movie-one-liners I’ve collected since I began collecting such things.

Here are 10 of my favorites.

On leadership:

If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.– Antoine de Saint-Exupéry

On travel:

I’m just going to walk the earth. …You know, like Caine in Kung Fu. Walk from place to place, meet people, get in adventures. – Jules in Pulp Fiction

On great fathers:

My father. He used to… He used to have a barbecue every Sunday after church. For anybody in the neighborhood. If you didn’t go to church, you didn’t get any barbecue. – Dom in Fast Five

On humanity:

Society tames the wolf into a dog. And man is the most domesticated animal of all.– Nietzsche

On wisdom:

By three methods we may learn wisdom: first, by reflection, which is noblest; second, by imitation, which is easiest; and third, by experience, which is the most bitter. – Confucius

On love:

Charlie Kaufman: But she thought you were pathetic.
Donald Kaufman: That was her business, not mine. You are what you love, not what loves you.
(scene from Adaptation)

On writing:

People ask me why I write. I write to find out what I know.

On hard work:

If you have two choices, choose the harder. If you’re trying to decide whether to go out running or sit home and watch TV, go running. Probably the reason this trick works so well is that when you have two choices and one is harder, the only reason you’re even considering the other is laziness. – Paul Graham

On life choices:

All we have to decide is what to do with the time that is given to us. – Gandalf

On youth:

Two young salmon are swimming along one day. As they do, they are passed by a wiser, older fish coming the other way.
The wiser fish greets the two as he passes, saying, “Morning boys, how’s the water?”
The other two continue to swim in silence for a little while, until the first one turns to the other and asks, “What the hell is water?”
– From David Foster Wallace’s 2005 Commencement Speech at Kenyon

DiSSS and CaFE: Tim Ferriss’ approach to quick mastery of any topic

DiSSS and CaFE are Tim Ferriss’ frameworks for mastering new information-based topics. In particular, he applies them to foreign languages and in 4-Hour Chef, to the mastery of cooking.

Mostly personal notes but I Googled and couldn’t even find a basic description of DiSSS and CaFE, so here it is!


1. D for Deconstruction. What is the minimum useful unit of knowledge? For a foreign language, it would be a word

2. S for Selection. What 20% of those minimum units will lead to 80% of your desired outcomes? For cooking, it would be basic knife handling skills so you can cut, chop, filet, mince, and do whatever to your heart’s delight (my guess since I suck at cooking).

3. S for Sequencing. What’s the most effective order for learning these units? For cooking, Tim tells the story of how most cookbooks have the wrong sequence for beginners, since what newbie really wants to cook 6 chicken dishes in a row?

4. S for Stakes. What psychological and social mechanisms can you setup for discipline and motivation? For example, you could publicly announce your goal and a deadline, and have your friends keep you accountable (from what I’ve read, this seems effective for losing weight). You could set a calendar reminder to spend 30 minutes each morning before work, and reward yourself with a piece of chocolate (lol, yes…that’s a lame reward).


1. C for Compression. Can I compress the most important 20% into an awesome cheatsheet?

2. F for Frequency.  What is the best duration and frequency, knowing my personal limits and goals? Setup a SCHEDULE. If you’re a slow learner, 5 minutes/day won’t do shit since you’ll barely warm up your brain before time’s up.

3. E for Encoding. How do I create mental anchors & tricks to make sure I remember stuff? CaFE and DiSSS are great examples :)

Thanks Tim, for an awesome book. Only 15% of the way through but appreciate the hard work and beautiful product!