Watch the video for homework. Then discuss the following questions in class.
How does Thiel distinguish between creating value (X) and capturing value (Y), and why does he argue that these are independent variables? (This gets at the foundational formula for what makes a business valuable, with examples like airlines vs. Google.)
Thiel claims there are essentially only two kinds of businesses: perfectly competitive ones and monopolies, with very little in between. What evidence from the lecture supports this binary view, and how do the “lies” people tell about their markets distort our perception?
Why does Thiel use restaurants as a prime example of a perfectly competitive, low-profit industry, and how does the “British food in Palo Alto” narrative illustrate the flawed way people try to differentiate in hyper-competitive spaces?
Google is often accused of having a monopoly in search, yet it describes itself as part of much larger markets (advertising, technology, etc.). According to Thiel, why do monopolies pretend to be in competitive markets, and what incentives drive this behavior?
Thiel advises startups to start with small markets to achieve monopoly status quickly, then expand concentrically. How do examples like PayPal (power sellers on eBay), Facebook (Harvard students), Amazon (books), and eBay (Pez dispensers/Beanie Babies) demonstrate this counterintuitive strategy?
What are the four characteristics Thiel identifies that help create and sustain monopolies (proprietary technology, network effects, economies of scale, and branding), and how do most of them have a time dimension that contributes to long-term durability?
Thiel emphasizes being the “last mover” rather than the first mover. Why is durability more important than raw growth rate in valuing tech companies, and how does his PayPal discounted cash flow example from 2001 illustrate this?
In discussing the history of innovation, Thiel argues that many breakthroughs (in science, railroads, early aviation, etc.) created massive societal value (high X) but captured almost none (Y ≈ 0%). What two broad categories does he identify where people actually captured significant value, and why does he highlight software and vertical integration (e.g., Tesla/SpaceX) as particularly powerful?
Thiel critiques competition not just economically but psychologically and culturally — calling it a form of mimetic validation, imitation, and even insanity (e.g., Hollywood aspiring actors, intense academic rivalries, or prestige tracks like law firms). How does he connect this to broader human tendencies, and what personal anecdote from his own career does he use to illustrate the trap?
Thiel expresses skepticism toward lean startup methodology, iteration, and heavy customer feedback, suggesting great companies often make quantum leaps without surveys. How does this view contrast with popular startup advice, and what does it imply for how founders should approach risk, inspiration, and building something truly differentiated?
