Competition is for Losers with Peter Thiel (How to Start a Startup 2014: 5)

TL;DR

Peter Thiel argues that the central goal for a startup should be to build a monopoly and avoid competition, because competition destroys profits. Value creation (X) and value capture (Y%) are independent; many valuable innovations (e.g., scientific discoveries, airlines) fail to capture value, while monopolies like Google capture a high Y% from a smaller market.

Key insights

• A valuable company creates X dollars of value for the world and captures Y% of X; X and Y are completely independent variables.
• The US airline industry (195B revenue) has near-zero cumulative profit over 100 years, while Google (50B revenue) is vastly more valuable because it captures a high Y%.
• There are exactly two kinds of businesses: perfectly competitive (no profits) and monopolies (stable, high profits); everything in between is rare, and people lie about which category they are in.