The most important task in business – as well as our lives – is the creation of real value. And in order to create real value, we have to do new things.
GREATNESS ISN’T BORN FROM “BUSINESS AS USUAL”
What works today isn’t going to work tomorrow. And merely subscribing to the mimicry of models means you’ll never be any better than lockstep or one step behind. And never once will you have the opportunity to carve out anything more, in terms of value.
Today’s best practices lead to dead ends.
Peter Thiel argues, in Zero to One, that “unless they invest in the difficult task of creating new things, companies will fail in the future no matter how big their profits remain today.” And “if you are copying these guys, you aren’t learning from them.”
Why? Because “equilibrium means stasis, and stasis means death.”
So “if you want to create and capture lasting value, don’t build an undifferentiated commodity business.”
OUR MASTERY OF MEDIOCRITY
It starts in school.
From middle school through college, we’re encouraged to hoard extracurriculars and pursue comprehension in all fields deemed worthy, otherwise positioning ourselves as “well-rounded.” And as people who “play well with others.”
A definite view, by contrast, favors firm convictions. Instead of pursuing many-sided mediocrity and calling it well-roundedness, “a definite person determines the one best thing to do and then does it.”
“Elite students climb confidently until they reach a level of competition sufficiently intense to beat their dreams out of them.” (Like the Peter Principle) “Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. For the privilege of being turned into conformists, student (or their families) pay hundreds of thousands of dollars in skyrocketing tuition that continues to outpace inflation.” (Thiel)
“To an indefinite optimist, the future will be better, but he doesn’t know how exactly, so he won’t make any specific plans. He expects to profit from the future but sees no reason to design it correctly.”
Indefinite optimists are those that are optimistic about the future but uncertain when or how it will improve, as opposed to definite optimists (who know when and how), indefinite pessimists or definite pessimists. Thiel argues that this is the current mindset of the United States since the early 80’s.
Thiel clarifies: “Instead of working for years to build a new product, indefinite optimists rearrange already-invented ones. Bankers make money by rearranging the capital structures of already existing companies… private equity investors and management consultants don’t start new businesses; they squeeze extra efficiency from the old ones with incessant procedural optimizations.”
But why, then, do we reward individuals in these roles so much?
MONEY MAKES MONEY
Short of having your own good idea, you can always piggy-back on someone else’s. You’ll never make the returns of those doing the real pioneering on the ground, at the forefront, but you can ride their coattails with financial models. “Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.”
Harsh – especially for those of us who earned degrees in finance and who regard the field as “the creation of value.” And yet, certainly true.
Companies are the root of the actual value. The value – and markets – that they create are the bedrock, and the cash generated by this is almost as a byproduct, that then supports the financial markets, such as investment and banking. “At no point does anyone in the chain know what to do with money in the real economy.”
Now, this is obviously an extreme viewpoint, in which the relationship is symbiotic and one player is a parasite. In reality there is a bit more interdependency – many startups will use debt or equity to get going. Even those that bootstrap depend on personal finance or basic financial measures to exist.
This doesn’t change the fact, however, that one of these bodies needs the other a bit more than the other needs it.
HOW TO, STEP ONE: DEFINE “THE WHAT”
The most important question we can first ask is:
“What important truth do very few people agree with you?”
And with that:
“What valuable company is nobody building?”
The best problems to work on are often the ones nobody else even tries to solve.
“As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell, especially in an already crowded market.”
Well, ten is certainly arbitrary (Thiel certainly doesn’t back the measure with any measurable statistics), but I get what he’s saying, and I think you can too.
HOW TO, STEP TWO: FIND YOUR “WHO”
Who’s the right fit for pursuing real value, either in terms of founders or initial hires?
In short: the outliers.
And what this looks like? Passion. Real passion. Relentless passion. Blind passion. Unapologetic passion.
If we subscribe to the “mediocrity models,” it also means that we subscribe to particular viewpoint of “work.” That being: we love to hate it.
But it’s not healthy. Work shouldn’t be something we dread, and nobody benefits from these badges of glory on the sort of things around which we build our “work rapport:” a “case of the Mondays” or our “thank goodness it’s Friday” or whatever else. And even when we’re burning the midnight oil, it’s so often done… begrudgingly. Not for the love of the product, but in hopes of a promotion.
“Is a lukewarm attitude to one’s work a sign of mental health? Is a merely professional attitude the only sane approach?”
The extreme opposite of the love most startup teams share is “a consulting firm like Accenture: not only does it lack a distinctive mission of its own, but individual consultants are regularly dropping in and out of companies to which they have no long-term connection whatsoever.”
So, who then?
The passionate. And the courageous.