STRATEGIES

GLOBILIZATION AND TECHNOLOGY

1. Performance-improving innovations that replace old products with new and better models.

2. Efficiency innovations that help companies make and sell established products or services to the same customers at lower prices.

3. Market-creating innovations that “transform complicated or costly products so radically that they create a new class of consumers, or a new market.

A recurring theme in all of Thiel's interviews and writings is globalization vs. technology. The key to success is to be different. Whereas there are multiple companies out there that may offer the same or similar services, another emerging player would not change the world, just add to the competition. That's globalization. Technology, on the other hand, requires creativity and the creation of a new market.

In The Capitalist's Dilemna, scholar and business consultant Clayton Christensen outlines

three possible types of innovation:

Thiel agrees that market-creating innovations are the way to

go and aims to fund such promising companies. By creating a new

market, companies are not going from 1 to n, but 0 to 1, as outlined in his

best-selling book, Zero to One.

FOUR RULES

The first rule to creating a successful company is to build proprietary technology that is 10x better than the market already offers. Because capitalism and competition is always in conflict, an entrepreneur's goal is to create a monopoly and a completely new market. While difficult to accomplish, this rule is imperative for a business to create value.

People use Microsoft Word because it it the most common word processing software, Paypal because it is the standard for transferring money, and Facebook because everyone else you connect to uses it. These are examples of network effects. Thiel advises to aim for small markets at first and avoid all competition. As more people uses a product or service, the value of the business skyrockets.

As a company grows, the value of the business increases with each lasting customer. One starts with a market too small to attract competitio but grows to be a high margin business that is invulnerable. It all has to do economies of scale.

All of the top companies are instantly recognizable. Apple is renowned for their quality computing products. Walmart promises and delivers low prices. Amazon is a huge online marketplace for anyone to buy virtually anything. A brand is a promise. They define a company. And that is why although it is an often overlooked aspect, brands are still crucial to the success of a business.

Rule #1:

Build Proprietary Technology

Rule #2:

Look for Network Effects

Rule #4:

Build a Strong Brand

Rule #3:

Create Economies of Scale

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CONTINUE TO ZERO TO ONE