“If you’re starting a company, you always want to aim for a monopoly and avoid competition. Hence, competition is for Losers.” – Peter Thiel
Who the Hell Are You Calling a Loser?
In a famous Y Combinator master class, Peter Theil founder of Paypal and Palantir, presented his famous business strategy that requires founders to position their growth for a monopoly of the industry.
‘Competition is for losers’ is one of his mantras. ‘Monopoly is the condition of every successful business’ is another. It is the ultimate test of entrepreneurship to build something that is one of a kind, sufficiently different from what already exists to render the idea of competition redundant.
In this article, we’ll cover how Peter approaches new markets and how to create a monopoly. But first, here’s a brief background on Thiel and why you should even care what he has to say in the first place…
Who the Hell is Peter Thiel?
You could say he knows a thing or two about the tech space. Peter Andreas Thiel is a German-American billionaire entrepreneur and venture capitalist. A co-founder of PayPal, CIA-based Palantir Technologies, and Founders Fund.
He was also the first outside investor in some of the biggest unicorns in silicon valley including Facebook, Stripe and Space X.
His companies and investments have earned him a net worth of $5 billion. He also gives a small number of entrepreneurs $100k over two years to skip college and build their own companies.
You can watch his talk at Y Combinator. Or read the summary below…
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So How Do You Enter a Crowded Market? Don’t…
As Peter explains, especially to tech founders, companies need to be very careful about what markets they enter and especially how they differentiate themselves as not better, but something entirely different when approaching markets of high competition.
Similar to the Blue Ocean Strategy, Theil explains that if you’re entering into a crowded market it’s very difficult (and often expensive) to gain the attention needed to build effective brand awareness. Especially if you offer similar product or service…
Success in saturated markets requires a lot of money to advertise, dramatically lowering your margins and ability to win. This has also been dubbed, the start-up graveyard.
Evaluate the Cost Trap of Entering Saturated Markets
The only way to enter saturated markets with established larger brands (with way more money than you) is to make a product or service completely better and different than everyone else on the market.
But doing so is way easier said than done. That’s where the case for chasing emerging market trends pays off. Emerging companies (especially tech), should forget fitting into existing markets and instead pursue entirely new and emerging potential markets. Even if it’s risky.
Here’s why…
When entering markets with less or no competition, you have a greater chance of success and it’s far easier and more cost effective to acquire the attention you need to scale. Simply because you’re one of a few players in the space.
Even if you launch in an emerging market with an average or similar product at the beginning, you will have more time and opportunity to develop and perfect your average product and service while you’re building your audience and future customer base.
In fact, if you think about it, that’s exactly how most successful tech companies have been able to scale so fast as early stage market players. They rode the wave of the trend and captured all the early attention establishing their future industry dominance.
Conclusion:
Facebook wasn’t the first social network site, Google wasn’t the first search engine, Microsoft wasn’t the first OS company or Apple wasn’t the first computer company. But they were early in the market, they caught the trend and they executed better than everyone else. And when market reached its full potential they became big brands or monopolies.
That’s what Peter Thiel meant by “competition is for losers”…
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