Luck vs the Definite Future [Peter Thiel]

Audio source: https://www.listennotes.com/podcasts/the-intellectual/peter-thiel-different-t5016qW_GCo/#1

Transcript

[00:00:00] swyx: [00:00:00] I always enjoy Peter Thiel's non-consensus takes on everything. And in the age where we have everyone thinking in probabilities,  Annie Duke is making books where it's talking about thinking in bets. 

[00:00:10] Peter Thiel was making a very strong argument for investing in founders who just have a strong belief in the definite future of the world. These are the people that are likely to stay with it and make for the big bets rather than the professional CEOs. So here's a clip:

[00:00:25] Peter Thiel: [00:00:25] I think the internal story in these businesses is one that's strikingly, not one about, Oh, we're going to take crazy risks or anything like this. It's one where it's destined to succeed. It's going to happen. As a venture capitalist, you always want to invest in the ones where they speak indefinite, future tense. Something you have to sometimes be careful. They're not totally crazy people but  that's the sort of person you want to invest in.

[00:00:48] And you do not want to invest in people  who are talking too much about probabilities or risks or things like that. Because my experience has been that the people who think they're involved in some sort of lottery ticket, like dynamic are already setting themselves up to somehow get the probabilities wrong and invariably lose.

[00:01:06] And there's a similar version of this that I experienced as an investor. There's always this very tricky question of what the role of luck and chance is in these things working. And there's there certainly is this external.

[00:01:16]Truth perspective that there is a certain amount of luck that's built into the nature of the universe. And you try to model it. You try to get the probabilities right. And so that when people say that luck is involved, this is a statement about the deep nature of our universe.

[00:01:32] And then there is the internal truth version where whenever we've thought that it's a matter of luck psychologically, I can say this has often been a very bad sign where  you say we don't know if this is going to work. Maybe it works. Maybe it doesn't. So let's just invest a slightly smaller amount to just for our lack of knowledge.

[00:01:50] And as a pattern, I would say those are investments that have generally gone very badly wrong and has explained why. It's something like when you think you're multiplying a small probability by a big payoff, you psych yourself into playing the lottery and you psych yourself into losing because you somehow are being sloppy and not doing that much work.

[00:02:09] And so the external account of luck is that something about the nature of reality, the internal account of it is that you talk about luck when you're too lazy to think for yourself. And that you start talking about luck when you're too lazy to think through the various contingencies and try to make sense of what happens. And so that it's a moral failing and not a metaphysical statement about reality. 

[00:02:30] I think the much larger narrative has been one where the word some very powerful, definite visions of the future that animated the founders and the Facebook version.  It's hard to do this in retrospect, but even very early on, there were all these discussions of how unbelievably important this company was going to be. And they had to be very careful who would control it because it was going to change the media landscape in all these sorts of ways. And there are ways in which this sort of internal view of.

[00:03:00]The determination of human agency, us being able to determine the future. If we set our minds to, it gets you to a very different set of outcomes from the external view, that it's all a matter of contingencies and chance. The most important single moment in the history of Facebook in my mind was in July of 2006, we were about two years into the company's history and we received a $1 billion acquisition offer from Yahoo.

[00:03:24]The company had about 40 million in revenues, no profits. It was just a college site. I think the management team was a little bit nervous about the 22 year old CEO they had generally And there are three of us on the board, myself and other venture capitalists, Mark Zuckerberg. And and I think in fairness, the two of us probably thought that we should take the billion dollars Zuckerberg sort of started the board meeting and it started with , it'll just going to take 10 minutes when you just have a quick formal board meeting to turn this down. And  I said we should probably talk about it a little bit more. And then we had a six hour long discussion about the pros and cons of doing it. And it was like Mark, you're 22 years old, you on a quarter of the company.

[00:04:01] You'd make a quarter of a billion dollars. There are many things you could do with this money. This is the indeterminate account of the future. Money is always the ultimate value because it's pure optionality. You have more options with money than with anything else.

[00:04:13] And so you should always take the cash on some level. And then Zuckerberg was I don't really know what I would do with a quarter of a billion dollars. I guess I would start another social networking site, but since I like the one I already have, why would I sell it? And went back and forth like this. I think the key point that that Mark made that that did at the end of the day, convinced us  to not sell it was, there were a whole series of specific products that the company was going to be launching in the next six months.

[00:04:40] They were clearly not being valued. By the would-be acquirer and we thought, we probably were safe waiting and th they wouldn't go away that that soon. And we could go ahead and do this. And I do think that  there are many challenges with having the founders of these companies continue to manage them as CEOs in the years ahead, that there's all sorts of things that do not [00:05:00] understand that. They're often young immature. There are a lot of things that go wrong, but but the one, one big difference is they actually do believe in the thing they're working on.

[00:05:09] And if we had. If we had hired a professional CEO at Facebook early on maybe they would have done everything better. Except for this one thing, they would have sold the company for a billion dollars. And the conversation that Monday would have gone something like, I can't believe they're offering us a billion dollars.

[00:05:25] I'm going to have to make sure that we don't pretend to be too eager to take it. But obviously, we've been like a litany of discussions about all the risks the company had so as to scare the board and make it really certain that we would sell the business and in one way or another.