Eleven Lessons
I learned about this book at Tim Ferriss' podcast, and was struck by, as a billionaire, founder of Paypal and Palantir, and founding investor in Facebook and LinkedIn, how both understated and credible Peter Thiel is. I thought to myself, here is a man who sees the big picture and understands how the world really works. I recognized how, by putting his thoughts between two covers of a book in plain language to share freely with whoever is inclined to pay attention, he had given an incredibly generous gift to the world. Clearly, it is not just another book.
I got it quickly and devoured it eagerly. After the first reading, I decided to go back and read it again, this time taking careful notes. From these notes, here are the eleven lessons I learned:
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Definite vs. Indefinite Optimism. For me, the most striking lesson was how, since 1982, the year after I graduated from high school – my entire adult working life – our nation's culture has been characterized by Indefinite Optimism.
Indefinite Optimism is a vacuous, anxious state of cognitive dissonance that says, “It'll all work out, but I'm not sure how. I smile on the future, but I'm not sure why.” It's a radical departure from the Definite Optimism that preceded it, and had prevailed since the end of World War II, when the Greatest Generation laid the foundations and built the infrastructure that so many of us now take for granted. (Last July I got so fed up with Indefinite Optimism that I wrote a poem about it.)
Beginning in Chapter 6, "You Are Not a Lottery Ticket", Thiel breaks it all down for us. He shows how across time, space, and influential thinkers, the problem of Indefinite Optimism has seized us, and how among the four possible combinations (Definite Pessimism, Indefinite Pessimism, Definite Optimism, and Indefinite Optimism), it is the only one that does not work. This was hugely instructive and consoling for me, because I am, and have always been, a Definite Optimist.
At Making End$ Meet, I offer a planning method that is definite. Much to my surprise, people do not line up to accept my offer like they'd line up to buy season tickets at an amusement park, a sporting event, or to shop on Black Friday.
I think what I'm offering is awesome. I've been told it's what everybody needs. But if that is so, I have asked myself, why aren't they lining up to get it? What's wrong? What is going on?
I used to blame myself, supposing I was doing a bad job of marketing or something. But now, reading Thiel's book has helped me see the real challenge: there's a basic mismatch going on. I am a Definite Optimist offering Definite Optimism to an Indefinitely Optimistic market.
It's like offering broccoli to a chocolate market. I may be offering the market what it needs; but because it's not used to being Definitely Optimistic, I'm not offering what it wants - yet.
So what? Should I throw in the towel and go into the Indefinite Optimism business? Stop selling broccoli and start selling chocolate?
No. Thiel validated and vindicated me, encouraging me to stay the course. He affirmed that while I may not be trying to do the popular thing, I am trying to do the right thing, and that if I persist, I'll succeed. As long as the culture remains Indefinitely Optimistic, my offer will be a tough sell . . . but it's still the right sell.
In my own Marketing Plan, understanding the Definite/Indefinite Optimist distinction has helped me sharpen my Target Market. Owing to cultural inertia, for the time being Indefinite Optimists outnumber Definite Optimists. But I'm confident that there are enough Definite Optimists to keep me busy. I just need to accept the difference, and focus on those who appreciate being definite. Meanwhile, since Indefinite Optimism doesn't really work and Definite Optimism does, I can rest in the assurance that over time, my Target Market will grow. That's really good to know.
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Thiel poses an important question:
On what important truth do very few people agree with you?
( In a related question - “What valuable company is nobody building?” - he contends that its answer can lead to great businesses.) I have a few:
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We should help people who need help.
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Planning comes first. As a blueprint precedes a house, the plan precedes what's planned. That might seem obvious, but in the financial professions it doesn't often work that way.
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We should be as businesslike about households as we are about businesses.
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We should talk about money openly and honestly with our loved ones, and work with them to plan and achieve important goals.
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Money is not evil. On the contrary, it's a sacrament. It can be, and is, used to do really good things.
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We can, and should, have a sense of humor about it.
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Language matters a lot because it indicates a lot about mental order and health. It can be a wall or a bridge between people. Bridges are good.
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We should teach Economics and Accounting in elementary schools.
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Customer Relationship Management (CRM) is a huge, invisible, missing piece in the puzzles of most businesses; but it works only if it's used by caring people, who are rare.
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Echoing Declining by Degrees and John Taylor Gatto, Thiel contends that schools are rigged. As a son of public school teachers, I agree with him and am so grateful that he has taken the trouble and risk to tell the truth.
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Monopolies are good. Perfect Competition, in which the economy reaches a state of idealized “equilibrium” that we learned in school was desirable, is actually deadly to businesses because in a state of perfect competition, no one is profitable, no one's business is sustainable, and everyone suffers. Monopoly, or being a big fish in a small pond, is good because it is sustainable and it means you've done a great job of delivering a superior product or service to your customers. It rewards a job well done.
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Last Mover. To position for a good monopoly, be the last mover, that is, the last among your competition to make an innovation or improvement that sets the new standard in your field. In search, think Google versus Netscape: Netscape was an early mover. Google was the last.
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Power Law. Thiel vindicated and affirmed Pareto Optimality and demonstrated powerfully how it works in his experience. For example, Venture Capital investment accounts for less than .2% of Gross Domestic Product (GDP); yet VC funded tech companies created 11% of all private sector jobs, and their combined revenues are 21% of GDP.
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Singularity. Thiel argues for definite commitment. He contends that in our preoccupation with diversification, hedging bets, browsing, getting “a well-rounded education”, keeping our options open, and so on, we lose by creating mediocre self-defeating investment portfolios and disengaged lives and careers.
In a scatterbrained culture characterized by social media feeds (ironic, since he helped create Facebook and LinkedIn), he argues for singular focus. For example in Chapter 11 about sales (“If you build it, will they come?”) he argues that, there's a Power Law of Distribution in which, for a given business, one sales method is far more powerful than any other.
He argues further that most businesses dabble in sales methods, don't get any of them right, and fail. By singularity he means, stop dabbling. Don't be a dilettante. Pick one sales method that works, and stick with it.
He so dislikes dabblers and dilettantes that in Chapter 9 about Foundations, he comes out soundly against consultants and for on-site full-timers. He asserts that consultants are nihilists and are the opposite of what companies need to succeed. (This is why I've always avoided that label.)
What they need are not nihilists, but dogmatists. Comparing successful startups with cults, he says cults are fanatically wrong about something, while successful startups are fanatically right about something.
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Sales. I loved what he had to say about sales, and totally agree. For me, reading Chapter 11 was really vindicating and encouraging. In the beginning of the chapter, he uses the book Hitchhiker's Guide to the Galaxy to show how, culturally, we're bigoted against sales and salespeople. It's all self-defeating nonsense because in the final analysis, we're all salespeople. When we despise salespeople, we despise ourselves. My final notes on the chapter read, “All of us want to believe that we make up our own minds, that sales doesn't work on us. But we're wrong. Everyone has something to sell. Look around: if you don't see any salespeople, then you're the salesperson.”
All of us need to accept this. This is why I've worked so hard on researching marketing and sales, and building the Marketing Plan and CRM pages: to provide tools that help people surmount anti-sales bigotry, and develop solid Sales Chops.
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Technology versus Globalization. He defines Technology as “a new and better way of doing things.” It's creative. It's about making something from nothing, or going from Zero to One. Globalization, on the other hand, spreads what Technology creates. It goes from 1 to n. He asserts that Technology matters more than globalization, and is the key to creating a hopeful future.
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Secrets. I loved Chapter 8. I learned so much from it. He pointed out that, on a test, every correct answer is necessarily a secret. To know the answer, one must have done one's homework. It isn't obvious. If it were, everyone would ace the test.
He pointed out how in “Unibomber” Ted Kaczynski's manifesto, he divided human goals into three categories: easy, hard, and impossible. He believed all hard goals had been achieved; what remain are either easy or impossible. By contriving hard problems with a campaign of destruction, he sought to recover a sense of purpose.
Thiel showed how, although we would all say Kaczynski is crazy, many people share a lot in common with him because they've stopped looking for secrets, too. They figure that, just as the whole world has been mapped, there are no more hard problems to solve. In religion, questions are either easy ones that children can answer, or impossible mysteries. Answering hard questions risks heresy.
But he asserts we have plenty of remaining hard problems to solve; we just don't notice them because they're secret. To notice and solve them, we have to become interested in secrets. He asserts that great companies are built around secrets. They notice a hard problem, develop a secret solution, then sell it.
This provoked me to ponder hard problems Making End$ Meet solves, and the secret solutions I use to solve them:
Hard Problem |
Secret Solution |
How to earn a living helping struggling people? |
Through a unique deferred compensation plan, invest in them. |
How to thrive in a culture of indefinite optimism? |
Invent an easy way to help people become definite: the Lifetime Savings Plan. |
How to predict & afford emergencies? |
Manage as though they happened on schedule. Build an Emergency Fund designed to be used and replenished every four years. |
How to predict the future? |
Create it. |
How to foresee, prepare for, and afford irregular expenses? |
Include a Short-Term Savings Plan in your Budget. |
How to understand investments? |
Study them annually and store findings in a cumulative database. Publish findings. (See the Investment Research on the web site.) |
How to be the minority of the sales force that closes the majority of sales? |
Tool up to follow through with a good CRM solution. |
How to make sense of the bewildering variety of available CRM solutions? |
Develop criteria, and rank them. |
How to untangle perplexing interdependencies? |
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As a professional athlete, how to manage a brief career? |
This is just a partial list. For more secret solutions to hard problems, please explore this web site.
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Seven Questions. In Chapter 13, in a fascinating discussion of the $50B lost in “Green” technology, he identifies seven vital questions about engineering, timing, monopoly, people, distribution, durability, and secrets that successful startups answer, and Greentech, in its smug “do well by doing good” hubris, ignored. His counsel for what he calls “Energy 2.0” is for companies to develop good answers to the seven questions and think small so they can dominate a niche in a small market, then build from there.
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Founders. He pointed out how founders are strange. In terms of the statistical bell-shaped normal curve, their bell is upside down: they're bundles of opposites and contradictions. For example founders can be both rich and poor, charming and rude, famous and infamous, etc. Using both modern (Jobs, Gates, Howard Hughes) and ancient (Oedipus, Romulus & Remus) examples, he shows how “every king is a living god; every god is a murdered king” and how before scapegoats were killed, they were worshiped. He says the lesson for businesses is that they need founders, and the lesson for founders is to stay humble and be careful.
He ends the book on an encouraging note: “Our task today is to find singular ways to create the new things that will make the future not just different, but better – to go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for our future.”
Reading it has already helped me do a better job of adding value to my clients' economies. For example one client was discouraged by a momentary loss and felt like his business was worthless and failing. Recalling an example from the book, I pointed out to him how investors value companies based not on past profitability, but on anticipated cash flows – a great example being the difference in market capitalization between the historically profitable New York Times, and Twitter.
It's really a case study in the credibility of Biblical faith: the assurance of things hoped for, and the conviction of things not seen. It's all about your view of the future.
It's a singular book. I'm really glad I read it carefully, and I am sure that, in ways I have yet to notice and that will surprise me when they happen, it will continue to help me improve my work and be even more valuable to you.
I hope you find this review edifying, profitable, and useful.
Faithfully yours,
Kris Freeberg, Economist
Making End$ Meet