Friday, January 09, 2015
Thursday, January 01, 2015
The 100th person at Google, no matter what you did, was better off than the average founding CEO of the average venture-backed startup in Silicon Valley
--- Peter Thiel, in an interview by Peter Slen on C-SPAN's Communicators, October 13, 2013
Peter Slen. Peter Thiel, what is the power law you talk about?
Peter Thiel. [14:30] Well, the power law is this distribution in the size of these technology companies. If you look at the tech industry in the U.S., the top dozen tech companies have a market capitalization of abut $2 trillion, and they’re probably as big or bigger than all other tech companies combined. You end up with these radically unequal outcomes in terms of company sizes. Unlike the U.S. declaration of independence where all men are created equal, in the case of business not all companies are created equal and some end up being vastly more successful than others. As a venture capital investor, it’s typically the case that your single best investment ends up being worth more than all of the others combined. This is a very strange dynamic, and it’s worth thinking through a great deal.
[15:20] An application of the power law to entrepreneurs, and to founders, is that it’s perhaps not always the right thing to start a company. You may be much better off joining a company that’s going to be very successful. The 100th person at Google, no matter what you did, was better off than the average founding CEO of the average venture-backed startup in Silicon Valley. We sometimes privilege founding companies too much, and we undervalue the potential scale and so we overvalue founding, undervalue scaling. It is always worth thinking really hard about whether you will be able to build a great company or whether you might be better off joining another company that is doing something truly great.