Category Archives: Innovation

Ten key recommendations to support youth entrepreneurship

I just recieved a very interesting analysis by E&Y and the G20 Young Entrepreneurs’ Alliance (G20 YEA), entitled Avoiding a lost generation: Ten key recommendations to support youth entrepreneurship across the G20. Both their recommendations and what young entrepreneurs look for deserve some attention.


Here are the 10 recommendations:

Access to funding
1- Capital without mentorship is lost capital.
Create funding mechanisms, either government run or government backed, that make mentorship and financial education a condition of funding.
2- Access to alternative funding is critical.
Create strong relationships and provide incentives with venture capitalists (VCs), incubators and business angels to develop or create initiatives that enable alternative sources of capital.
3- Public funding matters.
Sponsor start-up growth with low-cost funding for targeted groups.
4- Entrepreneurs still need banks to keep credit moving.
Create a new class of loan for small businesses and young entrepreneurial firms that offers targeted funding to meet expansion capital needs.

Tax and regulation
5- Targeted tax and business incentives are highly important to supporting young entrepreneurs in scaling their businesses.
5a-: Encourage investment in start-ups by offering tax benefits.
5b-: Enable young, high-growth entrepreneurial firms to scale up through amplified support for market access.

6- Support global mobility for young entrepreneurs.
Encourage top international talent by changing visa rules and offering funding support.
7- Complex and burdensome rules in areas such as tax hold back young entrepreneurs.
Simplify and streamline tax administration to ease administrative burdens on young entrepreneurs.

Entrepreneurship culture
8- Positive mainstream views about entrepreneurship are needed to attract young people.
Create a positive narrative around entrepreneurship to help engage young people from an early age.
9- Encourage a national, regional and local culture of entrepreneurship.
Encourage and foster hubs, incubators, accelerators and networks to bring relevant talent together.

Developing an entrepreneurial ecosystem
10-For many of the recommendations and actions to have sustainable impact they need to work as part of a regional ecosystem, and within a regional ecosystem framework that fosters and attracts a critical mass of talent, capital and most importantly entrepreneurial leaders.
Create the foundation for a regional entrepreneurial ecosystem to flourish.

And nearly as interesting is the perception from the entrepreneurs. Just notice that the priorities are not emphasized in the same order. We see that tax is not their main problem, an intuition that I always had.


Was Christensen wrong and is Disruptive Innovation a shaky theory?

Clayton Christensen has been one of my heroes. Will I have to kill this father figure? The often excellent New Yorker magazine published recently The Disruption Machine with subtitle What the gospel of innovation gets wrong. Author Jill Lepore knows a lot about the Innovation gurus from Schumpeter to Porter and Christensen and what she has to say is at least very disturbing.

“Disruption is a theory of change
founded on panic, anxiety,
and shaky evidence.”

You have to read the article: Lepore seems to have strong arguments about the weaknesses of Christensen’s. In the Disk Drive industry, she claims, Seagate Technology was not felled by disruption. Same with Bucyrus and Caterpillar for the mechanical-excavator industry or “Today, the largest U.S. producer of steel is — U.S. Steel”. Difficult for me to assess the claims. I have to admit I had read more recent books of Christensen which were really disappointing but I thought his first breakthrough remained strong.

Funnier: “The theory of disruption is meant to be predictive. On March 10, 2000, Christensen launched a $3.8-million Disruptive Growth Fund. Less than a year later, the fund was quietly liquidated. In 2007, Christensen told Business Week that “the prediction of the theory would be that Apple won’t succeed with the iPhone,” adding, “History speaks pretty loudly on that.” In its first five years, the iPhone generated a hundred and fifty billion dollars of revenue.”

There has been a debate following Lepore’s claims which I will let you discover:

– Business Week: Clayton Christensen Responds to New Yorker Takedown of ‘Disruptive Innovation’: here.

– Forbes: What Jill Lepore Gets Wrong About Clayton Christensen and Disruptive Innovation: here.

– Slate: Even the Father of Disruption Thinks “Disruption” Has Become a Cliche: here.

PS: thanks to Martin for pointing that amazing article to me!

Innovation and Society: are the Returns and Benefits Sufficient?

Here is my latest contribution to Entreprise Romande. I return to a subject that is dear to me, Innovation and Society. (If you read French, the original version is certainly better…)


The Enterprise is more than ever at the core of the political debates through its role in the creation of jobs and wealth – both individual and collective. It is indirectly the source of populism and of protectionist temptations. Inside and outside of its walls, innovation is the subject of similar tensions: are the returns and benefits of innovation sufficient for society?

Mariana Mazzucato and the Entrepreneurial State

A recent book tackles the topic of the respective roles of business and government in innovation: Mariana Mazzucato, a professor at the University of Sussex, develops in The Entrepreneurial State [1] – a fascinating and quasi-militant book – the argument that the States have not collected the fruits not only of direct investments in their universities, and even indirectly from the help and support provided to businesses, investments and supports that are at the origin of the major innovations of the last fifty years.

Mazzucato brilliantly illustrates this through the example of the iPhone and the iPad, which integrate components initially financed by the public bodies: from electronics developed for the space and military programs to the touch screen or GPS, or even Siri, the voice recognition tool (which has sources at EPFL), the author shows that Apple has masterfully integrated technologies initiated by public money. Google is also the result of research done at StanfordUniversity. Mazzucato adds that clinical trials for new drugs are mainly made ​​in hospitals funded by public money, from molecules equally discovered in university laboratories.

Mazzucato therefore advocates major reforms both on the governance of the initial support and on taxation. She fights for a new tax system that would compensate the absence or insufficiency of direct returns to universities or from businesses, all the more that it is indeed undeniable that multinational companies easily optimize their taxation. She shows how Apple has taken advantage of international rules to create subsidiaries in Nevada or Ireland to minimize its taxes.

The English researcher is convincingly claiming that Apple has to pay more. But how to pay? Paying a license for the GPS, but to whom? I’m not even sure that the GPS is patented. And if the Internet had been patented, it would probably not have had the same development – I do not ned to go over the limitations of the French Minitel. By seeking more direct financial returns (which are not as insignificant as one might think – Stanford has received more than $300M for its equity shares in Google and over $200M of the first patents in biotechnology), the risk would be very high to discourage creators and stifle innovation. I doubt that the solution lies in more rigorous national rules.

Peter Thiel and the Individual Entrepreneur

Peter Thiel, an libertarian entrepreneur and investor, is so opposed to such views that he encourages youung people motivated in entrepreneurship to abandon their studies by providing them with $ 100,000 grants and he even imagines moving businesses to offshore vessels off California so they totally escape tax. He is afraid of any form of public support which, he considers, quickly becomes bureaucratic. It is worth adding that Thiel’s motto also shows his skepticism about the social benefits of innovation: “We wanted flying cars; instead we got 140 characters.” [2]

Upstream, there is therefore the question of direct returns and the actual role of the state. But without the incredible creativity of Steve Jobs at Apple, without the extraordinary ambition of Larry Page and Sergei Brin at Google, without the vision of Bob Swanson, a co-founder of Genentech, the world would probably not have experienced the same technological revolutions. Downstream, the question arises of how to create international rules on innovation. Let me make a wide digression. The Internet, another innovation initiated by public authorities, has become a major topic in the political, economic and fiscal fields. But “neutrality and self-organization are part of the libertarian options […] and are inconsistent with politics. Humanity must seize this opportunity to revisit what is considered important. […] The Internet enables the emergence of a global political space, but it is still to be invented. At the time of this invention, the Internet will probably be gone!” [3]

If from experience I lean more toward Thiel’s view on innovation as an individual act of exception, actually quite far from the public investment, even if it is its seed, yet, I cannot agree with abandoning the public good. It is the soil that allows the emergence of exceptional talent. Companies also have their share of responsibility in discounting the importance of the collectivity. Just like in any complex human activity, innovation is a delicate balance between private and public actors. But especially today, issues have become global. The question is not so much as Mazzucato says that the role of the state has been largely underestimated in this process, but rather that the tax return has largely been decreased by globalization and the lack of economic governance.

Tax as a single global solution?

Does society receive any return from the public money spent on schools, roads, security? No, because it’s not an investment in the true sense of an objective of financial gain. These are infrastructure provisions that allow citizens and businesses to exist and develop properly. And they 8should) pay taxes in return. When Darpa funds Stanford, it is not sure that a student from Korea will not benefit from it and later work for Samsung. The concept of ​​supporting national champions seems of another age.

We are left with Tax, in a renewed vision of its global governance. Whether innovation is in the public or private domain, the world globalization will soon prevent from hiding behind the argument of whom is basically at its origin. Not only individuals but states also must agree upom a greater share of its profits, at the risk of serious crises. At a time when Switzerland reviews its tax policy and its citizens think they can create barriers from its neighbors as its borders, it is important to be aware that the current tensions are an opportunity to revisit the status of innovation in society before new major crises emerge. Wishful thinking?

[1] The Entrepreneurial State – Debunking Public vs. Private Sector Myths. 2013, Anthem Press,
[2] Peter Thiel. Zero to One – Notes on Startups or How to Build the Future. Sept. 2014, Crown Business press,
[3] Boris Beaude. Les fins d’Internet. 2014, FYP Editions,

Ray Kurzweil has mostly wrong predictions

As often, Marc Voinchet had a remarkable broadcast this morning on France Culture. First a great guest, Cécile Lafontaine for her book The body market, the commodification of human life in the era of bioeconomy (in French only – my translation of the title) which goes beyond the adressed topic by asking questions about the tensions between the individual and society. It provides excellent answers to the debates opened by Thiel. But here I stop and let you discover the interview if the subject interests you.


In addtion Xavier de la Porte wrote an excellent chronicle that I copied directly from the website of France Culture on the French part of my blog (in order to be able to translate it here): The brain is not one million lines of code.

When we look at what the digital world has to say about the body and life, there is a high likeliness to find quickly intimidating predictions: “Soon we will all be cyborgs” and “In 2045, we will have completely merged with the machines.” A specialist in this kind of statements is a guy named Ray Kurzweil – which I mentioned here already. Pretty awesome inventor, wise businessman, Kurweil became in the last twenty years the promoter of a movement called transhumanism – which considers that humankind will soon merge with machines, thus giving rise to post-humanity – ideas that Kurzweil sold worldwide with books and conferences, ideas that he also sells to super-powerful companies: Google has hired him to run a program on teaching language to machines. The problem with Kurzweil – and many transhumanists – it is their strength of conviction that passes through a scientific-techno-philosophical discourse which we feel is not right, but without knowing exactly where. But recently , I came across evidence that Kurzweil says non-sense. I enjoyed my discovery and I want to share this joy with you.

It has to do with an important aspect of transhumanism: the belief always repeated that very soon we can duplicate our brains into computers. Kurzweil believes that this will be possible in 2020, and moreover, he has stored the brain of his deceased father in that perspective. And in order to support his thesis, here is the type of speech that Kurzweil gives: “The code of the brain is in the genome. The human genome is 3 billion base pairs, six billion bits, which is about 800 million bits after compression. After eliminating redundancies […] this information can be compressed into approximately 50 million bits. But the brain is about half of that, about 25 million bits, or one million lines of code.” And here, in a ruthless and intimidating demonstration, Kurzweil shows us a million lines of code suffice to duplicate the function of the human. (I say “sufficient” because it is just one million lines of code; for comparison, Microsoft Office 2013 is 45 million lines of code).

Except that for once, someone came forward to explain that Kurzweil told non-sense. This person is called Paul Zachary Myers. He is a recognized biologist at the University of Minnesota, specializing in developmental genetics and writes a blog called Pharyngula. And it is on his blog that Myers explains very calmly why what Kurzweil says is wrong. Here is his demonstration. The premise of the reasoning of Kurzweil is “The code of the brain is in the genome.” Totally wrong, says the researcher. The code of the brain is not encoded in the genome. What is in the genome is a collection of molecular tools which is the regulating portion of the genome, which makes cells sensitive to interactions with a complex environment. During its development, the brain unfolds through interactions between cells, interactions which we understand today a small part only. The final result is a brain that is much more complex than the sum of nucleotides that encode a few thousand proteins. One can not deduce a brain from the protein sequences of its genome. How will these sequences express is dependent on the environment and the history of hundreds of billions of cells, interdependent on each other. We have no way to calculate in principle all possible interactions and functions of a single protein with tens of thousands of others who are in the cell, which is the essential first step in the execution of the unlikely algorithm of Kurzweil. In support of his argument, the researcher takes a few examples of some proteins and shows how the interactions are numerous, complex and mostly still unknown.

What is very interesting is that Myers states that he is not hostile to the idea that the brain is a kind of computer, and we will be able to artificially reproduce one day its functions. But he says that he does not need to say stupide nonsense, as does Kurzweil and build hisreasoning on false premises. And here is for you, Kurzweil. If only more researchers could take more time to bring their expertise to question the transhumanist speech, it may save us to hear many absurdities and attend another commodification of human life, which is about seeling biotechnology dream.

When Peter Thiel talks about Start-ups – Final Thoughts: Human After All

As you noticed if you read my previous posts, I’ve been quite impressed by Peter Thiel’s notes about start-ups. I’ve written 7 long parts. I had been similarly impressed by Mariana Mazzucato’s The Entrepreneurial State even if with only 5 posts!


I said it already, I would have loved to attend their debate in a few days at the conference Human After All, Toronto 2014. But apparently they do not participate to the same roundtable anymore… (After reading what follows, I see that Taleb would have been a great addition).

– He will discuss “The Economics of Radical Uncertainty.”
How do human beings truly react when confronted with conditions of genuine “unknown unknowns”? According to Frank Knight, “Uncertainty must be taken in a sense radically distinct from the familiar notion of risk, from which it has never been properly separated…The essential fact is that ‘risk’ means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far – reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating… It will appear that a measurable uncertainty, or ‘risk’ proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all.” The economics literature from Knight onward is very good at laying out the propensity of markets to greatly overshoot and undershoot the fundamentals. However, economics does not adequately address the implications of “Knightean” uncertainty, because the discipline finds it hard to model this phenomenon. To get a full measure of this, one has to enter into the realm of psychology and neuroscience. That’s where the definition lies. Radical uncertainty, like so much else, is too important to be left to the realm of economics alone.

– She will be part of “Innovation: Do Private Returns Produce the Social Returns We Need?”
The machines of the first age replaced and multiplied the physical labour of humans and animals. The machines of the second age will replace and multiply our intelligence. The driving force behind this revolution will, argue the “techno-positivists,” exponentially increase the power (or exponentially reduce the cost) of computing. The celebrated example is Moore’s Law, named after Gordon Moore, a founder of Intel. For half a century, the number of transistors on a semiconductor chip has doubled at least every two years. But the information age has coincided with – and must, to some extent, have caused – adverse economic trends: stagnation of median real incomes; rising inequality of labour income and of the distribution of income between labour and capital; and growing long – term unemployment. Are the great gains in
wealth and material prosperity created by our entrepreneurs in and of themselves sufficient to produce desired social returns demanded in today’s world?

Start-ups are a great area to study the tension between individuals and society. A kind of chicken and egg situation… Indeed they might explain the growing gap between the USA and Europe in many dimensions. Mazzucato would be on the social side, Thiel closer to the individual. But do not see any provocative statement here. The thoughts of Thiel and Mazzucato are profound. I agree with most of what they say, disagree with smaller pieces, though most people could think their thinking can not be reconciled. I really think that combining their point of views is an interesting approach to what innovtaion really is…

PS (May 8, 2014): I just found that video of Thiel at SXSW.

When Peter Thiel talks about Start-ups – part 7: luck & uncertainty

This is my last post about Thiel’s class notes at Stanford and it is about Class 13 – Luck. Now I need to wait for his book to be published…


I love accidents. I mentioned it in a post which has nothing to do with start-ups (related to Street Art). The accident here is funny: I totally forgot to copy-paste Thiel’s class 13 and it is only when I began to read class 14 that I noticed my mistake. Now let me quote Thiel: “Note that this is class 13. We are not going to be like the people who build buildings without a 13th floor and superstitiously jump from class 12 to 14. Luck isn’t something to circumvent or be afraid of. So we have class 13. We’ll dominate luck.” Strange, right? I had to call this final part, part 7…

So what does Thiel say about luck? Well it is a debated topic, as I experienced in my activity at EPFL. Thiel feels the same. He begins with: “The biggest philosophical question underlying startups is how much luck is involved when they succeed. As important as the luck vs. skill question is, however, it’s very hard to get a good handle on. Statistical tools are meaningless if you have a sample size of one. It would be great if you could run experiments. Start Facebook 1,000 times under identical conditions. If it works 1,000 out of 1,000 times, you’d conclude it was skill. If it worked just 1 time, you’d conclude it was just luck. But obviously these experiments are impossible.” adding the famous Thomas Jefferson’s line: “I’m a great believer in luck, and I find the harder I work the more I have of it.”

Thiel is not so much interested in luck as in determinism vs. indeterminism. “If you believe that the future is fundamentally indeterminate, you would stress diversification. […]. If the future is determinate, it makes much more sense to have firm convictions. […] Overlay this diversification/conviction dynamic over the optimism/pessimism question and you get further refinement. Whether you look forward to the future or are afraid of it ends up making a big difference. And here is his vision of the world:


With an even more surprising and quite convincing:


“But the indeterminate future is somehow one in which probability and statistics are the dominant modality for making sense of the world. Bell curves and random walks define what the future is going to look like. The standard pedagogical argument is that high schools should get rid of calculus and replace it with statistics, which is really important and actually useful. There has been a powerful shift toward the idea that statistical ways of thinking are going to drive the future.”

But here I’d love to ask Peter Thiel what he makes of Black Swans if he believes in 0 to 1 more than in 1 to n. 1 to n belongs to statistics, not 0 to 1… (read again my part 1 if this is cryptic)


Thiel likes crazy ideas, like Reber’s project for the Bay Area in the 1940s above. He also still believes in finance despite its excesses: “In a future of definite optimism, you get underwater cities and cities in space. In a world of indefinite optimism, you get finance. The contrast couldn’t be starker. The big idea in finance is that the stock market is fundamentally random. It’s all Brownian motion. All you can know is that you can’t know anything. It’s all a matter of diversification. There are clever ways to combine various investments to get higher returns and lower risk, but you can only push out the efficient frontier a bit. You can’t know anything substantive about any specific business. But it’s still optimistic; finance doesn’t work if you’re pessimistic. You have to assume you’re going to make money. […] Indeterminacy has reoriented people’s ideas about investing. Whereas before investors actually had ideas, today they focus on managing risk. Venture capital has fallen victim to this too. Instead of being about well-formed ideas about future, the big question today is how can you get access to good deals. In theory at least, VC should have very little in common with such a statistical approach to the future.“

And he might agree with Mariana Mazzucato during his debate to come with her (at Human After All, Toronto 2014 – program in pdf) : “The size of government hasn’t changed all that much in the last 40-50 years. But what the government actually does has changed radically. In the past, the government would get behind specific ideas and execute them. Think the space program. Today, the government doesn’t do as many specific things. Mainly it just shifts money around from some people to other people. What do you do about poverty? Well, we don’t know. So let’s just give people money, hope it helps, and let them figure it out.”

Darwinism and design.

And all of a sudden, while reading this class 13, Thiel again surprises me! Obviously, the indeterminate optimism can be quite easily linked to Darwin’s theory of evolution. Accidents happen, but there is general positive evolution. And “Applied to start-ups, obsession with indeterminacy leads to the following phenomena:
• Darwinistic A/B testing
• Iterative processes
• Machine learning
• No thinking about the future
• Short time horizons”

Typical Blank’s messages! But Thiel envisages another possibility: “Apple is absolute antithesis of finance. It does deliberate design on every level. There is the obvious product design piece. The corporate strategy is well defined. There are definite, multi-year plans. Things are methodically rolled out.” (I do not think Thiel talks here about intelligent design which is opposed to Darwinian theory, but the coincidence is a little puzzling!

“On the heels of Apple has come the theme of well-designed products being really important. Airbnb, Pinterest, Dropbox, and Path all have a very anti-statistical feel. […] That link—great design—seems to work better and faster than Darwinistic A/B testing or iteratively searching through an incredibly large search space. The return of design is a large part of the countercurrent going against the dominating ethos of indeterminacy. Related to this is the observation that companies with really good plans typically do not sell. If your startup gets traction, people make offers to buy it. In an indefinite world, you will take the money and sell, because money is what you want. […] But when companies have definite plans, those plans tend to anchor decisions not to sell.[..] In an indefinite world, investors will value secret plans at zero. But in a determinate world, robustness of the secret plan is one of the most important metrics […] It’s important to note that you can always form a definite plan even in the most indefinite of worlds. […] We’re falling downwards towards pessimism. Can we shift instead to definite optimism?”

This is the end of my notes on Thiel’s great vision about start-ups.

When Peter Thiel talks about Start-ups – part 6: founder uniqueness, technology singularity

Thiel’s concludes his Class Notes Essays (CS183 —Stanford, Spring 2012) with philosophical considerations about the uniqueness of founders (class 18) and the singularity of technology (class 19). Founders are a topic I regularly covered, for example with European Founders at Work or Founders at Work.

Again Thiel presents unusual ideas about founders. He sees them as a combination of extreme outsiders and extreme insiders.
which he reinforces with this virtuous/vicious circle:

If this is not clear, two examples may help:
– “All [these] questions apply to Gates. Was it nature or nurture? He was a Harvard insider but a dropout outsider. He wore big glasses. Did he become a nerd unwillingly? Did he prosper by accentuating his nerdiness? It’s hard to tell.”
– “And then there’s the Steve Jobs version. […] He had all the classic extreme outsider and extreme insider traits. He dropped out of college. He was eccentric and had all these crazy diets. He started out phreaking phones with Steve Wozniak. He took LSD.”

Thiel is convincing when he explains that a start-up is not a democracy. Founders are Kings, and Thiel may have followed René Girard at Stanford since he then develops a theory of scapegoats. The god may become a victim.

Thiel is a little short about the dual-founder situation: “The dual founder thing is worth mentioning. Co-founders seem to get in a lot less trouble than more unbalanced single founders. Think Hewlett and Packard, Moore and Noyce, and Page and Brin. There are all sorts of theoretical benefits to having multiple founders such as more brainstorming power, collaboration, etc. But the really decisive difference between one founder and more is that with multiple founders, it’s much harder to isolate a scapegoat. Is it Larry Page? Or is it Sergey Brin? It is very hard for a mob-like board to unite against multiple people—and remember, the scapegoat must be singular. The more singular and isolated the founder, the more dangerous the scapegoating phenomenon. For the skeptic who is inclined to spot fiction masquerading as truth, this raises some interesting questions. Are Page and Brin, for instance, really as equal as advertised? Or was it a strategy for safety? We’ll leave those questions unanswered and hardly asked.”


Thiel’s vision (as well as the visions of his guests – I mixed them here) of technology was mentioned in my previous post. Again quite fascinating. “People do tend have some view of the future. They usually project relative stagnation. People tend to believe that, not only will most things not change, but what will change won’t change very quickly.” But “there’s a compelling case that we’ll very likely see extraordinary or accelerated progress in the decades ahead.”

One guest: “My take is that innovation comes from two places: top-down and bottom-up. There’s a huge DIY community. These hobbyists are working in labs they set up in their kitchens and basements. On the other end of the spectrum you have DARPA spending tons of money. Scientists are talking to each other from different countries, collaborating. All this interconnectedness matters. All these interactions in the aggregate will bring the change.

Another guest: “I disagree. There are a very few visionary people who can make a real difference at the formative early stage. This is why mainstream opinion formers are absolutely pivotal. Perhaps no other subset of people could do more to further radical technology. By overpowering public reluctance and influencing the discourse, these people can enable everyone else to build the technology. If we change public thinking, the big benefactors can drive the gears.”

The third guest: “I do not think that progress will come from the top-down or from the bottom-up, really. Individual benefactors who focus on one thing, like Paul Allen, are certainly doing good. But they’re not really pushing on future; they’re more pushing on individual thread in homes that it will make the future come faster. The sense is that these people are not really coordinating with each other. Historically, the big top-down approaches haven’t worked. And the bottom-up approach doesn’t usually work either. It’s the middle that makes change—tribes like the Quakers, the Founding Fathers, or the Royal Society. These effective groups were dozens or small hundreds in size. It’s almost never lone geniuses working solo. And it’s almost never defense departments or big institutions. You need dependency and trust. Those traits cannot exist in one person or amongst thousands.”

Peter Thiel: “That’s three different opinions on who makes the future: a top-down bottom-up combo, social opinion molders, and tribes.”

To be honest, I was more convinced with his analysis of founders than of technologies. His conclusion is worth reading as inspiration: “This course has largely been about going from 0 to 1. We’ve talked a lot about how to create new technology, and how radically better technology may build toward singularity. But we can apply the 0 to 1 framework more broadly than that. There is something importantly singular about each new thing in the world. There is a mini singularity whenever you start a company or make a key life decision. In a very real sense, the life of every person is a singularity. The obvious question is what you should do with your singularity. The obvious answer, unfortunately, has been to follow the well-trodden path. You are constantly encouraged to play it safe and be conventional. The future, we are told, is just probabilities and statistics. You are a statistic. But the obvious answer is wrong. That is selling yourself short. Statistical processes, the law of large numbers, and globalization—these things are timeless, probabilistic, and maybe random. But, like technology, your life is a story of one-time events. By their nature, singular events are hard to teach or generalize about. But the big secret is that there are many secrets left to uncover. There are still many large white spaces on the map of human knowledge. You can go discover them. So do it. Get out there and fill in the blank spaces. Every single moment is a possibility to go to these new places and explore them. There is perhaps no specific time that is necessarily right to start your company or start your life. But some times and some moments seem more auspicious than others. Now is such a moment. If we don’t take charge and usher in the future—if you don’t take charge of your life—there is the sense that no one else will. So go find a frontier and go for it. Choose to do something important and different. Don’t be deterred by notions of luck, impossibility, or futility. Use your power to shape your own life and go and do new things.”

Reading these last lines, I remembered the conclusion of my book: “And I suddenly remembered an essay by Wilhelm Reich, the great psychoanalyst, which he wrote in 1945: “Listen, Little Man”. A small essay by the number of pages, a big one in the impact it creates. “I want to tell you something, Little Man; you lost the meaning of what is best inside yourself. You strangled it. You kill it wherever you find it inside others, inside your children, inside your wife, inside your husband, inside your father and inside your mother. You are little and you want to remain little.” The Little Man, it’s you, it’s me. The Little Man is afraid, he only dreams of normality; it is inside all of us. We hide under the umbrella of authority and do not see our freedom anymore. Nothing comes without effort, without risk, without failure sometimes. “You look for happiness, but you prefer security, even at the cost of your spinal cord, even at the cost of your life”.

When Peter Thiel talks about Start-ups – part 5: a vision of the future of technology

I am still not sure how Thiel’s class notes on start-ups will finish, but they are more and more fascinating, class after class. At least his vision of this world is.

Class 14 is about cleantech and energy. “Alternative energy and cleantech have attracted an enormous amount of investment capital and attention over the last decade. Almost nothing has worked as well as people expected. The cleantech experience can thus be quite instructive. […] To think about the future of energy, we can use the [another] matrix. The quadrants shake out like this:
Determinate, optimistic: one specific type of energy is best, and needs to be developed
Determinate, pessimistic: no technology or energy source is considerably better. You have what you have. So ration and conserve it.
Indeterminate, optimistic: there are better and cheaper energy sources. We just don’t know what they are. So do a whole portfolio of things.
Indeterminate, pessimistic: we don’t know what the right energy sources are, but they’re likely going to be worse and expensive. Take a portfolio approach.”

Both for energy and transportation, Thiel’s fills his quadrants with interesting examples:

and he adds: “Petroleum has dominated transportation. Coal has dominated in power generation. […] Typically a single source dominates at any given time. There is a logical reason for this. It doesn’t make sense that the universe would be ordered such that many different kinds of energy sources are almost exactly equal. Solar is very different from wind, which is very different from nuclear. It would be extremely odd if pricing and effectiveness across all these varied sources turned out to be virtually identical. So there’s a decent ex ante reason why we should expect to see one dominant source. This can be framed as a power law function. Energy sources are probably not normally distributed in cost or effectiveness. There is probably one that is dramatically better than all others.”

But the analysis explaining the cleantech bubble were far from clear. “One problem was that people were ambiguous on what was scarce or problematic. Was there resource scarcity? Or were the main problems environmental?” […] “To have a successful startup, you must have good answers—or at least a good plan for getting those answers.” Answers to many issues such as
– the market
– the secrets
– the team and its culture
– the funding
and unfortunately many mistakes were made.

Regarding the market, there was the issue of both explaining how to become a leader of one segment (PV, wind,…) and why a segment was better. Regarding the secret: “If you want to start a company, you should have some important secret. But in practice, most wind, solar, and cleantech ventures relied on incremental improvements.” Even worse, “most cleantech companies in the last decade have had shockingly non-technical teams and cultures. Culture defaulted toward zero-sum competition. Savvy observers would have seen the trouble coming when cleantech people started wearing suits and ties. Tech people and computer people wear t-shirts and jeans. Cleantech people, by contrast, looked like salesmen. And indeed they were. This is not a trivial point. If you’re dealing in something that’s incremental and of questionable durability, you actually have to be a really good salesman to convince people that it’s dramatically better.” Finally “a good, broad rule of thumb is to never invest in companies who are looking for less than $1 million or more than $1 billion. If companies can do everything they want for less than a million dollars, things may be a little too easy. There may be nothing that is very hard to build, and it’s just a timing game. On the other extreme, if a company needs more than a billion dollars to be successful, it has to become so big that the story starts to become implausible.”

If Thiel were to bet on soemthing, it would apparently be Thorium as a nuclear fuel.

Class 15 is about other future bets.


Thiel is a strong believer in contrarian (and sometimes huge) bets. He is interested in or at least puzzled by transportation, robotics, weather and energy storage. And his way of choosing is to look at what did not work (yet) in the past: “Various VC firms in Silicon Valley warned expressed concern about [investing in unique technologies]. They warned us that investing in SpaceX was risky and maybe even crazy. And this wasn’t even at the very early stage. […] (Danielle Fong:) People like to act like they like being disruptive and taking risks. But usually it’s just an act. They don’t mean it. Or if they do, they don’t necessarily have the clout within the partnership to make it happen. (Peter Thiel:) It is very hard hard for investors to invest in things that are unique. The psychological struggle is hard to overstate. People gravitate to the modern portfolio approach. The narrative that people tell is that their portfolio will be a portfolio of different things. But that seems odd. Things that are truly different are hard to evaluate. […] The upside to doing something that you’re unfamiliar with, like rockets, is that it’s likely that no one else is familiar with it, either. The competitive bar is lowered. You can focus on learning and substantive things over process, which is perhaps better than competing against experts.”

Class 16 is about maybe the highest of all bets: life and death.

I have not so far mentioned the sentence which comes at the top of each series of class notes: “Your mind is software. Program it. Your body is a shell. Change it. Death is a disease. Cure it. Extinction is approaching. Fight it.”

The problem.

“Like death itself, modern drug discovery is probably too much a matter of luck. Scientists start with something like 10,000 different compounds. After an extensive screening process, those 10,000 are reduced to maybe 5 that might make it to Phase 3 testing. Maybe 1 makes it through testing and is approved by the FDA. It is an extremely long and fairly random process. This is why starting a biotech company is usually a brutal undertaking. Most last 10 to 15 years. There’s little to no control along the way. What looks promising may not work. There’s no iteration or sense of progress. There is just a binary outcome at end of a largely stochastic process. You can work hard for 10 years and still not know if you’ve just wasted your time.

To be fair, we must acknowledge that all the luck-driven, stats-driven processes that have dominated people’s thinking have worked pretty well over the last few decades. But that doesn’t necessarily mean that indeterminacy is sound practice. Its costs may be rising quickly. Perhaps we’ve found everything that is easy to find. If so, it will be hard to improve armed with nothing but further random processes. This is reflected in escalating development costs. It cost $100 million to develop a new drug in 1975. Today it costs $1.3 billion. Probably all life sciences investment funds have lost money. Biotech investment has been roughly as bad a cleantech.”

The perspectives.

“Drug discovery is fundamentally a search problem. The search space is extremely big. There are lots of possible compounds. An important question is thus whether we can use computer technology to reduce scope of luck. Can Computer Science make biotech more determinative?”

“These are big secrets that play out over long time horizons, not web apps that have a 6-week window to take over the world.”

“The sequencing of the genome is like the first packets being sent over ARPANET. It’s a proof of concept. This technology is happening, but it isn’t yet compelling. So there is a huge market if one can make something compelling enough for people to actually go and get a genome sequenced. It’s like e-mail or word processing. Initially these things were uncomfortable. But when they become demonstrably useful, people leave their comfort zones and adopt them.”

“Biotech got quite a burst in late 70s early 80s, with new recombinant DNA and molecular biology techniques. Genentech led the way from the late 70s to the early 80s. Nine of the 10 biggest American biotech companies were founded during this really short time. Their technology came out some 7-8 years later. And that was the window; not very many integrated biotech companies have emerged since then. There was a certain amount of stuff to find. People found it. And before Genentech, the paradigm was pharma, not biotech. That window (becoming an integrated pharmaceutical company) had been closed for about 30 years before Genentech. So the bet is that while the traditional biotech window may be closed, the comp bio window is just opening.”

“There’s really no rush to spill the secret plans. This space is very much unlike fast-moving consumer Internet startups. Here, if you have something unique, you should nurse it.”

“Slow iteration is not law of nature. Pharma and biotech usually move very slowly, but both have moved pretty fast at times. From 1920-1923 Insulin moved at the speed of software. Today, platforms like Heroku have greatly reduced iteration times. The question is whether we can do that for biotech. Nowhere is it written in stone that you can’t go from conception to market in 18 months. That depends very much on what you’re doing. Genentech was founded the same year as Apple was, in 1976. Building a platform and building infrastructure take time. There can be lots of overhead. Ancillary things can take longer than a single product lifecycle to accumulate. [… the] VC is broken with respect biotech. Biotech VCs have all lost money. They usually have time horizons that are far too short. VCs that say they want biotech tend to really want products brought to market extremely quickly. “Integrated drug platform” is an ominous phrase for VCs. More biotech VCs are focused on globalization than on real technical innovation. VCs typically found a company around a single compound and then pour a bunch of money into it to push it through the capital-intensive trial process. Most VCs not interested in multi-compound companies doing serious pre-clinical research.”

And as a conclusion of class 16, “Startups are always hard at the start. There are futons and ironing boards in the office. You have to rush to clean up for meetings. But maybe the hardest thing is just to get your foundation right and make sure you plan to build something valuable. You don’t have to do a science fair project at the start. You just have to do your analytical homework and make sure what you’re doing is valid. You have to give yourself the best chance of success as things unfold in the future.”

Class 17 is about the brain, artificial intelligence, maybe the last frontier in technology, certainly going further than the previous topics addressed here.


Not much more to add except maybe the short description of the approach by 3 start-ups:
Vicarious is trying to build AI by develop algorithms that use the underlying principles of the human brain. They believe that higher-level concepts are derived from grounded experiences in the world, and thus creating AI requires first solving a human sensory modality.
Prior Knowledge (acquired by Salesforce since Thiel’s class) is taking a different approach to building AI. Their goal is less to emulate brain function and more to try to come up with different ways to process large amounts of data. They apply a variety of Bayesian probabilistic techniques to identifying patterns and ascertaining causation in large data sets. In a sense, it’s the opposite of simulating human brains.
– The big insight at Palantir (…) isn’t regression analysis, where you look at what was done in the past to try to predict what’s going to be next. A better approach is more game theoretic. Palantir’s framework is not fundamentally about AI, but rather about intelligence augmentation.

And one more comment: “For the most part, academics aren’t (working on strong AI or crazy things) because their incentive structure is so weird. They have perverse incentive to make only marginally better things. And most private companies aren’t working on it because they’re trying to make money now.(…) Bold claims also require extraordinary proof. If you’re pitching a time machine, you’d need to be able to show incremental progress before anyone would believe you. Maybe your investor demo is sending a shoe back in time. That’d be great. You can show that prototype, and explain to investors what will be required to make the machine work on more valuable problems. It’s worth noting that, if you’re pitching a revolutionary technology as opposed to an incremental one, it is much better to find VCs who can think through the tech themselves. When Trilogy was trying to raise their first round, the VCs had professors evaluate their approach to the configurator problem. Trilogy’s strategy was too different from the status quo, and the professors told the VCs that it would never work. That was an expensive mistake for those VCs. When there’s contrarian knowledge involved, you want investors who have the ability to think through these things on their own.”

End of part 5!

When Peter Thiel & Friends talk about Start-ups – part 3: company culture, founders, team, investors

Part 3 of my series of comments about Thiel’s class notes at Stanford mainly cover his Class 5-8. But first I should add that Thiel invited a “honor class” of innovators during his 19 classes. Quite fascinating!

Thiel-Friends-CS1st row: Stephen Cohen, co-founder and Executive VP of Palantir Technologies,
Max Levchin, co-founder PayPal and Slide,
Roelof Botha, partner at Sequoia Capital and former CFO of PayPal,
2nd row: Paul Graham, partner and co-founder of Y Combinator,
Bruce Gibney, partner at Founders Fund,
Marc Andreessen, general partner Andreessen Horowitz,
3rd row: Reid Hoffman, co-founder of LinkedIn,
Danielle Fong, Co-founder and Chief Scientist of LightSail Energy,
Jon Hollander, Business Development at RoboteX,
4th row: Greg Smirin, COO of The Climate Corporation,
Scott Nolan, Principal at Founders Fund and former aerospace engineer at SpaceX,
(Elon Musk was going to come, but he was busy launching rockets),
5th row: Brian Slingerland. Co-Founder, President & COO at Stem CentRx,
Balaji S. Srinivasan, CTO of Counsyl,
Brian Frezza, Co-founder, Emerald Therapeutics,
6th row: D. Scott Brown, co-founder of Vicarious,
Eric Jonas, CEO of Prior Knowledge,
Bob McGrew, Director of Eng, Palantir,
7th row: Sonia Arrison, Associate Founder of Singularity University,
Michael Vassar, the Singularity Institute for the study of Artificial Intelligence (SIAI),
Aubrey de Grey, Chief Science Officer at the SENS Foundation.

Thiel covered how to build a company from the ideas and vision of founders, through hiring and sometimes funding from investors. But he began with a critical though fuzzy concept, the company culture: “A robust company culture is one in which people have something in common that distinguishes them quite sharply from rest of the world.”

He mentions also some important dimensions of the culture:
– Consultant-nihilism or Cultish Dogmatism: “You want to be somewhere in the middle of that spectrum. To the extent you gravitate towards an extreme, you probably want to be closer to being a cult than being an army of consultants.” which could be why Thiel said earlier,
pre-money valuation = ($1M*n_engineers) – ($500k*n_MBAs).
– To Fight or Not To Fight (i.e. Nerds or Athletes or again Zero-sum and Non zero-sum). “So you have to strike the right balance between nerds and athletes. Neither extreme is optimal. Consider a 2 x 2 matrix. On the y-axis you have zero-sum people and non zero-sum people. On the x-axis you have warring, competitive environments and then you have peaceful, monopoly/capitalist environments. The optimal spot on the matrix is monopoly capitalism with some tailored combination of zero-sum and non zero-sum oriented people. You want to pick an environment where you don’t have to fight. But you should bring along some good fighters to protect your non zero-sum people and mission, just in case.”
I was just told this is crytic… I agree… another reason to read Thiel directly!

Foundings are obviously temporal. But how long they last can be a hard question. The typical narrative contemplates a founding, first hires, and a first capital raise. But there’s an argument that the founding lasts a lot longer than that. The idea of going from 0 to 1—the idea of technology—parallels founding moments. The 1 to n of globalization, by contrast, parallels post-founding execution. It may be that the founding lasts so long as a company’s technical innovation continues. Founders should arguably stay in charge as long as the paradigm remains 0 to 1. Once the paradigm shifts to 1 to n, the founding is over. At that point, executives should execute.”

Max Levchin: The notion that diversity in an early team is important or good is completely wrong. You should try to make the early team as non-diverse as possible. There are a few reasons for this. The most salient is that, as a startup, you’re underfunded and undermanned. It’s a big disadvantage; not only are you probably getting into trouble, but you don’t even know what trouble that may be. Speed is your only weapon. All you have is speed. […] How to hire? A specific application of this is the anti-fashion bias. You shouldn’t judge people by the stylishness of their clothing; quality people often do not have quality clothing. Which leads to a general observation: Great engineers don’t wear designer jeans. So if you’re interviewing an engineer, look at his jeans. There are always exceptions, of course. But it’s a surprisingly good heuristic. […] PayPal also had a hard time hiring women. An outsider might think that the PayPal guys bought into the stereotype that women don’t do CS. But that’s not true at all. The truth is that PayPal had trouble hiring women because PayPal was just a bunch of nerds! They never talked to women. So how were they supposed to interact with and hire them?

“No CEO should be paid more than $150k per year” (in Silicon Valley)
“Another important insight is that people must either be fully in the company or not in it at all.”

Dilution and funding
Building a valuable company is a long journey. A key question to keep your eye on as a founder is dilution. The Google founders had 15.6% of the company at IPO. Steve Jobs had 13.5% of Apple when it went public in the early ‘80s. Mark Pincus had 16% of Zynga at IPO. If you have north of 10% after many rounds of financing, that’s generally a very good outcome. Dilution is relentless. The alternative is that you don’t let anyone else in. It’s worth remembering that many successful businesses are built like this. Craigslist would be worth something like $5bn if it were run more like a company than a commune. GoDaddy never took funding. Trilogy in the late 1990s had no outside investors. Microsoft very nearly joined this club; it took one small venture investment just before its IPO. When Microsoft went public, Bill Gates still owned an astounding 49.2% of the company. So the question to think about with VCs isn’t all that different than questions about co-founders and employees. Who are the best people? Who do you want—or need—on board?

The VC model in a nutshell: a power law. “To a first approximation, a VC portfolio will only make money if your best company investment ends up being worth more than your whole fund. (And the investment in the second best company is about as valuable as number three through the rest.)”

I have not yet read the following classes…