Thiel on Unique Investing

I like this comment from Peter Thiel in his latest Stanford lecture. He is talking about the trouble with unique investments:

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. Suppose someone wants to start a rocket company. You might ask, quite reasonably, “What experience do you have with rockets?” The answer might be “zero.” Elon didn’t have any experience in making rockets before he started SpaceX. Or suppose a VC wants to invest in a rocket company. The question becomes: “What on earth do you know about rockets?” Again, the answer is probably “nothing.” No one has invested in rockets in over 40 years.

iPhone games, by contrast, are entirely familiar. If you ask a gaming entrepreneur what experience he has with games, he’ll tell you about all the games he’s made before. Ask a VC what they know about games and they’ll go on and on about the many gaming companies in their portfolio.

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.

More here.

Related posts:

  1. Investing Lessons from Betting on the NCAA Tournament
  2. Field Notes: Smiths, Trees, China, Android, Rockets, Thiel, Chile, etc.
  3. Dixon Doll’s Team-Centric Venture Investing
  4. Futures, the Personal Kind
  5. Is Venture Investing Like Pascal’s Wager?