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Interesting, fun also some of the reactions I got to my many ideas. I have realised that one needs some sort of monopoly to make any money. https://www.youtube.com/watch?v=3Fx5Q8xGU8k

For context, this article is about a new book, 'The Contrarian' about Thiel (I haven't read the book).

I've long been a fan of Peter Thiel's thinking. If you're unfamiliar, this talk from YC's Startup School 2014 covering the ideas from Zero to One is excellent: https://www.youtube.com/watch?v=3Fx5Q8xGU8k

But back the book this article is based on, I found this review of the book on Amazon quite insightful: https://www.amazon.com/gp/customer-reviews/R3PSWXNTHIHYNB/

I've never met Peter Thiel, don't know much about him personally, and don't agree with everything he says and does, but he's a complex and interesting character that I've learned a lot from over the years. I think we all can.

Watch this talk, "Competition is for losers" (by Peter Thiel)

https://www.youtube.com/watch?v=3Fx5Q8xGU8k

It's a clickbaity title but it's a serious talk.

⬐ Akcium

Will do, thanks for sharing!

Whenever I hear someone saying the market is huge I think of this classic Thiel talk. Sounds like its definitely something you should watch. https://www.youtube.com/watch?v=3Fx5Q8xGU8k

Peter Thiel has a great talk at YCombinator on how "Competition is for Losers": https://www.youtube.com/watch?v=3Fx5Q8xGU8k

⬐ hieunc229

Do you agree with Peter? I guess the angle he is looking at as a huge player in the market, where he couldn’t get bigger. So, it’s is true to play his strategy.

On the otherhand, it is nearly impossible to not having competitors. Especially for young companies. Since most of the human needs (or demand) already have the solution (or supply)

⬐ kristianc

It also vastly depends on your goals. Thiel's advice is great if you are setting out to create the next Palantir, Facebook or Paypal.

If you're looking to bootstrap a passive-income business as a solo developer, it's not as useful. In fact I'd flip his advice on his head and instead of "Build a Platform" say "Build a successful and revenue positive business off someone else's platform with the aim of being acquired by it some day."

This post misses the forest for the trees. The reason for the low margins in the restaurant business is the lack of differentiation. Their products are largely commoditized, so they have no competitive advantage or market power. Peter Thiel discussed this in a lecture for YC, where he said that you can work very hard to make the best restaurant in a city, but it doesn't give you much pricing power, because the second best is still pretty good.[1]

[1] https://www.youtube.com/watch?v=3Fx5Q8xGU8k

⬐ jariel

The issue is not 'why they have thin margins' - the issue is their inflexible operating ability mostly due to fixed costs, specifically rent.

If restaurants had 20% margins they would still be facing collapse.

Rent is a huge portion of costs vis-a-vis most other businesses that can be run 'anywhere' whereas restaurants need prime locations.

⬐ nickff

If restaurants had much better margins, they (or their owners) would have bigger rainy day funds. There are lots of businesses with large fixed costs.

⬐ pixl97

There are few businesses with such large fixed costs and ample competition.

⬐ scoot_718

I have no idea where the restaurants I order from are.

⬐ mynegation

That's one way to look at it. I, on the other hand, right now order only from the restaurants that are close to home, and I know exactly where they are. In the hopes that at least some of my favourites survive.

⬐ paypalcust83

My great-grandfather was in the restaurant business back east, but my grandfather saw how unprofitable it was and became a mechanic rather than continue the family business. (He got fired once as a short-order chef in the 50's from a Howard Johnsons for cooking too well.)

Restaurants must relocate to cheaper areas like warehouses and shift to a delivery-first distribution model, which Uber, Lyft, and Google Express could help dispatch. It sucks from a customer-interaction perspective, but it's necessary. Other businesses like Pret in London were already using a hybrid centralized preparation with small, hyperlocal retail sales model.

If you want to make money, you can't think and do what everyone else is doing in all respects.

⬐ PaulDavisThe1st

Wait, so now the plan is (a) reduce rent overhead (b) pay someone to deliver all the food? You're betting that the increase in costs implied by (b) exceeds the possible drop caused by (a) ? Good luck!

⬐ 1996

> He got fired once as a short-order chef in the 50's from a Howard Johnsons for cooking too well.

Under which logic? The Baron Von Muchausen argument of demoralization?

⬐ throwawaysea

I didn’t understand that note about firing either. Care to explain your reference? I’m not familiar with it.

⬐ kayfox

Consistency is a big deal in restaurants because mismatched expectations drives bad experiences.

⬐ Melting_Harps

> Consistency is a big deal in restaurants because mismatched expectations drives bad experiences.

It could also be that the expo/chefs valued speed over anything else, I've never been or eaten at a Howards Johnoson's, but I can easily see it being an issue if you're trying to make an effort while being behind on a ton of tickets and management prioritizes volume over quality and it they're seen as the bottle neck.

I admit speed is not my strong point, but my presentation and knife skills are strong so I make up for it that way and I'm organized and clean--its what got me to work under a 3 star Michelin chef (total nightmare, he finally got fired a months after I left) despite focusing mainly on Farm to table concepts for most of my career.

But I've been judged negatively in other kitchens for playing to my strengths and believing/saying that speed comes with time--in the last place I proved that is the case and trained 4 people due to that philosophy/results.

But patience isn't exactly easily found in kitchens or tolerated amongst a bunch of fast talking, high-strung adrenaline/stress junkies which is what most chefs are, myself included.

⬐ Gollapalli

>Restaurants must relocate to cheaper areas like warehouses and shift to a delivery-first distribution model, which Uber, Lyft, and Google Express could help dispatch. It sucks from a customer-interaction perspective, but it's necessary. Other businesses like Pret in London were already using a hybrid centralized preparation with small, hyperlocal retail sales model.

Yes. Let's just kill all community space. Great idea. I too enjoy being a pod person.

⬐ MattGaiser

> Yes. Let's just kill all community space. Great idea. I too enjoy being a pod person.

The problem is that a heck of a lot of people are ok with that. I'm one of them. When I went to university, the delivery apps arrived in the middle of my time there. I think I went to a restaurant a 5-6 times in the remaining two years after UberEats and SkipTheDishes arrived.

I lived in the centre of downtown my final year and I didn't go to a restaurant downtown once.

I'm an extreme case of wanting to be at my computer to be sure, but it only takes a small percent opting out to make slim margins go to zero.

A lot of the demand for community type space was under a certain logistical duress. I either had to go to a restaurant, choose from a limited selection of delivered foods, or order takeout (and I may as well just eat it there if I have to make the journey anyway). That no longer exists and instead of paying for the overhead of the restaurant, my money goes to UberEats.

⬐ distances

I also want to be on my computer, but I have never ordered food delivery and don't plan to change that. I'm lucky to have a wealth of restaurants nearby and I like it that way, so it's eat out or take-away when I don't feel like cooking. The price premium alone for delivered food makes the whole concept unappealing to me in inner city.

⬐ pdonis

> Let's just kill all community space.

It might be helpful to differentiate "community space" from "restaurant". Or perhaps to differentiate "restaurant that is primarily selling convenience", which is the kind the article seems to be describing, from "restaurant that is primarily selling a dining experience in a community space". I would expect margins on the latter type of restaurant to be significantly higher.

⬐ chii

all restaurants want to be a 'dining experience'.

But only restaurants that can be this are famous ones which have a lot of celebrity pull. So the remaining ones that don't have such pull will need to adapt, or die.

It's not that all restaurants will die - just the ones who aren't celebrity/famous and can sell an experience.

⬐ pdonis

> all restaurants want to be a 'dining experience'.

Wanting to be a dining experience, and having "be a dining experience" be your primary business model, are two different things.

I'm sure the author of the article would like his restaurant to be a "dining experience", but that's not his primary business model. His primary business model is selling convenience. His customers buy his food because it's more convenient than preparing it themselves, not because they need to have the "experience" of dining in his restaurant. His restaurant could just as easily be a truck parked at the curb--as many sellers of food actually do in large cities--and his customers probably wouldn't care as long as the food was the same and was available as quickly.

Sure, if you ask the customers, they'll say they prefer the restaurant space to a truck at the curb, but unless they're willing to pay more for the former than they would for the latter, there's no business value in the former. And the fact that customers aren't willing to pay enough to support a restaurant space, but what they're willing to pay probably would be enough to support a truck at the curb, is precisely why the author is struggling to find ways to cut costs--because he mistakenly thinks the space itself is part of his business model, when it actually isn't. He'd like it to be, but it isn't, because his customers aren't willing to pay extra to support it.

⬐ lostcolony

Chain coffee houses are doing fine. And ever been to a McDonald's on a weekday morning? Community still has places, even if independent restaurants are likely going to reduce in number.

⬐ dralley

Because it's so much easier to fundamentally change a huge and enduring societal institution (the concept of restaurants in trafficked places) than to re-adjust the expectations of the fucking landlords, which has never been dealt with before...

The hyperfocus on "disruption" you sometimes see in here is really... something.

⬐ nrp

I know I'm being pedantic, but the best restaurants in the biggest food cities have pricing power because they effectively become Veblen goods. Benu, Coi, Quince, and so on can pretty much charge what they want to. They will continue to be booked out a month in advance, and the exclusivity itself becomes a draw. The line a restaurant needs to cross to achieve that differentiation is apparently a second Michelin star.

⬐ LaEc

Those are not examples of true Veblen goods but rather goods which use price as a signal of quality. True Veblen goods are things like staple foods for the very poor where the increase in price eats so much of their income that they can only buy more staple foods.

⬐ opo

You are thinking of a Giffen good.

A Veblen good:

>...A higher price may make a product desirable as a status symbol in the practices of conspicuous consumption and conspicuous leisure. A product may be a Veblen good because it is a positional good, something few others can own.

https://en.wikipedia.org/wiki/Veblen_good

A Giffen good:

>...The classic example given by Marshall is of inferior quality staple foods, whose demand is driven by poverty that makes their purchasers unable to afford superior foodstuffs. As the price of the cheap staple rises, they can no longer afford to supplement their diet with better foods, and must consume more of the staple food.

https://en.wikipedia.org/wiki/Giffen_good

⬐ dehrmann

> lack of differentiation.

Exactly. The French Laundry can charge $325+ for dinner because it is arguably one of the 15 best restaurants in the country. It is incredibly differentiated.

⬐ PaulDavisThe1st

That level of differentiation, though, is only available to on the order of 20 restaurants in the entire country.

⬐ dehrmann

I don't think we disagree here. I was pointing out that those rare times restaurants are differentiated, they can demand a premium, but only because they're differentiated. Restaurants aren't inherently low-margin, but most are, and it's because they're not differentiated.

⬐ wendyshu

What's an example of a well differentiated restaurant?

⬐ blueblimp

What I don't understand is that restaurants seem very well differentiated to me. I have a significant preference for the food of some restaurants over others, and I'm not remotely a foodie.

The medium post seems to be arguing for charging $12 for the example Doner instead of $11. It could just be that I'm relatively price-insensitive, but if I'm choosing between meals at two different restaurants where one costs $11 and the other $12, the decision is being made by which meal I'd prefer eating, not by the $1 difference.

If we're talking a 2x in price, then sure, that can sway my decision. But the article is not talking about such big differences.

I'm a little iffy on this idea that there is any monopoly on air travel in the US in any general sense. Maybe for specific routes, but if you look at the big picture, you have:

4 "major" carriers - American, Delta, United, Southwest

1 "mid major" / borderline major in Alaska Airlines

1 "not a major, but not exactly a regional carrier" in Jet Blue

and a bunch of regional outfits like Frontier, Porter, Spirit, etc.

That's not to say that more competition wouldn't be nice, but it's hardly the case that there is no competition. Heck, as far as that goes, Peter Thiel uses airlines - and their razor thin profit margins - as the prototypical example of why "competition is for losers"[1] in his talks.

[1]: https://www.youtube.com/watch?v=3Fx5Q8xGU8k

⬐ droopyEyelids

With air travel the routes are the product. If there is a monopoly on the route, there is a monopoly. And a cartel situation with the carriers agreeing not to compete with each other on that route.

This is the video you're talking about, probably.

https://www.youtube.com/watch?v=3Fx5Q8xGU8k

⬐ ouid

here's the transcript, for those of you that read faster than peter thiel talks

https://genius.com/Peter-thiel-lecture-5-business-strategy-a...

⬐ noir_lord

I tend to watch these things at x1.5 or faster but the transcript is useful as well :).

⬐ everybodyknows

I heard the talk as a sort of deprogramming of university graduates (or dropouts) from the cult of careerism. For years they've had it beaten into them that they have to "be competitive" in order to "succeed" -- when in the real world the outsized rewards go instead to those who succeed while hardly competing at all.

⬐ pascalxus

"We always think of advertising as this thing that works on other people, for all the stupid people who follow ads on TV, but they obviously work to some extent and they work to the disturbing extent on all of us and it's something we must work to overcome."

I've heard this alot. But, I happen to know it doesn't work well on me at all. I know this, because I can create a pie chart of all my spending and show you that a very tiny percent of it is products I've ever seen advertisements for (Most of my spending is on products that don't have advertisement - not that I'm against ads, it just worked out that way).

But, why does he say it's something we should work to overcome? If you are making smart purchasing decisions as a consumer or business, then there's no need to "overcome advertisement". On the contrary, it can point out products you might rather buy - although this rarely happens because advertisement still sucks.

If you are smart about your spending, then advertisement isn't the problem. The problem is all the bad products we're forced to buy because there's no alternatives and very limited competition: ISPs, Utilities (electricity, water, garbage), Housing.

⬐ pascalxus

The content of this talk was in his book, Zero to One, it's well written, a good read.

⬐ pascalxus

I like the fact that he's being honest: it's about making money. There's no pretense of "changing the world" BS.

⬐ cableshaft

This is a great talk. Made me really reconsider what I spend my time on for personal projects.

⬐ hive_mind

Could someone please clarify what the ": 5" in "2014: 5" means? Thanks.

⬐ Nadya

Lecture number. See the other related videos:

>Growth with Alex Schultz (How to Start a Startup 2014: Lecture 6)

⬐ ouid

Most of this lecture is merely a convoluted parallel construction of a fact which is already quite obvious, that if you want to make a profit you should avoid competition.

He claims that "the amount of value that you produce", and "the amount of that value that you can capture" are independent variables, but then spends the rest of his lecture treating them as strongly anti-correlated.

He touches briefly on the corrolary that capitalism does not actually reward people for the value they create, and seems to think of this as something of a problem, but I think that should be the focus of his lecture. If he really wants to convince the students of something that they didn't already believe, the talk should be titled "value is for losers".