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Definite Optimism and Planning

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Definite Optimism and Planning

Scope: Thiel’s argument in Zero to One that a definite plan for the future, not iteration or option-collecting, is what produces new companies. Covers the definite/indefinite distinction, the critique of lean methodology, and why definite founders do not sell. For the monopoly logic the plan serves, see Monopoly and Competition Avoidance.

The framing of definite versus indefinite optimism is introduced in Peter Thiel’s author profile. This article develops what the fuller set of highlights adds: how indefiniteness shows up in institutions, why Thiel rejects the lean-startup default, and what a definite plan changes about decisions such as selling the company.

Indefinite Attitudes Explain Institutional Dysfunction

Thiel treats indefiniteness as a diagnosis of the wider culture, not only of startups. Without concrete plans, people reach for formal rules and portfolios of options.

“Indefinite attitudes to the future explain what’s most dysfunctional in our world today. Process trumps substance: when people lack concrete plans to carry out, they use formal rules to assemble a portfolio of various options.”

Finance is his clearest case:

“Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.”

He sees the same absence of plans in corporate and household balance sheets: “U.S. households are saving almost nothing. And U.S. companies are letting cash pile up on their balance sheets without investing in new projects because they don’t have any concrete plans for the future.” The pattern also reaches mortality: “Today our society is permeated by the twin ideas that death is both inevitable and random.”

The same indefiniteness appears in individuals. The definite person “determines the one best thing to do and then does it. Instead of working tirelessly to make herself indistinguishable, she strives to be great at something substantive—to be a monopoly of one.”

The Critique of Lean Methodology

The highlights add Thiel’s direct objection to the lean-startup default, which the existing wiki flags as a tension (see the warning in Monopoly and Competition Avoidance).

“But leanness is a methodology, not a goal. Making small changes to things that already exist might lead you to a local maximum, but it won’t help you find the global maximum.”

“iteration without a bold plan won’t take you from 0 to 1. A company is the strangest place of all for an indefinite optimist: why should you expect your own business to succeed without a plan to make it happen? Darwinism may be a fine theory in other contexts, but in startups, intelligent design works best.”

He reverses the four conventional principles (make incremental advances, stay lean and flexible, improve on the competition, focus on product not sales) and says “the opposite principles are probably more correct: 1. It is better to risk boldness than triviality. 2. A bad plan is better than no plan. 3. Competitive markets destroy profits. 4. Sales matters just as much as product.”

Steve Jobs is his counter-example to the minimum viable product: “Forget “minimum viable products”—ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others’ successes.” And: “Long-term planning is often undervalued by our indefinite short-term world.”

Where the lean/definite split dissolves

Thiel’s target is iteration without a destination (“iteration without a bold plan”), not iteration itself. Read this way it is compatible with Build-Measure-Learn as a method for executing toward a definite plan, and the quarrel is about which comes first. The sequencing view is developed in Building Before Scaling.

Definite Founders Do Not Sell

A concrete consequence concerns acquisition offers:

“founders only sell when they have no more concrete visions for the company, in which case the acquirer probably overpaid; definite founders with robust plans don’t sell, which means the offer wasn’t high enough.”

His illustration is Yahoo!‘s $1 billion offer for Facebook in July 2006, which Zuckerberg dismissed in the board meeting: “Okay, guys, this is just a formality, it shouldn’t take more than 10 minutes. We’re obviously not going to sell here.” Thiel’s reading: “Mark saw where he could take the company, and Yahoo! didn’t. A business with a good definite plan will always be underrated in a world where people see the future as random.”

Two Cautions Thiel Attaches

  • Exponential growth: “never underestimate exponential growth.” Definite plans compound; indefinite ones cannot.
  • Durability: a definite plan has to cover the long run. “For a company to be valuable it must grow and endure, but many entrepreneurs focus only on short-term growth.” The question to ask is “will this business still be around a decade from now?”

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