Being Peter Thiel: Thoughts on Creation, Risk, Rapid Innovation, Future Investment & Entrepreneurialism -- Part 1
The following is the first post of a three-part series.
CREATING A BETTER, MORE EFFICIENT SANDBOX
Last week, I returned from Israel where I gave a talk on data, storytelling and intelligent media at an event hosted by Cellcom. The trip was cathartic on many levels.
While the nuances are certainly unique to the place and the culture, the takeaway for me was roughly the same it's been in various foreign markets to which I've spoken over the last few years: The elements of creativity and business opportunity are becoming more and more aligned.
More specifically, what continues to impress me about smaller media and technology markets is the high level of innovation that springs from them. Everyone from the bit player to the multi-national conglomerate tends to think more on the edges.
As evidence in Israel: Channel 10's hands-on investment in an online content platform (Mako) and a hybrid multi-platform distribution technology/service (Screenz). Channel 10 is the not only the biggest TV network in Israel, but it is fast becoming one of its most active new media and technology incubators. The network also looks at its content partnerships somewhat agnostically; it uses social technology rigorously in its research practices, and where there is consumer demand, groups will jump over hurdles (such as competing production entities or networks) to make sure those audience needs are met. In short, innovative measures make for a better, more efficient sandbox.
If anything has been made clear over the last three years, perhaps even the last decade, it is this: Innovation as a mindset, as a practice, as an output, is more important than ever before.
This is a particularly interesting and confounding notion when you think about how, coming out of a post-industrial age, we can't produce fast enough and build markets quickly enough. Fact is, production isn't really the problem -- distribution is. Case in point, the digital media business: The cost to produce has gone way down, while the cost to distribute has gone way up (distribution within channels is fairly easy, but the ability to distribute across them is not).
So where do we net out in an era where time, attention and investment are so critical, and at the same time, so hypersensitive to each other?
BUSINESS INTENT & CULTURAL CONTEXT
Let's accept another inalienable truth: In the 21st century, culture defines business (not the other way around).
In the last century, we, as tribes, used to go to work, often in manufacturing jobs, and this routine dictated everything from how we spent our money, to how we lived our lives and raised our families. As manufacturing and distribution became more and more democratized, this changed significantly. Now, in this century, our own tribal behavior dictates the businesses we run or those for which we work.
This means that the nerve centers for economic growth are not economic at their core like they once were; they are primarily educational, infrastructural, civic and market-driven. This means that the businesses we create and support aren't just meant to serve financial markets or media markets, but rather emerging markets that serve the needs of people... Real needs of real value and informational utility.
This means that everything we do in business must be mindful of the bigger picture.
To no great surprise, the old, paradigmatic models found in finance, media, education and government are literally breaking at the seams. And if this is the case, the way we create, fund and leverage businesses must fundamentally change.
THE MYTH OF PETER THIEL
Peter Thiel is a figurehead for a transitional economy; he involuntarily said so in this artfully written manifesto from early October called "The End of the Future". (By the way, if you are a history or a pyscho-anthropology buff, I highly recommend this read – Thiel has a slick mind).
The man who so handsomely profited from Facebook, PayPal and other popular Silicon Valley deals now finds himself at an enviable crossroads: Even his own riches can't generate deals quickly enough.
There are a multitude of reasons behind this, many of which he strategically articulated and defended somewhat melodramatically in his manifesto. However, the main thrust is, for the most part (and the part Thiel himself won't tell you outright), the venture community has squeezed just about every ounce of blood from the start-up and middle-stage rock (Not to mention that private equity firms and hedge funds have done the same, but that's another story altogether…). There's lots of evidence to support this, including the failure rate of start-ups (even if "only" half of these businesses fail, that is not good) or the "Great Speedup" that drives them -- a society-wide ethos maintaining that hard work and sacrifice mean employees should literally give up their lives for a company, and for the prospect that they will strike it rich should they grind it out.
To boot, many VCs -- let me emphasize: many, but not all -- are not qualified operators nor do they care about the long-term growth of the companies into which they invest, as much as they might claim that they do. This seems antithetical to the purpose of investment -- to fund, grow and build a market around a said value proposition -- but in a commerce environment built on creating scarcity and hyper-inflated demand, you can quickly identify the logic. In other words, the intention has been to infiltrate, corner and dominate markets, as opposed to building them up. And of course, this does little for our economy -- locally, nationally or globally.
Let's look at the other side of this bittersweet coin. The investment community is often portrayed as an elite club that has little concern or empathy for the "little people", and those people are the ones who are actually generating and driving the great ideas of today and tomorrow. Meanwhile, larger, more commercialized industries can't keep up with the rate of technology as well as the ebb-and-flow of global economics. And so we are left with a wild conundrum, which is the need to bootstrap innovation... And fast.
Mr. Thiel created Breakout Labs to stem this tide and to seize the opportunities that really are present at the "smaller" intersections of art, science, technology and commerce. Kudos to Mr. Thiel. But are these efforts enough investment? Will these efforts really create the markets of tomorrow? These are open-ended questions. However, there are some promising alternatives to accompany the broader push into the more unseen territories of innovation.
Just this past weekend, my friend Logan Allin (Invesco & The Hemisphere Fund) gave me some background on K5 Ventures, a new platform that intends to fund rapid innovation projects, meaning those ideas that can grow and scale through carefully guided and measured investment. Most of these investments focus on new social technologies or real-time analytics tools, but all intend to either repair broken media and technology systems, and/or create entirely new ones. They also intend to apply to markets that can reach across verticals.
This "horizontal" approach to developing ideas suggests that competition isn't driven by market gains, but rather for gains in value. These shifts become "co-opetitive", and the products and/or services themselves drive that value into new business opportunities. A huge difference.
Clearly, the folks at K5 see an opportunity that most venture groups don't: That the investment really is in emerging markets. K5 also doesn't have the kind of pressure or exposure most venture firms have because they are investing their own money – not other people's money – into the deals they generate. Yet, they face the same challenge that Mr. Thiel does: deal flow.
So, back to the new dream, one that bootstraps ideas gleaned from not-so-popular culture, those ideas that exist in the spaces in between.
In the next piece we'll examine what this means, and explore some scenarios that incorporate real business application.