Advance to Go (Collect $$$)

PayPal cofounder advises entrepreneurs to aim for a monopoly

A WORD OF ADVICE for aspiring entrepreneurs: don’t pitch Peter Thiel on a restaurant. He’s not a big fan. In fact, the PayPal cofounder and billionaire investor thinks restaurant business plans are among the least sustainable, because eateries too often succumb to competition.

The restaurant taboo was one of the many rapid-fire nuggets of wisdom that Thiel shared at Questrom during a talk celebrating BUzz Lab, the University’s new center for entrepreneurship.

Thiel challenged the audience to consider this question: “What great company is nobody starting?” He also encouraged them to think of competition as the anto­nym of capitalism. “What you always want to be aiming for as an entrepreneur is a monopoly,” he said. Google has dominated the search engine market since 2002, he said, although its business moves—from smartphones to self-driving cars—try to hide that fact.

Successful entrepreneurs find niche markets. “All happy companies are different, because they found something unique to do,” Thiel said. Those that follow trends are bound to fail.

So what’s that first step toward launching a monopoly? Thiel advised focusing first on a small market, and then recognizing the value of a product or service and capturing a sizable percentage of the market share. He was one of the first people to financially back Mark Zuckerberg when his fledgling Facebook had a market of just several thousand Harvard undergraduates.

Thiel also compared the profitability of the aviation and search engine industries. The first generates $180 billion per year, while the second pulls in almost $50 billion per year. However, because airline industries are highly competitive, they end up with a 1 to 2 percent yearly profit margin; search engines like Google have a choke hold on the market and see a 20 to 30 percent yearly profit margin.