Peter Thiel: “Vertical integration is an under-explored modality of technological progress”

“In my mind, there probably are only two broad categories in the entire history of the last 250 years where people have actually come up with new things and made money doing so.”

The first is vertically-integrated, complex monopolies, which people started building at the end of the second industrial revolution—like Standard Oil and Ford at the end of the 19th century and start of the 20th century.

As Peter points out, this is done surprisingly little today:

“It’s typically fairly capital intensive and we live in a culture where it’s very hard to get people to buy into anything that’s super complicated and takes very long to build.”

But if you can pull it off—as Elon Musk has done with Tesla and SpacEx—these companies can be very valuable.

“Vertical integration is a very under-explored modality of technological progress that people would do well to look at more.”

The other category Thiel has come up with new things and made money doing so is software.

“There is something about software itself that is very powerful. Software has these incredible economies of scale and low marginal cost. And there is something about the world of bits—as opposed to the world of atoms—where you can often get very fast adoption.”

Source: Y Combinator “Competition is for Losers with Peter Thiel”