Blake Masters

Here is an essay version of my class notes from Class 15 of CS183: Startup. Errors and omissions are mine.

Four guests joined the class for a conversation after the lecture:

1. Danielle Fong, Co-founder and Chief Scientist of LightSail Energy;
2. Jon Hollander, Business Development at RoboteX;
3. Greg Smirin, COO of The Climate Corporation; and
4. Scott Nolan, Principal at Founders Fund and former aerospace engineer at SpaceX (Elon Musk was going to come, but he was busy launching rockets).

Credit for good stuff goes to them and Peter. I have tried to be accurate. But note that this is not a transcript of the conversation. 

Class 15 Notes Essay—Back to the Future

I. The Future of The Past

Sometimes the best way to think about the future is to think about the way the future used to be. In the mid-20^th century, it was still possible to talk about a future where the weather would be precisely predicted or even controlled. Maybe someone would figure out how to predict tornadoes. Or maybe cloud seeding would work. Transportation was the same way; people expected flying cars and civilian submarines. Robotics was yet another exciting frontier that people thought would be big.

But fast-forward to the present. Things haven’t really worked out as people thought they would in the ‘50s and ‘60s. Weather still kind of just happens to us. People have pretty much accepted that as inevitable. The prevailing sense is that trying to control the weather is dangerous, and we shouldn’t tinker too much with it. Transportation has been similarly disappointing. Forget flying cars—we’re still sitting in traffic. There has been some progress in robotics. But certainly not as much as everybody expected. We wanted the General Utility Non-Theorizing Environmental Control Robot from Lost in Space. Instead we got the Roomba vacuum cleaner.

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Today, I am going to participate in ritual. Along with thousands of CrossFitters around the world, I am going to do “Murph.” This means that, starting at about 10 a.m., I will do the following as quickly as possible:

• Run one mile
• Do 100 pull-ups, 200 push-ups, and 300 air squats (in any order)
• Run one mile

In some sense, this is unproblematic. Honoring fallen soldiers is good. But there’s also a sense in which Hero WODs serve as veiled support for substantive military policies or nationalism generally. Most people who know CrossFit would have to admit that there’s a certain degree of militarism to it. (There’s a good post about this here.) Before its association with Reebok, CrossFit HQ sold clothing labeled “Infidel,” ostensibly to be worn as a badge of pride.

So Hero WODs are rituals, and rituals are worth being skeptical about. One should understand what he or she is doing before participating. Provided that you’re not going to get punished for being public with your freethinking, it is always better to think through your actions than to just go along with the crowd.

The question, then, is whether Hero WODs necessarily imply support for the conflicts in which these people were killed. If so, I would not participate, since I do not support those conflicts.

It’s hard to be critical of Hero WODs once you know the stories behind them. Last year I read Lone Survivor, which was written by Marcus Luttrell, the sole survivor from Michael Murphy’s SEAL team. It is epic and intense. After reading it, it seems completely right to say that Michael Murphy is worth honoring and remembering. But what that means and how one should do that are interesting questions.

I’ve done Murph several times before. It’s never easy. Physically, of course, it’s brutal. It’s enough to floor anybody. But the real wallop is mental and emotional. It’s a long, methodical workout. There is plenty of time to think. Plenty of time to go through your narrative.

So what is that narrative? It’s different for different people, which is probably good. But I think the traditional narrative—the standard, uncontroversial version—goes something like this:

Michael Murphy was a badass soldier. He made unquantifiable sacrifices. He fought bravely to protect his brothers and his country. He believed in America. He fought for justice. Michael Murphy’s life and death show that we, as a people, are strong enough to overcome our losses and still win.

That’s not necessarily a political narrative, but there’s some nationalism and perhaps even militarism to it.

My narrative is different. I try and strip away the military piece. Honoring Michael Murphy is different from honoring his, or any politics. Perhaps Michael would disagree. But my take is more like this:

Michael Murphy was a badass human being. He challenged himself mentally and physically. This workout is an extended metaphor for challenge and improvement. I am angry that Michael died. Death is a horrible thing. War is a horrible thing. Life isn’t always easy. It isn’t always fair. We have to fight death, disease, nature, and, sometimes, maybe even other people. There is honor in physical and mental perseverance. There is honor in humanity. We have to keep moving.

Perhaps some people see no difference between those two narratives. If so, fair enough. But I do. It’s important to me to draw that distinction, because Hero WODs are ambiguous phenomena. If we don’t clarify our thinking—if we don’t earnestly try to understand what we’re doing when we do them—then I’m not sure we are really honoring anybody or anything. We’d just be going through the motions. And when that happens, ritual devolves to mere process, absent meaning.

My dad and me, 39 minutes into Murph on Memorial Day 2011.

Here is an essay version of my class notes from Class 14 of CS183: Startup. Errors and omissions are mine. Credit for good stuff is Peter’s.

Class 14 Notes Essay—Seeing Green

I. Thinking About Energy

Alternative energy and cleantech have attracted an enormous amount of investment capital and attention over the last decade. Almost nothing has worked as well as people expected. The cleantech experience can thus be quite instructive. Asking important questions about what went wrong and what can be done better is a very good way to review and apply many of the things we’ve talked about in class.

A. The Right Framework

How should one think about energy as a sector? What’s an appropriate theoretical framework?

Revisiting the 2x2 matrix of determinate/indeterminate and optimistic/pessimistic futures may be useful. To recap, here are examples of those respective quadrants:

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Here is an essay version of my class notes from Class 13 of CS183: Startup. Errors and omissions are mine. Credit for good stuff is Peter’s entirely.

Class 13 Notes Essay— You Are Not A Lottery Ticket

I. The Question of Luck

A. Nature of the Problem

The biggest philosophical question underlying startups is how much luck is involved when they succeed. As important as the luck vs. skill question is, however, it’s very hard to get a good handle on. Statistical tools are meaningless if you have a sample size of one. It would be great if you could run experiments. Start Facebook 1,000 times under identical conditions. If it works 1,000 out of 1,000 times, you’d conclude it was skill. If it worked just 1 time, you’d conclude it was just luck. But obviously these experiments are impossible.

The first cut at the luck vs. skill question is thus almost just a bias that one can have. Some people gravitate toward explaining things as lucky. Others are inclined to find a greater degree of skill. It depends on which narrative you buy. The internal narrative is that talented people got together, worked hard, and made things work. The external narrative chalks things up to right place, right time. You can change your mind about all this, but it’s tough to have a really principled, well-reasoned view on way or the other.

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Here is an essay version of my class notes from Class 10 of CS183: Startup. Errors and omissions are mine.

Reid Hoffman, co-founder of LinkedIn and Partner at Greylock Partners, joined this class as a guest speaker. Credit for good stuff goes to him and Peter. I have tried to be accurate. But note that this is not a transcript of the conversation.

Class 12 Notes Essay—War and Peace

I.  War Without

For better or for worse, we are all very well acquainted with war. The U.S. has been fighting the War on Terror for over a decade. We’ve had less literal wars on cancer, poverty and drugs.

But most of us don’t spend much time thinking about why war happens. When is it justified? When is it not? It’s important to get a handle on these questions in various contexts because the answers often map over to the startup context as well. The underlying question is a constant: how can we tilt away from destructive activity and towards things that are beneficial and productive?

A. Theater 

It often starts as theater. People threaten each other. Governments point missiles at each other. Nations become obsessed with copying one another. We end up with things like the space race. There was underlying geopolitical tension when Fischer faced off with Spassky in the Match of the Century in 1972. Then there was the Miracle on Ice where the U.S. hockey team defeated the Soviets in 1980. These were thrilling and intense events. But they were theater. Theater never seems all that dangerous at first. It seems cool. In a sense, the entire Cold War was essentially theater—instead of fighting and battles, there was just an incredible state of tension, rivalry, and competition.

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Several people have asked if they can make ebook versions of the notes essays. 

You can, of course, always do this for your own use. But for now at least, please do not distribute to the public. (One guy even tried to sell a version that he made!)

All of these notes are wrapped in a creative commons license. 

If we do end up publishing a pdf/ePub/Kindle version, we will likely want to work with a single designer and get things to our liking. 

I’m not trying to stifle innovation with IP. Obviously I want Peter’s ideas and the notes to spread far and wide. And to be clear, I’m not interested in making money from them.

But neither do I want dozens of versions of a book alleging to have been written by myself or Peter Thiel floating around when, in fact, neither of us has seen or approved the particular formatting, editing, etc.

Here is an essay version of my class notes from Class 11 of CS183: Startup. Errors and omissions are mine. Credit for good stuff is Peter’s.

Class 11 Notes Essay—Secrets

I.  Secrets

Back in class one, we identified a very key question that you should continually ask yourself: what important truth do very few people agree with you on? To a first approximation, the correct answer is going to be a secret. Secrets are unpopular or unconventional truths. So if you come up with a good answer, that’s your secret.

How many secrets are there in the world? Recall that, reframed in a business context, the key question is: what great company is no one starting? If there are many possible answers, it means that there are many great companies that could be created. If there are no good answers, it’s probably a very bad idea to start a company. From this perspective, the question of how many secrets exist in our world is roughly equivalent to how many startups people should start.

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I’ve put 10 class notes essays online so far. That material represents roughly half of the course (there are 19 classes in total).

Several people have asked me what the traffic to the site has been. I always enjoy when people post this kind of data that gives their projects more transparency (e.g. this). So here is some of that for anyone who might be interested.

The date range is April 2nd (when the class started) through this morning, May 10th.

At first glance an average visit duration of 2 minutes seems very low. Many people are not reading material that, at least for a moment, is literally right in front of them. But maybe 2 minutes is actually quite high. While many people may tl;dr click away, many others seem to be reading the full posts.

The image below shows the spike from David Brooks’ Creative Monopoly piece in the NYT. Daily visitors shot up to 25k and have since settled down to about 5k/day since. 

(I edited this graphic a bit to get the visits axis labeled on this scale.)

Update: here is the visit duration view:

Some possibly relevant things that people have told me today:

• Readers using things like Instapaper or Pocket might not be fully represented.
• Google Analytics can’t detect single page time, so visits from people who read in full off a link and then bounce go unrecorded or are logged in the first bucket.

The traffic stuff is interesting. I won’t pretend I know exactly what the stats mean. In some sense it doesn’t matter; it’s the same undertaking whether 2, 200, or 200k people follow along. But truly interesting ideas should spread far and wide, and it’s been fun to see that happening.

Here is an essay version of my class notes from Class 10 of CS183: Startup. Errors and omissions are mine.

Marc Andreessen, co-founder and general partner of the venture capital firm Andreessen Horowitz, joined this class as a guest speaker. Credit for good stuff goes to him and Peter. I have tried to be accurate. But note that this is not a transcript of the conversation.

Class 10 Notes Essay—After Web 2.0 

I.  Hello World

It all started about 40 years ago with ARPANET.  Things were asynchronous and fairly low bandwidth. Going “online” could be said to have begun in 1979 with the CompuServe model. In the early ‘80s AOL joined in with its take on the walled garden model, offering games, chat rooms, etc. Having laid the foundations for the modern web, the two companies would merge in ’97.

The Mosaic browser launched in 1993. Netscape announced its browser on October 13^th, 1994 and filed to go public in less than a year later. And so began the World Wide Web, which would define the ‘90s in all kinds of ways.

“Web 1.0” and “2.0” are terms of art that can be sort of hard to pin down. But to speak of the shift from 1.0 to 2.0 is basically to speak of what’s changed from decade to decade. When things got going content was mostly static. Now the emphasis is on user generated content, social networking, and collaboration of one sort or another. 

Relative usage patterns have shifted quite a bit too. In the early ‘90s, people used FTP. In the late ‘90s they were mostly web browsing or connecting to p2p networks. By 2010, over half of all Internet usage was video transmission. These rapid transitions invite the question of what’s next for the Internet. Will the next era be the massive shift to mobile, as many people think? It’s a plausible view, since many things seem possible there. But also worth putting in context is that relative shifts don’t tell the full story. Total Internet usage has grown dramatically as well. There are perhaps 20x more users today than there were in the late ‘90s. The ubiquity of the net creates a sense in which things today are very, very different. 

II.  The Wild West

The Internet has felt a lot like the Wild West for last 20 years or so. It’s been a frontier of sorts—a vast, open space where people can do almost anything. For the most part, there haven’t been too many rules or restrictions. People argue over whether that’s good or bad. But it raises interesting questions. What enables this frontier to exist as it does? And is the specter of regulation going to materialize? Is everything about to change? 

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Here is an essay version of my class notes from Class 9 of CS183: Startup. Errors and omissions are my own. Credit for good stuff is Peter’s entirely. 

Class 9 Notes Essay—If You Build It, Will They Come?

 I. Definitions 

Distribution is something of a catchall term. It essentially refers to how you get a product out to consumers. More generally, it can refer to how you spread the message about your company. Compared to other components that people generally recognize are important, distribution gets the short shift. People understand that team, structure, and culture are important. Much energy is spent thinking about how to improve these pieces. Even things that are less widely understood—such as the idea that avoiding competition is usually better than competing—are discoverable and are often implemented in practice.

But for whatever reason, people do not get distribution. They tend to overlook it. It is the single topic whose importance people understand least. Even if you have an incredibly fantastic product, you still have to get it out to people. The engineering bias blinds people to this simple fact. The conventional thinking is that great products sell themselves; if you have great product, it will inevitably reach consumers. But nothing is further from the truth.

There are two closely related questions that are worth drilling down on. First is the simple question: how does one actually distribute a product? Second is the meta-level question: why is distribution so poorly understood? When you unpack these, you’ll find that the first question is underestimated or overlooked for the same reason that people fail to understand distribution itself.

The first thing to do is to dispel the belief that the best product always wins. There is a rich history of instances where the best product did not, in fact, win. Nikola Tesla invented the alternating current electrical supply system. It was, for a variety of reasons, technologically better than the direct current system that Thomas Edison developed. Tesla was the better scientist. But Edison was the better businessman, and he went on to start GE. Interestingly, Tesla later developed the idea of radio transmission. But Marconi took it from him and then won the Nobel Prize. Inspiration isn’t all that counts. The best product may not win. 

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Here is an essay version of my class notes from Class 8 of CS183: Startup. Errors and omissions are mine.

Bruce Gibney, partner at Founders Fund, gave the lecture these notes are based on. Credit for good stuff goes to him and Founders Fund.

Class 8 Notes Essay—The Pitch

I.  Pitching Context & Goals

One of the most important things to remember when thinking about pitching is that there are huge numbers of pitches in the world. Venture capitalists hear quite a few of them. And they find the process frustrating because it is such a low yield activity (a tiny fraction of first pitches lead to subsequent diligence and even fewer of those lead to a deal). So if you want VCs to listen to you, you need to force them to listen—to break through the clutter. Doing so requires you to hack into the VC mind. 

Conceptually, pitching sounds easy. You are smart. You have a great idea and you tell people with money that great idea. They’re rational; they give it to you. 

But it’s not that easy. What you essentially have to do is convince a reasonably smart person to exchange his capital for your piece of paper (a stock certificate) that is really nothing more than a promise about something that may be valuable later but, on a blind statistical basis, probably won’t be. It turns out that this is difficult.

Humans are massively cognitively biased in favor of near-term thinking. VCs are no different. That’s curious, because you’d think they would have overcome it, since good long-term thinking is sort of the entire nature of venture capital. But humans are humans. VCs are just sacks of meat with the same cognitive biases as everyone else. They are rational systems infected with emotional viruses (and infused with a tinge of wealth and privilege and all that implies). You must address both sides of their brains; you have to convince VCs that your proposal is economically rational, and then you must exploit their reptilian brains by persuading their emotional selves into doing the deal and overcoming cognitive biases (like near-term focus) against the deal. You should also offer VCs entertainment. They see several pitches a day (most bad) and that gets boring. Be funny and help your cause. In the tech community, even one joke will suffice.

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