Faking Market Share

I enjoyed Peter Thiel’s Zero to One which he wrote with Blake Masters. Thiel seems more interesting than most business leaders. The book spews out ideas in a slightly haphazard, but never boring, fashion. Thiel is unafraid to think outloud and while I didn’t agree with some of his conclusions he was clearly willing to say things that might be controversial. He went well beyond the business as war metaphors that business leaders like to offer to puff themselves up. (For the record Thiel’s most egregious error was on page 123, he explained his team “preferred the capitalist Star Wars to the communist Star Trek”. Ignoring his overenthusiatic political labeling he doesn’t explain how intelligent people can prefer Star Wars to Star Trek.)

Thiel has views that would generally be classed as right of centre. Despite this he isn’t shy about highlighting what he sees as a contradition between competition and capitalism. He sees the aim of capitalism as trying to ensure that you aren’t competing away profits. (This isn’t necesarily bad for consumers. For instance, you can avoid competition by simply offering something much better for your consumers than any potential rival.)

My favourite section is when he details competitive lies. He argues non-monopolists claim to be “in a league of our own” (page 28) despite being the same as other firms. On the other hand monopolists, hoping to avoid government oversight, claim to be just a small player in a big market. Google thus claims to be a medium sized advertising firm not the only search engine worth thinking about. What allows both sets of firms to lie? Of course it is market share. This metric can be massaged to say whatever you want it to say. Thiel talks about how you can always own a market. Define the market really narrowly, such as British food in Palo Alto.

“Non-monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets…. Monopolists, by contrast, disguise their monopoly by framing their market as the union of several large markets” (Thiel and Master 2014, page 30). Few have explained the problems with market share as clearly as Thiel.

Read: Peter Thiel with Blake Masters, 2014, Zero to One: Notes on Startups, or How to Build the Future, Crown Business, New York.