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Peter Thiel Says the Lean Startup Has a Fatal Flaw

By Peter Thiel · Strategy · 1 min read

You don't have enough time to A/B test your way to a breakthrough. Start with a vision.

Key Points

The search space is too big for pure experimentation to work
You need a strong analytical framework first, then fine-tune with testing
The world is too skewed toward experimentation and not enough toward vision

The search space is simply way too big. You don't have enough time before your venture capital funding runs out to do thorough A/B testing.

The Problem with Not Knowing Anything

Peter Thiel sees a bias in startup culture. Founders claim they don't know anything. So they default to experiments. A/B test everything. Ask the customers. Let the data decide.

Thiel says this sounds smart. It's not. It's nihilistic.

When you don't know anything, you end up defaulting too much to the experimental search approach.

The Search Space Problem

Here's Thiel's math. The number of possible things you could build is infinite. The time before your funding runs out is finite. You can't test your way through the full search space. Not in a lifetime. Not in the history of the universe.

You can't go through the full search space. Not in a lifetime. Not in the history of the universe.

The search space is simply way too big. You don't have enough time to do a thorough A/B testing.

Start with a Framework

Thiel's alternative is simple. Start with a strong analytic framework. This is an important problem. Here's the set of things we need to combine. Here's how they fit together.

Then fine-tune with testing. But the vision comes first. The experiments come second.

It's often much better to have a good analytic framework first.

The PayPal Pivots

Thiel isn't rigid about this. PayPal pivoted multiple times. Payments on Palm Pilots. Wireless payments. Email-linked payments. Three big pivots in year one.

But he's clear: there's nothing virtuous about starting with a bad idea. If you have a dumb idea, change it. But don't celebrate having a dumb idea in the first place.

If you have a dumb idea, it's important to change it. But it's not virtuous to have a bad idea in the first place.

The World Needs More Vision

Thiel: We live in a world where it's far too skewed to experimentation and not enough toward vision-driven, mission-driven companies.

We live in a world far too skewed to experimentation and not enough toward vision-driven companies.