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Peter Thiel: The Lean Startup's Nihilistic Bias — You Can't A/B Test Your Way Through the Universe

By Peter Thiel · Strategy · 1 min read

We tend to be dominated by a somewhat nihilistic bias where we claim not to know anything. When you don't know anything, you default to A/B testing. But the search space is way too big. You don't have enough time.

Key Points

The lean startup's experimental approach has a nihilistic bias — claiming not to know anything
The search space is too big to A/B test through — you need a good analytic framework first
PayPal pivoted three times in year one — but it's not virtuous to have a bad idea in the first place

The search space is simply way too big. There's probably enough time in the history of the universe — much less before your VC funding runs out — to do a thorough A/B test.

The Nihilistic Bias

Thiel: There are versions of both approaches that work. Having a minimum viable product — by definition, it's probably the minimum what you need. At the same time, we tend to be dominated by a somewhat nihilistic bias where we claim not to know anything.

When you don't know anything, you default too much to this experimental search, A/B testing approach. What do we do, A or B? Let's ask the customers.

We're dominated by a nihilistic bias. Claim not to know anything. Default to A/B testing.

The Search Space Is Too Big

Thiel: The problem is that the search space is simply way too big. There's probably enough time in the history of the universe — much less before your venture capital funding runs out — to do a thorough A/B test and go through the full search space.

It's often much better to have a good analytic framework. This is an important problem that needs to be solved. This is the set of things we have to combine in just this way. Then once you've done that, there are ways to fine-tune — and that's where A/B testing is useful.

The search space is too big. Have a framework first. A/B test to fine-tune.

PayPal Pivoted. That's Not Virtuous.

Thiel: PayPal's original business plan was payments on Palm Pilots. Then wireless payments. Then payments linked to email. We had a few fairly big pivots in the first year.

I'm not sure there's anything especially virtuous about that. If you have a dumb idea, it's important to change it. But it's not virtuous to have a really bad idea in the first place.

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