Mr. Thiel’s latest book is mainly compilation of his Stanford lectures, so it feels a bit eclectic, but for such short page-turner, it doesn’t really matter and most of the book reads like a bible to someone like me, to libertarian running his first (well, second, but about that below) start-up.

You can almost read Mises in Mr. Thiel’s initial definition of term monopoly, which is important for later implications he draws from it. Mises explained how problematic is the very definition of monopoly in policies aimed at preventing or dismantling one because virtually anything can be considered to be a monopoly. Any homeowner selling a house has a monopoly on that particular property because there exists only one house like that. Any sane person would agree, that it doesn’t mean the owner should be forbidden to exclusively sell the house, or that he should split it into several parts and sell all but one (as some companies were threatened). If a train operator on a free market is the only one operating a certain route, which would consider him a monopoly, he still has to compete with bus operators or airlines. And even if theoretically he would own all those businesses, he still has to compete for costumers choosing between different destinations or an option to simply stay home and spend their money otherwise. Real monopoly can be created only by government’s total ownership of means of production. A decision at which level a monopoly over certain segment is deemed harmful is thus completely arbitrary and as such, no policy decisions should be based upon it.

Mr. Thiel takes this notion even further and explains how natural monopolies are in fact beneficial to consumers because they allow businesses to focus on long-term innovations rather than slashing margins at all costs to keep up with competition. He is certainly not alone in this argument, Robert Murphy explained how different monopolies in the history of American capitalism benefited consumers by bringing innovations and still rapidly lowering prices.

Yet regulators and often history draws simple conclusions, that there must be something wrong with any company having such position. Many real heroes of 19th century capitalism are referred to as robber barons and contemporary monopolies such as Microsoft and Google have spent countless millions of dollars in legal fees or faced risk of being dismantled by progressive populists who hold envious grudge against them. As a result, they loose their focus on innovations (as Microsoft did), which hurts the same consumers these bureaucrats pretend to protect or they quickly expand to other segments in order to avoid scrutiny. Thus Google’s constant re-imagining itself as a technology company even vast majority of their revenues come from search advertising where they hold effective monopoly.

Monopoly, Mr. Thiel argues is a necessary target for any startup with ambitions to become another Facebook or Google. Startups shouldn’t just look for validated models and take them from one to many, they should create something from nothing, the market of their own, go from zero to one (and as he argues later, any successful VC needs to look only at startups with potential to become another Facebook or Google). He outlines several characteristics, at least some of which any successful startup with monopolistic potential should have and underlines them with the story of his own – story of PayPal.

The stage for the PayPal success is strikingly similar to where the world stands now. Federal reserve was kicking the can down the road after the collapse of over-leveraged Long-Term Capital Management by bailing it out and slashing interest rates (sounds familiar?), which lead to malinvestments in other places, particularly tech sector. Valuations went nuts, IPOs were happening all over the place and Ferrari showrooms were full of geeks. Thiel and his co-founders knew the party was going to end soon, so they moved fast to raise funds while those were available. When the shit hit the fan, PayPal was financially secured while other startups expected the next round of funding which would never arrive because money was simply gone.

This should be a lesson for today’s startups – raise while money is up for grabs, spend wisely and be there when competition gets wiped out waiting for more funds to come. Even if the company doesn’t have competition in it’s business model, it competes for resources like employees or investments with others, so when the latter runs dry, it’s good to have resources for more or better of the former and to be able to innovate even when markets tank. In recent interview, Mr. Thiel argues we are not in the same situation, because everyday folks are not involved in the NASDAQ casino. I would add that’s mainly because their savings are gone and have been replaced with even more institutional leverage, but of course the question remains to what extent.

Mr. Thiel explains his skepticism about current education system, which favors convention to individual talent. If tough competition shortens the vision of businesses and if the most innovation comes from monopolists in their respective niche markets, there is no reason to expect different results in highly competitive and unified education system where everyone is taught the same stuff and rewarded with the universal grade system regardless of their individual talents and dreams and visions are beaten out of them in the process.

Monopolies are good, Mr. Thiel says. From a certain point of view and in such narrow (natural) definition probably for the society, but most certainly for those who start, own and invest in them because they make a ton of money, shape the future and claim a good share in making the world a better place. Because VCs typically have one investment which returns more than all others combined, i.e. they need one investment which will cover returns of he whole fund, it makes more sense for them to invest only in businesses which have a potential to become next Google or PayPal by creating a new market segment and seize a monopoly over it,

The process of going from zero to one needs to be incremental, with company looking for the smallest possible niche to take over, like Facebook did with Harvard social network or PayPal did with – then very narrow group of – eBay “PowerSellers”. Only after seizing that market, it should move to wider audience. The book provides a variety of ingredients such successful monopoly should have, some of which will probably seem obvious, but others might give you a bit of head scratching. I myself am guilty of repeating on multiple occasions, that if over-the-counter retail is multi-trillion dollar market, even if we get .1% of it, we would have won a lottery. This is a clear red flag according to Mr. Thiel. Avoid competition at all costs, create your own market he says. Its’ hard to argue with that.

The book is a lot of fun at times. As a Star Wars fan and libertarian, I thoroughly enjoyed comparison of capitalist George Lucas’ trilogy to communist Star Trek and as someone who had to get used to show his face on live prime-time TV here and there when Bitcoin broke mainstream a year ago, I understand the reference to nerdy fear of cameras or skepticism towards journalism. His favorite interview question “what important truth do very few people agree with you on” made me almost scream “state sucks!” and memories of PayPal team’s vision of creating currency independent of any government strongly resembles current sentiment among Bitcoin entrepreneurs and enthusiasts.

Unfortunately things go sour when Mr. Thiel moves on to his and his partner’s post-PayPal activities.

Mr. Thiel’s repeated praise of Elon Musk’s ability to secure government-granted (and taxpayers-backed) massive loan for Solarcity, NASA’s contracts for SpaceX (courtesy of taxpayers) or outright subsidies, which middle class pays for wealthy buyers of Tesla cars are in striking contrast to his self-proclaimed (and still widely practiced) libertarianism. Even the statist “wing” of libertarians (minarchists if you will) admit only very narrow role of the state, namely in defense, justice and law enforcement, certainly not in space programs or electric cars. Mr. Thiel’s own business rides on the wave of surveillance and police state the US is turning into, which undermines civil liberties of ordinary Americans and is most certainly against anything that can be considered part of a libertarian philosophy. Free market capitalism with consumer choice over what should be produced and what shouldn’t is a necessary component of libertarianism as opposed to crony capitalism, which favors businesses and sectors on arbitrary grounds and redistributes ever-growing portion of the resources created by general public and taken coercively by bureaucrats with guns. Mr. Musk with his active lobbying for subsidies for sectors and projects he considers necessary is a prime example of crony capitalist of 21st century, albeit one with much more sex-appeal to modern progressives (see great reporting by Tim Carney on this topic). No libertarian can seriously celebrate Mr. Musk for his recent activities, let alone extract resources from people to improve surveillance systems which rob them of their privacy and civil liberties.

This is not some academic talking sour grapes. I had a short stint when I tried to get into 3D printing and makers movement with my own start-up before finally admitting Bitcoin is my real passion. Since 3D printing is currently sector favored by Singaporean government, I was repeatedly offered and I repeatedly turned down taxpayers-backed funding. Even now after launching Coin Of Sale, I have refused to join a scheme which would allow me to extract subsidies from local innovation fund and I had to turn down one investment fund in the round we are trying to close because it was partially backed by EU funds. I know how is it to have such easy money at the reach of your hand and I would like to give Mr. Thiel a benefit of doubt by saying it was a hard decision to refuse them, but it wasn’t. You either are a libertarian and live by those principles or you aren’t. I very much hope Mr. Thiel will have a change of mind and heart and return to applying his genius on what consumers, not bureaucrats, spies and soldiers want. He once vastly improved the world we live in, we all could use that again.