Peter Thiel argues the Lean Startup's emphasis on minimum viable products and endless A/B testing is impractical. The search space is too large and time is too short. He points to PayPal's pivots from Palm Pilot to wireless to email payments as proof that vision matters first, testing second.
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There's obviously versions of both approaches that work. Having a minimum viable product, by definition is probably the minimum what you need, and then it's probably on some level you don't need more than a minimum viable product. So there's almost an analytic sense in which that is, that's tautologically true. At the same time, I do think we sort of tend to be dominated by a somewhat nihilistic bias where we claim not to know anything. And when you don't know anything, you end up defaulting too much to this sort of experimental search AB testing approach. What do we do, A or B? Let's figure it out, let's ask the customers. And in the abstract, I would say the problem with that is that the search space is simply way too big and you don't have enough time. There's enough time in the history of the universe, much less before your venture capital funding runs out, to do a thorough AB testing and go through the full search space. So I think in practice the problems are not as sort of purely empirical as people like to make them. I think it's often much better to have a good analytic framework. This is an important problem that needs to be solved. But this is the set of things we have to combine in just this way to do it. And then once you've done that, there obviously are a lot of ways to sort of fine tune that. And that's where I think the A B testing approaches are very useful. So I think that there's definitely room for both. I would say we live in a world where it's far too skewed to the first and not enough to the sort of vision driven, mission driven, vision driven company.
So maybe practically have you invested in companies who had that big vision, but then, to use I hate the word but sort of pivoted, but then nonetheless were successful. And so they had something that they went after. And at some point there's a tweak, I guess any company, there's always sort of tweaks on the margin in terms of what they're doing. But have you invested in companies where you've seen that sort of play out? Any examples come to mind?
There definitely are companies where. And again, it's a bit of a term of art. What counts as a pivot, what counts as a tweet? So all these, we sort of get lost in the terminology. There definitely are points where things changed quite a bit. I think PayPal original business plan was to have payments on Palm Pilots, then it was wireless payments, then it was payments linked to email. So we had a few fairly, fairly big pivots in the first year. I'm not sure there's anything especially virtuous about that. I think 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.
