Course Quiz

Q1 In Thiel's framing, what is the one-word synonym for horizontal (extensive) progress?

• Technology
• Globalization
• Disruption
• Optimization

Q2 Why does Thiel argue that statistical thinking cannot guide a 0-to-1 venture?

• Because startups rarely gather enough user data in their first year
• Because markets are perfectly efficient, so no analysis of any kind helps
• Because something genuinely new has a sample size of one, so there is no distribution to reason from — you need determinate, calculus-style planning
• Because probability theory only applies to public companies with long track records

Q3 According to the Coase framework in this class, what determines the size at which firms settle?

• The balance point between internal coordination costs and external coordination costs
• The amount of venture capital available in their market
• Government regulation and tax policy
• Whether the firm has reached 150 employees, the universal natural limit

Q1 On Thiel's account, why did the world's money flood into Internet stocks starting in late 1998?

• Internet companies had finally proven they could generate large profits
• Every alternative — the old economy, emerging markets, Europe, leverage — had just failed, leaving tech as the default
• The Federal Reserve cut interest rates to zero after the LTCM collapse
• Netscape's IPO in late 1998 triggered the frenzy overnight

Q2 Why did Thiel argue in 2012 that there was no tech bubble?

• Valuations in 2012 were lower than at any point in the 1990s
• Fewer students were studying computer science than in 1999
• A bubble requires widespread, intense belief, and society no longer intensely believed in anything
• Post-2000 government regulation made bubbles impossible

Q3 What finally made PayPal's user base take off in early 2000?

• A distribution partnership with major banks like HSBC
• A television advertising campaign funded by Nokia Ventures
• Beaming money between Palm Pilots at conferences
• Paying users directly — $10 to sign up and $10 per referral — producing 7–10% daily growth

Q1 According to Thiel, why can't airlines be considered great companies?

• They don't create real value for society.
• They create huge value but capture almost none of it as profit.
• Their market is too small to matter.
• They lack durability and disappear within a few years.

Q2 For a healthy tech company whose growth rate exceeds its discount rate, where does a typical model place most of its value?

• In the first two to three years of cash flow.
• Spread evenly across every year of operation.
• In years 10 through 15 — far in the future.
• In the liquidation value of its assets.

Q3 What is Thiel's verdict on the common startup instinct that a bigger market is always better?

• Correct — bigger markets mean bigger potential outcomes.
• Utterly wrong — huge markets breed brutal competition, while well-defined smaller markets can actually be owned.
• Right for consumer products, wrong for enterprise software.
• Irrelevant — only the founding team determines outcomes.

Q1 According to Thiel, why do both monopolies and highly competitive firms misdescribe their market position?

• Neither type of firm can actually measure its own market share.
• Monopolies downplay dominance to avoid antitrust scrutiny, while competitive firms exaggerate uniqueness to attract capital.
• Both exaggerate their dominance to intimidate potential entrants.
• Accounting rules force every firm to report a conservative market definition.

Q2 Which of the following is NOT one of the four foundations of market ownership discussed in this class?

• Network effects
• Proprietary technology
• Being first to enter the market
• Scale cost advantages

Q3 In the boat-in-the-fog metaphor, what does the time you have already spent sailing represent?

• A proxy for how much distance — how much frontier — likely remains ahead.
• The amount of funding a startup has already burned.
• Proof that the market has already closed to new entrants.
• The number of competitors that have entered the field.

Q1 On Thiel's culture spectrum, where should a startup aim to sit?

• As close as possible to the detached professionalism of a consulting firm
• At full cult-level devotion, sealed off from all outside input
• Between consultant nihilism and cult dogmatism — strong shared beliefs about the mission, still open to correction
• Culture is irrelevant as long as the product is good enough

Q2 Why did Founders Fund treat the cleantech team's 20% ownership (vs. 80% for VCs) as disqualifying?

• The cap table made future fundraising legally impossible
• It revealed a passivity so deep that a team unable to stand up to its own investors could never stand up to competitors
• Founders Fund only invests when founders keep at least 50% of the equity
• Cleantech was considered a fundamentally unattractive sector

Q3 According to Stephen Cohen, what can compensation alone actually buy from an engineer?

• A full decade of loyalty, if enough equity is included
• About one year of all-out effort — ten years requires genuine love of the work
• Nothing at all; great engineers ignore money completely
• Permanent retention, as long as you match Google's offer

Q1 According to Thiel, if a VC could reduce all diligence to a single question, what should it be?

• How large is the addressable market?
• How much does the CEO draw in salary?
• How strong is the company's patent portfolio?
• How fast is monthly revenue growing?

Q2 Why does Thiel favor a 1x non-participating liquidation preference over a 2x participating one?

• It guarantees investors a larger payout in every possible exit.
• It protects investors from abuse while keeping founders and investors wanting the same outcome in mid-sized exits.
• It removes the need for a board of directors.
• It automatically prevents future down rounds.

Q3 A startup offers you 200,000 shares. Per this class, what do you actually need to know to evaluate the offer?

• The current price per share
• The total number of shares you would hold after four years
• What percentage of the fully-diluted company those shares represent
• Whether the shares are ISOs or NSOs

Q1 According to Thiel, a venture fund is, to a first approximation, profitable only when what happens?

• More than half of its portfolio companies return at least 2x
• Its single best investment ends up worth more than the entire fund
• Annual management fees exceed the fund's operating costs
• It diversifies across at least 100 companies to catch every winner

Q2 Founders Fund's backtest found that always taking full pro rata in up rounds led by smart VCs was highly profitable. Why does this inefficiency exist?

• Up rounds usually include liquidation preferences that protect follow-on investors
• Most VCs do not truly believe the power law, so exponentially growing companies stay underpriced even in up rounds
• Lead investors are contractually obliged to buy out earlier investors at a premium
• Flat and down rounds are priced too low, so skipping them sacrifices the best bargains

Q3 What did the panel say about a startup that pitches five different revenue streams, A through E?

• It is ideal, because multiple streams diversify the company's risk
• It is a red flag: within a business, one revenue stream almost always dominates
• It only matters for consumer startups, not enterprise companies
• It is required — most VCs want at least three proven streams before investing

Q1 Why does Thiel advise founders to pitch VCs early in the day?

• VC partner meetings are always scheduled in the morning, so decisions happen then.
• Decision fatigue: like the parole judges who approved two-thirds of morning cases and almost none by day's end, VCs get more likely to say no as the day wears on.
• Morning slots are longer, giving you more time to walk through the full deck.
• Competing startups usually pitch in the afternoon, so mornings are less crowded.

Q2 Whom does Thiel counterintuitively suggest pitching first inside a VC firm?

• The most senior partner, since only partners can ultimately approve an investment.
• Whichever partner shares your alma mater, since affinity drives deals.
• Senior associates or principals — junior investors need good deals to advance their careers, so they evaluate fairly and push hard.
• The firm's external scouts, who filter everything before partners see it.

Q3 Why does Thiel reject the "Instagram meets TaskRabbit" style of elevator pitch?

• It is too long to deliver in an actual elevator ride.
• VCs rarely know the referenced companies well enough to decode it.
• The mashup format works in Hollywood but signals a derivative, easily replicated business; a strong pitch instead states the problem, the solution, and the market.
• It reveals so much strategy that it should only be shared under an NDA.

Q1 According to Thiel, what is the number one cause of startup failure?

• A product users don't love enough
• Running out of funding too early
• Poor distribution
• Hiring the wrong early team

Q2 A subscription product has $40 monthly ARPU, a 24-month average customer lifetime, and 40% gross margin. What is the most you should spend to acquire one customer?

• $960
• $384
• $40
• Any amount, as long as growth is viral

Q3 Why did PayPal concentrate its viral push on eBay power sellers?

• Their high money velocity made viral growth fastest, and locking up the best segment forced rivals into second-best segments
• They were the largest group of internet users at the time
• eBay had officially partnered with PayPal and subsidized the effort
• Power sellers rarely churned, which maximized lifetime value

Q1 According to Andreessen, why did most of the great internet ideas of the late 1990s fail?

• They fundamentally misread what consumers wanted
• They were substantively right but arrived too early, before the infrastructure and users existed
• Government regulation shut them down before they could scale
• They lacked patent protection against larger competitors

Q2 What does the 'strongest' version of the software-eats-the-world thesis claim?

• Value within the tech industry shifts from hardware to software and the cloud
• Old industries like newspapers are forced to digitize their existing operations
• Silicon Valley-style software companies, with engineering-first cultures, will come to dominate every industry
• Software will make sales and marketing organizations obsolete

Q3 What is the number one reason Andreessen Horowitz rejects startup pitches?

• A great product with no real distribution strategy
• Founders who are too young to serve as CEO
• Target markets that are too small to matter
• A weak patent portfolio relative to incumbents

Q1 On Thiel's map of truths, where do valuable secrets live?

• Among easy conventions that everyone already accepts
• In the middle zone of truths that are hard but possible to reach
• Among impossible mysteries like superstring theory
• Spread evenly across easy, hard, and impossible truths

Q2 Which set is Thiel's list of social forces that erode belief in secrets?

• Globalization, regulation, taxation, litigation
• Monopoly, power law, distribution, sales
• Incrementalism, risk aversion, complacency, egalitarianism
• Optimism, pessimism, determinism, indeterminism

Q3 In 1999 PayPal saw that linking money to email was a big secret that others would soon discover. What did that imply?

• Go into deep stealth mode and file patents before doing anything else
• Keep the idea from most employees to prevent leaks
• Drop the idea, since a secret others can find is not worth pursuing
• Move extremely fast and share the secret liberally to build the team before copycats arrived

Q1 According to the Shakespearean model Thiel favors, why did PayPal and X.com end up in all-out war?

• Their founders held fundamentally opposed ideologies about payments
• They were nearly identical companies chasing exactly the same prize
• One side was far stronger and set out to crush the weaker player
• Regulators forced them into a winner-take-all market

Q2 What does the Microsoft–Google rivalry illustrate in this essay?

• Sustained head-to-head competition sharpens both companies into winners
• While two rivals converged and fought, Apple avoided the war and became worth more than both combined
• Search engines are inherently more profitable than operating systems
• The first mover in any market eventually wins

Q3 In Hoffman's interview question about splitting $100k between iOS and Android, why is '50-50' the only wrong answer?

• Because Android clearly deserved the larger share in 2012
• Because iOS developers earned more revenue per user
• Because an even split signals you have no developed view of where technology is heading
• Because budgets should never be divided across two platforms

Q1 What does Thiel offer as the strongest evidence that startup success is not mostly luck?

• Large statistical studies comparing thousands of startups
• Serial founders — Jobs, Dorsey, Musk — who each built multiple billion-dollar companies
• The consistently high hit rate of top venture capital funds
• Founders' own testimony that they worked harder than everyone else

Q2 According to the essay, what is the built-in contradiction of indefinite optimism?

• It expects a better future while nobody plans, saves, or invests to create it
• It requires a savings rate as high as China's
• It only works in countries with strong central governments
• It is too obsessed with engineering mega-projects

Q3 In an indefinite world, how are companies with genuine secret plans priced — and what follows from that?

• At a premium, because scarce plans attract capital
• Fairly, because markets are efficient
• At zero, so truly definite companies are systematically undervalued
• They cannot be priced at all and get shut out of markets

Q1 Why, in Thiel's telling, did the cleantech bubble produce so many failed companies?

• Government pulled subsidies too early.
• The underlying science was mostly fraudulent.
• They failed nearly all of the ten things every startup must get right, not just one.
• Oil prices collapsed and made alternatives uncompetitive.

Q2 Which technology does the essay hold up as a genuine energy secret — a breakthrough hiding in plain sight?

• Nuclear fusion
• Thorium reactors
• Shale gas fracking
• Grid-scale lithium batteries

Q3 After Solyndra collapsed, what question did Thiel say neither political party asked?

• Whether executives should be prosecuted
• Whether the loan process followed proper procedure
• Whether taxpayers could be repaid
• Whether the technology actually worked

Q1 According to this class, what is the right way to use the failed predictions of the 1950s and 60s?

• Copy them faithfully now that technology has finally caught up
• Treat them as proof that those ideas were impossible all along
• Diagnose why progress stalled, then attack the problem differently with modern tools
• Wait until experts stop saying the technology is 25–50 years away

Q2 How did LightSail Energy reframe the energy storage problem?

• By searching for a breakthrough battery chemistry beyond lithium
• By treating storage as a physics problem: compressed air in tanks, with water spray to manage heat
• By betting on hydrogen fuel cells for grid-scale storage
• By building larger pumped-hydro reservoirs near cities

Q3 Thiel's rule of thumb for big-ticket enterprise sales: your next biggest deal will realistically be…

• Whatever a $100M government RFP happens to offer
• About 10x your largest deal, if the product is truly great
• About 2x your largest deal so far
• Unpredictable, since each enterprise buyer evaluates objectively

Q1 The class notes that developing a new drug cost about $100 million in 1975 but $1.3 billion by 2012. What explanation does the essay favor?

• FDA fees and paperwork alone account for the increase.
• Scientists have become dramatically less productive.
• The luck-driven screening lottery has exhausted its easy wins, so each random discovery costs more.
• Demand for new drugs has collapsed, shrinking economies of scale.

Q2 Why does Brian Frezza believe now is the right time for computational biology, despite biotech's long slump?

• Windows open and close: Genentech's late-1970s window produced 9 of the 10 largest U.S. biotechs after 30 shut years, and a new computational window is opening now.
• The FDA has recently deregulated drug approval, making trials cheap.
• Biotech VCs are newly eager to fund multi-compound platform companies.
• Viral diseases have mostly been eliminated, freeing resources for harder problems.

Q3 How does Balaji Srinivasan expect genomics to reach mainstream adoption?

• By hiring a large hospital-facing sales force to push sequencing.
• By waiting for governments to mandate universal sequencing.
• By making sequencing entirely free to consumers.
• Through a compelling on-ramp—pregnancy screening—after which the marginal cost of using one's genetic data approaches zero.

Q1 In Thiel's explored-vs-consensus 2x2 matrix, where did AI sit in 2012 — and why did that matter?

• Heavily explored, consensus — everyone agreed it was the next big thing
• Underexplored, contrarian — decades of broken promises scared rivals off, leaving thin competition
• Underexplored, consensus — everyone agreed but no one acted
• Heavily explored, contrarian — many teams pursued it in secret

Q2 According to the class, when does the Ricardian gains-from-trade case for AI break down?

• When AI is slightly better than humans at a few tasks
• When AI starts facing FDA-style regulation
• When AI becomes vastly superior at everything, so trading with humans stops making sense
• When displaced workers refuse to retrain, as the Luddites did

Q3 Which strategy did Bob McGrew's Palantir represent, and what evidence supported it?

• Extracting brain principles, supported by ferret rewiring experiments
• Bayesian predictive databases, supported by the explosion of cloud data
• Full brain emulation, supported by Deep Blue defeating Kasparov
• Intelligence augmentation, supported by human-computer chess teams beating both lone grandmasters and lone computers

Q1 According to the essay, which model best describes the distribution of founder traits?

• A normal distribution — founders are average people who got lucky.
• A right-shifted curve — founders are simply above average on most traits.
• An inverted normal distribution — founders occupy both extremes of the same traits simultaneously.
• A uniform distribution — founder traits are essentially random.

Q2 Why can't the scapegoat be a completely ordinary member of the community, chosen at random?

• Ordinary people were too well protected by their clans.
• The crowd would see itself in the victim and fear being chosen next.
• The gods were believed to accept only high-born victims.
• Random selection was impractical before written records existed.

Q3 What does Thiel identify as the truly decisive advantage of having co-founders?

• More capital and wider networks at the earliest stage.
• Complementary skills reduce technical mistakes.
• Investors systematically prefer teams over solo founders.
• A mob needs a singular victim, so multiple founders are much harder to scapegoat.

Q1 Thiel challenges the panel: if the singularity is inevitable, why not just grab popcorn and watch? What is de Grey's core rebuttal?

• Exponential extrapolation is statistically flawed, so the singularity may never come at all.
• Timing matters enormously: roughly 100,000 people die of aging-related causes every day, so each day of delay carries a massive human cost.
• Watching passively is fine for individuals, but governments have a duty to act first.
• The singularity is only inevitable if enough billionaires fund it directly.

Q2 According to Vassar, who has historically forged the big leaps forward?

• Lone geniuses working in isolation.
• Large government institutions and defense departments.
• Mid-sized groups of dozens to a few hundred people bound by trust, like the Royal Society or the American founders.
• Mass consumer markets voting with their wallets.

Q3 In his closing remarks, what does Thiel mean by "your life is a singularity"?

• Everyone in the class should go work on singularity-related technologies.
• Careers, like startups, succeed by following well-established statistical patterns.
• Your life is a one-time, unrepeatable event, so treating yourself as a statistic on the safe default path sells yourself short.
• Only a handful of founders like Thiel or Musk can actually shape the future.