Peter Thiel was one of the original founders of Paypal. He has gone on to make a number of other significant and successful investments. He has thought long and hard about how the world works and his financial investments reflect the investment of mental energy in making sense of things. He wrote about his perspective in Zero to One. He devotes a chapter to what he considers an important and all too rare world view which he refers to as definite optimism.
Thiel offers a 2 x 2 matrix for us to consider. He asserts we can either believe our ability to influence outcomes in the world through our actions is possible or that things are random and events outside our control. Here, you’re asking yourself “Do your actions make a difference?” Explorers, entrepreneurs, athletes, and creatives all exemplify what it means to hold a definite perspective. Definite implies that we can influence events with our actions. They are responding with an enthusiastic, “Yes, My Actions Matter Always.” To demonstrate how a definite perspective presents itself, Thiel quotes Ralph Waldo Emerson’s writing, “Shallow men believe in luck, believe in circumstances…Strong men believe in cause and effect.” Those that don’t believe their actions are able to influence events, according to Thiel, reflect an indefinite perspective. An indefinite view holds that the world weaves its own way independent of our contributions. Complexity conspires to increase an indefinite perspective. We can’t act to change things we don’t understand. The other dimension of Thiel’s matrix is optimism and pessimism. This question is “Do you believe the future will be better or worse?” If you view the future of the world and your place in it as improving, then you’re an optimist. If you see the future as one where things are likely to get worse, then you fall in the pessimist camp.
Combining the two dimensions provides a quadrant of four possibilities. If we’re pessimists in an indefinite world we believe that the future is getting worse and there’s little we can do. Those in this group aren’t inspiring. They are largely nihilists living for today. Saving, what’s the point? Investing energy trying to get better in order to make the world a better place, why bother? Thoughts like, “it’s no use, what’s the point?” or “no one will listen to me” pervade the perspective of an indefinite pessimist. According to Thiel, indefinite pessimists are stuck in a dark drift with no idea what to do. Bureaucratic businesses in a slow state of constant crisis are the hallmark of this group. We can then consider the indefinite optimists. These are those that believe the world is improving but their role is limited. Innovation isn’t in their vocabulary. Instead, businesses try to rearrange already invented things. Mergers and vertical integrations are the strategy directions of indefinite optimists. They may be a little happier than our first group, but they are not much more motivated to get up and go. They see the world as a pleasant enough place to be. They are ok with saving a little for the future, though not sure in what to save. Diversification is their default. They happily invest in mutual funds or index funds as there’s little point in trying to pick an investment vehicle. Investment bankers are more likely to have an indefinitely optimistic perspective. They don’t know which of the software developers or product designers will produce something good, but are confident one of them will. They, therefore, invest a little in a lot of different ideas. Their efforts don’t matter too much from their perspective so they aren’t digging in and trying to make changes. To Thiel the heart of indefinite optimism is to “overrate the power of chance and underrate the importance of planning.” They’re content going with the flow because the flow will take care of itself and take them to a happy place. This group is along for what they believe will be a pleasant ride.
Moving to Thiel’s third group we have the definite pessimists. These folk aren’t enthused about the future prospects of the world but believe their actions matter. They are taking defensive action to protect themselves from the perceived bleak future. This group is interested in saving for a rainy day. They have defensive investments in which they are willing to invest. They like insurance products. They are more inclined to work hard, build their own skill set to be in a position to contribute, and stock pile in preparation for problems. Planning and preparing is the essence of the existence of Definite Pessimists. They will do their part, but aren’t bright eyed about the future. If we’re fans of random, then we’re less likely to commit to a course of action. Preserving optionality becomes our focus. We aspire to be generalists able to adapt to conditions changing outside our control.
Finally, we have what Thiel considers a group of which we need more. The definite optimists believe in both themselves and the future. They believe that they matter, their actions matter, the world is improving, and their role in making positive improvements is real. They are willing to invest in themselves and new ideas. Definite optimists are willing to sacrifice and slog to seek skills with which they will forge the future. They want to create things. They want to engage with the world.
Leaders like John F. Kennedy captured this worldview when he introduced the Apollo Space program in the early 1960s. In a speech, President Kennedy offered, “We choose to go to the moon in this decade and do the other things…. because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win.” Kennedy’s approach captured both a positive view of the future as well as his belief in his country’s citizen’s ability to influence that future with their efforts.
Those with a definite perspective adopt a posture of agency. Their actions matter. It is the root of all effort. We only try at things in which we believe our efforts make a difference. Belief in our contributions is the basis from which our efforts evolve. Our willingness to invest our energies and our resources is heightened when we believe we can make a difference and the future to which we’re working will be better than today. The IT industry with its software developers epitomize a definite optimistic perspective. Participants produce code intended to achieve specific results. Product designers also fit this mold. True innovators ooze the mindset of a Definite Optimist. Explorers and adventurers, too, are likely to look at things through the glasses of definite optimism. Optimists look forward to the future. Definite optimists don’t just look forward to it, they take action to move towards it.
Pessimists want to avoid the future. Definite pessimists are motivated by fear. They are trying to move away from something they consider will be painful. Those with indefinite perspectives don’t believe in themselves. They are difficult to motivate. Their default is to believe their efforts won’t make a difference, what’s the point of exerting effort.
Thiel’s quadrant offers a useful lens through which to look at many things. Our approach to relationships, policy, investments, education, health, and more can be assessed against these four options. For example, when it comes to personal health how would an indefinite pessimist behave? Indefinite pessimists believe their actions don’t matter and the future will be worse. When it comes to their health they aren’t likely to invest in nutrition or exercise as these would be reflective of their own efforts. They would see no point in either of these. They would resign themselves to the fact that their health in the future will be worse. They would, therefore, be likely to pursue pleasure in the present. Enjoy what you can today because you won’t have it tomorrow. They would eat, drink, and be merry. The approach of someone that views the world through eyes of a definite optimist would be markedly different. The definite optimist believes their actions matter and the future is likely to be better. They will work to learn about nutrition, eating healthy. They will adopt an exercise program. They will not take unnecessary risks. They will also look forward to medicine making advancements so their efforts to be healthy will be supported by a medicine that will allow them to be active and enjoy life well into their golden years.
The time horizon we consider for decisions will differ based on where we are in Thiel’s matrix. Our commitment to our roles will also differ. If we doubt the impact of our efforts, our commitment will dwindle.
Thiel notes that indefinite pessimists are likely to get what they expect as a self-fulfilling prophecy. If you think the future will be bleak and your actions don’t matter, you won’t do anything to help your future. As a result of not doing anything, surprise, your future won’t be that great. Definite pessimists, though a little depressing to be around, can function productively. They are willing to work hard to prepare for problems. It is an approach that can lead to a useful and fruitful existence. The definite optimists are also more likely to be met with success as they are taking action towards to specific positive future. Thiel points out that the indefinite optimists are the odd ball in that there’s a logical disconnect between the likelihood of a positive future following an absence of effort. This perspective violates nature’s law of Entropy which suggests that all systems devolve into chaos without the action of an external force. Without working to make things better, things inevitably deteriorate. The indefinite optimist is sitting idly with crossed fingers hoping for the world to magically make things better. Thiel writes, “Progress without planning is what we call evolution.” Sure, nature seems to have things figured out. However, a business that thinks that it will have a positive future without planning and working for it is delusional.
In which quadrant do you spend most of your time? In which would you place your business? Are they aligned? What are some consequences of not being aligned? In what quadrant would you put your industry? What does the stance seem to be of those you see stepping forward and leading in a given industry? Can you think of an example of a business that fits in each category? Can you think of people you know that would fit in each quadrant?
If you have a positive view of the future and your ability to influence it, how are you likely to behave? Is your business more likely to invest today for benefits tomorrow? Will your business be willing to sacrifice revenue or opportunity today for a brighter tomorrow? Thiel tries to bet on definite optimists. When assessing start ups, Thiel evaluates the mindset of founders as much or more than the underlying business concept. He wants to allocate his investments in those that believe their actions matter and they want to contribute to making the world a better place in the future. A mindset of definite optimism empowers. It is the only one of the four that is likely to create positive outcomes. We depend on definite optimists to decide to dive in to developing our better futures.