A Contrarian Take on Contrarianism

A quick guide to understanding the Silicon Valley psyche

Welcome to Silicon Valley Outsider, a newsletter for aspiring startup founders and investors who live outside the SF Bay Area. Special shoutout to the 50(!!) people who subscribed last week.

🍎 Quick Bite of the Week: I’m not entirely sure why, but I crowdsourced a list of every startup with a four-letter .com domain name.


Balaji Srinivasan has made millions by making contrarian plays.

He founded Counsyl (genetic screening) and sold it for $375 million. He founded a blockchain company in 2015 that he sold to Coinbase. He invested early in Cameo, Superhuman, Soylent, Bitcoin, and Ethereum. But his past success became prologue when Balaji made an incredibly prescient and contrarian stance: he was one of the first prominent people in the United States — and certainly the first in Silicon Valley — to sound the alarm about the coronavirus pandemic.

At the time, this tweet was criticized as fearmongering. The United States had under ten cases, the rest of the world thought COVID-19 was just another flu, and Balaji said that the sky was about to fall. But then, of course, he was right. His opinion was strongly contrarian — independent-minded, and against the tide of the rest of society — and right.

That’s the dream, as far as Silicon Valley is concerned. Many entrepreneurs treat contrarianism as gospel, and if it is, Balaji is surely a Patron Saint. His coronavirus call was brilliant — but we shouldn’t forget that many people considered it to be overreacting or just plain malicious. And we can’t ignore that Balaji’s case is an example of contrarianism at its best.


To the contrary, some would argue that Peter Thiel represents the worst of contrarianism.

Thiel founded PayPal, sold it to eBay for $1.5 billion, and helped companies as diverse as Facebook and SpaceX get off the ground in their early days. Thiel was also Patient Zero for contrarianism in Silicon Valley, beginning with 2014 book, “Zero to One,” which he kicks off by sharing his favorite question to ask in an interview:

The point, he explains, is to find contrarians: people who strongly believe in counter-cultural truths and are willing to stand behind those convictions.

The trouble, however, is that sometimes those truths turn out to be false. Thiel famously backed Donald Trump in 2016, donating over one million dollars and hammering home one clear, contrarian talking point: Trump was to be taken “seriously, but not literally.” And, regardless of what you think of Trump’s politics, it’s clear that Trump meant that he literally wanted to build a wall. In this case, Thiel’s contrarianism was dead wrong.

It’s perhaps unfair to single out Thiel as a disagreeable contrarian, because the world believes that contrarianism is always disagreeable. Society craves order, and order demands conformity. But contrarians refuse to conform, and instead think things through for themselves. (For another example that’s almost too wild to believe, check out Thiel’s attempt to promote “seasteading.”)

Silicon Valley has infamously adopted Thiel’s contrarianism as a core virtue, anti-social side effects be damned. And today, after some very public failures by contrarians like Thiel, contrarianism is an easy target for the ire of journalists who critique modern Silicon Valley culture.



In my book, contrarianism is laudable when done for real, but too often bastardized in Silicon Valley.

In its truest form, contrarianism does not mean being disagreeable, it just means being independent. New initiates to the Silicon Valley ethos often forget this, however, and use the shield of contrarianism to excuse bad behavior. Wannabe-contrarians also naively ignore commonly-held, battle-tested wisdom — but in fact, it is precisely that wisdom that has made Silicon Valley such an incredible place to start a startup.

Startups don’t need to innovate on incorporation law — they’re all just Delaware C Corps. They don’t need to innovate on fundraising docs — they all just use SAFEs. Trying to innovate on every front is a waste of your precious time and brainpower as a founder, and being a blind contrarian is foolish.

The world also often forgets that contrarianism cannot be a shared group identity. It’s an individual trait, and trying to be recognized and validated as a contrarian is both self-contradictory and patently ridiculous.

That’s where much of Silicon Valley’s trouble with contrarianism has come: as contrarianism has gained popularity as a concept, I’ve increasingly seen the startup culture trapped in battles to be the most contrarian. As Alex Danco (former investor now at Shopify) wrote in an epic piece called “I, too, am Contrarian”:

The irony, of course, is that this social obsession with being seen as an independent thinker drives everyone towards the same narrow band of nervous conformity; and this conformity is actually an important part of what makes Silicon Valley work smoothly. It unlocks capital; it lowers friction; it creates templates for how to speak, feel, fundraise, build and ship, that we copy from one another. Silicon Valley works because, in a lot of important ways, everyone thinks and acts the same way and wants the same things.

I’ve seen many “contrarians” publicly condemn folks who dare question Silicon Valley dogma, like when the traditional VC world revolted against the Softbank’s Vision Fund. When the $100 billion fund was announced, and particularly during its first few years of operation, Silicon Valley VCs railed against the fund’s contrarian move to deploy massive amounts of capital into later-stage companies. But now, after a few major successes under its belt, the Vision Fund may turn out to have been a brilliant, contrarian bet — precisely the thing those VCs should have applauded.


In the end, contrarianism’s days may be numbered — but a worthy successor may already have emerged.

Contrarianism was not the first attempt to philosophize Silicon Valley’s unique brand of exceptionalism, and it won’t be the last.

First came Schumpeter’s 1939 “gale of creative destruction,” which begat Clayton Christensen’s 1995 coining of “disruption,” which begat Marc Andreessen’s 2011 article “Why Software Is Eating the World,” which began Thiel’s contrarianism. The logical successor to contrarianism, by my estimation, comes from an entrepreneur who Thiel has both worked alongside and invested in — Elon Musk.

Although Musk has never, and perhaps never will, put down his philosophy into writing (except maybe in tweets), he has earned a reputation as the Patron Saint of Thinking From First Principles. In his words, it’s a “physics way of looking at the world”:

I’d recommend watching the whole clip, but I know you’re busy people (and your headphones might be in the next room over), so I’ll quote it at length here:

Elon Musk: “Somebody could say — and in fact people do — that battery packs are really expensive and that’s just the way they will always be because that’s the way they have been in the past. Well, no, that’s pretty dumb. If you applied that reasoning to anything new, then you wouldn’t be able to ever get to that new thing…

For batteries, they would say, “Historically, it costs $600 per kilowatt-hour. And so it’s not going to be much better than that in the future.”

The first principles would be: What are the material constituents of the batteries? What is the spot market value of the material constituents? It’s got cobalt, nickel, aluminum, carbon, and some polymers for separation, and a steel can.

So break that down on a material basis; if we bought that on a London Metal Exchange, what would each of these things cost? Oh, jeez, it’s $80 per kilowatt-hour. So, clearly, you just need to think of clever ways to take those materials and combine them into the shape of a battery cell, and you can have batteries that are much, much cheaper than anyone realizes.”

This, in my eyes, is just contrarianism in a hyper-rational, deliberately a-social frame. It’s what good contrarians were doing anyways — thinking for themselves — and avoids the weirdly reflexive nature of the contrarian mindset.

Given Musk’s superlative success, expect the next big mental model to emerge from Silicon Valley to be First Principles Thinking. Or, if it’s not, at least you now have some ammo to be contrarian about contrarianism. That’s an expert Silicon Valley move. Welcome to the inside!


,
Christian