Thiel's Trap
By Peter Clark
Few economic concepts demonstrate scarcity as clearly as the Malthusian Trap. An economic condition where population growth outpaces food production (Malthus,1798). The fight for subsistence is in the rearview mirror of the developed world, but Malthusian logic is now applied to environmentalism(Hardaway,1997). This concept also applies to business.
In Zero to One (2014), PayPal founder Peter Thiel describes the dangers of intense market competition. Firms vying for razor-thin margins bring us to Thiel’s Trap (Thiel & Masters, 2014). The oversupply of producers greatly diminishes market share and consumer demand, generating a commons (Hardin, 1968). The participating firms do not exercise market dominance, all fighting over a narrowing market share.
The only way to escape the chasm of Thiel’s Trap is innovation. Similar to how agricultural advances helped the world climb out of the Malthusian Trap, the Schumpeterian winds of Creative Destruction (Schumpeter,1943) will lift your company out of Thiel’s Trap. Inventing a new product category is the escape hatch from subsistence in business.
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