There Is No Such Thing As Branding

Peter Thiel claims there are 4 ways to build a monopoly:

1. Network effects (where the product/services get incrementally better relative to customer/user with each new customer/user)

2. Economies of scale (where delivery of value to customer requires high fixed costs, but low marginal costs)

3. IP - Where secrets are leveraged (technology secrets, personal secrets (like in the Mafia))

4. Branding - “Branding alone is always a difficult one. It’s a real thing. It’s something I don’t claim to understand, so I don’t like investing in companies that are nothing but a brand, even though sometimes those things do work." Peter Thiel

I align with 1-3, however, I would like to challenge 4.

There is no such thing as branding.

Branding is just the probability that a customer will transact again with the company and is therefore only a byproduct of the transaction history relative to a customer and company.

Versace has a strong brand because Gianni Versace was a fantastic designer who was sewing with his mother since he was a toddler and developed design skills which lead to best-in-market design relative to a specific customer.

Yves Saint-Laurent was creating paper dolls as a kid, which lead to designer dresses (IP), which lead to the best-in-market design relative to a specific customer.

Coca-Cola had cocaine in its products and now high levels of caffeine (chemical IP which leads to addiction - very high probability that customer will perform repeat transaction)

Starbucks has the highest caffeine/ml content.

Caffeine (mg)Volume (ml)mg/ml Starbucks Relative StrengthStarbucks310473.180.6551418065 Tim Hortons2705630.479573712336.61%MacDonalds145473.180.3064372966113.79%Dunkin Donuts210414.0290.507210847529.17%

Starbucks' "brand" is a byproduct of having the highest level of chemical dependency through caffeine.


- Doing any activities with the prime directive as "branding" is stupid, since branding is merely a byproduct of being useful. Focus on IP, network effects, economies of scale.

- Marketing should demonstrate utility.

- Betting on addictive products (products that leverage chemical dependencies) that intertwine economies of scale and network effects is a good investment strategy.


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