The other buzzword that epitomizes a bias toward substitution is “big data.” Today’s companies have an insatiable appetite for data, mistakenly belie… - Peter Thiel

Today’s companies have an insatiable appetite for data, mistakenly believing that more data always creates more value. But big data is usually dumb data.

It’s better to think of distribution as something essential to the design of your product. If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business — no matter how good the product.

Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Amazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books. There were millions of books to catalog, but they all had roughly the same shape, they were easy to ship, and some of the most rarely sold books — those least profitable for any retail store to keep in stock — also drew the most enthusiastic customers. Amazon became the dominant solution for anyone located far from a bookstore or seeking something unusual. Amazon then had two options: expand the number of people who read books, or expand to adjacent markets. They chose the latter, starting with the most similar markets: CDs, videos, and software. Amazon continued to add categories gradually until it had become the world’s general store. The name itself brilliantly encapsulated the company’s scaling strategy.

Network effects can be powerful, but you’ll never reap them unless your product is valuable to its very first users when the network is necessarily small.