When asked to choose between Facebook and Uber reaching a trillion dollars first, venture capitalist Chamath Palihapitiya sided with Facebook.
He worked for the social media giant as its head of platform in its early days, but he mainly voted for Facebook because it has a monopoly, whereas Uber, despite being the highest-valued private company, does not.
“It really comes down to a very simple thing which is the principle of ‘N of 1’ versus ‘1 of N’, and this is something that I think about a lot,” Palihapitiya said during a conversation with venture capitalist Semil Shah at a StrictlyVC event.
An “N of 1” company is a number of one — there is only one Google and there is only one Facebook. When it comes to Uber, there’s a litany of other companies doing the exact same thing, so it’s only “1 of N”.
Many companies start at out as one of many, but then somewhere along the way, the others fall off and it separates itself from the pack, Palihapitiya explained. Only then do they become of “1 of N” and effectively gain a monopoly.
Facebook, for example, faced competition from Friendster and Myspace. It was one of many social networks. That changed, though, as it became the monopoly and emerged the winner.
“For example at Facebook, for five years, all we talked about was user growth. There’s one thing that matters and it’s user growth. Why? Because at a certain point it becomes this canonical, definitional service in the world. My language, which they will not use, but it is you are the de facto standard,” Palihapitiya said.
“That’s how you become worth a trillion dollars because you have market effects and pricing effects. The ability to attract talent that is just completely unique and differentiated,” Palihapitiya said.
People may have valued Uber as the monopoly in its group, but it’s nowhere near it.
It’s competing both in the ride-hailing industry and against traditional public transportation, and Uber has yet to exert the control over a market to have the monopoly. It’s still fighting to gain entry into cities and fighting local competitors on the ground.
Then there’s the spin-offs of UberEATs, its food delivery program, and then all of the “Uber for X” companies that are trying to recreate it. Compare that to Facebook and Google where you don’t hear companies clamoring to be a “Facebook for X” or a “Google for X”.
Palihapitiya said it’s “beyond a shadow of a doubt” that Facebook will be worth a trillion dollars, and likely in the next 15 years.
“Uber, it’s not clear,” Palihapitiya said. “Great company, but not any clear path to be an ‘N of 1’ company.”
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