ZERO TO ONE
This is a book about creation. Creating something new. Every time we create something new, we go from Zero to One. It’s creating something new or developing a new way of doing something. This world is available to everyone, not just the privileged kids at Stanford or those with access to Venture Capital, EVERYONE.
“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.”. ~ Peter Thiel
Every time we create something new, we go from Zero to One. It’s creating something new or developing a new way of doing something. This world is available to everyone, not just the privileged kids at Stanford or those with access to Venture Capital, EVERYONE.
1 The Challenge of the Future
Properly understood, technology is defined as “any new or better way of doing anything.” This is also known as “vertical progress” vs. “horizontal progress” which is creating the same thing over and over. Startups are one of the best vehicles to execute vertical progress.
“Positively defined, a startup is the largest group of people you can convince of a plan to build a different future. [ ] Because that is what a startup has to do: question received ideas and rethink business from scratch.”
2 Party Like its 1999
There are many lessons to learn from the 1990’s and the crash that began in March of 2000 and bottomed out in October of 2002.
“The most contrarian thing of all is not to oppose the crowd but to think for yourself.”
3 All Happy Companies Are Different
In this chapter Peter discusses perfect competition (equilibrium) and monopolies. And, at the end of the day how new better ideas and true differentiation are the power of successful businesses and profit.
“Creating value is not enough, you need to capture some of the value you create.”
4 The Ideology of Competition
In this chapter Peter discusses the history of competition and how, largely, this has been used almost entirely to our detriment. War and competitive language are pervasive in our business culture but it is a destructive force.
“If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most.”
5 Last Mover Advantage
Successful businesses are defined by their ability to generate positive cash flow long into the future. For a company to endure, it must grow and endure yet many entrepreneurs focus on short term growth. This chapter discusses these future cash flow business monopolies and some elements they all have in common. Lastly, Peter debunks the concept of “disruption”.
- Proprietary Technology
- Network Effects
- Economies of Scale
“Always err on the side of starting too small. The reason is simple: it’s easier to dominate a small market than a large one.”
“As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.”
6 You Are Not A Lottery Ticket
Your future is NOT a matter of chance, good fortune or circumstance. Your future is determined by how you view the future and how well you plan. In this chapter Peter discusses four different competing philosophies; definite pessimism, indefinite pessimism, indefinite optimism and definite optimism. Our world has drifted into the realm of indefinite optimism, we believe the future will be better but we have no plan to get there. We need a plan. Definite Optimism works when you BUILD THE FUTURE YOU ENVISION.
“A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world.”
7 Follow the Money
This chapter describes in detail the “power law”. The power law is The Pareto Law on steroids, that 80% of the value comes from 20% of the actions (actually he described real estate in Italy). What you choose to do, the area you decide to focus will have a dramatic affect on the size of the outcome. Peter describes in this chapter Venture Capital and the role of the winners in the portfolio.
The two rules for VC.
“This implies two very strange rules for VC’s. First, only invest in companies that have the potential to return the value of the entire fund. This is a scary rule, because it eliminates the vast majority of possible investments. This leads to rule number two: because rule one is so restrictive, there can’t be any other rules.”
“An entrepreneur makes a major investment just by spending her time working on a startup. Therefore every entrepreneur must think about whether her company is going to succeed and become valuable.”
Our society is slowly giving up on the idea that there are any secrets left out there, that there are no big problems worth solving. Incrementalism, risk aversion, complacency and globalization has removed the mystery and thus our curiosity about finding these secrets. The truth is, there are plenty more secrets left to discover, we just need to reprogram ourselves to go out and find them.
“There are two kinds of secrets: secrets of nature and secrets about people. Natural secrets exist all around us; to find them, one must study some undiscovered aspect of the physical world. Secrets about people are different: they are things that people don’t know about themselves or things they hid because they don’t want others to know.”
The founding of your company can happen only once. And, it is this moment in time that can put your and your business on the path to value …. or not. There are three items you should consider on aligning everyone to achieve this common goal of value creation; ownership, possession and control.
Some fundamental truths:
- The ideal board size is 3, 5 maximum.
- A CEO of a venture backed startup should be paid NO MORE THAN $150,000.
- Equity is the best way to compensate employees to be long term minded and in line with goals and strategies.
10 The Mechanics of Mafia
The origins of the “PayPal Mafia” have deep roots in culture and the type of people the early PayPal team brought on. Similarly, how and who you recruit for your startup are equally critical. There are two general ways for you to identify and hire the right people, alignment with your existing team or with your company vision.
“No company has a culture; every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.”
11 If Your Build It, Will They Come?
In this chapter Peter emphasizes the importance or sales. If you look around your company and you don’t see a sales person, then, you’re the sales person!
“But customers will not come just because you build it. You have to make that happen, and it’s harder than it looks.”
“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.”
12 Man and Machine
This chapter discusses the relationship between man and machine and hypothesizes that the most valuable companies will use computers to help humans to solve hard problems.
“Computers are complements for humans, not substitutes. The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.”
13 Seeing Green
In this chapter Peter uses the clean-tech movement of the 2000’s and the impending crash of that sector to remind us of the fundamental truths about riding some of these trends. Many of those businesses, similar to many in the Dot-Com crash a decade earlier, jumped on the wave without addressing the seven key factors to success.
- Engineering – Do you have a breakthrough?
- Timing – Is it the right time?
- Monopoly – Do you have a big share of a small market?
- People – Do you have the right team?
- Distribution – Can you deliver your product?
- Durability – Can you defend your market position?
- Secret – Do you have a unique opportunity?
“An entrepreneur can’t benefit from macro-scale insight unless his own plans begin at the micro-scale.”
14 The Founders Paradox
In this chapter, Peter discusses a fascinating question. Are all founders unusual people? Or do we just tend to remember and exaggerate whatever is most unusual about them? More important, which personal traits actually matter in a founder?
“The lesson for business is that we need founders. If anything, we should be more tolerant of founders who seem strange or extreme; we need unusual individuals to lead companies beyond mere incrementalism. The lesson for founders is that individual prominence and adulation can never ben enjoyed except on the condition that it may be exchanged for individual notoriety and demonization at any moment — so be careful.”
Conclusion: Stagnation or Singularity?
There are four likely outcomes for our future; recurrent collapse, plateau, extinction or takeoff (singularity). Since planning beyond 20-30 years appears impossible, we don’t know for certain. But what we do know, is that if we want a better future, we need to invent it.
“We cannot take for granted that the future will be better and that means we need to work to create it today.”