Zero to One: Notes on Start Ups, or How to Build the Future


Zero to One: Notes on Start Ups, or How to Build the Future
Publisher: Virgin Books
Published: 9/18/2014
Peter Thiel is the co-founder of PayPal and the first outside investor in Facebook. In the Spring of 2012, he gave a lecture course at Stanford for software engineers, calling on them to think boldly and broadly about how they might use their skills to shape the future, and imparting the lessons he has gleaned from his own experience. One of the students in that class - Blake Masters - took notes and posted them…

Book Summary - Zero to One by Peter Thiel with Blake Masters

Key Insights

PayPal founder and venture capitalist Peter Thiel taught a course on entrepreneurship at Stanford. Zero to One gives readers the key lessons from that course. Thiel has an insider’s perspective on how to succeed as a startup.

Thiel especially knows about the tech space. He was in Silicon Valley for the dot com rise and fall. Coming out the other side of the dot com bubble, Thiel has insights to share to help tech-based startups.

Anyone can create their own business. You don’t have to be a Silicon Valley tech wizard to have a startup company. Just because it’s easy to start doesn’t mean it’s easy to succeed. These key insights from Thiel’s book can give you a better chance of success.

Key Points

Innovative startups are more likely to succeed.

Thiel says that there are two kinds of progress: horizontal and vertical.

Horizontal progress takes what already exists and expands it. Globalization is horizontal progress. You take an existing product and expand its distribution to other countries. The improvements you see are incremental. Think of different generations of a cell phone. They’re similar products with slightly better features.

Vertical progress creates something new. This progress is known as going from zero to one. The progress comes from creating that one new technology or method. Horizontal progress takes one and grows it to some bigger number, n.

According to Thiel, vertical progress is better. Society advances through innovation. A startup with something new to offer is more likely to succeed.

To innovate, you can’t accept the status quo.

Progress is about what the future looks like. To get to something better in the future, you have to think about how the present can be different.

During interviews, Thiel asks people to name one thing that they believe that most others wouldn’t agree with. If everyone thinks the same as you, your idea isn’t the new thing.

If you want to change the world, you need to see the world (and its potential future) differently.

Focus on your startup’s future.

Many startups fail. Success is possible under specific circumstances. There is only one best of everything, so focus on getting there.

You want to get to the best product. You should target the best market for your product. Launch at the best time. Reach the best level of sales.

A plan is important for mapping out your startup’s future. But you do not want to get distracted. For example, students pile on extracurriculars to look good on college applications. They might stand out more if they were the absolute best in one area.

Focus on the future where your startup succeeds in its area. Don’t get distracted with alternatives. You want to look for the right conditions to get to success.

Monopolies are good for you and society.

It is better to have a monopoly than forced competition. A monopoly doesn’t necessarily mean there is an evil conglomerate killing competitors. If you are simply better than the rest, the others won’t last or can’t meaningfully compete. This results in a monopoly.

Look at Google. With the best technology, Google has something close to a monopoly for search engines. For a new company to compete, they would have to be better than Google. If that happened, society would benefit from having a better search engine.

Startups should aim for a monopoly. This is good for revenue and you can help the world by bringing something innovative. To get to a monopoly you can offer a unique product. With an innovative product, there is nobody around to compete.

You need technology, network, scale, and branding for an effective monopoly.

A tech startup should have a technology that others can’t copy (at least not easily). This means a brand new technology or a huge improvement on what is currently available.

Use a network that grows to protect your business. Facebook started with a limited pool of people that had access to the network before growing. As the network grows, it is harder and harder for anyone new to pull away customers.

Economies of scale can reinforce a monopoly. The more you produce of something, the lower the costs for each unit. With a monopoly, you have economies of scale in place. It would be hard for someone new to compete on price.

Your brand may be harder to copy than your product. For example, Apple has a look to its products that others have copied. But the Apple brand is a tech giant. Just knowing it is an Apple product gives it a certain value. Branding alone may help get you to a monopoly.

Vertical progress usually comes from optimists that plan.

Thiel talks about four types of people: indefinite pessimists, definite pessimists, indefinite optimists, and definite optimists. This last group has the innovators.

Indefinite pessimists think the future looks bad and do not plan for it. Definite pessimists plan for the future, but think things will be worse then than now. Indefinite optimists see a bright future, but don’t plan for it.

Definite optimists are the key. They believe in a brighter future and make plans to get there. Vision plus execution is essential for startup success.

Startup to success is about the long game.

Yes, there are companies that grew very quickly before selling for over $1 billion. That’s not the norm. Building a successful monopoly takes time.

Build your monopoly over time. Start with a narrow focus and conquer that before moving on. Amazon did exactly this. Jeff Bezos started with books. He expanded to CDs and videos. Now, there’s little you can’t buy on Amazon.

Just because you don’t have an overnight monopoly doesn’t mean your company is worthless. Projected profits are also part of your company value. If your goal is to sell your business, don’t forget about future sales.

Secrets help you succeed.

Like a barbecue dish with a secret sauce, you need something that others don’t know or have. Your secret may be a new technology you developed that didn’t exist before. Or, your secret may be a groundbreaking way of using technology that already exists. Either way, secrets are your not-so-secret weapons.

Choose people wisely from the start.

It may be tempting to try to do everything yourself, but you can’t. From the beginning, you need people that will benefit your company.

Thiel highlights the four Cs: competence, capabilities, compatibility, and commitment. You obviously want people that can do their job and do it well. They should bring essential skills to the job, limiting your need to train them. Staff should work well together to support the company. Everyone should be committed to seeing the business succeed.

Vet cofounders as well. Just because you like someone as a person doesn’t mean your interests and vision are aligned. Figure out how to resolve your conflicts or go your separate ways.

In a startup, the role of each person is magnified because there is usually only a small team. This team is part of your foundation for success.

If you can’t sell your product, your innovation is worthless.

Sales are critical to startup success. This doesn’t mean you have to personally peddle it like a door-to-door salesman. You can use tools to enhance your sales.

Think about your distribution. This includes your sales channels and weighing the effort for sales against potential benefits. For example, you may want to reach out to the biggest potential clients yourself. For smaller accounts, rely on staff.

Look for sales strategies that can help with your product. Creativity can boost your numbers.

Founders and entrepreneurs provide an essential vision but can become liabilities for their companies.

The greatest founders are usually unique individuals. They may have been outsiders from an early age or have strange hobbies. There are shared traits, like drive, focus, and energy. But not everything they offer is a hit.

For example, Steve Jobs co-founded Apple and was ousted before coming back in 1997. His iPod was not initially seen as innovative but then he moved into the groundbreaking iPhone and iPad world. The portrayal of Steve Jobs in a 2013 film also highlighted his personal problems in addition to his genius.

The founder can have a positive or negative impact on the company. You provide a vision for your business that only someone who was there before there was a business can. But you have to be mindful of how you are seen in the media. You are the face of the company.

The Main Take-away

Anyone can start a business, but not everyone can succeed. The strongest path to success is through a monopoly that benefits you and society. You create a monopoly by innovating and continuing to improve. You can protect that monopoly with a strong brand, customer base, and pricing strategy. Be the best at what you do and focus on making the best decisions to help your startup succeed.

About the Author

Peter Thiel is a venture capitalist and entrepreneur. He is best known for co-founding Confinity, the company that developed PayPal. Thiel was also the first outside investor in Facebook. In Silicon Valley at the time, Thiel witnessed the dot com rise and fall, drawing lessons for tech startups from the experience.

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