Zero to One

2019-02-14

“Zero to One” by Peter Thiel

My Summary

Companies need to be able to answer these 7 questions:

1. engineering: can you create a breakthrough tech instead of incremental change?
2. timing: is right now the best time to start your business?
3. monopoly: are you starting with a big share of a small market?
4. people: do you have the right team?
5. distribution: do you have a way to not just create, but deliver, your product?
6. durability: will your market position be defensible 10 or 20 years into the future?
7. secret: have you identified a unique opportunity that others don’t see?

My Notes

Intro

• there will not be another Bill Gates moment where an OS is built; new business and ideas will need to created from zero to one less you become another copycat… but that isn’t real learning or growth

The Challenge of the Future

• a question to ponder: “what important truth do very few people agree with you on?”
• ^ for me, it is that many technologies current and PAST (IMO this is where I really diverge) are hurting more than they are helping — especially relationships, families, and our mental and spiritual well-being; we cannot blindly pursue certain new technologies for the sake of technology, and we need to be really careful and examine existing technologies with the goal of restoring certain aspects of society and the individual that have helped humans thrive for centuries
• ^ other idea: anywhere the current US educational systems have students practicing some form of route memorization should be eliminated — computers are so much better at that than humans; we should be focusing on problem solving and the skills that enable the best problem solvers to do what they do
• ^ other idea: the underlying sexualization of so much of our entertainment is really hurting the ability for people to make long-term relationships and successful families; we should be avoiding it at all costs and have better ways to spend our (idle) time
• progress exists laterally from 1-to-N and vertical from 0-to-N
• many think globalization is the future, but if you were to bring all developing nations to live like Americans (or other developed countries) do, then the results would be catastrophic
• a small group is the ideal for 0-to-1 thinking because they will not be held back by bureaucracy

Party Like It’s 1999

• start with “what does everyone agree with?”
• the early 90s are less remembered but include the fall of the Berlin Wall, technological optimism, the dot com crash, and a return to a globalism focus and “bricks” instead of “clicks”
• stay lean and flexible and keep taking small steps
• you need a bit of the 90s hubris, but maybe not the blind optimism

All Happy Companies are Different

• what valuable company is nobody building?
• companies can frame themselves in a light that makes them look like less of a monopoly than they really are
• the history of progress is great monopolies replacing their incumbents
• creative monopolies are good for society and don’t hold us back from innovation
• in the long run, all failed companies are the same, they fail to escape competition
• in the long run, all successful companies and different and their difference has earned them a monopoly

The Ideology of Competition

• rivalry and competition will steal our focus away from growing our business and providing new and increasing value to customers
• if you have to fight, strike and move quickly — war/rivalry is costly and shouldn’t be a long term solution

Last Mover Advantage

• a companies value is the sum of its future revenues
• if you only focus on the near term you may not be able to sustain; will this company be profitable in 10 years?
• durability can come from having proprietary tech, but that tech must be 10x better than anything else
• durability through network is possible; “all my friends are on Facebook so I should get on it too”, but you’ll need solid first adopters and to grow that network large before it provides that kind of durability
• durability by economies of scale
• durability by brand
• start with smallest market possible and monopolize it — this is much easier than trying to monopolize a huge market
• remember: you want to avoid your competitors, get away from them and don’t worry about “disrupting”
• start small and expand to into adjacent markets

You Are Not a Lottery Ticket

• success is a product that you create — it isn’t merely luck or else serial entrepreneurs wouldn’t exist
• optimism and pessimism drive growth and business in ways we normally don’t think about — in America, we are indefinite optimists: we assume the future will be better, but we are not really sure how
• prioritize design over chance; being an indefinite optimist in a start-up isn’t a good thing
• a business with a good definite plan will appear underrated in a world where people think success is random
• reject the unjust tyranny of chance; you can plan and build and find a definite solution that is better

Follow the Money

• the 80/20 rule is found all over the natural and business world
• we should recognize and investors and entrepreneurs that is very likely that one investment in a portfolio of a dozen will disproportionality dwarf all the others — for the author’s fund, Facebook’s worth is more than all the other companies in the fund combined
• as an individual or entrepreneur you cannot afford to ignore the power (80/20) law; you need to think very long and hard about doing something you are good at with the best chance that it will be a long-run success; you have to fight conventional wisdom to “put many eggs in different baskets” or “pick anything and work hard enough and you’ll be a success” — instead remember that few baskets will be successful and you need to find them

Secrets

• as the world has grown smaller, people have stopped chasing secrets and lost the sense of wonder of former years
• there is the easy, the hard, and the impossible; for those who feel like all the hard problems are solved, the easy and impossible problems leave nothing left to provide satisfaction
• you must believe there are secrets still left to solve
• when starting a company ask: what secret is nature not telling you? What secret are people not telling you?

Foundations

• you have to get the first things right because the cost of undoing them is so steep
• companies are like USA in the sense that the big decisions that were made in Philadelphia still run our country today and the only thing we really try to change are small in comparison
• alignment is super hard to achieve with part-time employees and remote workers; avoid it
• equity is a way to incentivize dedication to the long term, but is tricky to get right

The Mechanics of Mafia

• if you can barely talk to your coworkers outside of work, then something is wrong; you should hire people you want to have long term relationships with
• getting the 20th person to join your company should be about attracting them your mission and your team
• homogeneity (in terms of purpose/drive/idea) in your startup team is good because you’re going to have to move fast and survive

If You Build It, Will They Come?

• if you’ve invented something new but you haven’t invented a way to sell it, then you have a bad business, no matter how good the product
• the larger the sale and sale cycle the more attention the sale needs; when you are doing 7 figure deals, people want to talk to the CEO, not a sales rep
• starting with small personal sales is a great way to grow larger; box started by selling their solution to a sleep study at a university and eventually it spread to the entire campus and local hospitals as an enterprise solution
• the “customer lifetime value” (CLV) or “lifetime value” (LTV) must exceed the amount you must spend to acquire that customer called the “customer acquisition cost” (CAC)
• get the biggest (bang for your buck) megaphone that you can find
• viral loops work well –> after someone uses it, they get others to use it via sharing, ease-of-use, etc (recently, think of how Venmo has done this)
• another example of this is how Uber would pay for “one free ride” if you invited someone — that is a pretty low CAC if it gets someone using Uber at least twice (CLV > CAC)
• just like the power law from earlier, you should focus on capture and dominating the right distribution channel — quality is better than quantity here

Man and Machine

• Thiel urges that computers are tools/compliments, not rivals
• computer + human hybrid solutions works well; PayPal did this to flag possible fraud and then let a human make the final call
• in the future, we will see more breakthroughs by asking “what problems can humans solves with computers” instead of “what problems can computers solve without any human”
• there are two ends on the current spectrum: (1) those who think “strong AI” is what we want and (2) those who want to avoid building more AI/machines altogether because they think “strong AI” will be our downfall; in the middle of this spectrum there is plenty of room to make things better by finding a complimentary relationship between humans and machines

Seeing Green

• the “clean tech” movement that Al Gore tried to get started ultimately failed, but not necessarily because of gov’t intervention, but because many of the clean tech companies didn’t have strong answers for the following 7 questions:
  • engineering: can you create breakthrough tech instead of incremental improvements?
  • timing: is now the right time to start your business?
  • monopoly: are you starting with a big share of a small market?
  • people: do you have the right team?
  • distribution: do you have a way to, not just create, but deliver your product?
  • durability: will your market position be defensible 10 or 20 years into the future?
  • secret: have you identified a unique opportunity that others don’t see?
• [my thoughts] ^ this could be the summary of things to do after reading this book
• engineering: your answer for this needs to be a 10x improvement to overcome the cost of setting up and transitioning
• timing: clean tech claimed the timing was right, but they failed to actually create the dynamic change that they aspired to
• monopoly: too many of the clean tech companies saw and targeted the trillion dollar energy market instead of trying to work with a small market, monopolize it with incredible value, and then expand from there
• people: most of the clean tech teams were great at raising capital and working with gov’t, but not building products that people wanted to buy
• distribution: clean tech courted the gov’t officials and forgot about their customers and how to get them the new clean product
• durability: you have to ask “what will the future look like 10 or 20 years and how will my company fit in?”; clean tech companies overlooked fracking and they overlooked China making cheaper alternatives
• the best problems to solve are often the ones that don’t have consensus or that people don’t care about (or at least they don’t until you change the world!)

The Founder’s Paradox

• we need unusual individuals to lead companies… yes it is paradoxical, but it has been shown many-a-times to work
• don’t dispel the myth entirely; we need great visionary, and often eccentric founders; without them, the straight-laced, business types have often stopped innovating and driven companies into the ground