Zero to One is a book on the mindsets of disruptive entrepreneurship. Peter Thiel, the author, says that mindsets come first because there is no guide to being a successful entrepreneur, but the mindsets will always apply.

Overview

• Don’t look for incremental improvements; look for 10x: have the hubris to dream big.
• Think like a smart cooperator: don’t think about disruption or competition; think about creating something new and adding value.
• Pick founders and employees who share your vision and culture.

Notes

About the Author:
Peter Thiel is a billionaire entrepreneur, investor, and venture capitalist. He is most famous for having launched PayPal with Elon Musk.

Mindsets Come First

Every major moment in business happens one time only.
The next Zuckerberg won’t build a social network, and the next Larry Page won’t build a search engine.
Your best bet, then, is to learn the mindset of going from zero to one:

Zero to One: The Vertical & Horizontal Way

Thiel talks about two different kinds of changes: horizontal and vertical.

• Horizontal: incremental improvements on what already exists.
• Vertical: doing something completely new.

Vertical is not easy to do or envision because it means finding new paths that nobody has explored before.

That means going from Zero to One.

Peter Thiel says that globalization is a horizontal change: taking what works in one place and replicating it somewhere else.
China wants to be and do what the United States does. But without radical changes in technology, the world cannot sustain billions of people living with the same US standards.

Startups Need New Thinking

In some big and dysfunctional corporations, entrenched interests work as a roadblock to change.

In those organizations, politicking is more important than getting work done.

If that’s the case in your company, you should quit.
Also, read:

• Office political players

On the other hand, a startup’s most valuable asset is a new way of thinking. What a startup must do is question ideas and rethink businesses.

Brilliant thinking is rare, but courage is in even shorter supply

Party Like It’s 1999

Peter Thiel says that the lessons learned from the dot-com bubble are:

1. Better to risk boldness than triviality.
2. A bad plan is better than no plan.
3. Stay away from competitive markets: they destroy profits.
4. Sales matter as much as the product.

He says we need to look into the future and think big. We need that 1999 hubris to achieve it.

My note:
You can see this book has aged a few years. Thinking small is nobody’s problem these days. 10x and moonshots have actually become the new norm. Possibly, Zero to One helped shape this culture.

The most contrarian thing of all is not to oppose the crowd, but to think for yourself

Monopoly is Where You Want to Be

Monopoly is a company doing something so good that nobody else can offer a close substitute.
Google is such an example of a company achieving monopoly by having gone from zero to one.

Thiel says monopolies are the best companies in the world.

Since they don’t have to worry so much about profits, they can allow themselves to treat their employees well, invest in new helpful technologies, and fund social projects.

It’s the companies in perfect competition that are the most cut-throat businesses instead.

My Note: This is simplistic in my opinion. Once you are a monopoly, you can leverage networks and integrations to keep a sub-par product afloat even if it’s not the best. Google, for example, could have a poorer map, but the competition can’t usurp it because Google can integrate it with all its other products.

Monopolies Power Moves

Monopolies want to look non-dominant and weak by defining their markets broadly.
Normal companies want to look unique.

Basically, they do the opposite: monopoly companies define their market broadly and say they’re in tough competition because they don’t want unwanted attention from regulators.

Cooperate & Innovate, Don’t Compete

Our culture wants to embrace competition, but Thiel says competition is a destructive and distracting force instead.
Better to make alliances instead, as he did with former competitor Elon Musk to build PayPal together.

The author says that wars start for trivial reasons and keep going without any real reason.
Microsoft VS Google is such an example, taking on each other with a myriad of competing products.
Until Apple came along and focused on innovating instead of battling and made a killing,

Disruption

Peter Thiel says disruption has become a buzzword for anything that wants to sound trendy and new.

He says that the disruption mindset is silly and counterproductive.

When you call yourself disruptive, you look at yourself through the eyes of other companies that become older and the enemies.
But your act of creation should be the focus, not disrupting and upsetting this or that industry.
Also, when you see yourself as the dark horse rebel, you become focused on roadblocks and enemies.

But seeing yourself as the dark horse upsetting the world only brings trouble.
Think about Napster, Thiel says, which wanted to take on the whole music industry.
Troublemakers are sent to jail, and troublemaker companies are sent to Chapter 11 courts.

The author says PayPal was disruptive, but they didn’t want to challenge any competitor, and they ended up bringing more business to other payment methods eventually.

Don’t disrupt: add value and avoid competition

Also, see the fundamental strategies of power:

The Last Will Be First

There’s no inherent benefit to being the first.

It should be a tactical move, but not your goal. It’s far better being the last instead and enjoying years of monopoly profits.

You do that by dominating a niche first and then expanding from there.

Foundations

You’ll always make mistakes, but there are a few things you better get right at the beginning.

The author says, indeed, that early mistakes are often very costly.
The constitution hardly ever changed, even though an update would be beneficial.

Similarly, early mistakes in choosing your co-founders or even early employees are damn hard to correct.

Thiel says that these days he only invests in startups where the founders share a history and knew each other long before they started pitching VCs.

Set Up Clear Structure & Clear Responsibilities

Thiel says that a clear structure and clear responsibilities will help keep people in line in the long run.

A basic structure tells you who:

1. Owns the company (ownership)
2. Runs the company on a daily basis
3. Formally controls the company affairs

The author says that distributing ownership in theory gives everyone incentives, but it also multiplies the chances for misalignment and internal power struggles.
Keep the board small, then.
Similarly, everyone should be doing one thing and evaluated for that one thing only.

Keep Equity Shares Secret

Equity is a great way of aligning interests and keeping individuals motivated.

However, it must be allocated smartly.
Giving everyone the same is a mistake, but giving differently and making it public is also a mistake as that will breed resentment.

The Mechanics of Mafia

Thiel says that in the ideal culture, employees love the company and love their job to the point they don’t look at the clock when it’s time to go home.

The author poignantly asks: why should an engineer be the 20th hire instead of going to Google for more money?
Well, the answer is specific to your company, but it’s related to:

1. Your Team
2. Your Mission

The perfect hires are excited specifically to work with your company because of what you are trying to achieve.

And they want to join because they are perfectly in sync with their colleagues already working there.
When everyone perfectly fits in and is bought into the mission, the company will look like a cult.
And that’s a good thing.

Sometimes your company won’t make sense to external people. But that’s OK. Better to become a cult. Or even a mafia.

The opposite of a cult are firms like consulting companies (Accenture, for example). Consulting companies don’t have a mission on their own, and consultants are always rotating in and out of companies they have no link to.

No company has a culture. Every company IS a culture.

If You Build It, Will They Come? Sales Matters

Peter Thiel says there’s a certain anti-sales mindset in Silicon Valley.
The idea, as wrong as it is, is that if you need to sell a product, the product is not that good.

Actually, sales might matter more than the product. Sales and distribution can create a monopoly, but a great product without strong sales and distribution won’t spread by itself.

Cons

• Hindsight bias

In analyzing a few past trends and events.
For example the ‘seven reasons why green engineering failed’ felt easily retrofitted to fit the narrative.

• Wrong demographics and ‘call of unsustainability’

Thiel says the world needs tech breakthroughs because we’re becoming too many who want to live the rich life, and listing China.
But most Western countries, and China in primis, are below replacement levels of fertility

• Disagree with some analyses (ie.: monopolies are good)

The idea that monopolies are good companies that treat employees well and experiment with new helpful technologies is not completely wrong but also somewhat naive.

Google’s employees are as money- and power-driven as anyone else, and they will want to make sure that their products are commercial successes so that they can line their pockets.

And being a monopoly allows them to squash any new upstart, thus possibly stifling competition and new products which could be more useful to the customers.

• “Be like a mafia”

The way he talks about “being like a mafia” feels like he hasn’t taken into account the second-order consequences of tribal behavior. Ie.: externalities are pushed onto the collective.

• Elon Musk is a great salesman?

Peter Thiel says that Elon Musk is a master salesman.

I think in a way, he is. But in the grander picture, rather than through interpersonal skills. Interpersonally, the upper echelons of sales skill also call for social intelligence.

Also, read the full article here:

• Elon Musk’s emotional intelligence (and how he was emotionally manipulated by his ex-wife)

Review

“Zero To One” is considered a seminal book on entrepreneurship, with the biggest takeaway probably in the title.

While some of Thiel’s analyses are his opinions, debatable, and dates, many insights remain evergreen and valid.
For example, thinking boldly, avoiding competition, and making alliances are crucial principles that apply not only to entrepreneurship but also to life in general.

Also see:

• Best entrepreneurship books