Peter Thiel shows you how a unicorn founder think. Zero to One indeed doesn’t give us an how to manual, but a treaty on mindsets.
- 3 Sentences Summary
- Full Summary
- Chapter 1: The Challenge of The Future
- New Thinking
- Chapter 2: Party Like It’s 1999
- Chapter 3: All Happy Companies Are Different
- Chapter 4: The Ideology of Competition
- Chapter 5: Last Mover Advantage
- Chapter 6: You Are Not a Lottery Ticket
- Chapter 7: Follow The Money
- Chapter 8: Secrets
- Chapter 9: Foundations
- Chapter 10: The Mechanics of Mafia
- Chapter 11: If You Build It, Will They Come?
- Chapter 12: Man And Machine
- Chapter 13: Seeing Green
- Chapter 14: The Founder’s Paradox
- Zero To One: Conclusions
- Practical Applications
3 Sentences Summary
- Don’t look for incremental, look for 10x: have the hubris to dream big
- Don’t think disrupt, don’t think competition: think new, think value adding
- Pick founders and employee who share your same vision and your same culture
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:
Chapter 1: The Challenge of The Future
Peter Thiel says that the future is only the future if it’s different from today. If society doesn’t change for a thousand years, than the future is a thousand years away. If things change drastically over the course of a decade, than the future is now.
The author says that nobody can see the future, but we know two things about it: it will be different, and yet it will be rooted in today’s world.
Zero to One
Thiel talks about two different kind of changes: horizontal and vertical. Horizontal means incremental improvements on what exists already. Vertical improvement means doing something completely new. It’s not easy to do and to envision because it means finding new paths that nobody explored before.
That means going from Zero to One.
Peter Thiel says that globalization is an horizontal change: taking what works in one place and replicating it somewhere else. China wants to be and do as the United States does. But without radical changes in technology the world cannot sustain billions of people living with the same US standards.
The author says that in some big and dysfunctional corporations entrenched interests work as roadblock to change and politicking is more important than getting work done.
If that’s the case, you should quit.
On the other hand, a start up most valuable asset is a new way of thinking. What a start up must do is question ideas and rethinking businesses.
Chapter 2: Party Like It’s 1999
Peter Thiel says that the dot.com bubble taught entrepreneurs four fake big lessons:
- Make incremental advances: the only safe path
- Stay lean and flexible: plans are seen as a straight jacket. “try things out” instead, don’t plan
- Improve on the competition: don’t try to enter new markets prematurely
- Focus on product, not sales: if you need sales, your product is not good
Thiel says the the opposite is true instead:
- Better to risk boldness than triviliaty
- A bad plan is better than no plan
- Stay away from competitive markets: they destroy profits
- Sales matters (as much as product)
But the dot.come bubble wasn’t just madness, Thiel says. It had some clarity and vision. He says we need to look into the future, think big and we need that 1999 hubris to achieve it (read Bold by Peter Diamandis for more on moonshots and big dreams).
My note: you can see this book has a few years now. 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.
Chapter 3: All Happy Companies Are Different
The business equivalent of a contrarian question is:
What valuable company is nobody building.
Peter Thiel talks in this chapter about monopolies and perfect competition.
Monopoly though means something different in Peter’s vocabulary: it means a company doing something so good that nobody else can offer a close substitute. Google is such an example of a company achieving monopoly for having gone from zero to one.
I found it super interesting to read Thiel’s view on what actual companies say when they’re monopolies and when they’re in highly competitive businesses.
Basically, they say the opposite: monopoly companies define their market broadly and say they’re in tough competition because they don’t want unwanted attention from regulators. Businesses in competitive market instead define their markets very narrowly so they can dominate it.
An original Tajikistan restaurant for example might say they’re in a league of their own as the only restaurant of its kind in the city. But what if the market is not Tajikistani food but simply all the restaurants?
Basically, this is the same old principle of the noisiest man in the room: when someone screams too loudly he’s different, he is the one with the most to prove (as also expressed by Tim Grover).
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, to invest in new helpful technologies and to fund social projects.
It’s the companies in perfect competition that are the most cut-throat businesses instead.
All happy companies are different because they solved a unique problem or came up with a unique, life changing product. All failed companies instead are the same: none of them came up with a great new product.
Chapter 4: The Ideology of Competition
Thiel says it’s just economists who frown over monopolies and love competition. It’s our society that has embraced the competition ideology. Our educational system is based on competition and businesses love war references (“make a kill”, “sales task force” etc.).
The author says that the 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 product. Until Apple came along and focused on innovating instead of battling.
Thiel says competition is a destructing force instead, and exemplifies his alliance and merger with former competitor Elon Musk to build, together, Paypal.
Chapter 5: Last Mover Advantage
Peter Thiel takes on the short term culture pervading many startups. He says the most fundamental question instead is: will this business still be around 10 years from now?
Numbers alone can’t tell you the answers but you have to think critically about your business (in contrast to the number-centrism espoused by Michael Gerber in The E-Myth).
He says that there’s no sure fire way to build a monopoly, but each monopoly shares four characteristics:
- Proprietary Technology: great tech improving on the past on order of magnitudes (ie: google search, ipad)
- Network Effects: when so many people use a product the scale tips and everyone joins
- Economies of Scale: monopoly businesses get stronger growing bigger (not the case for service businesses)
- Branding: a brand should embody an idelogy
Peter Thiel says disruption has become a buzzword for anything that wants to sound trendy and new. He says it’s silly and counterproductive. When you call yourself disruptive you look at yourself through the eyes of other companies that become the old and the enemies. But your act of creation should be the focus, not on 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, who 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.
The Last Will be First
There’s no inherent premium in 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.
Chapter 6: You Are Not a Lottery Ticket
Peter Thiel here talks about “luck” and its role in business success. He says the phenomenon of successful serial entrepreneur calls into question the luck logic.
My Note: the serial entrepreneur thing is no proof to be honest. One might easily “get lucky” twice. Or even thrice. Pretty sure there are several double lottery winners in the world.
The author talks further about pessimists and optimists and about Lean Methodologies. He says six sigma and lean methodology is about incremental improvements and will not get you from zero to one.
Chapter 7: Follow The Money
Thiel says that anyone without a salary or stock options is misaligned with the company interests. Part time employees and external consultant don’t work because they don’t have aligned interests. They don’t really have the best future of the company at heart.
Even remote workers should be limited as it’s easy to disalign without daily face to face.
The hiring decision should be binary: either fully on board or not.
Another interesting trend the author found which was illuminating for me was that the less the company pays its CEO, the better it does. Too high salary make CEOs behave more like politician busy defending the status quo.
A low salary also sets an example for the rest of the company.
Chapter 8: Secrets
Peter Thiel says in this world most people don’t think there are any “secrets” left to discover.
My Note: I can so relate to this. As a kid first learning about Columbus and the explorers I always thought the world by now had it all figured it out.
Of course, the truth is there are countless “secrets” left to be found and countless problems left to be solved.
Chapter 9: Foundations
You’ll always make mistakes, but a few things you better get them 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.
Often the beginning of a relationship is full of excitement, but when it dissipates, if major rifts take place, they can easily take the whole company down.
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.
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:
- Owns the company (ownership)
- Runs the company on a daily basis
- Formally control the company affairs
The author says that distributing ownership in theory gives everyone incentives, but it also multiplies the chances for dis-alignment and internal power struggles. Keep the board small then.
Similarly, everyone should be doing one thing and evaluated for that one thing only.
My Note1: this reminds of Eleven Rings when Phil Jackson says that having clear roles allows people to focus on the task rather than wasting energies on.
My Note2: however don’t let that “one thing” define you. To become a Linchpin employee (read: Linchpin) you have to do your one thing and then more core functionalities until you become a key, irreplaceable player.
Keep Equity Secret
Thiel says 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.
Time is also a huge differentiator in a fair equity distribution. For example if the company explodes in value a secretary joining Ebay in 1996 would make and own more than anyone else joining in 1999.
So to avoid any issue… Keep the details secret.
Chapter 10: 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 when it’s time to go home.
The author poignantly asks: why should an engineer be the 20th hire instead of going for Google for more money? Well the answer is specific to your company, but it’s related to:
- Your Team
- Your Mission
The perfect hires are excited specifically with working with your company because of what you are trying to achieve. And they want to join because they are perfectly in sync with the colleagues already working in 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.
Chapter 11: If You Build It, Will They Come?
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.
The author says that marketing and advertising works, and works on everyone including the people who say it doesn’t work. Actually, sales might be superior because better sales and distribution can create a monopoly, but a great product without strong sales distribution and won’t spread by itself.
Some great summaries on sales and influencing for you: Maximum Influence, The Art of Closing The Sale, Pre-Suasion, Triggers.
A product is viral if the core functionality leads you to invite their friends to also use your product. I invite you to check Contagious to learn more on how you can make your product more likely to become and go viral.
Chapter 12: Man And Machine
Peter Thiel says the debate of man VS machine, or even machine taking over people’s task is a silly one. Computers are complimentary to human beings, not substitutes. And the best companies will be built by entrepreneurs empowering people, not taking away their jobs or their tasks.
Chapter 13: Seeing Green
Peter Thiel talks in this chapter about the failure of the clean tech bubble. He says the reason of the failure is to be researched in 7 key areas every business must address:
- Engineering: can we create breakthroughs instead of incremental
- Timing: is now the 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 distribute your product
- Durability: will your market be defensible in 10 years in the future
- Secret: have you identified unique opportunities others don’t see?
If you nail all the seven you’ll grow a monopoly and amass a fortune. Even 5 or 6 might work.
I found it most interesting the monopoly one. Thiel says you should dominate a small market first instead of going for a big one. Big markets are usually competitive, so better build your foundations on a smaller niche and then go big. Facebook for example started with Harvard first. Then universities. And then the world.
Peter’s Thiel analyses the tech bubble along those 7 variables and then goes into why Tesla has been successful by nailing those seven variables. They’ve very good analysis and I invite you to get the book to read it.
Chapter 14: The Founder’s Paradox
Thiel talks about how paradoxical founders can be and what a difference they can make to a company. Founder can also become the main figure of the whole companies, and in spite of the modern tech they build, come to resemble kings of feudal time who imbibe their companies with their spirit -or use their persona for further marketing, hard to say sometimes-.
Zero To One: Conclusions
Thiel says we need new technologies to build a better future. No other options are possible. Even a plateau would mean troubles for us, because in a world with finite resources and growing, consuming population, that would be unsustainable.
Go ahead fellow founders and creators then, we need people going from zero to one.
There are many key mindsets. Here a few to keep in mind:
- Don’t focus on “disrupting”: it get you in a uselessly combative mindset
- Pick your co-founder as you’d pick your husband/wife
- Hire people who believe in your mission and fit your culture
- Don’t look at the size of the overall market: dominate a niche, then go from there
Absolutely loved From Zero To One.
It’s a mix of mindsets, psychology and sound business advice.
You will certainly benefit from reading it.