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Zero to One: Notes on Startups, or How to Build the Future Hardcover – September 16, 2014
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“Crisply written, rational and practical, Zero to One should be read not just by aspiring entrepreneurs but by anyone seeking a thoughtful alternative to the current pervasive gloom about the prospects for the world.”
– The Economist
"An extended polemic against stagnation, convention, and uninspired thinking. What Thiel is after is the revitalization of imagination and invention writ large…"
– The New Republic
"Might be the best business book I've read...Barely 200 pages long and well lit by clear prose and pithy aphorisms, Thiel has written a perfectly tweetable treatise and a relentlessly thought-provoking handbook."
– Derek Thompson, The Atlantic
“This book delivers completely new and refreshing ideas on how to create value in the world.”
- Mark Zuckerberg, CEO of Facebook
“Peter Thiel has built multiple breakthrough companies, and Zero to One shows how.”
- Elon Musk, CEO of SpaceX and Tesla
" Zero to One is the first book any working or aspiring entrepreneur must read—period."
- Marc Andreessen, co-creator of the world's first web browser, co-founder of Netscape, and venture capitalist at Andreessen Horowitz
"Zero to One is an important handbook to relentless improvement for big companies and beginning entrepreneurs alike. Read it, accept Peter’s challenge, and build a business beyond expectations."
- Jeff Immelt, Chairman and CEO, GE
“When a risk taker writes a book, read it. In the case of Peter Thiel, read it twice. Or, to be safe, three times. This is a classic.”
- Nassim Nicholas Taleb, author of Fooled by Randomness and The Black Swan
“Thiel has drawn upon his wide-ranging and idiosyncratic readings in philosophy, history, economics, anthropology, and culture to become perhaps America’s leading public intellectual today”
"Peter Thiel, in addition to being an accomplished entrepreneur and investor, is also one of the leading public intellectuals of our time. Read this book to get your first glimpse of how and why that is true."
- Tyler Cowen, New York Times best-selling author of Average is Over and Professor of Economics at George Mason University
"The first and last business book anyone needs to read; a one in a world of zeroes."
- Neal Stephenson, New York Times best-selling author of Snow Crash, the Baroque Cycle, and Cryptonomicon
"Forceful and pungent in its treatment of conventional orthodoxies—a solid starting point for readers thinking about building a business."
- Kirkus Reviews
About the Author
Peter Thiel is an entrepreneur and investor. He started PayPal in 1998, led it as CEO, and took it public in 2002, defining a new era of fast and secure online commerce. In 2004 he made the first outside investment in Facebook, where he serves as a director. The same year he launched Palantir Technologies, a software company that harnesses computers to empower human analysts in fields like national security and global finance. He has provided early funding for LinkedIn, Yelp, and dozens of successful technology startups, many run by former colleagues who have been dubbed the “PayPal Mafia.” He is a partner at Founders Fund, a Silicon Valley venture capital firm that has funded companies like SpaceX and Airbnb. He started the Thiel Fellowship, which ignited a national debate by encouraging young people to put learning before schooling, and he leads the Thiel Foundation, which works to advance technological progress and long- term thinking about the future.
Blake Masters was a student at Stanford Law School in 2012 when his detailed notes on Peter’s class “Computer Science 183: Startup” became an internet sensation. He went on to co-found Judicata, a legal research technology startup.
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Two of the ideas are HUGE and the rest are filler. The first infuriated me and the second inspired me. The remaining four ideas were not exactly news to me because I once founded and ran a startup. There's also a couple rants, one against biotechnology and one against green tech, which to my ears sounded tribal.
After the ideas and the rants comes some rather embarrassing stuff that probably should not have made it into print. For example "we never invest in entrepreneurs who turn up for the interview in a suit" or "four of the founders of PayPal had built bombs as children." Memo to Peter Thiel: you are successful despite your prejudice against people who don't share your sartorial taste, and your partners made it to adulthood despite having been poorly supervised as children.
Idea number one is that "Monopolies are Good"
Not just for the monopolist (that would hardly have been a contribution) but also for everybody else. The general idea is that competition hurts profits and the lack of profits leads firms to an existential battle which does not allow them the scope to innovate. Monopolies are good because they have the power and scope to bring innovation to everybody. So Bill Gates brought the computer to every home. He was not beaten by a better provider of software, he was superseded by a shift in technology toward powerful mobile devices, tablets and the cloud, all of which, in turn, were motivated by other entrepreneurs' desire to obtain monopoly profits. So Steve Jobs dominated many of these arenas for long enough to enjoy monopoly profits and other people will some day take this all further. Even the government is in on the act, Peter Thiel claims, or else it would not be granting patents to inventors or freedom from competition from generic drugs to the pharmaceutical companies that first develop new medications.
Erm, where do I start? My mom taught me that "necessity is the mother of invention:" GM did not develop the Volt till it was up against the wall, Archimedes discovered how to screw water upwards during the Roman siege of Syracuse, the Germans developed jet propulsion, the swept wing and the rocket we later sent to the moon when they had pretty much already lost WWII. Intel gave us the messed-up Pentium when it was as close to a monopoly as it will ever be, Steve Jobs gave us the Newton when he was feeling comfortable, Ford gave us the Edsel when profits were still huge, Coke gave us New Coke when its only true competition came from water; Peter Thiel has 99% of human history against him on this one.
Now, I will be the last to contest that Pericles' Athens gave us the Parthenon when he were sitting on half of Greece's treasure, that the Medici sponsored some fantastic art when they were at their apogee or that Peter Thiel could make some fantastic contributions to philosophy in the years to come, but that's beside the point. Pericles and the Medici both came to an end I would not wish upon Peter Thiel, let's put it that way. Bottom line, he's hanging with far too many courtesans who are telling him what he wants to hear and too many fellow "job creators" and he needs to get out more.
The really painful thing is that Economics deals with all these issues, and Peter Thiel should read some Economics. Many fields of endeavour, for starters, relate to limited markets. Example: the size of the market for flat bread in New York State. Meeting in the McDonalds car park with the heads of the other three major bakeries that make flat bread to fix the price of flat bread should be illegal, period. Buying out the other three makers of flat bread so you can regulate the price by yourself should also be illegal. Provision of mattresses across the North American continent springs to mind: A US king size mattress is twice the price of a UK king size mattress and it only has 3 inches extra on each side and I'll leave that one right there. I can see how an ocean and different sizes benefit the mattress industry in the US, but I really don't see how Americans will one day benefit from paying double for their mattresses. Dunno, maybe they will discover a different way to sleep.
And then we have the cases where, as the author says, it's clear that you need to incentivize people to innovate (drugs spring to mind, where the US has a lead) and that's where patents come in. Again, though, it's crystal clear that there is a limit to how long these monopolies should last. And it was crystal clear to everybody with a modicum of common sense that both Intel and Microsoft were not helping the world along when they used dirty tricks to hurt AMD and Netscape.
All that said, monopolies are fantastic for you if you can set them up, and the four pieces of advice on how to set up a monopoly sound pretty sensible: 1. Proprietary Technology 2. Network Effects 3. Economies of Scale and 4. Brand. Duly noted, and well worth remembering. Most important piece of advice: start with a small monopoly you know you can get (example: launch Facebook among your Harvard classmates, launch Paypal among the 20,000 eBay power users) and take things from there.
The number two idea is that you need a Plan. Things do not just work out if you put together optimism, good people, hard work, capital and buy a lottery ticket. The author takes us on a (rather gratuitous) trip from Plato and Aristotle to Nozick and Rawls via Epicurus, Lucretius, Hegel and Marx to discuss when optimism is and isn't warranted and the bottom line is that you're only allowed to be an optimist if you have "definite optimism" based on a specific Design (my capital D) for a business. Peter Thiel takes a massive swipe at the Malcolm Gladwells of the world who overemphasize chance, serendipity and fate with facile arguments about the similarity in Steve Jobs' and Bill Gates' birthdates.
Bottom line, fortune smiles on those who have a design. After the fact they might look lucky, but only then. Thiel considers Steve Jobs to have been a designer, first and foremost. In his words "The greatest thing Jobs designed was his business. Apple imagined and executed definite multi-year plans to create new products and distribute them effectively."
I LOVED this. Loved it, loved it, loved it. Please somebody email this thought to Mariana Mazzucato and her tribe of nihilists.
The third idea is that our world is best described by the extremes rather than what happens in the middle. It's the Nassim Nicholas Taleb idea, and he duly appears on the back cover to endorse the book. The relevant insight here is that when you invest in startups, like the author does, the performance of your entire fund is a function of your one best investment; the rest of your investments, even if they kinda do OK, are neither here nor there, deserve none of your time and get none of it if you're doing your job right. The lesson if you are involved in a startup is "what are the chances that this venture will be the one?" This is not a novel idea. For the best book on the subject I'd swerve around NNT's work and turn to Benoit Mandelbrot's masterpiece, "The (Mis)behaviour of Markets."
The fourth idea is no more original, but Thiel puts it well: "there are many more secrets left to find, but they will yield only to relentless searchers." A company that's based on having solved a hard problem, either a "secret of nature" or a "secret about people" is going to have a much better chance of succeeding than one that adds a twist to an already existing business model. That said, the author is quick to mention that some entrepreneurs (for example Richard Branson) do very well from doing exactly that. It's just that this is not his type of company.
The fifth idea is you need to pick your partners i.e. your investors, your fellow managers and your (ideally 3) directors very carefully in order to make sure you all want the same thing out of the company (and it had better not be immediate rewards). As a former entrepreneur, I can vouch for the fact that this is a "good problem to have." For my series 1 I saw 42 potential investors and chose the 2 who were prepared to give me money, I hired as managers and engineers best guys I could find and I had no say regarding the idiot my investors put on my board. But if you can afford to follow Peter Thiel's advice, it's not controversial. And neither is "idea 5.5" that the people who work at a startup will belong to a cult, not to an army of consultants. Outside of a bubble environment that's precisely who will join anyway. You won't get any consultant types banging on your door, unless they are putting together their CV to get into B-school.
The sixth idea is that marketing is extremely important. If you build it they won't come. You need to sell it. True. But not all startups have the funding to sell it, so it's not a total disaster if it somehow does sell itself. But point taken.
The closing chapter is a vomit-inducing hagiography of founders. The question is posed: are founders different because they founded a firm or did they found a firm because they are different. Answer: nobody cares. For the record, I think a successful entrepreneur is a guy who does not know how to give up. That's what they all have in common. But once they have their first billion and don't need to run their ideas by anyone else to get them funded they very often go do something stupid (dunno, like go mine asteroids) with exactly the same fervour they previously applied to the sensible endeavour that made them rich. The more grounded ones keep their further investments close to home and direct their creativity toward giving lectures and writing books. Peter Thiel, fortunately for himself, falls in the second category.
Far too often I see a microcap company’s investor presentation start off with some enormous addressable market ($20 billion, $100 billion, etc) and what follows is “If we just capture 2%….”. This has always annoyed me because in many ways the worst thing an undercapitalized public microcap can do is try to attack a huge highly competitive market.
In Zero to One, Peter Thiel talks about how small emerging companies/and investors need to take the opposite approach. In simple terms, aim for monopoly, competition is for losers. Monopolies have far greater profits, pricing power, and ability to think long-term. For small companies like microcaps to be a monopoly they need to focus on dominating a small market that is expanding, and then further grow into other complimentary markets. “Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away.” When a company dominates a market (large or small) it is much more profitable and valuable then one owning 1% of a large competitive market.
When I look back at some of the best microcap performers they too had this characteristic of dominating a small market that is expanding rapidly. These companies normally have high organic growth rates, profitability, and pricing power. These powerhouse businesses can fund high rates of growth from internal cash flows. Their market leadership and profitability allows them to make longer-term strategic decisions that provide an even wider moat.
Upside: A really solid book by an accomplished entrepreneur and investor (one of the PayPal founders).
Downside: The Audiobook https://www.amazon.com/Zero-One-Notes-Startups-Future/dp/B00M284NY2 was read by a nearly unlistenable voice (God, I hope that's not you, Peter Thiel!).
But the content cuts through.
I had to take a HyperFocus DRIVE. The Ultimate Solution for FOCUS and MOTIVATION. just to keep my mind from going into a monotone listening coma (think Ben Stein, but without the personality. Or cool glasses).
If you're a true innovator or inventor, you will find yourself nodding all the way through this book as Thiel exposes the differences between Innovation and Raw Creation.
He also sets out the Rules for Revolutionaries and Guideposts for Success.
Ignore these at your own risk.
A must-read for any entrepreneur who wants to make a difference.