Zero to One: Notes on Startups, or How to Build the Future: Book Summary

The great secret of our time is that there are still uncharted frontiers to explore and new inventions to create. In Zero to One, legendary entrepreneur and investor Peter Thiel shows how we can find singular ways to create those new things.

Preface

  • Every moment in business happens only once. The next Bill Gates would not build an operating system.
  • Doing what we already know how to do takes the world from 1 to n but every time we create something new, we go from 0 to 1.
  • Technology is miraculous because it allows us to do more with less, ratcheting up our fundamental capabilities to a higher level.
  • Successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.

Chapter 1: The Challenge of the future.

  • Brilliant thinking is rare, but courage is in even shorter supply than genius.
  • Properly understood, any new and better way of doing things is technology.
  • Vertical progress is doing new things and horizontal progress is copying things that work.
  • Most people think the future of the world will be defined by globalization, but the truth is that technology matters more.
  • A new company’s most important strength is new thinking.

Chapter 2: Party like it's 1999.

  • “Madness is rare in individuals—but in groups, parties, nations, and ages it is the rule,” -- Nietzsche
  • Lessons from the dot com crash
    • Make Incremental advances
    • Stay lean and flexible
    • Improve on the competition
    • Focus on the product, not sales
      • The only sustainable growth is viral growth
  • The most contrarian thing of all is not to oppose the crowd but to think for yourself.

Chapter 3: All happy companies are different.

  • THE BUSINESS VERSION of our contrarian question is: what valuable company is nobody building?
  • If you want to create and capture lasting value, don’t build an undifferentiated commodity business.
  • Monopolists can afford to think about things other than making money; non-monopolists can’t.
  • In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot.
  • Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.
  • All successful companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

Chapter 4: The ideology of competition

  • Creative monopoly means new products that benefit everybody and sustainable profits for the creator.
  • There is no middle ground: either don’t throw any punches, or strike hard and end it quickly.
  • If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most.

Chapter 5: Last Mover Advantage

  • The value of a business today is the sum of all the money it will make in the future.
  • Growth is easy to measure, but durability isn't.
  • If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now?
  • If you build something valuable where there was nothing before, the increase in value is theoretically infinite.
  • Monopolies share some combination of the following characteristics:
    • Proprietary technology
    • Network effects
    • Economies of scale
    • Branding.
  • Network effects make a product more useful as more people use it eg Facebook
  • A monopoly business gets stronger as it gets bigger: the fixed costs of creating a product (engineering, management, office space) can be spread out over ever greater quantities of sales
  • A good startup should have the potential for great scale built into its first design.
  • Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market.
  • Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets.
  • As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

Chapter 6: You're not a lottery ticket.

  • THE MOST CONTENTIOUS question in business is whether success comes from luck or skill.
  • Shallow men believe in luck, believe in circumstances.… Strong men believe in cause and effect. -- Ralph Waldo Emerson
  • “Victory awaits him who has everything in order—luck, people call it.” -- Roald Amundsen
  • Four Views of life
    • Indefinite Pessimism
      • An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it.
    • Definite Pessimism
      • A definite pessimist believes the future can be known, but since it will be bleak, he must prepare for it.
    • Definite Optimism
      • To a definite optimist, the future will be better than the present if he plans and works to make it better.
    • Indefinite Optimism
      • To an indefinite optimist, the future will be better, but he doesn’t know how exactly, so he won’t make any specific plans.
  • Today our society is permeated by the twin ideas that death is both inevitable and random.
  • Progress without planning is what we call “evolution.” Darwin himself wrote that life tends to “progress” without anybody intending it.
  • You mush reject the unjust tyranny of Chance. You are not a lottery ticket.

Chapter 7: Follow the money

  • MONEY MAKES MONEY.
  • “For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them” (Matthew 25:29)
  • Monopoly businesses capture more value than millions of undifferentiated competitors.
  • We don’t live in a normal world; we live under a power law.
  • The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.
  • Once you think that you’re playing the lottery, you’ve already psychologically prepared yourself to lose.
  • The dozen largest tech companies were all venture-backed. Together those 12 companies are worth more than $2 trillion, more than all other tech companies combined.
  • An entrepreneur makes a major investment just by spending her time working on a startup.
  • You could have 100% of the equity if you fully fund your own venture, but if it fails you’ll have 100% of nothing.
  • You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.
  • You should not necessarily start your own company, even if you are extraordinarily talented.

Chapter 8: Secrets

  • Every one of today's most famous and familiar ideas was once unknown and unsuspected.
  • You can achieve difficult things but you can't achieve the impossible.
  • “In order to be happy, every individual “needs to have goals whose attainment requires effort, and needs to succeed in attaining at least some of his goals.” -- Kaczynski
  • People are scared of secrets because they are scared of being wrong.
  • “Why search for a new secret if you can comfortably collect rents on everything that has already been done?”
  • If you think something hard is impossible, you’ll never even start trying to achieve it.
  • When thinking about what kind of company to build, there are two distinct questions to ask
    • What secret is nature not telling you?
    • What secretes are people not telling you?
  • Most people think only in terms of what they’ve been taught; schooling itself aims to impart conventional wisdom.
  • The road doesn’t have to be infinite after all. Take the hidden paths.

Chapter 9: Foundations

  • “A startup messed up at its foundation cannot be fixed.” -- Thiel's Law
  • As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.
  • It’s not just founders who need to get along. Everyone in your company needs to work well together.
  • If you want an effective board, keep it small.
  • As a general rule, everyone you involve with your company should be involved full-time.
  • Working remotely should be avoided, because misalignment can creep in whenever colleagues aren’t together full-time, in the same place, every day.
  • A company does better the less it pays the CEO
  • If a CEO doesn’t set an example by taking the lowest salary in the company, he can do the same thing by drawing the highest salary. So long as that figure is still modest, it sets an effective ceiling on cash compensation.
  • High cash compensation teaches workers to claim value from the company as it already exists instead of investing their time to create new value in the future.
  • Equity is the one form of compensation that can effectively orient people toward creating value in the future.
  • Giving everyone equal shares is usually a mistake
  • Since it’s impossible to achieve perfect fairness when distributing ownership, founders would do well to keep the details secret.
  • Equity is a powerful tool precisely because of these limitations. Anyone who prefers owning a part of your company to being paid in cash reveals a preference for the long term and a commitment to increasing your company’s value in the future.
  • The most valuable kind of company maintains an openness to invention that is most characteristic of beginnings.

Chapter 10: THE MECHANICS OF MAFIA

  • What would the ideal company culture look like?
  • A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.
  • Recruiting is a core competency for any company. It should never be outsourced. You need people who are not just skilled on paper but who will work together cohesively after they’re hired.
  • Why would someone join your company as its 20th engineer when she could go work at Google for more money and more prestige?
    • There are two general kinds of good answers: answers about your mission and answers about your team.
  • From the outside, everyone in your company should be different in the same way.
  • On the inside, every individual should be sharply distinguished by her work.
  • When assigning responsibilities to employees in a startup, you could start by treating it as a simple optimization problem to efficiently match talents with tasks.

Chapter 11: if you build it, Will they come?

  • All salesmen are actors: their priority is persuasion, not sincerity. Like acting, sales works best when hidden.
  • If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business -- no matter how good the product.
  • No matter how strong your product—even if it easily fits into already established habits and anybody who tries it likes it immediately—you must still support it with a strong distribution plan.
  • If you can get just one distribution channel to work, you have a great business.
  • Your company needs to sell more than its product. You must also sell your company to employees and investors.
  • If your company consists of just you and your computer. Look around. If you don’t see any salespeople, you’re the salesperson.

Chapter 12: Man and Machine

  • The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.
  • As computers become more and more powerful, they won’t be substitutes for humans: they’ll be complements.
  • The most valuable companies in the future won’t ask what problems can be solved with computers alone. Instead, they’ll ask: how can computers help humans solve hard problems?

Chapter 13: Seeing Green

  • 7 questions that every business must answer

    • The engineering question

      • Can you create a breakthrough technology instead of incremental improvements
      • Only when your product is 10x better can you offer the customer transparent superiority.


    • The Timing question

      • Is now the right time to start your particular business
      • Entering a slow moving market can be a good strategy, but only if you have a definite and realistic plan to take it over.


    • The Monopoly question

      • Are you starting with a big share of a small market
      • You can’t dominate a submarket if it’s fictional, and huge markets are highly competitive, not highly attainable.


    • The people question

      • Do you have the right team.
      • There's nothing wrong with a CEO who can sell but if he actually looks like a salesman, he's probably bad at sales and worse at technology


    • The distribution question

      • Do you have a way to not just create but deliver?
      • Selling and delivering a product is at least as important as the product itself.


    • The durability question

      • Will your market position be defensible in 10 and 20 years into the future?
      • What will the world look like 10 and 20 years from now and how will my business fit in?


    • The Secret question

      • Have you identified a unique opportunity that others don't see.
      • Great companies have secrets: specific reasons for success that other people don't see.


  • The best projects are likely to be overlooked, not trumpeted by a crowd; The best problems to work on are often the ones nobody else even tries to solve.

Chapter 14: The Founder's Paradox

  • Some people are strong, some are weak, some are geniuses, some are dullards -- but most are in the middle.
  • We should be more tolerant of founders who seem strange or extreme; we need unusual individuals to lead companies beyond mere incrementalism.

Stagnation or Singularity

  • Without new technology to relive competitive pressures, stagnation is likely to erupt into conflict.
  • Our task today is to find singular ways to create the new things that will make the future not just different but better to got from 0 to 0.
  • Only by seeing our world anew, as a fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future.