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

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

If you want to build a better future, you must believe in secrets.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. Thiel begins with the contrarian premise that we live in an age of...

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Title:Zero to One: Notes on Startups, or How to Build the Future
Author:Peter Thiel
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Edition Language:English

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

  • Nick

    The first book since Antifragile that had me hooked beginning to end. The definite/ indefinite paradigm had me thinking long after the book was finished. Fantastic.

    Ch. 1 The challenge of the the future

    The first chapter is an introductory piece on the creation of new value (going from nothing to something) thus zero to one as opposed to logarithmic and or incremental changes one to n.

    - He argues that spreading old ways to create wealth around the world will only further globalize the world into

    The first book since Antifragile that had me hooked beginning to end. The definite/ indefinite paradigm had me thinking long after the book was finished. Fantastic.

    Ch. 1 The challenge of the the future

    The first chapter is an introductory piece on the creation of new value (going from nothing to something) thus zero to one as opposed to logarithmic and or incremental changes one to n.

    - He argues that spreading old ways to create wealth around the world will only further globalize the world into sameness. This sameness means a universal current state. The downside to this is that everyone will now have a North American live style which requires a lot more energy and competition for the same resources. Thiel calls for a pursuit of new growth not a desire to spread the sameness around.

    - He argues that old technologies still pervade our society and that new technologies will and should come from startups because large scale bureaucracies move slowly and entrenched interests in these organizations shy away from risk. In a lot of organizations signaling that your work is completed is more important than the work itself.

    Ch. 2

    - When growing a company exponential growth in size of your business also means exponential growth in your cost structure.

    - Out of fear of a post 90's tech bubble do not treat the lessons learned as dogma. The goal of lessons is that the mistakes of the past are potential future realities not a determined future. Silicon Valley currently is trapped in this thinking that the bubble of the past dictates how we should act presently.

    - Current tech companies focus on too much 1) incremental advances 2) have no idea where there business will go or what they will be doing 3) forego creating new markets and instead attempt to gain more ground in overcrowded markets 4) ignore sales completely

    - The opposite is important 1) risk boldness 2) have a framework of where you'd like to take your company 3) search for new markets 4) sales matter as does product design not more though

    Ch. 3 All Happy Companies are Different

    - Ask yourself what valuable company is nobody building.

    - Create value and then capture that value

    - Choose to become a monopoly as competitive markets strip your profits away. Become a company so good at what you do that no one offers a close substitute. Differentiate your company from all others.

    - Monopolists lies to protect themselves (google claims its an advertising company and thus has only 3% of the global advertising market but if it is to be considered a search engine company then it owns 67% of the search engine market).

    - Competitive companies lie and exaggerate their share of the market to attract investors.

    - Monopolistic profits allow companies to transcend the competitive struggle and focus on their employees.

    -Monopolies can keep innovating and profits ease long term planning and make it more feasible to attempt ambitious R&D projects.

    - Basic economics are a relic of the past.

    - Every business is successful exactly to the extent that it does something others cannot.

    - Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past.

    - Is your market the right one to be in? Everybody loses when the war isn't worth fighting.

    - Do not accumulate enemies. And if you can't beat a rival consider merging.

    - Short term thinking diverts your focus from company growth and durability.

    - Will your company be around in 10 years?

    - Characteristics that may guarantee you dominance: proprietary technology, network effects, economies of scale, and brand.

    - The problem with MBA types: initial markets are small that they often do not perceive them as opportunities.

    - Choose small market demand with immediate product adoption.

    - First dominate a specific niche and then scale to adjacent markets.

    Chapter 6:

    - How you perceive the future may dictate your outcome. Are you indefinitely pessimistic, definitely pessimistic, definitely optimistic or indefinitely optimistic.

    - Indefinite pessimist: the future is bleak and there is nothing anyone can do about it.

    - Definite pessimist: the future is bleak and must be prepared for.

    - Definite optimist: the future will be better and everyone must work in a direction to make it better (Entrepeneurs)

    - Indefinite optimist: the future will be better but how it will materialize is unforeseeable (law school students).

    - Entrepeneurs do not view their future as out of their hands and are optimistic enough to plan for their future. They only sell their company when they have no plans for where they would like to take it.

    - Long term planning has become undervalued in a world that only thinks in quarterly cycles and 4 year election cycles.

    - A startup is the largest endeavour over which you can have some sort of control over your own destiny.

    Ch. 7

    - Venture returns don't follow a normal distribution, rather they follow a power law: a small handful of companies outperform all others.

    - The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of fund combined. Every investment in your portfolio must have the potential to succeed at a vast scale. Less than 1% of companies started each year receive venture funding.

    - You are an investor in yourself. When you choose a career you believe your line of work will be desired in years to come.

    - An individual cannot diversify his own life by keeping dozens of possible careers in his back pocket.

    Ch. 8

    - What company is nobody building?

    - Have unorthodox ideas and do not be afraid to hold these ideas. Having mainstream ideas that everyone else has is not a sign of progress. It is thinking with a contrarian-esk perception is where new ideas stem from.

    - If you think something is hard you'll never try.

    Ch.9 Foundations

    - Thiel's law: a startup messed up at the beginning cannot be fixed.

    - Bad decisions made early on such as choosing the wrong partners or hiring the wrong people can be very hard to correct after they are made.

    - You cannot build something great on flawed foundations.

    - When you start something the most important decision is who you start it with.

    - Technical abilities and complementary skill sets matter, but how well the founders know each other and how well they work together matter just as much. Founders should have a prehistory before they start a company together otherwise it is just a gamble.

    - The benefit of working for yourself is you have sole control of a vision the downside is that you don't gain the benefit of having a team.

    - You need good people who get along but you also need a structure to keep everyone aligned for the long term.

    - Sources of unalignment: ownership, possession and/ or control. Ownership: who owns equity. Possession: who runs the company on a day to day basis. Control: who governs the company's affairs.

    - Be aware when bureaucracy is creeping into your company.

    - Refrain from having conflict between investors and founders due to differing interests and priorities. Have a smaller board because the smaller the board the easier it is for people to reach consensus and for control to be exercised. Every person on your board matters because each has the possibility to bring an issue that you may have to deal with so be selective. A board of 3 to 5 is perfect.

    - Everyone should be a full time employee (except lawyers and accountants) to keep your company aligned with your goals.

    - A company does better the less its CEO makes. A CEO that takes a high salary in startup will defend his pay and the status quo while a CEO that takes less money or money equal to his founders and employees will work hard to ensure problems do not arise and when problems arise to help solve them. A cash poor executive will continually focus on creating value for his or her company.

    - Anyone who prefers owning a part of your company rather than being paid in cash reveals a preference for the long term and a commitment to increasing your company's value.

    - The most valuable kind of company maintains an openness to invention and new ideas.

    Ch. 10

    -Do not assemble a team by hiring the most talented people based on a resume or some other arbitrary metric of talent.

    - Your time is your most valuable asset and thus create a team you would enjoy spending time with on a shared vision. You want a tight knit group not a team of free agents only looking out for themselves. Hire people who enjoy working together, excited about your vision and talented.

    - Always ask yourself why someone would want to work for you not the inverse which is why should I hire them. If they ask why they should work for you you should be able to respond why your mission matters and why your team is a team people likeminded people where they could not afford to not want to join.

    - Make every person responsible for doing just one thing by defining roles to reduce conflict. Avoid people overlapping each other doing the same job and thus leading to conflict over the same responsibilities. Eliminate competition among your employees by differentiating their tasks.

    Ch. 11

    - Never underestimate the importance of sales. Sales works best when hidden. The worst salesmen are the ones who let us know we are being sold to.

    - A product is viral if its core functionality encourages users to invite their friends to become users to.

    - You must also sell your company to investors and employees. Keep them engaged.

    - You should never assume that people will admire your company without a public relations strategy.

    Ch. 12

    - Computers are complements for humans not rivals or substitutes. The most valuable businesses of the future will be created by entrepreneurs who seek to empower people rather than making people obsolete.

    Ch. 13

    - Companies should strive to make their product 10X better than their rivals because merely incremental improvements often end up meaning no real improvement at all for the end user.

    - Entering a slow moving market can be a good strategy but only if you have a definite and realistic plan to take it over.

    - Customers won't care about any particular technology unless it solves a particular problem in a superior way.And if you can't monopolize a unique solution for a small market you will be stuck with vicious competition.

    Ask yourself 7 questions

    1) Is your technology superior?

    2) Is the timing right?

    3) Do you have a monopolistic advantage?

    4) Have you assembled a good team?

    5) Do you have a good distribution chain?

    6) How durable is your company?

    7) Do you have any insight as to why your company is different?

    Ch. 14

    - The most important task in business is the creation of new value which cannot be reduced to a formula.

    - We need unusual individuals to lead companies beyond mere incrementalism.

    Ch. 15

    - Always remember the first essential step is to think for yourself.

  • Andrew Garvin

    Having worked with Peter - and the PayPal mafia more generally - for almost 10 years now, I have a unique perspective on Zero to One. Indeed, a lot of the ideas contained within are familiar to me. The launching point for the book is Peter's stock interview question - a question he asked me 8 years ago.

    'What is something you think is true, but that most people disagree with you on?'

    My answer at the time (2006) was: 'There is a bubble in housing.' Of course, that was cheating, since I knew this w

    Having worked with Peter - and the PayPal mafia more generally - for almost 10 years now, I have a unique perspective on Zero to One. Indeed, a lot of the ideas contained within are familiar to me. The launching point for the book is Peter's stock interview question - a question he asked me 8 years ago.

    'What is something you think is true, but that most people disagree with you on?'

    My answer at the time (2006) was: 'There is a bubble in housing.' Of course, that was cheating, since I knew this was a pet idea of Peter's. Not surprisingly, he asked if I had another answer. I didn't, but I extemp-ed some bs about how FDI in Iraq was a good idea. Luckily I was strong enough in other ways to make it through.

    His breakdown of this question and why it's so difficult to answer is incisive and in itself reveals a truth that is lying in plain sight. Very few ideas are both contrarian and correct. And, yet, finding that combination is critical to successful investing, entrepreneurship, or even career development.

    The book moves at a quick, clear pace with examples generously distributed throughout. Even the Bible quotes (and nerd Bible quotes - i.e. Lord of the Rings) feel natural or at least refreshing. Moreover, as Peter is wont to do, there are several easter eggs or dog whistles in the text which hint at some of Peter's more unique ideas. Of course I am biased, but particularly in the 'business' category, Zero to One is a special and thought-provoking book.

  • Jacek Ambroziak

    I thoroughly enjoyed the book even if I have found myself in violent disagreement with many of its thoughts. The book opens up with these words.

    I thoroughly enjoyed the book even if I have found myself in violent disagreement with many of its thoughts. The book opens up with these words.

    Initially, I kind of liked this quote. It is indeed hard to imagine a new business to threaten the dominance of Google Search or Facebook's social network. But the fact that Google search dominates is not really a zero-to-one effect, but a decisive improvement over previously existing internet search engines. Facebook was not originally conceived of as a dominant social platform; it so happened that it turned out to be well liked by millions of people beyond the original community of Harvard students. In operating systems we already have Linux and Android (using Linux) which have way more deployments than Windows. So it is not the case that "every moment in business" happens only once, unless in a very literal sense.

    Peter discusses "copying" with disdain, but not all "copying" is just copying, a lot of progress happens via semi-continuous improvements. This civilization does not only progress by one-off disruptive inventions. A lot of it is steady improvements. And these improvements occasionally lead to

    zero-to-one (or dominating) developments.

    Peter asks "What company is nobody building?" Like the previous quote, this question has some charm, but I think it too is misleading. Well, maybe nobody is building this "company X" yet, because it is not yet

    . Eg. voice over internet existed in the lab (IBM?) since mid 70's, but Skype made sense only much later when lots of people got access to personal computers and these computers started being connected to the Net all the time.

    Bottom line: it is not all "zero to one", nor it can be or should be.

    I still give the book 5 stars as I enjoyed its thought provoking character; it was an engaging reading: disagreeing, agreeing, learning new perspectives. Highly recommended but please don't treat it as Gospel :-)

  • Peter

    In business, we don’t get the panacea methodology guaranteed to deliver a market-dominating business or monopoly, and the methodology for the next big thing, likely hasn’t been defined yet. We need to look at each business from multiple perspectives and I do believe Peter Thiel provides another unique perspective – not a replacement perspective but an additional one. The research shows that disruptive innovation typically comes from new start companies and they tend to dominate a new

    In business, we don’t get the panacea methodology guaranteed to deliver a market-dominating business or monopoly, and the methodology for the next big thing, likely hasn’t been defined yet. We need to look at each business from multiple perspectives and I do believe Peter Thiel provides another unique perspective – not a replacement perspective but an additional one. The research shows that disruptive innovation typically comes from new start companies and they tend to dominate a new market niche until they grow dramatically or are acquired. Iterative innovation in specific markets tends to be dominated by the incumbents, which are usually large multinational companies if the market is lucrative. So I agree with Peter Thiel, that new start businesses need to consider an order of magnitude value step change over existing solutions, to succeed, which is the zero to one transformation.

    Zero to One suggests a very different method from the lean-agile approach proposed by Steve Blank and Eric Ries in The Four Steps to the Epiphany and The Lean Startup respectively. They suggest that Customer Discovery, Validation, Creation and Building are the cornerstones of the startup approach.

    I believe we need to start with a vision of what a successful business would look like, and we need to see that it will be significantly different (10x) from existing competitive solutions. How do we get there? By understanding and executing a market entry path that is iteratively to build, test & learn. I would also question Thiel’s suggestion that only technology enables that step change. In the cited case of Facebook, there were multiple solutions offering social media platforms and it appears the leadership and marketing of Facebook, were more the decisive factors. We could even argue that Facebook is an example of the Eric Ries approach.

    The example of Paypal and Thiel’s insights into the economy and the investment community around the DotCom boom and bust were very interesting. The investor expectations are a constant challenge as I’ve heard from one investor that he wouldn’t get out of bed if a company wasn’t turning over €40million in 3 years and another saying if you showed me figures like that I’d think I was working with unrealistic idiots.

    After the main point of vertical innovation is made, the book rambles and while the discussion points are interesting you often wonder what this has that to do with the main premise of the book. The book does feel a little unstructured and elements seem to be included as they were part of a lecture series rather than an integral part of a framework for achieving that 0 to 1 impact.

    I would recommend reading this book as it may encourage and inspire you to consider where you want to go with the company and its core solutions. It does, however, need to be tempered with the knowledge that other approaches exist and Peter Thiel may be wrong, at least in parts.

  • Yevgeniy Brikman

    This book fluctuates between brilliance and madness. When it focuses on the mechanics of start ups, it's great. When it focuses on Thiel's philosophies, it's a bit whacky. Thiel enjoys being a contrarian too much. Doing something new and valuable may require being a contrarian, but just being contrarian doesn't mean your ideas are new and valuable. Worth reading if you're interested in startups, but be prepared to skim and shake your head.

    Pros:

    * Great chapters on how to build a monopoly, approa

    This book fluctuates between brilliance and madness. When it focuses on the mechanics of start ups, it's great. When it focuses on Thiel's philosophies, it's a bit whacky. Thiel enjoys being a contrarian too much. Doing something new and valuable may require being a contrarian, but just being contrarian doesn't mean your ideas are new and valuable. Worth reading if you're interested in startups, but be prepared to skim and shake your head.

    Pros:

    * Great chapters on how to build a monopoly, approach markets, luck, hiring, culture, and sales.

    * lots of contrarian views that will force you to reconsider your own ideas

    * Interesting outlook on the future of technology and humanity

    * Clear writing

    Cons:

    * The ideas of vertical vs horizontal progress is nonsense. All ideas are horizontal, built incrementally on top of all the ideas that came before by people who came along at the right time and place. This includes the ideas behind paypal and palantir.

    * Limited perspective on competition. It exists. It leads to better products for consumers. It hurts some businesses, but drives others to greatness.

    * I disagree with Thiel's negative view of education. Yes, higher ed is too expensive and can be done better, but that's not the same as eliminating it. And if you want to change it, then have your companies stop filtering candidates by college degree.

    * Dismissing a broad curriculum and saying everyone should study just one thing is absurd coming from a lawyer turned businessman who likes to quote a very wide array of human knowledge, including philosophy, history, physics, mathematics, medicine, economics, and mythology. It's also absurd since the fusion of ideas from different disciplines is what leads to much of innovation.

    * Comparing hipsters to the uni bomber? Really?

    Fun quotes:

    As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell, especially in an already crowded market.

    By the time a student gets to college, he’s spent a decade curating a bewilderingly diverse résumé to prepare for a completely unknowable future. Come what may, he’s ready—for nothing in particular.

    But leanness is a methodology, not a goal. Making small changes to things that already exist might lead you to a local maximum, but it won’t help you find the global maximum. You could build the best version of an app that lets people order toilet paper from their iPhone. But iteration without a bold plan won’t take you from 0 to 1. A company is the strangest place of all for an indefinite optimist: why should you expect your own business to succeed without a plan to make it happen? Darwinism may be a fine theory in other contexts, but in startups, intelligent design works best.

    As globalization advances, people perceive the world as one homogeneous, highly competitive marketplace: the world is “flat.” Given that assumption, anyone who might have had the ambition to look for a secret will first ask himself: if it were possible to discover something new, wouldn’t someone from the faceless global talent pool of smarter and more creative people have found it already? This voice of doubt can dissuade people from even starting to look for secrets in a world that seems too big a place for any individual to contribute something unique.

    The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.

    Every great company is unique, but there are a few things that every business must get right at the beginning. I stress this so often that friends have teasingly nicknamed it “Thiel’s law”: a startup messed up at its foundation cannot be fixed.

    You can’t accomplish anything meaningful by hiring an interior decorator to beautify your office, a “human resources” consultant to fix your policies, or a branding specialist to hone your buzzwords. “Company culture” doesn’t exist apart from the company itself: no company has a culture; every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.

    All salesmen are actors: their priority is persuasion, not sincerity.

    The most fundamental reason that even businesspeople underestimate the importance of sales is the systematic effort to hide it at every level of every field in a world secretly driven by it.

    It’s better to think of distribution as something essential to the design of your product. 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.

    Tthe seven questions that every business must answer:

    1. The Engineering Question

    Can you create breakthrough technology instead of incremental improvements?

    2. The Timing Question

    Is now the right time to start your particular business?

    3. The Monopoly Question

    Are you starting with a big share of a small market?

    4. The People Question

    Do you have the right team?

    5. The Distribution Question

    Do you have a way to not just create but deliver your product?

    6. The Durability Question

    Will your market position be defensible 10 and 20 years into the future?

    7. The Secret Question

    Have you identified a unique opportunity that others don't see?

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