Zero to One
Author: Peter Thiel
Reviewer: Sharon Ribas, MBA
Peter Thiel states this book is about questions we must ask in order to succeed "in the business of doing new things." Unless companies create something different, they will eventually fail despite current profits. He says that the book is built on what he has learned as the billionaire co-founder of PayPal and Palantir and as an investor in hundreds of startups, including SpaceX and Facebook.
The book, a published form of notes taken from a class on startups Thiel taught at Stanford, is replete with contrarian, out-of-the-box, and sometimes odd ideas and conversations spanning the wisdom of the ancients to prognostications on the future.
Shun best practices, Theil states. They "lead to dead ends; the best paths are new and untried." They are formulas, not "first principles"—the unique, new, and unexpected concepts in which successful people find unexpected value.
Focus on technology. He defines vertical progress, doing something no one has done before, as technology (horizontal progress is globalization). Startups, which create new technology, he defines as "small groups of people bound together by a sense of mission [who] have changed the world for the better." And as "the largest group of people you can convince of a plan to build a different future."
Be contrarian. Ask, what's the most contrarian thing you can do? Don't "oppose the crowd...think for yourself."
Be a monopoly. It's not "a pathology or an exception" but "the condition of every successful business."
Competition creates problems. It means" no profits for anybody, no meaningful differentiation, and a struggle for survival." It distorts our thinking, causes us to rely on old opportunities, and "slavishly copy" whatever worked in the past.
Theil then defines the value of a business as the sum of all the money it will make in the future. Become a monopoly because it has the largest future cash flows.
Elements needed to achieve this are to develop proprietary technology, utilize powerful networks, and establish a strong brand. Start small and scale up while not disrupting in the attempt to expand the market as doing so draws attention and causes trouble. "Avoid competition as much as possible."
Theil discounts the benefits of "first mover advantage." Be the "last mover" by making the greatest development in a market and then enjoying "decades of monopoly profits."
Theil diverts briefly to ponder the future. We can control our future if we have a definite, versus, indefinite view of it. By being definite, we can plan, control, and master it. Coupled with optimism, this world view generates innovators, inventors, explorers (which is what we had in the past, Theil states) who will create exciting worlds for us to live in. Optimism without a plan to master our future gives us lawyers and bankers.
While Theil brushes aside many maxims, he agrees that money makes money and that compound interest is magical. He then explains the power law as it relates to venture capital and as it impacts on everyone.
Theil then expounds on the drawbacks of the nation's institutionalized education system, which seems odd given that he is a product and beneficiary of that system and remains affiliated with an educational institution.
Continuing with Theil's creative use of language, he describes how "secrets" hold the keys to world-changing companies that haven't been invented yet. He asks, "what valuable company is nobody building?" Every correct answer is a secret waiting to be discovered, developed, marketed, and transformed into a monopoly. He tells readers how to think about secrets, find them, and what to do with them.
Theil isn't contrarian about foundation building. Because beginnings are special and set the tone for any startup, entrepreneurs must get it right. He looks at our nation's founding and the examples set in successful marriages—both images of which he compares to building a solid and successful business.
Theil then takes a closer look at the mechanics of startups by asking "What would the ideal company look like?" He discusses hiring and recruiting practices and explains why the working environment should be relationship-based, not transactional. "From the outside, everyone in your company should be different in the same way" and "on the inside, every individual should be sharply distinguished by her work." He advocates for extremism for startups, not in the manner of cults which get something important wrong, but by getting something fanatically right.
Regarding sales, Theil states that superior sales and distribution alone can create a monopoly even without product differentiation and that distribution is essential to product design. Moreover, because distribution follows a power law of its own, entrepreneurs should learn which distribution channel works best for them.
Theil's view of the future is that computers will complement and empower humans, not replace them. This is power of complementarity because technology increases mastery over nature and generates abundance.
Theil then addresses the potentials and pitfalls of clean technology companies. Many who discovered the secrets of this market, he states, unfortunately used conventional methods to run their companies which doomed them to failure.
Finally, Theil muses about the founders' paradox, which is the power and danger that exist in a company when its leader has distinct rather than interchangeable talents. Founders, several of whom he describes, tend to be extreme and contradictory figures who both inspire and vex. But, because of their unusual natures, they tend to lead their companies beyond incremental growth and they have the ability to bring out the best work in others.
In the end, Theil says, the challenge is to "find singular ways to create new things that will make the future not just different, but better—to go from 0 to 1." Posing contrarian questions and looking at the world anew will allow us to re-create and preserve it for the future. ~~~
• Hardcover: 224 pages
• Publisher: Crown Business; 1 edition (September 16, 2014)
• Language: English
• ISBN-10: 0804139296
• ISBN-13: 978-0804139298
About the Author:
Peter Thiel is an author, teacher, and venture capitalist. Born in Germany, he spent part of his childhood in Africa until his family moved to California. He became a New Zealand citizen in 2011.
As a child, Thiel excelled in chess and mathematics. He earned a B.A. in Philosophy and a J.D at Stanford University where he founded The Stanford Review, a conservative and libertarian paper. After graduation, he worked as a judicial clerk, a derivatives trader, and as a speechwriter for former U.S. Secretary of the Department of Education, William Bennett. Theil then launched his venture capital career. He has founded and co-founded several companies, including PayPal, and was an early investor and member of the board of Facebook.
Thiel is involved with a number of political causes and a wide variety of philanthropic pursuits. He has contributed articles to publications such as The Wall Street Journal, Forbes, and Policy Review.
Honors include: In 2006, the Herman Lay Award for Entrepreneurship; in 2007, recognized as one of the 250 most distinguished leaders under 40 years of age by the World Economic Forum; in 2013, the TechCrunch Crunchie Award for Venture Capitalist of the Year.
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