BOOK REVIEW: Zero to One – Notes on Startups, Or How to Build the Future

A Billionaire’s Guide to Succeeding in Business

When a billionaire who co-founded PayPal, is a Facebook director and is the driving force behind data analysis giant Palantir Technologies and venture capital firm Founders Fund doles out business advice, budding entrepreneurs had better sit up and take notice.

It is not for nothing that Peter Thiel’s book “Zero to One—Notes on Startups, Or How to Build the Future” has been hailed as one of the best business books of all time and has sold over one million copies worldwide.

Co-written by Blake Masters, one of Thiel’s former Stanford Law School students, the 188-page book reveals the secret formula that has propelled German-American Thiel into the ranks of the world’s billionaires. According to Forbes, his wealth is now estimated at $4.2 billion.

Be a Creator, Not a Copier

The title of the book — ‘Zero to One’ — encapsulates his business acumen.

“It’s easier to copy a model than to make something new: doing what we already know how to do takes the world from 1 to n, adding more of something familiar,” he argues.

However, “every new creation goes from 0 to 1. “

Google is a good example of a company that went from 0 to 1. It bucked the “perfect competition” principle and instead opted for a “creative monopoly”.

Thiel explains in detail how to identify start-up opportunities for entrepreneurs that will get them from 0 to 1.

He dismisses ‘horizontal progress’ as a waste of time and resources as it merely involves copying things that work—going from 1 to n. Vertical progress, going from 0 to 1, means doing something nobody else has done.

Thiel is adamant that new technology is the only way forward—and that new technology tends to come from startup ventures—which is why he invests so much capital in startups.

Thiel’s 4 Guiding Principles for the Budding Entrepreneur

  • It’s better to risk boldness than triviality
  • A bad plan is better than no plan
  • Competitive markets destroy profits
  • Sales matter just as much as product.

Monopoly, he says, is the condition of every successful business. Businesses fail because they fail to escape competition.

Competition is a dead-end street and means “no profits for anybody, no meaningful differentiation, and a struggle for survival.”

People only believe competition is healthy because it is an ideology “that pervades our society and distorts our thinking”.

“If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most,” argues Thiel.

Technology companies, he cautions, often lose money for the first few years.

“Most of a tech company’s value will come at least 10 to 15 years in the future.”

The author has a clear message for would-be entrepreneurs.

“Unless they invest in the difficult task of creating new things, companies will fail in the future no matter how big their profits remain today.”

The 7 Key Questions Every Startup Must Address

Entrepreneurs face the enormous challenge encapsulated in the following question: What valuable company is nobody building?

If you think you have an answer to this question, before launching your venture you should consider the following:

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 not only to create but to deliver your product?

6) The Durability Question: Will you be able to defend your market position 10 or 20 years into the future?

7) The Secret Question: Have you identified a unique opportunity that others don’t see?

It Helps to be ‘Strange’

Thiel believes that founders of successful startups are often “strange or extreme”.

The so-called ‘PayPal Mafia’—the small group of six involved in starting PayPal—could all have been described as eccentric.

Four of the six had built bombs in high school. Five were just 23 years old—or younger. Three had escaped to the West from communist countries: China, Poland, and Soviet Ukraine.

Other entrepreneurs such as Bill Gates, Richard Branson, and Steve Jobs also fall into the category of “strange or extreme”.

Get it Right the First Time

Thiel leaves us with the following warning: It’s not possible to fix a startup that’s messed up at the foundation.

Bad decisions made early on—e.g. choosing the wrong partners or hiring the wrong people—are very hard to correct.

In other words, get it right the first time!

***

Zero to One—Notes on Startups, Or How to Build the Future
Book written by Peter Thiel with Blake Masters
Available from Amazon: Hardcover edition €17, Kindle edition €16.5

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