Book Notes: Zero to One by Peter Thiel

every great business is built around a secret that’s hidden from the outside. loc. 1102

insidious danger for every business is to lose all sense of myth and mistake disenchantment for wisdom. loc. 1924

We cannot take for granted that the future will be better, and that means we need to work to create it today. loc. 1957 

This book is about the questions you must ask and answer to succeed in the business of doing new things: loc. 122

I started reading this book because one of my mates told me that it was blowing his mind. He said it was giving him insights into why businesses fail and why modern governments are failing to make progress. Sounded to me like a pretty good read.

I wasn't disappointed.

Authors Blake Masters and Peter Thiel convey concepts and ideas in a way that is both intellectually stimulating and practical, and the book takes readers on an incredible journey. It begins with a call to action, and defines the ‘startup' as a ticket to the future. We're then treated to an insiders account of the 90s and the dot com boom. From there we're taken through some insights into monopoly and competition, a new take on ‘first mover advantage' and an eye-opening conceptualisation of optimism and pessimism and how they relate to taking action both at a personal and global level. Prior to the final few chapters, which deal with a wealth of practical advice for startups, we experience a discussion on secrets. The idea of the ‘secret' is probably the message that stuck with me most from this book. Let's take a closer look at some of the points from the book that most struck me. (If you're tempted to skim make sure you look at the 7 question that every company needs to be able to answer down the bottom!)

How does the strategic narrative of the Monopolist differ from that of the Capitalist?

Monopolists lie to protect themselves. They know that bragging about their great monopoly invites being audited, scrutinized, and attacked. Since they very much want their monopoly profits to continue unmolested, they tend to do whatever they can to conceal their monopoly—usually by exaggerating the power of their (nonexistent) competition. loc. 268

Non-monopolists tell the opposite lie: “we’re in a league of our own.” When you hear that most new restaurants fail within one or two years, your instinct will be to come up with a story about how yours is different. You’ll spend time trying to convince people that you are exceptional instead of seriously considering whether that’s true. It would be better to pause and consider whether there are people in Palo Alto who would rather eat British food above all else. It’s very possible they don’t exist. loc. 289 

So, a monopoly is good for everyone on the inside, but what about everyone on the outside? Do outsized profits come at the expense of the rest of society? Actually, yes: profits come out of customers’ wallets, and monopolies deserve their bad reputation—but only in a world where nothing changes. loc. 327

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. loc. 355

First or Last Mover?

If you’re the first entrant into a market, you can capture significant market share while competitors scramble to get started. But moving first is a tactic, not a goal. What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you. It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits. loc. 612

Optimistic or Pessimistic, Definite or Indefinite?

An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it. loc. 662

A definite pessimist believes the future can be known, but since it will be bleak, he must prepare for it. Perhaps surprisingly, China is probably the most definitely pessimistic place in the world today. loc. 669

To a definite optimist, the future will be better than the present if he plans and works to make it better. loc. 681

To an indefinite optimist, the future will be better, but he doesn’t know how exactly, so he won’t make any specific plans. He expects to profit from the future but sees no reason to design it concretely. loc. 709

And the context of our beliefs

When Baby Boomers grow up and write books to explain why one or another individual is successful, they point to the power of a particular individual’s context as determined by chance. But they miss the even bigger social context for their own preferred explanations: a whole generation learned from childhood to overrate the power of chance and underrate the importance of planning. Gladwell at first appears to be making a contrarian critique of the myth of the self-made businessman, but actually his own account encapsulates the conventional view of a generation. loc. 727

Thiel and Masters argue that the world needs Definite Optimists

We have to find our way back to a definite future, and the Western world needs nothing short of a cultural revolution to do it. loc. 843

A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket. loc. 847

Some of the practical tips from chapters 9 and 10

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. loc. 1111

They met at a networking event, talked for a while, and decided to start a company together. That’s no better than marrying the first person you meet at the slot machines in Vegas: you might hit the jackpot, but it probably won’t work. loc. 1131

 A board of three is ideal. Your board should never exceed five people, unless your company is publicly held. loc. 1175

As a general rule, everyone you involve with your company should be involved full-time. loc. 1180

Sometimes you’ll have to break this rule; it usually makes sense to hire outside lawyers and accountants, for example. anyone who doesn’t own stock options or draw a regular salary from your company is fundamentally misaligned. loc. 1182

 A company does better the less it pays the CEO—that’s one of the single clearest patterns I’ve noticed from investing in hundreds of startups. In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary. loc. 1188

Startups don’t need to pay high salaries because they can offer something better: part ownership of the company itself. loc. 1202

Equity is the one form of compensation that can effectively orient people toward creating value in the future. loc. 1203

don’t fight the perk war. Anybody who would be more powerfully swayed by free laundry pickup or pet day care would be a bad addition to your team. loc. 1270

entrepreneurs should take cultures of extreme dedication seriously. loc. 1303

 Thiel's 7 Questions that EVERY BUSINESS must answer of themselves

Most cleantech companies crashed because they neglected one or more of the seven questions that every business must answer: loc. 1607

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? loc. 1612 

SPOILER ALERT: Closing Words…

Whether we achieve the Singularity on a cosmic scale is perhaps less important than whether we seize the unique opportunities we have to do new things in our own working lives. Everything important to us—the universe, the planet, the country, your company, your life, and this very moment—is singular. Our task today is to find singular ways to create the new things that will make the future not just different, but better—to go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as 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. loc. 1958