Ideas from the book Zero to one by Peter Thiel

Progress

  1. Horizontal - Copying things that work. Going from 1 to x. Eg. You take one typewriter and then build another hundred copies.
  2. Vertical - Doing new things. Going from 0 to 1. Eg. You take a typewriter and build a word processor.

Startup Thinking

  • A new company’s most important strength is new thinking.
  • A startup has to question received ideas and rethink business from scratch.
  • A lone genius might create a classic work of art or literature but he will never create an entire industry on his own.
  • Startups operate on the principle that you need to work with other people to get things done. You also need to stay small enough so you actually can.
  • A startup is the largest group of people you can convince of a plan to build a different future.

Monopolies

  • Competition and Capitalism are opposites.
  • Monopolies exaggerate the power of their (nonexistent) competition to avoid scrutiny.
  • Entrepreneur’s exaggerate how powerful they are and understate the competition. “We are in a league of our own”.
  • The value of a business today is the sum of all the money it will make in the future. You also have to discount future cash flow to its present worth due to depreciation.
  • Ask yourself “will this business be around a decade from now?”

How to Build a Monopoly

1. Proprietary Technology

  • A proprietary technology must be at least 10 times better than its closest substitute in some important dimension.
  • The easiest way to be 10 times better is to invent something new. Where there was nothing before, the increase in value is theoretically infinite.

2. Network Effects

  • Network effects make a product more useful as more people use it. Eg. Twitter.
  • To reap the benefits of network effects, your product must be useful to its very first users, when the network is naturally small.
  • You must start will specially small markets.

3. Economies of Scale

  • The cost of creating another copy of your software should be close to zero.
  • A good startup should have the potential for great scale built into its first design.

4. Branding

  • A technology company can’t be built on brand alone.
  • Begin with substance then build your brand.

How to Choose A Market

  • Start with a very small market. Always err on the side of starting too small.
  • It’s easier to dominate a small market than a large one.
  • Choose a small group of particular people, concentrated together and served by few or no competition.
  • It’s a red flag to talk about 1% of a very large market. You’ll have to fight too many competitors to get that 1%.
  • Once you create and dominate a niche market, gradually expand into related and slightly broader markets. Eg. Amazon wanted to dominate all online retail but started with books.
  • Don’t disrupt. Avoid competition as much as possible
  • “You must study the endgame before anything else” - Grandmaster José Raúl Capablanca

The Power Law

  • A small handful of companies radically outperform all others.
  • The differences between companies dwarf differences in roles within companies.
  • Before you focus relentlessly on something you’re good at, think hard about whether it will be valuable in the future.
  • For startups this means you should not necessarily start your own company, even if you are extraordinarily talented. It might be better to join a successful company when it’s growing fast.
  • You could have 100% equity if you fully fund your own company. If it fails you will have a 100% of nothing. Owning just 0.01% of Google will give you millions.

Secrets

  • There are two kinds of secrets:
    1. Secrets about nature - Undiscovered aspects of the physical world.
    2. Secrets about people - Things people don’t know about themselves or things people want to hide from you.
  • What secrets is nature not telling you?
  • What secrets are people not telling you?
  • You can’t find secrets without looking for them.
  • The best place to look for secrets is where no one else is looking for them.
  • A great company is a conspiracy to change the world.

Selling

Your company needs to sell more than its product. You must sell your company to employees and investors.

Computers are a Tool

“How can computers help humans solve hard problems?”

Planning

  • Jobs saw that you can change the world through planning; not by listening to focus group feedback or copying others’ success.
  • Long-term planning is often undervalued in our indefinite short-term world - If you see the future as random why plan?

7 Questions Every Business must Answer

  1. Can you create breakthrough technology instead of incremental improvements?
  2. Is now the right time to start your particular business?
  3. Are you starting with a big share of a small market?
  4. Do you have the right team?
  5. Do you have a way to create and deliver your product?
  6. Will your market position be defensible 10 to 20 years into the future?
  7. Have you identified a unique opportunity others don’t see?

The Future

  • Focus on making new things.
  • Make the future not just different but better.
  • Think for yourself.
  • Look at the world with fresh perspective similar to the ancients.