Zero to One is one of the definitive books on building and investing in startups. A combination of a manifesto and a guide to starting and investing in startups, it is one of the best books for people who want to build companies that change the world.
Who is Peter Thiel?
Peter Thiel is a German-American billionaire entrepreneur and venture capitalist. He co-founded PayPal, Palantir Technologies, and Founders Fund, and was the first outside investor in Facebook and was an early investor in companies such as SpaceX and LinkedIn.
As of June 25, 2021, Thiel has an estimated net worth of $7.24 billion and is ranked 385 on the Bloomberg Billionaires Index.
The first team Thiel formed is known in Silicon Valley as the “PayPal Mafia” because many of his former colleagues have gone on to help each other create and invest in successful tech companies.
In 2002, PayPal was sold to eBay for $1.5 billion.
Since then:
Elon Musk founded SpaceX and co-founded Tesla Motors
Reid Hoffman co-founded LinkedIn
Steve Chen, Chad Hurley and Jawed Karim co-founded YouTube
Jeremy Stoppelman and Russel Simmons founded Yelp
David Sacks co-founded Yammer
and Thiel himself co-founded Palantir
Today, all seven of those companies are worth more than $1 billion each.
Why is this book important?
Zero to One is one of the definitive books on building and investing in startups. A combination of a manifesto and a guide to starting and investing in startups, it is one of the best books for people who want to build companies that change the world.
It is a condensed and updated version of a popular set of online notes taken by Masters for the CS183 class on startups, as taught by Thiel at Stanford University in the spring of 2012. Zero to One was a continuation of a class on entrepreneurship that Peter Thiel taught at Stanford and which was documented in detail by Blake on his blog.
These are the six points I highlighted from the book:
Progress can take one of two forms. Horizontal or extensive progress means copying things that work: moving from 1 to n. Horizontal progress is easy to imagine because we already know what it looks like.
Vertical or incremental progress means doing new things: going from 0 to 1. Vertical progress is harder to imagine because it requires doing something that no one has ever done before. If you take a typewriter and build 100, you’ve made horizontal progress. If you have a typewriter and build a word processor, you’ve made vertical progress.
Globalization is another form of horizontal progress, taking an idea from one place and applying it in another. Vertical progress only comes with technological advances, and this does not just apply to computers. If a new way of doing something is discovered, that is technology.
The single word for vertical progress, from 0 to 1, is technology. The rapid progress of information technology in recent decades has made Silicon Valley the capital of “technology” in general. But there is no reason for technology to be limited to computers. Properly understood, any new and better way of doing things is technology.
Technology in today’s world is not sustainable, especially if all countries adopt it. Resources are limited and the environment cannot sustain the level of pollution it would generate. Therefore, globalization without technological advancement would make the planet uninhabitable.
At the beginning of this decade, many people thought that technology would improve enormously, that humans would no longer have to work long hours, that vacationing on the moon would no longer be a fantasy, and that we would all fly around in cars. However, the only vertical progress is in computer technology.
“Monopoly is the condition of every successful enterprise.”
In competitive markets, firms have super-tight margins, while monopolies are better at making profits. Both competing firms and monopolistic firms often tell white lies.
A monopolistic firm will not like to attract government scrutiny by admitting that it is a monopoly, on the other hand, a competitive firm will understate its competitive status, and emphasize its unique selling points.
In a static world, monopolies are bad – they can raise the price of their product knowing that people will pay for it. However, in a dynamic world, it is a creative force that gives people more choices.
The government understands this, and that is why there is the patent system, which allows a company to be a monopoly for a period of time. This encourages invention because companies know that if they invent new things, they will enjoy a monopoly on them for a considerable time, which will help them make a good profit from it.
Happy companies create monopolies for their unique business environment; unhappy companies have one problem: competition.
Many successful entrepreneurs, such as Warren Buffett and Bill Gates, argue that luck plays a huge role in the success of their businesses. Theil, in Zero to One, argues that we might tend to dismiss anyone who is successful based on the above statement. Although it cannot be objectively proven, the sample size of a single successful person is one, and by reading on, I assume you share the same opinion. Otherwise, why are you reading if you believe that success is completely random?
“Shallow men believe in luck, they believe in circumstances… Strong men believe in cause and effect.”
Ralph Waldo Emerson
Everyone is just as lucky as everyone else. You’ll just be luckier if you work harder and smarter.
There are four different attitudes towards the future, which are
Optimism defined – The future can be predicted and will be better
Indefinite optimism – The future cannot be predicted, but it will be better
Ultimate Pessimism – The future can be predicted, and it will be worse,
Indefinite pessimism – The future cannot be predicted, and it will be worse.
1. The engineering question – Can you create breakthrough technology rather than incremental improvements?
2. The question of the moment – 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 staffing question: Do you have the right equipment?
5. The distribution question: Do you have a way to not only create, but distribute your product?
6. The question of durability: will your market position be defensible in 10 and 20 years?
The Secret Question – Have you identified a unique opportunity that others don’t see?
«Seven questions that every company must answer» – Taken from: Peter Thiel, “Zero to One”, pp. 153-154
When I was thinking about writing my notes on this book I came across a video by Ali Abdaal, one of my favorite Youtubers, using the same concept. I also wanted to use it as a starting point and share it with you.
In this video, he defines the concept as a mental model that he uses every day. He says that he always wants to invest in things that take him from zero to one, rather than 1 to 1.1. What he means here is that like zero to one, like if you go from not having a phone to having a phone, that’s a zero to one difference. Whereas if you go from the iPhone 8 to the iPhone 10, that’s not zero to one. That’s like 1 to 1.05. It’s like a very incremental upgrade versus a completely novel upgrade.
When people ask you what piece of technology you would buy for under $500 or something like that? You usually recommend getting a real camera because the difference between not having a real camera and having a real camera is so big because it means that you suddenly start taking more and more photos and those photos are really nice and high quality.
The task facing businesses is to create new things that benefit and change the future, innovation that goes from 0 to 1. To do this, think, see the world anew, see it like the ancients who saw the future we live in today, recreate it and preserve the future, making it a better place to live.
Start small and dominate. Once you have that idea to base your startup on, don’t expand too quickly. Identify a niche where you can outperform your competition and dominate. After you establish a monopoly, expand into other markets.
