My Overview:

• Peter Thiel needs no introduction, he is the co-founder of PayPal and was Facebook’s first professional investor, very impressive credentials. His book ‘Zero to One’ has been a hit since its publication in September 2014 and is seen as an absolute must-read in start-up circles. In the preface Thiel highlights that the book is all about ‘how to build companies that create new things’, but doesn’t try to hide the fact that he doesn’t have a success formulae, the paradox of teaching entrepreneurship is that one doesn’t exist.
• I have no desire to become a Silicon Valley style entrepreneur, so I was slightly unsure when sitting down to read this, but I’m glad I did. It is an excellent book with lessons that can be transferred across many different domains. There are a couple of points from the book that I want to quickly discuss:
  • Monopoly Companies – I find his view on Monopoly very interesting. It is obviously from an entrepreneur’s perspective, so opposes the view proposed in economic theory around the benefits of a competitive market. Personally, I’m not convinced industries dominated by monopolies are always going to be best for consumers in the long run, although no doubt they are optimal for that company.
  • Last Move Advantage – I really agree with his last mover advantage perspective, although I feel it slightly contradicts the avoid competition point. It is very difficult to leverage last mover advantage without having first competed with them. It’s not impossible, but not something that happens regularly.
  • Against Anti-fragility – Instead of pursuing many-sided abilities/optionality, or anti-fragility as Nassim Nicholas Taleb calls it, Thiel feels it results in mediocrity not ‘well-roundedness’. At this stage I can see both perspectives and haven’t fully decided who I agree with more. If you are interested in finding out more on anti-fragility you can read my blog post on it here: Why you don’t need to be rich to achieve optionality.
  • If you build it people will come is a fallacy – Couldn’t agree more.
  • Optimistic of the Future – Thiel is optimistic on the future impact of automation and AI on humans, seeing the two as complementary not in conflict. I agree with him on this, although I’m sure more than a small part of that is hope!
• Below are the full notes I took when reading the book, many of these are direct quotes. These are the key messages that I found to be important to me when reading, I’m sure there are plenty I have missed. Let me know in the comments if there are any you would add.

Chapter 1: The Challenge of the Future

• What important truth do very few people agree with you on? Key question to ask yourself. This has also become a rather common interview question nowadays
• Globalisation is horizontal progress: taking something that works in one place & making it work everywhere
• Vertical progress (0 to 1) is technology

Chapter 2: Party like its 1999 

•  Lessons learned in Silicon Valley;
  • Make incremental advances
  • Stay lean & flexible, i.e. unplanned & try things out
  • Improve on the competition
  • Focus on product not sales (especially at the start)
• The most contrarian thing of all is not to oppose the crowd but to think for yourself

Chapter 3: All happy companies are different 

• What value company is nobody building?
• If you want to create and capture lasting value, build a differentiated business
• Entrepreneurs are always biased to understate the scale of competition, but that is the biggest mistake a start-up can make. The fatal temptation is to describe your market extremely narrowly so that you dominate it (even if only by definition).
• Money is either an important thing or it’s everything. Monopolists can afford to think about things other making money; non-monopolists can’t.
• Monopolies drive progress because the promise of years or decades of monopoly profits provides a powerful incentive to innovate…to stay ahead.
• All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

Chapter 4: The Ideology of Competition

• We preach competition, internalise its necessity, and enact its commandments, and as a result, we trap ourselves within it – even though the more we compete, the less we gain.
• If you can recognise competition as a destructive force instead of a sign of value, you’re already more sane than most.

Chapter 5: Last Mover Advantage

• The value of a business today is the sum of all the money it will make in the future. To properly value business you also have to discount those future cash flows to their present worth, since a given amount of money today is worth more than the same amount in the future.
• Don’t focus on near term growth above everything else. Most important question; will this business still be around a decade from now?
• Characteristics of Monopoly;
  • Proprietary Technology: 10x better than closest substitute. Easiest to reach by creating something new
  • Network Effects: more useful as more people use it, e.g. Facebook
  • Economies of Scale: fixed price can be spread over great quantities of scale, e.g. Software, cost of additional unit is almost zero
  • Branding: creating strong brand is powerful way of creating monopoly
• How to build a monopoly;
  • Start small & monopolise – easy to dominate a small market rather than big one. Look for a small group of particular people concentrated together and served by few or no competitors
  • Scaling Up – gradually
  • Don’t disrupt – disruption causes unwanted noise from established players, instead craft a plan to expand to adjacent markets, avoid competition as much as possible
  • The last will be first – make the last great development in a specific market, not the first, and enjoy years of monopoly profits

Chapter 6: You are not a lottery ticket 

• Success is never accidental
• Instead of pursuing many-sided mediocrity and calling it ‘well-roundedness’, a definite person determines the one best thing to do and then does it.
• Philosophy: Plato & Aristotle are definite pessimistic – accepted limitations on human potential. Hegel & Marx are definite optimistic – expect material advances to fundamentally change human life. Rawls & Nozick are indefinite optimistic – believed people could get along but didn’t have any specific vision of future.
• Long-term planning is often undervalued by our in definite short-term world.
• When a big company makes an offer to acquire a successful start-up it almost always pays too much or too little. A business with a good definite plan will always be underrated in a world where people see the future as random.

Chapter 7: Follow the Money

•  Money makes money…never underestimate potential growth.
• The biggest secret in Venture Capital (VC) is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.
• Therefore, as a VC you should only invest in companies that have the potential to return the value of the entire fund.
• The ‘Power Law’ is Pareto’s 80-20 law, but actually more like 99-1 law.
• You can’t diversify your life, e.g. Have several parallel careers, therefore focus relentlessly on something your good at, but before you do must think hard about whether it will be valuable in the future.
• If you start your own company, the power law is also very important; (a) carefully choose one market (b) carefully choose one distribution method

Chapter 8: Secrets

•  Contrarian thinking doesn’t make any sense unless the world still has secrets left to give up.
• What valuable company is nobody building? The answer is a secret: something important and unknown, something doable but hard. It’s not a mystery, difference between mystery & secret, mystery is a rabbit hole.
• Four social trends have conspired to root out belief in secrets;
  • Institutionalised Incrementalism – only small steps allowed
  • Risk Aversion – sacred of being wrong
  • Complacency – if the current is working why change
  • Flatness – world is homogeneous & competitive, surely someone has already done it
• If insights that look so elementary in retrospect can support important and valuable businesses, there must remain many great companies still to start.

Chapter 9: Foundations

• ‘Thiels Law’ – A start up messed up at its foundation cannot be fixed
• Founders should share a prehistory before they start a company together
• In the boardroom less is more. The smaller the board the easier it is for directors to reach consensus and exercise effective oversight. 3 is ideal.
• Everyone involved in company should be full time, ideally.
• A company does better the less its CEO is paid…high pay for CEO incentivises him to defend status.
• Equity can’t create perfect incentives, but it’s the best way for a founder to keep everyone in the company broadly aligned.

Chapter 10: Mechanics of Mafia

• No company is a culture; every company has a culture. A start up is a team of team on a mission, a good culture is just what it looks like on the inside.
• From the outside, everyone in your company should be different in the same way.
• On the inside, every individual should be sharply distinguished by their work – defining roles reduces conflict.
• Best start-ups can be considered slightly less extreme kinds of cults, where everyone is so driven and engaged by ‘the mission’

Chapter 11: If you build it they will come?

• Customers will not just come because you build it. You have to make that happen, have to sell it.
• People overestimate the relative difficulty of science and engineering, because the challenges are obvious. What nerds miss is that it takes hard work to make sales look easy.
• Sales work best when hidden.
• Advertising can work for start-ups, but only if customer acquisition costs & customer lifetime value makes every other distribution channel uneconomical.
• Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the market.
• If you can get just one distribution channel working for you, you have a great business. If you try several but don’t nail one, you’re finished.

Chapter 12: Man & Machine

• Computers are complements to humans, not substitutes. People compete for jobs & for resources, computers compete for neither.
• Technology is the one way for us to escape competition in a globalising world, computers complement this.
• Big data is usually dumb data. Companies can find patterns that elude humans, but they don’t know how to compare patterns from different sources or interpret complex behaviours. Actionable insights can only come from human analysis.

Chapter 13: Seeing Green

• Why have so many Clean Tech companies failed? They failed to answer the following;
  • Engineering - Can you create breakthrough technology instead of incremental improvement? You need at least 10x improvement
  • Timing – Is now the right time to start this business?
  • Monopoly - Are you starting with big enough share of market?
  • People – do you have right team?
  • Distribution – have a way not just to create but deliver product?
  • Durability – is market position defendable in 10-20 yrs. time?
  • Secret – have identified a unique opportunity that others don’t see?
• Tesla is 7 from 7
• There simply aren’t enough resources in the world to replicate old (developed countries progress) approaches or redistribute our way to prosperity.
• No matter how much the world needs energy, only a firm that offers a superior solution for a specific energy problem can make money.

Chapter 14: The Founders Paradox

• Founders are often both insiders & outsiders in the same sentence.
• We need founders, so embrace strange or extreme founders as historically they’ve been incredible founders.
• Founders shouldn’t overestimate their own power as individual, a team is needed.

Conclusion: Stagnation or Singularity?

• Stagnation: Belief that globalisation, convergence and sameness will all become more prevalent in the coming decades. Unlikely given competition to consume scarce resources.
• Singularity: Imagined result of new technologies so powerful as to transcend the current limits of our understanding. Based on Moores Law.
• We cannot take for granted that the future will be better, and that means we need to work to create it today.
• Our task today is to find singular ways to create the new things that will make the future not just different, but better, from 0 to 1.
• Start by thinking for yourself and see the world anew.