Source: Amazon

“ZERO to ONE” Summary and review

By Peter Theil with Blake Masters

Peter Thiel, co-founder of PayPal, took lectures at the Stanford University. He revised the notes of one of the student, Blake Masters and published them as the book “Zero to One”. Book is recommended reading for startup entrepreneurs and strategists, I summarize here the key points and learning.

“Every new creation goes from ZERO to ONE”

“The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. If you are copying these guys, your aren’t learning from them”

Theil gives one of the best explanation of what it means going from ZERO to ONE, The essence of true innovation.

Book ZERO to ONE is about building companies that create new things. Theil has brilliantly summed up various patterns he observed during his journey as co-founder of PayPal & Palantir and as investor in hundreds of companies including Facebook & SpaceX.

Learning from dot-com crash

NASDAQ was at its peak (5048) during Mar, 2000 and crashed to 3321 in middle of April. Later bottomed out at 1114 in Oct, 2002. PayPal managed to survive dot com crash but important lessons were learnt which still guide the business thinking today

1. Make incremental advances
2. Stay lean and flexible
3. Improve on competition
4. Focus on product, not sales

Monopoly and last mover advantage

Theil favors monopoly over competition, goes on to say “Monopoly is successful state of business” and suggests each entrepreneur to adopt below characteristics to become monopoly

1. Build proprietary technologies which is difficult to replicate and gives an edge
2. Develop strong network which has exponential effect in reaching out to potential customers
3. Look for economies of scale which is money multiplier
4. Build brand power

He uses another great quote by Grand-master Raul Capablanca: “In order to improve the game you must study the endgame before everything else”

So, sometimes it is good to be a last mover if you can monopolize and generate cash flows and profits for decades.

Foundation

Another important learning is foundation, I would rather call it “Foundation and stakes”

“A startup messed up at its foundation cannot be fixed”. Company foundation is very important, partnership is like getting married and conflict is like divorce.

Different stakeholders who hold ownership, possession and control must make perfect balance. People with vested interests care more for the company.

Sales power

Believe in power of sales which works best when hidden like acting, all salesman are actors. Everybody sells — no matter whether you are an employee, a founder or an investor.

The essentials

Every business must answer seven questions

1. Engineering question: Can you make breakthrough technology instead of incremental improvements
2. Timing question: Is now the right time to start particular business
3. Monopoly question: Are you starting with big share of small market
4. People question: Do you have right team
5. Distribution question: Do you have a way not to just create but deliver your product
6. Durability question: Will your market position be defensible 10 and 20 years into the future
7. Secret question: Have you identified an opportunity which others do not see

The Bad

1. Monopoly is ideal state of business but how many monopolies can we have and it will be out of the game if next mover is better. Firms should also learn to fight competition as there will always be a next mover
2. All examples are related to the companies which failed or achieved success but I would have loved to know the specifics of what changes should currently emerging companies bring in to become successful
3. Lastly visuals could have been better