[notes] Zero to One

Zero to One: Notes on Startups, or How to Build the Future (2014) by Peter Thiel #

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This book is short and sweet, like candy. In the prologue, Thiel mentions that it’s heavily based on a lecture series that he gave at Stanford in 2012. I wouldn’t recommend it as a core piece of literature, but it has a couple interesting thought-bits.

1. The Challenge of the Future #

“Whenever I interview someone for a job, I like to ask this question: "What important truth do very few people agree with you on?”“

2. Party Like It’s 1999 #

The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today:

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

And yet the opposite principles are probably more correct:

  1. It is better to risk boldness than triviality
  2. A bad plan is better than no plan
  3. Competitive markets destroy profits
  4. Sales matters just as much as product

3. All Happy Companies Are Different #

"Creating value is not enough – you also need to capture some of the value you create.”

“The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

4. The Ideology of Competition #

“Our educational system both drives and reflects our obsession with competition. Grades themselves allow precise measurement of each student’s competitiveness; pupils with the highest marks receive status and credentials. We teach every young person the same subjects in mostly the same ways, irrespective of individual talents and preferences. Students who don’t learn best by sitting still at a desk are made to feel somehow inferior, while children who excel on conventional measures like tests and assignments end up defining their identities in terms of this weirdly contrived academic parallel reality.”

“And it gets worse as students ascend to higher levels of the tournament. Elite students climb confidently until they reach a level of competition sufficiently intense to beat their dreams out of them. Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. For the privilege of being turned into conformists, students (or their families) pay hundreds of thousands of dollars in skyrocketing tuition that continues to outpace inflation. Why are we doing this to ourselves?”

5. Last Mover Advantage #

“A great business is defined by its ability to generate cash flows in the future.”

“The overwhelming importance of future profits is counterintuitive even in Silicon Valley. For a company to be valuable it must grow and endure, but many entrepreneurs focus only on short-term growth.”

Analyzing your business according to these characteristics can help you think about how to make it durable:

  1. Proprietary Technology
    • “As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.”
  2. Network Effects
  3. Economies of Scale
  4. Branding

Start Small and Monopolize #

“Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market.”

The Last Will Be First #

“Moving first is a tactic, not a goal. What really matters is generating cash flows in the future, so it’s much better to be the last move – that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits.”

6. You Are Not A Lottery Ticket #

7. Follow the Money #

8. Secrets #

9. Foundations #

“I stress this so often that friends have teasingly nicknamed it "Thiel’s law”: a startup messed up at its foundation cannot be fixed.“

  1. Founding Matrimony
  2. Ownership, Possession, and Control
    • "In the boardroom, less is more.”
  3. On the Bus or Off the Bus
    • “As a general rule, everyone you involve with your company should be involved full-time.”
  4. Cash Is Not King
    • “In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary.”
  5. Vested Interests
    • “Startups don’t need to pay high salaries because they can offer something better: party ownership of the company itself.”
  6. Extending the Founding

10. The Mechanics of Mafia #

“A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.”

“Recruiting is a core competency for any company. Why should the 20th employee join your company?”

“There are two general kinds of good answers: answer about your missions and answers about your team.”

“From the outside, everyone in your company should be different in the same way.”

“On the inside, every individual should be sharply distinguished by her work.”

11. If You Build It, Will They Come? #

“In Silicon Valley, nerds are skeptical of advertising, marketing, and sales because they seem superficial and irrational. But advertising matters because it works.”

12. Man And Machine #

Substitution vs. Complimentary #

13. Seeing Green #

Seven questions that every business must answer:

  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 be defensible 10 and 20 years into the future?
  7. The Secret Question: Have you identified a unique opportunity that others don’t see?

14. The Founder’s Paradox #

Conclusion: Stagnation of Singularity #


Now read this

[notes] The Toyota Way

The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer (2004) by Jeffrey Liker # Buy from Amazon Great book. Personal commentary is at the bottom… Notes # Part One: The World-Class Power of the Toyota Way #... Continue →