Ideas from the book Zero to one by Peter Thiel
- Horizontal - Copying things that work. Going from 1 to x. Eg. You take one typewriter and then build another hundred copies.
- Vertical - Doing new things. Going from 0 to 1. Eg. You take a typewriter and build a word processor.
- 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.
- 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.
- 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.
- There are two kinds of secrets:
- Secrets about nature - Undiscovered aspects of the physical world.
- 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.
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?”
- 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
- Can you create breakthrough technology instead of incremental improvements?
- Is now the right time to start your particular business?
- Are you starting with a big share of a small market?
- Do you have the right team?
- Do you have a way to create and deliver your product?
- Will your market position be defensible 10 to 20 years into the future?
- Have you identified a unique opportunity others don’t see?
- 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.