Book Review: “Zero to One: Notes on Startups, or How to Build The Future” by Peter Thiel

“Zero to One” is a great book for people who are interested in starting their own company or investors who want to invest on start up company. The author, Peter Thiel, one of the cofounders from Paypal, really know his stuffs or the stuffs that make a successful startup company. Key takeways for me:
1. Your startup needs to have 10x the benefits of the company/industry you’re try to compete with.
2. Don’t disrupt. Find a niche then grow from it, like Amazon’s starting with books then expand to all others.
3. Challenge yourself with this question: “What important truth do very few people agree with you on?”
4. Startup CEO needs to sets an example of low salary.
5. Finding the “secret” is like asking “What valuable company is nobody building?”
6. Best place to look for secrets is where no one is looking. Once you found the secret, don’t tell, found a company. “A great company is a conspiracy to change the world.”
7. Foundations of a startup: “Thiel’s Law” – “a startup messed up at its foundation cannot be fixed.” a. Form the founding team – how well they know each other and work together. Sharing a prehistory matters.
8. Having Founder around is important to keep the company going.

A short summary:
1. The challenge of the future: discussion of vertical (doing new things or technology) vs. horizontal (copying things that work). Sets the tone for the book: the questions you must ask and aswer to succeed in the business of doing new things.

2. Party Like It’s 1999: A brief history of dot-com boom/bust and the dogmas of making incremental improvement vs. risk boldness, stay lean and flexible (no plan) vs. a bad plan, improve on the competition vs. no competition, and focus on the product, not sales vs. sales matter as much as product.

3. All Happy Companies Are Different: Ask the question: “What valuable company is nobody building?” “Creating value is not enough — you also need to catpure some of value you create.” E.g., airlines vs. Google. Monopolies lies and competition lies. Creative monopolies are good for society, he argues. “All happy companies are different; each one earns a monopolies by solving a unique problem. All failed companies are the same; they failed to escape competition.

4. The Ideology of Competition: Marx vs. Shakespearean view of competition: great vs. little differences. Competition is a destructive force. Don’t be obsessed with competition. Focus on building a creative monopoly.

5. Last Mover Advantage: Company’s value is based on the discounted values of future cash flows. Startup value is based on long-term future cash flows while an Old Economy Business is based on present and near term cash flows. Characteristics of Monopolies: Proprietary Technology, Network Effect, Economy of Scale, and Branding. The steps to building a monopoly: start small and monopolize, scale up, don’t disrupt; disruptive companies often pick fight they can’t win. It’s much better to be the last mover – study the end game before everything else.

6. You Are Not A Lottery Ticket:4 quadrants: definite vs. indefinite, and optimistic vs. pessimistic. China is in the definite pessimistic quadrant and US today is in the indefinite optimistic quadrant against Europe’s indefinite pessimistic quadrant. Leave nothing to chances.

7. Follow the Money: Startup companies’ return distribution follows a power law – huge return on a handful of companies. The most important things are singular: one market will probably better than all others.

8. Secrets: Most people act as if there are no more secrets to be found, like the Unabomber. There are easy, hard, and impossible goals or secrets. Are all the “hard” goals achieved and secrets found. About finding the two secret types: of nature, and of people. When thinking about what kind of company to build, ask: What secrets is nature not telling you? What secrets are people not telling you? A great company is a conspiracy to change the world.

9. Foundations: Choosing a co-founder is like getting married. How well they know each other and work together matter. Three concepts: ownership, possession, and control. Conflicts often arise between ownership (founders) and control (board).Small board of 3 is ideal. Everyone involved in the company should be full time: on the bus or off the bus. Low CEO pay sets the standard. Distribute ownership fairly. If you get the founding moment right, you might be able to extend its founding indefinitely.

10. The Mechanics of Mafia: Offer the opportunity to do irreplaceable work on a unique problem alongside great people. From the outside, startups should have their early staff as similar as possible. Every new hire must be equally obsessed with the mission. From the inside, every individual should be sharply distinguished by his/her work. Make each person responsible for one thing. Having the “cult-like” culture is better than the “consultant” culture (the opposite extreme).

11. If You Build It, Will They Come?: The author exalts the importance of sales or “distribution” of the products/services. CLV (customer lifetime value) must be > CAC (Customer acquisition cost). The higher the price of your product, the more you have to spend to make a sale – the more it makes sense to spend it. There is deadzone in between the personal sales and tradition advertising – distribution bottleneck to small-to-medium businesses. Great products without a distribution channel would cause the business to fail. Everybody sells.”Look around. If you don’t see any salespeople, you’re the salesperson.”

12. Man and Machine: “The computers are complements for humans, not substitutes. The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.”

13. Seeing Green: The 7 questions that the cleantech fails to answer correctly: 1) Engineering question: can you create breakthrough technology instead of incremental improvements? Not 10x better. 2) The Timing: Is now the right time to start your particular business? Entering a slow-moving industry. 3) Monopoly: Are you starting with a big share of a small market? No different than a restaurant in Palo Alto. 4) People: Do you have the right team? Started by non-technical person. 5) Distribution: Do you have a way to not just create but deliver the product? 6) Durability: Will your market position by defensible, 10 and 20 years into the future? Could’ve predicted Chinese businesses entering the market with government subsidy. 7) Secret: Have you identified a unique opportunity that other don’t see?

14. The Founder’s Paradox: It’s “more powerful but at the same time more dangerous for a company to be led by a distinctive individual instead of an interchngeable manager.” The author argued that most founders lie in the two opposite ends of the normal distribution of weak to strong spectrum, like Hughes, Lady Gaga, Bill Gates, Steve Jobs and etc. Great founders bring out the best work from everybody at this company.

15. Conclusion: Thiel doesn’t see the arrival of singularity that would doom the mankind as long as we find singular ways to create the new things that will make the future not just different, but better -to go from 0 to 1. The essential first step is to think for yourself and see our world anew and strange as our ancestors did.