Peter Thiel shares his thoughts on building successful startups and businesses in his book “Zero to One.” He draws on his own experience founding and selling PayPal, investing in Facebook, and becoming a billionaire. Thiel’s book offers valuable lessons for entrepreneurs looking to create something new and innovative.
There are several important thoughts to keep in mind when you’re starting a new business.
Table of contents
- Personal view on the future determines the success or failure of your business and your life.
- Future progress
- Competition is bad and should be avoided. Monopoly is the way.
- Foundations of a startup are crutial. Tips for building a solid foundation and culture of mafia
- Having a great product is NOT enough. You have to know HOW TO sell it
- Are humans going to be replaced by machines?
Personal view on the future determines the success or failure of your business and your life.
There are in general 4 views of the future :
- Indefinite pessimism
- We see the future as unpredictable and feel helpless about it. This leads to pessimism. We usually avoid spending money, making investments, and making progress in general. As a result, we may become unsure of what to do and leave the responsibility of our future to others.
- Definite pessimism
- Although we know what we want to do and where we want to go, we sometimes doubt our plans. Instead of forging our own path, we fall into the trap of copying what has worked for others, expecting nothing extra new in terms of discoveries or innovations.
- Definite optimism
- We have a solid plan that we believe will bring us great progress and a better future. If the plan is doable, it doesn’t make sense to ignore it. Wouldn’t you want to live in a better future?
- Indefinite optimism
- Although we may not have specific plans, we remain optimistic about the future. After all, we assume that the future will naturally be better than the present. Typically, people build on what already exists and improve upon it over time.
You may have heard that a startup should be “lean” and that you should create multiple “iterations of your product”. While this is true, you can’t continue to iterate without a solid foundation. That’s where having a plan comes in. Starting by setting goals and outlining the steps necessary to achieve them provides a baseline for progress. In order to succeed, we need a plan and must take action to make it happen, ultimately improving our future.
Without a plan, it’s easy to become distracted, lose focus, and remain inactive, ultimately hindering our chances of a better future.
We are driven by the hope for a better future. That’s why we invest our time and money in products and services that help us move from a current present to a better future. This is what we call progress.
There are two ways in which we can achieve progress:
- We copy what works from others and we incorporate it to our business. This is particularly true in globalization, where less developed countries have adopted practices from more developed countries.
- We invent a whole new thing that’s going to change the world. For example UI for computers, iPhone or ChatGPT.
Almost all products that followed the vertical progress were related to technology. Why? Because technology allows us to achieve more with less, allowing us to create something new rather than simply improving what already exists. It allow us to go from 0 to 1. With technology, people become more efficient and powerful, allowing them to invest in ways that make the future better.
On the other hand, horizontal progress in a world of finite resources is unsustainable and will eventually lead to collapse. This is why we should prioritize technology and building new tools to make the future better. But where can we build these technologies? Startups provide the best platform for innovation and development.
Competition is bad and should be avoided. Monopoly is the way.
Competition is a fundamental aspect of any market, with two spectrums: perfect competition and monopoly.
Perfect competition exists when numerous companies provide the same product or service, while monopoly exists when only one company provides a unique product or service. In perfect competition, companies compete on price, leading to decreased profits in the long run. This may benefit consumers, but employees suffer from low wages, long working hours, and minimal benefits. Typical example can be restaurant.
Monopoly, on the other hand, maximizes profit and provides employees with high salaries, benefits, and vacation time. Successful businesses typically operate as a monopoly, as competition is like war and it’s costly. Monopoly is the key to happy, optimistic, and creative employees and is the condition of every successful business. Examples include Google and Amazon.
How to build monopoly?
- Begin with a proprietary technology in a small market. It’s easier to dominate a small market than a large one. Make your technology at least 10 times better than the competition. Once you have dominated this market, you can move on to monopolize it.
- Use the network effect to expand to other markets once you have a stronghold on the initial, small market.
- Build a strong brand while developing new products or services.
Remember: Don’t disrupt other businesses and try to avoid competition as much as possible while building your new product or service.
Foundations of a startup are crutial. Tips for building a solid foundation and culture of mafia
A startup is a team of people on a mission, and good culture is what it looks like on the inside. When building a new company, you have a unique opportunity to create rules that will guide the entire organization and its culture. Once the foundation is set, it is almost impossible to change, much like a constitutional convention. Once you lay the groundwork, it remains unchanged.
How can you set a right foundations for your company?
- Your co-founder should be someone you know well. Never start a company with someone you just met.
- Everyone in the company should be involved full-time, except outsourced resources such as accountants. Additionally, do not allow part-time employees and do not allow new hires to work remotely.
- Never outsource hiring process to others.
- When hiring, focus on involvement, excitement, and personal traits rather than just person’s skills and experience. Your time is your most valuable asset, and you want to spend it with people who share the your of the world and are obsessed with the same long-term goals as you and the rest of the team.
- Every person should have a clearly defined role and be responsible for one task or area of the company. This will help prevent conflicts between team members.
- CEO should have a lowest salary in the company. It shows commitment and involvement.
- Ownership or equity is a form of compensation that drives people to create long-term value. Cash, on the other hand, encourages short-term thinking. However, never disclose how much a person owns. This information should remain strictly private.
Having a great product is NOT enough. You have to know HOW TO sell it
Customer won’t come because you’ve built it. You have to make that happen (p. 133)
Technical experts can solve problems by creating products, such as software or devices. However, if no one knows about your amazing product, who will buy it? You need someone who can market and sell the product or service to others. This person is commonly known as a salesperson.
We are all salespeople. Every second of our lives, we are selling. We act as actor persuaders, promoting our skills, products, or services. However, when we realize someone is selling to us, an alarm starts beeping in our head, and we tend to keep our distance from these people. We don’t want to deal with people who are obviously trying to sell us something. The best sales, therefore, are hidden. We don’t even realize that someone has sold us a product or service until we make the purchase.
Selling strategies depend on the target customer and the price of your product or service. If you are selling rocket ships to a government for millions of dollars, you have to use a different strategy than if you are selling a product or service for one hundred dollars or less. What works for smaller sales does not work for bigger sales.
Remember: you are selling your company to investors and potential new employees every single second.
Are humans going to be replaced by machines?
Everybody is afraid that machines, particularly AI, will take our jobs. It might be true in the far future when humanoid-like robots operate, but we are still far from that reality.
Machines, technology, computers, or AI are not substitutes for humans. They excel at different things than humans. Machines excel in data processing, but they struggle with making judgments. On the other hand, humans are great at creating plans and making judgments in difficult situations, but are not as efficient in processing large amounts of data.
Machines do not compete in the job market. They do not require anything except for electricity to function, and they do not demand expensive resources. However, people compete in the market and have a wide range of demands and needs such as clothing, food, entertainment, etc.
In the globalized world with free markets, where everyone competes with each other, technology is one way to escape competition. We get much more gains with working with technology like computers and AI rather than with trading with other people. It gives us power to become more productive and do more in less time.
Better technology in law, medicine or education won’t replace professionals; it will allow them to do more (p. 156)
I find this quote excellent to summarize the whole book:
Our task today is to find ways to create the new things that will make the future not just different, but better - to go from 0 to 1. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both recreate it and preserve it for the future. (p. 201)