Daniel Clausen's Blog - Posts Tagged "zero-to-one"

It starts with a simple and elegant thesis: a new idea is a singularity that changes the world.

The best paths in business are new and untried. For this reason, there can be no definite road plan toward their creation. Every formula for innovation is new and unique.

Buried within a book on business and startups is a deep thesis about the relationship between technology, society, and our historical moment. From the beginning, I assumed this was a book written by an MBA or computer scientist, but instead it was written by a philosophy major and law school graduate -- these influences showed. There is a subtlety and thoughtfulness that are rare in the business book sludge.

This thin book seemed both small and abnormally huge at the same time. It vacillated between talking about building a startup company that could dominate a small market segment and discussing innovation as the salvation of the world.

Thus, the book is both about how to start a company and how to save the world: entrepreneurship as business; entrepreneurship as social salvation.

In the author's own strange but beautiful philosophy startups are a kind of salvation from societal decline and stagnation. This makes the book more interesting and important. But because the book is mostly about starting a company, the author's societal thesis and its grand, sweeping arguments about technology, the role of leaders, the plague of bureaucracy, and the macro-history of innovation are left untested and underexplained.

And yet...these aspects of the book are the most intriguing because they are the least explained and most controversial.

Thus, you either had to tentatively accept the underlying theory or if not, bracket it, to make your way through the rest of the ideas about start ups.

If Mr. Thiel, however, were to write a follow-up book outlining his underpinning philosophy, here is what he should address.

1) Zero to One makes the case for "definite optimism" -- having a plan and using resources to deliberately follow that plan. In some cases, it even seems like he is advocating this approach on a large scale. Since the book challenges many of the lessons of "libertarianism" (on the right) and "social justice/rights" advocates (on the left), I would like the book to address some of the great works in both of these genres -- James Scott's "Seeing Like a State" which argues against large-scale state planning; "The Tyranny of Experts" written by William Easterly, which has interesting ideas about when not to use expert advice; Nassim Nicholas Taleb's "Black Swan" which makes the best case for "optionality" and small-scale tinkering.

2) Since it rails against bureaucratization but also lauds grand projects like the canalization of large parts of the world, the space program, the Manhattan project, the interstate highway program, and the Empire State Building, I would like the any follow-up to address how a "definite optimism" future of the world can possibly work without large-scale bureaucracies. I would also like the author to explain how the European Union is not a "definite optimist" project.

(I wonder also if there is a historical process to the American loss of "definite optimism". One perhaps that begins in Vietnam?)

3) I would like this follow up books to address the difference between large-scale entrepreneurship, which relies on large bureaucracies implementing projects and small-scale tech entrepreneurship that rely on small teams. Is he suggesting that large engineering projects should be broken up into small teams? Is there a process aspect that I missed? Does innovation start with small teams and then move toward a bureaucratization stage (in the scaling up stage)? Since the pre-1970s "definite optimist" US employed bureaucracies extensively, this is a question that I would like answered. Or at least a more nuanced theory used in its place.

4) I would also like the author to address in more nuance the difference between technologies that are a result of creative discovery (see Nassim Nicholas Taleb) versus those that are the result of deliberate planning. I would also like the author to take on Nassim Taleb's thesis that most innovation is a process of creative discovery, not deliberate planning.

This is a wish list. I doubt I'll ever see Peter Thiel's full underlying philosophy explained, tested, or fleshed out, but it would make a very good book. Probably a big one, too. (One, I'm sure, he's too busy to write.)

Top Ideas I took away from the book:

Dominate a Niche Market (then grow from there):
It's okay for a company to meet a macro-need, but all great startups need to start by carving a niche and dominating a small market (Facebook with the Harvard social scene; Paypal with eBay).

Build a Small Team:
Innovation happens best when planned in small groups rather than individually or in large organizations. Individuals are best for idiosyncratic creations like novels and comic books. Large groups usually do things like bureaucracies, at a snail's pace. Small organizations maintain focus and flexibility.

A Start-Up is Like a Cult (Organized around an Idea about How to Change the World, not a Crank Idea):
The interesting thing about start ups is their "cult-like" status (to the point of ignoring their family and friends, and gaining social value from interactions with each other). Start ups share the aspects of a cult because they believe fanatically they are right about ideas others are wrong about.

On Sales:
No one likes salespeople, but everyone is a salesperson. The better you are at not looking like a salesman, the better you are at sales.

On the Destructiveness of Competition:
*The more we compete, the less we gain. Competition is stupid and unhealthy. All industries with heavy competition have very low-profit margins. War is costly and destructive. When deciding whether to fight, there is no middle ground: either don't throw any punches or strike hard and end it quickly.
*In business, pride and honor get in the way of this truth. *Avoid direct competition altogether!
*Most brave people are willing to fight for almost nothing at all. (This might make them ideologically anti-business.)

The 10x Rule:
For an existing technology to be a monopoly it must be about 10x better than its next competitor.

Dominate a Niche Market:
It's better to dominate a small market than try to gain a small percentage of a large market.

Between the Easy and the Impossible is Your Target:
Between easy truths and unknowable truths are very difficult problems. These are the ones most satisfying. If you don't believe in these, you are especially prone to fundamentalism. Fundamentalism attributes all great problem-solving to an outside force: the market, the environment, God.