Zero to One: Notes on Startups, or How to Build the Future

by Peter Thiel

EVERY MOMENT IN BUSINESS happens only once.

Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1.

In a world of scarce resources, globalization without new technology is unsustainable.

Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can. Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.

Conventional beliefs only ever come to appear arbitrary and wrong in retrospect; whenever one collapses, we call the old belief a bubble.

The most contrarian thing of all is not to oppose the crowd but to think for yourself.

Creating value is not enough—you also need to capture some of the value you create.

if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

the benefit of hindsight,

Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past.

growth is easy to measure, but durability isn’t.

will this business still be around a decade from now?

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.

The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.

Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets.

As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

Forget “minimum viable products”—ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others’ successes.

A business with a good definite plan will always be underrated in a world where people see the future as random.

startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket.

The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.

People are scared of secrets because they are scared of being wrong.

we have given up our sense of wonder at secrets left to be discovered.

If you think something hard is impossible, you’ll never even start trying to achieve it. Belief in secrets is an effective truth.

a startup messed up at its foundation cannot be fixed.

As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.

When you start something, the first and most crucial decision you make is whom to start it with. Choosing a co-founder is like getting married, and founder conflict is just as ugly as divorce.

Technical abilities and complementary skill sets matter, but how well the founders know each other and how well they work together matter just as much. Founders should share a prehistory before they start a company together—otherwise they’re just rolling dice.

Ownership: who legally owns a company’s equity? • Possession: who actually runs the company on a day-to-day basis? • Control: who formally governs the company’s affairs?

board of three is ideal. Your board should never exceed five people,

For people to be fully committed, they should be properly compensated.

cash bonus is slightly better than a cash salary—at least it’s contingent on a job well done.

Since it’s impossible to achieve perfect fairness when distributing ownership, founders would do well to keep the details secret.

Equity is a powerful tool precisely because of these limitations. Anyone who prefers owning a part of your company to being paid in cash reveals a preference for the long term and a commitment to increasing your company’s value in the future. Equity can’t create perfect incentives, but it’s the best way for a founder to keep everyone in the company broadly aligned.

The founding moment of a company, however, really does happen just once: only at the very start do you have the opportunity to set the rules that will align people toward the creation of value in the future.

The startup uniform encapsulates a simple but essential principle: everyone at your company should be different in the same way—a tribe of like-minded people fiercely devoted to the company’s mission.

But advertising matters because it works.

But advertising doesn’t exist to make you buy a product right away; it exists to embed subtle impressions that will drive sales later.

All salesmen are actors: their priority is persuasion, not sincerity.

If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product.

The total net profit that you earn on average over the course of your relationship with a customer (Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC).

Good enterprise sales strategy starts small, as it must: a new customer might agree to become your biggest customer, but they’ll rarely be comfortable signing a deal completely out of scale with what you’ve sold before.

A product is viral if its core functionality encourages users to invite their friends to become users too.

Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.

The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.

Founders are important not because they are the only ones whose work has value, but rather because a great founder can bring out the best work from everybody at his company.

We cannot take for granted that the future will be better, and that means we need to work to create it today.