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by
Peter Thiel
Read between
January 30 - March 23, 2020
The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. And the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them.
Zero to One is about how to build companies that create new things.
this book offers no formula for success. The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innovative.
successful people find value in unexpected places,
“What important truth do very few people agree with you on?”
A good answer takes the following form: “Most people believe in x, but the truth is the opposite of x.” I’ll give my own answer later in this chapter.
No one can predict the future exactly, but we know two things: it’s going to be different, and it must be rooted in today’s world.
The single word for vertical, 0 to 1 progress is technology.
Properly understood, any new and better way of doing things is technology.
it’s hard to develop new things in big organizations, and it’s even harder to do it by yourself.
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.
new company’s most important strength is new thinking: even more important than nimbleness, small size affords space to think. This
Because that is what a startup has to do: question received ideas and rethink business from scratch.
Small, incremental steps are the only safe path forward.
All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation.
The most contrarian thing of all is not to oppose the crowd but to think for yourself.
BUSINESS VERSION of our contrarian question is: what valuable company is nobody building? This
you want to create and capture lasting value, don’t build an undifferentiated commodity business.
Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better. Even the government knows this: that’s why one of its departments works hard to create monopolies (by granting patents to new inventions) even though another part hunts them down (by prosecuting antitrust cases).
Monopoly is the condition of every successful business.
All happy companies are different: each one earns a monopoly by solving a unique problem.
Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. For the privilege of being turned into conformists, students (or their families) pay hundreds of thousands of dollars in skyrocketing tuition that continues to outpace inflation. Why are we doing this to ourselves?
“So, Peter, aren’t you glad you didn’t get that clerkship?” With the benefit of hindsight, we both knew that winning that ultimate competition would have changed my life for the worse. Had I actually clerked on the Supreme Court, I probably would have spent my entire career taking depositions or drafting other people’s business deals instead of creating anything new. It’s hard to say how much would be different, but the opportunity costs were enormous. All Rhodes Scholars had a great future in their past.
The hazards of imitative competition may partially explain why individuals with an Asperger’s-like social ineptitude seem to be at an advantage in Silicon Valley today. If you’re less sensitive to social cues, you’re less likely to do the same things as everyone else around you.
If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most. The
Those who succumb to measurement mania obsess about weekly active user statistics, monthly revenue targets, and quarterly earnings reports. However, you can hit those numbers and still overlook deeper, harder-to-measure problems that threaten the durability of your business.
What does a company with large cash flows far into the future look like? Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.
Service businesses especially are difficult to make monopolies.
Brand, scale, network effects, and technology in some combination define a monopoly; but to get them to work, you need to choose your market carefully and expand deliberately.
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.
Amazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books.
to first dominate a specific niche and then scale to adjacent markets—a
What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you. It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits. The way to do that is to dominate a small niche and scale up from there, toward your ambitious long-term vision.
“Victory awaits him who has everything in order—luck, people call it.”
To a definite optimist, the future will be better than the present if he plans and works to make it better.
Instead of working for years to build a new product, indefinite optimists rearrange already-invented ones. Bankers make money by rearranging the capital structures of already existing companies.
And private equity investors and management consultants don’t start new businesses; they squeeze extra efficiency from old ones with incessant procedural optimizations.
It’s no surprise that these fields all attract disproportionate numbers of high-achieving Ivy League optionality chasers; what could be a more appropriate reward for two decades of résumé-building than a seemingly elite, p...
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Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth. If they don’t go to law school, bright college graduates head to Wall Street precisely because they have no real plan for their careers. And once they arrive at Goldman, they find that even inside finance, everything is indefinite. It’s still optimistic—you wouldn’t play in the markets if you expected to lose—but the fundamental tenet is that the market is random; you can’t know anything specific or substantive; diversification becomes supremely important. The
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total VC investment accounts for less than 0.2% of GDP. But the results of those investments disproportionately propel the entire economy. Venture-backed companies create 11% of all private sector jobs. They generate annual revenues equivalent to an astounding 21% of GDP. Indeed, the dozen largest tech companies were all venture-backed. Together those 12 companies are worth more than $2 trillion, more than all other tech companies combined.
If you do start your own company, you must remember the power law to operate it well. The most important things are singular: One market will probably be better than all others, as we discussed in Chapter 5. One distribution strategy usually dominates all others, too—for that see Chapter 11. Time and decision-making themselves follow a power law, and some moments matter far more than others—see Chapter 9. However, you can’t trust a world that denies the power law to accurately frame your decisions for you, so what’s most important is rarely obvious. It might even be secret. But in a power law
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what valuable company is nobody building?
If everything worth doing has already been done, you may as well feign an allergy to achievement and become a barista.
Second is risk aversion. People are scared of secrets because they are scared of being wrong. By definition, a secret hasn’t been vetted by the mainstream. If your goal is to never make a mistake in your life, you shouldn’t look for secrets.
Third is complacency. Social elites have the most freedom and ability to explore new thinking, but they seem to believe in secrets the least. Why search for a new secret if you can comfortably collect rents on everything that has already been done?
if it were possible to discover something new, wouldn’t someone from the faceless global talent pool of smarter and more creative people have found it already? This voice of doubt can dissuade people from even starting to look for secrets in a world that seems too big a place for any individual to contribute something unique.
you think something hard is impossible, you’ll never even start trying to achieve it. Belief in secrets is an effective truth.
The actual truth is that there are many more secrets left to find, but they will yield only to relentless searchers.
Airbnb saw untapped supply and unaddressed demand where others saw nothing at all.
A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.
