Zero to One


Tags: management book-notes

I’ve read Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel. Here are my notes on the book.

Background #

Peter Thiel is a well known Silicon Valley founder and investor. He is often portrait as a contrarian and is quite a controversial figure. He is a founder of PayPal and Plantir. I’ve heard very good reviews of the book and it was on my list for quite some time.

Main points #

Startup thinking.

Control the future.

How to evaluate businesses?

The questions every business must have an answer for:

  1. The engineering question => Can you create breakthrough technology instead of incremental improvements?

  2. The timing question => Is now the right time to start your particular business?

  3. The monopoly question => Are you starting with a big share of a small market?

  4. The people question => Do you have the right team?

  5. The distribution question => Do you have a way to no just create but deliver your product?

  6. The durability question => Will your market position be defensible 10 and 20 years into the future?

  7. The secret question => Have you identified a unique opportunity that others don’t see?

My comment #

I really enjoyed the book. I’ve found a lot of the ideas appealing.

Modern thinking often takes you your agency away. Some examples — you should invest in index funds, because picking winning stocks is impossible; you’ve just graduated — great, but it only means you’d come from privilege; space flights? well, the budget is tight and grand projects won’t get you reelected.

This is what I’ve really liked about the book, it tells you that you’re not a lottery ticket. You can plan and build the future. You have to think about your actions because only few will give extraordinary results. There are still secrets out there — maybe if you search hard enough you can find some of them. Of course there’s no guarantee — by (power law) definition most of the efforts will be mediocre . But at least the book asks you to try, because if you don’t then for sure you can’t expect great returns.

There is some concrete advise there as well, I’ve liked the checklist on evaluating if a business is viable; also the note on the earnings and future cash flows — earnings are trailing indicator, if you want to invest (your time or money), you should evaluate the future prospects (discounted future cash flows) instead of the last quarterly results. Also, the chapter on salesmanship, I liked that it presented sales from a different perspective. I’m programmed to consider sales people as sneaky and pushy unlikable characters. And yet, we have to sell all the time. Plus, we don’t really see the good ones, we only notice the ones that are not the best in their craft.

The part about indefinite things really resonated with me, e.g. the politicians don’t have their opinions anymore, they have near-realtime pools and they know what to tell to be liked. Nobody knows how to make money, the bankers diversity and invest in many funds and sectors, the funds diversify and invest in many companies. Maybe some companies know what to do with the money, but on the other hand the big tech sits on piles of cash.

Of course the book is not a scientific article or a fair debate which tries to present both sides of an argument. There’s a lot of things to disagree with, but I’ve enjoyed even the parts that I disagreed with (I don’t focus on them here) — it was intellectually challenging to consider the author’s arguments.

I recommend to read the book.

Other books that may correspond with Zero to One:

Raw notes #

Startups #

What important truth do very few people agree with you on? #

0 to 1 vs 1 to N #

Capitalism and competition #

Startup thinking #

What drives company valuations? #

It’s not current earning (looks like P/E is useless, as it provides a rear view mirror image of a company). What matters are discounted future revenues, i.e. the ability to generate cash flows in the future.

E.g. Twitter vs New York Times.

The company must grow and endure. The latter, durability, is hard to measure. E.g. Groupon or Zynga. Will the business be still around a decade from now?

Monopolies #

Characteristics #

  1. Proprietary technology:
    • As a rule of thumb should be 10x better than competition, otherwise don’t bother.
  2. Network effects.
  3. Economies of scale.
  4. Branding.

How to build it? #

  1. Start small, capture a niche first and monopolize it.
  2. Scale up — expand from the niche into new markets.
  3. Don’t disrupt — focus on creation, not on the fights.
  4. Last mover advantage — moving first make it easy to capture the market, but it’s better to have the last great development on the market, unseat current contenders and enjoy monopoly. Arguably this point is not super clear to me.

Controlling the future #

Is success accidental? E.g. Gates, or Buffet, or Bezos claim there was some luck involved in their success. There are serial entrepreneurs like Musk, or Jobs. Thiel seems to think that success is not accidental, but OTOH is it different than mutual fund management (all of the fund managers suck, some seems successful, but given there are so many of them some will be successful many years in a row just by chance)?

Definite vs indefinite: you can control or at least try to shape the future.

Optimism vs pessimism.

Definite Indefinite
Optimistic U.S., 1950s–1960s U.S., 1982–present
Pessimistic China, present Europe, present

Indefinite results in hedging your bets and mediocrity — diversification, many extracurricular activities; no specialization, not trying to be great at a single thing.

Here I think the book resonates nicely with Essentialism, though I’m not sure if I buy it 100%.

Our word is indefinite. The next points really resonate with me.

Indefinite finance #

Indefinite politics #

Indefinite philosophy #

Indefinite life #

Finally the points above lead to indefinite life.

Evolution vs Design #

Startup is the largest endeavor over which you have an agency over. Reject the tyranny of chance. You are not a lottery ticket.

Follow the money #

Secrets #

Foundations #

The Mechanics of Mafia #

If You Build It, Will They Come? #

Everybody has a product to sell.

Man and Machine #

Seeing Green #

The Founder’s Paradox #

Stagnation or Singularity? #

For patterns for humanity:

  1. Recurrent collapse
  2. Plateau
  3. Extinction
  4. Taskoff

Future won’t build itself, help it!

>> Home