Zero to One – Peter Thiel

There are a few books which give you pleasure reading them, and there are others which provide you with knowledge while there are a few which redefine the way we think which reshape what we know and challenges our assumptions and gives us a new direction. Zero to One by Peter Thiel is one such book.

Peter Thiel, as some of you might know, is one of the fascinating personalities to come out of silicon valley. He was one of the founders of Paypal, and what’s famously known as the Paypal Mafia. Among the first investors in Facebook. During its early stages and later co-founded Palantir which has helped bust human trafficking rings, finding exploited children, and unravelling complex financial crimes and has FBI, CIA, NSA and others as its major clients.

Zero to one is his notes on the startup ecosystem and how to build the next generation of startups.

The following snippet that I am going to write is not a review or an opinion; instead, it’s just my notes that I’ve taken for my reference which I am sharing with you. To decide whether you have to read this book or not is for you to make and not mine.

So, this books builds on a radical idea of Perfect competition and capitalism are opposite to each other, he goes on to defend his thoughts by showing examples of how all the successful and large-tech are just monopolies. Example Google is a monopoly in the search engine, Facebook a monopoly in Social Media, Apple has its ecosystem, and so on.

He also goes on to suggest that no real monopoly would want to show that it’s a monopoly. Because of the legal and political hassles instead, they try to hide in plain sight by claiming to be a part of something larger market than what they really are, as Google tries to create smoke screens in terms of all its products which really don’t make much money and claims itself as an internet company rather than a search engine company, which would make it a smaller player in a broader market rather than a monopoly.

He goes on to define a few characteristics of a monopoly.

1. Proprietary Technology - far superior to the rest at least 10X better than the closest rival
2. Network Effects - Can quickly scale as Facebook did
3. Economies of scale - The cost of acquiring a new customer is way below the customer lifetime value
4. Branding - Establishing a clear brand differentiation, Ex: Apple

He also shares his thoughts on how to build a monopoly.

1. Start small and monopolise - Don’t try to scale unless you’ve entirely monopolised the initial small market that you’ve chosen
2. Scaling up - Once you have a killer product quickly scale-up
3. Don’t Disrupt - He says that the word disrupt itself is a bad idea because it tries to capture a market that already has established players and he is against the idea of trying to go and eat into the market share of other existing players instead he believes in creating a new market that nobody is looking at
4. The last will be the first - He says that you should become the last player, it might look contradictory but makes complete sense. Because he says, the product and the offering should be so unique that once you monopolise the market, there should be no space left for others to enter.

Being a VC himself, he shares his success mantra. His strategy has been to select few which have a clear and distinctive technology advantage and are miles ahead of the competition rather than invest in a lot of startups and wait for one of them to succeed which he thinks is not the right approach

He says Opportunities can be found in two places or two broad areas:

1. Secrets of Nature. Ex: Monopoly and competition are opposites
2. Secrets of People. What important secrets are people not telling you

His thoughts on essential elements of finding a company:

1. Founding Matrimony - Your partner should be someone whom you would naturally get along with regardless of the company who compliments your strengths rather than someone who doesn’t understand your thought process and is a hurdle
2. Ownership, Possession and Control :

Ownership - who owns

Possession - who runs the day to day operations

Controls - who steers the company

1. On the bus (or) Off the bus - Hire only full-time employees for all the essential functions rather than freelancers or part-timers because the commitment of somebody working part-time wouldn’t stay loyal
2. Cash is not the king - While hiring people in the early days of a startup, it’s better to prefer people who are willing to take part of their pay in equity rather than cash. Because those are the ones who believe in the company and its future and invest their energy to make the idea a reality, it doesn’t mean you shouldn’t hire people who would prefer cash. It’s an individual preference, principally those who have joined for cash also have left opportunities at a larger firm to work for you and your idea.
3. Don’t give equal shares to everyone - Everyone doesn’t deserve equal shares because some might work more than others. It is easier said than done.
4. Extending the founding - If the initial foundation is strong, the company can steer itself from the hurdles it faces and can reinvent itself any number of times.

Paypal Mafia:

His take on how he built PayPal and how it was able to create so many individuals who went on to create some of the largest tech companies

1. Hire people whom you would want to spend time with even after office hours
2. Work should be something you do for leisure and enjoy doing
3. Why should the 20th person join your company: By being honest about what do you want to achieve with this company and what their contribution towards that goal would be, and the right people would find you
4. Each individual should be responsible only for a specific task (No jacks of all trade)
5. Everyone in the company should be different in the same way - Since the initial team would be small it’d be better to find individuals with similar interests/hobbies
6. Be a small cult

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