Zero to One summary: Advice for start-ups

Countless?ideas people?I respect and admire said that this is their all-time favourite book.

I enjoyed it - but as much as I would pass on the recommendation of?Zero to One, to say I loved all of it would be a bit of a yarn.

Reading this is like playing he loves me... he loves me not. It forces you to reconsider your ideas but some of those are nonsensical. There is exceptional wisdom on how to build a monopoly but a limited perspective on competition. The book is written very clearly but sometimes oversimplified.

The key here is to absorb all the brilliance and disregard the occasional wackiness.

To absorb the genius in just a few minutes - read on

Start-ups should exist to create something new and valuable, to take the world from 0 to 1.

But, it is not all "zero to one" - it can't and shouldn't be.?

The Challenge of the Future

Thiel argues that our society has lost its optimism about the future and that this is a problem for innovation.

Spreading old ways to create wealth will result in devastation, not riches - so entrepreneurs should look to technological innovation, not globalisation.

Any new and better way of doing things is technological innovation - this is why start-ups exist.

Must we always create something new for society to improve??

Guiding Principles

It is better to risk boldness than triviality.

• Create great things, look to change the world and do not take small, incremental steps forward. A big, audacious goal is more likely to motivate and inspire a team than incremental improvements.

Competitive markets destroy profits.

• Competing in a crowded market is a recipe for failure because it leads to price wars and shrinking profits. Instead, create a new market where the company can be a monopoly or at least a dominant player.

Sales matter just as much as the product.

• A great product is not enough to succeed in business. Sales and distribution are equally important. Focus on building a strong sales team and distribution channels to get your product to customers.

Competition is for Losers

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

Capitalism means that in a world of competition, your piece of the pie will get eaten by other players. When there is competition, price is affected by supply and demand, and every player will be left licking their lips.

Monopolies are frowned upon because it is felt that they exist due to questionable tactics, licenses, or lucrative contracts. When Thiel talks about monopolies he is talking about companies that invent new and better things and run away with them.

“If you can recognise competition as a destructive force instead of a sign of value - you're already saner than most".

Last Mover Advantage

Sometimes it's better to be a "last mover" to observe what works and what doesn't in a market and enter when the time is right.

The best way to do this is to start with a?small market. Always err on the side of starting too small - it's easier to dominate a small market than a large one.

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

Once you create and dominate a niche market, you should gradually expand into related and slightly broader markets.?Jeff Bezos's?founding vision was to dominate online retail, but he deliberately started with books.

Don’t disrupt.?Directly challenging large competitors will reduce your profits.

Start-up Foundations

"A start-up messed up at its foundation cannot be fixed".

Beginnings are special. The first and most crucial decision you make is whom you start your business with - you want to know your founders and know them well.

You also want every employee to be a full-time player. This is because anyone who doesn't own stock options or draw a regular salary from your business is?fundamentally misaligned. You're either on the bus or off the bus.

The less the salary the CEO gets, the better it is for the start-up. It incentivises the CEO to work for long-term value and sets the standard for everyone else.

High cash compensation teaches workers to claim value from the company as it already exists instead of investing their time to create new value in the future.

Similarly, 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 - let this guide your hiring decisions.

Recruiting

Do not assemble and build your team by sorting through resumes or simply hiring the most talented people. This creates a solely professional view of the workplace, in which free agents check in and out on a transactional basis.

Of course, hires must be talented, but they must be excited about doing irreplaceable work on a unique problem alongside great people.

Lastly, when assigning responsibilities to employees - make every person responsible for one unique thing. This will make managing and evaluation easier, but more importantly, eliminates the biggest start-up killer - internal conflict.

Sales Matter Just as Much as the Product.

The common idea that “if the product is good enough, it will sell itself” is almost always incorrect.

Two metrics set the limits for good?product distribution:

1. The total net profit you earn on average throughout your relationship with a customer (Customer Lifetime Value).
2. The amount you spend on average to acquire a new customer (Customer Acquisition Cost).

If your average sales figure is seven figures or more, distribution works best if the CEO does the job himself. These are?complex?sales.

If your average sales figure ranges between $10,000 and $100,000, you need to establish a sales team of modest size that can move the product to a large audience. Build a team of relationship builders that make the product more valuable to consumers.

For products around $1,000 for small businesses - there might be no good distribution channel. Even with a clear value proposition, how do you get people to hear it? Advertising would either be too broad or inefficient and a personal sales effort will create a bottleneck.

For lower-priced products - marketing or advertising works best.

If you get just one distribution channel to work, you have a great business. If you try for several but don't nail one - you're finished.

If you get just one distribution channel to work, you have a great business. If you try for several but don't nail one, you're finished.

Every Start-up Must Answer These Questions:

1. The?Engineering?Question: Can you create breakthrough technology instead of incremental improvements? 20% improvement is not enough.
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 not 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?