Book Review: Zero to One by Peter Thiel
When you get inspired by Bill Gates and build another five companies like Microsoft then you go from 1 to n. But when you create something unique that did not exist before, you are going from zero to one. This book is all about inspiring you to think about grand ideas and not for those who are looking to merely tinker. Unsolved problems are hotbeds of opportunity. Conventional education leads to conventional choices. So his Thiel Fellowship program funds smart people who are under 20, to forgo their college education and start their own companies.
Peter Thiel is a billionaire entrepreneur (he started Paypal in 1998 as a way to create an alternative to the dollar), turned venture capitalist turned author taught a class on entrepreneurship at Stanford. He was the first outside investor in Facebook. He studied philosophy at Stanford University before going on to Stanford Law School, and working in a law firm in New York and then as a derivatives trader on Wall Street.
The book starts by asking Thiel’s favorite interview question, “What important truth do very few people agree with you on?” This book is about asking you to think, “What valuable company is no one building?” If the company you are thinking of will show diminishing rate of return, your idea is not original enough. An original idea (like LinkedIn, says Thiel) will give progressively higher rate of returns. All the “zero to one” ideas like Facebook follow four rules.
- They are bold ideas and not about taking baby steps and making incremental progress.
- The founder has a clear plan. A wrong plan is better than no plan. See how you can leverage technology.
- Try to create a small monopoly. That is where profits lie. But never declare yourself as one.
- Product is important but so is Sales. Nerds often do not get this when they come up with a great product – someone has to sell it.
There is no such thing as luck – it is all about skills and a great team. A lone genius cannot create a start-up. He quotes Jack Dorsey, the founder of Twitter who said, “Success is never accidental”. A founder must have a long term view. Steve Jobs designed Apple’s future with a series of ground breaking new products every few years. That’s where the Power Law kicks in. Those who can think of a Zero to One idea will create monopolies and leave pennies for those who will be inspired to follow. That’s a strong warning to all those who imitate Steve Job’s arrogance without having his vision.
Thiel has seven questions that he thinks every start-up must answer:
- Can you create breakthrough technology that is at least 10x better?
- Is now the right time to start your business?
- Are you starting with a big share of a small market? Think monopoly.
- Do you have the right team?
- Do you have a way to not just create but to deliver your product?
- Will your market position be defensible 10 or 20 years into the future?
- Have you identified a unique opportunity that others don’t see?
Thiel has strong opinions on everything – even how you should dress (hint: don’t wear suits ever!). He is a contrarian and is unafraid of offending you by challenging your world view.
The book certainly inspired me to abandon incremental thinking. This book should be read by everyone who wants to be an entrepreneur. You cannot think short term. Thiel may know a thing or two about success. The PayPal core team members went on to start Yammer, LinkedIn, YouTube and Yelp. In that sense the book will become a handbook that entrepreneurs will read in order to really ask whether their idea really is going to be a “Zero to One” idea just like this book.