Notes on: "Zero to one: Notes on Startups, or how to build the future" Part 1
Written by Peter Thiel, cofounder of Paypal among other companies. This book is the result of a course about Startups he made at Stanford back in 2012, one of his students, Blake Masters, took some notes that became popular around the campus. Later they worked together to consolidate these notes in this book.
The Challenge of the Future
Talks about challenging the Status Quo, and how we can't look at the past to create new, innovative things. It puts on the table the concept in the title of the book, going from zero to one.
When we improve existing things, we're going from 1 to n, this is, we produce increments from a way to do something into a better, more efficient, way but without revolutionizing anything. Also called Globalization or horizontal progress.
On the other hand, when we create new things, we go from 0 to 1 producing disruption. This is called Technology or vertical progress.
Party Like It's 1999
Here we travel to the 90s, where historical events like the dot-com bubble were produced by the boom of startups creating websites. The lessons of this event include avoiding excessive optimism, adhering to business fundamentals, and the importance of market timing. These insights, emphasize the importance of sustainable growth and realistic expectations for VCs when funding new startups.
The collapse of the dot-com bubble should not be forgotten and it will always serve as a reminder of these lessons. One phrase,
All Happy Companies Are Different
They say competition is better than monopoly, but actually, monopoly is good if we don't consider the ones that rely on bullying competition or have friends in the government.
Competition for economists is a state of equilibrium where different actors compete in the market, prices are set by demand and usually decrease due to competition, making profit margins very low. These kinds of businesses tend to grow a lot and every competitor offers nearly the same value, but they don't evolve much and can't afford research or innovation.
Instead of that, what we need are monopolies that don't have competition because no one can replicate the value they offer or the growth they have.
Also, the chapter mentions ways "the good" monopolies use to not look like monopolies, by diversifying their business and offering different products to portray themselves as a "multifaced tech company". This way they prevent audits or lawsuits.
Regardless of what's mentioned above, we should aim to build unique products/services that stand out, instead of copying what's already done.
Last Mover Advantage
It’s not about being profitable today but having a future projection of high profits and cash flow.
Characteristics of a Monopoly:
They have special technology that can’t be easily copied (e.g., Google’s search engine, which is being threatened by AI this year).
They leverage a network effect that allows them to naturally expand their user base (e.g., Facebook). However, the author suggests starting with small niches and expanding carefully.
They can scale exponentially with linear costs. Again, this needs to be done carefully (e.g., Amazon started with just books before expanding to other products).
They have a strong brand (e.g., Apple is known for its premium products, but people buy them even if they’re overpriced).
To build a monopoly, we should start small but monopolize a solution. Then we can scale up at a healthy pace and avoid competition.
Finally, it’s better to move last than to be the first in a market. Contradictorily, this last point implies some competition.
You Are Not a Lottery Ticket
While many successful people, and people talking about successful people, claim that their success is a matter of luck (being in the right place at the right time). However, Thiel emphasizes that many are being strategically humble and the reality is that there might be solid factors like the privileged environment they grew up in and their innate intelligence to name some. Relying on luck is a recipe for inaction.
He mentions 4 ways people embrace the future based on Optimism and Definiteness:
Indefinite pessimism: Accepts they don't have control over the future and that it might be scarce. Present Europe is depicted as an example, where they act in a reactive way towards events just waiting for the worst to happen while enjoying life as it is.
Definite pessimism: Thinks they have control over the future and that it might be scarce. Present China is an example where they are austere about money, and work relentlessly on copying others' inventions as cheaply and profitably as possible.
Definite optimism: Thinks they have control over the future and that they can make it bright. US from the 17th century up to the 70s, there was clear collective thinking that improvements at large scale had to be done, lots of innovation and plans to build things unimaginable before. Planning defined an era rich in technological advancements and development.
Indefinite optimism: Accepts they don't have control over the future and that it will be bright. US from the 70s to the present: There's no clue on what to do and there're few plans to make great things. People rely on strategies that worked in the past but now aren't working and mostly don't plan a better world. Also mentions that Boomers are used to seeing better times coming from past events without actually participating much in them, hence the high expectations and disappointments with the youth and the world today.