Zero to One: Notes on Startups, or How to Build the Future – Peter Thiel, Blake Masters
If you invest in, build, work for or otherwise have interest in anything startup or entrepreneurship related, read this book. Read it now.
Nov 2015 - Partially read / partially audiobooked
- Start by dominating a smaller market, then expand.
- Qualitative characteristics set an incredible innovation up to thrive in the short-term, which enables the long-term.
- The idea of salespeople isn’t restricted to the profession of sales alone. Sales and distribution is a required element of every company. Salespeople can be engineers. Whatever their form, sales must happen.
- The best founders are also incredible salespeople.
- A company is a culture. There is no such thing as company culture.
- Offer a recruit the opportunity to work on world changing things, never be bored and love the people they work with. Perks beyond the basics don’t matter.
- Don’t tell everyone the secrets you know. Great companies are built on secrets hidden from others.
- Founder relationships must be strong long before starting a company. You should like each other.
- Companies are made up of ownership, possession (day to day control) and control. They are traded based on the interests of the parties.
- Big boards ensure you have no board governance.
- People are either IN or OUT. No part-time/consultants.
- A VC hedging strategy essentially means you see your world as having lottery characteristics. Only invest in what you believe can be a billion dollar company.
- Don’t work on things that make the world incrementally better.
- Solar companies jumped in led by slick people in suits to take advantage of market froth. No one made the market better by building better tech with great distribution.
- Your product must be something people can’t imagine their lives without.
Elements of a monopoly
- 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 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?
Highlights (audiobooked most of this book so highlights are light):
- Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1. The act of creation is singular, as is the moment of creation, and the result is something fresh and strange.Location: 46
- In a world of scarce resources, globalization without new technology is unsustainable.Location: 118
- Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.Location: 137
- The most contrarian thing of all is not to oppose the crowd but to think for yourself.Location: 263
- The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.Location: 288
- Suppose you want to start a restaurant that serves British food in Palo Alto. “No one else is doing it,” you might reason. “We’ll own the entire market.” But that’s only true if the relevant market is the market for British food specifically. What if the actual market is the Palo Alto restaurant market in general? And what if all the restaurants in nearby towns are part of the relevant market as well?Location: 321
- A monopoly like Google is different. Since it doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products, and its impact on the wider world. Google’s motto—“Don’t be evil”—is in part a branding ploy, but it’s also characteristic of a kind of business that’s successful enough to take ethics seriously without jeopardizing its own existence. In business, money is either an important thing or it is everything.Location: 361
- All Rhodes Scholars had a great future in their past.Location: 432
- The hazards of imitative competition may partially explain why individuals with an Asperger’s-like social ineptitude seem to be at an advantage in Silicon Valley today. If you’re less sensitive to social cues, you’re less likely to do the same things as everyone else around you. If you’re interested in making things or programming computers, you’ll be less afraid to pursue those activities single-mindedly and thereby become incredibly good at them. Then when you apply your skills, you’re a little less likely than others to give up your own convictions: this can save you from getting caught up in crowds competing for obvious prizes.Location: 465
- If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now? Numbers alone won’t tell you the answer; instead you must think critically about the qualitative characteristics of your business.Location: 551
- Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.Location: 555
- As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.Location: 563
- Network effects can be powerful, but you’ll never reap them unless your product is valuable to its very first users when the network is necessarily small.Location: 584
- A monopoly business gets stronger as it gets bigger: the fixed costs of creating a product (engineering, management, office space) can be spread out over ever greater quantities of sales. Software startups can enjoy especially dramatic economies of scale because the marginal cost of producing another copy of the product is close to zero.Location: 593
- Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple: it’s easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is.Location: 624
- The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.Location: 633
- As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.Location: 677
- the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits. The way to do that is to dominate a small niche and scale up from there, toward your ambitious long-term vision. In this one particular at least, business is like chess. Grandmaster José Raúl Capablanca put it well: to succeed, “you must study the endgame before everything else.Location: 681
- The other three views of the future can work. Definite optimism works when you build the future you envision. Definite pessimism works by building what can be copied without expecting anything new. Indefinite pessimism works because it’s self-fulfilling: if you’re a slacker with low expectations, they’ll probably be met. But indefinite optimism seems inherently unsustainable: how can the future get better if no one plans for it?Location: 895
- which companies will succeed, so even the best VC firms have a “portfolio.” However, every single company in a good venture portfolio must have the potential to succeed at vast scale. At Founders Fund, we focus on five to seven companies in a fund, each of which we think could become a multibillion-dollar business based on its unique fundamentals. Whenever you shift from the substance of a business to the financial question of whether or not it fits into a diversified hedging strategy, venture investing starts to look a lot like buying lottery tickets. And once you think that you’re playing the lottery, you’ve already psychologically prepared yourself to lose.Location: 996
- Why would professional VCs, of all people, fail to see the power law? For one thing, it only becomes clear over time, and even technology investors too often live in the present. Imagine a firm invests in 10 companies with the potential to becomeLocation: 1002
- Unless you have perfectly conventional beliefs, it’s rarely a good idea to tell everybody everything that you know. So who do you tell? Whoever you need to, and no more. In practice, there’s always a golden mean between telling nobody and telling everybody—and that’s a company. The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.Location: 1216
- Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true. No matter how strong your product—even if it easily fits into already established habits and anybody who tries it likes it immediately—you must still support it with a strong distribution plan.Location: 1502
- 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 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?Location: 1768
- These salesman-executives were good at raising capital and securing government subsidies, but they were less good at building products that customers wanted to buy. At Founders Fund, we saw this coming. The most obvious clue was sartorial: cleantech executives were running around wearing suits and ties. This was a huge red flag, because real technologists wear T-shirts and jeans. So we instituted a blanket rule: pass on any company whose founders dressed up for pitch meetings.Location: 1842
- Doing something different is what’s truly good for society—and it’s also what allows a business to profit by monopolizing a new market.Location: 1912
- Above all, don’t overestimate your own power as an individual. Founders are important not because they are the only ones whose work has value, but rather because a great founder can bring out the best work from everybody at his company.Location: 2126
First published on November 25, 2015