Iterating on existing products takes the world from 1 to N. Zero to One is about how to build companies that create NEW things. Peter Thiel calls on entrepreneurs to build valuable businesses around such opportunities – to build a better future for everyone.
This book is for entrepreneurs, founders, or investors that want to build or invest in valuable businesses. While much of the advice is geared towards innovative startups, many of the insights also apply to small businesses that want to carve out a profitable niche. It’s an inspirational read for anyone interested in business strategy.
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1. The Challenge Of The Future
Ask yourself, “What important truth do very few people agree with you on?” A good answer should take the form of “Most people believe in x, but the truth is the opposite of x.” The majority of responses are different ways of seeing the present; good responses are as close as we can come to looking into the future.
Peter’s answer to this contrarian question is that most people think the future of the world will be defined by globalization, but the truth is that technology matters more. In a world of scarce resources, globalization without new technology is unsustainable. Today our challenge is to both imagine and create the new technologies that can make the 21st century more peaceful and prosperous than the 20th.
A startup is the largest group of people you can convince of a plan to build a different future. A new company’s most important strength is new thinking: even more important than nimbleness, small size affords space to think. Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can.
2. Mistaken Reactions To Past Mistakes
Dot-com mania was intense but short—18 months of insanity from September 1998 to March 2000. It was a Silicon Valley gold rush. When it collapsed, everyone learned to treat the future as fundamentally indefinite, and to dismiss anyone with plans big enough to be measured in years instead of quarters.
Globalization replaced technology as the hope for the future. The entrepreneurs who stuck with Silicon Valley learned four big (mistaken) lessons that still guide business thinking today: (1) make incremental advances, (2) stay lean and flexible, (3) improve on the competition, and (4) focus on product, not sales.
Those lessons have become dogma in the startup world, and yet the opposite principles are probably more correct: (1) it is better to risk boldness than triviality, (2) a bad plan is better than no plan, (3) competitive markets destroy profits, and (4) sales matters just as much as product.
We still need new technology. To build the next generation of companies, we must abandon the dogmas created after the crash. Ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes? The most contrarian thing is not to oppose the crowd but to think for yourself.
3. All Happy Companies Are Different
The business version of the contrarian question is: “what valuable company is nobody building?” This question is difficult, because a company can create a lot of value without becoming very valuable itself.
The airlines compete with each other and make no money. Google stands alone and is worth three times more than every U.S. airline combined. The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.
Monopoly businesses can afford to think about things other than making money; non-monopolists can’t. This is not about illegal bullies or government favorites. Here “monopoly” means the kind of company that’s so good at what it does that no other firm can offer a close substitute.
How much of the world is actually monopolistic? How much is truly competitive? It’s hard to say, because both monopolists and competitors are incentivized to bend the truth. Monopolists work to hide their monopoly status and non-monopolists exaggerate their uniqueness.
All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.
4. Uncovering Secrets
Every one of today’s most famous and familiar ideas was once an unknown and unsuspected secret. Every correct answer to the question “what valuable company is nobody building?” is necessarily a secret. But four social trends have conspired to root out our belief in secrets:
- Incrementalism – From an early age, we are taught that the right way to do things is to proceed one very small step at a time, day by day, grade by grade.
- Risk aversion – People are scared of secrets because they are scared of being wrong. By definition, a secret hasn’t been vetted by the mainstream.
- Complacency – Social elites have the most freedom and ability to explore new thinking, but they seem to believe in secrets the least.
- Flatness – As globalization advances, people perceive the world as one highly competitive marketplace. Anyone who might have the ambition to look for a secret will first ask: if it were possible to discover something new, wouldn’t someone have found it already?
If you think something is impossible, you’ll never even start trying to achieve it. But if insights that look so elementary in retrospect can support important and valuable businesses, there must remain many great companies still to start. Belief in the existence of such secrets is an effective truth.
5. You’re Not A Lottery Ticket
The most contentious question in business is whether success comes from luck or skill. Historically luck has been something to be mastered, dominated, and controlled. Everyone agreed that you should do what you can, and not focus on what you can’t. When we debate historical questions like these, luck is in the past tense. Far more important are questions about the future.
You can expect the future to take a definite form or an indefinite one. And you can expect the future to be better or worse than the present. Together these possibilities yield four views: definite pessimism, definite optimism, indefinite pessimism, and indefinite optimism.
Definite pessimism works by building what can be copied without expecting anything new. Definite optimism works when you build the future you envision. 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?
The baby boomer generation produced many indefinite optimists so used to effortless technological progress that they feel entitled to it. We have to find our way back to a future of definite optimism, and the Western world needs nothing short of a cultural revolution to accomplish it.
We cannot take for granted that the future will be better, we need to work to create it today.
After The Zero To One Book Summary
This book summary of Zero To One focused on five insights for creating new products and services. However, it’s not meant to be a substitute for reading the book. That’s because the original text provides a much richer learning experience.