The first book I read in 2023 is “Zero to One”, a book written by Peter Thiel, co-founder of PayPal, Palantir Technologies, and Founders Fund, and one of the first investors in Facebook.
He taught a popular course on entrepreneurship at Stanford University. The lectures were so well-received by students that he decided to turn them into a book.
In the book, Thiel offers his opinions on what makes a venture successful and how to avoid common mistakes. From the importance of creating something new, choosing the right market to start with, and paying attention to distribution, this book is an excellent resource if you want to learn more about what it takes to thrive in business.
Below you you find my main takeaways from the book:
Find a unique problem and solve it
Thiel argues that the most valuable companies are those that create new markets or industries, rather than those that compete in existing ones. This concept is known as “vertical progress” and it refers to creating something new (going from 0 to 1), rather than simply improving upon what already exists (going from 1 to n).
Every moment in business happens only once. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. And the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them.
Take for example Airbnb. When it was founded in 2008, there were no established players in the home-sharing market. Airbnb’s unique business model, which allows people to rent out their homes or apartments to travelers, was a completely new concept and has since become a dominant player in the travel industry.
Aim to create a monopoly
Thiel argues that businesses with a monopoly in their industry are the most prosperous. A business can set higher pricing and make more money if it has market domination.
Non-monopolists tend to exaggerate their market position by focusing on specific niche markets. For example, a restaurant in Berlin that also offers a co-working space may claim to be the leader in the “tech-friendly restaurants in Berlin” market, even though there are many other options for their target audience.
On the other hand, monopolies tend to mask their dominance by expanding into multiple large markets. A good example of this is Google, which positions itself as operating in several markets, such as search engine, advertising, email, hardware, and more, instead of just one market. As a result, they present themselves as a small player in a large market.
Start small and avoid strong competition
Find a group of people not being served, and build them a unique solution. That’s how you create a monopoly. Avoid crowded markets with strong competition. It’s not only about creating value but also about capturing it.
Many of the most successful businesses had humble beginnings:
- Facebook started out as a social media platform reserved only for Harvard students. They didn’t start reaching out to other colleges, high schools, then everyone until much later.
- Slack was initially targeted at small teams within larger companies. The company focused on meeting the needs of this specific market and gradually expanded to include larger groups and organizations.
- Amazon established a monopoly for books before dominating other things and going on to become the biggest retailer in the world.
My favorite quote in this chapter comes from the business variant of Thiel’s contrarian interview question (“What revolutionary truth do you know that no one else agrees with?”):
What valuable company is nobody building?
Build a small and strong team
Use a small, dedicated team to achieve maximum efficiency: Thiel stresses the importance of having a small and dedicated team in order to achieve maximum efficiency. A small team allows for better communication and decision-making, and also allows for a more nimble and adaptive approach to business.
Take Apple’s example, they have a small, dedicated team of engineers working on the development of their products.
Is best to have everyone involved in the company working full-time. This is because people who are truly invested in the company and motivated by having ownership, rather than just a high salary, will be more likely to work hard and contribute to the success of the company.
He also highlights that it’s hard to develop new things in big organizations due to the bureaucratic hierarchies and resistance to risk:
In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work (if this describes your company, you should quit now).
Ensure success in at least one distribution channel
Most businesses struggle to effectively distribute their products or services, this being the main reason for business failures and not the quality of the product.
Thiel argues that if a company can find just one successful distribution channel, they have a great chance of success. However, if they try to focus on multiple distribution channels and fail to make any of them work, it is likely that the business will not be successful.
Continue to innovate and learn
Over the years, Netflix has continually evolved and modified its business model, switching from a DVD rental service to a streaming service and producing its own original content, among other things. As a strategy to enhance its goods and services, Netflix has embraced continuous learning and data-driven decision-making.
Doing this make sure you also keep your plans and ideas secret from competitors in order to maintain a competitive advantage. By keeping your plans and ideas secret, you can prevent others from copying your ideas and also maintain flexibility in your plans.
The Complementary Nature of Technology
Probably many will not highlight this after reading the book but for me, it’s an important mindset we could embrace or at least consider – until now, technology meant creating additional value for our society. Everything is now cheaper and more accessible due to technological progress.
For instance, the emergence of new markets like e-commerce and online advertising has been made possible by the invention of the internet. Without the technological developments that made it possible for the internet to be created, these markets would not have been feasible. Technology can give organizations new chances to expand and add value in this way.
We might be scared that in the end people will be replaced by machines. But what if we can use computers to complement our work instead of thinking of them as replacements for humans? Unlike humans, computers don’t yearn for more money, bigger houses, or luxurious items. All they require is a nominal amount of electricity.
Plan for long term
Think long-term, as opposed to short-term, in your business strategy: Thiel encourages business owners to think long-term, as opposed to short-term, when developing their strategy. By taking a long-term perspective, a business can make strategic decisions that will lead to long-term success, rather than simply focusing on short-term gains.
Amazon is an illustration of a business that has considered the long-term possibilities of its industry. Jeff Bezos had a long-term goal for the business that included diversifying its product line and entering new markets. To support its long-term growth, Amazon has also regularly made investments in infrastructure and technology.
The 7 questions every business must answer
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?
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. The best projects are likely to be overlooked by a crowd; the best problems to work on are often the ones nobody else even tries to solve.
Even while I found myself in disagreement with many of the book’s ideas, I nevertheless really enjoyed it. I still give the book 4.5 stars because I liked how thought-provoking it was; it was an interesting read that had me agreeing and disagreeing and learning new perspectives.