Zero to One: Notes on Startups, or How to Build the Future
Updated 7 months ago
This post contains my personal notes on questions, and lessons learnt after reading Zero to One by Peter Thiel.
Overall, I found the book very insightful. I think this book contains a lot of relevant information especially for technology entrepreneurs in their ideation, or project discovery phase.
Notes on questions to ask yourself in the project discovery phase
What important truth do very few people agree with you on?
What does everyone agree on? (Look out for delusional/conventional/popular beliefs)
What is the “backdrop” of your current technology? What are the things happening around you that people are talking about, that governments, investors, and the market as a whole are focusing on?
For your product to work, how many users will you need?
How can you partner up with notable companies to laud your growth/ comment positively?
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.
What valuable company is nobody building? (Remember: Creating value is not enough. You also need to capture some of the value you create)
What valuable company is nobody building? (Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable. If there are many secrets left in the world, there are probably many world-changing companies yet to be started)
How can you disguise your monopoly by framing your market as the union of several large markets? (For example, Google -> search engine ∪ mobile phones ∪ wearable computers ∪ self-driving cars)
“Most of a tech company’s value will come at least 10 to 15 years in the future.” What value will you create 10-15 years later, from your initial idea today? (“For a company to be valuable it must grow and endure. Growth projections often in the form of numbers alone won’t tell you the answer; instead you must think critically about the qualitative characteristics of your business.") Will this business still be around a decade from now? Evaluate your proposed idea based on durability as well.
“The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.” Who are your target market? Are they small enough? (A market is small enough if you are a monopoly when serving them)
“Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Amazon shows how it can be done. Jeff Bezos’s founding vision was to dominate all of online retail, but he very deliberately started with books”. What is your niche market? How do you plan to scale it into broader markets?
“Sequencing markets correctly is underrated, and it takes discipline to expand gradually.” What is your market sequencing strategy?
"Indefinite optimism" vs "Definite optimism"? In what way is your business idea and vision definitely optimistic?
“Apple imagined and executed definite multi-year plans to create new products and distribute them effectively.” What are your business’ definite multi-year plans? Do you have any?
What is your secret?
What’s the difference between really believing in your ideals and sticking to them vs pursuing some unrealistic dream that actually doesn’t have merit? Can you tell the difference between the two things?
How can computers help humans solve hard problems?
Engineering question: Can you create breakthrough technology instead of making little incremental improvements? Do you have proprietary technology an order of magnitude better than existing solutions? (10x)
Timing question: Is now the right time to start the business?
Monopoly question: Are you starting with a big share of a small niche market?
People question: Do you have the "right team"?
Distribution question: Do you have a plan of not just to create but distribute and deliver your product?
Durability question: Will your market position be defensible 20 - 30 years later?
Secret question: Have you identified a unique opportunity that others don’t see?
What is the underlying principle behind your idea/motivation to start a company?
“To succeed, you must study the endgame before everything else.”
Notes on lessons learnt
“If you want to create and capture lasting value, don’t build an undifferentiated commodity business.”
Conceal your monopoly—usually by exaggerating the power of your (nonexistent) competition.
“Entrepreneurs are always biased to understate the scale of competition, but that is the biggest mistake a startup can make. ” [Caution]
“Non-monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets: British food ∩ restaurant ∩ Palo Alto
"Monopolists, by contrast, disguise their monopoly by framing their market as the union of several large markets: search engine ∪ mobile phones ∪ wearable computers ∪ self-driving cars”
Be a creative monopoly: “Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.”
“Competition can make people hallucinate opportunities where none exist.”
“A great business is defined by its ability to generate cash flows in the future. ”
“Comparing discounted cash flows shows the difference between low-growth businesses and high-growth startups at its starkest”
“Every monopoly is unique, but they usually share some combination of the following characteristics: 1. proprietary technology, 2. network effects, 3. economies of scale, and 4. branding.”
“A good startup should have the potential for great scale built into its first design.”
“Beginning with brand rather than substance is dangerous. No technology company can be built on branding alone.”
“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.”
“A definite person determines the one best thing to do and then does it. Instead of working tirelessly to make herself indistinguishable, she strives to be great at something substantive—to be a monopoly of one”’
For startups, deliberating through “intelligent design works best.”
“If you treat the future as something definite, it makes sense to understand it in advance and to work to shape it.”
“If you do start your own company, you must remember the Power law to operate it well. The most important things are singular: One market will probably be better than all others, as we discussed in Chapter 5. One distribution strategy usually dominates all others, too—for that see Chapter 11. Time and decision-making themselves follow a power law, and some moments matter far more than others—see Chapter 9.”
Think from first principles and innovate
Empower people, do not substitute them
There are two modes of progress: 1. Horizontal progress = Globalization, that is, taking things that work somewhere and making them work elsewhere.
2. Vertical progress = Technology. Any new and better wayof doing things is technology.
“Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalization without new technology is unsustainable.”
“New technology has never been an automatic feature of history.”
“Today our challenge is to both imagine and create the new technologies that can make the 21st century more peaceful and prosperous ”
By “monopoly”, we mean the kind of company that’s so good at what it does that no other firm can offer a close substitute.
A small favor
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