November 22, 2014

Key points from the book Zero to One by Peter Thiel

I've read the book Zero to One – Notes on startups, or how to build the future by Peter Thiel. When I wrote a biography on Elon Musk, I gave a brief introduction to Peter Thiel’s life because he and Elon Musk used to work in the same company. In his new book, Peter Thiel also talks a little bit about his life so I thought it would be interesting to see if I could learn something new.

The book's title originates from Peter Thiel's view that you should always create something new (from 0 to 1) and not copy someone else (from 1 to n). Therefore, the book is about how to build companies that create new things, which is difficult because it requires doing something nobody else has ever done.

Peter Thiel knows what he's talking about because he has founded (or co-founded) both PayPal and Palantir, and was and early investor in both Facebook and SpaceX. All these companies went from 0 to 1. The problem today is that most entrepreneurs want to go from 1 to n because it's easier even though our world is in a desperate need of innovation.

In a world of scarce resources, globalization without new technology is unsustainable. Not many years ago, we looked forward to vacations on the Moon. The computer in a modern smartphone is more powerful than the computer that landed on the Moon, but we are only using our smartphones to fire birds against pigs. While in the 1950s, people welcomed big plans, today is a long-range plan considered as hubris. Moreover, the number of new drugs approved per billion dollars spent on R&D has halved every year since 1950. How can the future get better if no one plans for it?

According to Peter Thiel, these new technologies can only emerge from startups. A startup is the largest and smallest group of people you can convince of a plan to build a different future. Larger organizations are too inefficient, and you can't do it on your own.

From Zero to One is a short book (380 pages on my iPad) but it is filled with knowledge and is easy to read. Among others, here are some important key points from the book:
  • Today's "best practices" lead to dead ends – the best paths are new and untried.
  • Technology is miraculous because it allows us to do more with less.
  • There's no formula for success because every innovation is new and unique.
  • Ask yourself the following question: "What important truth do very few people agree with you on?"
  • In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancements than actually doing work.
  • How much of what you know about business is shaped by mistaken reactions to past mistakes?
  • The most contrarian thing of all is not to oppose the crowd but to think for yourself. 
  • Monopoly is the condition of every successful business. Under perfect competition, no company makes an economic profit. On the other hand, a monopoly owns its market, so it can set its own prices. 
  • Higher education is the place where people who had big plans in high school are stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. 
  • Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past. When PayPal wanted to copy Square the only difference they made was a triangular card reader.
  • Competition can make people hallucinate opportunities where none exist. 
  • For a company to be valuable it must grow and endure – even though many entrepreneurs focus only on short-term growth.
  • You are not a lottery ticket! If successful entrepreneurs were just lucky, then entrepreneurs like Steve Jobs and Elon Musk wouldn't have created several billion-dollar companies. But there's no way to find out if that's really true because companies are not experiments. 
  • Today the whole Eurozone is in slow-motion crisis, and nobody is in charge. 
  • China is probably the most pessimistic place in the world today because they know there's no way Chinese living standards can catch up with those of the richest countries – because of lack of resources. 
  • Avoid the lean startup where you iterate a minimum viable product. Making small changes to things might lead you to a local maximum, but you will miss the global maximum.
  • The most important lesson learned from Steve Jobs has nothing to do with design. The greatest thing Steve Jobs designed was a long-term vision. 
  • Less than 1 percent of new business in US receive venture funding, but ventured-backed companies create 11 percent of all private sector jobs and generate revenues equivalent to 21 percent of GDP. 
  • If you think something hard is impossible, you'll never even start trying to achieve it. 
  • The best startups might be considered slightly less extreme kinds of cult. 
  • Poor sales rather than bad product is the most common cause of failure. Engineers know their jobs are hard, so when they look at salespeople laughing on the phone with a customer or going to a 2-hour lunch, they suspect that no real work is being done. What engineers miss is that it takes hard work to make sales look easy. 
  • Computers are complements for humans – not substitutes.
  • Big data is usually dumb data.
  • The most valuable companies in the future will ask, "How can computers help humans solve hard problems?"
  • The best problems to work on are often the ones nobody else even tries to solve.
  • 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.

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