13 Lessons In Business and Life From Peter Thiel’s ‘Zero To One: Notes On Startups, Or How To Build The Future’

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I pre-ordered Peter Thiel’s Zero To One very early on, having heard a few of his interviews during early promotion for the book.

Thiel has a wealth of experience to draw from, and as billionaire founder of PayPal and an early investor in Facebook, he’s the kind of entrepreneur you want to listen to when he offers advice.

What peaked my interest more than Thiel’s credentials in those interviews were his ideas. Mostly drawn from class notes of Thiel’s lectures at Stanford, the material felt fresh and controversial, bracing even, in its originality. Thiel’s advice for the would-be CEO bravely counters much of the standard dogma passed down to aspiring entrepreneurs.

After that, I wanted in.

So I bought the book. I read it in a day. And cards on the table, I loved it.

I’ve never felt compelled to write about a business book, but Zero To One is perhaps the most quotable, insightful and practical advice for modern startups I’ve ever read. The book deserves to storm up the charts and already feels like one of those modern classics destined to sit atop the New York Times Bestseller list for a long time.

Why Zero To One Succeeds Where Other Business Books Fail

The book has three major positives:

1.   It is rich in advice (I highlighted so many lines and took so many notes it’s ridiculous).

2.  It never drags, and the author never tests your patience (i.e. no LONG, DULL autobiographical sections. Any material drawn from the author’s experience is used to make a point, rather than fill pages).

3.   It feels original and provocative. (You don’t get that annoying feeling you often do with business books that it’s just repackaged information from somewhere else).

After reading Zero To One, I realized why so many business books aren’t very useful. It’s because they tend to suffer from one of two problems:

They are either too general and therefore largely useless, with the author proclaiming a guru-like status an offering vague ‘philosophical’ mysticism about money and wealth that leaves you none the wiser about the real challenges businesses actually face.

Or, an author will try to hitch onto a recent fad or business trend of the last year, like telling everyone how to get rich on the App market, or Twitter, and by zoning in on a burgeoning tech industry they guarantee their words will quickly become obsolete within a year or two.

Zero To One admirably avoids both traps.

Although the book imparts many general principles and advice that would apply to any aspiring entrepreneur, its brilliance comes from the fact that it always feels highly practical and rooted in the challenges entrepreneurs face in a modern 21st century economy, but without narrowing itself to one specific industry or recent business trend.

The author also never pretends to be writing a book that will guarantee you riches. Rather, it tells you (a) the reasons many start-ups fail, and (b) what beliefs and practices have allowed certain companies to become great.

Who Should Read It?

I highly recommend the book for the following:

[*]     Those who are thinking of or already own a start-up business of any size.

[*]      Bloggers, content-generators, and anyone concerned with generating revenue from their online activity.

[*]     Individuals who want to differentiate themselves on the job market and think about their career and skills in a more creative way.

[*]     Those who want to know what it takes to innovate and create monopoly profits in a world of competition.

Top 13 Takeaways On Business And Life

There are too many great ideas in the book to list, but I’ve done my best to highlight my top 13 takeaways:

  1.   Want the biggest profits? Go for ‘Vertical Progress’, Not Horizontal

“If you take one typewriter and build 100, you have made horizontal progress. If you have a typewriter and build a word processor, you have made vertical progress”.

Those who succeed the greatest go for vertical progress. It’s what changes the world and builds the future. Vertical Progress involves creating, not copying. Creating takes us from 0 to 1. Copying only takes us from 1 to n.

One of Steve Jobs’ main priorities when he returned to Apple was to slash product lines and “focus on the handful of opportunities for 10x improvements.

10x improvements are difficult, time-consuming work, but they also break new ground and yield all the rewards.

It’s not the easy path, but its vertical progress that defines true innovators – oddly, startups have an advantage in this sense, because they are small and nimble, and don’t suffer from the stifling resistance of big bureaucratic organizations.

  1.    It’s better to own 0.01% of a huge winner than 100% of a failure

Not every talented person should own a company.

You can become tremendously successful by joining the very best company while its growing fast.

Many of the hangers-on in the early Facebook days are now multi-millionaires. So are some of lesser-known members of Paypal. Even Stormtroopers on Star Wars received 0.001% shares in what is now a multi-billion dollar franchise.

The lesson? 0.01% of Google is better than 100% of a failed business.

Although this isn’t billed in the book as one of the ‘big takeaways’, I found it a powerful insight. Many people at a young age become obsessive about owning their own company, and may forgo opportunities to get in at the ground level on an incredible venture just because someone else happens to own 95% of the business.

Think about it: Would you really have done yourself harm by having 1% of Facebook instead of setting up your own rival social networking site? No. It would have been the smartest decision you ever made.

Don’t get obsessive about owning everything right now. Just get on board with a winning team.

  1.    Creating value is only the first step – you also need to capture some of the value you create

This lesson is a great tonic for anyone who thinks they can get rich just by setting up a blog, or by merely having a great website.

It’s all well and good to have people interested and excited in what you’re doing, but sooner or later you need a way of turning those page views into something tangible.

The point isn’t to start trying to turn everything into a cash-spinner, but it is important to ask: “What do I need to turn this value into actual profit?”

  1.    Monopoly is the condition of every successful business

All happy companies are different: each one earns a monopoly by solving a unique problem

Arguably this is the book’s central thesis. All great companies are mini-monopolies of some kind, and all small companies should aspire to this condition.

What are the kind of characteristics that allow monopolies to endure? While I can’t go into detail on each here, they are: 1. Proprietary Technology, 2. Network Effects, 3. Economies of Scale, and 4. Branding. (Not every monopoly will have all of these though).

Monopoly has become a dirty word, but in fact, all great companies are great only because they manage to dominate a niche market and thus escape the daily grind of competition.

When companies aren’t locked in the ‘struggle for survival’ they enjoy monopoly profits and can plan long into the future and fund ambitious projects that a competitive firm could never afford.

Monopoly’s also benefit consumers. Apple were able to push whimsy and imagination in technology with multi-year plans that enabled them to undertake bold projects and create exciting new products:

“Creative monopoly means new products that benefit everybody and sustainable profits for the creator”

Thus, monopolies actually have more incentive and ability to innovate:

Which leads us to insight no. 5…

  1.    Competition is massively overrated

The average entrepreneur is attracted to highly competitive markets because she assumes that’s where all the profit must be.

The truth is the exact opposite:

“Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival”.

Competition chews away at profits. Over-subscribed industries end up fighting petty price wars and become over-crowded.

Thiel uses the example of higher education to illustrate the defects of personal competition, where similarly talented elite students all battle it out to try and land graduate jobs in the exact same industries (e.g. investment banking, management consulting), and consistently student apply the same twenty companies.

What’s worse, in business, competition actually makes us more risk-averse, and encourages conformist thinking: “Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past”.

The real long-term challenge is not winning against competition, it’s escaping competition.

As Thiel says in the book: “Everybody loses when the war isn’t one worth fighting”.

  1.    Biggest startup mistake = understating the scale of competition

Every start-up believes it is a unique snowflake.

A new pizza delivery service believes it has a niche simply because it has an award for the freshest dough and tomato sauce in town. That’s not a niche, that’s if anything a slim advantage in a hugely competitive industry.

Just because you have award-winning pizza dough, doesn’t mean you’re suddenly a monopoly. You’re still competing with every pizza restaurant out there that does exactly what you do.

Bottom line: Having a niche is about solving a unique problem, not being slightly better than your competition.

  1.    Seize and dominate your own niche before you conquer the world

Amazon began with books. Facebook began with Harvard users. Paypal began by making it easy for EBay buyers to pay for products.

All of these businesses have expanded well beyond their original niche. Amazon is now a superstore. Facebook is no longer limited to just getting college students laid.

Once you have your niche, start small, and do it well.

You can expand and broaden out gradually later on.

You see this principle at work among individuals as well. Paul Newman was just an actor before he was selling condiments and sauces worldwide. Richard Branson owned record stores before Virgin owned gyms and airlines.

Don’t try to make your startup do everything first, unless you want to sound like this during a pitch.

  1.    Sales Matter (A LOT)!

One of my favourite pieces of advice in the book, simply because no other book I’ve ever read stresses it enough:

Customers will not come just because you build it. You have to make that happen, and it’s harder than it looks.

In a world of click-bait and multiple avenues of communication, people assume it will be easy to sell to people. In fact, many people just think if their product is great, it will just sell effortlessly.

If that were true, authors would never go around promoting their books on TV. Actors would never go on talk shows to sell their movie (you thought they were on Letterman just for a chat?).

Much of the time, you just don’t see the sales work. If a company is very good at it, it won’t even look like a sales pitch (that’s what the glossy Apple Keynote is all about, after all).

Everyone has to sell. Directly and indirectly. Your product will never ‘sell itself’.

  1.    What you do does matter as much as how well you do it

“You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.”

Of course, only relevant if your out to make money. For personal advice, I’m not sure if it’s so applicable. Research into indigenous Viking cultures may or may not be widely valuable economically, but if it’s your area of expertise there is probably a job in it somewhere.

But nonetheless, in general the point still stands: Do some research and thinking into whether what you’re working on is valuable to others in some way.

10.    A Question To Ask Yourself: Will this business still be around a decade from now?

A short-term boost in growth doesn’t mean you’ll be around forever.

Angry Birds is fashionable now, but when will that brand lose its appeal? Remember when buying ringtones was a big money-maker? Not anymore.

Don’t be seduced into thinking that every year will be like this year. Ask the difficult question: How long will this company last (even if its successful?)

Remember: “A great business is defined by its ability to generate cash flows in the future”. This is why Twitter was valuable long before it ever generated actual income for anybody.

   11.    Think like a contrarian

One of the first question Thiel asks in the book is: What very important truth do very few people agree with you on?

Clearly for Thiel, the answer is: Monopolies are good, competition is bad.

Breaking new ground comes from thinking for yourself, not like everyone else. What are unique problems that no-one else solves? What is a way of doing things no-one thinks about that you’d like to see?

   12.     It is better to risk boldness than triviality

A lesson for life more than anything. Triviality gets lost in the pile. Boldness, even when misplaced, is always better than being dropped in the mediocre crowd.

13.     There’s no magic industry that sprays gold dust upon all who enter the market

Beware the short-term craze, or the ever expanding bubble that is going to generate money for everyone sheltered under its cosy embrace:

No sector will ever be so important that merely participating in it will be enough to build a great company.

In the 1990’s every Internet company thought it the good times could never end. They did.

When everyone starts getting on a train, it may already be a sign that its time to start building something new.

*       *       *       *       *       *       *       *       *       *

If you want to grab your copy of the book, you can buy it here.

Buy it even if you’re just vaguely interested in the subject matter of tech, start-ups, modern economics, or innovation and what it takes to think differently.

Then start building!

(Want regular updates on new blog posts? Follow me on Twitter)

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9 comments

  1. Jade · September 29, 2014

    Hi Stephen. It is obviously a brilliant book, but I think the book looks so brilliant because you have the insight to read, understand and digest the precious value of the book. How many books do you read each week? You mentioned you finished reading the book in one day – how did you read so fast?

    Like

    • Stephen Hussey · October 16, 2014

      Sometimes I’ll read a book in a single day, if it’s fairly simple and it’s a Sunday. I always have a book on-the-go and try to read for at least an hour or two each day. It keeps ideas flowing and makes me more creative. I’d say I at least finish a book a week typically. Maybe two if I have little going on socially, maybe less if I’m travelling and working abroad, which for some reason makes it much harder for me to squeeze in reading time. Then I get guilty and have to read a bunch when I get home to make up for it! lol

      Thanks Jade!

      Stephen

      Like

      • Jade · October 17, 2014

        Thanks for your reply, Stephen. I finished reading your Get The Guy book within 48 hours because it was so ENGAGING! So far, it’s the most interesting and valuable book in English! (English is not my first language, but your book is stimulating enough to keep my attention.) Thank you and your brother for making learning so fun. I will see you at the Retreat towards the end of next year.

        Like

  2. wisekitty · September 29, 2014

    Stephen, I started following Matt’s site 2 weeks ago after I saw a couple of his wisdom talk videos and your insightful articles in the blog. Sometimes you just want to follow the people you have a similar look in life and you agree with in many subjects. It makes us feel good when we meet people who are like-minded, doesn’t it? It is hard to find in the USA. Believe me. I will write about it in my own blog (it is a brand new blog). I am a Mediterranean relocated in the USA 7 years ago. So now I am here following this blog as well. Having said that, I can relate to many ideas here. I have a master’s degree in management and just finishing up a certificate program on hotel management, which is a baby addition to my master’s degree. Plus, I have a small photography business which I am working on the side. I am always into personal improvement. Self-improvement is a life long journey to me. I wanted to introduce myself a little here by telling all this stuff, just so you have a little idea who is talking.

    “Triviality gets lost in the pile. Boldness, even when misplaced, is always better than being dropped in the mediocre crowd.” Great advise. That is why, we need to surround ourselves with people who have goals. They encourage you to be bold.

    “You don’t get that weird feeling you often do with business books that it’s just repackaged information from somewhere else.” I went to the book store the other day to search some self-improvement books. There are so many of them out there now. It is a new fad or what? Everybody is a published writer these days. So thanks for making it clear that Zero to One is not an average book. I will check it out.

    Looking forward to more articles.
    All the best,
    Kiraz

    Like

    • Stephen Hussey · October 16, 2014

      Thanks so much Kiraz,

      Yep, there are so many books published now, it’s important to be more discerning than ever. As Harold Bloom says in one of my favourite of his quotes: “Who reads must choose, since there is literally not enough time to read everything, even if one does nothing but read”. That’s why I always like to rave when I find something really worth taking time to read!

      Thanks for your comments,

      Steve

      Like

      • wisekitty · October 17, 2014

        Thank you for the reply, Steve. Besides the books, I like reading articles from some magazines too. So yes there is really not enough time to read everything. There are so many things to explore, learn and experience. 24 hours is just not enough. When I hear someone saying I am bored, I want to bang my head to a brick wall. Actually, I guess I should bang their heads, not mine. 🙂

        Have a great weekend!

        Like

  3. Emma · September 30, 2014

    This is such a brilliant piece! I haven’t read the book yet but these are all excellent points I am going to start implementing in my own life. You are a great writer – please post more things!

    Like

  4. bunsy · December 7, 2016

    He also helped get Donald Trump elected President of the United States. So there’s that.

    Also, if you think of it, please pass this quote from Thomas Paine on to your brother (or use it yourself in conversation, he’ll be impressed) —

    “The summer soldier and the sunshine patriot…”

    Like

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