Zero to One, by Peter Thiel – Reviewed by Alan Gleeson
by Conor Foley
Zero to One (2014) explores the world of startups, through the lens of Peter Thiel, a serial entrepreneur and investor based in San Francisco.
Thiel is a pretty fascinating character. He was one of PayPal’s co-founders, was an early investor in Linkedin, and has since launched Palantir Technologies, a software company with deep connections to the US government. He is intensely bright, extremely successful (his net worth is estimated at in excess of $2.5bn) and is very thoughtful, known for his contrarian views and for devoting a lot of his time thinking about the future.
“Long-term planning is often undervalued by our indefinite short-term world.”
More recently he has become known for his libertarian views, his support of Trump, his financing of Hulk Hogan’s lawsuit against Gawker ($10M) and for obtaining New Zealand citizenship in 2011. A colourful character indeed.
The book is designed to support aspiring entrepreneurs, encouraging readers to look for value in unexpected places rather than in making incremental changes to what is already available.
“The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles rather than formulas”.
He goes on to argue that “companies must strive for 10X better because merely incremental improvements often end up meaning no improvements at all for the end user.”
So what were my key takeaways from the book?
- Encourage Contrarian Thinking
He is a big advocate of encouraging people to think radically differently, as he believes that a disproportionate amount of value is created by those looking in areas where others aren’t. Think Elon Musk.
Society conditions us all to think similarly, after all, he argues that ‘schooling itself aims to impart conventional wisdom’.
We need people to think for themselves and to think creatively about the problems we face. Yet our education systems persist with encouraging rote learning and rewarding those who are best at memorising the facts, a completely redundant requirement for the modern world we live in.
“The most contrarian thing of all is not to oppose the crowd but to think for yourself.”
In many ways, he is echoing Sir Ken Robinson’s famous Ted talk “How to Escape Education’s Death Valley” where he too argued that the education system that we have all come through stifles creativity and is ultimately detrimental to children’s education. Robinson’s view on the “ADD epidemic” in the US is pretty much to the point.
“If you sit kids down hour after hour doing low-grade clerical work, don’t be surprised if they start to get fidgety”.
- Create a Monopoly
Another key theme of his book is to avoid creating a business in a competitive market, as ultimately prices will get bid down and profits eliminated.
“If you want to create and capture lasting value, don’t build an undifferentiated commodity business”.
Again historically, we’ve been conditioned to think of monopolists in wholly unfavourable terms, viewing them as something we need to be protected from. We view them through the lens of antitrust laws, and abuses of monopoly power. Instead, he argues that we need to ensure our startups have monopolistic characteristics i.e. where the company has no close substitutes and they have an opportunity to ultimately become a monopoly.
Of course, given the history, he argues that on both sides there are inherent biases, that serve to confuse matters. As a result monopolists lie for fear of being targeted by governments.
“Monopolists lie to protect themselves. They know that bragging about their great monopoly invites being audited, scrutinized and attacked…Since they very much want their monopoly profits to continue unmolested they tend to do whatever they can to conceal their monopoly – usually by exaggerating the power of their (nonexistent) competition.”
On the other side of the fence, no one wants to claim to be in a perfectly competitive market when starting a business as they’d never raise any money, so they downplay the extent of the competition. Thus startups in perfectly competitive markets lie for fear they won’t be able to raise money or to even survive.
In summary, Thiel believes that the old ways we have done things will no longer work and we need to think much more creatively and to look for opportunities away from the crowd. He is a big fan of monopolies as he believes the allure of years of monopoly profits (and access to cash) help to drive innovation. Finally, he encourages entrepreneurs to solve big challenges as he argues that “winning is better than losing, but everybody loses when the war isn’t one worth fighting”.
Zero to One is available from Amazon