Zero to One

Notes on Startups, or How to Build the Future

By Peter Thiel 2014

Peter Thiel’s Founders Fund distinguishes itself from other venture capital firms by its embrace of hardware and not just software: the world needs better robots in addition to better apps, it believes. The firm invested in SpaceX, Elon Musk’s big-dreaming venture to send people to space. And Thiel’s thought-provoking (and best-selling) book Zero to One is framed around questions like: Why is commercial space travel not a reality today?

Thiel is a co-founder of PayPal. He is one of the biggest beneficiaries of the dot-com boom. As a leader in the Silicon Valley VC world he has facilitated the growth of some leading digital companies. But information technology, he says, is just a part of technology. The digital revolution does not mean that technology is progressing as a whole, and this is a problem. “The smartphone that distracts us from our surroundings also distract us from the fact that our surroundings are strangely old: only computers and communications have improved dramatically since mid-century.”

So why has no one invented a sweetener that makes people lose weight, or a wearable material that is as hard as steel, or a genetic synthesis that lets people live past 100? His answer is that too few people in the digital age think big. Too few so-called ‘innovative entrepreneurs’ are actually inventing anything new. The US political system no longer supports grand visions of the country’s future, and the private sector is not adequately funding the development of big new things. Indeed the whole system right through business school trains bright people to think narrowly, move incrementally, and keep all options open since most plans fall apart.

But successful enterpreneurs, Thiel says, must be bold inventors. They must have a vision of a new way to do something, and they must work intensely and methodically to achieve that dream no matter how long it takes. The act of invention takes a product from “0 to 1.” That is the hard part that creates value. It is then followed by “1 to n” – a bunch of derivations and imitations. A one-to-n enterprise would be an app that lets you find the nearest bagel shop. Zero-to-one enterprises include Amazon, Google … and PayPal. Silicon Valley is full of successful people with Asperger’s-level inability to relate to others, he says, because to follow through on a good idea requires a person to truly not care about the herd mentality.

OUR TAKE

Zero to One was clearly written by a smart man who got rich young and now styles himself an authority on nations, finance, and history. His argument is remarkably anti-competition (“the more we compete, the less we gain”) and pro-monopoly. His thinking on monopolies is unconvincing. A young business should aspire from the outset to be a monopoly (by which he means a dominant commercial player, not a sole vendor: ie, PayPal) because then it can focus on technology and not engage in destructive competition. But he underplays the role of competition in creating these businesses in the first place – and sustaining their edge in the present. His arguments are a recipe for Apple or Google to become complacent.

Overall the book reads like a riveting lecture. It was adapted from Thiel’s lectures at Stanford Business School. The best part is his eagerness to trash the orthodoxies of the start-up world even at altar of its cathedral: Stanford. The “lean startup” model is mostly rubbish, he says. “Pivoting” and adapting your product to consumer tastes just means that you didn’t have a plan to begin with.

Shock value is not the aim of all this criticism of conventional wisdom. HIs critiques support a winning thesis. And that thesis is fundamentalist. To do well, you must have a truly original idea as well as the energy and drive to implement it. These ideas should be implemented in more places than Silicon Valley and in industries other than IT. If more people did that the US would be a better place, because optimistic visions would become realities once again. “How can the future get better if no one plans for it?”

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