May 20, 2015
We wanted flying cars, instead we got 140 characters.
According to Peter Thiel, an amazing future lies ahead. All we have to do is build it. Unfortunately, cultural shifts have steered us away from audacious, grandiose, and truly innovative projects. We need to stop focusing on making slight improvements to existing technology (going from 1 to 1+n) and start making new things (going from 0 to 1). In short, we need more of the hubris that America has had in past decades.
Zero to One: Notes on Startups, or How to Build the Future is an excellent book by the self proclaimed contrarian and billionaire Peter Thiel. It’s about building startups and thinking big. Zero to One will inspire you and make you think. It’s one of the few business books that can’t be re-written in five pages.
Zero to One starts off with a big question:
What important truth do very few people agree on?
This is a tough question to answer well. Most people come up with something widely believed, like the healthcare system is broken, or an opinion, like how chocolate ice cream is better than vanilla. The key is to find something that is both true and unpopular.
For example, think about the housing crisis. Right before the crisis, the important truth was “the housing bubble is about to pop”. Most people thought the good times were going to last, but some people saw the impending crunch. They used that knowledge to make a lot of money, while the rest of the country lost their shirts.
Finding these contrarian truths gives you an insight into the future. An insight that can you can use to build a business or make an investment. Think of how many truths we take for granted today that were science fiction a few decades ago.
These things were once considered impossible, but now are obvious.
Here’s a few contrarian truths that I think about on a regular basis:
So when looking for business opportunities, you should ask yourself: What valuable business is nobody building?
a startup is the largest group of people you can convince of a plan to build a different future.
- Peter Thiel
Since the .com bubble popped, the startup community has moved towards the Lean Startup model.
The Lean Startup model goes as follows:
The beauty of this approach is that it’s a scientific way to build a business. No one knows exactly what’s going to work, so you run as many tests as you can to get to a market.
Thiel doesn’t agree with this method. He advocates something a little different. His philosophy is that startups should make big plans and carve out their own monopoly. They can do this in one of two ways.
In my experience, I have noticed that most big companies fall into the category of 10x improvements. Even companies that are credited with creating new markets, like Apple, are usually just improving existing technology. MP3 players, smartphones, tablets, and smart watches all existed before Apple took them to the next level. When I think of companies that made something new, I think about Pirates of Silicon Valley
He also mentions that head to head competition always results in a drop in profits. Look at any commodity market and you will notice that profit margins are razor thin. To avoid this, you need to stay so far ahead of the competition that you can charge enough to make a healthy profit. This profit can then be used to build moonshots or attract the best employees by giving them a world class working environment. Google is a great example of this. Thier monopoly status allows them to treat their employees like royalty while trying to tackle large problems.
To build a monopoly, Thiel advocates starting small and dominating a niche market. Be the big fish in the small pond. I think the bootstrapping community has this down on the small scale. They advocate niching down your product so that it serves your target audience perfectly. The primary difference with Zero to One is that once you master that small scale niche, you then expand your reach. Facebook is a great example of this. It started off with just one college and spread like a zombie plague from school to school. I remember the day when Facebook arrived at my school. Nearly everyone on campus was signed up within a week. It was insane.
Honestly, I think Thiel overstates his contrarian-ness here. While his criticisms of the lean model are legitimate, his alternative is very similar. Start small and blow up. I like how he focuses on sales, which is a dirty word to most developers. The importance of selling is often understated in the Valley. Even the best product will fail is no one’s heard of it.
Shallow men believe in luck, believe in circumstances… Strong men believe in cause and effect - Ralph Waldo Emerson
Indefinite attitudes about the future explain what’s most dysfunctional in our world today. Process trumps substance
- Peter Thiel
One of the major themes of Zero to One is the importance of making plans. One of the biggest problems with our society right now is this indefinite attitude towards the future. America used to be a country of big ideas. Even normal people felt they could come up with something big and pitch it to the public. Today, people who think big are often attacked. Ambitious initiatives, like seasteading and life extension, are regularly attacked by lovers of the status quo. If people like Tim Ferriss or Peter Thiel are indicative, having detractors is evidence that you are doing something right. People who change the world are going to make some enemies.
The most contrarian thing of all is not to oppose the crowd but to think for yourself. - Peter Thiel
The best part of Zero to One is that it will make you think. Unlike many business books, which can be summarized in a page or two, Zero to One is packed full of interesting and useful information. It’s one of my favorite business books and I think that it’s a good book for developers who want to build something great.