Zero to One Book Summary
Zero to One Book Summary
In this article, you can read Zero to One book summary. The book is
written by Peter Thiel. This powerful book is a step to step guide to start a
business or technology startup. The principles illustrated in this book are
powerful and they will help you for startup.
The author of the book is not a common
person. Peter Thiel is a successful and experienced entrepreneur.
It means this book will guide you in a
proper direction. By reading this summary you can learn from the experience of
a successful person.
The core concept of the book is how to
create something new. Creating something new means when there is nothing
exists.
Peter Thiel,
the co-founder of PayPal and the owner of venture capital firm Founders Fund
says, the only path to human progress is creating new things and this is a
great way to profit economically.
This book provides a solid advice to
entrepreneurs and makes them truly unique thinkers.
Book Summary
The author advocated the principles and
advice which are essential for startups. Here, I summarised:
Chapter 1: The Challenge of Future
The author gives two concepts of
progress; one is horizontal and the second is vertical.
According to author, horizontal progress
means going from zero to n. Horizontal progress also means globalisation
In this mode of progress we don’t create
new things, but copying and modifying the things that work.
On the other hand, there is vertical
progress and it means going from zero to one. This progress refers to technology.
Here, the technology doesn’t mean computer,
but doing things in a new and better way is technology.
Vertical mode of progress refers to
create something new which doesn’t exist.
Therefore, vertical progress is hard to
envision because it requires something that is never done by anyone.
The author gives the example, taking one
typewriter and then building 100 is a horizontal progress. But, if you take one
typewriter and then create word processor, is vertical progress.
Chapter 2: Party Like Its 1999
It is quite easy to fall to delusional
beliefs. Since the 1929 crash, the internet craze in ‘90s was considered the
biggest bubble. Good and bad things happened in that period.
That bubble created some lessons which
defined and distorted the thinking about the technology of today.
The dot com mania was lasted only for 18
months from September 1998 to March 2000, but it was intense.
In this period of time the investors
were ready to invest in any startup. Many of them left their jobs, because they
were creating their companies to become rich.
A lot of money was wasted, but the
people believed on dot com economy. They were strongly convinced and they were
ignoring warning signs.
But, dot com crashed stopped that
process. It affected the Silicon Valley. It created some beliefs. They include:
-Incremental
Advances; the safe path forward is small
incremental steps.
-Staying Lean
and Flexible; a startup
should stay flexible and lean.
-Improving
Competition; small startup
should focus on existing customers rather than creating new markets at early
stages.
-Focusing on
Products rather than Sales; the startups
should focus on products not sales. Products are more important than sales.
The author suggests some principles
which are probably more correct;
1. Risk is better than triviality
2. No plan is worse than a bad plan
3. Competition destroys profits
4. Sales is important as much as product
These are the two sets of learning; neither
is right nor is wrong. The author suggests the readers to think for themselves.
Chapter 3: All Happy Companies Are Different
Competition is a factor that determines how
much a company will earn. The competition varies from company to company and
industry to industry.
The author advocates two important
concepts one is monopoly and second is perfect competition.
Monopoly means when there is no
competition. By using tactics some companies become monopolies against
potential competitors.
Some companies become monopolies when
they get license or permission from state.
But,
according to Peter Thiel, there are some other companies that get monopolies
because they offer something different and unique. And they are the real
monopolies.
When they create something new and
unique they leave the other companies behind.
On the other hand, in perfect
competition supply and demand determine the prices of products.
All the companies offer the similar
products. For companies it is not possible to make high income in these
circumstances.
So, monopolies are not bad if they focus
on innovation and value creation. It can give more choices.
Chapter 4: The Ideology of Competition
The author argues that, creative
monopoly creates benefit for everybody and profit for creator.
On the other hand, competition creates
no profit, and it is just survival for businesses.
The Marx and Shakespeare concepts are
two different ways to look at competition.
According to Marx, people are different
from each other because of life’s circumstances therefore they have conflict.
According to Shakespeare’s view, people
don’t have any reason to fight but they do it because they are mostly the same.
When businesses get competitive with
rivals they lose the view of important goals.
Competition is a war. It limits the
vision and increases hostility. Copying each other decreases the creative
potential.
One way to resolve the problem of
competition is to merge with rival that can help to save resources.
Chapter 5: Last Mover Advantage
In this chapter the author advocates the
last mover advantage. But, on the
other hand there is first mover advantage.
First mover advantage means entering
first in the market and capturing a big share while competitors just to start.
It is not a goal, but a tactic.
The important thing is to generate money
in future. Being first mover is not something good because anyone can replace you.
Being last mover is better because you
make last development in market and you enjoy benefits and profits for years or
decades.
In order to get monopoly you must escape
competition. There are some characteristics to establish monopoly:
1. Proprietary Technology
Proprietary technology is a must thing
for monopoly because it makes your products difficult for your competitors to
replicate.
2. Network Effects
Network effects are also important for a
monopolistic advantage. It makes a product useful. If your product is good the
network effects will be powerful.
3. Economies of Scale
A startup must have the potential for
economies of scale. As the business gets better it becomes bigger than before.
Through economies of scale the fixed
cost of creating products can be spread out over large quantities of sales.
4. Branding
A powerful brand can help to claim
monopoly. The author illustrated the example of Apple, which is a strong brand
in today’s world.
It has products like iPhone, Mac Book
and control over customer experience.
Building Monopoly
The characteristics mentioned above are
not enough. There are other factors you will have to work upon to claim
monopoly.
1. Start
Small and
According to the author every startup
has to start with a very small market which calls niche.
The reason is that to dominate a small
market is easy than the large one. Start with small market and then dominate.
2. Scale Up
Scale up means expanding your activities.
Once you dominate a small or niche market then the next stage is to expand and
dominate a bigger market.
3. Don’t Disrupt
The startup should avoid disruption as
much as possible. Disruption means overtaking the incumbent companies by
introducing low-end products at low prices.
6. You Are Not a Lottery Ticket
Success is the result of luck or it
comes from hard work, this discussion always goes on.
Many successful and good thinkers
believe the success comes from hard work.
There are a lot of examples of
successful people, they did not win the lottery but they became extraordinary.
You can be positive or optimist or you
can be negative or pessimist. An optimist welcomes the future, and a pessimist
fears it.
There are four important situations:
1. Indefinite
Pessimism; A pessimist
looks the future as miserable and no idea what to do about it.
2. Definite
Pessimism; Definite pessimists, they believe
the future can be known, but it will be unwelcoming so they must prepare for
it.
3. Definite
Optimism; Definite optimism means future is
predictable, and it will be better.
4. Indefinite
Optimism; Indefinite optimism refers future
is not predictable, but it will be better.
You can be successful if you work hard
and smart. Luck can make you successful, but hard and smart work will
definitely lead you to success.
The author advocates the definite optimism. This is the factor to
build great companies or businesses.
7. Follow the Money
In this chapter the author described the
80-20 rule or it calls The Pareto Principle, or also known as Power Law.
It means your 20 percent work produces
80 percent results. In, business 80 percent sales come from 20 percent clients.
If you want to maximise efficiency you
must focus on 20 percent opportunities, which can return 80 percent of gains.
It plays an important role for a startup
and venture capitalists to get exponential growth.
This power law is the backbone of
venture capital. The aim of the venture capital is to make profit at the early
stage. It is high risk investment.
Many companies fail at the early stages.
But, some companies get success because they become the part of companies which
are 20 percent and they make 80 percent earnings.
As a startup in venture capital becomes
the part of company which is growing with fast pace. By this way you can
minimise the risk of failure and loss.
8. Secrets
This
chapter is about secrets. The secrets refer in the sense of discoveries, and
which are important for a business.
When we
say secrets that means the ingredients which makes a big business.
Secrets
are of two kinds: secrets of nature and secrets about human. The secrets about
nature exist around us.
In
order to find the secrets of nature an individual must study the physical world
particularly the aspects which are undiscovered.
Secrets
about people, they are different. They include the things people don’t know or
they hide because they don’t want other people to know.
A
secret that is hidden from outside, is the key to build a great business. A
conspiracy by a great company to change the world, when it shares a secret it
turns the recipient into fellow conspirator.
Revealing
your secret to everyone is not a good idea.
9. Foundations
According
to author, to start business foundations are much important. The decisions made
at early stages can be hard to change.
The
mistakes that made at start can prove the startup wrong. Beginnings are the
times when the rules are about to form and ground works take place.
The
beginning of a startup decides what will happen next and how it will work.
Individual
should be very careful about choosing the co-founder of the business.
The author
says, choosing a co-founder is like a marriage partner. You must be careful
whom you are choosing as a business partner.
For a
startup there are three important things that must be defined and clear,
otherwise it can create conflicts:
1.
Ownership; legal owner of the company’s equity
2.
Possession; Who runs the affair of company on
day-to-day basis?
3.
Control; Who runs the overall affairs of
company?
A
startup must allocate ownership, possession, and control to avoid conflicts.
10. The Mechanics of Mafia
For a
startup you must build a team and keep it tight. The culture of the company
should be ideal for work.
The
workplace should not only be ideal, but people love to work there. The fancy
perks at work don’t make a culture. In reality, the company is culture.
The
author built a team for PayPal, and all the members of that team started
successful businesses.
Tesla, LinkedIn,
and YouTube are the creations of those members. They are also known as PayPal
mafia.
Author
says, a startup should not outsource people. The people in team must be
like-minded.
11. If You Build It, Will They Come?
Sales
are important for business. Most people underestimate the value of sales.
Distribution of those products is crucial.
Creation
of products is not enough. But, you will to deliver or distribute that to the
customer.
Many
technical people don’t understand the value and importance of sales and
distribution of products.
Advertisement
and marketing are important to connect with your customers. It creates value
for company.
Advertisement
works in real way. It is not useless. It doesn’t make customers to buy
products, but helps to increase sales in future.
It
helps to put ideas in the mind of consumers. Sales people work is not easy.
They play an important role for increasing sales.
Salespersons
like actors. An excellent distribution and sales team can build a monopoly.
A
strong distribution plan needs for success. For a startup marketing and
advertisement is important, but you don’t have to compete with big companies.
As a
startup you must develop public relation strategy. It will help you how to
deliver your story to customers.
At the
end, just creating a product is not enough; you must have strategy as a startup
for distribution of it.
12. Man and Machine
The
information technology advancement and growth is very rapid. Technology changed
everything.
It has
a huge impact on human life. Now, we have access to a lot of information so
easily.
As a
human being we are expecting the computers to perform more in future.
The
question of replacing human workers by computers is wrong. Computers in future
will not necessarily replace human workers.
They
are complements for humans, but not substitute. In order to establish a
business in future, the entrepreneurs must value and empower the people and not
to make them obsolete.
According
to the author, technology is a way to avoid competition in the globalising
world.
The
author believes that, machines can help humans rather than replace them.
13. Seeing Green
In
early millennium, a lot of much money was invested in ‘clean-tech, but that couldn’t
deliver the results.
The
clean-tech was failed and many companies ended up and went out of business.
The
reason of the failure was that these companies neglected the elements of
success. And also they ignored some basic questions related to;
-breakthrough
technology
-timing
of starting a business
-starting
with big share in small market
-right
team for business
-system
of distribution
-durability
and positioning in market
-hidden
business secret identification
The
clean-tech companies failed because they made several mistakes. If you want a
great business you must answer these questions.
14. The Founder’s Paradox
The
founders of PayPal were unusual. The personal traits of the founders of a
startup are important.
Normally,
startups are not normal people. They have extreme qualities or traits.
The
extreme traits attract extreme traits. The people with these qualities attract
each other.
A
company which is to be led by distinctive founders rather than interchangeable
managers can be powerful but it can be dangerous as well.
According
to the author, the founders are more important, everyone’s work has value. But,
a great founder must have the ability to bring out the best from everyone in
the company.
The
author says, to create great business we need unusual people to lead businesses
beyond mere incrementalism.
The
founders might be at the same time rich and poor, genius and idiot or hero and
villain. And this is the founder’s paradox.
Conclusion
The
core concept of the book is, to go from zero to one, rather from zero to n.
Zero to
one means creating something new and on the other hand, zero to n means only
changing and modifying the existing things.
According
to author we need technology startup to go from zero to one. It is the need of
the time to create new things for a better and different future.
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