Thiel argues capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away.  Because creating value is not enough, you also need to capture some of the value you create.The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

Capitalism and competition are opposites

The best startups might be considered slightly less extreme kinds of cults. The biggest difference is that cults tend to be fanatically wrong about something important. People at a successful startup are fanatically right about something those outside it have missed.

A startup or a cult?

The quote with which Tolstoy opens Anna Karenina might describe people, but for businesses it's the opposite: All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

“All happy families are alike; each unhappy family is unhappy in its own way.”

Every monopoly is unique, but they usually share some combination of: <ol><li>Proprietary technology: a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.</li><li>Network effects: keep in mind that you’ll never reap network effects unless your product is valuable to its very first users when the network is necessarily small.</li><li>Economies of scale: A good startup should have the potential for great scale built into its first design.</li><li>Branding</li></ol>

Characteristics of successful  monopolies

The book draws on Thiel's experience as a co-founder of PayPal and Palantir, investor in hundreds of startups, including Facebook and SpaceX. Thiel cautions the book offers no formula for success. Such a formula cannot exist as every innovation is new and unique. The most powerful pattern he has noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.

Zero to One is about how to build companies that create new things

"The most contrarian thing of all is not to oppose the crowd but to think for yourself.". Is the advice given throughout the book. Thiel encourages to think different, but most of all to think for yourself.

Think for yourself

PayPal was in 2001 the only email-based payments company in the world. It employed fewer people than the restaurants on Castro Street (Mountain View, CA), where the Paypal team used to go for lunch. The business was much more valuable than all of those restaurants combined. Starting a new restaurant is a really hard way to make money. If you lose sight of competitive reality and focus on trivial differentiating factors, maybe you think your naan is superior because of your great-grandmother’s recipe, your business is unlikely to survive.

New and unique versus more of the same

Why would someone join your company as its 20th engineer when she could go work at Google for more money and more prestige? You’ll attract the employees you need if you can explain why your mission is compelling: not why it’s important in general, but why you’re doing something important that no one else is going to get done. Just cover the basics like health insurance and then promise what no others can: the opportunity to do irreplaceable work on a unique problem alongside great people.

Recruit the right people

The single greatest danger for a founder is to become so certain of his own myth that he loses his mind. But an equally insidious danger for every business is to lose all sense of myth and mistake disenchantment for wisdom.

Myths are important and dangerous

The stark differences between man and machine mean that gains from working with computers are much higher than gains from trade with other people. We don’t trade with computers any more than we trade with livestock or lamps.

Technology Means Complementarity

Our task today is to find singular ways to create the new things that will make the future not just different, but better - to go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future.

Our task: go from 0 to 1

The value of a business today is the sum of all the money it will make in the future.

<ol><li>The Engineering Question: can you create breakthrough technology instead of incremental improvements? </li><li>The Timing Question: is now the right time to start your particular business? </li><li>The Monopoly Question: are you starting with a big share of a small market? </li><li>The People Question: do you have the right team? </li><li>The Distribution Question: do you have a way to not just create but deliver your product? </li><li>The Durability Question: will your market position be defensible 10 and 20 years into the future? </li><li>The Secret Question: have you identified a unique opportunity that others don’t see?</li></ol>

Seven questions that every business must answer

Progress can take one of two forms:<ul><li>Going from 1 to n: horizontal or extensive progress means copying things that work -. Horizontal progress is easy to imagine because we already know what it looks like. </li><li>Going from 0 to 1: Vertical or intensive progress means doing new things. Vertical progress is harder to imagine because it requires doing something nobody else has ever done. </li></ul>Example: 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..

Zero to One explained

Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

Start with a small market and dominate

A startup messed up at its foundation cannot be fixed.

Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.

How to Start a Business: A Startup Guide for Entrepreneurs

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Leadership & Management

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The Startup Masterclass

WHAT VALUABLE COMPANY IS NOBODY BUILDING? The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. If you are copying these guys, you aren’t learning from them. It’s easier to copy a model than to make something new: doing what we already know how to do takes the world from 1 to n, adding more of something familiar. Every new creation goes from 0 to 1. This book is about how to get there. ‘Peter Thiel has built multiple breakthrough companies, and Zero to One shows how.’ ELON MUSK, CEO of SpaceX and Tesla ‘This book delivers completely new and refreshing ideas on how to create value in the world.’ MARK ZUCKERBERG, CEO of Facebook ‘When a risk taker writes a book, read it. In the case of Peter Thiel, read it twice. Or, to be safe, three times. This is a classic.’ NASSIM NICHOLAS TALEB, author of The Black Swan

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WHAT VALUABLE COMPANY IS NOBODY BUILDING? The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. If you are copying these guys, you aren’t learning from them. It’s easier to copy a model than to make something new: doing what we already know how to do takes the world from 1 to n, adding more of something familiar. Every new creation goes from 0 to 1. This book is about how to get there. ‘Peter Thiel has built multiple breakthrough companies, and Zero to One shows how.’ ELON MUSK, CEO of SpaceX and Tesla ‘This book delivers completely new and refreshing ideas on how to create value in the world.’ MARK ZUCKERBERG, CEO of Facebook ‘When a risk taker writes a book, read it. In the case of Peter Thiel, read it twice. Or, to be safe, three times. This is a classic.’ NASSIM NICHOLAS TALEB, author of The Black Swan

Peter Thiel is an accomplished writer whose work has resonated with readers around the world. Peter Thiel has published several books that explore a range of topics, from fiction to nonfiction, and has received critical acclaim for the ability to weave compelling narratives. Peter Thiel's writing style is known for its depth and authenticity, and has earned quite a loyal following of readers.

Peter Thiel

Blake Masters is an accomplished writer whose work has resonated with readers around the world. Blake Masters has published several books that explore a range of topics, from fiction to nonfiction, and has received critical acclaim for the ability to weave compelling narratives. Blake Masters's writing style is known for its depth and authenticity, and has earned quite a loyal following of readers.

“THIEL’S LAW”

Similar ideas to “Thiel’s law”

Adaptation

Managing your mindset

Start with a small market and dominate