Zero To One – A Book Review
Start-ups. The word triggers different images for different people, but what often comes to mind, is the idea of dreamers who dare to make something new. They choose risk over comfort and often give up a cushy well-paying job to sow their dreams, build it, and make it grow. Peter Thiel, the founder of Paypal, Palantir, and other successful companies, dives into what makes a start-up thrive in his book Zero to One.
You can watch a quick video review of it below.
Continue reading for the complete version.
I decided that I had to read and review this book because almost every company has its roots as a start-up, and it would be interesting to understand the nuances and characteristics of the start-up culture. I also wanted to know what makes or breaks a start-up. After all, though several people attempt to start their own company, only some succeed. Zero To One provided a fascinating insight into the factors which govern the life and growth of a start-up.
Firstly, let’s talk about what the term Zero to One means. The book talks about vertical and horizontal growth. Vertical growth is the difficult task of doing what hasn’t been done before. The process of going from zero to one. Horizontal growth, on the other hand, refers to building upon an already existing foundation, which is, going from 1 to n. The authors believe that both the future and start-up culture depend predominantly on vertical growth.
Here are the 4 principles which Thiel believes are essential for any entrepreneur:
- Risk boldness rather than being trivial
- A bad plan beats having no plan at all
- Competitive markets destroy profits
- Sales are just as important as having a solid product
These may run contrary to conventional lessons, especially those derived from the dot-com bubble crashing. He goes on to substantiate his reasoning for the above in the rest of the book, and his arguments are rather persuasive. He also talks about how to succeed as a startup, and the key to this, according to him, is to aim for a monopoly. To establish one, you need to solve a unique problem and/or find the right audience to sell your product to.
It helps if you’re the first in the market, but you can also try to be the last mover as long as you ensure that your offering is the best.
The first person to dominate the most important section of a market will be the last mover.
Finally, you need to avoid hostile competition, as it is a waste of resources.
Thiel makes another interesting point about looking for secrets. This means you need to find something which no one else has put thought into, which is hard to do, but not impossible. For instance, in 1990, Hewlett-Packard (HP) was worth 9 billion dollars. In the next decade, they expanded their products massively and innovated relentlessly. The result was that by the mid-2000s, the company was worth 135 billion dollars.
However, they stopped making new things and looking for secrets around then, and at the end of 2012, the company’s value dropped and they were worth only 23 billion dollars, which isn’t much more than it was worth in 1990 if you adjust for inflation.
The moral is, you can’t stagnate if you want to maintain your dominance.
You should also ensure that your startup’s foundation is impeccable. Decisions that you make early on can be very difficult to rectify later. One of these essential decisions is selecting who you start your company with. You need to make sure that you work well with your co-founder(s), and have a healthy history. A bonus would be having complementary skill sets.
The next thing to focus on is ensuring that everyone in your company works well together. The distribution of equity is also something that makes a start-up unique, and careful consideration should be given to who gets how much. Keeping these values a secret can keep disharmony away.
Lastly, as a CEO, don’t pay yourself too much. If paid too much, the focus might shift towards keeping the status quo rather than increasing the value of the company as a whole.
Sales, marketing, and distribution are just as important as innovation, and many startups fail to realize that. They focus heavily on the aforementioned or the tech, not both. When it comes to distribution, it’s better to succeed in one channel rather than try in multiple sectors and fail in all of them.
The author also looks at technology and the paranoid perception that it will replace a human workforce. He simply points out that they both have different strengths – humans can make decisions in complex situations that computers cannot handle, while computers can process massive amounts of data which a human would struggle under.
In a nutshell, the two work best when used together. For instance, while looking for credit card fraudsters, it was found that a computer lacked the accuracy to exactly identify a fraudster but humans couldn’t scan millions of transactions either. By using software to scan massive amounts of data and have humans analyze the suspicious transactions, they were able to crack down massively on the fraud.
The last part of the book deals with the seven questions you need to ask yourself before starting your business. They will make sure you have something viable on hand. These are:
- Engineering: Have you created breakthrough tech as opposed to mere improvements to existing tech? Breakthrough ideally means made better by a magnitude of ten times
- Timing: Is this the right time to start your business?
- Monopoly: Do you have a big share of a small market?
- People: Is your team good?
- Distribution: Can you deliver your products as opposed to merely creating them?
- Durability: Will you be valuable in the market 10 or 20 years in the future?
- Secrets: Have you found a unique opportunity unnoticed by others?
To conclude, Thiel talks about the future. For the best possible outcome where technology will take off and carry humanity into a better tomorrow, the author says everyone needs to work for it. The first step is thinking for yourself. Then you can find things which will make the future better, and take it from zero to one.
Here are my key takeaways from this book:
- As a startup, prioritize vertical growth over horizontal growth.
- Aim to be a monopoly and the last mover in a market. Avoid hostile competition.
- Keep looking for secrets and innovating, rather than just improving existing tech.
- Pick the right co-founders and the right team.
- Focus on sales, distribution, and marketing along with the tech.
- Ensure you succeed in one channel of distribution rather than try for many and fail.
- Use tech and human resources in tandem.
- Ask yourself the 7 questions to make sure your startup is viable.
This book was definitely worth the read for me! Have you read Zero To One?
Let me know what you thought about this book in the comments below, as well as what it might have taught you.
