Zero To One

“[…] the future won't happen on its own. We cannot take for granted that the future will be better, and that means we need to work to create it today. 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.” - Peter Thiel, Zero To One

INTRODUCTION

Peter Thiel wrote Zero To One in 2014, and I recall immediately getting a copy and reading it.

While some of the nuance and perspective that is so expertly condensed into this short read was long on me at the time, the core messages did resonate with me and little did I know, started to shape my perspective.

In particular, Peter’s message around innovation (going from Zero To One) and the future (the need for design and conviction) stuck with me.

Re-reading it almost a decade later, I find previously missed nuggets and insights.

Zero To One is a clear articulation around the core message of effectively building a category defining company (creative monopoly) - and specifically doing so by answering 7 core questions; which the entire book leads the reader up to understanding, so by the time you get there, you understand the stage Peter has set.

FUTURENATIVE - THINK BETTER. BUILD BETTER.

I very occasionally send out an email recapping some thoughts, learnings and ideas typically centred around a thesis & approach I call being “FUTURENATIVE”.

In short, the thesis states: FUTURENATIVE individuals and organization find a unique way to leverage apparent tensions and blend both discovery & execution work, in order to unlock massive impact.

You can sign up here to learn more:

KEY TAKEAWAYS

• Great companies can be built on open but unsuspected secrets about how the world works.

• 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. But every time we create something new, we go from 0 to 1.

• Unless they invest in the difficult task of creating new things, American companies will fail in the future no matter how big their profits remain today.

• Today's "best practices" lead to dead ends; the best paths are new and untried.

• humans are distinguished from other species by our ability to work miracles. We call these miracles technology. Technology is miraculous because it allows us to do more with less, ratcheting up our fundamental capabilities to a higher level. by creating new technologies, we rewrite the plan of the world. These are the kind of elementary truths we teach to second graders, but they are easy to forget in a world where so much of what we do is repeat what has been done before.

• The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innovative.

• Indeed, the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.

• What important truth do very few people agree with you on?" Actually, it's very hard to answer. It's intellectually difficult because the knowledge that everyone is taught in school is by definition agreed upon. And it's psychologically difficult because anyone trying to answer must say something she knows to be unpopular.

• In the most minimal sense, the future is simply the set of all moments yet to come. But what makes the future distinctive and important isn't that it hasn't happened yet, but rather that it will be a time when the world looks different from today.

• Horizontal or extensive progress means copying things that work= going from 1 to n. Horizontal progress is easy to imagine because we already know what it looks like. Vertical or intensive progress means doing new things going from 0 to 1. Vertical progress 15 harder to imagine because it requires doing something nobody else has ever done.

• Properly understood, any new and better way of doing things is technology.

• New technology tends to come from new ventures - startups. in business, small groups of people bound together by a sense of mission have changed the world for the better.

• Positively defined, a startup is the largest group of people you can convince of a plan to build a different future. A new company's most important strength is new thinking: even more important than nimbleness, small size affords space to think.

• what follows is not a manual or a record of knowledge but an exercise in thinking. Because that is what a startup has to do: question received ideas and rethink business from scratch.

• The first step to thinking clearly is to question what we think we know about the past.

• The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today:
1. Make incremental advances Small, incremental steps are the only safe path forward.
2. Stay lean and flexible All companies must be "lean," which is code for unplanned." You should not know what your business will do; planning is arrogant and inflexible.
3. Improve on the competition
4. Focus on product, not sales
• Instead ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes? The most contrarian thing of all is not to oppose the crowd but to think for yourself.

• by "monopoly," we mean the kind of company that's so good at what it does that no other firm can offer a close substitute. Google is a good example of a company that went from 0 to 1: it hasn't competed in search since the early 2000s.

• If you lose sight of competitive reality and focus on trivial differentiating factors your business is unlikely to survive.

• In business, money is either an important thing or it is everything. Monopolists can afford to think about things other than making money; non-monopolists can't. In perfect competition, a business is so focused on today's margins that it can't possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.

• monopolies deserve their bad reputation-but only in a world where nothing changes. But the world we live in is dynamic: it's possible to invent new and better things. Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren't just good for the rest of society; they're powerful engines for making it better.

• But the history of progress is a history of better monopoly businesses replacing incumbents.

• In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.

• All failed companies are the same: they failed to escape competition.

• CREATIVE MONOPOLY means new products that benefit everybody and sustainable profits for the creator. Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival. So why do people believe that competition is healthy? […] the more we compete, the less we gain.

• Competition can make people hallucinate opportunities where none exist.

• ESCAPING COMPETITION will give you a monopoly, but even monopoly is only a great business if it can endure in the future.

• But a great business is defined by its ability to generate cash flows in the future. […] the value of a business today is the sum of all the money it will make in the future.

• If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now?

• What does a company with large cash flows far into the future look like? Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.

• Brand, scale, network effects, and technology in some combination define a monopoly; but to get them to work, you need to choose your market carefully and expand deliberately. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple: it's easier to dominate a small market than a large one.

• Sequencing markets correctly is underrated, and it takes discipline to expand gradually. The most successful companies make the core progression to first dominate a specific niche and then scale to adjacent markets a part of their founding narrative.

• if your company can be summed up by its opposition to already existing firms, it can't be completely new and it's probably not going to become a monopoly.

• But since we expanded the market for payments overall, we gave Visa far more business than we took. The overall dynamic was net positive, unlike Napster's negative-sum struggle with the U.S. recording industry. As you craft a plan to expand to adjacent markets, don't disrupt: avoid competition as much as possible.

"you must study the endgame before everything else." - Grandmaster José Raúl Capablanca

"Shallow men believe in luck, believe in circumstances. . . . Strong men believe in cause and effect." - Ralph Waldo Emerson

"Victory awaits him who has everything in order - luck, people call it." - Roald Amundsen

• Far more important are questions about the future: is it a matter of chance or design?

• If you treat the future as something definite, it makes sense to understand it in advance and to work to shape it. But if you expect an indefinite future ruled by randomness, you'll give up on trying to master it.

• A definite view, by contrast, favors firm convictions. Instead of pursuing many-sided mediocrity and calling it "wellroundedness.' a definite person determines the one best thing to do and then does it. Instead of working tirelessly to make herself indistinguishable, she strives to be great at something substantive to be a monopoly of one.

• Optimists welcome the future; pessimists fear it.

• To an indefinite optimist, the future will be better, but he doesn't know how exactly, so he won't make any specific plans. He expects to profit from the future but sees no reason to design it concretely. […] Instead of working for years to build a new product, indefinite optimists rearrange already-invented ones.

• But in an indefinite world, people actually prefer unlimited optionality; money is more valuable than anything you could possibly do with it. Only in a definite future is money a means to an end, not the end itself.

• But indefinite optimism seems inherently unsustainable: how can the future get better if no one plans for it?

• progress without planning is what we call "evolution."

• Would-be entrepreneurs are told that nothing can be known in advance: we're supposed to listen to what customers say they want, make nothing more than a "minimum viable product," and iterate our way to success. But leanness is a methodology, not a goal. Making small changes to things that already exist might lead you to local maximum, but it won't help you find the global maximum.

• A company is the strangest place of all for an indefinite optimist: why should you expect your own business to succeed without a plan to make it happen? […] in startups, intelligent design works best.
• The greatest thing Jobs designed was his business. Apple imagined and executed definite multi-year plans to create new products and distribute them effectively. Forget "minimum viable products"-ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others’ successes. Long-term planning is often undervalued by our indefinite short-term world. Jobs planned the iPod to be the first of a new generation of portable post-PC devices, but that secret was invisible to most people

• When a big company makes an offer to acquire a successful startup, it almost always offers too much or too little: founders only sell when they have no more concrete visions for the company, in which case the acquirer probably overpaid; definite founders with robust plans don't sell, which means the offer wasn't high enough.

• A business with a good definite plan will always be underrated in world where people see the future as random.

• A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket.

• The power law is not just important to investors, rather, it's important to everybody because everybody is an investor. An entrepreneur makes a major investment just by spending her time working on a startup. Therefore every entrepreneur must think about whether her company is going to succeed and become valuable.

• The more you dabble, the more you are supposed to have hedged against the uncertainty of the future. But life is not a portfolio: not for a startup founder, and not for any individual.

• You should focus relentlessly on something you're good at doing, but before that you must think hard about whether it will be valuable in the future.

• However, you can't trust a world that denies the power law to accurately frame your decisions for you, so what's most important is rarely obvious. It might even be secret.

• Every one of today’s most famous and familiar ideas was once unknown and unsuspected.

• You can achieve difficult things, but you can't achieve the impossible. Recall the business version of our contrarian question: what valuable company is nobody building? Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable.

• Along with the natural fact that physical frontiers have receded, four social trends have conspired to root out belief in secrets.
• First is incrementalism.
• Second is risk aversion. People are scared of secrets because they are scared of being wrong. By definition, a secret hasn't been vetted by the mainstream. If your goal is to never make mistake in your life, you shouldn't look for secrets.
• Third is complacency. Social elites have the most freedom and ability to explore new thinking, but they seem to believe in secrets the least.
• Fourth is "flatness” - As globalization advances, people perceive the world as one homogeneous, highly competitive marketplace: the world is "flat."

• You can't find secrets without looking for them.

• Great companies can be built on open but unsuspected secrets about how the world works.

• There are two kinds of secrets: secrets of nature and secrets about people. Natural secrets exist all around us; to find them, one must study some undiscovered aspect of the physical world. Secrets about people are different: they are things that people don't know about themselves or things they hide because they don't want others to know. What secrets is nature not telling you? What secrets are people not telling you?

• Secrets about people are relatively under appreciated. Maybe that's because you don't need a dozen years of higher education to ask the questions that uncover them

• The best place to look for secrets is where no one else is looking. Most people think only in terms of what they've been taught.

• In practice, there's always a golden mean between telling nobody and telling everybody--and that's a company. The best entrepreneurs know this: every great business is built around a secret that's hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.

• "Thiel's law": a startup messed up at its foundation cannot be fixed. […] As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.

• This leads to a second, less obvious understanding of the founding: it lasts as long as a company is creating new things, and ends when creation stops.

• Since time is your most valuable asset, it's odd to spend it working with people who don't envision any long-term future together.

• 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.

• What nerds miss is that it takes hard work to make sales look easy. […] Like acting, sales works best when hidden.

• The engineer's grail is a product great enough that "it sells itself." But anyone who would actually say this about a real product must be lying: either he's delusional (lying to himself) or he's selling something (and thereby contradicting himself).

• It's better to think of distribution as something essential to the design of your product. If you've invented something new but you haven't invented an effective way to sell it, you have a bad business no matter how good the product.

• Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true!

• At Paypal we didn't want to acquire more users at random; we wanted to get the most valuable users first. The most obvious market segment in email-based payments was the millions of emigrants still using Western Union to wire money to their families back home. Our product made that effortless, but the transactions were too infrequent. We needed a smaller niche market segment with a higher velocity of money segment we found in eBay ‘PowerSellers,' the professional vendors who sold goods online through eBay's auction marketplace. There were 20,000 of them. Most had multiple auctions ending each day, and they bought almost as much as they sold, which meant a constant stream of payments.

• If you can get just one distribution channel to work, you have a great business. If you try for several but don't nail one, you're finished.

• Your company needs to sell more than its product. You must also sell your company to employees and investors.

• Everybody has product to sell no matter whether you're an employee, a founder, or an investor. It's true even if your company consists of just you and your computer. Look around. If you don't see any salespeople, you're the salesperson.

• […] computers are complements for humans, not substitutes. The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.

• the seven questions that every business must answer:
1. The Engineering Question Can you create breakthrough technology instead of incremental improvements?
2. The Timing Question Is now the right time to start your particular business?
3. The Monopoly Question Are you starting with a big share of a small market?
4. The People Question Do you have the right team?
5. The Distribution Question Do you have a way to not just create but deliver your product?
6. The Durability Question Will your market position be defensible 10 and 20 years into the future?
7. The Secret Question Have you identified a unique opportunity that others don't see?

If you don't have good answers to these questions, you'll run into lots of "bad luck" and your business will fail.
• Customers won't care about any particular technology unless it solves a particular problem in a superior way. And if you can't monopolize a unique solution for a small market, you'll be stuck with vicious competition.

• […] selling and delivering a product is at least as important as the product itself.

• Every entrepreneur should plan to be the last mover in her particular market. That starts with asking yourself: what will the world look like 10 and 20 years from now, and how will my business fit in?

• Great companies have secrets: specific reasons for success that other people don't see.

• TESLA: 7 FOR 7
• TECHNOLOGY. Tesla's technology is so good that other car companies rely on […] But Tesla's greatest technological achievement isn't any single part or component, but rather its ability to integrate many components into one superior product.
• TIMING. Tesla CEO Elon Musk rightly saw a onetime-only opportunity.
• MONOPOLY. Tesla started with a tiny submarket that it could dominate: the market for high-end electric sports cars.
• DISTRIBUTION. Most companies underestimate distribution, but Tesla took it so seriously that it decided to own the entire distribution chain.
• While generic cleantech companies struggled to differentiate themselves, Tesla built a unique brand around the secret that cleantech was even more of a social phenomenon than an environmental imperative.

• An entrepreneur can't benefit from macroscale insight unless his own plans begin at the micro-scale.

• No sector will ever be so important that merely participating in it will be enough to build a great company.

• Apple's value crucially depended on the singular vision of particular person. This hints at the strange way in which the companies that create new technology often resemble feudal monarchies rather than organizations that are supposedly more "modern." A unique founder can make authoritative decisions, inspire strong personal loyalty, and plan ahead for decades. Paradoxically, impersonal bureaucracies staffed by trained professionals can last longer than any lifetime, but they usually act with short time horizons.

• 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.

• the future won't happen on its own. We cannot take for granted that the future will be better, and that means we need to work to create it today. 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.

FUTURENATIVE - THINK BETTER. BUILD BETTER.

I very occasionally send out an email recapping some thoughts, learnings and ideas typically centred around a thesis & approach I call being “FUTURENATIVE”.

In short, the thesis states: FUTURENATIVE individuals and organization find a unique way to leverage apparent tensions and blend both discovery & execution work, in order to unlock massive impact.

You can sign up here to learn more:

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