Zero to One: Notes on Startups, or How to Build the Future Hardcover – September 16, 2014

I have been reading Thiel‘s Zero to One in the last days. And after a compilation of his class notes last year, here are a few more comments. His book is as good as his notes but some readers may be puzzled. It’s not a book about how to build start-ups. (For this read Horowitz or Blank) “This book offers no formula for success. 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.” [Page 2]Thiel is a strong believer in exceptional achievements, in innovation just like in art or science. “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 advances2. Stay lean and flexible3. Improve on the competition4. Focus on products, not sales.These lessons have become dogma in the startup world. (…) And yet the opposite principles are probably more correct:1. It is better to risk boldness than trivaility2. A bad plan is better than no plan3. Competitive markets destroy profits4. Sales matters just as much as product.“[Pages 20-21]There is one point where I disagree with Thiel. Though I tend to be convinced by his argument that monopoly is good and competition is bad – read Thiel with care for the subtlety of his arguments – I do not think he is right when he writes [page 33]: “Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate”. I prefer Levine and Boldrin. Now I do believe that established players are displaced by new players – not competitors – who innovate when the champions who have become dinosaurs stop being creative.Thiel does not believe in luck. “You are not a lottery ticket” and I agree that you can minimize uncertainty by carefully planning and probably by adapting too. He still quotes [page 59] Buffett who considers himself “a member of the lucky sperm club and a winner of the ovarian lottery”. He also quotes Bezos with his “incredible planetary alignment” (which has not much to do with luck either). According to Thiel. success is never accidental.I also like his piece about founders: “Bad decisions made early on – if you choose the wrong partners or hire the wrong people, for example – are very hard to correct after they are made. It may take a crisis on the order of bankruptcy before anybody will even try to correct them. As a founder your first job is to get the first things right, because you cannot build a great company on a flawed foundation. When you start something, the first and most crucial decision you make is whom to start it with. Choosing a co-founder is like getting married, and founder conflict is just as ugly as divorce. Optimism abounds at the start of every relationship. It’s unromantic to think soberly about what could go wrong, so people don’t. But if the founders develop irreconcilable differences, the company becomes the victim.” [page 108]Ands now about sales: “In engineering a solution either works or fails. [Sales is different]. This strikes engineers as trivial if not fundamentally dishonest. They know they own jobs are hard so when they look at salespeople laughing on the phone with a customer or going to two-hour lunches, they suspect that no real work is being done. If anything, people overestimate the relative difficulty of science and engineering, because the challenges of those fields are obvious. What nerds miss is that it takes hard work to makes sales look easy. Sales is hidden. All salesmen are actors: their priority is persuasion, not sincerity. That’s why the word “salesman” can be a slur and the used car dealer is our archetype of shadiness. But we react negatively to awkward, obvious salesmen – that is, the bad ones. There’s a wide range of sales ability: there are many gradations between novices, experts and masters. […] Like acting, sales works best when hidden. This explains why almost everyone whose job involves distribution – whether they’re in sales, marketing, or advertising – has a job title that has nothing to do with those things: account executive, bus. dev, but also investment banker, politician. There’s a reason for these re-descriptions: none of us wants to be reminded when we’re being sold. […] 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.” [Pages 128-130] And if you do not like it said this way, watch HBO’s Silicon Valley episode 15… I may come with more comments when I am finished with this great book.In fact I have... and here are a few more comments, less about entrepreneurship than about social issues. Whatever the reputation of Thiel in Silicon Valley as a possible Libertarian, there were a couple of topics he addresses very convincingly. He is not a pure Contrarian. He disagrees with mainstream fashion in a very serious manner. Here are a couple of examples:– The machine will not replace humankindYes computers have made impressive progress in the recent decades, but not to the point of replacing mankind. He shows very convincingly through the cases of Paypal and Palantir [pages 144-148] that computers cannot solve automatically tough issues but are only (excellent and critical) complements to human beings. Even the Google experiment of recognizing cats “seems impressive – until you remember that an average four-year-old can do it flawlessly” [page 143]. He finishes his chapter about Man and Machine this way: “But even if strong AI is a real possibility rather than an imponderable mystery, it won’t happen anytime soon: replacement by computers is a worry for the 22nd century. Indefinite fears about the far future shouldn’t stop us from making definite plans today. Luddites claim that we shouldn’t build the computers that might replace people someday; crazed futurists argue that we should. These two positions are mutually exclusive but they are not exhaustive: there is room in between for sane people to build a vastly better world in the decades ahead. As we find new ways to use computers, they won’t just get better at the kinds of things people already do: they’ll help us to do what was previously unimaginable” [pages 150-151]. You will not be surprised I prefer this to Kurweil views.– Greentech was a bubble and it was obvious from day 1.I was always puzzled with greentech/cleantech. Why are people so excited about the promise to solve an important problem when we do not have any solution. Thiel is far tougher. First he shows the obvious: it was a bubble. Then he analyzes this industry through his “zero to one” arguments.“Most cleantech companies crashed because they neglected one or more of the seven questions that every business must answer:– Engineering: can you create a breakthrough technology instead of incremental improvements?– Timing: is now the right time to start your particular business?– Monopoly: are you starting with a big share of a small market?– People: do you have the right team?– Distribution: do you have a way to not just create but deliver your product?– Durability: will your market position be defensible 10 and 20 years into the future?– Secret: have you identified a unique opportunity that others don’t see?If you do not have answers to these questions, you’ll run into lots of “bad luck” and your business will fail. If you nail all seven, you’ll master fortune and succeed. Even getting five or six correct might work. But the striking thing about the cleantech bubble was that people were starting companies with zero good answers – and that meant hoping for a miracle” [page 154]. What’s next? Fintech?

Good insights on civilization and building companies. This is me writing more words to hit the minimum amount of words needed

Great book, wish I had attended the class. Fascinating way of perceiving the future, technology, creativity and business. Challenges some conventional wisdom and explains differences in marketing and creating. Highly recommend

This book is like a pair of Prescription Spectacles that put the Innovation Startup Business world, into Sharp Focus.When I first saw the price I almost hit exit. However, I thought “If this guy has the balls to ask this price, this book had better be good”. Else I'm going to roast him in my Amazon review. I ain't roasting!!As usual I attacked reading this book in concept extraction mode for my normal initial scan read. Chapter 6, You are not a Lottery Ticket, hit me with a Baseball bat right between the eyes. and slowed my reading pace down to almost snails'. Despite this slow first read, this Chapter deserved a re-read, at almost letter by letter speed. Almost every word or phrase brings an idea from the past, often vague, to the fore and into sharp focus. When I finished my first highlighting trip, almost every word in this chapter was lit. I had to choose and eliminate some of them.In Zero to One, Thiel explores the world of New Business Creation. I would have loved using the word entrepreneurship but excessive and inappropriate use by “experts” have stripped this word of it's true meaning. We even invented a new version in South Africa under the ANC – Tenderpreneur.True entrepreneurship from basics is the creation of a New business that facilitates Economic Development by providing an Inventive New Product creating a New Market Sector that facilitates New Consumer Productivity enhancing opportunities.In Thiel's thesis, basic human attitudes can be split into a 2x2 matrix. I also tend to think in 2x2 matrixi. So this chapter fitted my mind. But Wow did he blow my mind with his various Definite vs Indefinite and Optimistic vs Pessimistic discussions. Despite many years in multinational business I could not fault the Author on any of his explanations. He clarified a lot for me. One of them “strategically humble” is certainly a new, yet valid descriptor for a company with a profitable monopoly. Yet in their Financial market press releases, they deliberately select a market description that yields for them a minority market share in a large market and not their true market share in the niche they dominate totally. (Are they hiding from Monopoly acuzations?)A few key quotes.”In the 1950's, Americans thought big plans for the future were too important to be left to experts”. (San Francisco Dam)Ralph Waldo Emmerson is quoted as saying “Shallow men believe in luck, believe in circumstances …...... Strong men believe in cause and effect.”“you should do what you could, not focus on what you couldn't” Is to my mind the Quote of the Year.Another hand clapper was “No one pretended that misfortune didn't exist, but prior generations believed in making their own luck by working hard”I consider the following a nice funny; When Peter had to use either the words he or she in his text he seemed to consistently use she. I suppose this enables him to duck accusations of Sexism. Showing signs of being scared of Indefinite Pessimists?“We have to find our way back to a definite future, and the Western World needs nothing short of a cultural revolution to do it.”“ 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”The rest of the book is devoted to discussing the practicalities of founding Innovative Startups successfully. These are focused at exploiting what is commonly considered a secret simply because nobody has really explored it before. Their uniqueness create innovative monopoly opportunities - the key source of profit.One of the issues discussed is; Power Law; We all know the Pareto principle is valid and 80-20 describes the unequal distribution of results in everything. Peter adds these considerations;“It defines our surroundings so completely that we usually don't see it”.He continues with; “but everyone needs to know exactly one thing that even venture capitalists struggle to understand: we don't live in a normal world; we live under power law.”In this way many other facets of Startup founding are discussed practically.In the end I came away with the following thought pattern;A potential successful startup founder is someone who is a Definite Optimist with a long term perspective, prepared to take risks. Who has a mind open enough to identify factual or human secrets that need illumination. Who is prepared to do the hard work necessary to acquire the factual knowledge needed to explore this secret and find a way to change this mystery into a solution. Who is capable of funding this idea or selling it to Venture Funders to acquire funding. Who is prepared to expend the effort to develop the idea into a useful practical end product that solves something significant for a new market sector. AND; Who then has the flexibility to turn around from dreaming, research and creativity. To then display the tenacity to knuckle down to make this idea work in practice, prepared to live through the low personal income initial loss making era, building the practical business.Thanks – A stimulating read, well worth the time and money – even for retired me!