Zero To One

By: Peter Theil

Very engaging & well written. Peter Theil, being the first investor in Facebook & Co-Founder of Paypal has an immense understanding of startup dynamics. This is actually the only book I have read entirely in one sitting. This book covers all aspects of a startup's life from the founding team, fundraising, competition etc. Peter's talks about his obsession with creating businesses that are Monopolies and ties it all together with best practices to do so.

 

I recommend this book to any 21st Century Entrepreneur, will definitely give you some great information to apply to your business & life today.

 

Summary PDF >

6 Key Takeaways

  1. To succeed, you must study the endgame before everything else

  2. Monopolists can afford to think about things other than making money; non-monopolists cant

  3. One reason why we aren’t coming up with new discoveries is that we all think that if this is true, wouldn't someone more talented, smart or more qualified already found this out?

  4. When you start a company one of the most important decisions is to choose who to start with, If you start a company with the first person that you meet, it's probably not the best decision

  5. 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. If you cant count durable relationships among your fruits of the time at work, you haven’t spent your time well.

  6. You will be able to hire people if you are able to explain why your mission is compelling: not why its important in general but why you’re doing something important that no one else is going to get done.

Notes

Chapter 1 - The challenge of the future 

 

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

 

  • A startup is the largest group of people that you can convince to of a plan to build a different future

  • A new and better way of doing things is technology

  •  

Chapter 2  - Party like its 1999

 

4 Lessons Learnt :

  1. Make incremental advances: Anyone who claims to be able to do something great is suspect, anyone who wants to change the world should be more humble. Small incremental steps are the only safe path forward

  2. Stay lean and flexible: You shouldn’t have your final plan confirmed and should be willing to iterate through the way 

  3. Improve on the competition: Don’t try to create a new market prematurely, start with existing customers and build on recognizable products offered by successful competitors 

  4. Focus on product, not sales: If you need advertising or salespeople to sell it, it’s not good enough, Viral growth is the only way to go

 

Chapter 3 - All happy companies are different

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

 

Chapter 4 - The ideology of competition

Monopolies drive progress because the promise of years of monopoly profits provide a powerful incentive to innovate

 

Monopolists can afford to think about things other than making money; non-monopolists can’t 

 

Entrepreneurs are always biased to understate the scale of their competition, that’s the biggest mistake a startup can make. 

 

Shared characteristics for monopolies : 

  • Proprietary technology: Most substantive advantage a company can have because it makes your product difficult to replicate. It must be a minimum of 10 times better than it’s the closest substitute. The best way to make a 10x improvement is to invent something new.

  • Network effects: A product becomes more useful as more people use it. You’ll Never reap them unless your product is valuable to it’s very first users.

  • Economies of scale: A monopoly business gets stronger as it gets bigger. A good startup should have the potential for great scale built into its first design.

  •  Branding: Branding is extremely important as well

 

Chapter 5 - Last movers advantage 

 

How to build a monopoly ? 

  1. Start small and monopolize : Every startup should start with a very small market. It’s easier to dominate a small market than a large one. If you think your initial market is too big it most certainly is. The perfect target market for a startup is a small group of particular people concentrated together and served by no competitors

  2. Scaling Up : Once you create a niche market then you should expand into related and slightly broader markets. Most successful companies make the core progression - to first dominate a specific niche and then scale to adjacent markets 

  3. Don’t Disrupt : Original Meaning : Introduce a low-end product at low prices and improve it over time eventually overtaking even the premium products. New Meaning : Posing as Trendy & New : you shouldn’t think of yourself as someone battling dark forces. As you craft a plan to expand to adjacent markets , don’t disrupt. Avoid competition as much as possible

  4. The last will be first : The way to do this is to dominate a small niche and scale up from there , toward your ambitious long-term vision. “To succeed , you must study the endgame before everything else” 

 

Chapter 6 - You are not a lottery ticket 

  • If success were mostly a matter of luck , serial entrepreneurs like Steve Jobs , Jack Dorsey and Elon Musk wouldn’t exist.

  • “Shallow men believe in luck , believe in circumstances … Strong men believe in cause and effect” . “Victory awaits him who has everything in order - luck people call it”

  • You can expect the future to take a definite form or you can treat it as hazily uncertain. If you treat it as something definite , you can understand it in advance and work to shape it.

4 types of views for the world : 

  1. Indefinite Pessimism : Looks out into a bleak future but has no idea what to do about it. Can’t know whether the inevitable decline will be slow , catostrophic or gradual. All they can do it eat , drink and be merry in the meantime

  2. Definite pessimism : Believes the future can be know but since it will be bleak , he must prepare for it. 

  3. Definite optimism : The future will be better than the present if he plans and works to make it better

  4. Indefinite optimism : 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

 

  • The greatest thing that Steve jobs designed was a business. He saw that you can change the world through careful planning , not by listening to focus group feedback or copying other’s successes 

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

 

Chapter 7 - Money Makes Money 

 

  • You need to show VC’s that their investment will be multiplied by alot of times. This can be done by showing to them what your potential is as a company in terms of users , diversification etc.

  • Less than 1% of new businesses started each year in the US receive venture funding however these companies generate 11% of jobs in the private sector

 

Chapter 8 - Secrets

 

  • To be happy , every human being needs to have goals that’s attainment require effort

 

  • One reason why we aren’t coming up with new discoveries is because we all think that if this is true , wouldn’t someone more talented , smart or more qualified already found this out?

 

  • How do you find secrets?

There are 2 kinds of secrets 

  1. Secrets about nature : 

  2. Secrets about people : Things people don’t know about themselves or things that they don’t want others to know because they are embarrassed 

 

  • Capitalism and competition are opposites 

  • A geat 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 conspirors

 

Chapter 9 - Foundations 

 

  • “A startup messed up at it’s foundation cannot be fixed “ - Peter Theil 

  • When you start a company one of the most important decisions is to chose who to start with 

  • If you start a company with the first person that you meet , it’s probably not the best decision

  • Investors when investing in a startup look at the founding team : technical skills , how well do the founders know each other and how well they work together.

  • When starting out , your team must be extremely important and you should be able to work together well. Because no one can get anywhere without a strong founding team 

Things to keep in mind when starting off : 

  1. Ownership : Who legally owns the company 

  2. Possession : Who runs the company on a day-day basis 

  3. Control : Who formally governs a companies affairs 

  • Choosing every single member of your board is extremely important . Every one problem director will cause you pain and may even jeopardize your company’s future 

On the bus or off the bus :

  • When finding people to work in your company , they should either be involved full time or not.

Working remotely should be avoided as you could then be misaligned : if colleagues aren’t together full time at the same place everyday , misalignment lines up

  • As CEO : You should not expect a very high salary. It translates to employees wanting more salary and ends up making you care more about your position than the future of the company. Also , having a low salary means that employees will see your dedication and end up working hard

Vested Interests : 

  • Startups don’t need to pay high salaries because they can offer something better : Part ownership of the company itself. Equity is one form of compensation that can efficiently orient people toward creating value in the future.

  • Giving all employees equal shares is usually a mistake. Every individual has different talents and responsibilities as well as opportunity costs

  • Equity is a powerful tool . Anyone who prefers owning a part of your company to being paid in cash reveals a preference for the long term and commitment to increasing your company’s value in the future. Equity can’t create perfect incentives but its the best way for a founder to keep everyone in the company broadly alligned

Chapter 10 : The mechanics of Mafia 

  • 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. If you can’t count durable relationships among your fruits of the time at work , you haven’t spent your time well.

  • I need to hire people who actually enjoy working together with me . They should be excited about working on the product

  • You need people who are not just skilled but who will also work together cohesively when hired 

  • Why should our 20th engineer join our company when they can go work at google for more money and more prestige?

  • You will be able to hire people if you are able to 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. 

  • You also need to be able to convince your employees that the team they will be working with will enjoy their company. You should be able to explain to them why your company is a unique match to them personally.

  • Do One Things : Every employee in a company should be dedicated to doing only one thing . Defining roles reduced conflict as colleagues compete for the same responsibilities

 

Chapter 11 : If you build it will they come?

  • Customers will not come just because you built it , you have to make it happen and it’s harder than it looks

  • Every product no matter how good must be supported by a STRONG DISTRIBUTION PLAN

Two metrics that set the limits for effective distribution :

  1. Cost for acquiring the customer (CLV- Customer lifetime value) must exceed the CAC(Customer acquisition cost) 

  • Viral Marketing : A product is viral if its core functionality is to invite their friends to become users too. If every user leads to more than an additional user , this leads to exponential growth

  • The power law of distribution : Having several distribution channels ( employe some sales people , create a video , try viral marketing ) together doesn’t work. Poor sales rather than a bad product is the most common cause of failure. If you can just get 1 distribution Chanel to work , you have a great business

  • Selling to non-customers : Selling your company to the media is a necessary part for selling it to everyone else. Having no public relations strategy is a bad idea because what someone interested in joining your company will google you and your PR is critical to your success

  • Look around , if you don’t have any salespeople : you’re the salesperson 

 

Chapter 12 : Man and machine 

  • The most valuable businesses in the coming decades will be built by entrepreneurs who seek to empower people rather than making them obsolete 

 

Chapter 13: Seeing Green - Important to read when starting Energy companies / Humanitarian companies

Few questions to ask yourself 

  1. The engineering question : Can you make breakthrough products instead of incrementally increasing technology ?

  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 will run into lot’s of bad luck. If you nail all seven , you’ll master fortune and succeed

 

Chapter 14 : The Founders Paradox

Above all , don’t overestimate your own power as an individual. Founders are important not because they are the only ones whose work has value but rather because a great founder can brink out the best work from everybody at his company. 

The single greatest danger for a founder is to become so certain of his own myth that he loses his mind. 

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© 2020 Arjan Sahni