Zero to One: Notes on Startups, or How to Build the Future

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?

Peter Thiel navigates many interesting discussions. However, his examples of monopolies are of his own special definition of 'monopoly'--the nearest example being Microsoft towards the end of the Clinton administration, and that only "...monopolistic..." because it wasn't entire and was of a temporary nature. Competition begats redundancy and while that begats negative externalities it also begats a more diverse set of job opportunities for the top tier and also-rans. A society where there were only true monopolies would mean that the proletariat would probably have to starve to death, work for wages insufficient to serve as a positive extrinsic motivator (mostly just enough to narrowly escape the fear of death or a more general suffering), or else we would have to move further and further away from a market based economy to a planned one for the sake of avoiding fates as unemployable marauders, murderers, cannibals, and those who were wealthy enough or minimally viable economic units to murder through indifference and agreement to see the surplus humanity as criminals deserving of their horrible fates.Enjoyed the book, but I think that the hunt for monopoly is delusional. However, that doesn't mean it isn't a good starting point for evaluating the potential of a business. However, competition is inevitable in the short-run unless one has the capital to support research and development on materials and machines with internationally-recognized patent potential. In the long run, it is inevitable anyway because the head-start that having a patent gives you for perhaps 20 years (less if you spend any of it as an NPE) expires and if you wasted capital on failed marketing attempts and failed to up the ante with another well-timed patented improvement on the technology then a competitor who has observed your mistakes will surely come along and leverage your technology and their own patented improvement on it to steal the market you've made.I think that monopolies COULD be desirable within the context of a pre-utopian society that held it as its existential purpose to solve scarcity and put every sentient being to work on a variety of activities that best leveraged their abilities at achieving our collective utopia. Why waste resources when there are other hard problems to solve? However, that's not the world we live in. We live in a world where any sanction against competition means that the carrying capacities of our societies increase suffering and general idleness for the poor. In one of his last books, John Kenneth Galbraith wrote about the importance of jobs for their own sake in some present-to-future state of an economy. Peter Thiel is a libertarian so he presumably doesn't like shiftless bums, but widespread embrace of monopolistic behavior would lead to exactly that and demand that government become even more lionized as moral compass to either employ or subsidize the poor. Everyone is better off when everyone works and monopolies have no social contract with the public to hire people they do not need, while competing firms intrinsically involve occupational redundancy and increase human carrying capacity within a society.If Peter Thiel would like to use his wealth to save the fate of mankind, I have a plan for an alternate form of government called anarcho-technocracy, which seeks to combine direct democracy, rule by consensus of the demonstrably informed, universal employment, and autodidactic lifelong education to support upward mobility in both hobbies and jobbies. As he is a self-avowed Christian, I would like to pitch him on the theological inspiration for the form of government, which previously existed for a period for roughly 260 years in Israel prior to the coronation of Saul .What it comes down to is these points:1) If you're worth following, then rational people will follow (whether you want them to or not).2) The will of uninformed or irrational people should not be allowed to supersede the authority of those who cared enough to inform themselves about the policy in question. The barrier to suffrage is one's own commitment to accessing and comprehending freely available and actively promulgated information. If you can't meet that barrier, then it is unjust and immoral that ignorance (regardless of headcount) should win because, with little exception, the number of people who are informed about a narrowly defined public policy or industry topic at a level greater than or equal to a C- is much smaller than the number of people who know less or are indifferent.3) The cult of personality is always a bad thing and policy grab bags make rational administration of the public good and encouragement of public-private partnerships inconsistent and unreliable. We have achieved an information technology infrastructure sufficient that cults of personality and policy grab bags are neither the fairest, most rational, most expedient, or most informed ways of solving problems any longer.4) Few rules need to be set in stone beyond redaction and their subversioned or subversive amendments are only ever sub-cultural and so are best left to the local-most level of government (strong federal, strong regions, and strong counties) with rulings on an arbitration between concerned parties (individuals and organizations) fast-tracking directly to the widest scope of government where the preponderance of consequences might be externalized and with votes on any referendum and ruling being weighted towards those with skin in the game yet including anyone who sought to know the facts to at least a C- level.Why do I think that this would work better? Everybody is obligated to work for better instead of being excluded from the process arbitrarily--if you don't like a policy--inform yourself, propose a better idea, persuade others. If the experts and those with capital involved agree, it can happen more quickly without having to convince or bribe those who neither have capital involved nor have bothered to understand the facts let alone their provenance.

This book was really helpful to me. People who want to start a startup often feel like they are facing a huge, vague, and invisible wall at the starting line. It’s ironic that although it’s called a “startup,” starting feels so difficult. Maybe it’s because it’s their first time and there’s less concrete information than expected. When I first started, I needed not just simple words or emotions that come to mind when looking at a masterpiece, but truly realistic and clear methods-who to get investment from, who to approach, how to start, and specifically how to conduct market research. After reading this book, I could see why it’s considered a bible by so many entrepreneurs. The content isn’t just vague talk; though the book isn’t long, it’s packed with only the most essential information, and it even includes the author’s experiences and the visions based on those experiences. If you are going to start a business, this book will turn your initial anxiety into courage and will be a huge help in expanding your thinking. However, I want to give this book 1 star because I wish the author would publish more books. This book contains truly, truly good ideas and advice. I strongly recommend it to those who want to start an IT business or to those who, like me, found the beginning difficult. Now that I have started my own business, there are times when I feel anxious, tired, and want to rest, wondering if I am always on the right path. But I believe in doing my own work, creating something of my own, and that people will like what I create, and that I can make a better world. I sincerely hope that everyone does not give up and can achieve their own work. I express my deepest gratitude to the author.