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Zero to One by Peter Thiel: Book Summary and Reflection

Updated August 31, 2021
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Zero to One by Peter Thiel: Book Summary and Reflection essay

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Introduction

“Brilliant thinking is rare, but courage is in even shorter supply than genius.” These are borrowed words from Peter Thiel. There are countless books available in the world with brilliant and motivating words that could be a source of inspiration to a young graduate most specifically, to decide on following a career path or to take a risk and become an entrepreneur. For this assignment and personal benefit, the book picked and chosen for this purpose is ZERO TO ONE by Peter Thiel. The First part of this paper would provide a little information about the author and a summary of the book. The body would contain a review of the author’s position, relation to business management and concluding with the writer’s opinion.

About the Author

Born on October 11, 1967, Peter Andreas Thiel is a German- American entrepreneur, venture capitalist, philanthropist, political activist, and author. He is also the co-founder of PayPal and a co-founder of the Billion-dollar company Palantir Technologies and Founders Fund. He was a large initial investor of Facebook with 10.2% stake and as of 2019, he currently has a net worth of 2.5 billion USD, as provided on Wikipedia. Peter’s book Zero to One originated when he was providing lectures to students at Stanford University and one of the students, Blake Masters, had the initiative to turn his notes into this book.

Summary of the Book

According to Peter Thiel, people like Bill Gates will not build an operating system nor will the next Mark Zuckerberg create a new social network, if we just copy those that have succeeded. In doing so, we would be moving from A-N, but not Zero to One. Companies would fail if they do not realize this. Meaning, they should not try to fine-tune best practices but be more creative and find new and paths not yet ventured. Thiel’s book is structured into fourteen chapters, with each having a title.

Chapter One is The Challenge of the Future. Here, he says the future can only be the future if it’s different from today, meaning if society doesn’t change in a couple of years, then the future is still years away. Hence, no one can see the future but two things about it is that; it will be different and yet rooted in today’s world. Peter’s theory of zero to one originates in this chapter, where he stipulates that there are two types of changes, the Horizontal which involves incremental improvements on things that already exist and Vertical Improvements which means doing something completely new. Thus, finding new paths that no one has exploded before is an interpretation for going from zero to one. Thiel further encourages New Thinking, and states what an asset it is to businesses, and most especially start-up businesses.

Chapter Two is titled Party like it’s 1999. According to Thiel, the 1990s had a good image until the Dotcom bubble burst. He himself was scared about a crash in the technology market while he was running PayPal, and this taught entrepreneurs four fake lessons. However. Thiel stats that the opposites of these lessons are true instead. Some of the lessons learned here are:

  • It is better to risk boldness than a triviality.
  • A bad plan is better than no plan.
  • Competitive markets destroy profits.
  • Sales matter just as much as the product.

Chapter Three: All Happy Companies Are Different. In this chapter, Peter Thiel talks about monopoly and perfect competition. Monopoly in his own perspective means a company doing something so good that no one else can offer a close substitute. An example of a company going from zero to one, by achieving such a monopoly is Google. To Thiel, monopolies are the best companies and since they don’t have to worry so much about profits, they can treat their employees well, invest in new technologies and fund social projects. Thus, all flourishing companies are different because they invested in solving unique problems or came up with unique and life-changing products.

Chapter 4 is the Ideology of Competition. Here, society has embraced the ideology of competition and businesses love war. Thiel says, these wars start for trivial reasons and yet keep going without any reason. An example of this type of business war is Microsoft vs Google with a myriad of competing products, until Apple came along and instead of joining the war, focused on innovating rather than battling. This affirms Thiel’s theory that competition is a destructive force and the reason why he allied and merged with his former competitor Elon Musk to build PayPal.

Chapter 5: Last Mover Advantage. Thiel says the most fundamental question to be answered by start-up businesses is: Will this business still be around 10years from now? There’s no sure way of building a monopoly, but each monopoly shares at least four characteristics;

  • Propriety Technology, which involves having great tech which keeps improving on the past.
  • Network effects, when so many people use a product, it hints every other person to want to join.
  • Economies of scale simply mean that monopoly businesses get stronger while growing bigger.
  • Branding means that each brand should embody an ideology.

Further, in this chapter, Thiel insists that disruption is silly and counterproductive and companies that consider themselves as disruptive become the old and the enemies. Thus, don’t disrupt, rather add value and avoid competition. Also, he mentions here that being the first should be a tactical move, not a goal and it is better to be the last and enjoying years of monopoly.

Chapter 6: You Are Not a Lottery Ticket. Here, Thiel talks about “luck” and its roles in the success of a business. Some say success is the result of luck, whereas others attribute it to hard work. However, in the past, most great thinkers say that success comes from hard work. Nowadays people pay more attention to process than substance and follow the rules of success because they lack the inspiration to work towards a substantive goal. Thus, to Thiel, the six sigma and lean methodologies are about incremental improvements and will not get you from zero to one.

In Chapter 7, that is Follow the Money, Thiel says that anyone without a salary or stock options in a company, is misaligned with that company’s interests. Thus, they don’t have the best future of the company at heart, so the hiring decision should be binary in nature, either fully on board or not. In addition to this, Thiel stated that the less the company pays its CEO, the better it does, as such a high salary make CEOs behave like politicians

Chapter 8 is titled Secrets. The author simply establishes that fact that most people think there aren’t any “secrets” left to discover but the truth is, there are countless secrets and problems to be found and solved.

Chapter 9: Foundations. According to Thiel, mistakes would always be made but it is important to get things right at the beginning because early mistakes are often costly. Also, a clear structure and clear responsibility will help to keep people in line. Here, structure involves three things; ownership, who runs the company daily and who controls the company affairs. To Thiel, ownership should be kept small because distributing ownership gives people incentives which multiples chances for dis-alignment and internal power struggle. Equity is a great way of aligning interest and keeping people motivated but it must be done smartly.

Chapter 10: The Mechanic of Mafia. In this Chapter, Thiel says the ideal culture employees love their job and the company to the point that they don’t look at when its time to go home. Most people are more interested in the team and the mission of the company. Thus, perfect hires are more excited to work in a company because of what they are trying to achieve

Chapter 11: If you Build it, Will They Come? Thiel here says that marketing and advertising works, and sales might be superior as better sales and distribution create a monopoly. Thus, a viral product is one whose core functionality invites others to also use the products.

Chapter 12: Man, and Machine. Thiel establishes that the debate of man vs machine or machines taking over people’s task is silly because computers are complementary to humans, not substitutes and the best companies are those that empower people not taking away their jobs.

Chapter 13: Seeing Green. In this Chapter, Thiel states that reason for failure in every business is researched in seven areas; Engineering, timing, monopoly. People, distribution, durability, and secret. Thus, if you apply all seven you’ll grow a monopoly and a mass fortune. One should dominate a small market first, rather than going for a big one.

Chapter 14: The Founder’s Paradox. Here, Thiel talks about how paradoxical founders are and how they can make a difference in a company. In conclusion, Thiel says we need new tech to build a better future

How Can These be Applied to Small Business Management?

Thiel’s Zero to One has been an incredible read and a great coach for people who can be termed as “wannabe entrepreneurs”. In reading this book, we seek to find a connection between Thiel’s Zero to One and Small Business Management or how his points can be applied in the business world.

First and foremost, Zero to One can be used as a guide for entrepreneurs who seek to start up a business. In earlier years, defining the term Entrepreneur brings up a couple of characteristics which can be identified in Thiel’s book and which is currently being applied in our business world. An entrepreneur can be referred to as someone with a creative mind, able to find opportunity, find a solution to problems, take a risk, innovative and is able to act. Thiel mentions a vast majority of these traits in his book and encourages startups to focus on that rather than trying to polish or fix an already existing idea or opportunity.

According to Thiel, creating a game-changing company means going from zero to one, which means building from nothing to something, instead of going from something to a slightly better something. In today’s world of business, this urges people to seek innovation by thinking out of the box and not solutions for already existing ideas. Successful businesses today, such as PayPal, Facebook, Google, Uber etc. emerged because of people with creative minds focused on innovative ideas which have never been explored before.

A ‘zero to one’ company lays claim to an uninhabited market to create a monopoly. This is a good thing which opens valuable market territory by doing something completely new. Monopoly in economics can be defined as a market structure characterized by a single seller, selling a unique product in the market. Here, the seller faces no competition and is the sole seller of goods with no close substitute. These are the types of products the above examples provide, and they are the masters of their markets.

Every monopoly must be unique, and they must possess four attributes: proprietary technology, network effects, economies of scale, and branding. Today, Technology is one of the areas that create the most innovation at every level in the business world. Network effects would be related to the marketing and sales strategy to get more people interested in the products being offered. Economies of scale would be related to expansion or the possibility of the business growing bigger in the nearest future and branding how’s to do with how this idea transmit from the origin of the idea, the company, products, and the perception it gives its customers. Thus, every new business today must ensure they possess these attributes, to be able to survive.

Businesses have a higher possibility of success when they differentiate rather than compete. Differentiation is a very important marketing strategy every business should be able to apply to be competitive in its market industry. Direct competition to Thiel, drains value as companies beat each other up whereas differentiation creates value as companies charge more for desirable products and services that customers can’t get anywhere else. In today’s business world, competition is something that is not easily avoidable in each existing market with numerous entries and limited barriers, differentiation would be a key strategy to create more value. A healthy competition creates routes for innovation whereas extensive competition is only a pathway to self-destruction. Thus, disruptive companies often pick fights they can’t win.

Thiel also encourages entrepreneurs to take a risk, have a plan and develop successful sales strategies. Most businesses today like to play it safe to minimize losses. However, successful businesses today feed on their ability to take huge and reasonable risk. As we learn in business, the concept of risk and returns stipulates that greater risks yield greater returns. Also, every successful businessman or establishment must have a plan, whether it is a good or bad one because it is easy to identify what is wrong with that plan and resolve, then operating a business with no plan at all. Thus, just as we are thought in small business, to build a business, we must start by building a business plan. It is also important when presenting to potential investors or even applying for bank loans.

Thiel also advises us to start small where there’s a small concentration of people with few or no competitors and so long as you have the advantages of proprietary technology and network effects, the business would have potentials of being successful. Most businesses today try to start in large markets where there exist a lot of competitors and however end up being unsuccessful. This just as Thiel advises us, it is better to start small and in a small market, build brand and customer loyalty and once the reputation and sales start rising, then owners can look into expansion possibilities.

Thiel also emphasizes that the CEO shouldn’t focus on the money but on working aggressively to find and fix problems. This is right as most of the times in businesses when CEO start receiving high incentives, they are no longer motivated by the original values of the company, but whatever decisions which are possibly good enough to give the company more revenues. Thus, some of these decisions can affect employees, products, and consumers as well. Thus, the most important task in business is the creation of new value and the most successful founders make authoritative decisions, inspire strong personal loyalty, and plan for decades.

The author simply establishes that there are countless secrets and problems to be found and solved. Also, it is important to get things right at the beginning because early mistakes are often costly. A clear structure and clear responsibility, where structure here involves three things; ownership, who runs the company daily and who controls the company affairs. This can be related to the concept of finding the one idea that has protentional of solving an existing problem in entrepreneurship and the concept of a ‘structure’ has to do with management. Every company today always seeks to hire the right individuals at every position from the top to bottom based on skills required, to ensure that the companies interests and goals can be possibly met. Thus, perfect hires are more excited to work in a company because of what they are trying to achieve

Thiel also says that marketing and advertising works, and sales might be superior as better sales and distribution create a monopoly. This is a concept that is applied in every existing business today, as well as these, are concepts studied by every business student. Marketing and advertising are key strategies to create consumer awareness and increase sales.

Writer’s Point of View

Zero to One was a fantastic read. After going through this book, one can immediately get a proper idea of what an entrepreneur should be like and what it takes to be a successful entrepreneur. For anyone trying to start their own business and explore new ways to create a product or service, Zero to One will give you plenty to think about. Thiel is a powerful thinker and some of the ideas expressed in this book demonstrate his ability to see things from the inverse perspective and a proper reason why he can be called one of the most successful entrepreneurs today.

This Book contains several refreshing insights and personal truths that one might not get from other books on inventing the next big thing. When talking about the next big thing, Thiel gives a clear and precise context that makes it simple for one to compare with his or her idea to know whether there is a possibility for its success. Thus, going from zero to one, in other words going from nothing to something can be referred to as the greatest leap possible because this is basically bringing something into existence from the dark void of oblivion.

Many times, young entrepreneurs like myself, believe coming up with better ideas that are already in existence is innovation, but this book gives us the essence of true innovation.

Thiel’s principle of differentiation focuses on monopoly, which is creating something unique. However, this is not a guarantee that any business or product launched with a differentiation strategy, is going to be very compelling in an existing market. Also, a monopoly can become pathology when it creates a gap between those who can afford and the middles class or low class who cannot afford.

Thiel makes a concrete point with his rule that the CEO of a Startup shouldn’t receive large salaries. However, it is disappointing that most CEO’s do not live up to this, for example, Steve Jobs did this with his annual salary of $1.

Zero to One can be described as a book, based on experience and ideas, though most of the ideas may have been pirated or borrowed from other successful entrepreneurs or sources, it still makes for a lively read. Just as Thiel mentions, we cannot take for granted what the future holds and that it could be better. Which means we need to start making changes to create new things that not only make the future different but better and looking new. Thus, we need to go from zero to one. The book is filled with entrepreneurial advice, some form of management advice, business strategic recommendations, financial advice, and philosophical discussions. At this point, one can only say Zero to One is one of the most thoughtful books on entrepreneurship in today’s shelves.

Reference

  1. Wikipedia contributors. ‘Peter Thiel.’ Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 14 Feb. 2019. Web. 21 Feb. 2019.
  2. The Power Moves. “Zero to One by Peter Thiel: Book Summary & PDF.” The Power Moves, Penguin, 14 Dec. 2018, thepowermoves.com/zero-to-one-summary/.
  3. Thiel, Peter A., and Blake Masters. Zero to One: Notes on Startups, or How to Build the Future. Virgin Books, 2015.
Zero to One by Peter Thiel: Book Summary and Reflection essay

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