Zero to One

I have read Zero to One by Peter Thiel three times. And with every re-read, I have more appreciation for the wisdom that Thiel shares. According to Thiel, a business that can create new technology (going from zero to one) is far more superior than a business that mimics or incrementally improves existing technology (one to n).

A company that creates new technology can create a better future for the world while also making very good profits. On the other hand, businesses with undifferentiated products not only contributes to the stagnation of society but are also driven out of the market due to intense competition.

Three key takeaways that I got on how to create a winning company:

  1. Create a product that is ten times better than what is currently on the market.
  2. Find a niche and dominate that market.
  3. Find the right team.


The single most important 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.

Any new and better way of doing things is technology.

New technology has never been an automatic feature of history. Our ancestors lived in static, zero-sum societies where success meant seizing things from others.

Dot-com mania was intense but short – 18 months of insanity from September 1998 to March 2000. The most “successful” companies seemed to embrace a sort of anti-business model where they lost money as they grew.

On Paypal’s mission, Thiel says, “we wanted to create a new internet currency to replace the U.S. dollar.”

For Paypal to work, we needed to attract a critical mass of at least a million users. We gave new customers $10 for joining, and we gave them $10 more every time they referred a friend.

  1. It is better to risk boldness than triviality.
  2. A bad plan is better than no plan.
  3. Competitive markets destroy profits.
  4. Sales matters just as much as product.

The most contrarian thing of all is not to oppose the crowd but to think for yourself.


In 2012, the average airline made only 37 cents per passenger trip. Google creates less value but captures far more. Google brought in $50 billion in 2012 (versus $160 billion for the airlines), but it kept 21% of those revenues as profits – more than 100 times the airline industry’s profit margin that year.

Capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away. If you want to create and capture lasting value, don’t build an undifferentiated commodity business.

When you hear that most new restaurants fail within one or two years, your instinct will be to come up with a story about how yours is different.

The competitive ecosystem pushes people toward ruthlessness or death.

Our education system both drives and reflects our obsession with competition.

We teach every young person the same subjects in mostly the same ways, irrespective of individual talents and preferences.

Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking.

Competition makes companies focus on their rivals than innovation.

Competition can make people hallucinate opportunities where non exist. The crazy ’90s version of this was the fierce battle for the online pet store market. vs vs.

Thinking long-term

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.

Nightclubs or restaurants are extreme examples: successful ones might collect healthy amounts today, but their cash flows will probably dwindle over the next few years when customers move on to newer and trendier alternatives.

Most of a tech company’s value will come at least 10 to 15 years 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?


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

Characteristics of a monopoly:

  1. Propriety technology – must be at least 10x better than the closest substitute.
  2. Network effect – Network effects can be powerful, but you’ll never reap them unless your product is valuable to its very first users when the network is necessarily small. Successful network businesses rarely get started by MBA types: the initial markets are so small that they often don’t even appear to be business opportunities at all.
  3. Economies of scale – a monopoly business gets stronger as it gets bigger: the fixed cost of creating a product (engineering, management, office space) can be spread out over greater quantities of sales.
  4. Branding – creating a strong brand is a powerful way to claim a monopoly. Beginning with a brand rather than substance is dangerous.

Building a Mon0poly

Start small and monopolize

It is easier to dominate a small market than a large one. It is much easier to reach a few thousand people who really needed our product than to try to compete for the attention of millions of scattered individuals.

Scaling up

Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Amazon started with books, then moved to CD’s, videos, and software.

Don’t disrupt

If you truly want to make something new, the act of creation is far more important than the old industries that might not like what you create. 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 be a monopoly.

The last will be first

What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you.

The Return of Design

Every great entrepreneur is first and foremost a designer.

The greatest thing Steve Jobs designed was his business. Apple imagined and executed definite multi-year plans to create new products and distribute them effectively.

Steve Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others’ successes.

The Power Law of Venture Capital

If you focus on diversification instead of single-minded pursuit of the very few companies that can become overwhelmingly valuable, you’ll miss those rare companies in the first place.

The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.

VCs must find the handful of companies that will successful go from 0 to 1 and then back them with every resource.

Every single company in a good venture portfolio must have the potential to succeed at vast scale.

“Don’t put your eggs in one basket,” but investors who understand the power law makes as few investments as possible.

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.

How to find secrets?

What secrets is nature not telling you?

What secrets are people not telling you?


Thiel’s law: a startup messed up at its foundation cannot be fixed.

Bad decisions made early on – if you choose the wrong partners or hire the wrong people – are very hard to correct after they are made.

As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.

Founders should share a prehistory before they start a company together – otherwise they’re rolling the dice.

It’s very hard to go from 0 to 1 without a team.

You need good people who get along, but you also need a structure to help keep everyone aligned for the long term.

To anticipate likely sources of misalignment, it’s useful to distinguish between three concepts:

  1. Ownership: who legally owns a company’s equity?
  2. Possession: who actually runs the company on a day-to-day basis?
  3. Control: who formally governs the company’s affair?

A board of three is ideal.

Vested Interests

Equity is the one form of compensation that can effectively orient people toward creating value in the future.

Company Culture

No company has a culture. Every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.

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.

From the start, I wanted PayPal to be tightly knit instead of transactional.

You need people who are not just skilled on paper but who will work together cohesively after they’re hired.

If you build it, will they come?

But customers will not come just because you build it. You have to make that happen, and it’s harder than it looks.

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 is.

Superior sales and distribution by itself can create a monopoly, even with no product differentiation.

Customer Lifetime Value or CLV ( the total net profit that you earn on average over the course of your relationship with a customer) must exceed the amount you spend on average to acquire a new customer – Customer Acquisition Cost or CAC.

Personal Sales

In 2009, Blake sold a small Box account to the Stanford Sleep Clinic, where researchers needed an easy, secure way to store experimental data logs. Today the university offers a Stanford-branded Box account to every one of its students and faculty members. If it had started off by trying to sell the president of the university on an enterprise-wide solution, Box would have sold nothing.

Marketing and Advertising

Every entrepreneur envies a recognizable ad campaign, but startups should resist the temptation to compete with bigger companies in the endless contest to put on the most memorable TV spots or the most elaborate PR stunts.

Questions every business must ask:

  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?