Key points from "Zero to One" 11 Jul 2017 Post by: Steven Moe
Zero to One: Key points
It is hard to look past the credentials of Peter Thiel, who co-founded Pay Pal and was one of the original investors in Facebook and LinkedIn. It has endorsements on the back from Mark Zuckerberg and Elon Musk. The book came out in 2014 so has been out for a while and this article will pull out just some of the best and most challenging bits from it. This can form a cheat sheet for those who haven't read it or a set of good reminders for those who have.
The basic premise is: "It's easier to copy a model than create something new: doing what we already know how to do takes the world from 1 to n, adding more of something familiar. Every new creation goes from 0 to 1. This book is about how to get there."
Thiel was directly participating in the dot-com crash around 2000 and early in the book he draws four conclusions that people took from it:
- Make incremental advances – small steps are the best way forward.
- Stay lean and flexible – operate without definite plan and be able to adapt.
- Improve on the competition – build on what others have already done.
- Focus on product, not sales – develop an excellent product that will sell itself.
He then contrasts some of those conclusions with these four statements of what he has observed:
- It is better to risk boldness than triviality
- A bad plan is better than no plan
- Competitive markets destroy profits
- Sales matter just as much as product.
His conclusion here is that we need to be careful about broad brush conclusions reached as a result of mistakes like the dot-com crash. Instead he says, “to build the next generation of companies, we must abandon the dogmas created after the crash … the most contrarian thing of all is not to oppose the crowd but to think for yourself”.
There is an interesting story that he tells in the book which I relate to since it involves Thiel’s background studying law. As a lawyer myself it is interesting to read about his experience and I do often think about the fact that having a role as an advisor means that I myself am less likely to branch out into something new like a start-up. In actual fact that is not true any more as our law firm has looked at disruption and what it means for law firms and is the co-founder of a start-up that I have been actively involved in setting up. But this story is illustrative of a general point about what we settle for and what we think will make us happy:
“The highest prize in a law student’s world is unambiguous: out of tens of thousands of graduates each year, only a few dozen get a Supreme Court clerkship. After clerking on a federal appeals court for a year, I was invited to interview for clerkships with Justices Kennedy and Scalia. My meetings with the Justices went well. I was so close to winning this last competition. If only I got the clerkship, I thought, I would be set for life. But I didn’t. At the time, I was devastated. In 2004, after I had built and sold PayPal, I ran into an old friend from law school who had helped me prepare my failed clerkship applications. We hadn’t spoken in nearly a decade. His first question wasn’t “How are you doing?” or “Can you believe it’s been so long?”. Instead, he grinned and asked, “So, Peter, aren’t you glad you didn’t get that clerkship?”. With the benefit of hindsight, we both knew that winning that ultimate competition would have changed my life for the worse. Had I actually clerked on the Supreme Court, I probably would have spent my entire career taking depositions or drafting other people’s business deals instead of creating anything new. It’s hard to say how much would be different, but the opportunity costs were enormous. All Rhodes Scholars had a great future in their past.”
Thiel then has a really interesting few chapters about pessimism and optimism and how that has played out in different cultures and eras. In his view this has shaped the way that we think about entrepreneurs as being lucky vs having a plan. He comments that “indefinite optimism” means there is a general feeling that things will improve but no plan or direction for how to get there – so it involves cultivating and maintaining what we have rather than creating something new. He comments that this short term thinking is evident in politics too where we are concerned about predictions of elections for what the future will look like in a few weeks or months but lack the focus on 10 or 20 or 30 years from now. Ultimately his conclusion on this topic is that design trumps chance and there needs to be a lot of thinking and planning when involved in a start-up. He states: “Long term planning is often under valued by our indefinite short term world.”
This theme is emphasised more in the middle chapters of the book: “It does matter what you do. 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.”
He also spends time towards the end of the book analysing founders and the “big characters” that they tend to be (like Steve Jobs) and asks if they create their own images, if the media helps glorify certain aspects of them or if they are actually just naturally that way inclined. He seems to conclude it is a combination of all of those things and that the social media world we live in now leads to an emphasis on certain attributes compared to the past.
We ourselves have a startup at Parry Field Lawyers where we are working to develop an innovative and new product offering focused on the legal market so a lot of this book really resonated with our experience. The biggest takeaway for me was the basic point that founding a company that does something new is a lot of hard work and you need to be purposeful about choosing what you get involved in and who you choose to work with you. This type of book is useful in that it reminds us of some fundamental points about startups from a person who has had direct involvement in many of them.