Want to build the next Facebook, Google or Amazon?
Summary of Zero to One by Peter Thiel — how to build the future
Henry Ford once famously said:
“If I had asked my customers what they wanted they would have said a faster horse.
If he gave them faster horses he would have been taking a step from 1 to N. Instead of doing that Henry ford decided to think for himself, create the future and introduced the world to the automobile.
In doing so he took a step from 0 to 1.
It’s imperative to focus on businesses that create something new (going from 0 to 1) instead of copying concepts that already exist (going from 1 to N).
This is the way most of the successful companies we know and love like Google, Facebook and Amazon were created. They all went from 0 to 1 by creating something new thus moving the world and society forward.
If you want to create a company that generates profits well into the future like the companies mentioned above?
Don’t copy another business! Innovate — go from 0 to 1.
In this book, Peter Thiel breaks down how to build and maintain a monopoly.
And in this blog post I will explain these 4 concepts:
- Why monopolies are critical
- How to position yourself to start a 0 to 1 type company
- How to build a monopoly
- How to protect the monopoly
Why a monopoly?
In this book, the author makes the somewhat controversial claim that:
“ Capitalism and competition are opposites.
This is because capitalism is all about generating profits whereas competition eliminates profits.
Competition is all about lower prices and margins, in contrast, monopolies enjoy high profits and afford a company to invest in the future because the profits will compensate for such investments.
Therefore entrepreneurs should be intent on creating monopolies.
So the question now becomes — How do you create and maintain a monopoly?
How to position yourself to start a 0 to 1 type company
Start with yourself!
The author has the contrarian belief that success is not a matter of luck. If you think your future is ruled by luck you have to be ready for anything.
Our entire schooling system is built on this premise, it emphasizes diversification in skills and education.
Think about when you’re in high school or even university — you spend the exact same time on each subject.
We are rewarded for knowing for just enough of everything and the result:
You will be average at everything and really good at nothing.
Instead of taking the approach that you can actually shape your own future you will think very hard about your next steps and take the time to plan ahead.
You are not a lottery ticket!
Getting laser-focused early on can help you develop stand out skills and come up with those 0 to 1 type businesses that the world so desperately needs!
So how do you go about building a monopoly?
First, develop a 0 to 1 type offering for a niche market and then scale up.
To create a 0 to 1 type offering you need to create a product or service that delivers a 10x speed, performance, or convenience benefit over the status quo in order to get noticed and shift consumer behaviors.
Don’t worry about world domination at these early stages, in fact, if your TAM (Total Addressable Market) is more than a billion pounds it’s a red flag. These markets often lack a well-defined starting point and they face a lot of competition.
Remember, the key to success and value creation is to avoid competition at all costs.
How to protect your monopoly?
Monopolies aren’t worth much unless they’re protected.
You can maintain your monopoly through, network effects, economies of scale and branding.
Products like Facebook or Linkedin have network effects. The more users they have the greater the value to each user, making it incredibly difficult for someone to compete with them later.
Economies of Scale
The larger your volume the lower your average cost because of high fixed costs, making it difficult for a competitor to generate any profits. Amazon is an example of a company with great economies of scale. They are able to sell products cheaper than their competitors and still turn a profit as they have scale.
Companies like Apple and Google have spent decades developing great brands that represent quality and reliability which lowers their distribution costs. Other competitors will need a much more upfront investment in marketing to generate awareness and penetrate their market.
Peter has three core beliefs that form the backbone of his success.
- Product distribution is your largest risk fix this by remembering that growth is just as important as building a great product.
- Capitalism is the opposite of competition.
- We have the power to shape our own future.
If you want to change the world and create a 0 to 1 startup, you must focus on developing specific skills in your space that will prepare you to find the hidden solutions to the worlds problems.
What important truth do very few people agree with you on?