Peter Thiel’s Zero to One — (Books done quick, BDQ)
Thiel’s Zero to one is a short read full of lessons that need to be internalized. It is ironic that the series is called books done quick. The following is a chapter by chapter summary of the book itself. A large portion of Thiel’s historic reflections have been omitted and this summary focuses on its practical business implications.

Technology is miraculous because it allows us to do more with less, ratcheting up our fundamental capabilities to a higher level.
01 The challenge of the future
The now famous contrarian question: “What important truth do very few people agree with you on?”
A good answer takes this form: “Most people believe in x, but the truth is the opposite of x”.
What makes the future distinctive and important isn’t that it hasn’t happened yet, but rather that it will be a time when the world looks different from today. The only thing about the future we know is that it’s going to be different and it must be rooted in today’s world. Most answers to the contrarian question are different ways of seeing the present; good answers are as close as we can come to looking into the future.
Thiel differentiates two types of progresses:
- Horizontal or extensive progress: this is the progress where people copies things that work. It is easy to imagine. For example, globalization is taking things that work somewhere and making them work everywhere.
- Vertical or intensive progress: this is doing something that’s new and it is harder to imagine. This comes from technology. This is a macro definition of technology: any new and better way of doing things is technology.
To leverage for the future, startup is the right org to do vertical/intensive progress. It is defined to be the largest group of people you can convince of a plan to build a different future. A central tenet to the thought exercise is to question received ideas and rethink business from scratch.
02 Party like its 1999
Revisiting the contrarian question, the best way to deal with that is to start with a preliminary: what does everybody agree on? If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.
Nietzsche’s thoughts on madness: “It is rare in individuals but in groups, parties, nations and ages it is the rule”
The first step to thinking clearly is to question what we think we know about the past. Peter goes on to reccount the history of the 90s and ends the narrative with four lessons that guide today’s thinking:
- Make incremental advances — small, incremental steps are the only safe path forward
- Stay lean and flexible — iterate and experiment
- Improve on the competition- the only way to know you have real business is to start with an already existing customer and improve on the existing products
- Focus on product, not sales — tech is primarily about product dev not distribution.
However people disagrees loudly with these conclusions:
- It is better to risk boldness than triviality
- A bad plan is better than no plan
- Competitive markets destroy profits
- Sales matters just as much as the product (Distribution)
The true contrarian principle is not to oppose the crowd but to think for yourself.
03 All happy companies are different — “Winners take all”
On starting a company, creating value is not enough — you also need to capture some of the value you create. Peter doesn’t believe in profits in perfect competition. He believes the opposite — the monopoly. He defines monopoly as a kind of company that’s so good at what it does that no other firm can offer a close substitute.
His core tenet: if you want to create and capture lasting value, don’t build an undifferentiated commodity business. Looking at all the firms that are out there, there are two broad categories — monopolistic and the undifferentiated. Each is incentivized to lie about their true nature.
Monopolistic firms want to conceal their monopoly by exaggerating the power of their (nonexistent) competition. The undifferentiated tend to understate the scale of competition. Entrepreneurs tend to do the same but that’s the biggest mistake to make. A more logical characterization:
- Undifferentiated exaggerate their distinction by defining their market as the intersection of various smaller markets
- Monopolists disguise their monopoly by framing their market as the union of several large markets
In perfect competition, a business is so focused on today’s margins that it can’t possibly plan for a long-term future. Only one thing allow a business to transcend the daily brute struggle for survival: monopoly profits. The history of progress is a history of better monopoly businesses replacing incumbents.
Every business is successful exactly to the extent that it does something others cannot. Monopoly is the condition of every successful business. All failed companies are the same: they failed to escape competition.
04 The ideology of competition
We preach competition, internalize its necessity and enact its commandments; and as a result, we trap ourselves within it — even though the more we compete the less we gain. (Pyrrhic Victory)
But it doesn’t mean that we shouldn’t fight. When that’s true, you should fight and win. There’s no middle ground. I repeat, no middle ground. Either don’t throw any punches, or strike hard and end it quickly.

05 The last mover Advantage
Being a monopoly escapes competition but it is only a great business if it can endure. Now what characteristics do monopoly have? These aren’t meant to be a checklist but instead meant to help guide the understanding of what’s durable. Peter describes the following:
- Proprietary technology: it is the most substantive advantage because it makes your product difficult or impossible to replicate. A good rule of thumb is that it must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell. You can radically improve an existing solution: once you are 10x better, you escape competition. How that improvement looks like differ and has many solutions.
- Network effects: it makes a product more useful as more people use it. However, you will never build network effects unless the product is valuable to its very first user when the network is necessarily small. Network effects businesses must start with especially small markets.
- Economies of scale: A good startup should have the potential for great scale built into its first design. It is important because companies can spread out fixed costs over large quantities of sales. The good economies of scale is achieved when the marginal cost of producing another copy of the product is close to zero.
- Branding: the company has a monopoly on its own brand by definition. Creating a strong brand is a powerful way to claim a monopoly. However, caution about the branding is that beginning with brand rather than substance is dangerous. No tech company can be built on branding alone.
These are the characteristics and Peter also provides a step by step guide to how monopoly should be achieved. Getting the four characteristics to work together, the market needs to be chosen carefully and it should be expanded deliberately:
- Start small and monopolize: every startup is small at the start. Every monopoly dominates a large share of its market. Every startup should start with a very small market. Always err on the side of starting too small. The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse.
- Scale up: Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets. Sequencing markets correctly is underrated and it takes discipline to expand gradually. The most successful companies make the core progression — to first dominate a specific niche and then scale to adjacent markets — a part of their founding narrative.
- On disruption: 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. As you craft plans to expand to adjacent markets, don’t disrupt: avoid competition as much as possible. Disruption attracts attention. Try not to attract attention.
- Moving first vs last: moving first is a tactic not a goal. What matters is generating cash flows in the future. Grandmaster Jose Raul Capablanca puts it well: to succeed, you must study the end game before everything else.
06 You aren’t a lottery ticket
In this chapter, Peter describes lessons of history and attempts to understand the push and pull between the definite and the indefinite. Peter favors the definite view of the future. There is a definitive future. One can plan for that definitive vision. One can be wrong and make a bad plan but that’s still an order of magnitude better than no plans. Long term planning is often undervalued by the indefinite short term world. A business with a good definite plan will always be underrated in a world where people see the future as random.

07 Follow the money
The power law is the law of the universe — it describes severely unequal distributions. It defines our surroundings so completely that we usually don’t even see it. In venture capital, the return follows a power law: a small handful of companies radically outperform all others. If you focus on diversification instead of single minded pursuit of the very few companies that can become overwhelmingly valuable, you will 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 combines. This implies two rules of VC investing:
- Invest in companies that have the potential to return the value of the entire fund
- Because rule 1 is so restrictive, there can’t be any other rules.
Peter then talks about how to apply this power law in other areas of life. For example, in choosing a career, one should act on your belief that the kind of work you do will be valuable decades from now. You should focus relentlessly on something you are good at doing, but before that you must think hard about whether it will be valuable in the future.
What’s most important is rarely obvious.
08 Secrets
Contrarian thinking doesn’t make any sense unless the world still has secretes left to give. People aren’t active in finding secrets because of 4 reasons: 1. People are taught at a young age to do things by proceeding one small step at a time. 2. Risk aversion 3. Complacency 4. The world is flat.
Peter then talks about 2 secrets categories: 1. secrets of nature and 2. secretes of people. To identify these two secrets, you need to ask:
- What secrets is nature not telling you?
- What secrets are people not telling you?
Secrets about the people are under appreciate it. Simply reflect, what are people not allowed to talk about? What’s forbidden or taboo? Now there are many reasons an individual is forbidden to talk about. It could be an external factor, could be an internal factor, or some combination of both. Are there any fields that matter but haven’t been standardized and institutionalized?
The best entrepreneurs know that every great business is built around a secret that’s hidden from outside.
09 Foundations
Foundations matter and they are critical when starting out. The founders should have pre-history with one another. Misalignment is dangerous. It’s required to distinguish between three concepts:
- Ownership: who legally owns a company’s equity?
- Possession: who actually runs the company on a day to day basis?
- Control: who formally governs the company’s affairs?
Anyone who doesn’t own stock options or draw a regular salary from the company is fundamentally misaligned. For people to be fully committed, they should be properly compensated. Cash is attractive. It offers pure optionalityL once you get your paycheck, you can do anything you want with it.
Each individual has different opportunity costs, so equal amounts will seem arbitrary and unfair from the start.

10 The mechanics of mafia
Don’t spend time with people you don’t like.
The mission is to recruit people who believe in your mission. The true draw to working together:
The opportunity to do irreplaceable work on a unique problem alongside great people. You probably can’t be the Google of 2014 in terms of compensation or perks, but you can be like the Google of 1999.
Everyone at your company should be different in the same way — a tribe of like minded people fiercely devoted to the company’s mission. On the inside, everyone should be sharply distinguished by her work.
The best startups might be considered slightly less extreme kinds of cults. The biggest difference is that cults tend to be fanatically wrong about something important. Startups are fanatically right about something those outside it have missed.
11 If you build it, will they come?
Sales is completely the opposite of engineering. It is an orchestrated campaign to change surface appearances without changing the underlying reality. It takes hard work to make sales look easy.
Sales is hidden. Salesmen are actors: their priority is persuasion, not sincerity. Sales works best when hidden. This explains why almost everyone whose job involves distribution — has a job title that has nothing to do with sales.
The most fundamental reason that even businesspeople underestimate the importance of sales is the systematic effort to hide it at every level of every field in a world secretly driven by it.
IT is better to think of distribution as something essential to the design of your product. If you have invented something new but you haven’t invented an effective way to sell it, you have a bad business. Superior sales and distribution by itself can create a monopoly, even with no product differentiation.
Two metrics set the limits for effective distribution. CAC (Customer acquisition cost) and CLV (Customer Lifetime value). In evaluating the right go to market strategy, CAC and CLV limit the GTM approaches. Recall Jerry Chen’s article on unit of value and the article on GTM when no market exists. Both feature a chart that looks something similar to below:

Channels used depends on the relationships between CAC and CLV. That relationship derives the following channels:
- Complex sales: ticket size of 1–100 mil. Best use of CEO and or other executives
- Personal sales: ticket size of 10,000–100,000. Executive sales team. There’s a dead-zone between personal sales and traditional advertising.
- Marketing and advertising: these work on relatively low priced products that have mass appeal but lack any method of viral distribution.
- Viral: a product is viral if its core functionality encourages users to invite their friends to become users too. Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.
One of these methods is likely to be far more powerful than every other for any given business: distribution follows a power law of its own. If you can get just one distribution channel to work, you have a great business. If you try for several but don’t nail one, you are finished.

12 Men and Machine
The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than to make them obsolete. Technology is the one way for us to escape competition in a globalizing world.
Technology is supposed to increase our mastery over nature and reduce the role of chance in our lives; building smarter than human computers could actually bring chance back with a vengeance.
13 Seeing green
The seven questions that every business must answer:
- The engineering question: Can you create breakthrough technology instead of incremental improvements? A great tech company should have proprietary technology an order of magnitude better than its nearest substitute. Companies need to strive for 10x because mere incremental improvements mean no improvements at all.
- The timing question: Is now the right time to start your particular business? Entering a slow moving market can be a good strategy, but only if have a definite and realistic plan to take it over.
- The monopoly question: Are you starting with a big share of a small market? Exaggerating your own uniqueness is an easy way to botch the monopoly question.
- The people question: do you have the right team? The salesman execs are good at raising capital and securing government subsidies, but they were less good at building products that customers wanted to buy.
- The distribution question: do you have a way not just create but deliver your product?
- The durability question: will you market position be defensible 10 and i2 years in to the future? That starts with asking yourself: what will the world look like 10 and 20 years from now, and how will my business fit in?
- The secret question: Have you identified a unique opportunity that others don’t see? Specific reasons for success that other people don’t see.
An entrepreneur can’t benefit from macro scale insight unless his own plans begin at the micro scale. A valuable business must start by finding a niche and dominating a small market.

14 The founder’s paradox
More lessons of history by Thiel. The single greatest danger for a founder is to become so certain of his own myth that he loses his mind. But an equally insidious danger for every business is to lose all sense of myth and mistake disenchantment for wisdom.
15 Stagnation or singularity
Peter sees 4 world end states:
- Recurrent collapse
- Plateau
- Extinction
- Takeoff
