Notes on Startups, or How to Build the Future

Get the gist of Peter Thiel’s popular manifesto in 3 minutes

Peter Thiel, staring deep into your soul

Peter Thiel’s Zero to One: Notes on Startups, or How to Build the Future has received a pile of praise, and rightly so. The book is full of interesting musings about the future and practical recommendations to consider when starting a company.

I’ve summarized the crucial takeaways from the book below.

Takeaway #1

Technology is the future and the only way to ensure that you will have a sustainable business. The way to identify new technologies and companies is to ask the question, “What important truth do very few people agree with you on?” This is how you start to think in a contrarian manner.

Uncovering secrets lead to future advancement. What secrets is nature not telling you? What secrets are people not telling you? What are people not allowed to talk about and is taboo? The answers behind these questions reveal valuable opportunities for great companies.

Takeaway #2

Monopolies are actually very important because they make big profits that will allow research for better products. Ensure you will have a monopoly by building a proprietary technology, which must be 10x better than the closest substitute.

Perhaps the most important question: will this business be around a decade from now? Businesses have to grow and endure. Ways to endure: proprietary technology, network effect (better service as more people use it — like Facebook), economies of scale and branding.

Takeaway #3

Competition is merely a theory that distracts us from what is important. Education is an unfortunate example — competition turns kids into conformist robots. “Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past.”

Start small. It is much easier to dominate a small, niche market than a large one. Scale carefully by avoiding competition.

Takeaway #4

You make your own luck. “Victory awaits him who has everything in order — luck, people call it.” Understand a definite view of the future, and then work towards it. Being able to evolve is great, but “intelligent design works best.”

The power law — exponential growth — is the law of the universe. A small few will radically outperform all the others. Think top 1%, powerful companies and individuals. The best investors make as few investments as possible.

Takeaway #5

Firm culture is pivotal. Good companies have outstanding teams and inspiring missions. As the great Peter Drucker said, “Culture eats strategy for breakfast.”

Effective companies incentivize employees correctly. Cash payment is immediate gratification and deters long-term thinking. Equity is the opposite.

Takeaway #6

Sales are just as important as good products. However, sales are best when they are hidden. People don’t like to be sold. Advertising/PR is crucial — what does the public think about you and what do people find when they Google you?

Quotes and tidbits

  • Having a bit of Asberger’s — as in, not being too keen on social cues — is actually a good thing when you’re trying to create something revolutionary. Lots of people will tell you that you’re wrong — develop a way to ignore them.
  • “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.”
  • “Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.”
  • “The biggest secret in venture capital is that the best investment in a successful company equals or outperforms the entire rest of the fund combined.”
  • “A great company is a conspiracy to change the world.”
  • “People who sell themselves are called politicians.”
  • Early stage marketing requires smart techniques, not expensive ones. Get the most valuable customers first.
  • Founders of great companies are usually weirdos.

Further questions

  • Why do we compete? Answer this from a psychological/biological perspective.
  • Sure, the way to make something happen is to understand a definite future and work towards it. But isn’t it advantageous to diversify our ideas/investments since most people aren’t genius visionaries?
  • Should we have regulations against monopolies? Or should we let them do as they please?
  • Isn’t a key skill in raising funds and managing people being able to cooperate with others and understand social cues?
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