Book of the Week: Zero to One
14 Nov 2014
Zero to One is based on the notes taken by Blake Masters during Peter Thiel’s startup class at Stanford. Chapter 3 of the book and Blake’s notes are available online. Zero to one is about how to impact the future and be financially rewarded doing so. It is easier to go from 1 to N, than from zero to one.
Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.
Rat Race Reading about Peter’s early life reminded me of the people who were in the rat race from The Pursuit of Perfect. Thankfully he dropped out the rat race when he didn’t get a Supreme Court clerkship. Now I know why he is so adamant about saying the education system is very broken. He went through all the hoops and hurdles, yet he was left very unfufillled. Be a Monopoly One of the main ideas of the book, is that you should strive to be a monopoly. Being a monopoly is bad, because the government will get you, so monopolies say they are part of a bigger market. Companies that have trouble becoming a monopoly say that they are serving an artificially constrained market. If you aren’t a monopoly, then it is very hard to make any money. Without money, it is hard to invest in innovation. One should be more concerned with shaping the future than the competition. When I think about competition, I think about something becoming commoditized. Commodities are good for the general public, but not that great for the company making the commodity. They could be spending their time and energy to make something new, taking something from zero to one. For companies starting out, being a monopoly means dominating a small market.
For a company to be valuable it must grow and endure, but many entrepreneurs focus only on short-term growth.
If you want to build a valuable company, it must keep growing and last. Being a monopoly helps with lasting. Monopolies tend to have some combination of proprietary technology, network effects, economies of scale, and branding. Power Law
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.
To be a successful VC, you only need one of your investments to be a runaway success. Which means every investment you make should have a chance of being the company that makes your fund. The distribution of returns follows a power law. This also means that most startups fail and that differences between startups will be large. If you want to get rich, you are better off joining a rocket ship than starting your own company. I thank Peter for giving me a copy of Zero to One. Purchase Zero to One on Amazon.com or check it out at your local library.