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How to Build Something From Nothing: A Review of Peter Thiel’s Zero to One (2/52)

How to Build Something From Nothing: A Review of Peter Thiel’s Zero to One (2/52).

I've recently decided to attempt the arduous task of reading a book a week and summarizing my thoughts on the book in question. This is my second out of 52.

I'm Roger, startup growth guy for Springboard, food lover, sometimes-blogger teaching code at code(love) whose unifying theme is the belief that learning will rule the 21st century. I spend a lot of my time thinking about how to best optimize learning not only for myself, but for everybody around me.

Here's my latest from Peter Thiel's startup insight repository , Zero to One.

I like to write of people in a causal, first-name basis even if I've never really met them because that's just the voice that flows naturally from me. I'm not a big stickler for etiquette. I did have the opportunity to ask Peter at Web Summit what idea he'd be working on if he was an entrepreneur--he said something in healthtech focused on prolonging lives. We are by no means connected by anything more than that brief question.

Peter Thiel starts his book by challenging you to think about what is popularly accepted, and why that’s wrong. Contrarianism runs throughout his life, and it is enmeshed in every chapter of his book Zero to One. The thesis of his book flows from this questioning of convention: businesses should seek to escape from competition and become creative monopolies, overturning decades of capitalistic thinking on how competition makes best.

That is the nominal theme. The chapters of the book flow back and forth from personal perspective to philosophical musing. This is a function of how the book was built as an extension of class notes from his course at Stanford on how to start a successful startup. What is left remains a somewhat disjointed, yet valuable set of insights.

The central, animating insight is as follows: the new monopoly that Google represents is a force for good, not only for the entrepreneurs who created it, but also for society at large. Creative monopolies increase value for consumers at an exponential rate. They are rewarded for this with excess protected profits, similar in effect to a de facto patent grant achieved not through the pursuit of justice, but through the pursuit of product excellence.

Within that idea are a few themes that remained unexplored--and few points are made with systematic rather than anecdotal data. We are never told of the greater implications of monopoly as virtue for consumers, besides the caveat that like the creation patents spur, creative monopolies are win-win for all (except, one would assume, for low-income drug buyers).

The book seems moored to its particular point in history, never examining too much of the past except for its obvious analogue in the tech bubble of the 2000s (a look at what happened in the Gilded Age of the past might have made for great flavor, and great context as to the effects of monopoly on society).

The book seems to be fixated on the idea that new creative monopolies will disrupt old ones without wondering whether or not these last few years are merely the beginning of the digital economy or its inevitable continuation. Google and Facebook have already acquired many of their potential competitors, or strangled them with products that they can afford to host for a loss in the name of experimentation. That could be a trend that stays with us throughout the future.

The book does shine if you consider it a personal perspective on how great companies are built. You can tell that it isn’t set out to provide a grand sweeping meta-study on entrepreneurship and economic models. Set as the view of an authority on what contributes to optimizing for a certain set of conditions (the most amazing companies in the world), it makes for very good reading.

It should be noted here that while a lot of the evidence is anecdotal, it is anecdote of the strongest kind. Peter co-founded Paypal, and even now the culture he set way back then has helped cultivate the Paypal Mafia responsible for Internet titans such as Youtube, Linkedin, and Tesla.

He has quite a few tangible and actionable points on how to build the great startup ideas of the future. I’ve summarized five as a conclusion of sorts:

1) Look to build something 10x better, and go from 0 to 1. Build something new rather than transferring something old. A company that wants to succeed needs to build tons of value for its target group through innovation.

2) A great product doesn’t sell itself. Silicon Valley is obsessed with a product-first mentality--which is healthy until it begins to totally ignore the function of distribution. You can have a great product but with no means of distribution, you don’t have a business. A great business can get one channel going really well and focus on optimizing that channel--engineers tend to think the product itself is a channel, or they tend to try everything and see nothing work due to lack of focus.

3) Start small. A giant is never born the way it is now. Peter targeted Paypal at the beginning to a very narrow niche of powersellers on EBay--the product only succeeded because it jumped from one niche to another rather than trying to focus on all of them at once (an impossible task).

4) Use all of the resources you can. Peter points to Elon Musk using government funding to get his company to where it needed to be. Government funding on its own is definitely neither sufficient nor perhaps even necessary to build a great company, but what's important is realizing when exactly you need to leverage every resource at your availability. Don’t be shy to take what is needed to go from 0 to 1.

5) Ensure you start with the right foundation. There is nothing so foundational in a company as the co-founder relationship that will set the culture and define the future for any new venture. Your culture will become a critical part of what holds your company together: how you met your co-founder, and who you choose to join your early team are critical choices. Make sure your initial co-founder is somebody you’re ready to marry for the long-term (experience in your relationship counts) and make sure your early team reflects your values: they will hire the rest of the company for you.

Image Credit: https://www.flickr.com/photos/liewcf/17977023263

I'm reading through Make It Stick next, a book on maintaining the best learning habits: keep posted on the next recap by signing up to my mailing list :)

Comment below if there's a book you'd like me to review!

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