This book is written by Peter Thiel, an American entrepreneur, venture capitalist and former founder of Pay Pal. The book is based on the idea that every moment in business happens only once and that it is easier to copy a model than to make something new. As stated by the author, “doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1“.
The twenty main takeaways I got out of this book are:
- Today’s “best practices” lead to dead ends; the best paths are new and untried.
- The single most powerful pattern I have noticed is that successful people find value in unexpected places.
- No one can predict the future exactly, but we know two things: it is going to be different, and it must be rooted in today’s world.
- At the macro level, the single word for horizontal progress is globalization… The single word for vertical, 0 to 1 progress is technology. The rapid progress of information technology in recent decades has made Silicon Valley the capital of “technology” in general. Globalization and technology are different modes of progress, it is possible to have both, either, or neither at the same time.
- Most people think the future of the world will be defined by globalization, but the truth is that technology matters more. Without technological change, if China doubles its energy production over the next two decades, it will also double its air pollution… In a world of scarce resources, globalization without technology is unsustainable…. Today our challenge is to both imagine and create new technologies that can make the 21st century more peaceful and prosperous than the 20th.
- Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can… Positively defined, a startup is the largest group of people you can convince of a plan to build a different future… Because that is what a startup has to do: question received ideas and rethink business from scratch.
- The entrepreneurs who stuck with Silicon Valley learned four big lessons: 1) make incremental advances (small, incremental steps are the only safe path forward); 2) stay lean and flexible (you should try things out, “iterate” and treat entrepreneurship as agnostic experimentation); 3) improve on the competition (don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors); and 4) focus on product, not sales (if your product requires advertising or salespeople to sell, it is not good enough: technology is primarily about product development, not distribution.)
- Creating value is not enough – you also need to capture some of the value you create… More than anything else, competition is an ideology – the ideology – that pervades our society and distorts our thinking… Even though the more we compete, the less we gain… Our educational system both drives and reflects our obsession with competition. Grades themselves allow precisely measurement of each student’s competitiveness… We teach every young person the same subjects in mostly the same ways, irrespective of individual talents and preferences.
- Managers never tire of comparing business to war… War metaphors invade our everyday business language… But really it is competition, not business, that is like war: allegedly necessary, supposedly valiant, but ultimately destructive… Competition can make people hallucinate opportunities where none exist… Winning is better than losing, but everybody loses when the war isn’t worth fighting.
- The value of business today is the sum of all the money it will make in the future… Technology companies follow an opposite trajectory. They often lose money for the first few years: it takes time to build valuable things, and that means delayed revenue.
- Every startup should start with a very small market… It is easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is… Small doesn’t mean nonexistent… Once you dominate a niche market, then you should gradually expand into related and slightly broader markets.
- Moving first is a tactic, not a goal. What really matters is generating cash flows in the future…. Can you control your future? You can expect the future to take a definite form or you can treat it as hazily uncertain…. Long-term planning is often undervalued by our indefinite short-term world.
- Every great company is unique, but there are a few things that every business must get right at the beginning… a startup messed up at its foundation can not be fixed.
- Cash is attractive. It offers pure optionality: once you get your paycheck, you can do anything you want with it. However, high cash compensation teaches workers to claim value from the company as it already exists instead of investing their time to create new value in the future. A cash bonus is slightly better than a cash salary – at least it is contingent of a job well done.
- What would the ideal company culture look like? Employees should love their work. They should enjoy going to the office so much that formal business hours become obsolete and nobody watches the clock… But you can’t accomplish anything meaningful by hiring an interior decorator to beautify your office, a “human resources” consultant to fix your policies, or a branding specialist to hone your buzzwords. “Company culture” does not exist apart from company itself: no company has a culture; every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.
- Recruiting is a core competency for any company. It should never be outsourced. You need people who are just not skilled one a paper but who will work together cohesively after they are hired… Talented people don’t need to work for you; they have plenty of options. You should ask yourself a more pointed version of the question: Why would someone join your company as its 20th engineer when she could go work at Google for more money and prestige?
- Even though sales is everywhere, most people underestimate its importance. Silicon Valley underrates it more than most…. Two metrics set the limits of effective distribution. The total net profit that you earn on average over the course of your relationship with a customer (Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC). In general, the higher the price of your product, the more you have to spend to make a sale – and the more it makes sense to spend it.
- If your average sales is six figures or more, every detail of every deal requires close personal attention. It might take months to develop the right relationships. You might make a sale only once every year or two. Then you will usually have to follow up during installation and service the product long after the deal is done. It is hard to do, but this kind of “complex sales” is the only way to sell some of the most valuable products… Complex sales work best when you don’t have “salesmen” at all.
- Marketing and advertising work for relatively low-priced products that have mass appeal but lack any method of viral distribution… Advertising can work for startups, too, but only when your customer acquisition cost and customer lifetime value make every other distribution channel uneconomical.
- Seven questions every business must answer: the Engineering question (Can you create breakthrough technology instead of incremental improvements?); 2) the Timing question (Is now the right time to start your business?); 3) The Monopoly question (Are you starting with a big share of a small market?); 4) the People question (Do you have the right team?); 5) the Distribution question (Do you have a way to not just create but deliver your product?); 6) the Durability question (Will your market position be defensible 10 and 20 years into the future?); and 7) the Secret question (Have you identified a unique opportunity that others don’t see?).
Overall, Peter Thiel states that our task today is to find singular ways to create the new things that will make the future not just different, but better – go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future.