Hello readers! This week we’re talking about Zero to One by Peter Thiel.
This is my favorite book of 2017 so far!
Based on a class Thiel taught at Stanford, this book is intended to be an exercise in critical thinking. It absolutely delivered.
Here is my book review!
The phrase Zero to One refers to vertical progress. This means building something new as opposed to building upon something that already exists.
Vertical progress is harder to imagine because it requires doing something nobody else has ever done.
Let’s start with 3 key points that resonated with me!
Based on conventional business wisdom and the fact that we have laws (such as the Sherman Antitrust Act) ensuring fair competition, monopolies are usually cast in a negative light. However, what if I told you competition is bad and we need a more monopolistic approach? Sounds crazy, right? Well, Thiel argues in favor of monopolies very effectively in this book. Thiel believes a monopolistic approach involves a business attempting to solve a unique problem. In contrast, competition involves multiple companies all trying to solve a similar problem.
Essentially, Thiel believes developing a product or service for a new market is key. If you are able to offer a product or service that is so different and groundbreaking, you won’t be competing. Thiel argues that when we are competing we are saturating the market, and thus there is a limited amount of business we can attract. However, if you achieve vertical progress and manage to go from zero to one, you are essentially creating an environment conducive for a monopoly. I found this counterintuitive approach fascinating, because when you think about it, competition is not good. It implies that you are similar, that what you’re offering is easily replaced. But if you’re in your own category, competition doesn’t exist.
Creative monopoly means new products that benefit everybody and sustainable profits for the creator. Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival.
Let’s say you accept Thiel’s notion that adopting a monopolistic approach to business helps create a successful business. What strategies should we consider? In order to differentiate yourself, you should focus on a specific market segment. Thiel suggests to be as specific as possible, and dominate a very small market before moving forward.
Let’s look at an example of this in action. Facebook, a company that we’re all familiar with started off targeting Stanford university students. They didn’t bring their product to a larger market such as all young people in San Francisco. They focused solely on this specific market and quickly managed to have more than 50% of students using Facebook. Now, a lot has happened since then, and not every product is capable of the growth that Facebook experienced. However, if we go from zero to one and offer a product or service that solves a unique problem, creates a new market and focuse on a small market, we can set ourselves up for success.
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.
Now, we understand that we need to be innovative, develop a new market that eliminates the existence of competitors, and start dominating a small market, but there’s one more important factor to consider. Proprietary technology. Now, proprietary technology is any element that provides your business with a competitive advantage. Thiel suggests that your proprietary technology be at least 10x better than your nearest competitor. Think about that for a second. 10x better is difficult to achieve.
Why is it necessary? Because customers aren’t going to change their buying habits for incremental improvements. We are creatures of habit. If your product is 20% better, chances are we’re not going to be motivated enough to change. The technology has to be so much better that you’ve distanced yourself from your competitors so greatly that you’ve created a separate market. The difference is so visible that potential customers can’t help but notice what you’re offering is great.
Customers won’t care about any particular technology unless it solves a particular problem in a superior way. And if you can’t monopolize a unique solution for a small market, you’ll be stuck with vicious competition.
The most fundamental aspect of this book that I love is that it questions everything. Thiel flips everything you believe to be true in business on its head and convincingly explains the viability of a different approach, the Thiel approach. Even if you disagree with his philosophy, there is a lot to be learned through re-examining business assumptions we assume to be true.
Honestly, I don’t have any negatives for this book. There was nothing that I felt was lacking in any way. If anything, I didn’t want the book to end, so perhaps it could have been longer.
Who should read this?
Attention all high school and university students! I encourage you to read this book as it encourages critical thinking. What you learn in this book, is not something you will come across in your Intro to Business class. This book will give you insight into the mindset of one of the most successful businessmen of our time.
I also think if you’re considering starting your own business, this book will help you analyze if your product or service has a viable chance of succeeding. It will probably make you re-evaluate your business, question if you have developed the necessary proprietary technology and adjust the size of the market you’re targeting.