The phrase Zero to One refers to vertical progress. This means building something new as opposed to building upon something that already exists.
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.
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.
Thiel flips everything you believe to be true in business on its head and convincingly explains the viability of the ‘Thiel approach’ to business. Even if you disagree with his philosophy, there is a lot to be learned through re-examining business assumptions we assume to be true.
This book is for you if…
- You are a high school or university student – The business insight gained from this book is unlike anything you find in your traditional business classes
- You are starting your own business – This book will help you analyze if your product or service has a viability