Zero to One: Notes on Startups, or How to Build the Future - By Peter Tiel and Blake Masters
Date read: 2016-01-15How strongly I recommend it: 8/10
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Peter Tiel, co-founder of PayPal, talks about what it takes to build a great startup in Silicon Valley. Insightful book that explains it takes more than just thinking differently to be successful.
Contents:
My Notes
“What important truth do very few people agree with you on?” My own answer to this contrarian question is that most people think the future of the world will be defined by globalization, but the truth is that technology matters more.
The future is going to be different, and it must be rooted in today’s world.
Horizontal or extensive progress means copying things that work — going from 1 to n (i.e. globalization). Vertical or intensive progress means doing new things — going from 0 to 1.
A startup is the largest group of people you can convince of a plan to build a different future. They have to question received ideas and rethink business from scratch.
Four big lessons from the dot-com crash that still guide business thinking today (false):
Yet the opposite principles are probably more correct:
Ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes? The most contrarian thing of all is not to oppose the crowd but to think for yourself.
If you want to create and capture lasting value, don’t build an undifferentiated commodity business.
In startups, intelligent design works best.
“Thiel’s law”: a startup messed up at its foundation cannot be fixed.
Ownership: who legally owns a company’s equity? Possession: who actually runs the company on a day-to-day basis? Control: who formally governs the company’s affairs?
Part-time employees don’t work. Even working remotely should be avoided, because misalignment can creep in whenever colleagues aren’t together full-time, in the same place, every day.
A company does better the less it pays the CEO—that’s one of the single clearest patterns I’ve noticed from investing in hundreds of startups. In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary.
Less obvious understanding of the founding: it lasts as long as a company is creating new things, and it ends when creation stops.
Monopolists lie to protect themselves. They know that bragging about their great monopoly invites being audited, scrutinized, and attacked. They disguise their monopoly by framing their market as the union of several large markets. Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better. This is the condition of every successful business.
Non-monopolists tell the opposite lie: “we’re in a league of our own.” They exaggerate their distinction by defining their market as the intersection of various smaller markets.
Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past.
The value of a business today is the sum of all the money it will make in the future.
If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now?
Every monopoly is unique, but they usually share some combination of the following characteristics:
As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.
It’s much better to be the last mover — that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits.
Instead of working tirelessly to make herself indistinguishable, she strives to be great at something substantive — to be a monopoly of one.
Only in a definite future is money a means to an end, not the end itself.
In philosophy, politics, and business, too, arguing over process has become a way to endlessly defer making concrete plans for a better future.
A business with a good definite plan will always be underrated in a world where people see the future as random.
The Power Law: a small handful of companies radically outperform all others.
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.
Every single company in a good venture portfolio must have the potential to succeed at vast scale.
There are two kinds of secrets: secrets of nature and secrets about people.
Secrets about people are different: they are things that people don’t know about themselves or things they hide because they don’t want others to know.
Two distinct questions to ask: What secrets is nature not telling you? What secrets are people not telling you?
What are people not allowed to talk about? What is forbidden or taboo?
No company has a culture; every company is a culture.
Why would someone join your company as its 20th engineer when she could go work at Google for more money and more prestige?
Good answers: answers about your mission and answers about your team.
You probably can’t be the Google of 2014 in terms of compensation or perks, but you can be like the Google of 1999 if you already have good answers about your mission and team.
From the outside, everyone in your company should be different in the same way. On the inside, every individual should be sharply distinguished by her work.
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).
Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.
Any prospective employee worth hiring will do his own diligence; what he finds or doesn’t find when he googles you will be critical to the success of your company.
The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.
As computers become more and more powerful, they won’t be substitutes for humans: they’ll be complements.
But big data is usually dumb data. Computers can find patterns that elude humans, but they don’t know how to compare patterns from different sources or how to interpret complex behaviors. Actionable insights can only come from a human analyst (or the kind of generalized artificial intelligence that exists only in science fiction).
They’ll ask: how can computers help humans solve hard problems?
Seven questions that every business must answer:
Companies must strive for 10x better because merely incremental improvements often end up meaning no improvement at all for the end user.
The best projects are likely to be overlooked, not trumpeted by a crowd; the best problems to work on are often the ones nobody else even tries to solve.