Zero to One – Peter Thiel and Blake Masters

Zero To One reviewMy Rating: 9 /10
Title: Zero to One: Notes on Startups, or How to build the Future (Amazon Link)
Authors: Peter Thiel, Blake Masters

“If nothing about our society changes for the next 100 years, then the future is over 100 years away.”

Zero to One covers a lot of ground, but upon reflection the core principle presented is that innovation is required for real societal change to occur. Globalisation and competition are simply expanding the systems we already know; taking us from 1 to n, while at the same time spreading a pool of profits more thinly over a larger number of people.

Innovation and technology development provides new systems that the world hasn’t seen before; providing new sources of wealth and livelihood. Importantly, it takes us from us from 0 to 1.

“Of the six people who started PayPal, four had built bombs in high school.”

Peter Thiel is a part of an exclusive group known as the PayPal Mafia. This group of early founders and employees of PayPal have founded an impressive seven other billion dollar companies:

  • LinkedIn – Reid Hoffman
  • Palantir – Peter Thiel
  • SpaceX – Elon Musk
  • Tesla Motors – Elon Musk
  • Yammer – Russel Simmons
  • Yelp – Jeremy Stoppelman and Russel Simmons
  • YouTube – Steve Chen, Chad Hurley and Jawed Karim

“A great company is a conspiracy to change the world.”

Think of the best startups as being a slightly less extreme version of a cult. From the outside, everyone on the inside is different, but in the same way. The only real difference is that cults tend to be fanatically wrong, whereas successful startups tend to be fanatically right. They genuinely believe that they can change the world, and they do.

From the inside, everyone on the outside still looks different. More importantly, everyone else on the inside also looks different. Thiel thinks that they best thing he ever did at PayPal was to make every person responsible for just one thing. No two people had the same responsibility. Defining roles so that each person had a single primary objective that they would be judged against and defined by reduced conflict. Most fights in a company happen when colleagues compete for the same responsibilities or the same resources.

“What’s important is rarely obvious. It might even be secret.”

Perhaps the biggest secret in the world is that knowing conventional truths is important, but it won’t give you an edge. Understanding the same concepts in your class that everyone else also knows will provide you a base, a common language, and a sense of camaraderie. But it won’t help you differentiate yourself.

A common, but not necessarily the best, approach to finding a point of differentiation is to simply look on the boundaries of two disciplines. Identify what concepts have already been overlapped and then identify the concepts that haven’t. Applying familiar concepts in new places is fertile ground.

What I believe to be more powerful though is to do a deep dive and become a domain expert in a particular area. Work from the fundamentals, through the various innovations in the field to the current state of knowledge. As you do this you will become acutely aware of the limitations that exist in the field. For some this can be disheartening, the realization of just how little we actually know about what we initially thought were simple systems.

Now look to other fields and see what concepts they are working with. Identify the useful ones. Then use your expertise to not just map the concepts to partially address the limitations of your initial field of expertise (the cookie cutter approach), but rather intelligently adapt the concepts to remove the limitations entirely. This will create an entirely new set of limitations, but nonetheless it is tremendous progress. If a group of individuals or a business can achieve this, success will follow.

Sorry if that got a bit esoteric.

“What valuable company is nobody building?”

This is the key question. Every correct answer to that question is a secret. It’s hard though. Our modern world has been conspiring to root out our belief in secrets through:

  1. A culture of incrementalism.
  2. Risk aversion, where people are afraid of being wrong.
  3. Complacency – life for many is too comfortable. Few people have a sense of urgency in what they do.
  4. “Flatness” – Due to globalisation, people perceive the world as homogeneous; a highly competitive marketplace that is “efficient”.

“At the start of the 21st century, everyone agreed that the next big thing was clean technology.”

Unfortunately most cleantech companies failed. Usually because they failed to answer one of the seven questions that every business must answer:

  1. The Engineering Question. Can you create breakthrough technology instead of incremental improvements?
  2. The Timing Question. Is now the right time to start your particular 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?
  7. The Secret Question. Have you identified a unique opportunity that others don’t see?

Being able to answer one or two of those questions isn’t enough. It might get you partial success, enough to tread water for a few years. However once it is gone, will anyone remember?

“It takes hard work to make sales look easy.”

A belief you can change the world, an idea that can change they world, and colleagues standing beside you is all well and good. That is all worthless though if you can’t sell the idea and develop an effective distribution channel.

Most people underrate the importance of sales. They think a good product or service will instantly make money. They miss something though. You need to actively sell, because everyone else is. Advertising matters because it works. And it is easy to be drowned out (see my post on Permission Marketing).

The best salesman hide in plain sight. They use titles that disguise their true identity. People who sell advertising are “account executives”. People who sell to customers are “business developers”.

People who sell themselves are “politicians”.

“Statistics don’t work when the sample size is one.”

If you make your own luck, then success isn’t up to chance. Every person, situation, market and business is unique and different. Don’t fall into the trap of believing that opportunity is random. “You are not a lottery ticket.”

Start at Zero. Get to One.

“Choosing a co-founder is like getting married.”

To put it simply, Zero to One is quotable. Here’s some quotes I couldn’t fit in (but really wanted to). Think of it like your guide to the themes in the book that I didn’t cover:

  • “Managers never tire of comparing business to war.”
  • “We use headhunters to build a sales force that will enable us to take a captive market and make a killing.”
  • “The extreme opposite of a cult is a consulting firm like Accenture”
  • “Investors who understand the power law make as few investments as possible.”
  • “People overestimate the relative difficulty of science and engineering, because the challenges of those fields are obvious.”
  • “In economics, disbelief in secrets leads to faith in efficient markets.”
  • “The existence of financial bubbles shows that markets can have extraordinary inefficiencies.”
  • Unfortunately, “the more people believe in efficiency, the bigger the bubbles get.”
  • “If your industry is in a competitive equilibrium, the death of your business won’t matter to the world.”
  • “Moving first is a tactic not a goal.”
  • “You must study the endgame before everything else.”
  • “If you’re deciding whether to bring someone on board, the decision is binary.”
  • “If we define the future as a time that looks different from the present, then most people aren’t expecting any future at all.”

Go from Zero to One

I really enjoyed Zero to One. It is one of the best business books I have come across since reading The Personal MBA by Josh Kaufman. It managed to cover a broad range of topics, while still remaining focused. Something that I find to be rare.

– Stephen

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