Zero to One
The book was based on a detailed lecture note on Thiel’s lecture at Standford on startups. Peter Thiel is a billionaire serial entrepreneur and venture capitalist. He was a co-founder of PayPal, early investor of Facebook, SpaceX and many other successful startups. Through his foundation he encourages students to quit uni and start a company. He believes that they would learn a lot more than being stuck in uni environment that may stifle innovation and free thinking. To be as successful as he is, he must have conviction and self confidence to match his line of work (complete devotion to the business, take risk and win big).
I have mixed feelings about the book. It’s quite opinionated, harsh, at times, abrupt; that’s what truth was like in cut-throat business, I guess. The way the message was conveyed through out the book was inconsistent and sometimes incoherent. It swung back and forth from complete irrelevant to deep and profound.
Here are bits and pieces in the book that I like.
Starting a business
You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.
On education
Thiel was a Stanford law graduate, yet he showed disdain for formal education.
Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking. For the privilege of being turned into conformists, students (or their families) pay hundreds of thousands of dollars in skyrocketing tuition that continues to outpace inflation.
Incrementalism. From an early age, we are taught that the right way to do things is to proceed one very small step at a time, day by day, grade by grade. If you overachieve and end up learning something that’s not on the test, you won’t receive credit for it. But in exchange for doing exactly what’s asked of you (and doing it just a bit better than your peers), you’ll get an A. This process extends all the way up through the tenure track, which is why academics usually chase large numbers of trivial publications instead of new frontiers.
On decision
Either don’t throw any punches, or strike hard and end it quickly.
Company valuation
A great business is defined by its ability to generate cash flows in the future. Investors expect Twitter will be able to capture monopoly profits over the next decade, while newspapers’ monopoly days are over.
Thiel didn’t like conventional meaning of particular words, he invented his-own meaning.
(Good) Monopoly = successful company. It has proprietary technology, network effects, economies of scale, and branding.
Cult = company employees completely devote to the company mission, on which they live and breathe. They hang out among themselves in and out of work and build a very strong bond.
On venture capital
Venture capitalists aim to identify, fund, and profit from promising early-stage companies. They raise money from institutions and wealthy people, pool it into a fund, and invest in companies that they believe will become more valuable. If they turn out to be right, they take a cut of the returns—usually 20%. A venture fund makes money when the companies in its portfolio become more valuable and either go public or get bought by larger companies.
On mistakes
If the goal is to never make a mistake in your life, you shouldn’t look for secrets (things that will bring you success that no one else see). The prospect of being lonely but right—dedicating your life to something that no one else believes in—is already hard. The prospect of being lonely and wrong can be unbearable.
Lesson on remuneration in startups
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. Anyone who prefers owning a part of your company to being paid in cash reveals a preference for the long term and a commitment to increasing your company’s value in the future. Equity can’t create perfect incentives, but it’s the best way for a founder to keep everyone in the company broadly aligned.
On relationship at work
If you can’t count durable relationships among the fruits of your time at work, you haven’t invest your time well—even in purely financial terms.
On salespeople
Nerds/engineers underestimate the significance of salespeople. They believe that if the product is good, it will sell itself. Thiel disagreed and held salespeople or ability to sell in high regards. He believed that everyone sells something. Investment bankers sell companies. Professors sell themselves through academic self-promotion. Good sale is hidden. You wouldn’t know that you are being persuaded to buy.