Review of Peter Thiel's book “From Zero to One”

The new book by Peter Thiel “ From Zero to One ” is a clear and deep story about what capitalism and success in the economy of the 21st century means. It tells how to create companies that can produce fundamentally new. The author writes about everything he learned from his own experience, being a co-founder of PayPal and Palantir, and later on investing in hundreds of startups, including Facebook and SpaceX. Til is definitely a man of outstanding qualities. They made him famous and inspired the authors of the series “ Silicon Valley ” to create the image of Peter Gregory, the continuation of which, by the way, will be available for free from April 14.

Indeed, the projects in which he somehow participates seem to have been invented by a science fiction writer: a company that develops biotechnology for eternal youth, an organization that is going to create human communities in the ocean, a foundation that pays teens to drop out of college and go into business, engaged in the analysis of large amounts of data, which, according to rumors, contributed to the capture of Osama bin Laden.

The book is written in clear language, filled with capacious aphorisms and constantly makes you think. Thiel's most provocative statement: “competition is for losers”; monopoly is what an entrepreneur needs. Til gives his idea very ingeniously - controversial enough to provoke discussion, but also sensibly enough that with a gradual understanding it would be easy to find a reasonable grain. Thiel does not say that capitalism is bad. He says: just because capitalism is so good for the consumer, it has become a hell for companies. Businesses with really high competition, such as airlines of the same type or restaurants, see how their competitors and non-regular customers reduce profits. Before you grow, a startup starts small. An entrepreneur should strive to dominate a small market. In other words, he should try to build a mini-monopoly.

Thiel writes: “The ideal target market for a startup is a small group of well-defined people served by a small number of competitors or no one at all.” Many successful services, such as Facebook and PayPal, first started in small communities of advanced users. These first users tested the product, found bugs and helped to tell about the product to the world after expanding the company. The Harvard Alumni Online Magazine may not sound like a billion-dollar idea, but today Facebook is worth 200 billion dollars because Zuckerberg monopolized colleges before conquering the world.
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The book immediately begins with a very inspiring text about the fact that it is necessary to build something new, and not to deal with endless competition:

Every business event happens only once. New Bill Gates will not create an operating system. New Larry Page and Ser-gay Bryn will not invent a search engine. And the new Mark Zuckerberg will not build a social network. If you copy these guys, it means that you have not learned anything from them. Of course, copying a model is much easier than creating something new. Doing what we already know how to do, we move the world from one to two and further, to an arbitrarily large number N, increasing the amount of what already exists. But whenever we create something of our own, we take a step from zero to one. Every creative act is unique, like the moment of creation, and each time the result is something new and amazing.

In the third chapter, the author gives an example of competition in air travel:

American airlines annually serve millions of passengers, earning hundreds of billions of dollars. But in 2012, when the average price of a one-way ticket was $ 178, airlines earned just 37 cents per flight from each passenger. Compare with Google’s revenue — a company that earns less in absolute terms, but it is head and shoulders above competitors when it comes to net income. In 2012, Google earned $ 50 billion (while US airlines - $ 160 billion), but 21% of this money was net income: that is, Google's net profit was almost 100 times higher than that of air carriers.

If you want to create and save revenues, do not build a business based on the production of goods that are no different from the products of competitors.

Thiel came to the Valley in 1985. He graduated from Stanford twice, which, however, did not at all relieve him of the conviction that college was a waste of time. In 1998, he founded PayPal (then called Confinity) with a group of friends. After 2 years, at the peak of the dot-com bubble, he teamed up with Elon Mask - probably the most famous scholar in the Valley, who just founded a similar company - X.com - just a couple of blocks away.

In the second chapter, about which we, by the way, wrote in detail before the book was published, Thiel said: “Entrepreneurs who have remained loyal to Silicon Valley learned four big lessons from the history of the collapse of the dot-com bubble. These lessons today remain the basis for modern business thinking. "

1. Be careful in forecasts.
Great expectations helped inflate the dot-com bubble, so don't encourage them. Anyone who promises to do great things should be suspicious. The one who threatens to change the world must first learn to behave more modestly. Moving forward in small steps is the only way to advance without endangering yourself.

2. Act flexibly, adjust to reality.
Every company should learn to act flexibly - that is, not according to plan. Do not try to decide what your business is like: planning betrays excessive overconfidence and lack of adaptability. Try different methods, use a variety of options, treat entrepreneurship as a series of experiments for the skeptic.

3. Develop in the course of competition.
Do not try to create a new market ahead of time. The only way to make sure that your business is worth something is to start working with already mature clients and build your business, improving a recognizable product that is already
offer on the market successful competitors.

4. Think about the product, not about sales.
If your product needs advertising or sales agents to win market space, it’s not too great: technology requires you to focus on developing and improving the product, not on distributing it. In the era of the dotcom bubble, advertising was a waste of money. The only method to achieve sustainable growth is viral spread.

In the world of startups, these lessons have become a dogma. Anyone who decides to ignore them is doomed to incur the wrath of fate, overtaking the world of high technology at the time of the collapse of 2000. Perhaps it would be better to act in exactly the opposite way.

1. It is better to risk and be too brave than to be banal.
2. A bad plan is better than no plan.
3. Highly competitive markets kill hope for profitability.
4. Sales are as important as the product.

Not every day you hear how techie exalts sales. Til explains well why techies don't like salespeople, and why techies are wrong. “Techies are skeptical of advertising, marketing and sales, because it all seems superficial. They know how hard their own work is, so when they look at sellers who are chatting on the phone with buyers and going to two-hour meals, they suspect that there is no real work here. In general, people overestimate the relative complexity of science and technology, because the challenges and difficulties in these areas are obvious. Techies do not understand that making sales look simple is not at all easy ... If you invented something new, but didn’t invent a way to sell it, you have a bad business, no matter how good your product is. ”

The chapters on sales and distribution hide more simple wisdom than in other business books on the same topics.

It is a pity that Thiel did not pay due attention to the culture of failure, but endlessly builds a theory of success. In the chapter on luck - “ You are not a lottery ticket ” - the author defends the idea that mastery is more important than luck in the market. But in the next chapter, “ Go where the money is, ” he admits that most of the rates of venture investors fail. He writes: “The main secret of venture financing is that the best investment in a successful fund is equal to or exceeds the rest of the fund.” This is, in essence, a version of the Pareto law for venture investments: a small number of investments will bring a huge, disproportionately high gain, and it is almost impossible to guess which investments exactly.

Therefore, a complete denial of the effect on startups of chance and luck is at least debatable.

The author wrote a treatise that will inspire entrepreneurs, but he also inspires the whole genre. The book "From Zero to One" came to the market with low competition and by example proved the principle stated in it. Among the competing books on business, she built a mini-monopoly.

PS This review is a continuation of a series of articles on PayPal Mafia ( 1 , 2 ) for a corporate blog site on payment systems with monitoring of exchangers Web-payment.ru