Peter Thiel is known as one of the most controversial individuals in Silicon Valley due to his unique perspective on business and his credentials to back up his views. He co-founded well-known companies, PayPal and Palantir, and made early investments in Facebook, SpaceX and LinkedIn.
Thiel describes his thoughts on business and startups in his book Zero to One. The book has received praise from well-known entrepreneurs, such as Elon Musk and Mark Zuckerberg, and has even become a required reading for several classes at Baruch College.
The book’s title refers to the idea of going from nothing to something. Thiel starts the book by breaking up progress into two sections: vertical and horizontal. Ideally, it would be better to start a company that focuses on vertical progress, or making something new, instead of horizontal progress, which is copying something that already works.
Too often entrepreneurs create a business around incremental improvements on an already existing product. Making a faster or cheaper typewriter will not change the world, but building a word processor like Microsoft Word will.
Throughout the book, Thiel provides readers with tips on what to look for when building a startup, how to grow a business and what successful companies have in common.
Some of his theories may seem unorthodox at first, but Thiel uses data and facts to make a convincing argument.
In business classes, students are taught the benefits of the “first mover advantage.” If a company is the first to market, it can capture significant market share while competitors scramble to get started.
Thiel argues, however, that being the first mover is not enough. Instead, companies should focus on being the last mover — that is, making the last great development in a market.
There were social media networks that had first mover advantage, such as Myspace, but Facebook was able to make a better product and overtook Myspace in users and revenue several times over.
Another one of Thiel’s beliefs is that monopolies, for the most part, are good. In Thiel’s mind, a monopoly can be good because it provides a steady stream of revenue and motivates the company to keep innovating to maintain its profits.
Zero to One refers to Google as an example. The firm has a monopoly on search engines because it has a better product than Bing or Yahoo. Of course, individuals are free to use other searches, but they choose not to use them.
Google, meanwhile, wants to keep its profits, so it constantly works on improving its products. Its large profits also allow it to be innovative and invest in other ventures, such as Android, artificial intelligence and self-driving cars.
Thiel’s ideas may seem unconventional at first, but just by looking back on the last 10 years, one will find that the best ideas are often viewed as bizarre at first.
Sometimes it takes a radical idea to build a revolutionary company.