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Notes from "Zero to One"

These are my notes from "Zero to One" by Peter Thiel. Peter shares key concepts about entrepreneurship he's learned from cofounding PayPal, Palantir, and Founders Fund. This is a great book for anyone in business.

Startups operate on the principle that you work with other people to get stuff done, but you also need to stay small enough so that you actually can. A startup is the largest group of people you can convince to build a different future. A new company's most important strength is new thinking.

The business version of our contrarian question is, "what valuable company is nobody building?"

If you want to create and capture lasting value, don't build an undifferentiated commodity business.

Competition is an ideology that purveys our society and distorts our thinking. The more we compete, the less we actually gain.

Sometimes you do have to fight. Where that's true, you should fight and win. There is no middle ground. Either don't throw any punches, or strike hard and end it quickly.

A great business is defined by its ability to generate cashflows in the future. The value of a business today, is the sum of all the money it will make in the future, after discounting future cashflows.

The perfect target market for a startup is a small group of particular people concentrated together, and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse.

A startup is the largest endeavor over which you can have definite mastery. You can have agency, not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of chance. You are not a lottery ticket.

As a general rule, anyone you involve with your company should be involved full time. Anyone who doesn't own stock options or draw a regular salary is fundamentally misaligned. At the margin they'll be biased to claim value in the near term, not help you create more in the future.

A company does better the less they pay the CEO.

Startups don't need to pay high salaries because they can offer something better – part ownership of the company itself. Equity is the one form of compensation that can effectively orient people towards creating value in the future. However for equity to create commitment rather than conflict, you must allocate it very carefully.

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 over achieve 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 for doing it just a bit better than your peers, you'll get an A.

Unless you have perfectly conventional beliefs, it's rarely a good idea to tell everybody everything that you know. There is always a golden mean between telling everybody and telling nobody – and that's a company. Every great business is built around a secret that's hidden from the outside. A great company is a conspiracy to change the world. When you share your secret, the recipient becomes a fellow conspirator.

Recruiting is a core competency for any company. It should never be outsourced. Answer this question: "Why should the 20th employee join your company?" There are 2 general kinds of good answers – answers about your mission, and answers about your team.

Think of distribution as something that's essential to the design of your product. If you've invented something new but you haven't invented an effective way to sell it, you have a bad business. Superior sales and distribution by itself can create a monopoly even without a differentiated product. The converse is not true, no longer how strong your product.

Properly understood, technology is the one way for us to escape competition in a globalizing world.

Most clean tech companies crashed because they neglected one or more of the seven questions every company must answer.

  1. Can you create breakthrough technology instead of incremental improvements?

  2. Is now the right time to start your particular business?

  3. Are you starting with a big share of a small market?

  4. Do you have the right team?

  5. Do you have a way to not just create, but deliver your product?

  6. Will your market position be defensible in 10 or 20 years into the future?

  7. Have you identified a unique opportunity that others don't see?


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