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Three Thoughts from Zero to One by Peter Thiel

Zero to One Book Peter Thiel Review

Already familiar with a number of Peter Thiel’s viewpoints (some of which are hilariously depicted by the character of Peter Gregory on HBO’s Silicon Valley series), I was excited to begin reading his new book, Zero to One. Peter Thiel is a notable figure in entrepreneurship for his work as Co-Founder and CEO of PayPal, for making the first outside investment in Facebook, and more recently, co-founding an important big data firm called Palantir.

Zero to One was written as a set of “Notes on Startups, or How to Build the Future.” While digging into the book I saw some great arguments that challenge commonly accepted frameworks in entrepreneurship, innovation, and business strategy. I’d like to share three ideas from the book that I feel are essential to keep the U.S. ahead in these arenas – each something we should adopt to make sure that happens.

Don’t Live by Chance

As he previously titled an address at SXSW, “You are not a lottery ticket” was an interesting chapter in Zero to One. According to Thiel, we should each have finite plans to make the future: in our lives, our communities, and of course, our businesses. He points out that too often we attribute successes to luck and failures to chance. And in this same fashion we have accepted diversification (based on statistical reasoning) as a source of strength. Thiel strongly disagrees. He explains that it is “definite optimism” – the type of optimism driven by concrete plans and decided action – that we should utilize to make tomorrow better than today.

Aside from diversification, this challenges the “don’t plan, fail early, and pivot” models that have circulated in entrepreneurship. It’s worth considering that maybe failing early is too risk-averse, especially if you hope to innovate. Innovation will take risk, but we can own that process. We can make it worth our while if we make real plans (in whatever form that may be) in support of innovation.

Monopoly Businesses are Best

Similar in some respects to “blue-ocean strategy,” Peter Thiel writes to encourage the pursuit of “monopoly” business models. This is not to say he supports what we would consider the “evil empire” firms that dictate price, but he does argue that the economics concept of “perfect competition” leaves little room for businesses to survive or succeed. If that’s the case, is innovation likely to be in the budget? Rather than compete head-to-head in a situation where prices are driven down fast, he argues for business owners to offer a product or service that’s at least 10x better than the next. While this is easier said than done, the objective is to create an incomparable offering and just escape competition altogether.

Using Google as his prime example, he explains that the founders would still rather not talk about their monopoly on search engine marketing (market share of 60% or more). Instead the company frames itself as a highly diversified technology company (e.g. Android, Nexus, Google Glass, Drive, Gmail, etc.). Google might prefer to be seen as a small player in the global, half-trillion dollar advertising industry as opposed to the giant of paid search advertising.

Any way you look at it, he’s got a point. Why duke it out with close competitors on minor differentiation terms when a better objective might be to invest in innovation and let your products or services start to “speak for themselves”?

Constant Innovation is a Must

Thiel explains with great detail how Americans passively expect that technological innovation will continue on its path of acceleration. Perhaps his most contrary of points is that innovation in arenas outside of IT and communication has actually decelerated, yet we often overlook it. In some cases even technological regression has occurred (e.g. the retirement of the Concorde for the transportation sector). Another example illustrates that any new drug (a healthcare innovation) faces a multi-billion dollar cost hurdle imposed by FDA approval. It simply doesn’t add up when you compare it to internet innovations that remain essentially unregulated.

It is a shame that these are often self-inflicted circumstances that remove innovation from the picture. To combat it, Peter Thiel argues that we should all plan big and do big things. This is the only way to dodge a painful decline in the rate of innovation. And after all, if it’s not physically impossible to build what you dream, then why not do it?

These three points, and many others from the book, represent a continued emphasis on innovation. In the U.S. we live a life where amazing resources and endless information are at our fingertips, but we’re not done. The reasons for innovation are far stronger than the reasons against.

Innovation can take an endless number of forms, so what’s your take on how best to approach it?

About The Author

Jimmy Merritello
Jimmy Merritello - View more articles

Jimmy Merritello is Strategy Lead at Red Caffeine. He loves guitars and electronics, his switch from iOS to Android-vanilla, coffee, and sports. When not researching competition or fusing ideas into marketing strategy, he’s usually exploring web tech and checking with Emre to seek the truth. Connect with Jimmy on Twitter and LinkedIn.