Zero to One: How to Build Future Successful Businesses from Startup IdeasTHN
If you’ve read my two book recommendations earlier, and feel fired up to start a business this instance, before you burn your money – read this book!
It is by Peter Thiel who’s built great businesses. It is one of the best I have ever read on start-ups; I like how the ideas are presented. The book is basically a compilation of notes a student (Blake Masters) collected based on Peter Thiel’s lectures at Stanford University. Shout out to Blake Masters for this – he saved many 👊
When Peter Thiel speaks, I listen. He founded PayPal after convincing Elon Musk to merge his company that was doing the same thing. Together they went on to build a company that sold to eBay for $1.5 billion at the height of the dotcom bubble era. Most of the people he worked with and mentored went on to build other Billion dollar companies like Tesla, YouTube, LinkedIn, Yelp and so on.
For aspiring venture capitalists, there are also good notes on why most start-ups fail and VCs make losses in their hundreds of millions of dollars.
The core message of this book is; “Moving from ZERO to ONE – how to build the future.”
In summary, if I pick Thiel’s mind accurately, there are three counter-instinctive ways of starting a business. And by business here, I mean corporations and not a small business or sole proprietorship. The three ways are:
1 Bet on a CONTRARIAN TRUTH.
What IMPORTANT TRUTH do very few people agree with you on? Steve Jobs knew the App Culture would be the future and explained that physical keyboards would go away. People called him crazy – very few even at Apple could grasp his message. As always, smart people tried to prove Steve wrong, some cited the Mac’s and Pixar failure. But just like Noah and the Ark, the masses were wrong.
Netflix bet on serving Movies straight to our TV screens. Many called their idea silly. In fact, they even offered the largest movies store at the time (Blockbuster) a chance to buy Netflix when it was struggling with finances but was turned down for the idea was “stupid.” Needless to say, Netflix became a billion-dollar company while Blockbuster today is broke and closing shops.
Uber & AirBnB ideas were born like a joke. They made a bet humans would trust a stranger to offer them a ride or bed and breakfast for a fee. “Smart People” called them stupid. Today, both companies are billion-dollar businesses.
But all companies are the same – they always fail to escape competition.
If you are going to bet on your contrarian truths, you must:
- Be right.
- Your ideas MUST be one whose time has arrived. For example, in the early 2000s, the world faced a potential depletion of oil reserves. As such, governments & economic forecasts urged entrepreneurs to find & develop green energy solutions. Money was thrown at the problem and this lead to the Greentech Revolution in the periods between 2005/09. Later, the world discovered more oil reserves that could last several years. What followed was a big green energy bubble that popped. This does not mean Greentech revolutionaries were wrong – their ideas’ time had not just come. Greentech js still great, only you need deep pockets to function as the markets are still not ready!
2 If you want to start a Big Business, Start by Dominating a Small Market.
When Jeff besoz started Amazon, he figured he had a better chance of success selling books before expanding. The idea of online stores was foreign to humans. In fact, at one point Bezos went to Harvard University to pitch his idea to Computer Science students andnurged them tonjoin him. Midway through his presentation, more than three quarters of the students had left. People called Jeff mad.
But Jeff persisted, took the few Harvard students who agreed and they built an online book store (Amazon). Jeff figured if he started with books, he would have better chances since:
- Books were low cost items so a person wouldn’t be afraid ordering online.
- Books had small sizes & definite shapes hence easier and cheaper to store, package, and ship.
- And finally, book readers were a great target market since naturally, they were intelligent people because they loved knowledge hence had a higher net worth and disposable income to spend on future goods Jeff would sell on Amazon.
Years back (if you can remember the story), I had built a Spotify-like site after leaving my first job out of being bored at home. I was concerned by musicians then who were so broke & always complained over the issue of royalties. So I built my Spotify – nobody knew such a thing would work. But I didn’t have money to push it forward nor the right people to help me out so I quit. Few years later I saw many of my ideas all over. But having gotten older & wiser, I acknowledge I would have still failed because the way I designed everything was global-centric. One of my biggest regrets in life but I was young and stupid, so I regret nothing!
Life is paved with “smart people” who obsess over the wrong things. In summary, when starting, don’t go for the 1% of a billion dollar market. Strive for 75% of a small million dollar market that only you can see & scale.
A reason, I always differ with people on numbers & a number of things but most don’t know what they are talking about. Run with an empty basket, return with the goods!
3 Strive to be a Monopoly.
There are good monopolies and bad ones. Oil cartels and the OPEC are a bad monopoly. Google and Amazon are good monopolies because their status helps better life.
There are four ways Theil deems best when creating monopolies:
- Brand Association. Think of things people buy because they make them feel great. Think of Adidas, Nike, Lamborghini, and so on. Do you think they have the best products? Not necessarily. Brands have a cult-like following. Apple is the Louis Vuitton of Tech.
- Proprietory Technology. Why don’t people use Bing for search and only rely on Google? It’s because Google has smarter algorithms that serve better results on SERPs. This has made them a search monopoly to the extent looking things up the internet is said to be “Googling” 😂 But a better search helps humans escape the dangers of fake data as only credible info ranks at the top.
- Network Effects. Think Facebook. Facebook and all of social media are only as good as the numbers. If many of your friends are on Facebook or TikTok, that’s where you will go – not MySpace.
- Economies of Scale. Think Amazon. With a Prime account, you can access Prime for free movies and TV plus sports. Your subscription also enables you to receive free Amazon deliveries whenever you order items online on Amazon. Why?
Because Amazon has a large delivery network and ply most routes daily. They can afford to drop parcels around at zero costs since most people who aren’t subscribed to Prime, always pay for shipping.
This is something I didn’t know when I started my Spotify back in the day. Again, I was young and naive.
Later I went on to start two other online businesses. One was a success(ish) but the other (Dope Wardrobe) couldn’t work out well since it started on the wrong path. My proceeds from one successful venture ended up lost in another. I missed key aspects like warehousing, insurance, delivery costs, recurrent expenditure and so on, reasons for the failure. IMO, apart from the things Thiel points out for failure of many start-ups on Silicon Valley, lack of adequate financial reserves is the main cause of failure of great ideas. That’s still the reason Silicon Valley wins as Americans bet big on ingenuity unlike any other place on earth. The Tech industry is one of the trickiest – a reason VCs lose billions of capital each year!
Today, I’m very skeptical about starting businesses and focus on Investing. The next business(es) I will start, will happen in my thirties after being in sync with my bets on the future.
In the end, ZERO to ONE is about having a HIGHER POWER that let’s compounding work to your favor. A reason why any business plan that starts with “We are looking to be/are going to be the “Next” XYZ” or “we are making a thing like ABC” have already failed from start.
The next disruptions will not be things that have been done. Focus on building the future!
Otherwise, don’t start businesses. The odds of failure are way greater than success – you better have a great working idea and be right about the future. I prefer many people to invest instead (especially young people).
PS: From a person who’s tried and has had a feel about failure, I hope you listen 🤓
On a lighter note, this book shows what you get by attending an Ivy League School like Stanford University or Havard. Your class is taught by real world teachers 😂😂
Needles to say, Peter Thiel also views, “College as the biggest scam ever.”
He runs a program where he pays people $10,000 to drop out of college and use the money to pursue their real life dreams!
If you’ve read this book, drop your core message in the comments. If not highly recommend it especially if you are in Tech or see entrepreneurship as your future path.