Zero to One Notes on Startups, or How to Build the Future

The book’s subtitle starts with ‘Notes on’, and it is important to keep this in mind when reading. It does not read as a fully-fledged book with a well-crafted central thesis, nor is that its goal. Instead, it feels like a somewhat scattered collection of Thiel’s thoughts on startups, entrepreneurship and the future, because that is what it is.

Thiel is known as a contrarian, a heterodox thinker, a genius, lucky, an idiot or a supervillain, depending on who you ask. I did not have a strong opinion about him before reading this book, but I am now fairly convinced that he is, if nothing else, a heterodox thinker. The book is likely to have at least an idea or two that is novel to you, and given how short it is that already makes it worth a read.

What stood out to me in particular was (i) his discussion of monopolies vs highly-competitive environments and (ii) dominating a small market vs being a small fish in a massive one.

The conventional wisdom is that highly-competitive environments are good because they drive prices down, benefiting the customer. Conversely, monopolies are bad because they allow the monopolist to set their price at the profit-maximizing point, harming customers. While this is true, Thiel points out that companies engaged in cutthroat competition are in a constant struggle for survival, and hence cannot afford to be forward-thinking and innovative. In contrast, monopolists can. For example, Google implements (implemented?) the ‘2o% Project’, in which employees may spend 20% of their working time on personal projects. Gmail and Google News exist as a result of this project. If Google had tougher competition, perhaps they wouldn’t.

Start-up founders often say “this market is huge, we only need to capture 0.00x% of it to be successful”. Thiel argues that this is a bad idea, because such a huge market necessarily will have tough competition, leading to razor-thin margins and un-innovative companies. He argues one should instead start by attempting to dominate a small market (e.g., Paypal started with a handful of power users on Ebay) and build from there.