Zero to One by Peter Thiel — distinguishing the case for radical advances, instead of conformist incrementalism

Peter Thiel provides a philosophical book that is logical and thought provoking.

Peter Thiel posits that we have a mind-set that is a product of our environment. Unlike the environment of the 1950s, when we experienced tremendous innovation, Thiel suggests that the environment now is rife with pessimism and uncertainty. As a result Thiel argues that the mindset we all share is incrementalism. This leads to looking for ways to reduce uncertainty: building new companies that are slight variations of existing ones (incremental improvements) and not committing to big plans.

Thiel presents “staying agile” as the prevailing dogma, a direct result of a mind-set that the world is highly uncertain. Thiel questions 4 lessons from The Bubble that are dogma:

1. Make incremental advances. Be humble.

2. Be lean/flexible. Iterate.

3. Improve on competition. Do not create a new market prematurely.

4. Focus on product, not sales. Advertising is wasteful.

Thiel states that there is a different mindset: one where it is possible to find Very Large new opportunities. This is a mindset of optimism, as we had in earlier eras of massive innovation (like in the 1950s when we worked on putting a man on the moon). He urges us to think about bringing about big changes — going from Zero to One (the title of the book) — not incremental ones. This involves doing something new that no-one else is doing.

Agile?
Agile has its place, but not when you are building something new. In this world of optimism, pursuing the Zero to One opportunity, you need to have a vision, plan and execute on the plan. Audaciously, not incrementally. Make a bet on the future you are creating and then go ahead and create it. Execute. Don’t dabble. This reminds me a great deal of one of my earliest bosses and mentor, Thomas M. Siebel, who created the market for CRM software and more recently founded C3, an AI software platform and applications company.

The other thing Thiel does in this book is remind us of notions which are well-known. This is hardly revolutionary but worth revisiting:

1. Building Tremendously Valuable businesses requires being alone in a market: a monopoly. Don’t start a business where others are already competing. Instead look for white spaces where no-one else is paying attention. What do you believe to be true that no-one else does? Being alone and ahead can allow you to build a formidable business where you can earn monopoly profits for quite a long time. Apple and the iPhone is an example. He also explains being first is itself is not a monopoly barrier. Durable ones include technology that is 10x better, network effects that start in small markets and scale, and brand which a basis in substance.
2. Don’t build an undifferentiated commodity business. Your product may very well be better, but with all that competition, profits will be eroded away
3. Think about cashflow. The Present Value of Future Cashflows is basic Finance 101. But seeing it in Thiel’s book gives it importance to entrepreneurs, not just to the finance types.

Worth a read.