Zero to One: Notes on Startups, or How to Build the Future – Peter Thiel

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What are some business lessons that we can learn from one of the founders of PayPal? Peter Thiel goes in depth addressing several points as to why certain businesses thrive and dominate the industry while others don’t last. He addresses points such as the 10X rule, the importance of cash, distribution channels, and solid leadership. Here are some of the points to the book:

 

1. To become a leader and dominate your industry, create a product or service that’s 10x better than your competition’s. People aren’t early adopters when new things come around because they’re usually just marginally “better” than what they’re already used to/using. If the product or service offered is only a little better, people don’t usually want to invest their time learning how to use or make changes in their lives just for a marginal benefit. As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell, especially in an already crowded market.” He later states, Companies must strive for 10x better because merely incremental improvements often end up meaning no improvement at all for the end user. Suppose you develop a new wind turbine that’s 20% more efficient than any existing technology – when you test it in the laboratory. That sounds good at first, but the lab results won’t begin to compensate for the expenses and risks faced by any new product in the real world. And even if your system really is 20% better on net for the customer who buys it, people are so used to exaggerated claims that you’ll be met with skepticism when you try to sell it. Only when your product is 10X better can you offer the customer transparent superiority.

 

2. One thing that I’ve learned in business is that marketing is so important. T. Harv Eker has stated that he can make a prediction at how well your business will succeed just by looking at how much you put into marketing. You can have the greatest product or service but if no one knows about it, you won’t make as much money as you’d like. Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true. No matter how strong your product-even if it easily fits into already established habits and anybody who tries it likes it immediately-you must still support it with a strong distribution plan.

 

3. If you’re the leader/founder of the company, set a good example for your employees by not focusing too much on cashing out quickly, no matter the circumstances. As the leader, you’re the one guiding the company in the direction through your actions, and as always, actions speak louder than words. In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in a salary. It doesn’t matter if he got used to making much more than that at Google or if he has a large mortgage and hefty private school tuition. If a CEO collects $300,000 per year, he risks becoming more like a politician than a founder. High pay incentivizes him to defend the status quo along with his salary, not to work with everyone else to surface problems and fix them aggressively. A cash-poor executive, by contrast, will focus on increasing the value of the company as a whole.

 

4. The success (or lack of) is no coincidence. People in business, for the most part, get what they deserve. If a business fails, the founder(s) either didn’t have enough knowledge, create a good enough strategy, or execute their plan well. In January 2013, Jack Dorsey, founder of Twitter and Square, tweeted to his 2 million followers: ‘Success is never accidental.’ Most of the replies were unambiguously negative. Referencing the tweet in The Atlantic, reporter Alexis Madrigal wrote that his instinct was to reply:’ ‘Success is never accidental,’ said all multimillionaire white men.’ It’s true that already successful people have an easier time doing new things, whether due to their networks, wealth, or experience. But perhaps we’ve become too quick to dismiss anyone who claims to have succeeded according to plan.

 

By Ryan Lee

 

My rating:
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Check out the book here:
Amazon USA
Amazon Canada
Amazon UK

 

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