Counterintuitive ways to think about starting a business and building a better future.
The great secret of our time is that there are still uncharted frontiers to explore and new inventions to create. In Zero to One, legendary entrepreneur and investor Peter Thiel shows how we can find singular ways to create those new things.
Doing what someone else already knows how to do takes the world from 1 to n, adding more of something familiar. But when you do something new, you go from 0 to 1. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. Tomorrow’s champions will not win by competing ruthlessly in today’s marketplace. They will escape competition altogether, because their businesses will be unique.
Zero to One presents at once an optimistic view of the future of progress in America and a new way of thinking about innovation: it starts by learning to ask the questions that lead you to find value in unexpected places.
Key Takeaways
Three counterintuitive ways to think about starting a business and building a better future.
1. Bet on a contrarian truth what important truth do very few people agree with you on? The best answers to the Contrarian question reveal a truth about how people will act in the future in ways they’re either unwilling to admit right now or are just unaware of.
- Steve Jobs knew the truth about who we would use the smart phone in the future. Jobs knew we didn’t need nor want a physical keyboard, but almost everyone at that time disagreed with him.
Why is it so important to bet your business on a contrarian truth? If you don’t, you’ll be on the fast track to bankruptcy. “All failed companies are the same. They failed to escape competition.” When you bet your business on a contrarian truth, you dramatically increase your odds of avoiding completion, mainly because most people will think you’re crazy and ignore you long enough for you to build a significant lead in a particular market that will make it hard for anyone to catch you.
Heres a word of caution: make sure you bet on a contrarian truth whose time has come. Think Solar Energy, non-renewable sources.
2. Start by Dominating a Small Market when starting your business, don’t try to get 1% of a billion $$ market, instead, try to get 80% of a million $$ market.
“Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.” -Peter Thiel
3. Strive to be a Monopoly when you establish a monopoly, you prevent the competition from eating away your profits and that ensures you stay in business. If you aim for anything short of being a monopoly, you’re aiming to go out of business.
4 Monopoly Methods
1. Brand Association Be the first (and only) brand people consider in a market. It’s tough for any other brand to compete in the market
- What brand comes to mind when you think of an electronic device that makes you look fashionable? (Apple).
2. Proprietary Technology why do the majority of people use Google instead of Bing? Since Google’s algorithms are 10x better than its competition and those algorithms are proprietary, it’s nearly impossible to copy them and catch up.
3. Network Effects why don’t you switch to a new social-media platform? Most of you friends are already on Facebook/Instagram, and are unlikely to switch to a new platform. The more people on the Facebook or Instagram network, the harder it is to compete with them.
4. Economies of Scale why do you think Amazon can offer free shipping on a 100lb sofa, when most furniture retailers charge you $50 to ship the same sofa? The answer is Economies of Scale. Because Amazon has such a large infrastructure in place and ships so many products, their fixed operating costs per item are incredibly low, which allows them to make more profit on each item and offset the costs of shipping, which makes it nearly impossible for smaller retailers to compete with them.
Bonus Insights
You can’t build a great business, without the help of talented people, however attracting, hiring and managing talented peoples difficult.
How do you attract, hire, and manage talented people?
How to attract talented people? “Talented people don’t need to work for you. They have plenty of options. If you have a new software startup, it will be hard to offer a talented software engineer more money or a more prestigious position than Google can. Instead of fighting a perm war with a large company like Google, differentiate your company by offering talented candidates to opportuntnties.
- Chance to work on something no one else is working on.
- Highlight the unique ways that you are solving problem in the world.
- Chance to make a unique contribution in the world.
- Chance to work with people just like them.
Action Plan #1:
When you’re trying to attract the best talent, promise what few other companies can: and opportunity to work on something that no one else is working on and the chance to work with people with similar passions.
