Albert Ge

Zero to One By Peter Thiel

June 24, 2019

Nassim Nicholas Taleb says I should read this book at least once. Since I have to return this book to the library, and I tend to internalize things better if I write it down, here are some notes from the book.

Counterintuitive advice for startups

Monopoly good

Monopolies are good when it can invent new and better things - more choices.

"All happy families are alike; each unhappy family is unhappy in its own way"

- Anna Karenina

The opposite is true in business: companies die because they all failed to escape competition

Do not let rivalry get in the way of vision

On education

Education sysem emphasizes grades, credentials, status. More competition the higher you go.

Last Mover advantage

The value of a business today is the sum of all money it will make in the future.

Avoid metric mania (weekly user stats, monthly targets, quarterly earnings). Think about the qualitative characteristics of the company; numbers are not everything

"Disruption" - a low-end product with low prices, improve the product, and eventually overtake the premium products

Characteristics of Monopoly

To succeed, you must study the endgame before everything else

- Grandmaster Jose Raul Capablanca

Chance or Design?

Definite Indefinite
Optimistic US 1950s US 1982-present
Pessimistic China present Europe present

Baby boomers: things got better every year, and it had nothing to do with you. Great expectations but no specific plan to fulfill them. Thus there is a fundamental misunderstanding between boomers and their children

Biotech Software
Uncontrollable organisms Deterministic code
Poorly understood Well understood
Indefinite, random success Engineering
Heavy regulation Unregulated
>$1B per drug Seed money
Lab drones Entrepreneurial hackers

Biotech goes through the opposite of Moore's law - number of drugs approved halved every nine years, since 1950. Researchers experiment randomly, and they "might work", and the systems are inherently complex. Question: is it just an excuse for indefinite optimism?

US households aren't saving much, and US companies are piling cash on balance sheets without new projects.

Definite Indefinite
Optimistic Invest high, save little Invest little, save little
Pessimistic Invest high, save high Invest little, save high

Designining for the future

Jobs planned the iPod to be the first of a new generation of portable post-PC devices, but that secret was invisible to most people.

When a big company tries to acquire a successful startup, it offers too much, or too little. Founders sell when they have no more visions for the company (so overoffering). Founders with vision/(robust plans) see the value that is not yet actualized (so underoffering).

Believe in your own definite mastery. You can have agency over a small and important part of the world. You can reject the tyranny of Chance.

Rich get richer

Money follows whoever is already wealthy. That is the power law of venture capital; investors try to leverage exponential growth in early stage companies.

A small handful of companies radically outperform all others. So VCs:

Andreessen Horowitz invested $250k in Instagram, which sold to FB for $1billion. That was $78 million in profit - 312x return in <2 years. But, because the total capital of Andressen is $1.5billion, they would need 19 other Instagrams to break even. Thus they're incentivized to put a lot more money to get a bigger cut.

You cannot diversify your life

An individual cannot hedge against uncertainty be keeping dozens of equally possible careers alive. Ironically, this is what schools teach us: Hundreds of pages of course catalogs, "it doesn't matter what you do, as long as you do it well". In the startup world, you shouldn't necessarily start your own company. Power law means that differences between companies will dwarf differences in roles at companies.

What hard problems are left to solve?

There are four social trends that suggest there aren't many secrets to uncover:

Why we should believe in secrets

How to look for secrets

What to do with secrets

It's rarely a good idea to tell everybody, everything

Life has been discovered by many others, and exploring each is possibly infinite; but we can choose to take the hidden paths

Foundations

Choosing a co-founder is like getting married Examples of misalignment:

In the boardroom, less is more Hire people who are full time, with few exceptions (lawyers, accountants), so they can be a part of your vision

Money

CEO should be paid less in liquid comp than everyone else Keep ownership stakes a secret (amongst employees of company)

Company Culture

You cannot create culture with perks. The culture is the company itself, and how the company perceives its mission

Relationships

Build the company on strong relationships, because people are happier together and enjoy working together

Recruiting

Do not outsource recruiting. Do not fight the perk war. Have to explain why the company is a unique match personally.

Cult

Consultant (nihilism)<----------------x-->Cult (dogmatism)

Successful startups are fanatically right about something other people miss.

Sales is important

The idea of sales is to change surface appearances without changing the underlying reality. This clashes with engineers, who build on transparency.

How to sell

Customer Lifetime Value (CLV) > Customer Acquisition Cost (CAC)