Below is my review of Zero to One: Notes on Startups, or How to Build the Future as submitted to the Sturbridge Times Magazine for the April 2015 issue.
Zero to One: Notes on Startups, or How to Build the Future
Peter
Thiel with Blake Masters
Crown
Business, 2014
Hardcover,
195 pages
ISBN-10:
0804139296
ISBN-13:
978-0804139298
List:
$27.00 Amazon: $16.20
By
Richard Morchoe
In this
country, competition is enshrined as almost a sacrament. It is loved
so much that when it does not work, there is the obsession to create
the “level playing field.” There is no one to say a good word
for the opposite condition, monopoly.
Well, the
heretic Peter Thiel has come along to sing its praises. Monopoly has
a bad name, connected with robber barons and purchasers of influence.
That is not what Thiel is talking about.
Rather,
the author is about creating. That is, the going from Zero to One,
or making something where before there was nothing. Zero
to one; Notes On Startups, Or How To Build The Future is
just that, a book about building the future that Thiel wrote from
notes taken by his student, Blake Masters.
Peter
Thiel should have been the last man to write the book. His existence
had been that of a winner in American competitive life until it
wasn’t. Thiel had been top of his class in just about any school
he attended.
When you
are a star at a major American university such as Stanford the next
move is a top law school, again Stanford. He was shortlisted for a
possible clerkship by not just one, but two supreme court justices.
That’s a position that marks a future at the top of the American
legal system.
Thiel got
lucky in his quest. He didn’t get the job.
Instead,
he would coalesce with some friends, many from Stanford. The team
would build PayPal and it would make them all wealthy.
As the
author would reflect, had he clerked, “I would probably have spent
my entire career taking deposition or drafting other people’s
business deals instead of creating anything new. It’s hard to say
how much would be different, but the opportunity costs were enormous.
All Rhodes Scholars had a great future in their past.”
His point
is well taken. We don't want a supreme court of judicial dullards,
but should not our best and brightest be innovating the future
instead of regulating the present?
Just
how important is this? China and India have burgeoning
economies with large and rising middle classes. They aspire to a
lifestyle similar to ours. There
is, however, a problem. Billions of people means that if it is done
only using the tools we have today, the result will be an
environmental catastrophe. Innovation is imperative.
Is that
happening? The author makes it clear, “The smartphones that
distract us from our surroundings also distract us from the fact that
our surroundings are strangely old: only computers and communications
have improved dramatically since midcentury.”
This is
in contrast to the expectations of the 1950s where people looked
forward to, “a four-day workweek, energy too cheap to meter, and
vacations on the moon.”
There is
much going on, but how much is important? True, there are some high
profile monopolies out there that are not exploiting the masses.
Facebook is one. Is that something that has advanced civilization?
Google has saved untold hours in research as anyone who had to go to
the library in the stone age about a decade or so ago remembers. How
important is that?
Though he
makes the case that our tech age may not live up to the hype, he also
notes, it better start, “Today our challenge is to both imagine and
create the new technologies that can make the 21st century
more peaceful and prosperous than the 20th.” Yes, and
we need hurry, the current century is already even less peaceful that
the bloody 20th.
Despite
the doom and gloom, he does get to writing about building a startup.
His book is informative on how to go about it and the culture
inherent in such enterprises. Be forewarned, if you are not a genius
already, your idea may not automatically get venture capital funding
despite your fidelity to the ideas expressed in Zero to One.
So what
does the the budding monopolist need to succeed. The first great
advantage Thiel suggests is Proprietary Technology. Who can
argue that? For example, Google's computer code for search is sort
of like Coke's recipe. Unless you can better it, as they say in
Gotham, fuggedaboutit.
Network
Effects. Facebook and LinkedIn have it. If your peers are on
the network, you are probably too.
A startup
should also be able to achieve Economies of Scale. You really
can't do too much in a service business, but for a Twitter getting to
250 million users in no time, scale is baked into the design.
According
to Thiel, “creating a strong brand is a powerful way to create a
monopoly.” As a Branding success, he cites Apple. He
really doesn't say how to get there, but gives Yahoo as an example of
what isn't working.
The final
section in the chapter on building a startup discusses the advantage
of being the last mover. One might think being the first
mover is most important. Remember though, Yahoo was the first mover
in search and the big player for a while. Google came along and
displaced them and has never been elsewhere but at the top. This is
Thiel's point, “to make the last great development in a specific
market and enjoy years of monopoly profits.”
So that's
all you need to become a tech star. Assemble your team and get to
work.
Obviously, there is more to it. Still, Thiel's book is a good
overview of the process.
Zero
to One is not really a how to tome, though there might be a young
genius who could read the book, quit MIT and come up with the next
big thing. Thiel's book is a wide ranging discussion of the
startup culture, the economy and the political and social
environment. It is a great and important read, even though the
author is a bit suspect as he didn't drop out of school as did the
more successful examples, Steve Jobs, Bill Gates and Larry Ellison.
