The Future Lies Ahead and Peter Thiel Wants Us To Go There, Review of Zero to One

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 21^st century more peaceful and prosperous than the 20^th.” Yes, and we need hurry, the current century is already even less peaceful that the bloody 20^th.

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.