Tuesday, April 14, 2015

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

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

My biggest problem with business books is too much fluff around a simple core idea.  This book did well from that point of view: it didn't feel padded.  It was relatively short and to the point, and was interesting throughout.

I'm not sure I agree with everything he has to say, but that's vastly preferable to a bland book that you sort of nod along with because it's not bold enough to say anything people might disagree with.

The biggest, most important thing he asks is “What important truth do very few people agree with you on?”, as a way of discerning who has contrarian ideas that may actually be meaningful.  An interesting question.

One of the principle contrarian ideas in the book is that good businesses are something of a monopoly.  Sure, they don't want to come out and say it and get busted, but if you look at Microsoft, Google, and now Facebook... it's not like someone has come along and competed with them in what they do best.  New companies form around new things, and that generally happens only once per thing.

A less controversial point of view that's been promoted in other books like Crossing the Chasm, Thiel recommends starting out by dominating a niche.  Don't aim for "1% of a billion people", because that's going to have too much competition, be too hard to reach, and generally not be a good way to get started for a startup.

Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple: it’s easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse.
 This is what he really means by "zero to one".  Incremental evolution of a product is not his idea of what really changes the world.  What really changes things are creating something where previously there was nothing.

There were also a number of things I wish I could ask about in more detail, because they seem partially right, but also dubious in other ways.

He talks about how there used to be more... "central planning", for lack of a better term, in the United States.  Big projects like dams, interstate freeways, and going to the moon, that don't seem possible these days.  I agree with him on things like the Apollo program; I wish we did more of that.  On the other hand, some of the big planned projects have had pretty serious unintended consequences.  Dams in the Pacific Northwest have had serious impacts on salmon populations, just as one example.  Even in terms of government projects, the internet, which was not nearly as well funded or visible as the space program, has probably had far more of an impact on our daily lives.  And I don't think anyone could have planned that out at the time.  Still, I do agree that it's kind of sad not to see more big ambitious projects.

About company founders:
Founders should share a prehistory before they start a company together—otherwise they’re just rolling dice.
I wrote about this same topic here: http://journal.dedasys.com/2015/03/20/the-cargo-cult-cofounder/

Thiel comes out against remote work:
Even working remotely should be avoided, because misalignment can creep in whenever colleagues aren’t together full-time, in the same place, every day.
Cryptonomicon was required reading, and we preferred the capitalist Star Wars to the communist Star Trek
Say what?!  I don't really get why either one fits into 20th century economic schemes.

He talks about globalization, which might have some negatives for, say, factory workers, versus automation with computers, which he makes out in a very positive light:
Americans fear technology in the near future because they see it as a replay of the globalization of the near past. But the situations are very different: people compete for jobs and for resources; computers compete for neither.
Clearly, computers don't compete for jobs or resources, but the people running them sure do!

And in the middle of the book, he succinctly lays out his principles for what makes for a good company:

  1. The Engineering Question Can you create breakthrough technology instead of incremental improvements?
  2. The Timing Question Is now the right time to start your particular business?
  3. The Monopoly Question Are you starting with a big share of a small market?
  4. The People Question Do you have the right team?
  5. The Distribution Question Do you have a way to not just create but deliver your product?
  6. The Durability Question Will your market position be defensible 10 and 20 years into the future?
  7. The Secret Question Have you identified a unique opportunity that others don’t see?
Which seem like good questions for creating world-changing companies.