‘Zero to One’ book summary
‘Zero to One’ is written by PayPal co-founder, entrepreneur and venture capitalist Peter Thiel .The main idea behind ‘Zero to One’ is that it is imperative to focus on the businesses that create something new, going from 0 to 1 as opposed to copying things that already work, going from 1 to n. The author prescribes on how to build a company that generates profits well into the future. To succeed, one needs to build and maintain a Monopoly by understanding the following concepts:
· Why are Monopolies critical?
· How to position ourselves?
· How to build a Monopoly?
· How to protect a Monopoly?
Why are Monopolies critical?
The author states ‘Capitalism and Competition are opposites’. Capitalism is all about generating profits, whereas, Competition eliminates profits. Competition is all about lower prices and margins. In contrast, Monopolies enjoy high profits and afford a luxury of investing in the future because the profits will compensate for such investments. Therefore, entrepreneurs should create monopolies.
How to position ourselves?
The author has a contrarian belief that ‘Success is not a matter of luck’. Additionally, our system is based on this belief and emphasizes diversification in education and skills making one average at everything but good at nothing. Instead, one must shape his own future, take time to plan ahead and be laser focused early to develop stand out skills leading to ‘Zero to One’ solutions.
How to build a Monopoly?
Building a Monopoly would require ‘Zero to One’ offering for niche market and then scaling it up. The product or the service solution that delivers a 10x speed, performance or convenience benefit over the status quo in order to shift consumer behavior. The author suggests that the key to success in value creation is to avoid competition at all costs.
How to protect Monopoly?
Monopoly can be maintained through network effects, economies of scale and branding. Network effects address the value of the offering i.e. the more the number of users, the greater the value to each user, making it difficult for future competitors. Economies of scale address production costs i.e. the higher the volumes, the lower the average production costs, making it difficult for future competitors to generate profits. Branding addresses awareness which reduces distribution costs, making it difficult for future competitors due to higher upfront costs for penetration and awareness.
To conclude, the author has three core beliefs:
· Globalization is doomed without technological innovation
· Capitalism is the opposite of Competition
· We can shape our own future
Therefore, there is a need to focus on specific skills that will help to prepare innovative start-ups with monopolistic power, making bets on the future, which to a certain extent is unknowable. However, as the author quotes it, “Even a bad plan is better than no plan” Thus, the author encourages to plan ahead so that one can come up with a ‘Zero to One’ start-up.
