Book Review: Zero to One

As an engineer I’ve spent the last 10 years of my life devoted to technical details.  For most of this time all I could tell you about business was what I’d learned in college: B-schoolers get to party on Thursdays because they don’t have class on Fridays. 😉 Recently I’ve become intent on learning more about how business directly influences the technical projects I work on as an engineer.

A few months ago during an engaging conversation about tech business with my uncle, a university professor of business, he recommended I read Zero to One: Notes on Startups, or, How to Build the Future by Peter Thiel.  For those of you who don’t know of Mr. Thiel, he “co-founded PayPal and Palantir, made the first outside investment in Facebook, funded companies like SpaceX and LinkedIn, and started the Thiel Fellowship, which encourages young people to put learning before college” (excerpt taken from the back cover of Zero to One).

The title of the book comes from Thiel’s explanation of killer companies: they create something that has *never* been done before (moving from zero to one) as opposed to creating incremental improvement on an idea somebody else has already implemented (moving from n to n+1).

General Notes

Here are some general notes I took while I was reading, for things that stood out to me:

• What important truth do very few people agree with you on?
• Find a market you can completely own. Own 100% of that market. Then expand after that. (Don’t ‘disrupt’ an existing market. Create a new one.)
• Advice that many people don’t understand
  • Better to risk boldness than triviality
  • A bad plan is better than no plan
  • Competitive markets destroy profits
  • Sales matters just as much as product
• The Last Mover Advantage
  • Proprietary Technology
  • Network Effects
  • Economies of Scale
  • Branding
• Its not about how machines can replace humans, its about how machines can *compliment* humans

Annoying THINGS

“The most obvious clue was sartorial: cleantech executives were running around wearing suits and ties. This was a huge red flag, because real technologists wear T-shirts and jeans. So we instituted a blanket rule: pass on any company whose founders dressed up for pitch meetings.”

In chapter 13 “Seeing Green,” Thiel talks about the way tons of people jumped on the green energy bandwagon at the beginning of the 21st century. Cleantech was going to be the next big thing and everyone wanted a part of it.  Unfortunately, a lot of people starting these supposed engineering companies were business people looking to make a buck; they didn’t have any revolutionary engineering to back up their company.  Thiel’s investment company, Founders Fund, was not enjoying sifting through all these contentless companies, so they devised the rule quoted above that they would pass on companies with dressed up founders.

This quote gave me a negative knee-jerk reaction.  In one way I can see where Founders Fund is coming from; I have this mental image of tons of slimy salespeople lining up at their door with smoke and mirrors instead of good engineering, just looking to make a buck. Ugh!  However, it is still hard for me to completely empathize with his comments.  When you’re not the status quo in tech, and you tell people “I’m a software developer,” one of the most common responses is “Oh wow, but you don’t LOOK like a software developer!”.  Sometimes this exchange is even followed by technical questioning, to “make sure” that you’re really technical. It is exhausting and annoying.  And then the revered Mr. Thiel writes in his book that if a person doesn’t look like they are technical, they probably aren’t technical. Bummer.

I can recognize that my reaction might be more knee-jerk than anything, but I still thought I’d bring it up.  No matter how many times I read the quote it still sounds juvenile.  I also think it is ironic that Mr. Thiel is wearing a suit and tie in his Twitter profile picture.  😉

Favorite Things

I did enjoy most of the book. My favorite part was his section on determinate vs indeterminate, and optimism vs pessimism. He puts each of these in a matrix, and analyzes the outcomes depending out where society’s head is at. It was fascinating to think about contemporary American society, my network of tech friends and myself in terms of this matrix. Here is a nice representation of the matrix, courtesy of Startup Iceland:

I also loved his section about sales.  Nobody likes the used car salesman, because nobody likes to feel like they are getting sold something. Some people even claim to be immune to sales. But Thiel argues that everyone is getting sold, and with the best sales people you don’t even realize you are getting sold. Techies tend to roll their eyes at salespeople, because engineers are doing ‘the real work.’ But the fact is no matter how technically awesome your product is, nobody will be using it unless you have sales people getting it out there (and vice versa, no matter how incredible your sales team is, people will eventually stop using a product once they find out it sucks technically).  You need really talented people in both tech and sales to really get your ideas off the ground.

And finally, The 7 Questions You Must Answer:

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

After I read the book I did a little brainstorming to flesh out some company ideas I’ve had tumbling around in my head for awhile. Then I put each of the ideas to the test against the 7 questions. It was a pretty fun exercise to see how I thought they measured up!

This book was short and packed with interesting information.  It was a nice peak inside a brilliant person’s mind and is definitely one of my favorite books I’ve read so far this year.