Zero to one Notes on startups, or how to build the future

Review by New York Times Review

IGNORE THE SCENT of self-congratulation that wafts from nearly every book in the How to Succeed category and what remains is largess, priced to move. The subtext reads something like this: "I made it big, and if you follow my advice, sold here for a fraction of what it cost me, you can, too." But pure altruism rarely explains much, and the ulterior motives behind these works are often as interesting as their catechisms. The veneer of beneficence is somehow easier to see through in audiobook form, as evidenced by the works reviewed here. Of the three, "Zero to One: Notes on Startups; Or, How to Build the Future," by the Silicon Valley investor and PayPal co-founder Peter Thiel, spends the least amount of time justifying itself. This gives the book the feel of an advertisement for a man who believes he has no need to advertise. Which is a very savvy approach to self-promotion. "Zero to One" distills lectures from a class about startups that Thiel taught at Stanford in 2012, based on the scribblings of his former student Blake Masters, who is credited with a writing assist and who capably narrates the book. The lessons of Thiel's course are too important to be limited to a few lucky undergraduates, we are told in the preface: "There's no reason why the future should happen only at Stanford, or in college, or in Silicon Valley." So what future-shaping advice does Thiel have for the next generation of entrepreneurs? First, competition is expensive, risky, and it invariably reduces profits. So your goal is not to dream up a company in a field that already exists and then fight for market share. No, the smart move is to found a business in a still unimagined realm - an act of creation that Thiel, a serial catchphrase coiner, calls "going from zero to one." Once you've pioneered a new industry, you and your colleagues should set your sights on a very specific goal: building a monopoly. "Whereas a competitive firm must sell at the market price," Thiel tells us, "a monopoly owns its market, so it can set its own prices." Thiel's favorite example is Google, which all but invented the online advertising market and has dominated it for years. As advice goes, "Create the next Google" is both unassailable and perfectly useless. Thiel glancingly acknowledges that the type of start-up he is describing is rare, but the fortune he made at PayPal, and later as an investor in Facebook, has apparently convinced him that the exceptional would be far more common if people were just bolder and more imaginative. He makes this and other points in brief chapters packed with references to Pythagoras, the Unabomber, Tolkien, Karl Marx, Jim Morrison, Nietzsche, John Rawls and Shakespeare. In interviews and speeches, Thiel has displayed a sense of humor that would have been helpful here. Listening to this five-hour production is like getting stuck at a dinner party beside a guy whose money and surfeit of ideas has convinced him that he should do all the talking. IT TAKES a while to figure out the real point of "Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies," by Charles Koch, the chief executive of Koch Industries. The preface, narrated by Koch himself - Paul Michael, whose voice you might recall from "The Da Vinci Code" audiobook, handles the rest - is a folksy origins story, traced to the family patriarch, Fred Koch, a "John Wayne-type" chemical engineer. The younger Koch, now 80 years old, quickly segues into the tale of the astounding growth of the company, which currently employs some 100,000 people in fields as varied as oil, ranching and commodities trading. One thousand dollars invested in this privately held behemoth in 1960, Koch states, would be worth $5 million today. The secret? Market-Based Management, Koch says, which turns out to be a perfectly sensible, five-part framework for making decisions about hiring, firing and managing a company. But that framework was the subject of Koch's 2007 book, "The Science of Success." So what we have here is a rehash and, at a running time that exceeds nine hours, quite a slog, despite Michael's comfortingly authoritative voice. The bulk of "Good Profit" is self-evident truths that have been repackaged as wisdom. Typical is this mouthful from a chapter called "Incentives": "Every company should strive to leverage incentives to motivate all employees to fully develop and apply their capabilities to maximize long-term value for the company in a principled way." O.K. Did someone suggest otherwise? The liveliest part of "Good Profit," and arguably its reason for being, is a series of homilies in favor of free markets and against corporate welfare and special pleading of any kind. Profit that is "good" is earned honestly, without favors from the government. Giving a counterexample, Koch denounces a 2014 French law intended to aid independent bookstores by banning online booksellers from offering free shipping. "Artificially propping up businesses is bad for consumers," he writes, "and ultimately bad for the employees of those businesses, since change is inevitable." There is hardly a hint here that Koch and his younger brother David are among the most politically active executives in American history. Together, they have spent hundreds of millions of dollars backing candidates who stand against regulations and taxes. By the midterm elections of 2010, according to Jane Mayer's book "Dark Money," these efforts yielded astounding results. Democrats lost control of the House of Representatives and Republicans gained 675 seats in state legislatures across the country. Given that Koch Industries is among the country's leading producers of toxic waste and has spent millions settling cases in federal court, these guys are not exactly disinterested parties. No, they don't lobby politicians. They just have them replaced. Whether you think this strategy leads to "good profit" depends on where you stand politically. But Koch's very hands-on role in American politics is a bizarre omission in a book about the intersection of business and government. "TEAM OF TEAMS," by retired Gen. Stanley McChrystal and three co-authors, appears to have several goals. It works as a calling card for his consulting firm, McChrystal Group, which brings "lessons from the battlefield to the boardroom," as the company's website says. The book is also a history of one of his great victories: the pursuit and eventual killing of Abu Musab al-Zarqawi, the elusive and sociopathic leader of Al Qaeda in Iraq. Unfortunately, McChrystal the consultant keeps interrupting McChrystal the general. After every twist and complication in the al-Zarqawi story, we pause so that some theoretical concept - usually related to how groups are organized, and how McChrystal tinkered with command structure in Iraq - can be illustrated with a historical anecdote. Thus we get a potted biography of Frederick Taylor, the father of industrial efficiency; an account of NASA in its moonshot era; the story of Horatio Nelson's victory at Trafalgar; and mini-lectures on subjects as diverse as game theory and the Navy SEALs. McChrystal turns up to narrate five-minute summaries at the end of each chapter (Paul Michael, once again, handles everything else). No doubt these are meant as refreshers, but they make you wonder if this hybrid of management course and combat memoir really needs to be 12 hours long. That's especially true when McChrystal describes his great "aha" moment in the battle against Al Qaeda in Iraq: "We realized that our goal was not the creation of one massive team. We needed to create a team of teams." He means an organization in which groups from different fiefs, like the C.I.A. and the Army Special Forces, work together, rather than in competitive silos. That's the big reveal. Which is heartbreaking, because right after September 11 it was obvious that the intelligence agencies hadn't been communicating. McChrystal addresses this failure in a section called "Sharing." But he doesn't explain how lessons of that calamity could have been forgotten a few years later, let alone stand as the title-worthy insight of this overstuffed audiobook. DAVID SEGAL is a reporter in the business section of The Times.

Copyright (c) The New York Times Company [June 16, 2016]

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Review by Booklist Review

*Starred Review* A self-professed contrarian and proud of it, PayPal cofounder Thiel riffs on a series of his lectures given at Stanford. His major contention? That copycats are not what America needs, calling for, instead, those entrepreneurs who'll challenge convention and build a different, better world. As proof, he dissects, in some details, the dot.com boom and contrasts its faux learnings (e.g., make incremental advances) from the truth better to risk boldness than triviality. Why monopolies, beginning with small market/niche domination, will win. The mechanics of cofounders and establishing a company cult. An investigation into the failures of clean tech with one notable exception: Tesla. The one question to ask: What valuable company is no one building? Thiel pokes at and prods every corner of business, from recruiting to advertising and competition, never shy about his opinions. Two samples: Too many people are starting their own companies today and All Rhodes scholars had a great future in their past. Irreverent, with the disclaimer that truth can be stranger than fiction.--Jacobs, Barbara Copyright 2014 Booklist

From Booklist, Copyright (c) American Library Association. Used with permission.

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Review by Publisher's Weekly Review

In his first book, PayPal cofounder Thiel presents a series of musings-for example,Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1-rather than a cohesive narrative. He begins with promise, drawing a strict distinction between horizontal progress-making more of what already exists in the world-and vertical progress-creating something entirely new. To accomplish the latter, he proposes, more businesses need to think like startups. From there, the text sprawls wildly from one subject to the next, with periodic references to PayPals evolution as the main recurring motif. His provocative central premise is that successful businesses should strive to be monopolies-that readers should build something singular and exciting enough that it will be the only one of its kind. Though the book is presented as an instructional guide, it gives the reader little to take away. A brief meditation on the lessons of the dot-com bust (make incremental advances, stay lean and flexible, improve on the competition, focus on product, not sales) offers standard truisms rather than practical insights. Thiel touches on how to build a successful business, but the discussion is too abstract to offer much to the next Steve Jobs-or Peter Thiel. (Sept.) (c) Copyright PWxyz, LLC. All rights reserved.

(c) Copyright PWxyz, LLC. All rights reserved

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Review by Kirkus Book Review

Legendary startup icon and venture capitalist Thiel and Masters reveal how they succeed with startups and why business school graduates most often do not. Known as a co-founder of Paypal and early investor in Facebook and SpaceX, billionaire Thiel and his former student, Masters, are not offering tips on becoming superrich. Surprisingly, they are contemptuous of finance, which they call "the only way to make money when you have no idea how to create wealth." They offer an older model of business based on the potential earnings foreseeable as a by-product of the transformations associated with leaps in technology into unserved spaces in human activity. Paypal and Facebook are good examples. The authors distinguish their own thinking and methods from the orthodoxies of the financial and business communities. Lively and often acerbic, Thiel and Masters leave many of today's business shibboleths trashed along the way. They are unabashed proponents of monopoly to control and secure profit for reinvestment, and they assert, agreeing with thinkers like Walter Lippmann, that "[c]apitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away." In their view, monopoly is how technological innovators successfully change the rules with order-of-magnitude improvements instead of incremental advances. Thiel and Masters provide rules of thumb and case studies drawn from experiences, all bound up with their radically different business methods and practices. Their views on viral marketing and the importance of sales will be of interest to aspiring entrepreneurs, as will their dismissal of current ideas of market and technological disruption. They don't hide their dislike of the use of stock options as incentives for business leadership. Forceful and pungent in its treatment of conventional orthodoxiesa solid starting point for readers thinking about building a business. Copyright Kirkus Reviews, used with permission.

Copyright (c) Kirkus Reviews, used with permission.

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Preface Every moment in business happens only once. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won't make a search engine. And the next Mark Zuckerberg won't create a social net-work. If you are copying these guys, you aren't learning from them. Of course, it's easier to copy a model than to make something new. Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1. The act of creation is singular, as is the moment of creation, and the result is something fresh and strange. Unless they invest in the difficult task of creating new things, American companies will fail in the future no matter how big their profits remain today. What happens when we've gained everything to be had from fine- tuning the old lines of business that we've inherited? Unlikely as it sounds, the answer threatens to be far worse than the crisis of 2008. Today's "best practices" lead to dead ends; the best paths are new and untried. In a world of gigantic administrative bureaucracies both public and private, searching for a new path might seem like hoping for a miracle. Actually, if American business is going to succeed, we are going to need hundreds, or even thou­sands, of miracles. This would be depressing but for one cru­cial fact: humans are distinguished from other species by our ability to work miracles. We call these miracles technology. Technology is miraculous because it allows us to do more with less, ratcheting up our fundamental capabilities to a higher level. Other animals are instinctively driven to build things like dams or honeycombs, but we are the only ones that can invent new things and better ways of making them. Humans don't decide what to build by making choices from some cosmic catalog of options given in advance; instead, by creating new technologies, we rewrite the plan of the world. These are the kind of elementary truths we teach to second graders, but they are easy to forget in a world where so much of what we do is repeat what has been done before.   Zero to One is about how to build companies that cre­ate new things. It draws on everything I've learned directly as a co-founder of PayPal and Palantir and then an investor in hundreds of startups, including Facebook and SpaceX. But while I have noticed many patterns, and I relate them here, this book offers no formula for success. The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innova­tive. Indeed, the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.   This book stems from a course about startups that I taught at Stanford in 2012. College students can become extremely skilled at a few specialties, but many never learn what to do with those skills in the wider world. My primary goal in teaching the class was to help my students see beyond the tracks laid down by academic specialties to the broader future that is theirs to create. One of those students, Blake Masters, took detailed class notes, which circulated far be­yond the campus, and in Zero to One I have worked with him to revise the notes for a wider audience. There's no reason why the future should happen only at Stanford, or in college, or in Silicon Valley. Chapter 1 The Challenge of the Future Whenever I interview someone for a job, I like to ask this question: "What important truth do very few people agree with you on?" This question sounds easy because it's straightforward. Actually, it's very hard to answer. It's intellectually difficult because the knowledge that everyone is taught in school is by definition agreed upon. And it's psychologically difficult because anyone trying to answer must say something she knows to be unpopular. Brilliant thinking is rare, but courage is in even shorter supply than genius. Most commonly, I hear answers like the following: "Our educational system is broken and urgently needs to be fixed." "America is exceptional." "There is no God." Those are bad answers. The first and the second statements might be true, but many people already agree with them. The third statement simply takes one side in a familiar debate. A good answer takes the following form: "Most people believe in x, but the truth is the opposite of x." I'll give my own answer later in this chapter. What does this contrarian question have to do with the future? In the most minimal sense, the future is simply the set of all moments yet to come. But what makes the future distinctive and important isn't that it hasn't happened yet, but rather that it will be a time when the world looks different from today. In this sense, if nothing about our society changes for the next 100 years, then the future is over 100 years away. If things change radically in the next decade, then the future is nearly at hand. No one can predict the future exactly, but we know two things: it's going to be different, and it must be rooted in today's world. Most answers to the contrarian question are different ways of seeing the present; good answers are as close as we can come to looking into the future. Zero to One: The Future of Progress When we think about the future, we hope for a future of progress. That progress can take one of two forms. Horizontal or extensive progress means copying things that work--going from 1 to n. Horizontal progress is easy to imagine because we already know what it looks like. Vertical or intensive progress means doing new things--going from 0 to 1. Vertical progress is harder to imagine because it requires doing something nobody else has ever done. If you take one typewriter and build 100, you have made horizontal progress. If you have a typewriter and build a word processor, you have made vertical progress. At the macro level, the single word for horizontal progress is globalization--taking things that work somewhere and making them work everywhere. China is the paradigmatic example of globalization; its 20-year plan is to become like the United States is today. The Chinese have been straightforwardly copying everything that has worked in the developed world: 19th-century railroads, 20th-century air conditioning, and even entire cities. They might skip a few steps along the way--going straight to wireless without installing landlines, for instance--but they're copying all the same. The single word for vertical, 0 to 1 progress is technology. The rapid progress of information technology in recent decades has made Silicon Valley the capital of "technology" in general. But there is no reason why technology should be limited to computers. Properly understood, any new and better way of doing things is technology. Because globalization and technology are different modes of progress, it's possible to have both, either, or neither at the same time. For example, 1815 to 1914 was a period of both rapid technological development and rapid globalization. Between the First World War and Kissinger's trip to reopen relations with China in 1971, there was rapid technological development but not much globalization. Since 1971, we have seen rapid globalization along with limited technological development, mostly confined to IT. This age of globalization has made it easy to imagine that the decades ahead will bring more convergence and more sameness. Even our everyday language suggests we believe in a kind of technological end of history: the division of the world into the so-called developed and developing nations implies that the "developed" world has already achieved the achievable, and that poorer nations just need to catch up. But I don't think that's true. My own answer to the contrarian question is that most people think the future of the world will be defined by globalization, but the truth is that technology matters more. Without technological change, if China doubles its energy production over the next two decades, it will also double its air pollution. If every one of India's hundreds of millions of households were to live the way Americans already do--using only today's tools--the result would be environmentally catastrophic. Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalization without new technology is unsustainable. New technology has never been an automatic feature of history. Our ancestors lived in static, zero-sum societies where success meant seizing things from others. They created new sources of wealth only rarely, and in the long run they could never create enough to save the average person from an extremely hard life. Then, after 10,000 years of fitful advance from primitive agriculture to medieval windmills and 16th-century astrolabes, the modern world suddenly experienced relentless technological progress from the advent of the steam engine in the 1760s all the way up to about 1970. As a result, we have inherited a richer society than any previous generation would have been able to imagine. Any generation excepting our parents' and grandparents', that is: in the late 1960s, they expected this progress to continue. They looked forward to a four-day workweek, energy too cheap to meter, and vacations on the moon. But it didn't happen. 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. That doesn't mean our parents were wrong to imagine a better future--they were only wrong to expect it as something automatic. 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. Startup Thinking New technology tends to come from new ventures--startups. From the Founding Fathers in politics to the Royal Society in science to Fairchild Semiconductor's "traitorous eight" in business, small groups of people bound together by a sense of mission have changed the world for the better. The easiest explanation for this is negative: it's hard to develop new things in big organizations, and it's even harder to do it by yourself. Bureaucratic hierarchies move slowly, and entrenched interests shy away from risk. In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work (if this describes your company, you should quit now). At the other extreme, a lone genius might create a classic work of art or literature, but he could never invent an entire industry. Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can. Positively defined, a startup is the largest group of people you can convince of a plan to build a different future. A new company's most important strength is new thinking: even more important than nimbleness, small size affords space to think. This book is about the questions you must ask and answer to succeed in the business of doing new things: what follows is not a manual or a record of knowledge but an exercise in thinking. Because that is what a startup has to do: question received ideas and rethink business from scratch. Excerpted from Zero to One: Notes on Start-Ups, or How to Build the Future by Peter Thiel, Blake Masters All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

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