Notes on Peter Thiel’s “Zero to One”

I just finished reading Peter Thiel’s new book “Zero to One” and I want to write something that can neither be called a book summary nor a book review. I just want to discuss a few ideas from the book that I liked, interspersed with my own commentaries, without meticulously stating which one is what. So I am just going to call it “notes” and accept an adversarial reader who assumes all good ideas to be the author’s and all bad ideas to be mine.

Monopolies are good. Competition is bad.

This was new to me since I always thought of competition as a sign of a healthy economy. Peter Thiel argues that in any sector with high competition, profits are low and all progress is incremental: sign of a stunted economy. The conventional argument against monopolies is the lack of a force that drives progress. If there’s no competition, then the monopoly may be able to do whatever it pleases, which includes not doing anything at all and still mooching money off the public. However, this argument is flawed since there does exist a progress-driving force: profit.

Deciding what to do is way more important than doing it well.

This is not new to me since I have come to this realization myself through experience. In the world of venture capital, a portfolio usually follows a power law: one company in any VC’s portfolio outperforms every other company in the portfolio combined. So if your strategy is to half-blindly diversify hoping to hit the good ones just based on probabilities, you are mostly going to miss the superstar companies. The only strategy that works in the VC world is to meticulously screen for only those companies that have a high chance of outperforming everyone else combined.

Peter Thiel takes this argument to the next level: the options available to you in any decision follow a power law. Thus doing many things just in order to increase the probability of hitting the good ones is never a good strategy. One needs to meticulously fish for the superstar options and devote all resources to them.

Solving the really big problems requires sales skills.

Barring the problems that can be solved by a PhD student in at most a few months, most problems can be solved more efficiently by a strategic allocation of human capital to it. Once a problem becomes big enough, a strategic allocation of human capital is the only way to solve it. And motivating the humans to work on the problem requires sales skills.

 

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