Zero to One (Peter Thiel)

• Making another implementation of a good thing that has been done before is going from n to n+1. It's nice, but making something that hasn't been done before, going from 0 to 1 is much more impressive. This is what progress consists of.
• At the global scale n to n+1 is globalization. 0 to 1 is technology. Globalization is good for prosperity but technology is much more important.
• Technological innovation mostly happens in small organizations. Bureaucratic hierarchies are not a good environment for it.
• A good business question is: "what valuable company is nobody building?" It's important not only to create a lot of value, but also to capture a significant chunk of it.
• Innovative 0 to 1 businesses are not the only kind of monopoly, there are also businesses that have exclusive licenses or own a scarce resource, but don't do unique innovation. Here we only discuss the first kind.
• The best company is so good at what it does that nobody can compete. Most companies are quite close to one of the extremes on monopoly-competitive scale: either is's pretty much a monopoly, or pretty much a commodity supplier. The common perception is that most are somewhere in the middle because both sides have incentives to represents themselves as being away from their end.
• Monopolies have more relaxed management, better working conditions and they can be an ethical business. Monopolists can afford to think about things other than making money; non-monopolists can’t. Monopolists are also better at innovation because of the slack they have.
• One might think that profits of monopolies come at the expense of societies, but it's important to note that they create unique products that people want. If not for this company the product would not exist.
  • Vasily's note: in this sense network effect monopolies like Facebook are no different from license-based monopolies, at least at the point where they have settled into their network-effect maintained niche. They no longer create unique value. The basic question is: if company ceased to exist, would we be worse off with their first competitor?
• Monopolies might capture value, but competition destroys a lot of value. All the energy spent on advertising, marketing, figuring out how to lure the customers of competitors could be spent on technological innovation instead.
• We are taught that competition is good, but it's a rat race that achieves little for how much stress everyone lives with. It's much more powerful to create entirely new technologies, new products, new markets. Most of this waste is borne by the companies, but the society also loses the fruits of possible innovation.
• Characteristics of a monopoly:
  • Proprietory technology,
  • Network effects,
  • Economies of scale,
  • Branding, Vasily's note: That's the classical moat thing, not so much about innovation here.
• How to get there:
  • Start with a small market that you can dominate and then scale up.
  • Don't think about disruption, think about new abilities for customers.
  • Last mover advantage: it's better to be the last mover in a market (who displaces all previous movers and stays there).
• VC returns are distributed according to the power law. Why does it concern everyone else?
  • When you are founding or joining a startup it's much more important that your company wins than you having a top level role in it.