Notes: Zero to One (Peter Thiel)
This is a short book, an excellent book, one that left me bubbling with questions. It therefore scores highly on the ‘should I read this’ index.
My two-minute summary
Thiel likes to emphasize the importance of reasoning from first principles, so it seems appropriate to attempt to summarize this book in the same way:
- Technological improvement is of fundamental importance
- Therefore, we ought to understand how technological innovation occurs, and
how it can be promoted
- Most new technologies are implemented as solutions to definite problems – or
they start out that way. Therefore, one must be able to
- identify existing, or soon-to-exist, problems (read: “profit opportunities”)
- make and execute plans to solve them
- In particular, important problems usually aren’t solved by accident
- Therefore, it’s desirable to inculcate a spirit of definite optimism,
which consists of:
- imagining a better future
- constructing specific plans on how to bring it to pass
- Therefore, it’s desirable to inculcate a spirit of definite optimism, which consists of:
- Once the ‘imagination’ step has been completed – this consists in finding
what Thiel calls a secret – a plan has to be constructed and implemented
- Startups are a good way to do this, a cooperative framework with room
for individual agency
- So, what remains is to maximize the startup’s chance of success. Thiel
discusses a number of specifics, but most prominently:
- monopoly as a prerequisite to value creation
- commiting to doing one thing well
- proper incentive alignment
- So, what remains is to maximize the startup’s chance of success. Thiel discusses a number of specifics, but most prominently:
- Startups are a good way to do this, a cooperative framework with room for individual agency
- Most new technologies are implemented as solutions to definite problems – or they start out that way. Therefore, one must be able to
- Therefore, we ought to understand how technological innovation occurs, and how it can be promoted
In more detail
Some of what I have to say here is cribbed, unintentionally or otherwise, from (excellent) blog posts I read about this book before the book itself:
- Dan Wang (on Thiel’s views on recent tech progress specifically)
- Scott Alexander
I began reading Zero to One expecting to agree with essentially all of it, and I did. I expected to enjoy it immensely, and I did. I think a lot of ideas I’ve stumbled across in podcasts, blog posts, and so on that really resonated with me may have all been sourced in part from this book (or the original lecture notes from Thiel’s class, on which the book is based). In any case, Zero to One does an admirable job of summarizing, concisely, two basic ideas that I agree with violently, and that I’m ashamed of not taking seriously sooner:
The creation of new technologies is valuable in a way that the spread of existing technologies is not.
Creating new technologies (that’s going “from zero to one”) requires definite optimism: the ability to imagine a future that’s better in specific ways than the present, and to build and execute long-term plans to realize that future.
There’s a lot of advice in the book on how to build and manage startups, and on how to ‘sequence’ markets so as to obtain monopolistic advantage (fascinating, and unintuitive to me). However, I found the most valuable part of the book to be its moral injunction – Thiel charging the reader to be more optimistc, more invested in the future, and more willing to act to shape it.
I’d like to briefly mention to points in particular:
- Optimism and useful thought patterns
- Startups as personal augmentation
How to generate useful thoughts
C.S. Lewis once described morality as a set of instructions for running the “human machine”. That feels to me like what Thiel presents in Zero to One, and that’s why I’ve reacted so warmly to it.
The most important concept in the book is definite optimism, a mindset characterized by the ability to imagine improvements on the current state of affairs, and a desire and ability to act on concrete plans to bring them about:
To a definite optimist, the future will be better than the present if he plans and works to make it better.
Thiel argues that the US, and the Western world in general, used to maintain a culture deeply rooted in definite optimism, but that we’ve gradually lost that over the last few decades, falling into an indefinite optimism characterized essentially by intellectual sloth:
Instead of working for years to build a new product, indefinite optimists rearrange already-invented ones.
He provides a number of examples, notably in the shift towards finance as a magnet for talent:
Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.
(not the only way!)
If you want to get a flavor of the cultural shift, contrast the Apollo program of the 60’s, or the construction of the Panama canal decades earlier, with modern America’s relative paucity of ambitious new infrastructure projects. It’s not just about infrastructure, of course – an indefinite attitude allows us to forgo attempting to plan for the future altogether.
We are more fascinated today by statistical predictions of what the country will be thinking in a few weeks’ time than by visionary predictions of what the country will look like 10 or 20 years from now:
One bit in particular I found interesting – he suggests biotech may have been lulled into a sense of complacency by Fleming’s accidental discovery of penicillin, and may actually be too willing to place its hopes for e.g. drug development in “spray and pray” solutions. I’m not sure how fair that characterization (which he draws in contrast to the more definite plans of software developers) is, but I do agree that an aversion to making real plans is often a useful cover for avoiding commitments that require intellectual and moral courage.
As Thiel puts it,
Properly understood, any new and better way of doing things is technology.
On those grounds, definite optimism is a technology – a way of operating the human machine that leads, on average, to more useful thoughts (I’d also argue it’s a lot more fun than the alternatives).
Startups as personal augmentation
Suppose one does have a plan for improving the world – a secret, as Thiel puts it, that describes an act of potential and valuable creation not yet realized. How does one bring it about? Zero to One offers a simple answer, and as you might expect, it’s based on the principle of deterministic action:
A startup is the largest endeavour over which you can have definite mastery.
Humans benefit from cooperation – but bring too many people in, and the organization structure becomes unwieldy and potentially misaligned with the founder’s original goal. The sweet spot in the middle is precisely a startup, and that’s what he recommends as a tool for getting things done.
Thiel sort of defines away the question of ‘how big is too big’, but I like his approach. It places emphasis on what’s fundamentally important – the act of transforming the physical world that inspired the business in the first place.
This book reads like an admonition to behave responsibly and with intellectual courage:
- Figure out what ought to be done
- Figure out what steps need to be taken to make it so
- Build a team to do that thing in particular
- Don’t get distracted by competitive urges – everyone benefits from new ideas.
A would-be classic:
… have Jay-Z star in a cross between Hackers and Jaws: rap star joins elite group of hackers to catch the shark that killed his friend.
The death of Francis Bacon, definite optimist:
Bacon caught pneumonia and died in 1626 while experimenting to see if he could extend a chicken’s life by freezing it in the snow.
The 10x rule for monopoly-building through superior technology:
As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.
You should be careful in designing employee incentives when building a company:
Equity is the one form of compensation that can effectively orient people toward creating value in the future.