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There aren’t many books I’ve read more than once.
And I can count the number of books I’ve read more than twice on one hand.
“Zero to One: A Note on Startups, or How To Build the Future” by Peter Thiel is one of those books.
Thiel makes a strong case that building a monopoly business is not just a positive but a requirement.
If you’re a startup founder who’s looking for advice, a business owner who wants to level up their skills, or just someone who appreciates good thinking and good writing, this book is for you.
Let’s start with the man behind the book
Ever heard of a little company called…Facebook?
Peter Thiel was one of the first investors in the company, which (obviously) means he’s very, very, very rich.
Thiel, as an angel investor, invests money into companies with the hopes they return an outsized investment when they go public.
There’s an entire industry of already-rich-entrepreneurs who aim to get even richer through startup investing with the potential to create a monopoly business (more on that in a sec).
Their strategy looks like this:
- Invest in many different startups
- Watch 95% of them fail miserably
- Land one big winner that not only pays for all the losses but helps you profit 10, 100, or even 1,000X your investment
This is what startup culture is like in places like Silicon Valley.
Big players with deep pockets are constantly on the hunt for the next unicorn company. A company with the chance to become the next Facebook, Apple, Amazon, or Google.
Back in 2012, Thiel was teaching a class on startups at Stanford. One of his students at the time, Blake Masters, was publishing his notes from the class on his blog.
The lecture notes went viral, which led to Thiel and Masters working together to write “Zero to One.”
Some people consider Thiel a controversial guy, but nobody would say he’s anything less than brilliant.
It’s the kind of book you have to read for yourself to fully understand the depth of his wisdom, but let’s take a look at 3 of my favorite ideas…
1. Have the courage to answer the contrarian question
In the book, Thiel shares what he views as the single best interview question: What important truth do very few people agree with you on?
From Thiel:
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.
Thiel says answers like these don’t pass the test:
‘Our educational system is broken and urgently needs to be fixed.’
‘America is exceptional.’
‘There is no God.’
These 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.’
So what is Thiel’s answer to the question?
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. […] 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.
He didn’t state this as an answer to the contrarian question in the book, but he does make a contrarian statement by saying that monopoly businesses are a good thing.
He doesn’t use the term monopoly business in the classic sense, where a company is using some form of coercion, collusion, or strong-arming to block competitors.
Instead, these businesses become monopolies as a result of being so much better than the competition that they’re impossible to copy. These businesses go from “zero to one.”
This is the type of business that Thiel says entrepreneurs need to start to, essentially, save the world.
Go from zero to one
At the macro level, the single word for horizontal progress is globalization—taking things that work somewhere and making them work everywhere…. The single word for vertical, 0 to 1 progress, is technology…. Because globalization and technology are different modes of progress, it’s possible to have both, either, or neither at the same time.
Thiel has a different definition of technology than most of us do and he makes the argument that we haven’t made much technological progress in recent decades.
When we think of the word technology we use it as a substitute for information technology.
But the way Thiel uses it, technology is a brand new innovative solution. Things like fire, the wheel, and interstate highways all fit this definition.
So his argument for building a better future is to stop copying what’s already working and create something new. He cites fields of study like nutrition as places ripe for innovation with no real takers.
Either way, his argument for not just how to build a startup but how to build a better world focuses on building something brand new. This creates “vertical progress,” taking us from “zero to one” instead of “one to n.”
And Thiel knows about creating innovative companies.
Fun fact: He co-founded PayPal with Elon Musk. At the time, there was no safe way to send money over the internet, so this was a “zero to one solution.”
It was also a monopoly business for quite some time because it was the first company of its type and the only one people trusted for years.
A bunch of successful founders came from Paypal, giving them the nickname “the PayPal mafia,” which includes these founders and startups:
- Peter Thiel: Palantir Technologies, and first outside investor in Facebook.
- Elon Musk: SpaceX, Tesla, Inc.
- Reid Hoffman: LinkedIn.
- Steve Chen: YouTube.
- Chad Hurley: YouTube.
- Jawed Karim: YouTube.
- Jeremy Stoppelman: Yelp, Inc.
- Russel Simmons: Yelp, Inc.
- Max Levchin: Affirm.
- Roelof Botha: Partner at Sequoia Capital (backed companies like YouTube and Instagram).
- David Sacks: Yammer, Geni.
- Keith Rabois: Held prominent roles at LinkedIn, Square; notable tech investor.
- Ken Howery: Founders Fund.
If you look at those companies, MANY were zero to one.
YouTube was the first place that hosted that much video content. It changed many industries by helping people access useful information for free. It transformed the media landscape. Content creation wasn’t even a job 10 years ago, but thanks to places like YouTube, now it is.
Tesla and SpaceX are companies with obvious zero-to-one missions that have the potential to change the world in different areas, like combatting climate change or straight up vacating the planet if need be.
What happens, though, if the companies are so good at what they do that nobody can compete with them?
What would stop these companies from becoming monopolies?
Wouldn’t that be bad for the economy, for consumers, and the world?
According to Thiel, creating a monopoly isn’t a problem. It’s the goal.
2. Monopolies are good for the world
Thiel argues that competition isn’t good for business at all.
It eats profits and creates a race to the bottom.
Instead, work to build a natural monopoly—a product with such a deep moat that others can’t compete. Think Google.
Some of the biggest companies out there, natural monopoly companies, have an outsized positive contribution to the economy—like the GDP and the returns on the S&P 500.
Try this thought exercise: Imagine a world without these companies and their inventions.
- Google and the search engine
- Apple and the iPod, iPad, iPhone
- Netflix
- Facebook, X, LinkedIn, Instagram, TikTok, and their platforms that help millions of businesses run ads
It’s safe to say it would be a much different world.
Of course, monopolies that happen from collusion and corruption are bad for the world.
But companies that are so unique and good at what they do that nobody can compete are good for the world.
A monopoly business can afford to focus on innovation
Without constantly battling competitors, these companies can dedicate more resources to developing new and exciting products.
It means having the freedom to think and create without limits.
Apple has launched new products like Airpods and they just released AI glasses (AI is one of the new zero-to-one sectors). They can afford to “waste” time and money trying new strategies.
Or, take a company like Amazon that hit it big with Amazon web services, but only because they had the capital and room to launch many different products, some of which failed like the Kindle phone.
A monopoly business can more easily plan for what’s ahead
As owners of a monopoly market with zero true competitors, they can set long-term goals and work towards them without the worry of rival companies getting in the way.
Nobody is creating a new search engine that can compete with a monopoly like Google’s anytime soon, which is why companies like Google can make long and drawn-out plans to enter new arenas like self-driving cars and AI.
A monopoly business has higher profits for bigger projects
Less competition means monopolies usually make more money. This isn’t just good for their bank accounts; it allows them to invest in new ideas or improve what they already have.
“Orange Is the New Black” was one of my favorite shows. Same with “House of Cards.” Had Netflix not dominated the streaming game early on, they wouldn’t have been able to afford to break into new spaces like creating their own shows and films.
How to build your monopoly business
Well, if someone could just tell you how to build one of these businesses they wouldn’t be so special now would they?
There are guidelines you can think about, though—along with monopoly business examples—when it comes to building your unicorn:
- Start small and monopolize: Begin by focusing on a small market niche where you can dominate. Once you’ve achieved a monopoly in that niche, gradually expand into related and slightly broader markets. Facebook started as a Rolodex for students at one university.
- Scale vertically, not horizontally: Focus on deepening your offerings in a specific area instead of spreading your biz too thin over multiple areas. Do one thing better than anyone else. Amazon was first the biggest online retailer of books on planet Earth before it expanded into other offers
- Proprietary technology: Develop technology that is better than its nearest substitute. This technology should be difficult to replicate, providing a substantial barrier to potential competitors. Google’s search engine is the most obvious example.
- Network effects: Build a product that becomes more useful as more people use it. This approach is common in social networks and software platforms, where the value of the product increases with the user base. Paypal is a great example here. Once the userbase hit a tipping point, the company exploded.
- Economies of scale: Grow to the point where the per-unit cost of production decreases as the volume of production increases. This strategy works well for businesses with high fixed costs and low marginal costs. Companies like Uber and Airbnb make sense here. They don’t have to carry the inventory of cars or homes.
- Branding: Create a strong brand that resonates with consumers. A powerful brand establishes trust and recognition in the market. Apple is a self-evident example of the type of monopoly a strong brand can form.
- Unique business models or strategies: Implement innovative business models that are hard to replicate or require a unique approach. This might include unconventional marketing strategies, unique distribution channels, or innovative service models. Tesla went straight to consumers instead of dealership networks. From all appearances, it looks like they have the best tech in the EV game.
3. Want to succeed? Be this type of founder
If you want to go from zero to one, you need to be a definite optimist. You must make big bets on the future by listening to your gut instead of surveys and market research.
Definite optimists execute a long-term plan for the future (and they never waver from it).
Steve Jobs comes to mind, creating the iPod, iPad, and iPhone over the span of a decade. He created products nobody knew they wanted or needed and had the foresight to see opportunities for disruption in markets like the music industry, the phone industry, and the computer industry.
The best way to create a monopoly business is to have the courage to try to predict the future like Jobs did.
Defining optimism goes against the “lean startup” method that a lot of people in the startup world promote (where you ship a minimum viable product and continue to make improvements based on feedback from customers).
Thiel argues that we need less of these three founder types:
1. Indefinite optimism: Indefinite optimists believe that the future will be better, but they don’t know exactly how it will happen. They tend to rely on the idea that good things will come eventually, as long as they keep moving forward, but without specific plans or visions.
Boomers fit this category and a lot of people are upset at their indefinite optimism. They grew up in a reality where everything got better rapidly and constantly, so they expect others to see the world the same way they do. But, like Thiel said, innovation has stalled and many people don’t have boomer levels of optimism.
2. Definite pessimism: Definite pessimists believe that the future can be known, but that it will be worse. They often focus on preparing for specific negative outcomes and may engage in extensive planning to mitigate these expected downsides.
Thiel describes China as being in this category: “When Americans see the Chinese economy grow ferociously fast (10% per year since 2000), we imagine a confident country mastering its future. But that’s because Americans are still optimists, and we project our optimism onto China.
From China’s viewpoint, economic growth cannot come fast enough. Every other country is afraid that China is going to take over the world; China is the only country afraid that it won’t.”
3. Indefinite pessimism: Indefinite pessimists believe that the future will be worse, but they are unsure about what exactly will happen. They often feel that nothing can be done to prevent decline or negative outcomes, leading to a sense of uncertainty and resignation.
This is a nihilistic worldview that doesn’t seem to be helpful to anyone who has it so it’s probably best to avoid it altogether.
Being a definite optimist requires patience, diligence, and the willingness to suffer this fate (which is why, as Thiel explains, almost nobody commits):
The prospect of being lonely but right—dedicating your life to something that no one else believes in—is already hard. The prospect of being lonely and wrong can be unbearable.
When you look at the argument that way, it makes more sense why the people who found these companies get to be filthy rich.
They pay a big price upfront.
The odds of success are extremely low.
The companies and innovations that do work go on to change the world.
For every successful startup, there’s a graveyard filled with equally motivated and ambitious founders who failed for a number of reasons, some of which they had zero control over, including luck.
Do you have what it takes to be the next great founder?
I have zero desire to launch a venture-backed startup (sounds super stressful) but if I did, I would use “Zero to One” as my bible.
As an entrepreneur myself, there were a ton of different books and ideas that were helpful to me even though I run a bootstrapped company that will never IPO because I don’t want it to.
Maybe you don’t want to create a billion-dollar monopoly business, but you can take steps to make it much more difficult for other people to compete with you.
You can build a personal brand that reflects your personality and makes people want to buy not just because of your products, but because of you.
You can go out of your way to deliver exceptional products and services that get results faster.
You can create a mini monopoly business by, say, becoming impossible to compete with in your city, state, or region.
Take a page out of the books of these monopoly businesses and do more than just copy and paste what works.
The founder is the key. They create the vision.
If you’re the founder, have the confidence to make long-term bets, go against the crowd, and take calculated risks.
Will you end up with a monopoly business? Who knows. But your odds of success will be much higher if you apply the principles in this book.