Learning from Book: Zero to One by Peter Thiel. Part-1

I recently had a chance to read the book "Zero to One" by Peter Thiel. While the book appears to be on building successful startups, it has a lot of wisdom on looking at business, evaluating them and how to look at your career.

In the first part of this post I have tried to cover learning from the first 7 chapters of the book. The key points are given as per each chapter basis my limited understanding.

1. Preface
   1. Every moment in business happens once. That is why great business are built by finding value at unexpected places. These business solve problem using first principles and deriving learnings from multiple points.
2. The Challenge of Future
   1. To build great things in future you have to find or do things which lead to vertical progress and technology is for that. Extrapolating it to people you want to find people who can answer question " what important truth very few people agree with you". Difficult to answer since it means probably it will be an unpopular answer ( Brilliant thinking is rare, but courage is in even shorter supply that genius). Similar when u look at product u might need to think unpopular. Being Popular means u copy and break the concept of every moment in biz happens once. Example, copying Facebook or google will be incremental not vertical 0 to 1 growth.
   2. Deriving from above a startup is the largest group of people you can convince to build a different future. We can use this in investing to evaluate next big idea stock idea.
   3. The above paras kind of summarize why 0 to 1 is so difficult. It is about finding unpopular truth, then finding people for it and then probably tech to solve it.
3. Party like its 1999
   1. Learn from past. First step in good decision making is to think what we know about past. These are the 4 lessons learnt from dot-com bubble, but probably applicable for any business. Also, important for investors to evaluate management on these dimensions.
      1. Make incremental advances--> Grand visions often don't work or attract competition. make incremental steps, conquer one battle at a time.
         1. Stay lean and flexible--> Paramount in today's age as planning seldom works these days. ( Mike Tyson: Your plan is good, till you get punched in face). Also beware of arrogance arising out of plans. Example, remember the CAPEX's gone bad basis those perfect XL sheet plans
      2. Improve on competition--> Don't try to second guess customer. Look at an existing customer, find the poor solution, then improve it and monopolize it
      3. Focus on product, not sales--> though i don't completely agree as it should be balanced, but focus on product. After all that is what ur core solution is.
   2. Our default assumption is that contrarian means going against the crowd. Being contrarian is not to oppose crowd but to think for yourself.
4. All happy companies are different
   1. All happy companies are different in the sense they create monopolies which by definition can't be same as other.They solve unique problems. The trick is that due to business environment they will seldom say or portray they are monopolies. Example google says its revenue is ad sales which is a tiny portion of overall ad industry. Yet it has solved a unique problem. It has built a VALUABLE business which nobody is building or cant build. In investments this is what is separating wheat from chaff. Also links with the mental model that in traditional low value industries few companies create monopolies. 
   2. On other hand most companies who are run of mill will say they are different from competition and have a unique positioning. 
   3. Good example: Airlines. All biggies claimed they were unique and different, but it was south-west which created a monopoly.
5. The Ideology of competition
   1. Competition for the sake of it is futile. The less we compete the more we gain. That is what game theory proved. Example, Pepsi and Coke. Instead of fighting wars now they play the price game in tandem. Both price products at same cost and raise prices at same cost. . Shakespearean thought on war that all combatants are similar and often in war forget about why they are fighting cause there is nothing to fight about. In business happens often. Google and Microsoft fought OS/Browser wars and Apple came and changed the landscape itself. 
   2. Unfortunately our education system makes us think that beating competition is the only way out.Similarly, inside organizations people keep fighting for advancement without realizing that they are not on 0 to 1 path.
   3. As an investor we need to look at companies whose promoters think fighting competition is the most destructive activity. They either partner competition (refer Sun Tzu) or find a niche where people can partner them not compete with them
6. The last mover advantage
   1. A very counter intuitive thinking. First mover means you create a monopoly but it can be transient. Its a matter of time that someone comes and attacks you. The other inverted approach is move last in a specific market where needs are visible and then enjoy years of monopoly profit. From an investor perspective it often means that company might lose or may not be profitable initially, but can be immensely profitable later. And as investors that is what we should care about. Cashflows of future long out not the very near ones. Links to the bias of being attracted to whats nearby
   2. Once a company is last mover it needs to create a moat to keep generating profit. Links to Buffet on moat definition. This can be done using Proprietary Tech, Network Effect, Economies of Scale, Branding. Very similar thought process shared by Pat Dorsey.
   3. Bringing it together, to build a monopoly start with small specific segment. Don't disrupt and avoid competition at all costs. "If your company can be summed by its opposition to already existing firms then it can't be new and probably not a monopoly. So,monopolize this small segment and then move ahead. This movement ahead can be unpredictable but you need so scale in slightly broader markets where your tools of monopoly ( tech, network effect etc) still work
7. You are not a lottery ticket
   1. Again counter intuitive and contradicting to earlier idea of staying lean. He says that we are now overestimating role of luck. We use it as an excuse to defer definite planning. The thought process works if the company has managed to find the segment it wants to monopolize. It can then make small plans and not grandiose ones which we often hear.
   2. Investment thought, " A Business with a good definite plan will always be underrated in a world where future is seen as random". Powerful idea.
   3. Key I think is balance between appreciating role of luck and planning.