5 start-up lessons from Zero to One by Peter Thiel and Blake Masters: Follow the Money, Mechanics of Mafia and more
Peter Thiel’s Stanford startup class in 2012 inspired Zero to One. Blake Masters’ notes became the book, published in 2014. Its central message is simple: create something new instead of copying existing businesses. These 5 lessons explain how founders can approach that challenge.
Follow the Money
A few successful businesses can produce returns much larger than those of others combined. Founders Fund’s Facebook investment clearly showed this pattern. It returned more than all the fund’s other investments together.
Thiel advises investors to choose companies capable of returning an entire fund. For founders, the message is about focus. You cannot manage several companies or careers together. Choose something that could matter, then give it your full effort.
Build on a Secret
Great businesses often start with an important discovery others have missed. Peter Thiel calls this a secret: something difficult but possible to uncover.
Some secrets concern nature while others concern people. Airbnb, Lyft and Uber recognised unused supply and unmet demand. Their opportunities existed where others saw little value. Fear of risk and satisfaction with existing conditions can prevent such discoveries.
Get Foundations Right
Thiel believes mistakes made at the beginning can become impossible to repair. Choosing a co-founder for your start-up, therefore, needs serious thought. Founders should know each other before building a business together.
He recommends small boards, ideally with three members. Team members should work full-time. He favours ownership rewards over cash payments. His suggested salary limit for an early-stage CEO is $150,000 annually.
Mechanics of Mafia
For Thiel, a company does not merely have a culture. The company itself is a culture, built around a shared mission.
His early PayPal colleagues later built several major businesses. These included LinkedIn, YouTube, Yelp and Palantir.
He valued people who enjoyed working together, beyond impressive qualifications. Founders should explain why employees should join, without relying on attractive perks. Assigning each person a single clear job can reduce internal disagreements.
If you build it, will they come?
Building a product does not automatically bring customers. Businesses must also find an effective way to reach buyers.
The money earned from customers must exceed the cost of attracting them. Expensive deals need detailed sales efforts. Cheaper products may depend on advertising or customers spreading the word. Thiel argues that one successful channel can support a great business.
A note of caution
Published in 2014, the book includes examples and valuations from an earlier period. Treat its lessons as questions worth careful consideration, rather than as fixed rules.
