Thiel’s Zero to One


Jason Collins


February 15, 2016

I am sympathetic to many of Peter Thiel’s arguments in Zero to One: Notes on Startups, or How to Build the Future, but this is not a book where the arguments are buttressed with evidence to convince you they are true. Below are some random observations.

Thiel argues that competition is something a company should avoid. Competition erodes profits, so you want to be a monopoly. In some ways Thiel’s argument isn’t about avoiding competition, but a recommendation to compete in different spheres - competing to find the next monopoly, wealth, status, etc. It’s a recommendation to dream big - look for 10x improvements.

Thiel puts Apple and Google in this camp - they do what they do so much better than their competitors that they are effectively monopolies. In contrast, restaurants tend not be monopolies, with profits rapidly competed away. But this brings the exceptions to mind - the restaurant chains that explode in popularity - think Starbucks. Many businesses have done very well in competitive, commodotised markets. Were they 10x improvements? Is this an ex post justification where all extraordinarily successful businesses can be explained as 10x improvements?

A thread with which I have much sympathy is Thiel’s critique of education conformity (in fact, conformity in general). Through high school the ambitious build their CV to get into a top university. They then aspire to go into law, management consulting or finance. Are they happy competing on this treadmill?

I’m close to convinced that it would be a good thing if less bright people went to law, management consulting and finance (on the last, I’m reading John Kay’s Other People’s Money). But from the perspective of the student, I’m not sure the treadmill is a bad choice. It’s a pretty good payoff. And how many people diverge from this path, dream big and fail big? If society has a dysfunctioning structure - whether created by regulation or something else - why not take advantage of it?

This argument against conformity and the recommendation to compete in new ways is also a central thread in Malcolm Gladwell’s David and Goliath.

There are some sections of the book that didn’t work for me. In a chapter “You are not a lottery ticket”, Thiel disagrees with Malcolm Gladwell’s argument that luck is central to success (found in Outliers). Thiel quotes Warren Buffet’s statement that he is a “member of the lucky sperm club”, or Bill Gates’s suggestion that he “was lucky to be born with certain skills”, which at a level must be right. As Gladwell argues, if Gates was born anywhere but the small part of the US where he was born (with certain genes etc), it wouldn’t have panned out the same for him.

The only piece of evidence Thiel throws into the debate is the existence of serial entrepreneurs who have started multiple multimillion or billion dollar businesses. “If success were mostly a matter of luck, these kinds of serial entrepreneurs probably wouldn’t exist.” Thiel effectively ignores Gladwell’s central argument.

Following this, Thiel moves to classify people’s (and whole countries’ and continents’) perspectives on the future along two spectrums - optimism/pessimism and definite/indefinite. For example, a definite optimist (in Thiel’s mind, the US before the 1980s) believes the future will be better and that you can plan how you will get there. An indefinite optimist also believes the future will be better, but doesn’t know how it will be better so they don’t plan. Rather, they try to keep their options open (e.g. the resume building Ivy League generalist).

Thiel argues for definite optimism. Those who plan and don’t believe it is all down to luck will be the ones who create the future - who go from zero to one. Is Thiel arguing for the “growth mindset” - even if much of success is innate talent through genes etc, those who pretend success is wholly due to effort and plan accordingly will do better?

The argument is interesting, but I’m not sure it’s anything more than storytelling. Are Americans today really less “definite” about the future than people in the 1960s (e.g. is there any better evidence than stories about moon landings etc.)? The argument also made me think of this paragraph from Hayek:

This is not a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.

Is it a problem if a nation is “indefinite” and doesn’t plan if its people are “definite” planners?