in a world where most startups fall short have you ever wondered what makes a select few successful
we're often told all sorts of theories from the economy to the technology to the execution
but what if we could tap into the minds of some of the greatest entrepreneurs of the last century
and be given a framework to understand what makes a startup successful what's up everyone kenji here
and in this video i thought i'd share one of my favorite business books which is zero to one by
peter thiel where the author discusses all sorts of topics to do with startups but before we get
into it why should you listen to this guy well he was the founder and ceo of paypal and eventually
he would go on to recruit an all-star team of people that would change the business world among
the people where steve chen co-founder of youtube reed hoffmann founder of linkedin and elon musk
ceo of tesla and spacex and because of this huge influence that this team had on the business world
they came to be known as the paypal mafia in which obviously peter thiel was the dawn
so if you want to learn about business i don't think there's many people more qualified than him
in his network so let me summarize some of the key insights of the book
the first main theory he explains has to do with the types of companies there are out there
and the progress that they make he basically splits it into two main areas horizontal and
vertical progress horizontal progress is basically expanding on existing ideas so in short it's about
globalization on the other hand there's vertical progress which is creating something that didn't
exist before which he calls technology in other words horizontal progress is going from one to n
while vertical progress is going from zero to one hence the title of the book and to give some
examples horizontal progress could be distributing smartphones from developed nations to developing
nations while on the other hand vertical progress would be the act of going from a regular phone to
a smartphone and when put into practice the most valuable companies out there had vertical progress
the likes of apple with the computer or the smartphone
amazon with e-commerce or facebook with social media they're all things that required outright
innovation they weren't really around before that on the flip side you have horizontal progress
which might not sound as impressive as vertical progress but it's still a huge part of business
the example he uses is china see they basically copied everything that worked in developed nations
from 19th century railroads to 20th century air conditioned and even entire cities and as
for whether it worked china currently sits as the second largest economy in the world
with a growth rate higher than that of the us so it's fair to say that horizontal progress may not
sound as attractive but it's still definitely very powerful the second point has to do with
monopolies and we've all heard that monopolies are terrible for the economy from google to amazon
they're all squishing the small businesses but peter thiel has a bit of a different opinion on
that see if you've taken a basic economics class you know that there's two extremes on the one side
you have perfect competition and on the other side you have monopolies in perfect competition there's
many companies fighting it out the products are almost the same there's no barriers to entry
meaning that anyone can set it up and as a result a business can't set their own price because if
they set a higher price than they should then everyone will just go to the competitor right
a common example is in agriculture when we go to the supermarket there's just an abundance of
different tomatoes right and at the end of the day they're just tomatoes so it doesn't really
make a difference as to which one you pick so if you see one that's overpriced odds are you're just
gonna take the next one because at the end of the day the products virtually the same now on
the other hand you have monopolies which means that there's zero competition your product just
can't be much and it's very hard for others to enter this market according to peter thiel this
may sound a bit controversial but he thinks that his startup's aim should be to become a monopoly
there's really four main ways to go about that the first one has to do with proprietary technology
so basically a technology that's so good that it can't be matched and the example he uses has to
do with tesla where other big market players like bmw or volkswagen are really pushing hard to get
into the electric car market but they're still not quite able to match tesla the second one has to do
with network effects where basically the more you use a product the more valuable it becomes and the
example here has to do with social media where the more people sign up and the more pictures you post
basically the more the app becomes valuable right and you're not going to go to another app
because there's just not going to be any of your friends in it right the third way has to do with
economies of scale where the cost per unit goes down the more you produce typical example here has
to do with the car industry where there's high fixed cost at first so things like the factory
or the robotics but once that's out of the way the more cars that you're going to produce the
lower the cost per car is going to be so once a company has economies of scale set up it's a lot
cheaper for them to produce so it's very hard for newcomers to come in and pay all those fixed costs
and lastly we have branding and when it comes to branding it's kind of hard to understand because
it can't be quantified so these are the likes of say nike or coca-cola right when at the end
of the day say adidas or pepsi are really not that different but people still have strong preferences
that's mainly due to branding now all those points are great but is a monopoly good for society then
he basically believes that the incentive to become a monopoly is what drives innovation which is a
win for everyone right at the end of the day who doesn't want a nice computer a nice smartphone or
a car right now without the incentive of monopoly profits in the future he thinks that very few or
none of these innovative technologies would have been made the next point has to do with
sales see when people think of sales they think of something unglamorous like going around knocking
on people's doors trying to sell them a new phone contract or maybe even tricking them
into something right hello would you be interested in buying a brand new vacuum cleaner leave i don't
but on the other hand when you think of technology they think of blockchain ai
and all these glamorous things that create really beautiful products matter becomes mind and the
possibilities become endless but at the end of the day you can have the best product in the world
but if you can't sell it there's really no money to be made right and as he puts it if anything
people overestimate the relative difficulty of science and engineering because the challenges
in those fields are obvious what nerds miss is that it takes hard work to make sales look easy
but selling doesn't just stop with your customers when you try to recruit new employees you're
essentially selling your company when you look for fundraising you're selling your company when
you talk to the press you're selling your company so at the end of the day sales is
ever present so if there's a takeaway here the ability to sell cannot be understated
if you don't have any sales you're bound to fail there's really no way around that
and the last important point he makes has to do with starting small and he says that business
ideas should start with a very small niche market and once they have a dominant position in that
market then they should consider expanding out right and he actually gives three main examples
of that the first one has to do with tesla where they didn't even start in the general car market
or even the electric car market instead they focused on something much much smaller which
was the luxury electric car market so cars that were really a hundred thousand dollars and above
another example is amazon where they now dominate the e-commerce marketplace and it seems like a
huge market back in the day they were only focused on books and specifically selling books online and
i picked books as the first best product to sell online you're making a list of like 20 different
products that you might be able to sell which was virtually a non-existent sized market right
and the last example i'll give here is facebook when mark zuckerberg started facebook it was
really only tailored towards harvard university so the market size was really just one university
obviously after that once they got a dominant position they moved on to other universities and
eventually beyond that but at first it was just one university small now peter thiel is known
as a contrarian thinker so you may not agree with many of his points and that's fair enough
at least hopefully with a new fresh perspective if you want to get the book i'll leave it in the
description feel free to check that out and if you enjoyed the video feel free to like and subscribe
it really helps out the channel that's all for this one and i'll catch you in the next one