So it's surprising in a wonderful way just how simple Zero to One feels. Barely 200 pages long, and well lit by clear prose and pithy aphorisms, Thiel's has written a perfectly tweetable treatise and a relentlessly thought-provoking handbook.
His most provocative thesis, excerpted in a popular WSJ column, declares that "competition is for losers" and entrepreneurs should embrace monopolies. This is an ingenious framing device—just controversial enough to arouse debate, but commonsense enough to make an incrementalist acknowledge its virtue. Thiel is not suggesting that capitalism is bad. He's saying that, precisely because capitalism is wonderful for consumers, it's hell for companies. Truly competitive industries, like Manhattan restaurants, see their profits gobbled by rivals and fickle eaters. Every start-up must begin small before getting big. Entrepreneurs should at first seek to dominate a small market. In other words: They should try to build a mini-monopoly.
"The perfect target market for a start-up is a small group of particular people concentrated in a group but served by few or no competitors," Thiel writes. Lots of tech hits, like Facebook and PayPal, were launched in small communities of power users. These early adopters tested the product, identified early bugs, and helped to spread the word when the company expanded. An online yearbook for Harvard students might not strike you as a $100 billion idea. But today Facebook is a $200 billion company, because Zuckerberg established monopolistic fiefdoms at colleges before expanding to take over the world.
Thiel arrived in Silicon Valley in 1985. After two tours of duty at Stanford (which did little to dissuade him of the notion that college is a waste of time) he founded PayPal (then "Confinity") with a group of friends in 1998. Two years later, at the pinnacle of the dot-com bubble, he merged his business with Elon Musk, perhaps the Valley's most celebrated polymath, who happened to starting a similar company, X.com, just blocks away.
The crash left an intellectual hangover in the technology space, Thiel says. The founders who survived the deluge clung to four principles: 1) Be humble and make incremental advances; 2) Stay lean and experiment agnostically; 3) Don't try to create new markets all of a sudden; 4) Focus on product, not sales. But those who misremember history are doomed to repeat it. "The opposite principles are probably more correct," Thiel says. Start-ups should be bold, have a clear plan, try to build a small monopoly, and appreciate that sales matter as much as product.
It's refreshing to hear a techie extol the virtue of sales, and Thiel is good at explaining both why nerds hate marketers, and why the nerds are wrong. "Nerds are skeptical of advertising, marketing, and sales, because they seem superficial," he writes. "They know their own jobs are hard, so when they look at salespeople laughing on the phone with a customer or going to two-hour lunches, they suspect that no real work is being done. If anything, people overestimate the relative difficulty of science and engineering, because the challenges of those fields are obvious. What nerds don't realize is that it also takes hard work to make sales look easy ... If you've invented something new but you haven't invented an effective way to sell it, you have a bad business—no matter how good the product." There is more sneakily simple wisdom in Thiel's chapters on sales and distribution than in several perfectly suitable business books.