Zero to One

Creating Something New & Enduring That Stands The Test of Time

Core Philosophy

1.
Competition is really bad for businesses. It generally means you have incrementally improved an existing product, rather than innovated and created something new.
2.
Best founders are definite optimists. They believe the future will be brighter and it is a certain future without a lottery ticket. They have a worldview that society will look a certain way in 10-20 years and they are building around that.
3.
Indefinite optimists believe that the future is unknown and unknowable. Pessimists believe the future will not be better.

Gaining Traction

4.
Start with a really small piece of the market and then slowly expand to different parts of the market. You have to continuously attempt to create monopolies at all points of the business and capture that market incredibly quickly.
5.
PayPal started with emigrant offices and E-bay power users. Tesla started with Sedan Electric Sports cars then Luxury Sportscars. Amazon started with books. Uber started with cars at the SF airport. Facebook started with Harvard college campus.

Team Culture

6.
Founders no more than $100k salary. Need employees motivated by the long-term vision of the company with incentives aligned to creating long-term value.
7.
Good team culture borders on cult-like. Except they are right, not wrong, about something extremely important. You should pay 2-3x above market rate for good talent. It is rare and hard to come by. You need them more than they need you.
8.
Every startup tells employees they're solving a hard problem, they have a great team, and they can get paid in equity. Great employees want a mission they believe in whole-heartedly and a team that resonates with them.
9.
PayPal only hired people interested in replacing the US dollar and people obsessed with Sci-Fi. Need really lean and tight teams. Everyone is accountable for one thing means there is no competition.
10.
Early at PayPal, really small and tight-knit teams did more. Too many employees creates bloat and not enough for everyone to do and accomplish. The best hires in startups do not respond to tonnes of perks because they could get more in management consulting or Google.

Distribution

11.
Distribution is the umbrella term where marketing and sales sits underneath it. The type of distribution is related to your price point and the nature of your product.
12.
Only metric that matters is CAC: LTV/LTGP. If the product is less than $10K, you cannot do individual selling and you must have self-serve mechanism. This needs to be minimum 5:1 ratio for LTV and 3:1 Ratio for LTGP.
13.
Enterprise Sales ($50k to $1m): Need sales reps or typically the CEO initially travelling and meeting other Enterprise CEOs. Alex Karp spent 25/30 days travelling to sell Palantir initially. Each deal takes precision and class.
14.
Low-Touch Sales ($8-50k): About creating a system for repeatedly getting customers and closing them. Involves SMBs and maybe slightly larger companies. Traffic plus booking consistent calls with a system to close where LTV:CAC is minimum 5:1.
15.
Advertising Marketing: Self-serve products like SMB Software (Clay.com lower tiers, Hubspot, RB2B, Wiza) and Products & E-Commerce.
16.
Inherent Virality Marketing ($10-100 range): Cannot afford to pay for marketing so rely on viral trends and growth marketing. Common tactics include referral incentives, organic content (socials, SEO).
17.
PayPal used referral marketing paying $10 to get someone to sign-up for $10, got hundreds of thousands of customers. Tesla owned distribution channels (car dealerships) instead of selling through others.
18.
Superpower relied on organic content but most impressions came from Max. 2/3 of his audience was from Australia, so did not help attributable revenue. Paid ads were unprofitable for $1000 item.

Technology

19.
Human plus Tech is the best outcome. Thiel believes Tech replacing Humans completely is a 22nd century problem, not a 21st century problem.
20.
PayPal had tonnes of fraud, took both an automated system using Machine Learning plus humans in the loop for various functions.

Nature of the Market

21.
Timing is extremely important. The only real monopoly created in clean-tech was Tesla. They understood the secret that clean-tech was a social phenomenon, as much as an environmental phenomenon.
22.
Celebrities like Leonardo loved to drive Tesla. People wanted to be considered as part of the movement. Huge bubble around clean-tech because everyone acknowledged the problem that the way the world uses resources is not efficient.
23.
A problem itself does not create a durable business. People tried to frame clean-tech as a trillion dollar industry, but they were positioning themselves as if they were a monopoly in a $10BN industry.

6 Things Every Business Needs to Gain a Monopoly

24.
Timing: The market actually wants it at that point in time.
25.
10x better product: Goes from 0 to 1 through Network Effects, Proprietary Tech and Scalability.
26.
Good Culture and Team: Killers. Incentivised by long-term valuation.
27.
Monopoly/Durability: Does this have potential to be the last-mover in the industry? Will this company be around in 20-30 years?
28.
Distribution: Typically follows the power law. You need 1 exceptionally good channel that you can infinitely scale with capital.
29.
Understand a secret other people do not: Tesla with Social Phenomenon, Gates with WWW, Zuck with digital connectivity.
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