Who is Peter Thiel? Tyler Cowen calls him one of the most important public intellectuals of our era. Bloomberg called him responsible for the ideology of Silicon Valley “more than any other living Silicon Valley investor or entrepreneur.” Depending on who you ask, he’s either a shadowy plutocratic genius or a visionary forward-thinking genius: but everyone seems to at least agree that he’s a genius.
Zero to One is his book of business advice. Given that Thiel started two very successful businesses (PayPal and Palantir) and has been a key early investor in many others (Facebook, SpaceX, and Airbnb, to name a few), I reasoned that it had to be pretty good advice. What I didn’t anticipate is how surprising the advice would be. Given Thiel's vast influence on the tech world, I assumed that any wisdom would have filtered into mainstream awareness and become part of the established dogma. Instead, I had the opposite experience: I was surprised by much of the advice, and thought some parts were even in active conflict with other advice I’d read.
(Vox’s Timothy Lee takes the other position, accusing Thiel of repackaging “conventional wisdom as bold contrarianism” and “contrasting his own views against caricatured positions that hardly anyone actually agrees with.” I’ll present some examples below that illustrate why I think this is wrong.)
Zero to One is ostensibly a regular book organized into chapters, but reading it felt more like reading a collection of essays loosely connected by a few leitmotifs. Accordingly, I’ll summarize what I consider to be the big ideas of the book below, without any attempt to mirror the actual order that they’re presented in.
This seems counterintuitive: isn’t the whole point of the free market that competition is good? But Thiel argues that, from the perspective of businesses, competition is the ultimate evil. A competitive environment is one in which resources must be expended on staying ahead of other businesses, not in investing in the future. At the limit, perfect competition leads to perfect stagnation. In one of Zero to One’s many iconic quotes, Thiel quips:
If you can recognize competition as a destructive force instead of a sign of value, you're already more sane than most.
Viewing competition as bad has non-obvious implications. One implication is that you should only start a business when you have a clear path towards a competition-free market. This might be a new market, or a technological advance that obliterates the existing market. For examples of the latter, Thiel cites inter alia Google (for search) and Apple (for iPads). As a rough rule of thumb, a business needs a order-of-magnitude advantage over the competition to be free from competitive insecurity.
Thiel then goes on to criticize the push to maximize the total addressable market (TAM) of a startup. This is surprising, because every startup pitch I’ve seen tries to emphasize how big their TAM is. But if competition is bad, then the perfect place to start a company is a small, competition-free pond adjacent to a much larger ocean. 1% of a $10B market and 100% of a $100M market are the same number, but it’s much easier to grow a company in the latter. (This whole point reminds me of Blue Ocean Strategy.)
(You might think that this principle is less true for businesses dependent on network effects, like Ebay or Facebook, but Thiel paradoxically asserts the exact opposite. Since network effects rely on almost complete saturation, these startups in particular need to start in a small, easily dominated area—like Harvard for Facebook.)
Perhaps a less obvious implication of viewing competition as bad is that thinking in terms of “disruption” is also bad. I was surprised to read this, because the Silicon Valley-adjacent people I’ve interacted with seem obsessed with disruption: everyone wants to disrupt healthcare, or education, or government. But Thiel is skeptical of this urge:
If you think of yourself as an insurgent battling dark forces, it’s easy to become unduly fixated on the obstacles in your path. But if you truly want to make something new, the act of creation is far more important than the old industries that might not like what you create.
Disruption is a way to frame innovation in negative terms, highlighting how new ideas can destroy existing systems. Thiel instead wants founders to be motivated by a desire to create new wonders. A critical reader might call this a glass-half-full/glass-half-empty rephrasing, but how we frame our own motivations often has a variety of subtle, downstream effects that are hard to appreciate in the moment.
It’s pretty obvious that founders need to be optimistic, because convicted pessimists lack the desire to create anything new: a precondition for succeeding is believing that success is possible. But Thiel further bisets optimism into definite and indefinite halves. Indefinite optimists believe that things are going to get better, but lack a clear vision of how or why. In contrast, definite optimists have a positive vision for the future.
Thiel argues that indefinite optimism epitomizes the modern world (from c. 1970 to the present). Much of our economy is devoted to indefinite optimism:
Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth… the fundamental tenet is that the market is random.
Thiel also criticizes philosophy for succumbing to indefinite optimism. Previously, philosophers offered substantive visions of the good life; in the late 20th century, philosophers like Robert Nozick and John Rawls, although ideological adversaries, both focused on procedural theories of philosophy that emphasized the fairness of processes, not the nature of their outcomes.
Thiel proceeds to criticize government for indefinite optimism, focusing on entitlements and procedural fairness rather than centralized planning for the future, and biotech:
Today it’s possible to wonder whether the genuine difficulty of biology has become an excuse for biotech startups’ indefinite approach to business in general. Most of the people involved expect some things to work eventually, but few want to commit to a specific company with the level of intensity necessary for success. It starts with the professors who often become part-time consultants instead of full-time employees—even for the biotech startups that begin from their own research. Then everyone else imitates the professors’ indefinite attitude. It’s easy for libertarians to claim that heavy regulation holds biotech back—and it does—but indefinite optimism may pose an even greater challenge for the future of biotech. (emphasis added)
The conclusion of all this is what you might expect: as a founder, you should have definite optimism. Just thinking the world is likely to change is not enough to make you start a good company, no matter how exciting the field: “No sector will ever be important enough that merely participating in it will be enough to build a great company.” Thiel concludes:
Darwinism may be a fine theory in other contexts, but in startups, intelligent design works best…. A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world.
This seems like good advice. Nevertheless, I find it tough to square Thiel’s view that a company should have a clearly defined mission and purpose with the conventional wisdom that startups ought to be flexible in their early days. Paul Graham describes this in his piece on common startup mistakes:
Don't get too attached to your original plan, because it's probably wrong. Most successful startups end up doing something different than they originally intended — often so different that it doesn't even seem like the same company. You have to be prepared to see the better idea when it arrives. And the hardest part of that is often discarding your old idea.
And in another essay, he describes how common it is for startups to change their goal:
In the average Y Combinator startup, I'd guess 70% of the idea is new at the end of the first three months. Sometimes it's 100%.
Do Graham and Thiel disagree with one another on this point, or are these essays arguing about something slightly different? One attempt to synthesize these two views might be the opinion that a startup should work towards a definite goal but be somewhat path-agnostic, especially early on. I’m not sure if this synthesis would satisfy either party.
Thiel is quick to criticize the increasingly lavish corporate perks used to lure top talent, claiming that putting culture ahead of mission ultimately dooms companies:
No company has a culture; every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside. (emphasis original)
So, how do you build a team of people on a mission? The answer, Thiel claims, is to organize your company around a shared secret: a belief that the world can be changed for the better in a specific way. This is similar to the previous point about the importance of definite optimism. All founders should believe that they’ve discovered a way to change the world that other people haven’t realized—that they’ve discovered a secret insight. A company, then, is just the natural way to actualize and communicate that insight:
The best entrepreneurs know this: every great company is built around a secret that’s hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.
Thiel uses this insight to drive various points about corporate structure. For instance, every member of the conspiracy needs to be fully invested in the mission, to prevent problems arising from imperfect alignment of individual goals: “You need good people who get along, but you also need a structure to help keep everyone aligned for the long term.” This is true for management, who should be mostly paid in stock, to encourage long-termism, and for regular employees:
Everyone you involve with your company should be involved full-time… anyone who doesn’t own stock options or draw a regular salary from your company is fundamentally misaligned…. Even working remotely should be avoided.
Having a good mission is also key to recruiting, in Thiel’s mind. The uncomfortable truth about startups is that any potential hire could get a better offer, with more benefits, from an established company. Why would anyone want to work for you? The answer is that they believe in your mission—that they agree with your vision of the world and want to change it accordingly. Without a vision you’re just bidding for mercenaries.
Thiel breaks corporate governance down into three parts, which I found a useful conceptual distinction:
Perhaps one of the most explicitly esoteric ideas in the book is the claim that sales is omnipresent and rules every area of life, but is cloaked by the systematic attempt every salesman makes to disguise the nature of their art. In Thiel’s words:
Whatever the career, sales ability distinguishes superstars from also-rans… Even university professors, who claim authority from scholarly achievement, are envious of the self-promoters who define their field. Academic ideas about history or English don’t just sell themselves on their intellectual merits. Even the agenda of fundamental physics and the future path of cancer research are results of persuasion. The most fundamental reason that even businesspeople underestimate the importance of sales is the systematic effort to hide it at every level of every field in a world secretly driven by it…. 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.
I don’t think anyone currently in academia would dispute this characterization.
Thiel thinks that computers are better treated as assistants than replacements for humans:
Computers are complements for humans, not substitutes. The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete… We have let ourselves become enchanted by big data only because we exoticize technology.
This makes sense, but also might be a bit tautological. Any sufficiently advanced tool will invariably become a complement for some human’s workflow: AlphaFold and DALL-E have automated some human tasks, and now everyone’s expectations have adjusted and we use these tools as complements for our own capabilities. What’s the difference, a priori, between seeking to empower people and trying to make them obsolete? Does AlphaFold empower medicinal chemists or make structural biologists obsolete? (The critical reader will respond “Neither, at the moment,” which is fair.)
How can such a famous book remain countercultural almost a decade after it was published? One possibility is that Thiel presents only one side of a dialectic, while other authors present the natural opposing views. Since community consensus follows the synthesis of the two views, both extremes appear to be arguing against the norm even at equilibrium. This might be true; I’m not well-versed enough in the startup literature to know.
Another possibility is that Thiel’s advice is simply difficult to understand, or difficult to follow. It’s easy to read wisdom literature (like the Book of Proverbs) but hard to apply it to your life; simply reading something wise doesn’t automatically make you wise. Maybe Zero to One is like a modern-day Proverbs for founders—multitudes read it, but only a rare breed of person is able to successfully understand and actualize its insights.
Perhaps the biggest drawback of Zero to One is apparent just from the title. Thiel is primarily interested in businesses that aim to change the world, to build something completely new and revolutionary, to go not from 1 to N but from 0 to 1. And so much of the advice in the book is only applicable to businesses trying to go from 0 to 1: how does a restaurant gain an order-of-magnitude advantage over other restaurants and avoid competition? Is the French Laundry 10x better than Alinea? Is Chipotle 10x better than Qdoba?
Thiel’s answer to this question is probably “don’t start a restaurant”; in an interview with Tyler Cowen he said that the Straussian reading of Zero to One was “don’t start a business.” And indeed every piece of positive advice in the book can be inverted to the corresponding cautionary wisdom: don’t start a business unless (i) you think you’ve found a secret about the world and (ii) you have a concrete plan for implementing it without (iii) competing with existing businesses.
But it’s good that restaurants exist, and so at the very least we can conclude that Zero to One shouldn’t be read as a categorical imperative for all businesses, but advice only for a narrower subset thereof. Not every founder needs to start a “Zero to One” business. Not every business needs to be PayPal or Facebook.
What wisdom does Zero to One have for academia? The principle of avoiding competition is an obvious one: nobody in their right mind should start a new program in photoredox catalysis right now. In contrast, some research areas seem almost totally neglected at the moment (W. Dean Harman and his work on η2–arene complexes comes to mind).
Thiel’s point about definite optimism also translates readily to the research sphere. If our goal is to advance scientific progress, definite optimism starts with a vision of the future of our field and generates a roadmap of how to get there. This vision could be a lot of things—designing arbitrary enzymes in silico, perfect prediction of absolute binding constants in relevant environments, CO2 reduction on megaton scale, fully automated synthesis of arbitrary natural products—but the correct research direction then becomes “whatever gets us closer to that goal.” In contrast, indefinite optimism is a belief that science will advance more or less through Brownian motion, by following random grants and research directions that lead to publications. Needless to say, the former is better than the latter.
(The point about misalignment of incentives is also excellent when applied to academia, but deserves a longer treatment than I can give here.)
Overall, I think Zero to One is an excellent book, and worth reading for anyone considering anything startup-related (including starting a research group).