Reviews about Zero to One book( Notes on Startups, or How to Build the Future)

I really wanted to like this book. I’ve never read or heard anything previously from Thiel, so I had little bias going in. I heard a recent radio interview with Peter Thiel where I thought he handled questions really well and gave some great advice for entrepreneurs. From the amount of 5 star reviews on Amazon and an online list I found of best business books of all time with this book on it, I was expecting something very profound. I guess you could say no amount of Peter Thiel’s novel insights and experiential knowledge could have met my high expectations. However, I was going to give the book 4 stars until I hit about half-way through book, where it just all seemed to go downhill thereafter. I suddenly started questioning many of Thiel’s assertions from the earlier chapters, and ended up with a lopsided Pros vs. Cons list. I started researching into Thiel’s accomplishment’s and failures. The result was a three star review. My opinions are outlined below.

I’ll start with what I liked:

1.) The book has a core theme of empowering the individual. The technological future is not going to happen unless individuals or teams thereof make it happen. The future is not inevitable. Moore’s law for transistors just doesn’t happen like a natural phenomena; you need a dedicated team of innovators always solving the technical challenges. (Actually, Moore’s law is expected to not hold over the next decade, due to technological barriers.) I liked the idea of “You are not a lottery ticket.” Too much credit is given to founder blind luck in the creation of successful companies in popular culture. There were a whole lot of people busting their humps with late nights and weekends making these things happen. Startups are not 9-5 M-F jobs with lots of vacation and perks built in.

2.) Thiel reminds engineers that while their work is essential at a startup, its not sufficient for a successful business venture. You have to get your product to the customer (i.e. figure out the manufacturing/supply chains/logistics). You have to explain how this product is going to benefit the customer. You have to convince a customer to part from his/her money. This doesn’t just magically happen, you’re going to have to be a hustler if you ever want to see real profits.

3.) Although sometimes obvious, the book is full of useful advice and anecdotal lessons learned from tech startups’ failures and successes. If you are planning a startup or interested in joining one you should read this book. You will learn something about entrepreneurship.

Here’s what I didn’t like:

1.) Absence of Supporting Evidence. The writing style is very informal, which I actually enjoy (makes for a quick read), but many of his arguments are made poorly (sometimes unconvincingly). There are no citations in this book. No references are mentioned. Subjective opinions and personal anecdotes often substitute for any factual evidence. It’s pretty clear Thiel has a disdain for statistics of any kind, both in a factual statistic sense and for any technology that relies on stochastic techniques. The book is also chock full of superlatives and (mostly false) dichotomies. A prime example: “Almost all successful entrepreneurs are simultaneously insiders and outsiders….When you plot them out, founders’ traits appear to follow an inverse normal distribution.” No citation or reference given….yeesh….I mean is this a personality study Peter Thiel personally did or does he just completely make this up? Another example is his central theme: “All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.” Not really true of either sentence as counter examples are given even by Thiel later in the book (e.g. some companies implode by poor distribution, infighting, unprofitable ideas, etc.) I’m glad Thiel didn’t become a trial lawyer, he’d get embarrassed in any court room. Ironically, the book makes Thiel come across as sounding like the ivory tower university professor he so loathes, with all the ‘take my word for it’, ‘I’m the expert’superficial arguments he makes in the book.

2.) Poor definitions and arbitrary/contradictory arguments. It’s not real clear what’s an incremental advance and what’s not. A 10x improvement is not technically feasible or theoretically possible in many fields. For example, a power plant operating at 30% energy efficiency can’t have a 10x advance in energy efficiency (more than 100 % efficiency breaks the conservation of energy law). Sometimes just a 2X (100%) advance is a big freaking deal. Doubling the fuel economy on a car (without negatively affecting its performance, safety, or cost) is a really hard problem that, if solved would be a huge breakthrough. It would line customers up at your door. Even Tesla, the company Thiel has a major hard-on for in the Seeing Green chapter, hasn’t achieved that: a new Tesla roadster set you back at least $110,000 US, their lower end vehicles are still North of $60,000 US even with generous government subsidies and incentives. Not exactly a common man’s car anyone can afford.

Also, the claim of “undifferentiated products” is kind of a straw man argument. Do any two companies really produce identical products? Yes Pepsi and Coca-cola both make similar soft drinks, but they are not identical. Some people like the taste of Coke, others prefer the taste of Pepsi, but they don’t taste the same. Big Macs vs. Whoppers. One make/model of vehicles vs. others. One Airline carrier over others. Most people will prefer one over the other, even if just by a little, and even if the prices are different (within a reasonable range). That’s why businesses still exist in competitive markets. If this wasn’t true, the lowest price, even by a penny, wins by default and monopolies would happen naturally in the long run, without need for any further competition.

His last chapter on stagnation or singularity is very nebulous in which he plots “progress” on the vertical axis and time on the horizontal. It’s not really clear why he chose just four scenarios? Why not linear progress? Why not linear with a mix of boom/bust cycles? The possibilities/combinations are endless. What does he mean by progress anyway? Computing power? World GDP? The DJI or NASDAQ Index? Your guess is as good as mine.

3.) Patently Obvious. Some statements that Thiel writes is blatantly obvious: see Elkin Wells “Ok, not amazing.” review for great examples. The irony of this book is that it does not really represent a Zero to One contribution to thinking in technology, entrepreneurship, business, futurism, philosophy, etc. What Thiel states in this book has been said by many other people for quite some time. His central tenet of “creative” monopolies (i.e. a monopoly achieved through secured patents, copyrights, trade secrets, etc.) are a good thing that all startups should strive to achieve, wouldn’t surprise anyone who has taken a basic economics or business class or has tried to start a business. I mean who starts a business (excluding franchises) and thinks I’m going to get rich producing exactly the same product this other guy did at the same cost. Everyone thinks their business is unique in some way. On the novelty factor, the US Patent & Trademark Office states it’s mission is (it’s also in the Constitution) “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writing and discoveries.” This is pretty obvious stuff, if you have nothing to gain personally by inventing something and sharing it with the world, you probably won’t. And we all lose out in that scenario. Thus, a creative monopoly is something to be encouraged. The other key concept here is that these are temporary monopolies on specific products/works (e.g. a utility patent has a expiration of 20 years after filing). Creative monopolies don’t last forever. A company has to keep innovating in order to obtain more creative monopolies for different products or refined products. To be fair, I think Thiel was trying to say this about Google and Apple, but he didn’t finish the thought.

4.) Started Strong, ended very weakly. The first few chapters were pretty balanced and thought-provoking. The later chapters on green technology, characteristics of founders, and a brief comment on what the future may look like were a collection of half-baked and half-hearted ideas. The Founders Paradox chapter was an embarrassingly bad mix of pop culture nonsense that compares tech founders to rock stars and Gods (I’m not kidding or exaggerating). The book has “How to Build the Future” in its title and all we get from Thiel’s final chapter is what he thinks the future may look like in a five page conjecture about what shape the progress over time graph may look like. Thoroughly disappointing.

5.) The organization of the book is pretty haphazard as well. It jumps from discussions of monopolies and competition and recommendations/pitfalls to avoid for a successful startup (which fit the title of the book) to a poorly argued discussion about founder traits and green technology.

6.) Silicon Valley is the center of the Universe? Thiel constantly references Silicon Valley companies and culture ad nauseam. Google this and Apple that. Hoodies, Crocs, and T-shirts are the coolest…..Yes I know it is the IT Mecca and it’s where every programmer wants to land a job, but there is a whole startup world outside of the Valley. HBO’s Silicon Valley show highlights some of the absurdities within the Valley’s tech culture. Silicon Valley tends to suffer from a lot of superiority complexes, group think, and trend chasing as a result of both its real and perceived successes.

7.) Peter Thiel can do no wrong, or he can see the future and you can’t. Thiel has made a name for himself by claiming to be a “contrarian thinker” and for his financial successes at PayPal, Google, and Facebook. He also likes to point out indefinitely optimistic the financial world is (page 70) as if he somehow knows how to beat the market. However, his hedge fund took a beating just like all the rest of the others during the 2008 crash. He doesn’t discuss any of his failed VC endeavors at all in the book. Would be nice to hear what mistakes you’ve learned from personally. Or maybe every investment Thiel’s made has gone gangbusters? Doubtful. Never mentions the highly publicized failure of his Thiel fellowship where he paid $100K to 20 college students to drop out of college and start a business.

On page 75 he puts up a table of the differences between software and biotech companies (a real apples to oranges comparison, as evidenced by the table’s stark contrast of biotech’s study of expensive “poorly understood”, “uncontrollable organisms” and software’s artificially created, well understood, cheap environment.) He then makes the statement, “It’s possible to wonder whether the genuine difficulty of biology has become an excuse for biotech startups’ indefinite approach to research in general.” Actually, Thiel I think the extreme contrast of lack of knowledge and understanding in a natural complex system like biology versus an artificial system like software (which he just highlighted) is the reason for the indefinite approach. Also Thiel seems to have a disdain for biotech (my guess is he has been burned by the slow pace of biological research on several investments in biotech) without a respect for its inherent complexity versus the highly linear and artificial world of computing. Yes, designing the software for PayPal’s digital transactions is not trivial, but it pales in comparison to the difficulty of eradicating every ~100nm cancer cell in a human without killing the host. The number of variables (if they are even known in the biotech example) to account for are orders of magnitude larger than any problem a programmer would face. Re-iteration speed in computing is taken for granted as well. What’s the worse that happens if your code has errors? It won’t even break the machine it runs on unless that’s your intent. We all know what the worse case is in biotech/medicine. He also acts like no innovation has come from biotech in the past 3 or 4 decades. What about the human genome mapping? What about artificial hearts and kidneys? Artificial hips and knees? Genetically modified plants that have 10x better yields? DNA matching of criminals from trace amounts of tissue samples that has revolutionized the justice system?

He also didn’t see the Green Tech bubble coming? In the seeing green chapter he rails against solar companies for seeking only incremental advances in technology as their major downfall. Yet he fails to see the real technological challenges of solar and wind: they are location specific and their energy density (the amount of energy you get from the same stored volume or weight of the fuel) is nowhere near that of nuclear and non-renewables. That is a huge pitfall to overcome in the energy and transportation sector and it’s always been the well-known reason why wind and solar are niche power applications. At a coal or nuclear power plant, if the energy demand from a nearby city goes up, you just burn more fuel and possibly start up another turbine. The amount of fuel you have is only limited by logistics and your onsite storage. Not only are onsite storage needs larger for a solar or wind farm (a battery has much lower energy density than a lump of coal/ fuel rod/gallon of gasoline of the same weight) but your fuel (essentially electrons for storage) is generated onsite. Both wind and solar need enormously large areas of generation equipment (panels or turbines) to generate any appreciable energy for even a small city. And the ideal location for solar and wind power plants are often in deserts or on mountain sides, or miles off the coastline: exactly where most people don’t live. So any efficiency gains you get from putting it in an ideal location is lost to power line transmission by having to put it far away from people using the power. The poor energy density is an even bigger problem with electric vehicles. These are multiple engineering feats that need major improvement, not simply a 10x reduction in a single technology. Nevertheless, modest efficiency gains of even a few percent in the energy sector are technically challenging or costly or both; thermal efficiency of conventional power plants have gone up only ~10-15% in the past century. There are fundamental limits to thermodynamics.

In the end, Thiel is susceptible to the same dogmas (“peak oil”, Malthusian resource shortages, the inevitability of “green” technology, reduce carbon emissions at all costs) that anyone else could end up believing without questioning any assumptions. Thiel shows a glaring ignorance of technology outside of IT. When technical progress doesn’t meet the accelerated pace that he’s seen in the computing world, he resorts to shooting the messenger and blaming the researchers within the field.

9.) If all the negatives above sounds like a class you’ve taken in college. That’s because that’s exactly how this book started. Thiel taught a class at Standford about startups with the same material. In fairness, Thiel’s audience for the lectures that inspired the book, freshman and sophomores in Stanford’s Computer Science department, probably know as much about business and economics as Thiel knows about being humble about his success at PayPal, hence the lack of any real depth on any particular subject matter. However, this is not forgivable when the notes from a class are almost pasted into a hardcover book verbatim. I mean there was a chance for some serious editing, more depth and refinement, and re-organization during this conversion process, but it doesn’t appear much thought went into any of these. Honestly I thought the notes were better (which has more chapters as well), because they included many more pictures with better humor and more detail. My guess is that Thiel probably gave outstanding lectures with some cool Powerpoint slides, but any charisma and charm from the lectures were lost during the book transition.

Qualifiers and Disclaimers: I’m a bioengineer doing both hardware and software for a small biotech startup. I was a patent examiner (in semiconductors) for the USPTO and still do part-time contract work for them (in mechanical and medical devices) so I see innovation all the time. I also consider myself a libertarian politically, as does Peter Thiel. Read some of the other 3 star reviews of this book, they are very much on point.

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