Henry Ford said, “If I had asked people what they wanted, they would have said faster horses.”
If Henry Ford had supplied the people with faster horses like they wanted, he would have actually taken a step backwards, this is one to N. Instead, he decided to think for himself and introduced the world to the automobile. He took a step forward, this is zero to one.
One to N simply copies and pastes what already exists in the market. This can be seen with China seeing what is working in the west, repackaging it and selling it to the Chinese consumers.
Zero to One is innovation; this is what helps the society as a whole. It is what has taken humans from being cavemen to being civil. Zero to One has spawned the industrial revolution, the tech revolution and the information age.
Zero to One thinkers and action takers have given us faster modes of transportation, better communication devices, better healthcare, housing, food, energy and water. Zero to One individuals are rewarded for thinking differently from the masses like Steve Jobs, Mark Zuckerberg, Jeff Bezos, Bill Gates and so on. These people are rewarded with social, reputation and economic currency which they use to better the world and/or push progress.
Let’s look at how Peter Thiel breaks down the 4 criteria to go from Zero to One
Be bold – avoid small incremental growths like repackaging old product and adding a small new feature to it. This lacks ambition.
Create something completely different for your customers e.g. Ford, Amazon, Facebook etc.
A Bad Plan is better than No Plan – Having a vision of what you want to achieve and constantly working towards it is far greater than having small incremental growths. “Growing” by waiting for customer reports or competition analysis isn’t considered innovative.
A Competitive Market Destroys Profit – Peter Thiel explains how you should avoid competition at all costs because competition destroys profits.
The alternative and the only way is to create a monopoly so you get to keep a large portion of the profits. Peter uses the analogy of a pie. One person can enjoy 100% of the pie, 2 people can enjoy 50% each of the pie, but the more people you have the less pie (profit) you get.
Sales and Product are just as important – people believe in the idea that if you build it, they will come but this idea is flawed. Brand awareness, self-marketing and understanding your values are important for your brand, product and service to grow.
So here is how Peter Theil suggests applying his principles.
Most start-ups start small. Yes?
Creating a Monopoly gives 100% of the market share. Yes?
SO, your start-ups should work towards gaining a monopoly (huge market share) in a small niche with very low competition.
Peter Thiel introduces the 4 Rules For Creating A Great Business you can apply once you have a business or monopoly that need protecting.
- Proprietary Technology – something you can patent or copyright for your own (Google search algorithms).
- Economies of scale (it can grow) – this should be something you think of at the concept phase of development. Find a market too small no one thinks of it as worth doing, then scale up while retaining your customer base. This is something most tech companies like Microsoft, PlayStation, Dell etc. can do this with every new upgrade.
- Network Effects (Facebook or LinkedIn) – start with a niche and branch out once you have dominated that space. Facebook started by Mark Z only getting his classmates to sign up, then he moved on to his university, then ONLY university students could sign up finally he opened it up for everyone.This style of niching was applied with Google mail. Back when it started Gmail was invite-only. You could only use when a friend invited you and you could invite your friends with a max of around 20 invites.
- Brand – Building a brand is something most businesses overlook because it is intangible. But! “Intangible value usually accounts for the majority of the value of a successful business.”Presenting your brand in a positive and powerful way will capture the imagination of your audience and in turn create customer loyalty. A few examples would be Apple, Ferrari, Lamborghini, Rolex, Amazon and Facebook.Brands are essentially a promise. We value brands that we trust and that applies not only to consumers but also to suppliers, employees and other partners.
Hope you found this useful and took away something that could be applied straightaway in your business, blog or project. You can find Peter Thiel’s book Zero to One here (below)
Peter Thiel begins with the contrarian premise that we live in an age of technological stagnation, even if we’re too distracted by shiny mobile devices to notice. Information technology has improved rapidly, but there is no reason why progress should be limited to computers or Silicon Valley. Progress can be achieved in any industry or area of business. It comes from the most important skill that every leader must master: learning to think for yourself.
The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. Copying others takes the world from one to n, adding more of something familiar. But when you do something new, you go from zero to one. Tomorrow’s champions will not win by competing ruthlessly in today’s market place; they will escape competition altogether because their businesses will be unique.
Zero to One presents at once an optimistic view of the future of progress in America and a new way of thinking about innovation: it starts by learning to ask the questions that lead you to find value in unexpected places.