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I recently read the book *0 to 1* by author Peter Thiel. Author Peter Thiel was the co-founder and CEO of PayPal. In 2002, he sold PayPal to eBay for 1.5 billion dollars.
After the sale, the original members of Peter Thiel's team at PayPal, people he personally hired and mentored, went on to create companies such as Yelp, LinkedIn, and YouTube. These billion-dollar companies have fundamentally changed the way we use the internet today. Based on the number of successful companies that Peter Thiel has influenced, it seems that he knows the secret to building a billion-dollar business and building a better future.
After reading Peter Thiel's book *Zero to One*, I've discovered three counterintuitive ways to think about starting a business and building a better future.
First, bet on a contrarian truth. Try to answer the following question: What important truth do very few people agree with you on? Steve Jobs knew the truth about how we would use a smartphone in the future. Jobs knew that we didn't need or want a physical keyboard, but almost everyone at that time disagreed with him. Uber and Airbnb bet on the contrarian truth that you and I would be willing to get in a stranger's car or stay in a stranger's house. Netflix bet on the contrarian truth that most of us love to binge-watch TV. The best answers to the contrarian question reveal a truth about how people will act in the future in ways they're either unwilling to admit right now or are just unaware of.
Now, why is it so important to bet your business on a contrarian truth? Well, if you don't, you'll be on the fast track to bankruptcy. Peter Thiel says all failed companies are the same: they failed to escape competition. When you bet your business on a contrarian truth, you'll dramatically increase your odds of avoiding competition, mainly because most people will think you're crazy and ignore you long enough for you to build a significant lead in a particular market that will make it hard for anyone to catch you.
But here's a word of caution: make sure you bet on a contrarian truth whose time has come. In the late 2000s, there was something called the green tech revolution. The green tech revolution was based on a contrarian truth that we would all go from non-renewable resources like oil and natural gas to renewable resources like solar and wind. It may have been, and it still will be, a truth of humanity, but it was a truth whose time hadn't come yet. Solar panel technology wasn't where it needed to be to make the green tech revolution feasible at that time. So, before starting a business, ask yourself: Is my success dependent on outworking the competition or being courageous enough to bet on a contrarian truth whose time has come?
Counterintuitive business mindset number two: If you want to start a big business, start by dominating a small market. When Jeff Bezos started Amazon, he had the idea of creating an "everything store," but he didn't start by building an everything store. Instead, he focused on dominating a small niche market. That niche market was online book sales. It was a great initial market to dominate because all books are roughly the same size and shape, so they're easy to ship. Plus, book readers are a great target market because they're well-educated and typically have disposable income that they would be able to spend on future goods that Bezos would offer in his "everything store." Because Jeff Bezos could dominate a small niche market, he could generate enough cash flow, free of competition, to help fund his expansion into adjacent markets like online CD and DVD sales, and he had the infrastructure in place to go on to dominate those markets. When starting your business, don't try to get one percent of a billion-dollar market; instead, try to get eighty percent of a million-dollar market. Author Peter Thiel says, "Whoever is first to dominate the most important segment of the market with viral potential will be the last mover in the whole market."
Counterintuitive business mindset number three: Strive to be a monopoly. Now, you might be thinking, "Wait, aren't monopolies evil?" Well, yes, a monopoly that bullies its competitors and takes advantage of its customers is evil. But most monopolies today actually don't act like that. Most monopolies are actually good for the world. Google has a search engine monopoly, and because of that monopoly, they can generate so much profit, which allows them to give back to society in a big way. If Google didn't have a search engine monopoly, do you think they would pursue projects like free internet for everyone, or Google Maps and self-driving cars? When you establish a monopoly, you prevent the competition from eating away your profits, and that ensures that you stay in business. If you aim for anything short of being a monopoly, you're aiming to go out of business.
There are four ways to become a monopoly and secure a high profit margin without bribing politicians or resorting to organized crime. To understand these four ways, just think of the Big Four: Apple, Google, Facebook, Amazon.
Monopoly method number one: Brand association. What brand comes to mind when you think of an electronic device that makes you look fashionable? I'm guessing it's Apple. And if Apple is the first brand most people think of when they consider buying a device that makes them look cool, it's tough for any other brand to compete in the market of fashionable consumer electronics.
Monopoly method number two: Proprietary technology. Why do the majority of people use Google instead of Bing? Well, personally, I use Google instead of Bing because I feel that my search results are ten times better on Google. Since Google's algorithms are ten times better than its competitor's, and those algorithms are proprietary, it's nearly impossible to copy them and catch up to them.
Monopoly method number three: Network effects. Why do you use Facebook or Instagram over other new and probably better-designed social media platforms? I'd guess it's because most of your friends are already on Facebook or Instagram and are unlikely to switch to a new platform. The more people on the Facebook or Instagram network, the harder it is to compete with them.
Monopoly method number four: Economies of scale. Why do you think that Amazon can offer free shipping on a hundred-pound sofa when most furniture retailers charge you $50 to ship that same sofa? The answer is economies of scale. Because Amazon has such a large infrastructure in place and ships so many products, their fixed operating costs per item are incredibly low, which allows them to make more profit on each item and offset the cost of shipping, which makes it nearly impossible for smaller retailers to compete with them.
So, in the end, if you want to create a high-growth company and build a better future, bet on a contrarian truth whose time has come, and then build a big business around that truth by first trying to dominate a small market. Once you've proven that you can dominate a small market, expand to adjacent markets and set your sights on becoming a monopoly of a much broader market by either achieving brand association like Apple, using proprietary technology like Google, building a superior network like Facebook, or reducing your costs through economies of scale like Amazon.
That was the core message that I gathered from *Zero to One* by Peter Thiel. This book is essential reading for any aspiring entrepreneur. I highly recommend it.
If you would like a one-page PDF summary of insights that I gathered from this book, including the seven questions that every entrepreneur must ask, just click the link below, and I'll be happy to email it to you. If you've already subscribed to the free Productivity Game email newsletter, this PDF is sitting in your inbox.
If you like this video, please share it, and as always, thanks for watching and have yourself a productive week.