WPP Presentation

The book The effort

Book name: ZERO TO ONE

Notes on start-ups, OR how to build the future

Author : PETER THIEL

FACULTY CO-ORDINATORS: Prof : Jaya Lakshmi Prof : Lohith Kumar

REVIEWED BY: Sarella Sreeja M11-TPS-37 SEC- C

Who is PETER THIEL ? German-American entrepreneur.

Founder of PAYPAL,PALANTIR TECHNOLOGIES. Early investor in Facebook.

Venture Capitalist.

Political activist.

Author.

Net worth: $2.7 billion.

Still single !

CONTENTS

The challenge of the Future.

On lean startup dogmas.

Competition is for losers.

Business vs startup.

Building a monopoly.

Foundations.

7 questions every startup should answer.

Unless humans invest in the difficult task of creating new things, future cannot happen. Todays best practices lead to dead ends; the best paths are new and untried.

Indeed, the single most powerful pattern noticed is that successful people find value in unexpected places, Zero to One is about how to build companies that create new things.

What happens when weve gained everything tobe had from fine-tuning the old lines of business that weve inherited? Unlikely as it sounds, the answer threatens to be far worse than the crisis of 2008.Animals are instinctively driven to build things. But we are the only ones that can invent new things and better ways of making them.

These are the kind of elementary truths we teach to second graders, but they are easy to forget in a world where so much of what we do is repeat what has been done before.The paradox of teaching entrepreneurship is that such a formulanecessarily cannot exist; because every innovation is new and unique, no authority can prescribe inconcrete terms how to be innovative.

GLOBALIZATION TECHNOLOGY

1n

Most people think the future of the world will be defined by globalization, but the truth is that technology matters more.eg:type writere

When we think about the future, we hope for a future of progress. That progress can take one of two forms. Horizontal or extensive progress means copying things that workgoing from 1 to n.. Vertical or intensive progress means doing new thingsgoing from 0 to 1. Vertical progress is harder to imagine because it requires doing something nobody else has ever done. If you take one typewriter and build 100, you have made horizontal progress. If you have a typewriter and build a word processor, you have made vertical progress.

GLOBALIZATION EFFECTS This age of globalization has made it easy to imagine that the decades ahead will bring more convergence and more sameness.Ex: CHINA ENERGY PRODUCTION, INDIAN LIFESTYLE.

The smartphones that distract us from our surroundings also distract us from the fact that our surroundings are strangely old. Spreading old ways to create wealth around the world will result in devastation.

In a world of scarce resources, globalization without new technology is unsustainable !! Even our everyday language suggests we believe in a kind of technological end of history: the division of the world into the so-called developed and developing nations implies that the developed world has already achieved the achievable, and that poorer nations just need to catch up.

Most people believe in ' x' but the truth is the opposite of 'x'

Competition is for losers !!

To get more capital, you need to be a monopolist and escape the competition.

Capitalism means capital. Competition means there would be no capital for you. The pie will be eaten by the other players

You may argue that monopolies are bad, but this is true only in a world where nothing changes. In our world its possible to invent new & better things. .

IBMs hardware monopoly of the 60s and 70s was overtaken by Microsofts software monopoly. Microsoft had a huge monopoly in operating systems.At the same time, Apples iOS & Googles Android emerged and overtook operating system dominance. while U.S. airlines serve millions of passengers and create hundreds of billions of dollars of value each year, they make only 37 cents per passenger trip. On the other hand, Google has 100 times higher profit margin than all airline industry.

BMs hardware monopoly of the 60s and 70s was overtaken by Microsofts software monopoly. Microsoft had a huge monopoly in operating systems.

What valuable company is nobody building???Every new creation takes place far from equilibrium.Every business is successful exactly to the extent that it does something others cannot.

Monopoly is the condition of every successful business.

All happy families are alike; each unhappy family is unhappy in its own way. Business is the opposite. 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.

pets.com vs petopia.com example

MONOPOLYCOMPETITION =! MONOPOLY

In business, equilibrium means stasis, and stasis means death. If your industry is in a competitive equilibrium, the death of your business wont matter to the world; some other undifferentiated competitor will always be ready to take your place

Competition can make people hallucinate opportunities where none exist. The crazy 90s versionof this was the fierce battle for the online pet store market. It was Pets.com vs. PetStore.com vs.Petopia.com vs. what seemed like dozens of others. Each company was obsessed with defeating itsrivals, precisely because there were no substantive differences to focus on. Amid all the tacticalquestionsWho could price chewy dog toys most aggressively? Who could create the best SuperBowl ads?these companies totally lost sight of the wider question of whether the online pet supplymarket was the right space to be in. Winning is better than losing, but everybody loses when the warisnt one worth fighting.

Value of business today = value of earnings in the future Ex: Twitter vs New York Times Twitter 24 bil $ valuation = 12 * NYT market capWonder why?Twitterholds monopoly of the future while publishing houses are loosing business everyday.(TVM)

MONOPOLY

1.PROPRIETORY TECHNOLOGY(10x)

2.NETWORK EFFECTS (facebook)

3.SCALING(amazon,ebay) 4.BRANDING(last mover advantage)

To succeed, You must study the endgame before everything else .Proprietary technology (10 times better than any existing solution) pg.49Network effect (start with a niche market) refer pg:50- mark facebook started with just Harvard studentsMark Zuckerbergs first product was designed to get all his classmates signed up, not to attract all people of Earth.Perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.once you dominate a niche market expand to adjancent markets (always expand, example amazon and ebay pg.55)the last will be the first, instead of first mover advantage make the last great development in a specific market and reap the fruits of a mature ecosystem.

The definite optimist has a concrete plan for the future and strongly believes in that future being better than today. The indefinite optimist is bullish on the future but lacks any design and plan for how to make such a future possible. The definite pessimist has a specific vision for the future but believes that future to be bleak. The indefinite pessimist has a bearish view on the future but no idea what to do about it.

They think if the product is good enough, it will sell itself which is almost always incorrect.

The total net profit you earn on avg over the course of your relationship with a customer (Customer Lifetime Value, CLV)Amount you spend on average to acquire a new customer (Customer Acquisition Cost, CAC).CLV must be obviously higher than CAC

Take the Hidden Paths : SECRETS

Hewlette-Packard

1990- $9billion

2000-$ 135 billion

2005-$70 billion

2012- $23 billion

Fermat's theorem -102

The best entrepreneurs knowthis: every great business is built around a secret thats hidden from the outside. A great company is aconspiracy to change the world; when you share your secret, the recipient becomes a fellowconspirator.

HAVE A VISION Its true that every great entrepreneur is first and foremost a designer. Ex: Steve Jobs , iDevice, MacBook.

The greatest thing Jobs designed was his business.

Definite founders with robust plans dont sell.

Ex: When Yahoo offered to buy Facebook for $1 billion.

Fermat's theorem

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. It begins by rejectingthe unjust tyranny of Chance.

You Are Nota Lottery Ticket !!

Anyone who has held an iDevice or a smoothly machined MacBook has felt the result of Steve Jobss obsession with visual and experiential perfection. But the most important lesson to learn from Jobs has nothing to do with aestheticsApple imagined and executed definite multi-year plans to create new products and distribute them effectively. Forget minimum viable productsever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others successes in July 2006, everybody thought we should at least consider it. Mark saw where he could take the company, and Yahoo! didnt. And today Facebook accounts to be $33.3 billion !!

But Mark Zuckerberg walked into the board meeting and announced: Okay, guys,this is just a formality, it shouldnt take more than 10 minutes. Were obviously not going to sellhere.

WELCOME ENTREPRENEURS

1.The engineering question:The Timing Question: Is now the right time to start your particular business?The Monopoly Question: Are you starting with a big share of a small market?The People Question: Do you have the right team?The Distribution Question: Do you have a way to not just create but deliver your product?The Durability QuestionWill your market position be defensible 10 and 20 years into the future?: The Secret Question: Have you identified a unique opportunity that others dont see?