Peter Thiel’s new business book “Zero to One: Notes on Startups, or How to Build the Future” offers an unintentionally grim view of the future. This sounds like I didn’t enjoy it, but that’s not the case.
“Zero to One” is packed with insight. Thiel, who founded PayPal, shares truths that have an audience beyond the entrepreneurs for which the book is intended. It works as a guide to starting a company and to getting ahead in the workplace. Its lessons can be applied by individuals who will never work in Silicon Valley or seek VC funding.
You should focus relentlessly on something you’re good at doing, but before that you must think hard about whether it will be valuable in the future.
Which is a thing nobody I knew did in college.
While I enjoyed Thiel’s nuggets of wisdom and the contrarian nature of the book, I could not bring myself around to acknowledging the validity of its 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.
Do all “happy” companies earn a monopoly? I think it’s clear the answer is no. There are many happy companies that don’t have the market dominance of Google.
A happy company, according to Thiel, is narrowly defined as one that has escaped competition: a monopoly. Here we arrive at the reason this book has received so much attention. A capitalist is arguing that market competition is bad for business. Most capitalists will tell you that engaging in such competition is business.
According to “Zero to One,” businesses that cannot escape competition are doomed to some type of rapid or drawn-out failure unless they ascend as monopolies. Thiel assumes that monopolies occupy a higher state of being. But monopolies—like ancient Gods—have a way of feeling eternal until they no longer exist, and it’s the book’s largest failing that Thiel does not adequately address the shelf-life of the monopoly.
Monopolies—think of cable companies, for example—tend to provide maddening customer experiences in only a way that a company with no real competition can. They don’t innovate—think newspapers. They don’t anticipate change—think railroads. When profit margins are healthy, the incentive is to protect profit margins, not to defy the status quo and take risks. Lack of competition makes them flabby, and their dominance wanes over time.
Yet here is how Thiel describes monopolies:
Monopolies keep innovating because profits enable them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.
Let’s rewrite that sentence and insert the monopoly with which my career was once associated.
Newspapers kept innovating because profits enabled them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.
Let’s try another:
Eastman Kodak kept innovating because profits enabled them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.
Xerox kept innovating because profits enabled them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.
Obviously, none of them did so at a level that ensured their long-term dominance or even survival. Those three weren’t the only ones.
Thiel also does not address the fact that the federal government tends to bring the hammer down on monopolies, be they real or imagined. Antitrust lawsuits can drain a company of its market share and resources. Historically speaking, a monopoly is a company that’s waiting its turn to be sued by the federal government.
A company will either fail in the short-run, according to Thiel, or as a monopoly it will fail in the long-run, according to history. A more appropriate title: “Zero to One and Then Back to Zero Again, But Hey We Had a Good Run.”
Joe Donatelli is a journalist in Los Angeles. Facebook: joedonatelli1.