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The Contrarian Truth

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Zero to one
Peter Thiel
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Zero to One is written by the co-founder of Paypal Peter Thiel who is the first outside investment in Facebook, funded companies like SpaceX and Linkedin. Originally this book stems from the video and notes of his course about startups at Stanford. The book started with a question: “What important truth do very few people agree with you on?” This question sounds simple but it tests a person’s ability and sensitivity to perceive the world. The book launched around three things which the author believes are the contrarian truth.

The aim of a good company is not a competition but a monopoly. The author sees competition as repeating which is horizontal expansion x means from 1 to N. Creating something new is the vertical expansion y means from 0 to 1. People are driven by competitive dynamic since they are young, and believe that following the path, beat competitors that they will be the winners. In the contrast, competition makes people paying too much attention to beating others than finding the more valuable things in their lives.  The same issue applies to business. While a company is relying on copying the successful business instead of innovative products, it needs to spend a lot of time and money to defeat other competitors to gain more market shares. In a perfectly competitive market, even the most powerful company must set prices based on the market, monopolistic company do not. Without competition, the monopolistic company can certainly price their products based on the maximization of company interests, such as Google. Due to the monopoly in the search field has brought Google more than 90% of the high income, it has enough money and time to develop driverless cars that may change the future of mankind.

A few years ago, copies of Uber, shared bike, takeaway, and other fields in China were having countless large and small companies competing in the so-called trillion markets. The rules of survival they believe in was to take food from their competitors, defeat their rivals, and gain market share. Now it seems most of them are disappeared from the market, only a few large-scale companies survived. The essence of competition is survival of the fittest. As a startup business, if you want to develop faster and live longer in the market, creating something new and build a monopoly might be the best choice.

The business has no formula, but the author believes All happy companies are different. All unhappy companies are alike. In the book, the author mentioned, monopoly company with large cash flows have their own characteristics, but they usually have the following characteristics: patented technology, network effects, economies of scale, and brand advantages. The author reminds people about 80/20 rule which means many outcomes roughly 80% of consequences come from 20% of the cause. Same in the market, 80% of wealth is collected by 20% of companies. Use core technology to obtain a monopoly position to become a member of 20%. A good example is Apple. Almost every Apple product is the market leader, for instance, iPod, iPhone, AppleWatch, Macbook.

There are many secrets left in this world. This is the second contrarian truth author believes.  Secrets are the foundation of creating a company. Lots of people think there are not many areas to explore in the business world.  In fact, there are a lot of directions that can go in for startups, like IT, internet, robot, software, biotech, space tech, and etc. The author encourages people to find a secret path then turn it into a business idea. It’s like people who dream of starting a business are constantly looking for new ideas and opportunities in their lives. With the development of the times, some products and services may be eliminated, but people will always have new needs and desires. The new technology will release people from simply labor work for doing more creative and irreplicable jobs.

Globalization vs. technology. Globalization is the horizontal expansion and can only replicate previous successes, while technological innovation is vertical expansion, creating things that did not exist before. Without technological innovation, the world will come to an end. Throughout history, globalization seems to have slowed down the development of science and technology. A developing country like China can rapidly catch up with developed countries by copying the technologies. But the truth is there is no enough source on the earth for developing countries to fully copying western and reach the same level of lifestyle. Countries like China and India have cultivated a large number of scientific and technological talents. Developed countries should utilize this opportunity to guide the talents to create more value for the world.

The phenomenon that the author tries to tell is when most people believe in one thing, the fact is most likely its opposite. Great people always can find value in unexpected places. Innovative thinking will create the future. More analyzing about monopoly and competition will be written in another essay. In short, this is a very enlightening book and very recommended for reading.

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