Zero to One_ Notes on Startups, or How to Build the Future ( PDFDrive )

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PAYPAL MANIAWhen I was running PayPal in late 1999, I was scared out of my wits—notbecause I didn’t believe in our company, but because it seemed like everyoneelse in the Valley was ready to believe anything at all. Everywhere I looked,people were starting and flipping companies with alarming casualness. Oneacquaintance told me how he had planned an IPO from his living room beforehe’d even incorporated his company—and he didn’t think that was weird. In thiskind of environment, acting sanely began to seem eccentric.At least PayPal had a suitably grand mission—the kind that post-bubbleskeptics would later describe as grandiose: we wanted to create a new internetcurrency to replace the U.S. dollar. Our first product let people beam moneyfrom one PalmPilot to another. However, nobody had any use for that productexcept the journalists who voted it one of the 10 worst business ideas of 1999.PalmPilots were still too exotic then, but email was already commonplace, so wedecided to create a way to send and receive payments over email.By the fall of ’99, our email payment product worked well—anyone could login to our website and easily transfer money. But we didn’t have enoughcustomers, growth was slow, and expenses mounted. For PayPal to work, weneeded to attract a critical mass of at least a million users. Advertising was tooineffective to justify the cost. Prospective deals with big banks kept fallingthrough. So we decided to pay people to sign up.We gave new customers $10 for joining, and we gave them $10 more everytime they referred a friend. This got us hundreds of thousands of new customersand an exponential growth rate. Of course, this customer acquisition strategywas unsustainable on its own—when you pay people to be your customers,exponential growth means an exponentially growing cost structure. Crazy costswere typical at that time in the Valley. But we thought our huge costs were sane:given a large user base, PayPal had a clear path to profitability by taking a smallfee on customers’ transactions.We knew we’d need more funding to reach that goal. We also knew that theboom was going to end. Since we didn’t expect investors’ faith in our mission tosurvive the coming crash, we moved fast to raise funds while we could. OnFebruary 16, 2000, the Wall Street Journal ran a story lauding our viral growthand suggesting that PayPal was worth $500 million. When we raised $100million the next month, our lead investor took the Journal’s back-of-theenvelopevaluation as authoritative. (Other investors were in even more of a
hurry. A South Korean firm wired us $5 million without first negotiating a dealor signing any documents. When I tried to return the money, they wouldn’t tellme where to send it.) That March 2000 financing round bought us the time weneeded to make PayPal a success. Just as we closed the deal, the bubble popped.
Page 3 and 4: Copyright © 2014 by Peter ThielAll
Page 5 and 6: PrefaceZERO TO ONEEVERY MOMENT IN B
Page 7 and 8: THE CHALLENGE OF THE FUTUREWHENEVER
Page 9 and 10: century air conditioning, and even
Page 11 and 12: STARTUP THINKINGNew technology tend
Page 13 and 14: A QUICK HISTORY OF THE ’90SThe 19
Page 15: MANIA: SEPTEMBER 1998-MARCH 2000Dot
Page 19 and 20: The entrepreneurs who stuck with Si
Page 21 and 22: dogmatically rejecting them. Instea
Page 23 and 24: In this book, we’re not intereste
Page 25 and 26: Think about how Google talks about
Page 27 and 28: between Hackers and Jaws: rap star
Page 29 and 30: RUTHLESS PEOPLEThe problem with a c
Page 31 and 32: monopoly profits provides a powerfu
Page 33 and 34: competed even harder for the standa
Page 35 and 36: Office vs. Docs, and Surface vs. Ne
Page 37 and 38: If you can’t beat a rival, it may
Page 39 and 40: In March 2001, PayPal had yet to ma
Page 41 and 42: CHARACTERISTICS OF MONOPOLYWhat doe
Page 43 and 44: 3. Economies of ScaleA monopoly bus
Page 45 and 46: BUILDING A MONOPOLYBrand, scale, ne
Page 47 and 48: Silicon Valley has become obsessed
Page 49 and 50: YOU ARE NOT A LOTTERY TICKETTHE MOS
Page 51 and 52: CAN YOU CONTROL YOUR FUTURE?You can
Page 53 and 54: merry in the meantime: hence Europe
Page 55 and 56: hubris. You can still visit the Bay
Page 57 and 58: businessman, but actually his own a
Page 59 and 60: opinion exactly, so for the most pa
Page 61 and 62: Francis Bacon wrote that “the pro
Page 63 and 64: American households were saving, at
Page 65 and 66: THE RETURN OF DESIGNWhat would it m
Page 67 and 68:
YOU ARE NOT A LOTTERY TICKETWe have
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to understand: we don’t live in a
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The error lies in expecting that ve
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of companies that will successfully
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After 10 years, however, the portfo
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WHAT TO DO WITH THE POWER LAWThe po
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SECRETSEVERY ONE OF TODAY’S most
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WHY AREN’T PEOPLE LOOKING FOR SEC
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are found mostly in history books a
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THE WORLD ACCORDING TO CONVENTIONHo
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THE CASE FOR SECRETSYou can’t fin
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HOW TO FIND SECRETSThere are two ki
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WHAT TO DO WITH SECRETSIf you find
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FOUNDING MATRIMONYWhen you start so
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To see misalignment at its most ext
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ON THE BUS OR OFF THE BUSAs a gener
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VESTED INTERESTSStartups don’t ne
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10
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BEYOND PROFESSIONALISMThe first tea
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compensation or perks, but you can
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DO ONE THINGOn the inside, every in
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11
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NERDS VS. SALESMENThe U.S. advertis
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himself). The polar opposite busine
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The traditional U.S. aerospace indu
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mass appeal but lack any method of
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One of these methods is likely to b
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12
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SUBSTITUTION VS. COMPLEMENTARITYFif
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people. We don’t trade with compu
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computer hybrid approach from PayPa
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generalized artificial intelligence
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SEEING GREENAT THE START of the 21s
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5. The Distribution QuestionDo you
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THE TIMING QUESTIONCleantech entrep
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THE MONOPOLY QUESTIONIn 2006, billi
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Cleantech entrepreneurs’ thinking
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THE DISTRIBUTION QUESTIONCleantech
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gas, and gas prices had fallen more
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THE MYTH OF SOCIAL ENTREPRENEURSHIP
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broader markets in the future.TEAM.
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world needs energy, only a firm tha
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THE FOUNDER’S PARADOXOF THE SIX P
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THE DIFFERENCE ENGINESome people ar
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Where does this strange and extreme
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Another example is Sean Parker, who
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WHERE KINGS COME FROMExtreme founde
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For some fallen stars, death brings
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distinctive persona? Or, in his inc
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the impeccably credentialed executi
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future will look a lot like the pre
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Singularity, an attempt to name the
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Illustration CreditsThe illustratio
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Boyle, RobertbrandingBranson, Richa
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Earnhardt, Dale, Jr.East Asian fina
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housing bubble, 2.1, 8.1Howery, Ken
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dynamism of newlies ofprofits ofpro
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Q-CellsRand, AynRawls, John, 6.1, 6
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globalization andproprietarytechnol
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About the AuthorsPeter Thiel is an
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