Book of Mammon, Part III: Zero to One
The word entrepreneur must be so tired as to nearly be dead by now. Does that apply to freelancers and sole traders? Does it apply to people who go to big corporates and do something ‘entrepreneurial’. Roles at Unilever or Tesco described in this way don’t quite ring true but without a meaningful definition against which to measure claims, the word is apt for hijacking by pretenders of every shape.
One entrepreneur who could not be described as a pretender, Peter Thiel, has recently published a new book in this hectic pop-lit genre: Zero to One.
Thankfully, Zero to One is not a rags to riches, this-is-why-I’m -a-billionaire disaster like many of the books in the same category. The title refers to what Thiel considers to be the nature of entrepreneurship: creating something that did not previously exist.
Whilst the book itself is not a work of literature, it is of broader cultural significance because it taps the shallow of veign of contemporary business thought which at once shapes the world we live in and glances disappointingly off the surface. Thiel and Masters book measures well against the benchmarks of quality for the genre, like Warren Buffett’s Berkshire Hathaway Letters to Shareholders, or Dee Hock’s exceptional One From Many. It occasionally lapses into the generalisations that plague much of the genre but on the whole it is enjoyable for its structure, concision and insight if not into the business of high technology investment, then into one of the greatest technology investors of his generation.
Peter Thiel speaks with natural authority on the subject of successful technology companies and technology investing. He founded PayPal and led it as CEO until its public listing and acquisition by eBay in (2004?) and his venture capital firm, Founders Fund, was the first investor in Facebook. His latest company, Palantir, in which he is a co-founder and investor produces data analysis software that is being adopted by business and government across the world including the CIA and is rumoured to have been used in the CIA operation to track down Osama bin Laden. Whether it is true or not: such is the hype around Peter Thiel.
More interestingly, the book’s genesis is more nuanced than the usual business magnate’s PR excercise. The book’s co-author is a recent Stanford graduate called Blake Masters who came to Thiel’s attention after his detailed lecture notes on one of Thiel’s lecture courses at Stanford became an internet sensation. The book is in fact a collaborative write up and update of those notes, a sign perhaps of Thiel’s magpie-like eye for opportunity.
One key theme of the book is Thiel’s critique of competition. Better, he says, to operate a tiny monopoly than compete yourself to destruction in a giant market. ”Monopoly is the condition of every successful business.”
He gives light to the kind of low-tech decisions that his Founders Fund uses, in combination with some more sophisticated analysis to reach their conclusion: “cleantech executives were running around in suits and ties. This was a huge red flag because real technologists wear t-shirts and jeans. So we instituted a blanket rule: pass on any company whose founders dressed up for pitch meetings” and on explaining why he has not invested in Uber, ”I prefer not to invest in business models that venture capital guys are too familiar with.”
His understated manner is refreshing in a world dominated by hyperbole; on the subject of his Facebook investment he said simply to a recent interviewer: “it’s a good sign when a company is only looking for money to buy more computers to keep up with demand.”
He sets out his investment principle that any investment ventured by a fund should be capable of returning the entire value of the fund to shareholders because the majority of investments will fail. He sights a potential return of 10 times the investment as the only return that should be entertained by investors not because he expects big returns from all of the companies he invests in, but because each company must be potentially capable of making up for the failures of all the others.
This approach may leave the impression of a cavalier or even scattergun strategy, the kind of institutional gambling that is so vilified by the modern media but the impression of Thiel from the book is of a calculating pragmatist.
Thiel’s success as a founder turned investor outside of the literary world imbue the book with a significance that it would not otherwise deserve. Whilst Zero to One does not pertain to any standards of art, as the public face of an economically significant cultural phenomonen, it is interesting and even insightful and in the end, like any good shop-talk, it is easily confined to an afternoon.