Startups Need to Monopolize to Succeed

Peter Thiel's Zero to One: Notes on Startups, or How to Build the Future is a different kind of startup book giving what others would see as contrarian advise.

Peter, who co-founded PayPal and invested in Facebook and other successful startups, explains that contrary to popular belief, you should not aim to compete in an industry, but instead look to monopolize. When you try to compete, even by improving what already exists, you drive down profits for everyone. However if you come up with something new—what he calls zero to one—you have a monopoly, which not only allows you to determine prices and therefore margin, but also has more of a shelf life.

The second "contrarian" thing Peter suggests is that unless you can come up with a monopoly, you're better off joining one rather than starting your own business. As he explains, having 100% equity of a business that will either fail or just break even is less valuable than having a small equity stake of a company like Google. 

At a time when every other book seems to suggest that jobs are dying and that you have to be your own boss to have any future, I find Peter's contrarian recommendation a refreshing—and realistic—change. 

Yes, we want more rights as employees and even an equity stake so we're building a better future, but that does not mean that everyone and their brother should start a business. As someone who has tried this twice, I can tell you it's hard and that not everyone will be cut out for it. 

So if you have a great idea, first evaluate if it's a zero-to-one monopoly or not. If it is, start small, prove the concept, and then scale. If it's not, look for a monopoly to join and stay open to new ideas. Who knows, the next one may be your chance at a monopoly.

Have you tried to start your own business? Was it a monopoly? 

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