Review: Zero to One by Peter Thiel with Blake Masters

Steve Blank and Eric Ries have done great work in providing engineers with a way to test their product ideas in the real world with real people. They have provided processes and systems with built in, all-important, feedback loops.

They made widespread the concept of the minimum viable product (MVP.) They formulated a process where a product in its most basic workable is shown to the world at large and note is made of the response. These notes can either or endorse or refute the product creator’s work and vision and suitable action is taken. The the product loops back to the MVP state again and the process. It is a methodical and useful way to ensure that a business creates a product that people want.

While the Lean Startup movement has provided a core set of practical tools to the startup there still remains a plethora of questions that also need answering. The most important being, what constitutes a good idea for a product or service that is worth pursuing for profit?

A good place to start looking, if not for a direct answer but an intelligent way to think about the subject, is in Peter Thiel’s newly published book written in conjunction with Blake Masters, “Zero to One.” It refers to the idea that, “Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1. The act of creation is singular, as is the moment of creation, and the result is something fresh and strange.”

He goes on to say a page or so later, “…by creating new technologies, we rewrite the plan of the world.” And then declares in the next paragraph, “Zero to One is about how to build companies to create new things.”

While a lot of Steve Blank’s work is formulaic, and usefully so, Peter Thiel prefers to think about business from the aspect of first principles. The future that we create is grounded in the work of today. To make that future a peaceful and prosperous one we need new technology which in turn requires new approaches. Peter Thiel’s aim is to provide an, “..exercise in thinking. Because that is what a startup has to do: question received ideas and rethink business from scratch.”

That is an ambitious goal in itself. Thinking is hard and thinking originally is very hard. In fact we only have to look around us to see that thinking is so hard that most people avoid it at all costs.

To set the scene he describes the factors that led to the Dot-Com bubble of the late nineties. As CEO of PayPal during that period he had a ringside seat as the drama unfolded. He says that there were four major lessons that entrepreneurs seem to have derived from the experiences of those dramatic times.

1.) Make incremental advances
2.) Stay lean and flexible
3.) Improve on competition
4.) Focus on product, not sales

All of these ideas seem highly sensible and lie at the heart of many a startup’s strategy for going to market. However, Peter Thiel overturns these assumptions. He replaces these four general points of business strategy with some of his own somewhat contrarian ones:

1.) It is better to risk boldness than triviality
2.) A bad plan is better than no plan
3.) Competitive markets destroy profits
4.) Sales matters just as much as product.

In rejecting the lessons learned from history, the same lessons that have built in Silicon Valley one of the most powerful centres of wealth creation the world has ever known, he puts forward a very coherent, consistent and challenging alternative idea. He is adamant that, “To build the next generation of companies, we must abandon the dogmas created after the crash.”

So what is wrong with most of the companies being started or built today? Lack of differentiation caused by lack of original thought is his answer.

Commodity businesses have always had it hard. You set a price and a competitor with the same or similar product can undercut you. If your product is not differentiated enough then you have no choice but to undercut them in turn. It soon becomes a race to the bottom where profits are foregone for the sake of market share. The deciding factors in such a scenario are deeper pockets and greater business efficiency. The result is invariably a mediocre, at best, product.

Traditionally, economists regard the ideal market place is at its most efficient when governed by the forces of perfect competition. Peter Thiel points out that this is a fallacy and that a company that operates in a market that is in perfect competition is a market where no one makes any money at all.

The solution, therefore, is not to copy anyone else but to think for yourself and have faith in the originality of your own ideas. Use your uniqueness to your advantage. Create your own market and become a monopoly.

Peter Thiel’s assertion that the only way to make real money is to have a monopoly of a given market is a challenging idea. We have laws against monopolies and no customer likes to have only one choice of a service provider. However, if you want to make money being in effect the dominant provider of a given service or product is the only tenable and financially worthwhile way of operating.

If you take his point that real change and real growth comes from original thinking made manifest in new technologies then that original thinking constitutes the creation of a natural monopoly. At least for a certain amount of time. Which brings us to the idea of durability.

In what may be an interesting explanation as to why companies like Amazon are barely profitable The authors write that, “For a company to be valuable it must grow and endure.” And that while growth is easy to measure, durability isn’t. They are not fans of, “measurement mania,” and they believe that management time and energy should be focused on building a monopoly by wise use of brand, scale, network effect and technology.

To do this a company must start small and “dominate a large share of its market.” A company then grows by sequencing its growth to grabbing bigger shares of larger markets. Contrast this line of thinking to the current belief in startup circles that a that the ability to scale quickly is somehow a precursor for success.

They go on to be quite specific in that, “The perfect market for a startup is a small group of particular people concentrated together and served by few or no competitors.” The huge advantage is that once you have found the business whose customers meets that criteria then you have the opportunity to create your own future, right or wrong. You can avoid being taken down by competitors undercutting you or being dictated to by the bigger players stomping around in the sandpit you share with them.

A little after halfway through the book we come to, “‘Thiel’s Law’; a startup messed up at its foundation cannot be fixed.” As a founder of
Founder’s Fund
, Peter Thiel has had the opportunity to review many startups from an investment perspective. When he studies the teams, (he is not an advocate of sole proprietorship because it limits what kind of company you can build,) he looks for how well the founders know each other and how well they work together. He places great value on how easily complementary skills and personalities mesh.

He then goes on to discuss the legal and financial aspects of a startup to which an entrepreneur should pay special attention. For example, “Recruiting is a core competency for any company, It should never be outsourced.” A particularly valuable rule that he had at PayPal was that he made every employee responsible for just one thing. It had two benefits. It made it easy for him to evaluate an employees performance and that, “…defining roles reduced conflict.”

The authors then go on to argue that humans and computers are separate categories and are not interchangeable. They ask us to change the question surrounding this problem, how can we use computers to replace people with the much more practical question, “How can computers help humans solve hard problems?”

This is a book that is all about questions. But the answers are only something that you, as an individual, can provide. The questions are a tool to give you access to thinking more clearly about a problem as opposed to providing the certitude of a right or wrong answer.

Peter and Blake have posed seven questions that every business must answer. I suggest that the opportunity to understand the thinking behind the formulation of these questions and the opportunity to answer them yourself is reason enough for you purchase the book.

1.) The Engineering Question
2.) The Timing Question
3.) The Monopoly Question
4.) The People Question
5.) The Distribution Question
6.) The Durability Question
7.) The Secret Question

There is much more to read and learn in this book. It is fairly short but unlike most business books it is dense with useful ways to think about business and startups in particular. Staying true to his promise at the beginning, he uses questions to help us access his ideas and in doing so having us think for ourselves.

I would recommend this book to anyone thinking of going out on their own. The questions that the authors pose are challenging but they are designed to elicit answers that are uniquely yours. They help provide a path that leads to the building of uniquely differentiated products and understandings of what constitutes a successful enterprise.

The Opening and Naming of the Hartnett Enterprise Acceleration Centre

The Hartnett Enterprise Acceleration Centre was named and opened yesterday at the Limerick Institute of Technology (LIT). John Hartnett, the President of the Irish Technology Leadership Group and whom the building was named after was present at the event to receive this honour from his alma mater.

Following below are excerpts from the speech he gave to a gathering of some 300 people including the Minister of Finance Michael Noonan, the outgoing Mayoress of Limerick Marie Byrne and Dr. Maria Hinfelaar President of the LIT amongst others.

After opening remarks where Minister Michael Noonan, other dignitaries and the audience were thanked for taking the time and trouble to attend John Hartnett made the following comments;

“I came to LIT in the early eighties and access to education has been the most critical thing that has created not just my success but in starting my career off in a big way. It took a number of decades to get there but the really big start was from the LIT.

I hope the partnership that we are creating today, from my Silicon Valley perspective, will create another rung on the ladder for Irish Entrepreneurs.

I want to give you some key stats about Silicon Valley where I live today. It is about 45 miles north/south and about 10 miles east/west…It is very much the epicentre of technology.

The top technology companies in the world are headquartered there and that is not lightly said. Companies like; Apple, Intel, Cisco, Facebook, Twitter. All the big companies that you know and heard of are all there.

The combined market capitalization of Silicon Valley companies is 2 trillion dollars. For a small little location it has completely outshone every other location in the world. There are more than 700 VCs that operate in Silicon Valley.

It is the number one destination in the world for capital for young entrepreneurs. 40% of all investment in the United States has gone into Silicon Valley. That was 8 billion dollars last year and that was considered a bad year.

There are countries that have done a tremendous job of cracking the code and really accessing Silicon Valley. I would point to Israel as what Israel has done is focused very heavily on innovation, focused very heavily on access to capital in Silicon and the movement of investment from Silicon Valley into Israel.

Today the measurement of success is a public company on NASDAQ. Israel has 130 companies that there today which is a tremendous achievement. That is more than the entire continent of Europe. Ireland has about 3 or 4.

The big challenge for us…is that success isn’t being sold for 20, 30 or 40 million dollars. Success is going public. Success is about being multi-billion dollar company. Success is creating thousands of jobs that are going to stay here for a long, long time…

I have been in touch with over 400 Irish companies over the last couple of years. I have been very close to many universities both north and south of the border. I have experienced quality in terms of technology, in terms of the entrepreneurship here in Ireland. There is no question Minister, that Ireland can change the game. We just need to point in the right direction and stop looking back. Stop feeling bad about the past because we can’t do anything about it.

It’s all about the future.

In my view the future will be about innovation. In my view the future for our children will be what we did today about going after innovation. If Silicon Valley can do it why can’t we do it.

The secret ingredient is no secret.

  • The secret is that it has the number one university in the world for innovation — Stanford University.
  • It is the number one destination for customers. Those companies, the Apples, the Intels, are all there. That is where you are going to trade. It is a massive market place.
  • Probably the biggest one, which doesn’t recognised, is venture capital. Access to money is so important for young companies and right now in Ireland today access to capital is tough.

    Our relationship will hopefully create a gateway to that capital. Not just to our fund but to the syndication of our funds in Silicon Valley and help drive that investment into Irish companies.

  • The fourth ingredient is about attitude. It’s about vision. It’s about reaching big and it’s about going for it.

It’s about not criticizing failure. Many companies are going to fail. We shouldn’t get upset about the fact that Irish companies are going to fail at some point along the way. But we shouldn’t shoot down failure. Failure is what drives success.

It’s not good enough to be a small company. It is only good enough to be billion dollar company.

The leading nations are investing to drive this forward. We are probably underinvesting in innovation today compared to Scandinavian countries and countries like Israel. Israel invests between 4 and 5% of its GDP — We probably invest between 1.5 to 2%

We have a very well recognised education system…But we can’t be complacent. We are not in the top 5 or top 10 in Europe from an education perspective. We need our universities to be in the top 5 and that has to be our goal.

The investment here today in these facilities paves the way for these young people but that is the start of the journey. We need to make sure that both from a government and a private perspective that we are focused creating those multi-billion dollar companies.

We should be measuring the number of NASDAQ quoted companies that are produced from Ireland…

All we need is one $300Bn company and we will be well on the road but it takes some time do that. But I have every confidence that we can do that from an Ireland perspective.

We have the talent and I think with this initiative today, in terms what LIT are doing, is really taking leadership in terms of education, in driving entrepreneurship and really driving forward to our future which will be about innovation and technology.”

NDRC: A Bridge between Academic Innovation and the Marketplace

The National Digital Research Centre (NDRC) is an independent enterprise that endeavours to bring ideas nurtured in the academic world into the commercial marketplace should they be suitable. NDRC’s first projects began in 2008 when NDRC itself became operational and it is currently collaborating with 34 partners both in Ireland and internationally.

Although receiving a majority of its funding from the Department of Communications, Energy & Natural Resources NDRC is not a State agency and is set up as a not for profit company. We spoke to Amy Neale, Programme Manager and asked her why there was a need for NDRC or something like it.

“From our point of view we are focused on translating good research investments into commercial impact. So we are focused on what we would call translational research — taking good research outcomes and actually creating some market capital value on the back of those. That can be through licensing technologies or creating new spinout companies. We are very much focused on creating value for our partners and for the economy.

“We have put a slightly different model in place to the pipeline model that you might see elsewhere. We are very much focused on the types of outputs — either commercial licenses or new start up companies — that are in the digital space.

“All of our focus is on digital products in different application areas. We see that in that particular space there is the need for development to take place collaboratively.”

How does the process work?

“We set up and incorporate joint ventures between ourselves and an academic partner and an industry partner all of whom are sharing the risk to share the reward. Projects tend to be between eighteen months and two years. So we are just beginning to see the first outputs now and the earliest results from some of those projects.

Determining value is, “…an ongoing process throughout the lifetime of the project. From the very first engagement what we are trying to do is drill down into the market potential and who the customers are likely to be for any given idea.

“We start off with an evaluation process before we make a decision to invest in a project. We’ll ask people who have a good idea to put it down on paper. We will give them guidance on doing that but we will ask probing questions about; the problems they are trying to address, where the solution comes from, what the market looks like, what the competitive landscape looks like, who the customers might be. We’ll begin to probe what they think a likely route to market will be at that stage.

“We’ll then bring on board some international evaluators to have a look at the very earliest stage. They will provide us with some feedback from an expert’s position as to the potential of the idea. On the basis of that feedback we bring the team back in to pitch in front of a subset of our board. The NDRC board itself is balanced between academic and commercial partners.”

Where in the funding and enterprise system does NDRC fit in?

“What we are trying to do is create a bridge between research investment and venture capital. What we are trying to do is derisk technology before they go before any kind of venture investment. We are looking to reduce some of the risks that investors would typically see in the early stage technologies that are coming from the research base.

“For us that means getting some kind of validation from the marketplace. All of our projects have a focus on user trialling and market trialling at some point during their lifespan to ensure that we are not just developing technologies that nobody wants.

“We absolutely see that there is the need for a different sort of vehicle that helps academics get their technologies to market and we see that there is a gap in the market providing that. That is the gap we are trying to fill.”

If you have a project that NDRC may be interested or simply want to find out more you can contact them via their contact details at the website.

Silicon Valley: Moving to California

Silicon Valley, located in Northern California in the United States, is the epicentre of the global high-tech industry. It is synonymous with the world’s largest technology corporations including Apple, Google, Facebook, Cisco and HP.

This 30 by 15 mile stretch of land houses a wealth of resources waiting to be exploited by Irish companies willing to take a calculated risk. There are major opportunities for new Irish technology companies to make a global impact through contacts and funding available in the Valley.

Silicon Valley contains a huge concentration of venture capital (VC) firms who are seeking the next eBay or Intel. Many of these firms are centred on or around Sand Hill Road in Menlo Park – considered to be the Wall Street of Silicon Valley.

One Irish company that is currently seeking to take advantage of the opportunities available  is TapMap, founded in 2009 by Philip McNamara. The company uses mobile platforms to publish retailers’ price and inventory to make their products accessible to local consumers.

Philip moved to Silicon Valley three months ago. He said, “it’s an amazing place because there are so many people here who can help. You have these world class companies, these Fortune 50 companies, which are… just 15 minutes drive away.”

Compared with Ireland he says Silicon Valley has a, “Whole ecosystem that is full of really smart people, really good people who want to help out and want to see you succeed. I was in Ireland and it was really hard to get access to those kinds of people and companies.”

Along with the many benefits of moving your company to Silicon Valley, there are many challenges. There are a number of considerations when deciding whether or not to make the move:

  • An obvious disincentive is the physical distance from Ireland. California is just over 5,000 miles away and 8 hours behind in time. There is currently no direct flight between Ireland and the Valley, forcing commuters through other international airports to travel between the two.
  • Even though there is a lot of funding available, there is intense competition for it from all parts of the globe, including other parts of America. Philip McNamara says that although this is difficult, “There’s a lot more competition at the same time because everyone is attracted here so you have all the companies from all over the US coming here to get funding so there’s huge amount of competition but at the same time the talent is here, the experience is here and the connections are here.”
  • American VCs will expect you to set up a locally incorporated company which involves obtaining American legal counsel.
  • The overheads associated with locating your business in California are significant. Aside from lawyers and the other costs of forming a company, it is vital to be able to get around and that means renting or buying a car. Borrowing one if you are lucky. Accommodation is also expensive. Philip says: “You have to have friends. A joke we’ve made is “find a family” to stay with – that’s really important because otherwise you’re going to be spending money on a hotel and that’s just incredibly expensive…because you’re going to have to spend 2 or 3 months over here looking for funding and setting up your team.”
  • The business etiquette can be a culture shock. Philip said, “Everyone works all the time. I got an email this morning from an essential client at 7.15 am. You’re on twitter and you’re on email and you’re on LinkedIn and on Skype until all hours. It’s just the way it is. Business is business 24/7 even with your social life.”
  • Visas that allow you to work in the States can be hard to obtain and sometimes slow to arrive.
  • Give some thought to your American mobile phone operator. Verizon’s current 3G phones do not work in Ireland. AT&T or T-Mobile use the same technology as Ireland (i.e GSM or UMTS) so this may be a better option if your phone needs to travel home with you.

Some of these obstacles can be overcome by aligning your company with a business start-up centre who can help with VC meetings, office space, recruitment and advice. One such centre is the Irish Innovation Centre which opened last year.

Another facility is the Plug and Play Tech Center which TapMap is associated with. Philip notes, “They’ve been absolutely phenomenally useful. What they’ve done is put me in front of about 25 VCs to date. I had 4 VC meetings yesterday all set up by the Plug and Play Tech Center because they believe in TapMap and they want it to succeed.”

What if you decide that Silicon Valley is not for you? One company who has decided to stay in Ireland is Cork-based Ferfics, a  developer of intellectual property and microchips for radio frequency applications.

Eugene Heaney Founder and CEO of Ferfics, believes it is possible to attract global attention for a technology company without moving away from Ireland. The target market of his company are giants like Nokia, Apple and Samsung. Eugene says, “I don’t think we have ever had difficulties reaching customers or getting access to customers because of our location. That’s never been an issue.”

Ferfics secured €1.7 million equity funding last November to begin production of an energy efficient microchip. Eugene believes VC funding is available at home for other companies, “Ireland is a pretty good place to try to raise capital in my view. I know I may be saying that because we did raise capital.”

There is no denying that Silicon Valley is attractive for new tech companies looking to launch themselves into the world. It’s positive, energetic and a hub of funding and ideas. On the flip-side it’s expensive which can act as a barrier to many new companies but as Philip McNamara believes, “You have to be where your customers are and you’ve got to be where you can start the business.”

Facebook – Why Your Business Should Have a Presence

Facebook is the largest personal social network in the world. So why should any company bother doing any business networking elsewhere?

1. The Stats speak for themselves.

It is always a good thing to go do business where people are. Facebook has now passed the 500 million user milestone. If this growth keeps continuing soon Facebook will become the world’s first truly global social network. As a business you need to be there. Facebook is essentially becoming the new Web.

2. Establishing your brand on Facebook helps to humanize your brand – where is the Love?

Using Facebook people get to see what sits behind the brand. You need to be a part of the Facebook community. If you are considering developing your presence on Facebook it is where plenty of your future prospective customers are to be found. There is plenty of need for corporate and professional sites but with Facebook Pages this is changing fast but this will no doubt shift in the coming years as web traffic and individuals spend more and more of their time on Facebook. So it pays to build your community on Facebook. This in turn can drive your fans towards your company’s website.

Ignore this at your peril. There is a shift online and as a business you need to pay attention.

3. Trust and the “Social Glue”

Online community is a term you keep hearing over and over again. Facebook is a social connectivity tool and this is how people really like to interact and connect with one another. Many people use Facebook email to send mails to their friends now without bothering to even log in to their own personal email account. You can share, share, share with Facebook and this is what human beings enjoy doing. Online community is the best place to engage with people in an online space and it therefore makes complete sense to build a presence in Facebook to tap into your community online.

Research over and over again points to the importance of word-of-mouth and peer-generated content which comes from a community of practice or interest online. In creating your brand on Facebook you are giving your online fans the chance to Like your brand. Messages and special offers to the people who Like you on Facebook can be targeted specifically to those people who are interested in your product or brand. This is a great way to build up loyalty with your customers and offering special offers.We are also living in an attention economy and all the attention is currently being focused on Facebook.

Your brand needs to make decisions to shift time, money, effort and resources into creating an online presence and figure out the right way that builds relationships and drives traffic back to your website. It is not a wise tactic to dismiss the notion of online community for your business. According a recent Fast company article Neuroeconomist Paul Zak has discovered, for the first time, that social networking triggers the release of the generosity-trust chemical in our brains. And that should be a wake-up call for every company.

4. Social networks like Facebook are driving traffic online.

We are at the cusp of a major shift in the direction of diverted Web traffic this change in direction of Web traffic has only come about with social networks being created in the last few years – Facebook in particular. BF (before Facebook) it was MySpace and orkut. Social Networks like Facebook are beginning to challenge Google in the traffic stakes. Facebook is becoming the web’s top source of traffic. The speed at which this change is happening is lightening fast and this may explain why many corporate brands are slow to adapt to the change and the pace of change as it happens.

5. Customer Service

You can use Facebook to manage your online reputation, engage customer awareness by engaging with your customers in Facebook and targeting customers with specific messages and Facebook promotions. It can be used to advertise with targeted advertising.

6. Social networks like Facebook are disruptive.

Facebook is currently disrupting advertising, media, one-to-one and one-to-many communications, and online search. Search is changing and becoming much more social. People buy things online based on their friends recommendations. Search Vs Recommendation is sure to be a battle ground between the the two main Web players of Google and Facebook. Recommendation is a smarter type of search. Facebook has a lot of data on people and is steadily building up a rich picture of who people are, what their interests are and what they like. People trust their friends just ask Dr Love.

Ina O’Murchu is a Consultant at Social Bits

BlogTalk 2009 (6th International Social Software Conference) – Call For Proposals – September 1st And 2nd – Jeju, Korea

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BlogTalk 2009
The 6th Int’l Conf. on Social Software
September 1st and 2nd, 2009
Jeju Island, Korea

Overview

Following the international success of the last five BlogTalk events, the next BlogTalk – to be held in Jeju Island, Korea on September 1st and 2nd, 2009 – is continuing with its focus on social software, while remaining committed to the diverse cultures, practices and tools of our emerging networked society. The conference (which this year will be co-located with Lift Asia 09) is designed to maintain a sustainable dialog between developers, innovative academics and scholars who study social software and social media, practitioners and administrators in corporate and educational settings, and other general members of the social software and social media communities.

We invite you to submit a proposal for presentation at the BlogTalk 2009 conference. Possible areas include, but are not limited to:

  • Forms and consequences of emerging social software practices
  • Social software in enterprise and educational environments
  • The political impact of social software and social media
  • Applications, prototypes, concepts and standards

Participants and proposal categories

Due to the interdisciplinary nature of the conference, audiences will come from different fields of practice and will have different professional backgrounds. We strongly encourage proposals to bridge these cultural differences and to be understandable for all groups alike. Along those lines, we will offer three different submission categories:

  • Academic
  • Developer
  • Practitioner

For academics, BlogTalk is an ideal conference for presenting and exchanging research work from current and future social software projects at an international level. For developers, the conference is a great opportunity to fly ideas, visions and prototypes in front of a distinguished audience of peers, to discuss, to link-up and to learn (developers may choose to give a practical demonstration rather than a formal presentation if they so wish). For practitioners, this is a venue to discuss use cases for social software and social media, and to report on any results you may have with like-minded individuals.

Submitting your proposals

You must submit a one-page abstract of the work you intend to present for review purposes (not to exceed 600 words). Please upload your submission along with some personal information using the EasyChair conference area for BlogTalk 2009. You will receive a confirmation of the arrival of your submission immediately. The submission deadline is June 27th, 2009.

Following notification of acceptance, you will be invited to submit a short or long paper (four or eight pages respectively) for the conference proceedings. BlogTalk is a peer-reviewed conference.

Timeline and important dates

  • One-page abstract submission deadline: June 27th, 2009
  • Notification of acceptance or rejection: July 13th, 2009
  • Full paper submission deadline: August 27th, 2009

(Due to the tight schedule we expect that there will be no deadline extension. As with previous BlogTalk conferences, we will work hard to endow a fund for supporting travel costs. As soon as we review all of the papers we will be able to announce more details.)

Topics

Application Portability
Bookmarking
Business
Categorisation
Collaboration
Content Sharing
Data Acquisition
Data Mining
Data Portability
Digital Rights
Education
Enterprise
Ethnography
Folksonomies and Tagging
Human Computer Interaction
Identity
Microblogging
Mobile
Multimedia
Podcasting
Politics
Portals
Psychology
Recommender Systems
RSS and Syndication
Search
Semantic Web
Social Media
Social Networks
Social Software
Transparency and Openness
Trend Analysis
Trust and Reputation
Virtual Worlds
Web 2.0
Weblogs
Wikis