Rethinking Startups with Zero to One

If you ever land a job interview with Peter Thiel – the tech entrepreneur and billionaire investor behind some of Silicon Valley’s biggest names – brace yourself for one big question:

What important truth do very few people agree with you on?

It’s a tricky question, no doubt, but it offers an intriguing insight into what Thiel values, as he explains in his 2014 bestseller Zero to One: Notes on Startups, or How to Build the Future:

This question sounds easy […] actually, it’s very hard to answer. It’s intellectually difficult because the knowledge that everyone is taught in school is by definition agreed upon. And it’s psychologically difficult because anyone trying to answer must say something she knows to be unpopular. Brilliant thinking is rare, but courage is in even shorter supply than genius.

Which means your bold take on why The Godfather Part III is criminally underrated might not quite hit the mark…

It’s a compelling example of a question designed to test how you think – whether you can look beyond the well-worn blueprint of what’s come before, and whether you have the courage and intelligence to pursue what’s next.

As Thiel explains:

Every moment in business happens only once […] the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them. Unless businesses invest in the difficult task of creating new things, companies will fail in the future no matter how big their profits remain today.

According to Thiel, progress comes in two forms. Horizontal (or extensive) progress is about copying what already works – going from 1 to n. Vertical (or intensive) progress is about doing something entirely new – going from 0 to 1.

And vertical progress isn’t just about making something different – it’s about making something better.

With that in mind, let’s take a closer look at Thiel’s playbook for vertical progress. As the co-founder of a little company called PayPal and the first outside investor in Facebook, he’s someone worth hearing out – if only when it comes to cultivating startup success…

Secrets = Startup Gold

Thiel argues that every successful startup is built on a “secret” – a hidden truth about the world that most people either overlook or dismiss, “something important and unknown, something hard to do but doable.”

The problem? From an early age, we’re taught that the “right” way to do things is to follow instructions, stick to the syllabus, and stay inside the lines.

Thiel identifies three forces that actively discourage original thinking:

• Incrementalism – We’re conditioned to focus on what’s expected. As he puts it: “If you overachieve and end up learning something that’s not on the test, you won’t receive a credit for it.”

• Risk aversion – Bold ideas often get buried under fear of failure: “People are scared of secrets because they are scared of being wrong.”

• Complacency – If the current system pays, there’s little incentive to challenge it: “Why search for a new secret if you can comfortably collect rents on everything that has already been done?”

These dull our ability to see what others miss – and blind us to the fact that the biggest breakthroughs often start with a simple question: 

What valuable company is nobody building?

Get the answer right, and you’ve found your secret.

Thiel divides secrets into two types:

• Secrets of nature – things the physical world hasn’t revealed yet.

• Secrets about people – truths hidden in plain sight by convention or assumption.

Either one can be the starting point of a company no one else is building.

Take Airbnb. At the time of its founding, hotels dominated the market, and conventional wisdom said holidaymakers were unlikely to trust ordinary folk with something as personal as accommodation.

But the founders spotted a secret hidden in plain sight: lots of people had extra space, and many travellers wanted more affordable, authentic, or flexible alternatives to hotels. What seemed risky to most, they saw as a massive, untapped opportunity.

That secret – the willingness of people to trust strangers in their homes – came from questioning assumptions, and finding real value where others saw risk.

Airbnb didn’t compete with hotels on their terms. It invented an entirely new category. That’s what going from 0 to 1 looks like.

Monopoly Is the Goal, Not the Enemy

When people hear the word “monopoly”, they tend to think of something negative – giant corporations crushing the little guy. Or, in my case, epic family feuds over landing on Mayfair…

But, in Zero to One, Thiel argues that monopolies aren’t just good for business – they’re essential.

Why? Because monopolies do something better than anyone else. Competing in a crowded market might keep you busy, but it’s rarely where breakthroughs happen. As he puts it:

All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape the competition.

That said, it’s a delicate balancing act. Thiel explains:

No screenwriter wants to admit that her new movie script simply rehashes what has already been done before […] Non-monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets […] Monopolists, by contrast, disguise their monopoly by framing their market as the union of several large markets.

Put simply: non-monopolies try to look more original than they are, while real monopolies downplay just how dominant they’ve become. Thiel’s advice? Don’t hide from monopoly – build one. And do it through four key traits:

• Proprietary technology – at least 10x better than existing alternatives.

• Network effects – the more people use it, the more useful it becomes (like social media platforms).

• Economies of scale – the bigger you grow, the cheaper you operate.

• Strong brand – a distinct identity that’s hard to replicate.

Google is a prime example. It hasn’t faced serious competition in the search space this century. Thiel argues that monopolies like this don’t stifle progress – they create it. If someone wants to beat Google, they’ll have to invent something better, which ultimately benefits the consumer.

Still, there are two sides to this coin.

As I explored in my November 2019 blog Bring on the Competition, rivalry can also be a powerful driver of progress. When companies compete, they’re forced to evolve, improve, and stay focused on what really matters to their customers. Without that pressure, monopolies can grow complacent – prioritising profit over innovation.

So while Thiel may be right that chasing a monopoly can be a smart strategy, dismissing competition entirely ignores the healthy tension it creates – and the breakthroughs that often come with it.

People Are the Product

Secrets, monopolies, branding – none of it matters without the right people to bring an idea to life. As Thiel puts it, a startup is “the largest group of people you can convince of a plan to build a different future.” In other words, especially in the early days, your people are your product.

That’s why getting the foundation right is so important. Thiel writes:

Companies are like countries […] Bad decisions made early on are very hard to correct after they are made […] As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.

When assessing startups, Thiel doesn’t just consider technical skills or credentials. He pays close attention to the relationships within the founding team: “How well the founders know each other and how well they work together matter just as much.”

The team’s mindset and values shape how the company operates from day one. Recruiting, then, becomes a founder’s most important responsibility. Thiel believes hiring should never be outsourced, because building a startup means assembling a group that shares a clear mission and long-term commitment. If a founder can’t articulate why someone should join their company over a more established one, they’re probably not ready to grow the team.

 Reflecting on PayPal’s early days, Thiel shares:

We were all the same kind of nerd […] we needed every new hire to be equally obsessed.

To make that work, he kept roles focused and responsibilities clear.

The best thing I did as a manager at PayPal was to make every person in the company responsible for doing just one thing. Every employee’s one thing was unique, and everyone knew I would evaluate him only on that one thing.

This clarity reduced friction, fostered accountability, and made sure everyone knew exactly where they could make the most impact.

And judging by PayPal’s success, it clearly worked.

Is Luck a Lie?

This brings us to a big question: how much of startup success comes down to luck?

It’s a contentious one in business, and the subject of an iluli video earlier this year.

So, is startup success just a matter of being in the right place at the right time? Thiel doesn’t think so. Quoting Ralph Waldo Emerson – “Shallow men believe in luck… Strong men believe in cause and effect” – he argues that skill, focus, and long-term thinking are what really set successful founders apart:

No one pretended that misfortune didn’t exist, but prior generations believed in making their own luck by working hard.

Thiel sees this mindset clearly in Steve Jobs. In Zero to One, he writes:

The most important lesson to learn from Steve Jobs has nothing to do with aesthetics. The greatest thing Jobs designed was his business.

Jobs didn’t just dream up beautiful products – he built Apple to execute clear, long-term plans. According to Thiel, that kind of deliberate thinking is often undervalued in today’s “indefinite, short-term world.”

It ties into a belief that underpins much of Thiel’s thinking: success isn’t random – it’s built: "You are not a lottery ticket."

Startups, in his view, aren’t about betting on lucky breaks – they’re about making bold choices, taking control, and building with purpose.

Now, I don’t disagree – but I also think it’s folly to dismiss the role of luck, especially when it comes to context and timing.

As I wrote in a recent newsletter:

A young Bill Gates was sent to one of the few schools in the world with its own computer terminal. Steve Jobs grew up in Silicon Valley, and had Hewlett-Packard and Fairchild Semiconductors on the doorstep. Both were raised by supportive families (Jobs by his adoptive parents) and born within a few months of each other in 1955. The cards fell neatly so they could make their mark just as the biggest technological revolution of the century was starting.

And had Jobs never crossed paths with Wozniak, who knows – this post might’ve been typed on a Dell loud enough to double as a desk fan.

Plenty of people work hard. Plenty of people play the long game. But only a handful go on to build one of the most valuable companies in history. Clearly, there’s more at play than just effort and vision.

Personally, I’m more inclined to side with Daniel Kahneman, the Nobel Prize–winning psychologist, whose formula goes:

Success = talent + luck; great success = a little more talent and a lot of luck.

But while luck may open the door, it’s what you do with it that counts. 

Thiel’s core message is clear: real innovation doesn’t come from playing by the rules. It comes from asking better questions, challenging assumptions, and building something no one else can.

That takes bold ideas, focused execution, and a team of people obsessed with the mission. And yes – a little luck doesn’t hurt either.

In a world fixated on what’s trending, Zero to One is a reminder that the most valuable companies – the ones that define the future – aren’t built by following the crowd. 

They’re built by people brave enough to think for themselves – and relentless enough to follow through.