zero-to-one

Zero to One

Peter Thiel's 2014 framework (with Blake Masters) for building companies that create new things — going from 0 to 1 — rather than copying existing models from 1 to n. The thesis: "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 competition." The book rests on a single foundational claim — monopoly is the condition of every successful business — and gives you the models to build one.

Core Principle

Every moment in business happens only once. The next Bill Gates will not build an operating system; the next Mark Zuckerberg will not build a social network. Copying models takes the world from 1 to n; creating new things takes it from 0 to 1. Only 0→1 is technology.

Capitalism and competition are opposites. Under perfect competition, profits are competed to zero; under monopoly, a company that's so good at what it does that no one can offer a close substitute captures the value it creates. Creating value is not enough — you have to capture it. Airlines create hundreds of billions in value and earn $0.37 per passenger trip; Google kept 21% of $50B in revenue. A startup's job is not to compete harder, it's to escape competition entirely.

The foundation: "Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business." — Thiel, Ch. 3

Scoring

Zero to One offers two scoring lenses:

• The Seven Questions (Ch. 13) — a binary pass/fail rubric every business plan must address: Engineering, Timing, Monopoly, People, Distribution, Durability, Secret. Thiel's decision rule: "If you nail all seven, you'll master fortune and succeed. Even getting five or six correct might work." Zero good answers is "hoping for a miracle."
• The Four Characteristics of Monopoly (Ch. 5) — proprietary technology (10x better than nearest substitute), network effects, economies of scale, branding. Not a checklist to tick — a lens for assessing durability. Thiel's own caveat: "This isn't a list of boxes to check as you build your business—there's no shortcut to monopoly."

Goal: 7/7 on the Seven Questions. Tesla is the worked example of a 7-for-7 company.

The Zero to One Framework

1. The Contrarian Question

Core concept: Thiel opens the book by asking, "What important truth do very few people agree with you on?" It's a filter for conviction vs. consensus. A good answer has the form "Most people believe in x, but the truth is the opposite of x." The business version: "What valuable company is nobody building?" This question frames the 0→1 vs 1→n distinction — horizontal progress copies things that work; vertical progress does something new, and only vertical progress is technology.

Why it works: The knowledge taught in school is by definition agreed upon. Brilliant thinking is rare, but courage is in even shorter supply than genius — most people cannot bring themselves to say what they believe when it's unpopular. Good answers to the contrarian question aren't different ways of seeing the present; they're as close as we can come to looking into the future.

Key insights:

• Horizontal (1→n) progress is copying; vertical (0→1) progress is creating — "the single word for vertical, 0 to 1 progress is technology."
• Good answers point into the future, not at the present — restating a popular truth is the most common failure mode.
• Bad answers are either popular truths or a side of a familiar debate ("America is exceptional" or "there is no God").
• The business-specific form: "What valuable company is nobody building?"
• Courage, not IQ, is the scarce resource.
• A startup is "the largest group of people you can convince of a plan to build a different future."

Product applications:

Context	Application	Example
Interview	Open every founder interview with the contrarian question	Thiel asks it of every job candidate (Ch. 1)
Investment memo	Force an answer at the top: what is the thesis most investors reject?	"Most investors believed social networks needed to start global; Facebook started at Harvard"
Ideation session	Pair-up brainstorming using the "most people believe x, truth is opposite" form	Forces non-consensus framing
Founder diligence	Grade the founder's answer — popular truth = fail; unpopular conviction = pass	Reject answers that "take a side in a familiar debate"
Product strategy doc	Lead with the 0→1 claim, not a 1→n comparison	"The next X won't build Y" opener

Copy patterns:

• "What important truth do very few people agree with you on?"
• "Most people believe in [X], but the truth is the opposite of [X]."
• "What valuable company is nobody building?"
• "Every moment in business happens only once. The next [Gates] will not build [an OS]."
• "Brilliant thinking is rare, but courage is in even shorter supply than genius."
• "The most contrarian thing of all is not to oppose the crowd but to think for [yourself]."

See: references/contrarian-question.md for the full question grading rubric and founder-interview script.

2. Monopoly > Competition

Core concept: Capitalism and competition are opposites. Competition is an ideology — not just a market structure — that makes people fight rivals instead of asking whether the fight is worth having. All happy companies are different (each earns a monopoly by solving a unique problem); all failed companies are the same (they failed to escape competition). Monopoly is the condition of every successful business.

Why it works: Perfect competition drives prices to marginal cost and eliminates economic profit in the long run. A monopolist — "the kind of company that's so good at what it does that no other firm can offer a close substitute" — captures the value it creates. Creating value without capturing it is the airline industry: millions served, zero profit per passenger. Both sides lie about this — monopolists hide their dominance (Google calls itself an ad company, not a search monopoly), while competitors pretend they're unique (the British food restaurant in Palo Alto).

Key insights:

• Creating value is not enough — you have to capture it.
• Monopolists lie down (market = "advertising" not "search"); non-monopolists lie up ("we're in a league of our own" via intersecting niches).
• Rivalry causes you to overemphasize old opportunities and slavishly copy what has worked.
• While Google and Microsoft fought, Apple overtook them both (Jan 2013: AAPL $500B vs. GOOG + MSFT combined $467B).
• "If you can recognize competition as a destructive force instead of a sign of value, you're already more sane than most."
• "Either don't throw any punches, or strike hard and end it quickly. There is no middle ground."
• "Creative monopoly means new products that benefit everybody and sustainable profits for the creator. Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival."

Product applications:

Context	Application	Example
Market sizing	Ask "monopoly in what?" to unmask the reference market	Google = 68% search / 3.4% global ads / 0.24% global tech
Pitch diligence	Flag the narrowing lie (hyper-specific niche) and the expanding lie (1% of huge market)	British food × Palo Alto × restaurant
Rivalry audit	If the company is defined by opposition to an incumbent, it's not 0→1	PayPal–X.com 50/50 merger over continued war
Board deck	Reframe "competitive landscape" slide around monopoly thesis	Google's profit margin vs. airlines (100x)
Acquisition decision	Either merge or strike hard; no half-fights	PayPal + X.com merged to survive the 2000 crash

Copy patterns:

• "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 competition."
• "Monopoly is the condition of every successful business."
• "Capitalism and competition are opposites."
• "If you want to create and capture lasting value, don't build an undifferentiated commodity business."
• "By monopoly, we mean the kind of company that's so good at what it does that no other firm can offer a close substitute."

Ethical boundary: "Either don't throw any punches, or strike hard and end it quickly." Do not treat competition as a sign of value — it is a destructive force. Do not slavishly copy competitors out of rivalry.

See: references/monopoly-vs-competition.md for the Tolstoy inversion, the monopoly-lie pattern, and the Shakespearean-rivalry case studies.

3. The Four Characteristics of Monopoly + Last Mover Advantage

Core concept: A durable monopoly usually combines some mix of (1) proprietary technology at least 10× better than the closest substitute, (2) network effects that become stronger as more people use the product, (3) economies of scale that spread fixed costs, and (4) a brand that rests on underlying substance. The value of such a business is its future cash flows — which is why being the last mover in a market beats being the first.

Why it works: The value of a business today is the sum of discounted future cash flows, so durability dominates near-term growth. Twitter was worth 12× the New York Times at its 2013 IPO despite losing money, because the last-mover thesis values decades of future monopoly profits. Start in a tiny market you can fully dominate (Facebook–Harvard, Amazon–books, PayPal–eBay PowerSellers), then sequence into adjacent markets — making the last great development in a specific niche and holding it.

Key insights:

• Proprietary tech must be ≥10× better than the substitute in some important dimension to create real monopolistic advantage (PayPal vs. mailing a check; iPad tablets unusable → useful).
• Network-effects businesses must start with a very small market where the product is already valuable to the first few users.
• Economies of scale favor software: fixed costs spread over many units; great startups are designed for scale from day one.
• Brand on top of substance works (Apple); brand without substance fails (Yahoo re-brands). "No technology company can be built on branding alone."
• "Every startup should start with a very small market. Always err on the side of starting too small."
• "It's much better to be the last mover — that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits."
• Don't frame yourself around "disruption" — it anchors your identity to incumbents. "If your company can be summed up by its opposition to already existing firms, it can't be completely new."

Product applications:

Context	Application	Example
Moat analysis	Score the business on all four characteristics, not just one	Google = proprietary (PageRank) + scale + brand; Twitter = scale-built-in
Beachhead selection	Pick the smallest dominatable submarket	PayPal → 20,000 eBay PowerSellers; Amazon → books; Facebook → Harvard
Valuation story	Anchor value to 10–15-year cash flows, not near-term revenue	PayPal 2001: 75% of present value from 2011+ profits
10x product audit	Is there a real order-of-magnitude improvement?	iPad = tablets unusable → useful; PayPal = 7 days → instant
Expansion plan	Sequence into adjacent markets after niche dominance	Amazon: books → CDs/videos/software → everything

Copy patterns:

• "It's much better to be the last mover — make the last great development in a specific market and enjoy decades of monopoly profits."
• "Moving first is a tactic, not a goal. What really matters is generating cash flows in the future."
• "Every startup should start with a very small market. Always err on the side of starting too small."
• "A great business is defined by its ability to generate cash flows in the future."
• "Will this business still be around a decade from now?"
• "You must study the endgame before everything else." (Capablanca, via Thiel)

Ethical boundary: Do not begin with brand before substance. "Beginning with brand rather than substance is dangerous."

See: references/monopoly-characteristics.md for the 10x rule, the scaling playbook, and the anti-disruption argument.

4. Definite Optimism

Core concept: Views of the future split on two axes — optimism vs. pessimism, and definite vs. indefinite — yielding four worldviews. Definite optimism is planning the specific future you want and working to build it; indefinite optimism is trusting that things will get better without specifying how. Only definite optimists build great companies. Indefinite optimism is unsustainable: "how can the future get better if no one plans for it?"

Why it works: A definite optimist picks the one best thing and commits to it — striving to be "a monopoly of one." Indefinite optimists diversify, hedge, iterate, A/B test, and never commit. This is why finance (the dominant indefinite profession) is "the only way to make money when you have no idea how to create wealth," and why lean-iteration dogma fails to produce 0→1 products: "iteration without a bold plan won't take you from 0 to 1." Zuckerberg refused Yahoo!'s $1B in 2006 in a 10-minute board meeting because he had a concrete plan; Jobs executed definite multi-year roadmaps.

Key insights:

• A definite person determines the one best thing to do and then does it — striving to be a "monopoly of one."
• Indefinite optimism is self-undermining: the future can't get better if no one plans for it.
• "Leanness is a methodology, not a goal. Iteration without a bold plan won't take you from 0 to 1."
• Finance dominates the indefinite world: "the only way to make money when you have no idea how to create wealth."
• "A business with a good definite plan will always be underrated in a world where people see the future as random."
• Founders sell only when they lose a concrete vision (Zuckerberg declining Yahoo!'s $1B).
• "A startup is the largest endeavor over which you can have definite mastery."

Product applications:

Context	Application	Example
Roadmap review	If the plan is "iterate and see", label it indefinite and push for commitment	Counter to pure lean-startup MVP loops
Acquisition offer	A definite founder declines if she has a concrete vision; indefinite founders sell	Facebook vs. Yahoo! 2006
Hiring diagnostics	Candidates who plan their careers = definite; résumé-curators = indefinite	Thiel's own Clerkship incident (L1487)
Product vision doc	Demand a specific 5–10 year vision, not generic "better / faster / cheaper"	Apple's iPod as post-PC plan
Investor selection	Prefer investors who back one bold thesis over diversified spraying	Contrast with indefinite "spray and pray" VC

Copy patterns:

• "To a definite optimist, the future will be better than the present if he plans and works to make it better."
• "A bad plan is better than no plan."
• "A business with a good definite plan will always be underrated in a world where people see the future as random."
• "Iteration without a bold plan won't take you from 0 to 1."
• "A startup is the largest endeavor over which you can have definite mastery."

See: references/definite-optimism.md for the 2×2 matrix, the four-country map, and the Jobs/Zuckerberg definite-planning case studies.

5. The Power Law

Core concept: Returns, outcomes, companies, careers, and decisions follow a power law — a small number radically outperform all the rest combined. In VC: "the biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined." Concentration, not diversification, is the rational response.

Why it works: Venture outcomes aren't normally distributed, so spray-and-pray portfolios produce flops. Facebook alone returned more than the rest of Founders Fund's 2005 fund combined. Two rules of VC follow: (1) only invest in companies that could return the entire fund; (2) because rule 1 is so restrictive, there can be no other rules. The same logic applies to careers, markets, distribution channels, and decisions — "the most important things are singular."

Key insights:

• "We don't live in a normal world; we live under a power law."
• Facebook alone returned more than all other investments in Founders Fund's 2005 fund combined; Palantir returned more than all the rest minus Facebook.
• Life is not a portfolio — a founder can't diversify across many startups.
• "Owning just 0.01% of Google is incredibly valuable; owning 100% of a flop is worth nothing." Join the best rocket ship.
• Power-law distributions hide in plain sight because early variance is low.
• "The most important things are singular: one market will probably be better than all others. One distribution strategy usually dominates all others, too."
• "You should focus relentlessly on something you're good at doing — but first think hard about whether it will be valuable in the future."

Product applications:

Context	Application	Example
Career choice	0.01% of Google > 100% of a flop — join the best rocket ship	Founders Fund rule for individuals
VC portfolio	Only invest in companies that could return the fund	A16Z needed 19 Instagrams (at $78M returns) to break even on one $1.5B fund
Distribution strategy	Commit to one dominant channel — not a kitchen-sink of five	Most companies get zero channels to work
Market selection	Choose the one market that will dominate, not a portfolio	"One market will probably be better than all others"
Decision-making	Identify the one decision that matters most; over-invest there	Power-law allocation of attention

Copy patterns:

• "We don't live in a normal world; we live under a power law."
• "Only invest in companies that have the potential to return the value of the entire fund."
• "Life is not a portfolio: not for a startup founder, and not for any individual."
• "The most important things are singular: one [market / channel / decision] will probably be better than all others."
• "Differences between companies will dwarf the differences in roles inside companies."

See: references/power-law.md for the Founders Fund case math, the Instagram/A16Z counter-example, and career applications.

6. Secrets

Core concept: Every great company is built on a secret — an important truth that is hidden but discoverable — in the zone of hard truths between the easy and the impossible. You have to actively look for them. "Every great business is built around a secret that's hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator."

Why it works: Four social forces (incrementalism, risk aversion, complacency, flatness) have rooted out belief in secrets, but secrets still exist. There are two kinds: secrets of nature (undiscovered physical truths) and secrets about people (what they hide, or what they don't know about themselves). Airbnb, Uber, and Lyft all harnessed spare capacity hidden in plain sight — open but unsuspected secrets about how the world works. Belief in secrets is an effective truth — Andrew Wiles's nine-year proof of Fermat's Last Theorem required faith that the proof existed.

Key insights:

• Contrarian thinking makes no sense unless the world still has secrets to give up — belief in secrets is prerequisite.
• Two kinds of secrets: nature and people. "What secrets is nature not telling you? What secrets are people not telling you?"
• "The best place to look for secrets is where no one else is looking." Nutrition, for example: matters for everybody, can't major in it at Harvard.
• A great company is a conspiracy; hire conspirators, not employees.
• Open but unsuspected secrets power the strongest businesses (Airbnb, Uber, Lyft).
• Four social forces kill secret-hunting: incrementalism, risk aversion, complacency, flatness.
• HP stopped believing in secrets, pivoted to branding and services, and collapsed from $135B (2000) to $23B (2012).

Product applications:

Context	Application	Example
Ideation	Use the two-axis prompt: nature secret? people secret?	Airbnb = spare-capacity people secret
Pitch diligence	Reject pitches whose rationale is "everyone knows this market is huge"	Cleantech bubble — zero real secrets
Domain selection	Look in under-institutionalized fields — nothing standardized	Nutrition vs. physics
Hiring framing	Pitch roles as recruiting conspirators into a secret	Founding-team messaging
Corporate health	A company that stopped looking for secrets is dying	HP 2000–2012

Copy patterns:

• "Every great business is built around a secret that's hidden from the outside."
• "A great company is a conspiracy to change the world."
• "What secrets is nature not telling you? What secrets are people not telling you?"
• "The best place to look for secrets is where no one else is looking."
• "Great companies have secrets: specific reasons for success that other people don't see."
• "[Field X] matters for everybody, but you can't major in it — exactly the kind of field that could yield secrets."

See: references/secrets.md for the two-axis taxonomy, the four social forces, and the HP cautionary tale.

7. Foundations + Mafia Culture

Core concept: Get the founding right — cofounders, ownership/possession/control, small boards, low cash pay, equity, full-time — because "Thiel's law: a startup messed up at its foundation cannot be fixed." Then build a tightly-knit tribe (a "mafia") around a shared mission: "From the outside, everyone in your company should be different in the same way."

Why it works: Misalignment creeps in when ownership (who has economic upside), possession (who runs operations), and control (who governs) diverge. Structural rules — small boards, vesting, full-time-only — keep everyone aligned long-term. Low cash pay filters for commitment. The PayPal Mafia worked because the team was personally similar, obsessed with one mission, and each person had exactly one clearly-owned responsibility — which eliminated internal competition.

Key insights:

• "Thiel's law: a startup messed up at its foundation cannot be fixed. Beginnings are special."
• Choose a cofounder like choosing a spouse; founders should share a prehistory — not roll dice.
• "A board of three is ideal. Your board should never exceed five people, unless your company is publicly held."
• "In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary."
• Full-time only — consultants, part-timers, and remote workers are structurally misaligned. "You're either on the bus or off the bus."
• Equity, not cash, orients people toward creating future value; keep the cap-table secret because perfect fairness is impossible.
• "No company has a culture; every company is a culture."
• Every person responsible for doing exactly one thing — eliminates conflict and internal competition.
• PayPal Mafia: alumni founded SpaceX, Tesla, LinkedIn, YouTube, Yelp, Yammer, Palantir — seven $1B+ companies.

Product applications:

Context	Application	Example
Cap-table design	Align ownership, possession, and control; keep details private	Contrast with GM misalignment (Ch. 9)
Board formation	3 people ideal, 5 max — refuse bloated governance	Small boards actually govern
Compensation policy	Sub-$150K cash cap + heavy equity + vesting	PayPal founders' rule
Hiring filter	Full-time only; no consultants for core roles	"On the bus or off the bus"
Culture test	Would outside observers say "they're all different in the same way"?	PayPal Mafia pattern

Copy patterns:

• "Thiel's law: a startup messed up at its foundation cannot be fixed."
• "Choosing a co-founder is like getting married, and founder conflict is just as ugly as divorce."
• "Founders should share a prehistory before they start a company together — otherwise they're just rolling dice."
• "You're either on the bus or off the bus."
• "From the outside, everyone in your company should be different in the same way."
• "Make every person responsible for doing just one thing."

Ethical boundary: Do not outsource recruiting — it is a core competency. Do not fight the perk war — anyone swayed by free laundry or pet care is a bad hire. A cult is fanatically wrong about something important; a great startup is fanatically right about a neglected secret. Intensity is not the distinction — truth is.

See: references/foundations.md for the ownership/possession/control model, the PayPal Mafia case, and the one-thing-per-person rule.

8. Distribution (Sales Is Hidden)

Core concept: Distribution is as essential as the product — "customers will not come just because you build it" — and CAC (Customer Acquisition Cost) must be less than CLV (Customer Lifetime Value). The right channel depends on deal size: complex sales for $1M+, personal sales for $10K–$100K, marketing for consumer items, viral for products whose core use invites the next user. One channel will dominate; get just one working and you have a great business.

Why it works: Most businesses get zero channels to work. "Poor sales, rather than bad product, is the most common cause of failure." Sales works best when hidden (like acting) — grandmasters are called "account executives," "business development," "investment bankers," or "politicians." Superior distribution alone can create a monopoly even with no product differentiation. The sales ladder has a $1K-$10K dead zone where nothing works — too expensive for ads, too cheap for personal sales.

Key insights:

• "Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true."
• CAC < CLV is the core equation.
• Complex sales works best when there are no salesmen at all — Palantir's CEO spends 25 days/month on the road; SpaceX sold NASA billion-dollar contracts by founder sale.
• Viral growth requires short cycle times and a paid-to-refer loop — PayPal hit 7% daily growth at $20 CAC.
• "If you don't see any salespeople, you're the salesperson."
• "Distribution is the hidden bottleneck."
• Suit-wearing tech CEOs are a red flag: "If he actually looks like a salesman, he's probably bad at sales and worse at tech."

Product applications:

Context	Application	Example
Enterprise	Complex sales: founder-led, years-long, no separate salesforce	Palantir, SpaceX
Mid-market SaaS	Personal sales: start small, ladder up through the org	Box → Stanford Sleep Clinic → Stanford-wide
Consumer subscription	Marketing / advertising	Consumer goods playbook
Two-sided network	Distribution-as-product (adding supply adds value to demand)	ZocDoc: each new doctor adds consumer value
Viral product	Paid referral loops with short cycle times	PayPal: $20/user, 7% daily growth

Copy patterns:

• "Customers will not come just because you build it."
• "If you don't see any salespeople, you're the salesperson."
• "Sales is hidden. Like acting, sales works best when hidden."
• "Distribution is the hidden bottleneck."
• "If you can get just one distribution channel to work, you have a great business. If you try for several but don't nail one, you're finished."
• "Superior sales and distribution by itself can create a monopoly."

See: references/distribution.md for the full sales-ladder-by-deal-size, the CAC/CLV framing, and the Palantir/Box/ZocDoc case studies.

9. Man + Machine and the Seven Questions

Core concept: Build businesses where computers complement humans, not substitute for them — "the most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete." Then pressure-test any plan against the Seven Questions: Engineering, Timing, Monopoly, People, Distribution, Durability, Secret. Zero good answers is hoping for a miracle; all seven is how Tesla got built.

Why it works: Humans have intentionality; computers process data. A supercomputer with 16,000 CPUs still can't beat a four-year-old at cat recognition — but a cheap laptop can beat the best mathematician at certain tasks. Hybrid systems (PayPal's "Igor" fraud engine, Palantir, LinkedIn for recruiters) generate compounding value where pure automation stalls. The Seven Questions are themselves a recap of the book's frameworks — engineering (10x), timing, monopoly (niche), people (no suits), distribution (CAC/CLV), durability (last mover), and secret. Cleantech companies crashed because they had zero good answers; Tesla had seven.

Key insights:

• Computers and humans are categorically different — not rival labor pools. Big data is usually dumb data.
• "Technology is the one way for us to escape competition in a globalizing world."
• Design "how can computers help humans solve hard problems" — not "what problems can be solved with computers alone."
• The Seven Questions: Engineering (breakthrough not incremental), Timing (why now), Monopoly (big share of small market), People (right team, no suits), Distribution (can you deliver), Durability (defensible in 10–20 years), Secret (unique opportunity others don't see).
• "If you nail all seven, you'll master fortune and succeed." Five or six might work. Zero is hoping for a miracle.
• Thiel's people-heuristic: "Never invest in a tech CEO that wears a suit."
• Tesla got 7/7: breakthrough batteries + stack, 2010 DOE loan timing, Roadster high-end niche, Musk as engineer+salesman, owned stores, brand head-start, cleantech-as-fashion secret.

Product applications:

Context	Application	Example
Product design	Ask "how does this empower the human?" not "how does this replace the human?"	Palantir fraud detection; LinkedIn for recruiters
Business plan review	Score the plan 0–7 on the Seven Questions, question by question	Cleantech postmortem vs. Tesla
Founder screening	Apply the suit rule + the one-thing rule	Real technologists wear T-shirts
AI product framing	Complement > substitute; hybrid > pure automation	"Big data is usually dumb data"
Pitch rubric	Seven-question scorecard at the bottom of every deck	Tesla 7-for-7 worked example

Copy patterns:

• "Computers are complements for humans, not substitutes."
• "How can computers help humans solve hard problems?"
• "The Engineering Question — can you create breakthrough technology instead of incremental improvements?"
• "The Monopoly Question — are you starting with a big share of a small market?"
• "The Secret Question — have you identified a unique opportunity that others don't see?"
• "If you don't have good answers to these questions, you'll run into lots of 'bad luck' and your business will fail. If you nail all seven, you'll master fortune and succeed."
• "Never invest in a tech CEO that wears a suit."

Ethical boundary: Do not build technology whose goal is to replace humans — build complements. Do not equate more data with more value — "big data is usually dumb data." Do not use "social good" as cover for an undifferentiated business; "social entrepreneurs trying to 'do well by doing good' usually end up doing neither."

See: references/seven-questions.md for the full cleantech-vs-Tesla scorecard, complementarity case studies, and the question-by-question rubric.

Zero to One Process

Apply in order. Each step maps to a section and a chapter in the source.

1. Ask the contrarian question. Force a non-consensus answer: what important truth do very few people agree with you on? (Ch. 1)
2. Find a valuable secret that answers it — a hidden truth, either about nature or about people. (Ch. 8)
3. Define a small market you can actually monopolize — a specific group concentrated together, served by few or no competitors. (Ch. 5)
4. Pressure-test durability against the four monopoly characteristics: 10x tech, network effects, scale, brand-on-substance. (Ch. 5)
5. Commit to a definite optimistic plan. Reject indefinite optionality; pick the one best thing and do it. (Ch. 6)
6. Concentrate on the one thing that will dominate by the power law — one market, one channel, one moment. (Ch. 7)
7. Lay durable foundations — cofounder fit, board ≤5, full-time only, CEO cash ≤$150K, vested equity. (Ch. 9)
8. Build a mafia — a tribe different in the same way, one person per responsibility. (Ch. 10)
9. Pair product with a distribution motion that fits deal size. (Ch. 11)
10. Design for man + machine complementarity. (Ch. 12)
11. Pass the Seven Questions test before betting the company. (Ch. 13)
12. Accept the founder's paradox — lead as a distinctive, unbalanced individual; but don't believe your own myth. (Ch. 14)

Common Mistakes

Mistake	Why It Fails	Fix
Incremental-advances dogma	"Grand visions inflated the bubble, so they should not be indulged."	"It is better to risk boldness than triviality."
Stay-lean-and-flexible (plan-free iteration)	"All companies must be 'lean,' which is code for 'unplanned.'" — never builds 0→1	"A bad plan is better than no plan."
Improve-on-the-competition	"Don't try to create a new market prematurely" — traps you in 1→n	"Competitive markets destroy profits."
Focus-on-product-not-sales	"If your product requires advertising or salespeople to sell it, it's not good enough" (false)	"Sales matters just as much as product."
Differentiation fantasy in a crowded market	"The fatal temptation is to describe your market extremely narrowly so that you dominate it by definition."	Start with a very small, real market; err on the side of too small.
Chasing 1% of a huge market	"It's always a red flag when entrepreneurs talk about getting 1% of a $100 billion market."	"Perfect target market: a small group of particular people concentrated together."
Fighting competition out of rivalry	Rivalry causes you to overemphasize old opportunities and slavishly copy what worked.	Recognize competition as a destructive force, not a sign of value.
Disruption posturing	If your company is summed up by opposition to incumbents, it isn't new.	"Avoid competition as much as possible."
Indefinite optimism	The future can't get better if no one plans for it.	"A startup is the largest endeavor over which you can have definite mastery."
MVP-and-iterate as a substitute for a bold plan	Local maxima trap; iteration alone won't take you 0→1.	"Forget minimum viable products — change the world through careful planning."
Diversification as hedging	Spray-and-pray produces an entire portfolio of flops.	Focus relentlessly on the one thing that could be valuable in the future.
Board > 5 people	Huge boards merely provide cover for whoever actually runs the company.	Board of three is ideal; never exceed five (unless public).
Part-timers, consultants, remote-only core team	Misalignment — they claim near-term value, not future value.	"On the bus or off the bus." Full-time only.
Founder CEO cash > $150K	"Like a politician" — defends status quo instead of attacking problems.	Sub-$150K cash + heavy equity.
Cash comp and bonuses over vested equity	Teaches workers to claim existing value, not create new value.	Equity is the only comp that orients toward the future.
If-you-build-it-they-will-come	"If you haven't invented an effective way to sell it, you have a bad business."	Pair product with a specific, owned distribution channel.
Kitchen-sink distribution (no power-law channel)	"Most businesses get zero distribution channels to work."	Nail one dominant channel — "you can't afford not to think hard about where your actions will fall on the curve."
Ignoring one or more Seven Questions	Cleantech pattern — starting with zero good answers is "hoping for a miracle."	Score your plan on all seven; aim for 5+; target 7.
Suit-wearing nontechnical CEO for a tech company	"Real technologists wear T-shirts and jeans."	Technical founder as engineer + salesman (Musk, Tesla 7/7).
Replacing the founder with a professional CEO too early	"The creation of new value cannot be reduced to a formula and applied by professionals."	"We need founders… tolerate unusual individuals."
Founder self-worship	"The single greatest danger for a founder is to become so certain of his own myth that he loses his mind."	"Don't overestimate your own power as an individual."
Branding without substance	"Beginning with brand rather than substance is dangerous."	Build 10x substance first; brand follows.

Quick Diagnostic

Use this table to audit a startup plan, pitch deck, or investment memo.

Question	If No	Action
Can you answer the contrarian question with an unpopular truth?	Pitch is consensus, not 0→1	Revisit first principles; draft 5 "most believe x, truth is opposite" statements
Do you have a real secret (not a restatement of public consensus)?	Zero-secret startup	Brainstorm with the two-axis prompt: nature vs. people secrets
Are you starting with a big share of a small, dominatable market?	1%-of-huge-market trap	Pick a concentrated beachhead (Harvard-sized, PowerSeller-sized)
Does the business have ≥1 of the four monopoly characteristics with substance (esp. 10x tech)?	No durable moat	Re-scope product; pick one characteristic to build substance behind
Is the plan definite (specific 5–10 year vision) rather than indefinite (iterate and see)?	Indefinite-optimist drift	Write a concrete one-page plan; cut optionality
Have you concentrated attention/capital on the one thing that could dominate?	Portfolio / kitchen-sink	Apply power-law focus — pick one market, one channel
Are foundations solid (cofounders with prehistory, board ≤5, full-time only, CEO cash ≤$150K, vested equity)?	Thiel's law will bite	Fix before shipping anything else — "beginnings are special"
Does the team look like a mafia — different in the same way, one thing per person?	Generic team	Rewrite responsibilities so each person owns exactly one thing
Is there a specific distribution channel owned and matched to deal size?	Distribution-as-afterthought	Pick one channel (complex / personal / marketing / viral); nail it
Do computers complement humans, or substitute for them?	Replacement thesis	Redesign as hybrid ("how can computers help humans solve…")
Does the plan score ≥5/7 on the Seven Questions?	Hoping for a miracle	Score question-by-question; fix the zeros before launch

Reference Files

• contrarian-question.md: The question, the 0→1 distinction, grading rubric, and interview script
• monopoly-vs-competition.md: Tolstoy inversion, the two monopoly lies, Shakespearean-rivalry pattern
• monopoly-characteristics.md: 10x rule, network effects, scale, brand-on-substance, last-mover/DCF, anti-disruption
• definite-optimism.md: 2×2 matrix, four-country world map, Jobs/Zuckerberg definite-planning cases
• power-law.md: Founders Fund math, VC rules, life-not-a-portfolio, singular-focus principle
• secrets.md: Two-axis taxonomy, four social forces, HP cautionary tale, conspiracy framing
• foundations.md: Thiel's law, ownership/possession/control, board/cash/equity rules, PayPal Mafia
• distribution.md: CAC/CLV, sales ladder by deal size, Palantir/Box/ZocDoc, viral loops, suit rule
• seven-questions.md: Seven-question rubric, cleantech postmortem, Tesla 7-for-7, man+machine complementarity
• case-studies.md: Full case catalog — PayPal, Google, Facebook, Apple, Tesla, HP, GM, Airlines, and more
• checklist.md: Step-by-step founder/investor worksheet and the Seven-Questions scorecard

Further Reading

This skill is based on Peter Thiel's Zero to One: Notes on Startups, or How to Build the Future (2014), co-authored with Blake Masters. For the complete framework:

• Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel with Blake Masters (Crown Business, 2014). Hardcover ISBN 978-0-8041-3929-8; eBook ISBN 978-0-8041-3930-4.
• "Competition Is for Losers" — Peter Thiel, Wall Street Journal, September 12, 2014. WSJ essay adapted from Chapters 3–4.
• "The End of the Future" — Peter Thiel, National Review, October 3, 2011. Context for the definite-optimism and secrets chapters.
• Founders Fund manifesto: "What Happened to the Future?" — Bruce Gibney. Codifies the Founders Fund / Thiel worldview.
• The Diversity Myth (1995) by David O. Sacks and Peter Thiel — Thiel's earlier book; politically controversial and only tangentially related. Listed for completeness.

About the Author

Peter Thiel is an entrepreneur and investor who co-founded PayPal, led it as CEO, and took it public in 2002. He made the first outside investment in Facebook in 2004, co-founded Palantir Technologies that same year, and is a partner at Founders Fund, where he has backed SpaceX, Airbnb, and others. He founded the Thiel Fellowship and leads the Thiel Foundation. (Founders Fund; Penguin Random House)

Blake Masters was a student in Thiel's Stanford class CS183: Startup in 2012. His detailed class notes became an internet sensation and formed the basis for Zero to One. He co-authored the book with Thiel and later served as President of the Thiel Foundation and Chief Operating Officer of Thiel Capital. (TechCrunch)