Zero to One: Notes on Startups, or How to Build the Future

Most people in the US believe that the business of capitalism is competition. It’s often seen as a great virtue that companies engage in ruthless battles to control their market share, which brings down prices and sometimes improves quality. However, Thiel finds that competition limits innovation rather than stokes it: “More than anything else, competition is an ideology—the ideology—that pervades our society and distorts our thinking” (36). He asserts that too much emphasis on competition limits a company’s ability to make the really significant improvements to products and services that would greatly benefit consumers.

Just as startups disrupt their markets, Thiel argues for disrupting the way we think about business—and capitalism as a whole. The dominant narrative, that competition is healthy and necessary, starts in school, where getting good grades gives access to better schools and better job opportunities, so young people learn to be the best at imitating what their elders want. Today, when accelerating change calls on us to find innovative ways forward, most successful people are able only to keep repeating the winning formulas. When everyone has the same formulas, endless competition ensues: “We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it—even though the more we compete, the less we gain” (36).

In deemphasizing competition, Thiel emphasizes the roles of inspiration, creativity, and passion when it comes to market domination, building on his concept of creative monopoly. When companies focus on preserving and extending their portion of the mature market, they allow fear and the desire for stability to dominate their decision-making, rather than keeping their market share by earning their customers’ loyalty through innovation.

Thiel concedes that competition provides some benefits to customers: Prices drop and quality edges upward. The problem is that this becomes a race to the bottom, where prices end up so low that companies can no longer profit. With few or no profits to bank, they can’t afford to do the research and development that might generate entirely new and much better products. Thus, while competition looks virtuous and beneficial, it limits the ability of the marketplace to make important improvements to the things people buy. Companies should therefore avoid the trap of competition. As with his creative monopoly, Thiel ascribes a sort of morality to thriving outside of competition; by developing great new products, companies can dominate their markets, make large profits, contribute to the improvement of customers’ lives, and offer better pay and working conditions to their employees.

While Thiel sometimes emphasizes emotional or otherwise intangible aspects required for success, he cautions against placing too much value in the idea of luck. He claims that emphasizing luck is a side-effect of excessive competition, that people end up believing that whoever happens to do better in the marketplace with the same products will win the game. As companies take turns briefly at the top of a profitless marketplace, they can only afford to plan the next marketing campaign against their opponents. They have neither the time, money, nor belief that true market dominance is possible. No true innovations can come from this. Inventing the future requires companies that refuse to compete with the same old products or believe in the old way of doing things, but who will achieve dominance in their markets through creative risks.