Tuesday, March 26, 2019

Zero To One

Peter Theil wrote of the concept of Zero to One in his book titled the same. Here's the summary (thanks goodreads.com):



Doing what someone else already knows how to do takes the world from 1 to n, adding more of something familiar. But when you do something new, you go from 0 to 1.
 This concept explains why I still use my Nexus 5, a 5 year old phone, today. I could upgrade and go from 1 to 1+n (in my opinion n is a small number) but I don't really care. I can do (almost) everything with my current phone as with the latest. The new one is a bit faster, has a later os, fingerprint scanner, etc. Whatever its an incremental upgrade. Going from a non-smart phone to a smart phone was a 0 to 1 upgrade.

It also explains why companies that do go from 0 to 1 are super successful: they are doing something new and don't have competition. Another concept similar to this is Red Ocean / Blue Ocean. Imagine a red ocean where many sharks roam and there is blood in the water. This is like when there is a bloodbath of many companies all competing with each other. Then there is a the Blue Ocean where no companies are. If you successful thrive in the blue ocean than you will own all of it. Companies like Google and Facebook have done this.

However, beware of playing in the blue ocean or going from 0 to 1. Because of survivor-ship bias we don't see all the companies that played in the blue ocean and died because there was not enough opportunity there. Although its incredibly profitable, it also is incredibly difficult and risky. I've heard many recommendations that indie developers should stick to the red ocean because that means there there is a demand, the market is already validated. Indie developers do not have enough resources to work in the blue ocean. Doing this means not creating something new, not going from 0 to 1.

However, creating something completely new even for an indie dev is fun and still can be rewarding. 0 to 1 is an important concept to understand and all entrepreneurs should know where they stand and the tradeoffs.