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

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📝 From 0 to 1: Decoding the New Forces of Internet Entrepreneurship in China in 2018

Peter Thiel's "Zero to One" has indeed become essential reading in entrepreneurial circles worldwide. As PayPal's founder and Facebook's first external investor, Thiel's perspectives have shaped thinking far beyond Silicon Valley, influencing entrepreneurial ecosystems globally. When we examine his core concepts alongside China's internet entrepreneurship landscape in 2018, several fascinating insights emerge.

The book's central premise - creating something truly new rather than iterating on existing ideas - resonated particularly strongly within China's rapidly evolving tech ecosystem in 2018. During this period, China was transitioning from being primarily an imitator to becoming an innovator, with unique business models emerging that were specifically adapted to Chinese market conditions.

Companies like ByteDance (TikTok's parent company), Meituan, and Pinduoduo were demonstrating precisely the kind of monopolistic advantages that Thiel advocates for - creating entirely new categories or approaches rather than competing directly with established players.

The intersection of Thiel's philosophy with China's entrepreneurial environment in 2018 reveals how technological innovation was being shaped by distinctly Chinese characteristics, creating a fascinating case study in how universal entrepreneurial principles manifest in different cultural and economic contexts.

The Essence of Going from 0 to 1: Monopoly and Innovation

Peter Thiel's core thesis in "Zero to One" emphasizes creating entirely new value (0 to 1) rather than iterating on existing models (1 to N). This philosophy has been vividly demonstrated in China's internet entrepreneurial ecosystem in recent years, with Pinduoduo and Douyin serving as compelling success stories, while LETV stands as a cautionary tale.

The Rise of Pinduoduo

Pinduoduo's Nasdaq listing on July 26, 2018, set a record as the fastest IPO in Chinese internet history, just three years after its founding in September 2015. The company didn't simply replicate Taobao's e-commerce model but uncovered a critical insight: the massive demand for affordable e-commerce in China's third and fourth-tier cities and rural areas, where users displayed strong social sharing tendencies.

By ingeniously merging social networking with e-commerce, Pinduoduo created a novel "social+e-commerce" model that allowed it to outmaneuver traditional e-commerce platforms. This perfectly exemplifies what Thiel describes as "gaining a dominant position in a small market and then gradually expanding" - a fundamental strategy for moving from 0 to 1.

Douyin's Breakthrough

Douyin's growth trajectory in 2018 was remarkable: from 30 million daily active users in January to 70 million in February, reaching 150 million by June. This potentially makes it one of the fastest-growing applications worldwide.

Rather than mimicking BAT's (Baidu, Alibaba, Tencent) content distribution approach, Douyin pioneered a new content consumption method through algorithmic recommendations. Its algorithmic technology surpassed competitors by at least tenfold, aligning with Thiel's assertion that "patented technology must be 10 times better than the closest substitute to establish true monopoly advantage."

Douyin began with the relatively specialized short video market before methodically expanding into news, education, gaming, and other domains - perfectly executing Thiel's prescribed monopoly-building process of starting small and strategically expanding.

LETV: A Cautionary Tale

In 2017, LETV became China's "most discussed company," unfortunately for its dramatic downfall. The company attempted simultaneous entry into multiple industries - from video websites to mobile phones, televisions, and automobiles - without establishing core competitiveness or a sustainable business model in any single area.

This represents precisely the kind of unfocused expansion that "Zero to One" warns against: spreading resources too thin across multiple fronts rather than concentrating on developing a singular, defensible market position.

Get Rid of Competitive Thinking: From Inner Volume to Creation

Thiel argues that competition is a concept that distorts our thinking and drags us into pointless internal conflicts. Companies that successfully avoided red ocean competition in 2018 indeed achieved greater success by creating new market spaces rather than fighting for existing ones.

The Sudden Rise of Luckin Coffee

Luckin Coffee, founded in October 2017, strategically avoided direct competition with Starbucks in the premium coffee segment. Instead, they identified an untapped opportunity in the Chinese coffee market: urban professionals' need for affordable, quickly-accessible coffee.

Through their innovative "Internet + new retail" model, Luckin created an entirely fresh coffee consumption experience. Rather than simply offering coffee that was better or cheaper than Starbucks, they fundamentally redefined how coffee is obtained and consumed. Customers could order via app, pick up at convenient locations, or receive rapid delivery—a true 0-to-1 innovation in the coffee industry.

The Community Value of Xiaohongshu (Little Red Book)

In 2018, Xiaohongshu secured investment from Alibaba and gained significant visibility through promotion in popular shows like "Idol Trainees" and "Creation 101," making their slogan "Mark My Life" widely recognized. This exposure helped Xiaohongshu enter mainstream consciousness.

The platform's growth was remarkable—from 50 million cumulative users in June 2017 to 100 million by April 2018. A pivotal strategic shift occurred in June 2018 when Xiaohongshu repositioned from shopping to social networking.

Rather than competing directly with traditional e-commerce platforms, Xiaohongshu pioneered a novel consumer decision-making path based on product seeding. This approach organically integrated community engagement with e-commerce functionality.

Xiaohongshu's success stemmed from recognizing a fundamental consumer insight: shoppers value authentic user experiences to inform their purchasing decisions. This distinctive model enabled Xiaohongshu to establish a unique value proposition within the intensely competitive e-commerce landscape.

The Law of Power: Focus is Better Than Diversity

In "Zero to One," Peter Thiel emphasizes that we live in a world governed by power laws, not normal distribution. The Power Law (also known as the "80-20 rule" or "Pareto's Law"), first introduced by economist Wilfredo Pareto in 1906, observes that in any group of things, the most important elements constitute only a small portion (roughly 20%), yet produce the majority (approximately 80%) of the effect or value.

The essence of the power law lies in its nonlinear relationship: scale is inversely proportional to frequency—larger scales occur less frequently. In logarithmic coordinates, this distribution appears as a straight line, indicating that a few "extreme values" exert decisive influence on overall outcomes. When applied to entrepreneurship and personal development, this principle has profound implications.

Power Law in Entrepreneurship

For entrepreneurs, the power law suggests that one crucial decision may exceed the combined value of all other decisions. This is particularly evident in venture capital: the returns from a successful fund's best investment often equal or exceed the sum of all other investments. As Thiel notes: "Successful venture capital doesn't rely on diversifying the investment portfolio to generate profits, but on identifying the very few companies capable of creating tremendous value."

Personal Development Implications

The power law has equally significant implications for individual growth. Conventional education encourages comprehensive development and diverse skill acquisition to navigate future uncertainties. However, Thiel considers this "diversification" strategy fundamentally flawed at the personal level. He states: "Life cannot be 'diversified' for entrepreneurs and anyone. You should concentrate your attention on what you excel at, after carefully considering whether this area will become highly valuable in the future."

In a power law world, focusing intensely on one promising domain proves far more effective than mediocre development across multiple fields. This contradicts institutional education's approach—providing undifferentiated general knowledge, advancing students at uniform pace, and encouraging diverse skill development. Thiel argues this mindset ignores the power distribution characteristics of real-world outcomes.

Decision-Making Framework

The power law also guides entrepreneurial decision-making by highlighting factors that potentially trigger exponential growth:

Market selection: The right market choice may outweigh all other strategic decisions combined

Distribution strategy: An effective distribution model typically surpasses all other strategies

Critical junctures: Certain decisive moments far outweigh all others in importance

Those who understand power laws approach business creation with greater caution, recognizing that owning 100% of a failed company means total loss, while holding even a minute percentage (like 0.01% of Google's equity) of a wildly successful venture can yield extraordinary rewards.

Real-World Application: Pinduoduo's Market Focus

Huang Zheng, Pinduoduo's founder, exemplified power law thinking by avoiding direct competition with Alibaba and JD in first-tier cities, instead focusing intently on lower-tier markets. This strategic decision generated exponential growth, enabling Pinduoduo to go public just three years after founding, with its market capitalization temporarily surpassing JD —fully validating the power law's impact.

The power law world operates on "winner-takes-all" principles, where concentrating on a few key factors proves more valuable than dispersing energy across multiple domains. As Thiel warns: "In the world of power law, if you don't seriously consider where your actions will position you on the power curve, you truly cannot afford the consequences."

Believe in the Existence of Secrets: Discovering Unmet Needs

Thiel emphasizes that numerous secrets still await discovery in our world, and uncovering these secrets is fundamental to entrepreneurial success. He categorizes secrets into two types: secrets of nature and secrets of people. Nature's secrets represent undiscovered knowledge about how our world functions, while human secrets encompass gaps in collective understanding or deliberately concealed information.

The most fertile ground for discovering secrets lies in overlooked areas. Most individuals think along paths prescribed by formal education, which primarily transmits conventional knowledge. The domains that remain unstandardized and uninstitutionalized often harbor the greatest business opportunities. As Thiel notes: "If you believe certain difficult challenges are impossible, you won't attempt them. Believing in secrets is essential for effective exploration."

Societal Trends Against Secret-Finding

Four prevalent societal trends are eroding people's belief in the existence of secrets:

Progressivism: We're conditioned to believe that the correct approach is incremental advancement ("accumulate steps to reach thousands of miles")

Risk aversion: People fear making mistakes and facing their consequences

Complacency: The comfort of existing achievements diminishes the motivation to explore unknown territories

Globalization's flattening effect: The perception that the world has become a homogeneous competitive marketplace where all opportunities are already identified

These trends have diminished society's belief in undiscovered opportunities waiting to be found.

The Entrepreneurial Advantage

However, entrepreneurs who dare question established concepts and examine business fundamentals from first principles can uncover hidden secrets. When you discover a secret, discretion is crucial—neither keeping it entirely to yourself nor sharing it indiscriminately. Founding a company represents the optimal method for sharing secrets—indeed, all successful companies are built upon insights that weren't widely recognized. A truly innovative company functions as a conspiracy to transform the world. By sharing secrets selectively with collaborators, they become your advisors in the venture.

The most effective way to leverage a secret is establishing a company centered around it, then methodically expanding its scope. Entrepreneurs should seek unmet needs, neglected market segments, or develop unique resources (such as proprietary technology) that address specific pain points.

This approach of identifying and pursuing secrets differentiates transformative businesses from merely incremental improvements. The companies that create entirely new categories or solve previously unaddressed problems are those that have uncovered meaningful secrets about how the world works or what people truly need.

Build a Gang Culture: The Team is Better Than the Individual

Thiel emphasizes the critical importance of corporate culture, arguing that startups should foster a tightly unified "gang culture." He asserts: "Company culture cannot exist without the company itself: without a company there is no culture, the company is culture." At its core, corporate culture comprises shared values, beliefs, attitudes, and codes of conduct that collectively shape a team's cultural atmosphere.

At PayPal, Thiel cultivated the renowned "PayPal Mafia" culture where team members were closely united and supported one another. Many subsequently founded or invested in successful technology companies. This culture didn't rely on lavish benefits to attract talent, but instead sought individuals who believed in the company's mission and genuinely valued the team.

Thiel considers time our most precious asset, making it wasteful to invest in relationships with those unwilling to collaborate long-term. From day one, employees must form a cohesive unit, bound by more than mere transactional relationships. Recruitment should target those who naturally gravitate toward teamwork, possess talent, and sincerely enjoy working with the team.

Key Elements of Building a Gang Culture:

Clarify mission, vision, and values: The mission addresses "Where are we going and what will we contribute to society"; the vision answers "What will we become"; the values define "What we do and don't want, and how we behave." These interconnected elements activate team members' internal sense of purpose and value.

Focus each employee on one thing: Well-defined roles minimize internal conflicts. Internal harmony is crucial for startup survival.

Establish unified external symbols: Team apparel like cultural shirts and sweaters helps members feel distinctive and enhances belonging.

Cultivate cultural stories: Document meaningful moments in the company's development, especially employee performance during challenges and how the company rewards contributions. These narratives vividly embody organizational culture.

Develop unique organizational language and behavioral standards: This represents the highest level of organizational culture building. Team members develop their own communication system and achieve intuitive understanding.

Most critically, the founding team and management must demonstrate consistency between words and actions, leading by example. Only when leaders authentically embody cultural values will team members believe in and follow the mission vision. As Thiel notes: "Sometimes being called a cult or a mafia by outsiders isn't necessarily bad"—it suggests your team culture is sufficiently distinctive to differentiate from the mainstream and create unique value.

Pay Attention to Sales and Marketing: Products Are as Important as Promotion

Thiel challenges the myth that "good products don't require marketing" and underscores sales' importance to business success. In China's entrepreneurial ecosystem particularly, companies excelling in both product development and marketing typically achieve greater success.

Perfect Diary's Marketing Innovation: Perfect Diary established strong brand influence through multiple channels including Xiaohongshu product seeding, Weibo KOL collaborations, and private domain traffic operations. Rather than relying on traditional advertising, it leverages social media to precisely target users. This marketing approach proves as crucial as the product itself.

Luckin Coffee's Subsidy Strategy: Luckin Coffee rapidly acquired a substantial user base through aggressive subsidies and social sharing mechanisms. Though this approach faced criticism, it effectively helped Luckin build brand awareness and a user foundation quickly, establishing groundwork for subsequent development.

Practice in the Chinese Market From 0 to 1

Observational evidence suggests Thiel's philosophy has been vividly implemented in the Chinese market. Successful entrepreneurs follow key 0-to-1 principles: discovering secrets, creating monopolies, avoiding competition, maintaining core focus, and prioritizing team and marketing.

In this era of widespread entrepreneurship, genuine success lies not in replicating existing models, but in identifying unmet needs and generating entirely new value. As Thiel states: "The most counter-mainstream action is not resisting trends, but maintaining independent thinking within them."