https://docs.google.com/document/d/1sZJ_7keR1XuGViiAVX040D1Ehb0F0D6w3MlzeXMh8PA/edit

Zero to One - Peter Thiel

Ch 1.

• Horizontal(copy) vs Vertical (new) growth.  Horizontal is moving 1 to n, but vertical is going 0 to 1.  Both are needed but technological advancement is going vertically from 0 to 1.  Globalization is an example of Horizontal growth as it's just a wider market
• Startups are better at going vertically than established companies

Ch. 2

• The 90s weren't fantastic, there were many crises along the way.  The dotcom boom was only Sep 98 - Mar 2000.
• Dotcom crash Lessons
• Make incremental advances
• Stay lean and flexible - iterate instead of having a strict plan and being inflexible
• Improve on competition - easier to start with existing customer base
• Focus on product not sales - if product requires ads or sales ppl, it's probably not good enough
• However, real lessons are probably the opposite
• It's better to risk boldness than triviality
• A bad plan is better than no plan
• Competitive markets destroy profits
• Sales matter just as much as product

Ch 3.

• Monopolies that are the result of great technology are the businesses you want to be in
• Google is a company like this, they dominate most of the search market.
• Framing them as a Search company they are a monopoly.  At $17B in revenue and $37B online advertising total, they dominate.  However, looking at global advertising, they only own 3.4%
• Framing them as a product or tech company they had $2.4B vs a tech market of $1T
• Non monopolists define their market as an intersection of various smaller markets
• money and margins are everything
• Monopolists disguise their monopoly by framing their market as a union of several large markets.
• "We face an extremely competitive landscape in which consumers have a multitude of options to access information" = Google is a small fish in a big pond.
• can afford to think about long term future as money is not everything, just important
• History is a progress of better monopolies replacing incumbents

Ch. 4

• Competition is a destructive force instead of a sign of value.   
• Pets.com PetStore.com Pettopia.com, all selling the same stuff and unable to differentiate.  There is no reason to be in this business.

Ch. 5

• DCF is the way to value businesses.  Businesses that have high growth will be valued much more than low growth businesses because most of the value in low growth businesses is in the near term.  
• Tech companies value will come at least 10 - 15 years in the future
• Zynga - rapid short term growth claiming they have a psychometric engine that gauge appeal of new releases.  How can you reliably produce a constant stream of popular entertainment for a fickle audience? (nobody knows)
• Will this business be around a decade from now?  Numbers won't tell you, it's qualitative.
• Characteristics of a Monopoly
• All are unique: proprietary tech, network effects, economics of scale and branding.
• Proprietary Tech must be at least 10x better in some important dimension to lead a real monopolistic advantage
• Tablets before 2010 had a non-existent market despite Microsoft / Nokia having products.   Until iPad was released, it was clear Apple made an order of magnitude improvement
• Network effects - must start with especially small markets.
• Economies of scale - fixed cost of creating product can be spread over larger quantity of sales.  Many businesses only gain limited advantages by growth. Ie: yoga studios vs software which has 0 marginal cost of producing another copy.
• Branding - ads, stores, materials, speeches, price, design
• Monopoly needs to start with a small targeted audience, concentrated together with few or no competitors.  Paypal initially wanted millions of palm pilot users who had no need for their products.  Pivoted to a few thousand eBay powersellers and they had 25% that market quickly.

Ch. 6

• Don't be well rounded.  A definite person determines the one best thing to do and does it.
• The greatest things Jobs designed was his business.  Apple imagined and executed definite multi-year plans to create new products and distribute them effectively.
• Find a definite future.

Ch. 7

• VC expect returns to be normally distributed.  Bad fail, most flat and good ones return 2x to 4x.  But they follow a power law = small handful radically outperform all others.
• the best investment in a successful fund outperforms the rest of the fund combined
• Only 1 rule: invest in companies that have the potential to return the value of the entire fund
• this will eliminate the majority of investments
• ie: Andreessen invested in Instagram in 2010 for $250k, 2 years later sold it for $78M.  As a $1B fund, they would need 19 instagrams just to b/e.
• VCs must find a handful of companies that go from 0 to 1 and back them with every resource
• Focus relentlessly on something you're good at, but make sure it will be valuable in the future
• Join the best company while it's growing fast.  The differences between companies dwarf the roles inside companies in terms of their equity.
• .01% google is worth more than a startup you create that will most likely fail

Ch. 8

• Most of the easy 'secrets' have been solved and new advances are either impossible or extremely hard at this point.  There are many left to find, but only relentless search will get you there
• Cures for cancer, dementia, disease, age, metabolic decay.  Fossil fuel alternative.  Faster travel on the planet and beyond it.  
• Airbnb addressed untapped supply and demand.  Uber did also.  Insights that look elementary can support many valuable businesses.  What do people already have or do that can be untapped?
• 2 types of secrets:
• Natural - physical world
• People - communication / interaction
• What fields have not been standardized or institutionalized
• ie: nutrition, it's hard to study and most studies are old and wrong.

Ch. 9

• Management is important.  Everyone should be committed to the same goal and have some history of working hard and succeeding.  
• Management should not be taking large salary, but primarily paid if equity does well

Ch. 10

• You'll attract good employees if you can explain why your mission is compelling and why you're doing something important that no one else is going to get done.
• Employees need to all be different in the same way.  A tribe of link minded fiercely devoted people.
• Make everyone responsible for one thing.  Defined roles reduce conflict

Ch. 11

• Sales works best when it's hidden.  People who sell advertising are account executives.  People who sell customers are in business development.  People who sell companies are investment bankers.
• Distribution is essential, despite what engineers think. If you build it they won't come.  Inventions w/o an effective way to be sold is a bad business, no matter how good the product.
• Customer Lifetime Value (CLV) amount of profit earned by customer must exceed avg cost to acquire (Customer Acquisition Cost, CAC)
• Businesses with complex sales model, achieve 50% - 100% yoy growth over the course of a decade.  Good enterprise strategy starts small.  Once you've got a pool of customers, then you can go get bigger deals.
• Marketing / Advertising work for relatively low priced products that have mass appeal but lack a method of viral distribution.
• Facebook / Paypal.  Initial userbase of 24 people.  Realized paying people to join was the best acquisition strategy, at $20 per customer and 7% daily growth.
• Want to acquire the most valuable users first.  To Paypal that meant a niche ebay PowerSeller.
• Need to sell your company to the media, don't ignore them.

Ch. 12

• Machine + Human is much better than AI.  AI is good at filtering but humans much better at determining accuracy of what is being filtered.
• Companies that look to improve / complement human effort is the best.  However most schools seem to think that replacing human effort is the primary goal.

Ch. 13

• cleantech failed because they couldn't make break thru tech, only small incremental improvement
• they were unable to get any of the 7 main questions. engineering, timing, monopoly, people, distribution, durability, and secret.
• monopoly doesn't exist because consumers don't really care how electricity is generated.

Ch. 14

• founders are weird people.

Mark Douglas Think Like a Professional Trader

First you have to identify an edge
Once you have an edge, fear is what prevents you from realizing your system's edge

3 development stages

• Mechanical - moving stops at this stage will cause you to perform worse.
• Subjective - understand nuances of your strategy, you can move stops based on your gauge of high / probability once in the trade and gain more edge
• Intuitive - in the zone and you can sense the flow but can't really explain it - generally only lasts for a couple hours a day.

Euphoric trading generally leads to bad draw downs

Learning to trade without fear is believing you don't have to know what is going to happen on a trade by trade basis to win or make consistent money.

• The edge will only appear over a series of trades.  
• Trying to only enter trades that are 100% winners leads to not placing stops because you think the trade will work no matter what so a stop is not needed.
• Prices moves because other traders buy / sell after you.  You need other people to move price.  If they don't appear there is nothing you can do about that.

The information displayed on the screen is not inherently threatening.  Markets become threatening when your expectations define information as:

• being wrong
• losing
• missing out
• leaving money on the table

3 types of traders

1. Consistent winner w/ small draw downs that are a normal part of any system
2. Semi-consistent trader w/ extremely large draw downs that are the result of trading errors
• don't define risk in advance
• define risk but don't take the loss where system's edge is likely to work
• hesitate - getting in too late
• jump the gun - get in too soon when signal never develops
• get out of winning trade too soon - leaving money on the table.
• let winning trade turn to loser w/o taking profits
• move stop closer to entry point, get stopped and market trades back in your favor


3. Consistent loser w/ large wins

Large Institutions create reverse auctions where they drive price one way, collect stops and then drive it back.  Most technical analysis has no relationship to why these large institutions drive price. Technical indicators quantify the collective information

Change your expectations of the outcome from a winner to that just something random will happen.

Your state of mind is always the absolute truth.  Nobody can tell you that you're not feeling fearful or confident.  How you interpreted market events to get you into that state of mind can be dysfunctional.

• dysfunctional belief - the reason for putting on the trade has almost no correlation with why the market actually went for or against you.  
• analysis just puts you in a position to recognize when the likelihood of a trade has a particular outcome

The goal is to get to the point where anything that is inconsistent with what you're trying to accomplish does not enter your mind anymore

• anything that you're thinking, saying - negative thoughts, wasting time, unnecessary chatting
• doing - moving stops, trading where you shouldn't or marginal trades, feeling bored.
• deliberately refocus your attention on your goal - always go 1 step further.

Stop analyzing - technical analysis does not improve 'in the moment'.  If you get a signal, take your trade with your plan.  Stop thinking and trying see why the trade will work or not

• An identical setup has a random outcome.  The same people involved with that last trade are no longer here
• Disconnect the mechanism in your brain that any similarity in the past has any bearing on the future.  That is the difference in thinking in probabilities that separate good traders from everyone else.

Trade for a new reason - acquisition of new skills not the outcome of the trade.

• Take 20 trades in a row and set up the risk to take it assuming 20 losses in a row.
• You have to be completely comfortable losing the $ amount of 20 losses in a row.
• Rarely has he met a trader that doesn't have a problem after taking 3 losses in a row.
• Once you have the skills you'll make all the money you want but you have to be comfortable potentially losing every time.

Professional Mindset

• Anything can happen
• Every moment is unique
• Edge is an indication of a higher probability of one thing happening over another
• There is a random distribution between wins and losses on any given set of variables that defined an edge
• You don't need to know what will happen next.