00:00hi this is the 816 Z podcast this is
00:02Chris Dixon I'm here today with Blake
00:05masters who's the co-author of a new
00:07book called zero to one and his
00:10co-authors Peter teal and this is this
00:12came out of a class Peter taught at
00:15Stanford which Blake wrote about and
00:17they're blogged about rather and it
00:20became very popular I know I read it all
00:22and I think blogged about it and tweeted
00:24about it so it's great to have you
00:25thanks for having me so so let's just
00:28talk about some of the big themes of the
00:29book I know there's sort of competition
00:32monopolies versus commodities it's one
00:35big theme there's this idea of sort of
00:37having a secret for your startup idea
00:40there's the idea of sort of power laws
00:42existing as you know in venture capital
00:46maybe can use itit explains them as it
00:47is yeah the biggest macro theme in the
00:49book is is the distinction that we draw
00:52between technology and globalization so
00:54zero to one the title of the book that's
00:56the shorthand for for going from nothing
00:59and creating something going from zero
01:00to one and that's the single word for
01:02that we say is technology in contrast
01:06you have you know one to end copying
01:07something that already works that's
01:08that's globalization and so the whole
01:11book is a call to to do new things on
01:14the theory that you know technology is
01:16not not just gadgets it's not just nice
01:18to haves that could make the future
01:19better actually the future is going to
01:21be you know radically better than what
01:24we have now or it's going to be
01:25radically worse and and that's going to
01:26hinge on the question of whether we can
01:27develop new technology so the ideas
01:30we've gotten good at globalization at
01:311/2 n but within the process and
01:34neglected to zero to ones that kind of
01:35exactly exactly they're both progress so
01:38it's like when you you know everyone
01:40hopes for a future of progress but we
01:41really need to distinguish between these
01:42two modes kind of spreading old ways of
01:45creating wealth everywhere and then
01:46doing new things so if you look at like
01:48you know before World War one the world
01:51was you know for maybe the mid 19th
01:54century to World War one there was lots
01:55of globalization lots of trade also lots
01:58of technological development and you
02:00have World War one and you get from
02:02maybe 1914 to like you know Kissinger
02:05and China you get a tremendous amount of
02:08technological development but not much
02:10globalization and since
02:13since the early 70s we think there's
02:15been tons of globalization and limited
02:18progress in technology almost all that
02:20progress has been confined to IT which
02:22of course we know all about in Silicon
02:24Valley what is the theory as to why you
02:28know this is sort of connects to Peters
02:30Peters venture fund who has a famous
02:33sort of saying then we asked for flying
02:36cars and all we got were 140 characters
02:38referring to like social networks and
02:39things what what in your view and
02:42Peter's view is the theory as to why
02:45there's been so much progress in bits
02:46and not in atoms or in computer science
02:48and not in the real-world stuff well the
02:50libertarian answer of course is just
02:52regulation regulation you know any
02:55hacker can go in and get stuff done it's
02:58actually really hard to to manipulate
03:00the world of atoms because you have to
03:01deal with people regulators who know
03:04something about that they know what it
03:05looks like it's a convenient answer
03:07probably doesn't explain everything
03:09there's probably a certain path to so
03:10things like Moore's Law for exam it's
03:12not every area where you have this
03:14incredible exponential improvement it
03:16would be really hard actually to like
03:17improve you know global food production
03:20in any sort of exponential way that
03:22there resembles Moore's law but we also
03:25so there's something singular about the
03:27computer business or something singular
03:29about the last 40 years an IT and at the
03:31same time like the more that that goes
03:33we run the risk of just sort of
03:35conflating progress with with computers
03:38and kind of stop you know stopping
03:40demanding it in all these other in other
03:42contexts yep because what are some of
03:46the other big themes one of the biggest
03:48sort of sub themes is is the distinction
03:52between competition and monopoly in
03:54business so kind of Americans
03:57mythologized competition we really
03:59really like it we we can sort of
04:00conflate it with free market capitalism
04:03and political discussions and so you
04:05know politicians come out say I'm all in
04:06favor of competition but but the theory
04:10on this is actually competition is
04:12distracting in business in a perfectly
04:15competitive business sort of an econ 101
04:16textbooks competition means that like
04:20nobody makes any economic profit your
04:21profits are competed away your
04:23homogeneous supplier of goods
04:25actually the most successful businesses
04:27make a lot of money and they do that by
04:29doing something that no one else can
04:31funny because like Michael Porter you
04:32know the the Harvard strategist says
04:34strategy is the art and science of
04:37making your industry less competitive
04:39and therefore higher profit portraits
04:41are a great I mean they're either and
04:43you're right they're I mean I agree
04:44they're in direct opposition right
04:45competition and margins and it's but
04:48it's interested so yeah a lot of a lot
04:50of what we see in the book you know it's
04:52not it's not always novel ideas but
04:55sometimes it's just what we think is
04:57like a useful rhetorical shift so so
05:00Porter talks a lot about competitive
05:02edges you know what's your competitive
05:05but even that bias here there's a
05:08linguistic bias there Pro competition or
05:10elective you know clay Christensen talks
05:12about disruption and so startups have
05:14gone around talking about how good it is
05:16to disrupt things actually disruptions a
05:17term very much anchor and the vantage
05:20point it's like bigger firms the book
05:21was written for bigger firms as to how
05:23to avoid you know threats from these
05:24technology startups so we say like don't
05:27disrupt don't compete think about like
05:29what unique and valuable things you can
05:30do and then go do them and of course
05:32that's you know any successful industry
05:34is going to attract a competition but
05:36it's almost like the moment you focus on
05:38your competitors you're going to lose
05:39sight of the the big opportunity in
05:41front so don't so the advice the
05:43specific advice to entrepreneurs is
05:44don't create the enth social network go
05:47and do like Elon Musk style like you
05:50electric cars things where you can you
05:54know you can be the only one who's doing
05:56it in sort of a modern Silicon Valley
05:57style or something exactly exactly and
05:59the push back to this so people say you
06:01know we say don't create the N social
06:02network and people love to point out you
06:06well Zuckerberg you know came after
06:08Friendster he created an N social
06:10network and that's that's true in a
06:12technical sense and yet Facebook worked
06:16in a way that Friendster didn't so then
06:18there's the question of why did he just
06:19merely take the idea that already
06:21existed and sort of iterate on it and
06:23this agnostic process he didn't read he
06:26didn't focus on the competition as soon
06:28as he knew he had something at Harvard
06:29right there was a long-term plan then
06:32they that they set in motion and so it's
06:35it's not about it's not about
06:37necessarily being Ferg
06:38all right the first mover advantage can
06:40be a good tactic but what you really
06:42want to do is is ignore competition and
06:44figure out how you can be the last mover
06:46in any industry how you can define it
06:48you never want to be like a competitive
06:49player in social networking you want to
06:51be the company that defines social
06:52networking it's interesting sometimes I
06:55hear people say it's a similar idea
06:56which is it's sometimes harder ideas are
06:58easier and and you know I saw this for
07:01your investors actually founders fund
07:02was - I think in oculus as an example
07:05and it's interesting what I saw I was on
07:06the board there and I got to observe it
07:08which is you sort of go out you plant a
07:10flag you say I'm building virtual
07:11reality and then all of these people
07:12interesting people who have been
07:13thinking about the problem for years net
07:15had never had a home all kind of came
07:17together right and you sort of ended up
07:18with the talent monopoly and I I'm not I
07:20have no connection to the US companies
07:22but I've heard the similar things
07:23happened at SpaceX and Tesla if you want
07:25to go make Rockets like yeah there's one
07:27place to go right if you're like the
07:28smartest rocket person and you're tired
07:30of dealing with government bureaucracy
07:31like they all went there's my
07:32understanding right and so that in a
07:34weird way like it's harder but then by
07:36doing it it sort of inspires all of the
07:39best people to come potentially to come
07:40join you and I think that's the only way
07:42that if you're a start-up that's the
07:43only way that you're gonna you know
07:44you're not gonna be able to pay as much
07:45as Google or Facebook at this point and
07:47that's the only way to attract people
07:48yeah prosit is interesting yeah it's
07:51something that it was sort of
07:52counterintuitive I never would have
07:53understood it until I kind of got to
07:55observe some of it myself and see how it
07:57works what in somewhat some of the other
07:59big ideas book another big idea kind of
08:03in the investment context at least we
08:06use VC to explain it is the power law
08:07the idea that that some things are just
08:10radically less equal than others there's
08:13there's radical you know unequal
08:15distribution our law is sort of
08:16exponential growth with an exponential
08:18value of a company or you know the value
08:21of a whatever an asset like a VC
08:22portfolio things like this right so it's
08:24a tricky chapter to explain and because
08:27everybody sort of feels like they've
08:29already internalized this obviously you
08:31know people kind of think like things
08:32are unequal I know things are earning it
08:34and not everything's purely equal but
08:36the claim is just like however unequal
08:38you think things are it can actually be
08:40much more stark than that you know so if
08:42you look at Facebook's valuation
08:46all these other members of the so-called
08:48unicorn Club you know I think TechCrunch
08:50did like a bar graph lane it's like it's
08:52it's staggeringly valuable relative to
08:54even like very very successful company
08:56this is sort of the and this is
08:57power-law is sort of the outside way to
08:59describe what happened inside of the
09:01mechanism usually some kind of what they
09:03would call a cumulative advantage or
09:05rich get richer effect or anything like
09:08this like internally there's an effect
09:09that happens where this the successful
09:11company gets even more successful it
09:12compounds you get runaway growth and so
09:14the idea is we think it's sort of
09:17universally applicable outside the
09:19investment context you know so many
09:21decisions you face in life appear to be
09:22equal should I stay in Silicon Valley or
09:25move home you know to live with my
09:26parents after college should be sort of
09:28nice to be at home you know maybe maybe
09:31things really are equal a lot of the
09:32times but but I think the power law is a
09:35useful device because if you know it
09:37exists merely sort of injecting that
09:39possibility that things could be
09:40radically unequal into your thinking is
09:42going to help you kind of think about
09:45everything from an outsider's
09:46perspective and then and hopefully you
09:48can stumble on like that they're really
09:50valuable it's very hard to think that
09:51way the right isn't there it's sort of
09:53like you're trained in so many other
09:54contexts to think of things in kind of
09:55this linear like let me do the thing
09:58that's more prudent as opposed to let me
10:00do this thing that has you know like
10:02just to give you an example like I think
10:03the basic mistake that entrepreneurs
10:04make when they're pitching VCS is they
10:06they kind of pitch that they're likely
10:08to succeed as opposed to pitching that
10:11there's a small chance they'll be mega
10:13successful totally right which is sort
10:14of counterintuitive like yeah of course
10:15you're gonna walk in and say this is
10:16gonna succeed right yeah it doesn't
10:17probably fail but like you know on the
10:1910% chance we don't that's right it's
10:22but the reality is like nobody like once
10:24you do the investing for well and you
10:25kind of internalize the parallel stuff
10:26you don't like if you if you pass on a
10:28company where okay they maybe they'll be
10:29successful you don't you don't stay up
10:31at night thinking about that if you pass
10:33on the company that there's a 1% chance
10:35that the next Google and people are
10:36going to talk about this story for the
10:37next 30 years you know Frank there are
10:40still lots of stories about the people
10:41that passed on facebook and google and
10:43write the you know that's what bothers
10:45you right and so but and so flipping it
10:46around the entrepreneur wants to pitch
10:48that little possibility that it's gonna
10:50be the next big thing exactly yeah it's
10:52incredibly unintuitive yeah as a mode of
10:55thinking I mean you you see this every
10:56day as a professional investor
10:58and even in that context it's probably
11:00still hard so for like the you know non
11:03investment professional I think it's
11:05just like staggeringly hard but but the
11:07idea behind that chapter is just to
11:09remind people that these sort of
11:10distributions exist if you don't see
11:13them every day it's because you're not
11:14looking for them not because they they
11:16don't exist and so another big idea is
11:18this idea of secrets right can you can
11:19you talk about that yeah so people have
11:22people have talked about this you know a
11:24lot of people say like what's your edge
11:26what's your competitive advantage again
11:27and go back to Porter a little bit
11:30similar similar concepts just reframed I
11:34think when you ask what a competitive
11:36edges you can get like myopically
11:38focused on what other people are doing
11:40and how you're a little bit different
11:41and maybe some some sort of like micro
11:43truth that you know that they don't when
11:46you come out and declare that like hey
11:47secrets exist and every great business
11:49is built on a secret I think it's just I
11:51think it just shifts the conversation
11:53towards a more you know taking a more
11:55ambitious tilt so so the idea is there
11:58are hard truths out there we can find
12:01them but they're not easy you know
12:03there's no less an example and the
12:07example we give in the book is Andrew
12:08Wiles proving for Moz Last Theorem
12:11didn't really change the world in a non
12:13academic sense but it was a really
12:15important discovery because for 300
12:16years no one really had succeeded at
12:20this and yet he thought it was possible
12:21right so it's like if you see people
12:23fail for 300 years and you just assume
12:25that like that's not possible you'll
12:27never even try and so the idea is
12:30there's hard problems out there we can
12:32solve them going to Mars would be an
12:33example like a lot of people probably
12:35think it's impossible to think Elon is
12:36destined to fail I thought I thought a
12:39secret those do you believe something
12:41that no one else so he's his secret be
12:44like I can build a company that goes to
12:45Mars by 2020 right not like it's so
12:48there's like academic secrets did you
12:51know and every and the idea is every
12:52great business is founded on a secret is
12:54that right yeah so you look at like you
12:58know I guess you look at all the the
12:59delivery startups right now some are
13:01really succeeding the secret there is
13:03like that was a good idea didn't work in
13:06the 90s for all these reasons but like
13:07that's a good idea and then the secret
13:10is like now it's a good idea and you can
13:12ready you get a secret if you're not
13:13repair well you have to be I think you
13:17sort of have to be weird and you have to
13:18be like looking you have to be looking
13:20for secrets and you have to be sort of a
13:21strange person because the average
13:23person does not does not do that it's
13:25much I mean all of society basically
13:27runs on convention right like you have
13:29to interact with other people and all
13:30these conventional ways and that can
13:32sound like pejorative just because we
13:34don't like the word conventional but
13:35actually it's that's how society runs
13:36it's how it functions but how it moves
13:38forward I think is is is when the small
13:41minority of people who are sort of
13:42strange enough and interesting enough to
13:44look for secrets actually care to and
13:46find it sounds like you have to we said
13:48that yeah every company is a conspiracy
13:50to change the world and like when you
13:51bring someone on you can recruit someone
13:53if you can successfully convince them
13:55that your secret is valuable and that
13:58yeah the way so I think it's I agree I
14:00think it's a really fascinating idea I
14:02think of it as sort of there's different
14:04classes of secrets there's like there's
14:07like academic like you might have a
14:09computer science thesis you know a
14:10secret you might have gone you know
14:11whatever you did a PhD at Stanford and
14:13you now have a secret that networking
14:15can be done through software not
14:17hardware or something like this right
14:18and then there could be maybe like
14:19cultural secrets like maybe air B&B
14:21arguably like it's that the you know the
14:24this generation wants to go and explore
14:27the world and sleep on each other's
14:28couches and it's just different right
14:29yep like so I sort of think of it as
14:31like there's like and then maybe there's
14:32an industry secret like I worked in
14:34fashion for ten years and I have this
14:36deep insight I don't know I I think it's
14:38really interesting idea I actually used
14:40it as a way like on a first meeting I
14:42views as a VC you can't really evaluate
14:45somebody's idea if it's a good idea in
14:4830 minutes an hour or whatever and that
14:51instead you kind of look for things like
14:52does this person have a plausible
14:53background to have earned a secret right
14:55right like this person spent like an
14:57someone you gotta earn it right and you
14:59don't typically just walk down the
15:00street and blink you get hit by a secret
15:01right look you have to like have spent
15:04time doing something different you were
15:06off in some other country and some other
15:07industry doing some research or
15:09something to see the world differently
15:10yeah yeah I'm not a professional
15:11investor but I think it's a good sign if
15:13if I left a pitch meeting having just
15:15been pitched saying that person believes
15:17something really weird yeah that I don't
15:19that I'm not on board with yet but man
15:21they really believe in you know because
15:23you also like part of the story of the
15:24startup has to be why
15:25and why has an apple you know I want to
15:28build a phone that has better battery
15:30life well great well so does everybody
15:31like you know and they have you know
15:34tens of billions of dollars are you
15:36really gonna do it better versus a
15:38secret which is hey this is why everyone
15:39over overlooked it yeah the way we the
15:42way we open the book is with what Peter
15:44calls his contrarian question what
15:46valuable truth there's no one agree with
15:47you she says he likes to do ask as a
15:49interview question every question yeah
15:51yeah see here some here are some funny
15:54answers but it's actually really tough
15:55you know what what valuable truth do you
15:57believe that and then here's the whole
15:59cache I know Paul Graham has an essay
16:01what wait you're not allowed to say or
16:04what you can't say is you have to be
16:05careful you have certain beliefs what
16:06you think are things you can't say well
16:08probably everyone should exist if some
16:12like libertarian political thing because
16:16if you're comfortable telling like you
16:17know everything you know or think to be
16:20true on a podcast and it actually
16:21literally means like you have purely
16:23conventional beliefs yeah but what would
16:28be socially acceptable secret socially
16:33acceptable answer well you can't be the
16:34first person no it's but I think I think
16:41probably that I think Silicon Valley's
16:44like really culturally important I think
16:46a lot of people would agree with that so
16:47maybe it's a bad answer because it
16:48violates the presumption that no one
16:51agrees with it but I I think it's gonna
16:53be a lot more important in the future
16:55you know I think did the people are
16:58under estimating the importance to the
16:59degree to which it will be important I
17:01do I do and it's risky to say cuz it can
17:03be easy to sound you know like Silicon
17:05Valley technologists or II think I mean
17:06do you think like some people think okay
17:08there was the 90s bubble and now we're
17:10having the second bubble or is this like
17:12no this is it's like more like the
17:14Gartner hype cycle we had a bubble and
17:16it fell now it's gonna be the next 50
17:17years of probably more of the latter and
17:19probably more the latter I mean it's
17:21hard I mean from my casual perspective
17:23things can seem a little frothy but you
17:27know at the same time if you're
17:29optimistic I think you have to I think
17:30you have to be bullish on Silicon Valley
17:32because it's it's we need new technology
17:34and it's not it's not like technology
17:36only comes from Silicon Valley
17:39or that everybody needs to be like us I
17:42don't know if it was you or Marc who
17:43tweeted you know we need like 50 Silicon
17:45Valley's we did like so that's market
17:47review he calls it like you need drone
17:49Valley in the run Valley the coin bit
17:51coin Canyon yeah yeah all these all
17:56these versions but well I think his
17:59point is though that you need to get it
18:00you know don't try to go head-to-head
18:01against Silicon Valley on operating
18:03systems or something right right like go
18:05differentiate yourself including you
18:07know I think he agrees with your kind of
18:08regulatory view that like including
18:10through regulatory changes right like if
18:11still if San Francisco is not going to
18:13be friendly to drones maybe you talk can
18:15be or some writing and I can give them
18:16some edge especially as we apparently
18:18are moving into an area and to it Ihram
18:20which were more about atoms and bits
18:22right so so I'm incredibly bullish on
18:25technology because I think I think we
18:27have to be if we're gonna have any good
18:28future at all it's almost unbearable to
18:31contemplate you know being bearish on it
18:35alright alright well congratulations on
18:37the books I have to say like I think
18:39there's probably only a handful of
18:40business books worth reading and this is
18:42definitely one of them so everyone who's
18:44interested in technology and startups
18:45should definitely read it so appreciate
![How To Succeed As A NEW & YOUNG Realtor [Deals Every Month + Luxury Listings]](/_next/image?url=https%3A%2F%2Fi.ytimg.com%2Fvi%2FrtrRghgTayc%2Fhqdefault.jpg&w=3840&q=75)
