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

In speaking of startups, Thiel claims a company is worth not what it’s making today, but “the sum of all the money it will make in the future” (44). A concrete example includes Twitter, which lost money in 2012 but was valued at $24 billion the next year. Conversely, the New York Times Company, which made a profit in 2012, was valued in 2013 at $2 billion. Twitter was set to make lots of money, while the Times Company was not expected to grow at the same rate.

One sign of a company on the way up is increasing cash flows. Even if that company is losing money, the constant growth portends profits in the years ahead. Meanwhile, a company making a profit today but showing declining cash flow is likely to lose money and go out of business sometime during the next several years. Some investors obsess over near-term cash flow, but what counts is steady growth over several years.

Thiel names four characteristics that mark an up-and-coming creative monopoly. The first is “proprietary technology” (48). These are inventions that are so original no one else can immediately copy them. Such products should be ten times, or “10x,” better than anything similar.