Thiel’s 7 Essential Business Questions

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Peter Thiel is the co-founder of PayPal, the first outside investor into Facebook, and, among many other things, one of only a handful of men to be on the founding team of multiple billion-dollar companies. He knows business.

His book, Zero to One—which evolved from a students’ detailed notes on Thiel’s lectures on innovation at Stanford—is highly regarded in the entrepreneurial community. In it, he recommends people ask themselves—and truthfully answer—these seven questions before starting a new venture.

  1. Can you create breakthrough technology instead of incremental improvements? [The Engineering Question.]

Technology here means any type of tool that helps humans complete a task. It applies to all kinds of business, not just computers.

Do you and your team have the capability to 10 X the current technology in your industry? If not, think twice before embarking on the long and laborious effort of running a new business.

  1. Is now the right time to start your particular business? [The Timing Question.]

Like life, timing is a key ingredient in business. Enter too soon, your adoption rate isn’t high enough, people need to be educated about your product, you don’t have enough cash to fill purchase orders, or a variety of other problems arise, and your company dies. Enter too late and you won’t be able to capture enough market share from the incumbents to survive.

Timing isn’t everything, but it certainly is one thing.

  1. Are you starting with a big share of a small market? [The Monopoly Question.]

 Companies that go from zero to one and truly change the world are monopolies, according to Thiel. The book is filled with examples of this, along with the notion that true monopolies do everything they can to appear to not be a monopoly, while non-monopolies do the opposite.

If your product is for everyone, then your product is for no one. Dominate a niche and then scale.

  1. Do you have the right team? [The People Question.]

This is similar to Marcus Lemonis’s [Fortune 500 CEO and investor in dozens of small businesses] mantra, “People. Process. Product.”

You need the right people to succeed in business. Period.

  1. Do you have a way to not just create but also deliver your product? [The Distribution Question.]

Manufacturing, while critical, is not enough by itself. Yes, you need to make whatever product you intend to sell (or buy product from a supplier, or buy or create the products to facilitate your service) but you also need a way to get it to market.

Whether you’re selling paintings or a breakthrough VR device, you need effective distribution to get profitable and grow.

  1. Will your market position be defensible 10 and 20 years into the future? [The Durability Question.]

This question illustrates a good point: These are questions that every company, even the old blue chips, should ask themselves periodically. By looking that far ahead from time to time, it allows companies to predict potential threats and, when necessary, pivot.

Ninety-six percent of businesses fail or have failed after operating for 10 years. This question is essential for aspiring new ventures.

  1. Have you identified a unique opportunity that others don’t see? [The Secret Question.]

This final question may be the most important. In order to answer yes to the Durability Question, your answer for the Secret Question must also be positive.

In fact, Thiel believes in order to truly innovate your team should share the same Secret Question. PayPal’s was the belief in a better online banking system—one without a traditional bank.

The more of the questions you can answer positively, the better your chance for breakthroughs and success. Thiel makes the case that almost without exception, all great companies will be able to answer these 7 in the affirmative.

For further details on these questions, and much more experience-based entrepreneurial wisdom, check out Zero to One.