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

the internet is going to be big
. But too many internet
companies had exactly that same idea and no others. An entrepreneur can’t benefit from
macro-scale insight unless his own plans begin at the micro-scale. Cleantech companies
faced the same problem: no matter how much the world needs energy, only a firm that
offers a superior solution for a specific energy problem can make money. No sector will
ever be so important that merely participating in it will be enough to build a great
company.
The tech bubble was far bigger than cleantech and the crash even more painful. But the
dream of the ’90s turned out to be right: skeptics who doubted that the internet would
fundamentally change publishing or retail sales or everyday social life looked prescient
in 2001, but they seem comically foolish today. Could successful energy startups be
founded after the cleantech crash just as Web 2.0 startups successfully launched amid the
debris of the dot-coms? The macro need for energy solutions is still real. But a valuable
business must start by finding a niche and dominating a small market. Facebook started
as a service for just one university campus before it spread to other schools and then the
entire world. Finding small markets for energy solutions will be tricky—you could aim

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to replace diesel as a power source for remote islands, or maybe build modular reactors
for quick deployment at military installations in hostile territories. Paradoxically, the
challenge for the entrepreneurs who will create Energy 2.0 is to think small.

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14

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THE FOUNDER’S PARADOX
O
F THE SIX PEOPLE
who started PayPal, four had built bombs in high school.
Five were just 23 years old—or younger. Four of us had been born outside the United
States. Three had escaped here from communist countries: Yu Pan from China, Luke
Nosek from Poland, and Max Levchin from Soviet Ukraine. Building bombs was not
what kids normally did in those countries at that time.
The six of us could have been seen as eccentric. My first-ever conversation with Luke
was about how he’d just signed up for cryonics, to be frozen upon death in hope of
medical resurrection. Max claimed to be without a country and proud of it: his family
was put into diplomatic limbo when the USSR collapsed while they were escaping to the
U.S. Russ Simmons had escaped from a trailer park to the top math and science magnet
school in Illinois. Only Ken Howery fit the stereotype of a privileged American
childhood: he was PayPal’s sole Eagle Scout. But Kenny’s peers thought he was crazy to
join the rest of us and make just one-third of the salary he had been offered by a big
bank. So even he wasn’t entirely normal.
The PayPal Team in 1999
Are all founders unusual people? Or do we just tend to remember and exaggerate
whatever is most unusual about them? More important, which personal traits actually
matter in a founder? This chapter is about why it’s more powerful but at the same time
more dangerous for a company to be led by a distinctive individual instead of an
interchangeable manager.

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THE DIFFERENCE ENGINE
Some people are strong, some are weak, some are geniuses, some are dullards—but most
people are in the middle. Plot where everyone falls and you’ll see a bell curve:
Since so many founders seem to have extreme traits, you might guess that a plot
showing only founders’ traits would have fatter tails with more people at either end.

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But that doesn’t capture the strangest thing about founders. Normally we expect
opposite traits to be mutually exclusive: a normal person can’t be both rich and poor at
the same time, for instance. But it happens all the time to founders: startup CEOs can be
cash poor but millionaires on paper. They may oscillate between sullen jerkiness and
appealing charisma. Almost all successful entrepreneurs are simultaneously insiders and
outsiders. And when they do succeed, they attract both fame and infamy. When you plot
them out, founders’ traits appear to follow an inverse normal distribution:
Where does this strange and extreme combination of traits come from? They could be
present from birth (nature) or acquired from an individual’s environment (nurture). But
perhaps founders aren’t really as extreme as they appear. Might they strategically
exaggerate certain qualities? Or is it possible that everyone else exaggerates them? All
of these effects can be present at the same time, and whenever present they powerfully
reinforce each other. The cycle usually starts with unusual people and ends with them
acting and seeming even more unusual:

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As an example, take Sir Richard Branson, the billionaire founder of the Virgin Group.
He could be described as a natural entrepreneur: Branson started his first business at age
16, and at just 22 he founded Virgin Records. But other aspects of his renown—the
trademark lion’s mane hairstyle, for example—are less natural: one suspects he wasn’t
born with that exact look. As Branson has cultivated his other extreme traits (Is
kiteboarding with naked supermodels a PR stunt? Just a guy having fun? Both?), the
media has eagerly enthroned him: Branson is “The Virgin King,” “The Undisputed King
of PR,” “The King of Branding,” and “The King of the Desert and Space.” When Virgin
Atlantic Airways began serving passengers drinks with ice cubes shaped like Branson’s
face, he became “The Ice King.”
Is Branson just a normal businessman who happens to be lionized by the media with
the help of a good PR team? Or is he himself a born branding genius rightly singled out
by the journalists he is so good at manipulating? It’s hard to tell—maybe he’s both.

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Another example is Sean Parker, who started out with the ultimate outsider status:
criminal. Sean was a careful hacker in high school. But his father decided that Sean was
spending too much time on the computer for a 16-year-old, so one day he took away
Sean’s keyboard mid-hack. Sean couldn’t log out; the FBI noticed; soon federal agents
were placing him under arrest.
Sean got off easy since he was a minor; if anything, the episode emboldened him.
Three years later, he co-founded Napster. The peer-to-peer file sharing service amassed
10 million users in its first year, making it one of the fastest-growing businesses of all
time. But the record companies sued and a federal judge ordered it shut down 20 months
after opening. After a whirlwind period at the center, Sean was back to being an outsider
again.
Then came Facebook. Sean met Mark Zuckerberg in 2004, helped negotiate
Facebook’s first funding, and became the company’s founding president. He had to step
down in 2005 amid allegations of drug use, but this only enhanced his notoriety. Ever
since Justin Timberlake portrayed him in