Zero to One
Doing what we already know how to do takes the world from one to n, but doing something new takes the world from zero to one.
New technology tends to come from new ventures (startups).
Lessons from the .com crash:
- Make incremental advances.
- Stay lean and flexible. Entrepreneurship should be agnostic experimentation.
- Improve on the competition. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered.
- Focus on product, not sales. If your product requires advertisement to sell it, it’s not good enough. The only sustainable growth is viral growth.
The most contrarian thing of all is not to oppose the crowd, but to think for yourself.
In a perfectly competitive market, there is no differentiating factor between competitors and thus goods must sell at whatever price is determined by the market. If there’s money to be made, new firms will enter the market, flood the supply, and drive down the profits that attracted them in the first place.
The history of progress is a history of better monopoly businesses replacing incumbents.
Monopolies can allow companies to secure the profits they need to invest and innovate further in the future. Shortsighted competition can sometimes discourage long-term investment.
Every business is successful exactly to the extent it does something others cannot. Monopoly, then, is the condition of every successful business.
Happy companies are happy because they earned a monopoly that solves a unique problem. Unhappy businesses are those that failed to escape competition.
Growth is easy to measure, but durability isn’t.
Every monopoly usually has some combination of the following characteristics:
- Proprietary technology
- Network effects
- Economies of scale
- Branding
A company has a monopoly on its own brand by definition, so creating a strong brand is one of the best ways to create a successful monopoly.
Beginning with brand rather than substance is dangerous.
It’s much easier to reach a few thousand people who really need your product than to try and compete for a million scattered individuals.
To succeed, you must study the endgame before anything else.
Definite optimism works when you build the future you envision; definite pessimism works by building what can be copied without expecting anything new; indefinite pessimism works because it’s self-fulfilling; indefinite optimism is inherently unsustainable because a future can’t happen if no one plans for it.
Most of the differences investors and entrepreneurs see every day are between relative levels of success, not between exponential dominance and failure.
Nature gravitates toward a power law where the top distribution (say the top 20%) is responsible for the vast majority (say 80%) of productivity, output, value, et cetera.
Monopolies downplay their monopoly status to avoid scrutiny while competitive firms strategically exaggerate their uniqueness to achieve a monopoly.
Low CEO pay and cash-poor executives focus on increasing the value of the company as a whole.
If you’ve invented something new but haven’t invented an effective way to sell it, you have a bad business.
People compete for jobs and resources; computers compete for neither. Computers are tools, not rivals.
There are 7 questions every business must answer:
- Can you create breakthrough technology instead of incremental improvements?
- Is now the right time to start your particular business?
- Are you starting with a big share of a small market?
- Do you have the right team?
- Do you have a way not just to create but to deliver your product?
- Will your market position be defensible 10-20 years in the future?
- Have you identified a unique opportunity that others don’t see?
The companies that create new technology often resemble a feudal monarchy with a leader making authoritative decisions.
Only by seeing the world anew as fresh and strange as it was to the ancients can we both recreate it and preserve it for the future.