Zero to One¶

The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innovative. Indeed, the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.

Definition of technology: the practical use of scientific knowledge for practical purposes or applications.

Technological advancement allows us gear up our fundamental capabilities to higher and higher levels. Other animals are driven to make things as part of their instinctual habits, we are the only ones who make new things.

Globalisation Vs Technology¶

Horizontal progress: copying things that work, going from 1 to n. - This is easy to imagine because we already know what it looks like. - The single word for taking something that works and replicating it elsewhere is globalisation. - This elevates the general quality of life and increases general wealth but doesn't bring advancement.

Vertical progress: doing new things, going from 0 to 1. - This is harder, it is doing something no one has done before. - The single word for building something that has not been done before is technology. - This brings progress and solutions.

Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalisation without new technology is unsustainable.

Rewritten Rules¶

Since the dot com bubble, the following rules have come about for technology start-ups as truth:

Old rules: 1. Make incremental advances, grand visions are likely to lead to nothing (untenable). 2. Stay lean and flexible, in the sense of be ready to pivot business strategy, don't have a fixed plan. 3. Improve on competition over entering new markets. 4. Focus on products and not sales. Good products sell themselves.

New Rules: 1. It is better to risk boldness than triviality. 2. A bad plan is better than no plan. 3. Competitive markets destroy profits. 4. Sales matter just as much as product.

It requires boldness, planning, market dominance, and sales tactics to change the world through a startup. Those who espoused the first set of rules were setting their sights on globalization as the future. By taking baby steps, the best they could hope for was opening new, related markets. Those who play by the second set of rules, however, have the best chance of becoming a monopoly.

Monopolies vs. Competition¶

All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

We think monopolies are bad and competition is good. This can be true when a monopoly is attained through nefarious or manipulative means. But all the great recent technological advances through companies like Google, Microsoft, Apple and IBM were because these companies created incredibly high quality products (and kept creating) to inevitable capture markets. Followers could not keep up with the pace.

Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.

Competition kills profits.

Types of Thinking¶

Indefinite Pessimism: An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it.

Indefinite Optimism: The future will be better than the past, but the indefinite optimism doesn’t know how, exactly. They invest in other peoples ideas and follow successful trends.

Definite Pessimism: A person who thinks the future will be worse than the present and has a good idea as to why and he has a specific plan to navigate that new reality.

Definite Optimism: A person who believes the future will be better than the present and has a roadmap for how, or at least believes he plays a critical part in bringing it about.

Proven Practices¶

The four most important aspects of a start up's core product: 1. Proprietary technology - Monopolies in many ways exist because they have some sort of proprietary technology. It is a necessary factor in ensuring one's current and future profits are protected. If not, no matter how genius your product, you will soon enter the realm of competition rather than monopoly. And, your proprietary technology should be at least 10 times better than its closest substitute in some important dimension. 2. Network effects - Another factor that can make all the difference in bringing your business to the status of monopoly is its ability to capitalize on network effects. The network effect occurs when engagement with your product requires that others participate as well. 3. Economies of scale - Well-designed start ups are built such that costs don't scale on par with growth. 4. Branding - The last element to consider when evaluating the strength of a startup is brand. By definition, this will be all your own and unable to be copied. The question to ask is how distinctive and integrated it is into your product and company culture.

Seven Questions¶

Seven questions that each start up must answer before it can be confident in its potential for future revenues and growth.

1. The Engineering Question - "Can you create breakthrough technology instead of incremental improvements?"
2. The Timing Question - "Is now the right time to start your particular business?"
3. The Monopoly Question - "Are you starting with a big share of a small market?"
4. The People Question - "Do you have the right team?"
5. The Distribution Question - "Do you have a way to not just create but deliver your product?"
6. The Durability Question - "Will your market position be defensible 10 and 20 years into the future?"
7. The Secret Question - "Have you identified a unique opportunity that others don't see?"