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

www.amazon.com/dp/B00J6YBOFQ

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Top Highlights

  • 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 matters just as much as product.

  • The most contrarian thing of all is not to oppose the crowd but to think for yourself.

  • 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.

  • For example, rapid short-term growth at both Zynga and Groupon distracted managers and investors from long-term challenges. Zynga scored early wins with games like Farmville and claimed to have a “psychometric engine” to rigorously gauge the appeal of new releases. But they ended up with the same problem as every Hollywood studio: how can you reliably produce a constant stream of popular entertainment for a fickle audience? (Nobody knows.)

  • A monopoly business gets stronger as it gets bigger: the fixed costs of creating a product (engineering, management, office space) can be spread out over ever greater quantities of sales. Software startups can enjoy especially dramatic economies of scale because the marginal cost of producing another copy of the product is close to zero.

  • In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work (if this describes your company, you should quit now).

  • 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

  • how much of what you know about business is shaped by mistaken reactions to past mistakes?

  • Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can. Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.

  • monopoly like Google is different. Since it doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products, and its impact on the wider world. Google’s motto—“Don’t be evil”—is in part a branding ploy, but it’s also characteristic of a kind of business that’s successful enough to take ethics seriously without jeopardizing its own existence. In business, money is either an important thing or it is everything. Monopolists can afford to think about things other than making money; non-monopolists can’t. In perfect competition, a business is so focused on today’s margins that it can’t possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits.

  • 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.

  • Simply stated, the value of a business today is the sum of all the money it will make in the future. (To properly value a business, you also have to discount those future cash flows to their present worth, since a given amount of money today is worth more than the same amount in the future.)

  • The clearest way to make a 10x improvement is to invent something completely new. If you build something valuable where there was nothing before, the increase in value is theoretically infinite.

  • As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.

  • A company has a monopoly on its own brand by definition, so creating a strong brand is a powerful way to claim a monopoly.

  • Technology companies follow the opposite trajectory. They often lose money for the first few years: it takes time to build valuable things, and that means delayed revenue. Most of a tech company’s value will come at least 10 to 15 years in the future.

  • today. In middle school, we’re encouraged to start hoarding “extracurricular activities.” In high school, ambitious students compete even harder to appear omnicompetent. By the time a student gets to college, he’s spent a decade curating a bewilderingly diverse résumé to prepare for a completely unknowable future. Come what may, he’s ready—for nothing in particular. A definite view, by contrast, favors firm convictions. Instead of pursuing many-sided mediocrity and calling it “well-roundedness,” a definite person determines the one best thing to do and then does it. Instead of working tirelessly to make herself

  • the division of the world into the so-called developed and developing nations implies that the “developed” world has already achieved the achievable, and that poorer nations just need to catch up.

  • The single word for vertical, 0 to 1 progress is technology. The rapid progress of information technology in recent decades has made Silicon Valley the capital of “technology” in general. But there is no reason why technology should be limited to computers. Properly understood, any new and better way of doing things is technology.

  • In this book, we’re not interested in illegal bullies or government favorites: by “monopoly,” we mean the kind of company that’s so good at what it does that no other firm can offer a close substitute. Google is a good example of a company that went from 0 to 1: it hasn’t competed in search since the early 2000s, when it definitively distanced itself from Microsoft and Yahoo!

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