Creative Monopoly — How companies that started in garages have scaled to world dominance
In the beginning, Amazon was just an online bookstore that was started in a garage. At a glance, you wouldn’t think Jeff Bezos had ambitions of dominating online retail with the goal of one-day making shopping malls obsolete. Amazon would eventually grow to be the largest online bookstore, with a bigger selection than any of it’s rivals, and once they had a clear dominance in the online bookstore niche, they soon began scaling to adjacent markets as well. Dominating CDs, videos & software. These days, we know Amazon as the go-to place for just about anything you can think of.
According to Peter Thiel, Author of “Zero To One”, co-founder of Paypal, and early investor in Facebook, conventional business wisdom that encourages entrepreneurs to go for big markets under the assumption that a bigger market means more money, is sending startups to dive head first into a losing battle. Why? Going after a big market that forces you to compete with large companies for the attention of millions is a dumb strategy.
The strategy he suggests, is to bring a breakthrough innovation to a small niche market that you can realistically create a monopoly within, then scale up by doing the same thing within new markets you can create innovations within. For example, Google, is a search engine > advertising company > email platform > cloud service > office software > mobile OS > app store > movie store > music store > self-driving car manufacturer etc.
One of the main ideas of Peter Thiel’s work is that competition is death. You don’t want to be in a competitive market where people are forced to compete on price and efficiency because it invariably leads to racing to the bottom. You need to be in a market where you have little to no competition, and can, therefore, control the price; enjoying monopoly profits for decades. There are two ways to accomplish this:
- Create a completely new market by creating a unique product so the competition doesn’t exist yet, (Ie. The iPhone)
- Make products that already exist and already have a global market around them but make your product better than the existing ones by a landslide. (Uber for example)
The following are Peter Thiel’s 7 questions all creative monopolies must answer:
- Do you have a breakthrough innovation?
- Is your timing right?
- Do you have something no-one else has?
- Do you have the right people?
- Can you sell and market your stuff?
- Will you be still around in 10 years?
- Do you know something nobody else does?
Key Take Aways:
- Your goal should not be to make a commodity product with many similar products to compete with, companies that do that end up having to fight for every dollar since they’re in competition with a million other similar products. Your goal should be to make something that’s either completely new or better than any existing products by a landslide. The goal is to have no competition.
- It’s better to start too small than too big. Amazon, Google and Facebook are prime examples of companies that catered to a small niche but scaled up to adjacent markets until they became massive. Start small then grow outwards once you’ve dominated your niche.
Lastly, I’m working on a book that aggregates all the best business tactics from founders that made billion-dollar companies from scratch. It identifies the biggest obstacles people who are starting businesses run into and looks at how the most successful entrepreneurs in the world handled them, and later went on to make billions. If this sounds like something you might be into, you can preorder that here
