Zero to One — Key Takeaways
Contents:
- Chapter 1: Challenge of the Future
- Chapter 2: Party like It’s 1999
- Chapter 3: All Happy Companies Are Different
- Chapter 4: The Ideology of Competition
- Chapter 5: Last Mover Advantage
- Chapter 6: You Are Not a Lottery Ticket
- Chapter 7: Follow the Money
- Chapter 8: Secrets
- Chapter 9: Foundations
- Chapter 10: The Mechanics of Mafia
- Chapter 11: If You Build It, Will They Come?
- Chapter 12: Man and Machine
- Chapter 13: Seeing Green
Chapter 1: Challenge of the Future
Question to ask yourself: What important truth do very few people agree with you on?
Brilliant thinking is rare, but courage is in even shorter supply than genius.
Future of Progress
Horizontal progress vs vertical progress
- Horizontal Progress => Copying from the best (example: China)
- Vertical Progress => Inventing the next best (example: Silicon Valley)
Developed Nations vs Developing Nations (they just need to catch up)
But the problem is, if China ditto copies the USA, it would double or triple the air pollution! China needs to tackle it in a different way, find its own solutions rather doing the blatant copy of USA.
In a world of scarce resources, globalization without new technology is unsustainable.
Startup Thinking
- Startup: small groups of people bound together by a sense of mission have changed the world for the better.
- Contrary Perspective: It’s hard to develop new things in big organizations and it’s even harder when you do it yourself.
- Another definition of Startup: The largest group of people you can convince of a plan to build a different future.
Any company’s most important strength is its new thinking
Chapter 2: Party like it’s 1999
Madness (delusion) is rare in individuals but in groups, parties, and nations it is the rule.
Example, Companies are meant to make money, not lose money. But the decade 1990 to 2000, proved that the wrong. The whole economy went mad behind internet companies, investing billions and billions even while nothing was made in profits from these internet companies. Once the Bubble was formed, it busted and lessons were learned the most brutal way! (NASDAQ crashed from 5000 points to mere 1200 points)
Lessons from the Dot-Com Bubble
Everybody across various industries took notes after the dot-com bubble:
- Make incremental advances
- Stay lean and flexible
- Improve on competition
- Focus on product, not sales
This is what the entire tech industry follows even until today. But if you look closely, the contrast to these points makes even more sense actually:
- It is better to risk boldness than the triviality
- A bad plan is better than no plan
- Competitive markets destroy profits
- Sales matter just as much as the product
Chapter 3: All happy companies are different
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.
Question to ask yourself: what valuable company is nobody building?
Creating value is not enough, you need to capture some of the value you create! (i.e., monetize)
Valuable Company = Create More Value + Capture More Value
- US airline companies serve millions of people every day and capture just 30 cents a passenger, whereas Google serves the same amount of people, but captures far more. Margins are huge!
- Under perfect competition, no company makes an economic profit!
- Opposite of “Perfect Competition” is the “Monopoly”.
Chapter 4: The Ideology of Competition
Creative monopoly means new products that benefit everybody and also has sustainable profits for the creator. Fierce competition means no profits for anybody. But still, why do people say “Competition is healthy?”.
Some facts:
- People often lose sight of what’s important and focus on rivals instead
- Business Rivalry/War is costly.
- Competition can cause companies to hallucinate opportunities where none existed.
- If you can’t beat them, join them (Business Mergers).
Chapter 5: Last Mover Advantage
Fun fact, Twitter is valued 12 times more than the New York Times! Yet, Twitter hasn’t made any profits yet ;)
Why is this?
This is because “Future Cash Flow” of Twitter is expected to surpass all Media companies combined over the next decade and establish a monopoly for the source of news content.
Monopoly
Monopolies can set their price while others are forced to sell at market price.
Characteristics of a Monopoly Company:
- Proprietary Technology (Eg. Google)
- Network Effect (Eg. Facebook)
- The economy of Scale (Eg. Amazon)
- Branding (Eg. Apple)
How to build a Monopoly:
- Start small and monopolize
- Scale-up as fast as you can
- Don’t disrupt (disruption attracts attention) (move fast in silence).
Being the first mover into a market may not guarantee you all the success if someone comes along and does a better job and unseats you.
Last Mover Advantage works, But — You must study the endgame before everything else (when competing)
Chapter 6: You Are Not a Lottery Ticket
Learning about startup stories is worthless if you’re just reading stories about people who won the lottery.
You control your future.
Future is not randomness, it is controlled by your decisions!
Chapter 7: Follow the Money
Money makes Money!
Albert Einstein in fact called “Power of Compounding” the eighth wonder of the world!
Pareto Principle (80/20 principle) is true and it works whether you believe in it or not!
Power law becomes visible if you follow the money.
Invest in ideas/companies which have the potential to succeed at a vast scale!
People say don’t put all eggs in one basket, but the opposite is also quite true. For an entrepreneur, all he has is just his company. All his life’s work is put into it and That's okay! In fact, that’s good. But make sure that has 80/20 impact.
Chapter 8: Secrets
What important truth do very few people agree with you???
- Every one of today’s most famous and familiar ideas was once unknown and unsuspected.
- Try to see what other’s don't! (I don’t mean ghosts ;) )
- Seek, explore and reflect on facts which very few people see it as-of-today.
What valuable company is nobody building?
- Every correct answer is necessarily a secret: Something important and something unknown. Something hard to do, but doable.
Examples:
- Example 1: When Steve Jobs was back at Apple (2nd innings), He reflected that simplicity is the secret key to taking off Apple. The whole industry was making a zillion products with various codenames, confusing customers, distribution, marketing etc. He drew a simple chart with 2 Axis => X-Axis for Consumer/Professional and Y-Axis for Portal/Desktop. Apple eventually made only 4 products and sales took off through the roof!!
- Example 2: Elon Musk realized that the secret to reducing costs of Rockets was to reuse major components. He set out to build reusable rockets while no one else even saw this and people who saw didn’t believe in this idea.
- Example 3: More than 90% of the day Personal Cars are just idle sitting under the sun. Uber saw this secret and turned into a wonderful business. Going into the future, people will tend to buy fewer cars and instead use a rental car (Like Uber/Ola).
- Bonus Example: This is my personal one, currently I see Function-as-a-Service something which will take off big due to its simplicity of getting started, simplistic coding design pattern, minimal usage of resources and most important of all — very very minimal costs. Currently, not many companies have jumped their guns in that direction, But I am pretty sure this is the best way forward!
Chapter 9: Foundations:
A startup messed up at its foundation cannot be fixed.
Two aspects form the foundation of a startup:
- Founding Matrimony
- Ownership, Possession, and Control
Chapter 10: The Mechanics of Mafia
- Recruiting is a core competency for any company and should never be outsourced.
- From the outside, everyone in your company should be different in the same way.
- From the inside, every individual should be sharply distinguished by her work.
Chapter 11: If You Build It, Will They Come?
The answer is no;
Startups should care about sales just as much as they care about the product.
Even though sales is everywhere, people underrate its importance.
People overestimate the relative difficulty of science and engineering because of obvious reasons. What nerds miss is that it takes hard work to make sales look easy!
Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true!
CLV (Customer Lifetime Value) > CAC (Customer Acquire Cost)
Chapter 12: Man and Machine
People compete for jobs and resources (salary), whereas computers compete for neither 😅
Brutal truth: Software engineers are trained to work on projects that replace human efforts because that’s what they are trained to do.
Chapter 13: Seeing the Green
Everyone agrees to the fact that Clean energy is the next big thing because it is the need of the hour!
Still, hundreds of companies have tried and failed in the last decade; Struggle is still on, while many companies have made some very basic mistakes. Most companies which have failed made one or more mistakes from the below Golden Rules.
The Golden Rules
Seven questions every business should answer:
- The engineering question: Can you create breakthrough technology instead of incremental improvements?
- The timing question: Is now the right time to start your particular business?
- The monopoly question: Are you starting with a big share of a small market?
- The people question: Do you have the right team?
- The distribution question: Do you have a way to not just create but deliver the product?
- The durability question: Will your market position be defensible 10 to 20 years from into the future?
- The secret question: Have you identified a unique opportunity that others don’t see?
According to Thiel, Tesla checks 7 out of 7 from the above list and is a perfect example of how to build a successful startup.
