A business moment only happens once. The next tech genius won’t be building another operating system. There will never be another search engine like Google, and Mark Zuckerberg won’t create another Facebook.
The world is going to need miracles, and these miracles are called technology. It allows us to do so much more for less and enables us to find value in unexpected places. The world will look different in the future than it does today. Though most people think that the future of the world will be shaped by globalization, the truth is that technology has a bigger impact.
If you want to create a new future, the most individuals you can persuade are those at a startup.
A new business’s success is determined by its capacity to think differently. Startups must reimagine their businesses from the ground up and challenge conventional wisdom.
4 Lessons From the Dot-com Crash
Make steady progress
Keep your organization lean and flexible
Be better than the competition
Emphasize product over sales
Opposite Concepts Can Be True
It is better to take risks than to be insignificant.
Having a bad plan is better than not planning at all.
Competition decreases profit.
Sales are just as important as products.
Your knowledge of the business is partially shaped by past mistakes
It’s not enough to create value; you also need to capture some of it.
Typically, the word “monopoly” refers to a successful company that can’t be replicated by another. Google is an excellent example. Google generates 95% of its revenue from search advertising. Google can avoid all sorts of unwanted attention by framing itself as just another tech company. A startup’s biggest mistake is underestimating the level of competition. The temptation is to describe your market so narrowly that you dominate it by definition.
Most new restaurants fail within the first year or two, so your instinct will be to tell others that yours is different. Rather than seriously considering whether you really are exceptional, you’ll spend time trying to convince others that you are.
Business is either all about money or money is everything. Unlike non-monopolists, monopolists can think about things other than making money. The daily struggle for survival of a business can only be transcended by monopoly profits. Companies become monopolies when they solve a unique problem, however, failed companies have one thing in common: they failed to escape competition. Every successful business requires a monopoly. Competition means no meaningful profits for anybody, no distinct advantages, and a continuous struggle for survival. More competition means lesser gain.
People with a social ineptitude similar to Asperger’s seem to have an advantage in Silicon Valley nowadays, they seem to be immune to imitative competition. People who are less sensitive to social cues are less likely to do the same things as others around them.
One of the most substantive advantages a company can have its proprietary technology. To have a true monopolistic advantage, proprietary technology must be at least ten times better than its nearest equivalent in some significant dimension. Anything less will be harder to sell as it will be seen as a minor improvement. In order to improve something tenfold, you must invent something completely new. The increase in value is theoretically infinite if you create something valuable where none existed before.
Business opportunities for successful network businesses rarely present themselves to MBA types: the markets are so small that they are not even considered opportunities, to begin with. Starting small is the best way to create a successful business, then proceed to reach potential customers. In order to be successful, a startup must find a niche market composed of a very small number of particular people served by few or no competitors.
When entrepreneurs talk about getting 1% of a $100 billion market, it’s usually a red flag.
Avoid disrupting your business: avoid competition.
Is there an advantage to being first? It’s better to be the last one to move. Profit from years of monopoly profits by making the last great development in a specific market. Before anything else, focus on the endgame.
Does success come from skill or luck? Unfortunately, there is no way to settle this argument fairly, because statistics don’t work when the sample size is one.
You can either expect the future to take a definite shape or treat it as vaguely uncertain. If you perceive the future as something definite, preparing for it in advance makes sense, but if you would rather view the future as indefinite and full of randomness, you’ll give up on trying to prepare for it. The future could either be better or worse, so expect changes. Pessimists fear the future; optimists welcome it.
Europe is described like this. The indefinite pessimist sees a bleak future but has no idea what to do. In the meantime, he might as well enjoy eating, drinking, and being merry during the wait: hence Europe’s renowned vacation craze.
A definite pessimist believes that the future is certain, but it will be grim, so he needs to prepare. The Chinese leadership is obsessed with the possibility of things getting worse. In China, people of all classes take the future seriously.
An optimist believes that the future will be better than the present if he plans and works to make it so.
According to indefinite optimists, the future will be better, but they don’t know how, so they won’t make any specific plans. In the wake of the Baby Boom generation, indefinite optimists have grown accustomed to effortless progress, feeling entitled to it.
Engineers will be needed to design underwater cities and settlements in space in a DEFINITELY OPTIMISTIC future, but an INDEFINITELY OPTIMISTIC future calls for more bankers and lawyers. Indefinite thinking is characteristic of finance because it’s the only way to make money when you don’t know how to create wealth.
You can build the future you envision with DEFINITE OPTIMISM.
DEFINITE PESSIMISM works by replicating what can be copied with no expectation of a new outcome.
Infinite Pessimism works because it’s self-fulfilling: if you’re a slacker with low expectations, they’re likely to be met.
INDEFINITE OPTIMISM appears inherently unsustainable, however: how can the future improve without any planning?
However, leanness is more of a method than a goal. Often, startup founders are told there is no way to know what customers want in advance: we need to listen to them, make something as minimally viable as possible, then iterate until we succeed.
It’s vital that we return to a certain future.
Start-ups are the largest undertakings over which you can have definite control. It is possible for you to have agency not only over your own life but also over a small but very important part of the world.
If you think you’re playing the lottery, you’ve already mentally prepared yourself to lose. An individual is unavoidably an investor as well. Your choices of career rely on your belief that your work will be valuable decades from now. You don’t build a portfolio of your life, diversity cannot be achieved by holding dozens of equally feasible careers in reserve.
Unfortunately, our schools teach the opposite: “As long as you do it well, it doesn’t matter what you do.” This is completely false as it does matter what you do. While you should focus relentlessly on what you’re good at, you should also consider whether it will be valuable in the future.
Today, too many people are starting their own businesses. Those who understand the power law will hesitate more than others when it comes to starting up a new business because they know they could become immensely successful by joining a growing company. The equity you obtain when you fully finance your own venture is 100%, but the equity you receive when it fails is also 100%. By contrast, owning 0.01% of Google is a huge asset (more than $35 million now).
The contrarian question is, what is the most important truth few people agree with you on? A contrarian view won’t make sense if the world has secrets left to divulge.
Our contrarian question for businesses: What valuable company has no one built yet? There is a secret behind every correct answer, something difficult but possible, something difficult but doable.
Case in point: urban hipsterdom. handlebar mustache, vinyl records, penchant for vintage, and all things organic, all of these harken back to an earlier time when people were still optimistic about the future. All the important things have already been accomplished, so you might as well join the barista line and pretend you’re allergic to achievement.
A secret can be either of two kinds: it can be about nature or about people. A natural secret is a study of some undiscovered aspect of the physical world. Secrets about people are things that people don’t know about themselves or things they hide from others.
What topics are people not allowed to discuss? What is prohibited or taboo? Remember the monopoly secret: competition and capitalism are opposites.
What are people in charge of companies forbidden to say? What are some fields that matter but have not been standardized and institutionalized? It’s not a good idea to tell everyone everything you know unless you have perfectly conventional beliefs.
So who are you going to tell? Whoever you need to, but no more. Generally, a company always finds a middle ground between telling nobody and telling everyone. Successful business owners know that every great company has a secret that’s hidden from the outside world. Great companies are conspiracies to change the world; when you share your secrets, the recipients become fellow conspirators.
Before starting a business together, founders should have a common history, and the lesser a company pays the CEO, the better it performs.
Setting guidelines for aligning people towards creating value in the future is a vital part of creating a company. The concept of “company culture” exists only within the company. Startups are teams of people with an idea. Any company needs to be proficient in recruiting, in no case should it be outsourced. If you can tell a compelling story about why what you’re doing is important, why no one else will be able to accomplish what you’re doing, then you’ll attract the employees you need. Explain the specific reasons why your company would be a good match for a person. If you can’t do that, they’re probably not the right match for you. Everyone in the company should be responsible for just one thing, conflict can be reduced by defining roles. The majority of company fights occur when colleagues compete for the same responsibilities.
Sales work best when they are hidden, just like acting. Account executives sell advertisements, while business development people sell customers. In a world secretly driven by sales, even businesspeople underestimate the importance of sales due to the systematic attempt to hide it at every level of every field. It makes no difference how good your product is if you haven’t invented an effective way to sell it.
Media relations are a very important part of promoting your business.
Rather than becoming a replacement, computers should be able to complement humans. Entrepreneurs who aim to empower people over those who aim to devalue them will build the most valuable businesses of the next few decades. A computer can find patterns humans cannot, but a human analyst can provide actionable insights.
Can computers help humans solve hard problems? We shouldn’t let indefinite fears about the far future prevent us from making plans today.
Every business should answer these 7 questions:
The Engineering Question: Is it possible to create breakthrough technologies instead of incremental improvements?
The Timing Question: Would now be a good time to start your business?
The Monopoly Question: Do you have a big market share in a small market?
The People Question: Are you surrounded by the right people?
The Distribution Question: Do you have the means to not only create but also deliver your product?
The Durability Question: Is your position in the market likely to be viable in the future?
The Secret Question: Have you identified an opportunity nobody else is seeing?
A great business plan will be able to address every one of them, and not having good answers to these questions will lead you to lots of “bad luck”.
When something is considered “socially good,” does this mean it is good for society or is it simply perceived as such by society? Anything that receives applause from all audiences can only be conventional, making a difference in society is what truly benefits it.
The best projects are often overlooked, not celebrated by the crowd; the best problems are often those nobody else has even attempted to solve. Unless an entrepreneur begins with the micro-scale, he won’t be able to gain macro-scale insights. A company cannot be built by simply participating in a sector that is so important. An entrepreneur who believes in his own myth is most likely to lose his mind, but it is equally dangerous for every business to lose all sense of myth and mistake disenchantment for wisdom.