Zero to One

✅ Globalization (copying what others have done) gets you from one to n. Creating something new (technology) gets you from zero to one. ✅ In a world of scarce resources, globalization without new technology is unsustainable. Technology is essential for advancing civilization. ✅ If you want to create captured lasting value, don’t build an undifferentiated commodity business. ✅ Great business is defined by its ability to generate cash flows in the future. ✅ Leanness is a methodology, not a goal. Iteration without a bold plan won’t take you from 0 to 1. A good definite plan gets underrated when people see the future as random. The iPod example: Steve knew it would matter. The world thought it was useless. ✅ The biggest secret in venture capital: the best investment in a successful fund equals or outperforms the entire rest of the fund combined. So every company must have the potential to succeed at vast scale. ✅ If you think something hard is impossible, you’ll never even start trying to achieve it. ✅ Part time employees won’t work. They won’t be as committed. ✅ A company does better the less it pays its CEO. In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary. ✅ If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business, no matter how good the product. ✅ Poor sales, more than poor product, is the most common cause of failure. ✅ The most valuable businesses of coming decades will be built by entrepreneurs who empower people rather than try to make them obsolete. ✅ No sector will ever be so important that merely participating in it will be enough to build a great company. Dot com bubble At first, growth was slow. Then they paid customers $10 to sign up, and suddenly had hundreds of thousands of signups. Growth can be bought. That doesn’t mean it’s real. Silicon Valley’s four lessons from the crash: Make incremental advances. Grand visions inflated the bubble, so humility is required if you want to change the world. Stay lean and flexible. Be “unplanned.” Always iterate. Improve on the competition. Start with an already existing customer and improve what successful competitors offer. Focus on the product, not sales. If you need advertising or salespeople, the product isn’t good enough. Competition Elite students climb confidently until competition gets intense enough to beat their dreams out of them. Higher education can trap big plans inside conventional rivalries for conventional careers. Non-monopolies lie by saying: "We're in a league of our own." Entrepreneurs understate competition. The classic mistake: defining your market so narrowly you "dominate" by definition. Monopoly is the condition of every successful business: happy companies are different because each earned a monopoly solving a unique problem. Failed companies are the same because they failed to escape competition. If you see competition as destructive instead of a sign of value, you’re already more sane than most. Monopoly Monopolies are unique, but usually include some mix of: proprietary technology, network effects, economies of scale, branding. Proprietary technology: as a rule of thumb, it must be at least 10x better than the closest substitute on an important dimension. The clearest path: invent something completely new. Amazon was 10x better than other bookstores because they didn’t have to hold physical inventory. Network effects: the product becomes more useful as more people use it (Facebook). These businesses must start with especially small markets. It can’t only work at scale. Economies of scale: the company gets stronger as it gets bigger. A good startup has scale baked into its first design. Branding: a company has a monopoly on its own brand, so brand can help claim monopoly. Apple is the example. But no tech company can be built on branding alone. Market The perfect target market: a small group of particular people, concentrated together, served by few or no competitors. As you expand to adjacent markets, don’t “disrupt.” Avoid competition as much as possible. Secrets Great companies can be built on open but unsuspected secrets about how the world works. Few imagined you could build a $1B business by connecting people who wanted to go places with people willing to drive them there. You only see that if you believe in secrets and look for them. If ideas that look elementary in retrospect can support huge companies, then there are still many more companies left to start. Board Keep the board small. Three is ideal. Never exceed five unless you’re public. Ownership Equal equity for everyone is a big mistake. People contribute different talents. Equity should reflect that. Try not to make it open, resentment can kill the company. Culture Culture matters, but perks (ping pong, pets) only make sense if everyone is working hard. In hiring, listen to the “why here?” answer. Bad answers: stock, “smartest people,” generic “challenging problems.” Good answers: specific to your company. You’ll attract the right people when you can explain why your mission is compelling, not why it matters in general, but why you’re doing something important that nobody else is going to get done. If you can’t explain why someone is a unique match for your company, they probably aren’t. Don’t fight the perk war. Anyone swayed by free laundry pickup or pet day care is likely the wrong hire. Cover basics like health insurance, then offer what others can’t: irreplaceable work on a unique problem with great people. Assigning tasks Best management move: make every person responsible for just one thing. Make it unique. Evaluate them only on that one thing. It reduces internal conflict and internal competition, which is poison for a startup. Sales and distribution Engineers love to think salespeople don’t matter. It’s easy to resist obvious pitches and feel independent. But advertising isn’t trying to make you buy now; it’s embedding subtle impressions that convert later. Salespeople are actors: persuasion is the priority, not sincerity. The bad salesperson is the obvious salesperson. The “engineer grail” is a product that “sells itself.” Anyone who says this about a real product is lying. Treat distribution as essential to product design. How to sell Superior distribution alone can create a monopoly, even without product differentiation. The reverse is not true: a strong product without distribution still dies. Two metrics set distribution limits: customer lifetime value (CLV) must exceed customer acquisition cost (CAC). Higher price usually means higher cost to make the sale. Startups shouldn't try to compete with big-company TV ads. Referrals often work well. Whoever dominates the most important segment of a market with viral potential first will be the last mover in the whole market. Get the most valuable users first. The seven questions Answer all seven, and your odds are good: 1. Can you create breakthrough technology, instead of incremental improvements? 2. Is now the right time to start your business? 3. Are you starting with a big share of a small market? 4. Do you have the right team? 5. Do you have a way to not just create but deliver your product? 6. Will your market position be defensible 10 and 20 years in the future? 7. Have you identified a unique opportunity that others don’t see? Conclusion "Our task today is to find singular ways to create the new things that will make the future not just different, but better; to go from 0 to 1." The first step: think for yourself. See the world as fresh and strange again. That’s how you recreate it, and preserve it.