Zero to One
by Parker · 109 things on NewTwos
- Make incremental advances, stay lean and flexible, improve on the competition, and focus on product, not sales
- 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
- Progress can take one of two forms:
- Horizontal or extensive progress means copying things that work
- Vertical or intensive progress means doing new things
- The single word for vertical, 0 to 1 progress is technology
- A new company's most important strength is new thinking: even more important than nimbleness, small size affords space to think
- Question received ideas and rethink business from scratch
- The first step to thinking clearly is to question what we think we know about the past
- Big lessons from the dot-com crash
- Make incremental advances
- Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward
- Stay lean and flexible
- All companies must be "lean," which is code for "unplanned." You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, "iterate," and treat entrepreneurship as agnostic experimentation
- Improve on the competition
- Build your company by improving on recognizable products already offered by successful competitors
- Focus on product, not sales
- If your product requires advertising or salespeople to sell it, it's not good enough
- The opposite principles are probably correct
- It is better to risk boldness than triviality
- A bad plan is better than no plan
- Competitive markets destroy profits
- Sales matters just as much as product
- The most contrarian thing of all is not to oppose the crowd but to think for yourself
- What valuable company is nobody building?
- Creating value is not enough—you also need to capture some of the value you create
- 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
- Capitalism and competition are opposites
- 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
- Competition is an ideology that pervades our society and distorts our thinking
- Great business is defined by its ability to generate cash flows in the future
- The value of a business today is the sum of all the money it will make in the future
- For a company to be valuable it must grow and endure
- Will this business still be around a decade from now?
- Proprietary technology is the most substantive advantage a company can have because it makes your product difficult or impossible to replicate
- 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 real monopolistic advantage
- The clearest way to make a 10x improvement is to invent something completely new
- Once you're 10x better, you escape competition
- Network effects make a product more useful as more people use it
- Network effects can be powerful, but you'll never reap them unless your product is valuable to its very first users
- A good startup should have the potential for great scale built into its first design
- Choose your market carefully and expand deliberately
- Every startup should start with a very small market
- It's easier to dominate a small market than a large one
- Avoid competition as much as possible
- Moving first is a tactic, not a goal. What really matters is generating cash flows in the future
- To succeed, "you must study the endgame before everything else"
- Success results from a "patchwork of lucky breaks and arbitrary advantages"
- "Victory awaits him who has everything in order—luck, people call it"
- Prior generations believed in making their own luck by working hard
- 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
- Europeans just react to events as they happen and hope things don't get worse
- In startups, intelligent design works best
- Every great entrepreneur is first and foremost a designer
- You can change the world through careful planning, not by listening to focus group feedback or copying others' successes
- Long-term planning is often undervalued by our indefinite short-term world
- A business with a good definite plan will always be underrated in a world where people see the future as random
- You are not a lottery ticket
- Money makes money. "For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them"
- Never underestimate exponential growth
- The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined
- Only invest in companies that have the potential to return the value of the entire fund
- Because rule number one is so restrictive, there can't be any other rules
- You should only focus relentlessly on something you're good at doing, but before that you must think hard about whether it will be valuable in the future
- To say that there are no secrets left today would mean that we live in a society with no hidden injustices
- There are many more secrets left to find, but they will yield only to relentless searchers
- Secrets about people are things that people don't know about themselves or things they hide because they don't want others to know
- What secret is nature not telling you? What secrets are people not telling you?
- What are people not allowed to talk about? What is forbidden or taboo?
- PK: How miserable people are because what they are doing is not in line with what they really care about. They are being fed stuff that isn't in line with our true nature and it hurts us
- Every great business is built around a secret that's hidden from the outside. A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator
- A board of three is ideal. Your board should never exceed five people, unless your company is publicly help
- Part-time employees don't work. Even working remotely should be avoided, misalignment can creep in whenever colleagues aren't together full-time, in the same place, every day
- A company does better the less it pays the CEO
- Only at the very start do you have the opportunity to set the rules that will align people toward the creation of value in the future
- Founding: lasts as long as company is creating new things, and it ends when creation stops
- What would the ideal company culture look like? Employees should love their work
- You can't accomplish anything meaningful by hiring an interior decorator to beautify your office
- No company has a culture; every company is a culture
- If you can't count durable relationships among the fruits of your time at work you haven't invested your time well
- You'll attract the employees you need if you can explain why your mission is compelling: not why it's important in general, but why you're doing something important that no one else is going to get done
- Promise what no others can: the opportunity to do irreplaceable work on a unique problem alongside great people
- Everyone at your company should be different in the same way—a tribe of like-minded people fiercely devoted to the company's mission
- Startups must work quietly and efficiently in order to survive, and that's easier to do when everyone shares an understanding of the world
- On the inside, every individual should be sharply distinguished by her work
- Make every person in the company responsible for doing just one thing
- Defining roles reduced conflict
- Advertising matters because it works
- 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
- The total net profit that you earn on average over the course of your relationship with a customer must exceed the amount you spend on average to acquire a new customer
- Poor sales rather than bad product is the most common cause of failure. If you can get just one distribution channel to work, you have a great business
- The press can help attract investors and employees
- Look around. If you don't see any sales people, you're the salesperson
- Seven question that every business must answer:
- Can you create breakthrough technology instead of incremental improvements?
- Is now the right time to start your particular business?
- Are you starting with a big share of a small market?
- Do you have the right team?
- Do you have a way to not just create but deliver your product?
- Will your market position be defensible 10 and 20 years into the future?
- Have you identified a unique opportunity that others don't see?
- Blanket rule: pass on any company whose founders dressed up for pitch meetings
- Every entrepreneur should plan to be the last mover in her particular market
- What will the world look like 10 and 20 years from now, and how will my business fit in?
- Great companies have secrets: specific reasons for success that other people don't see
- Doing something different is what's truly good for society
- The single greatest danger for a founder is to become so certain of his own myth that he loses his mind
- 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 essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future