Zero to One: Notes on Start Ups, or How to Build the Future

by Blake Masters

“Our educational system is broken and urgently needs to be fixed.”

My own answer to the contrarian question is that most people think the future of the world will be defined by globalization, but the truth is that technology matters more. Without technological change, if China doubles its energy production over the next two decades, it will also double its air pollution.

in business, small groups of people bound together by a sense of mission have changed the world for the better.

if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

Google’s motto—“Don’t be evil”—is in part a branding ploy, but it’s also characteristic of a kind of business that’s successful enough to take ethics seriously without jeopardizing its own existence.

state in which all energy is evenly distributed and everything comes to rest—also known as the heat death of the universe.

The copy on the wrappers? “Summer is near. Oracle is here. To brighten your day and your career.”

true heroes take their personal honor so seriously they will fight for things that don’t matter. This twisted logic is part of human nature, but it’s disastrous in business.

Zynga scored early wins with games like Farmville and claimed to have a “psychometric engine” to rigorously gauge the appeal of new releases.

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 a real monopolistic advantage.

once you’re 10x better, you escape competition.

A good startup should have the potential for great scale built into its first design.

The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.

As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

business is like chess. Grandmaster José Raúl Capablanca put it well: to succeed, “you must study the endgame before everything else.”

success results from a “patchwork of lucky breaks and arbitrary advantages.”

Ralph Waldo Emerson captured this ethos when he wrote: “Shallow men believe in luck, believe in circumstances…. Strong men believe in cause and effect.”

Roald Amundsen wrote: “Victory awaits him who has everything in order—luck, people call it.”

You can also expect the future to be either better or worse than the present. Optimists welcome the future; pessimists fear it. Combining these possibilities yields four views:

The Chinese public, too, knows that winter is coming.

Every class of people in China takes the future deadly seriously.

To a definite optimist, the future will be better than the present if he plans and works to make it better.

From the 17th century through the 1950s and ’60s, definite optimists led the Western world. Scientists, engineers, doctors, and businessmen made the world richer, healthier, and more long-lived than previously imaginable. As Karl Marx and Friedrich Engels saw clearly, the 19th-century business class

they didn’t have any specific vision of the future. Their indefiniteness took different forms.

In philosophy, politics, and business, too, arguing over process has become a way to endlessly defer making concrete plans for a better future.

In 1928, Scottish scientist Alexander Fleming found that a mysterious antibacterial fungus had grown on a petri dish he’d forgotten to cover in his laboratory: he discovered penicillin by accident. Scientists have sought to harness the power of chance ever since.

Definite optimism works when you build the future you envision. Definite pessimism works by building what can be copied without expecting anything new.

But indefinite optimism seems inherently unsustainable: how can the future get better if no one plans for it? Actually, most everybody in the modern world has already heard an answer to this question: progress without planning is what we call “evolution.” Darwin himself wrote that life tends to “progress” without anybody intending it.

Every living thing is just a random iteration on some other organism, and the best iterations win.

A business with a good definite plan will always be underrated in a world where people see the future as random.

“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” (Matthew 25:29). Albert Einstein made the same observation when he stated that compound interest was “the eighth wonder of the world,” “the greatest mathematical discovery of all time,” or even “the most powerful force in the universe.”

At first, only a small minority of abolitionists knew that slavery was evil; that view has rightly become conventional, but it was still a secret in the early 19th century.

So when thinking about what kind of company to build, there are two distinct questions to ask: What secrets is nature not telling you? What secrets are people not telling you?

You need good people who get along, but you also need a structure to help keep everyone aligned for the long term. To anticipate likely sources of misalignment in any company, it’s useful to distinguish between three concepts: • Ownership: who legally owns a company’s equity? • Possession: who actually runs the company on a day-to-day basis? • Control: who formally governs the company’s affairs?

At the margin, they’ll be biased to claim value in the near term, not help you create more in the future. That’s why hiring consultants doesn’t work. Part-time employees don’t work. Even working remotely should be avoided, because misalignment can creep in whenever colleagues aren’t together full-time,

Oops im hurt :)

Two metrics set the limits for effective distribution. The total net profit that you earn on average over the course of your relationship with a customer (Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC).

The challenge here isn’t about how to make any particular sale, but how to establish a process by which a sales team of modest size can move the product to a wide audience.

30 years from now, will there be anything left for people to do? “Software is eating the world,”

VC Andy Kessler sounds almost gleeful when he explains that the best way to create productivity is “to get rid of people.”

Elon describes his staff this way: “If you’re at Tesla, you’re choosing to be at the equivalent of Special Forces. There’s the regular army, and that’s fine, but if you are working at Tesla, you’re choosing to step up your game.”

Sean Parker, who started out with the ultimate outsider status: criminal. Sean was a careful hacker in high school. But his father decided that Sean was spending too much time on the computer for a 16-year-old, so one day he took away Sean’s keyboard mid-hack. Sean couldn’t log out; the FBI noticed; soon federal agents were placing him under arrest. Sean got off easy since he was a minor; if anything, the episode emboldened him. Three years later, he co-founded Napster. The peer-to-peer file sharing service amassed 10 million users in its first year, making it one of the fastest-growing businesses of all time. But the record companies sued and a federal judge ordered it shut down 20 months after opening. After a whirlwind period at the center, Sean was back to being an outsider again. Then came Facebook. Sean met Mark Zuckerberg in 2004, helped negotiate Facebook’s first funding, and became the company’s founding president. He had to step down in 2005 amid allegations of drug use, but this only enhanced his notoriety.

Oedipus is the paradigmatic insider/outsider: he was abandoned as an infant and ended up in a foreign land, but he was a brilliant king and smart enough to solve the riddle of the Sphinx. Romulus and Remus were born of royal blood and abandoned as orphans. When they discovered their pedigree, they decided to found a city. But they couldn’t agree on where to put it. When Remus crossed the boundary that Romulus had decided was the edge of Rome, Romulus killed him, declaring:

More recently, Bill Gates has shown how highly visible success can attract highly focused attacks.

Steve Jobs and Bill Gates were opposites. Jobs was an artist, preferred closed systems, and spent his time thinking about great products above all else; Gates was a businessman, kept his products open, and wanted to run the world. But both were insider/outsiders, and both pushed the companies they started to achievements that nobody else would have been able to match.

Jobs’s return to Apple 12 years later shows how the most important task in business—the creation of new value—cannot be reduced to a formula and applied by professionals.

Ray Kurzweil, the best-known Singularitarian, starts from Moore’s law and traces exponential growth trends in dozens of fields, confidently projecting a future of superhuman artificial intelligence. According to Kurzweil, “the Singularity is near,” it’s inevitable, and all we have to do is prepare ourselves to accept it.

Whether we achieve the Singularity on a cosmic scale is perhaps less important than whether we seize the unique opportunities we have to do new things in our own working lives.

Everything important to us—the universe, the planet, the country, your company, your life, and this very moment—is singular.

Our task today is to find singular ways to create the new things that will make the future not just different...

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 ...