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1815 to 1914 was a period of both rapid technological development and rapid globalization.
Since 1971, we have seen rapid globalization along with limited technological development, mostly confined to IT.
In a world of scarce resources, globalization without new technology is unsustainable.
Paper millionaires would rack up thousand-dollar dinner bills and try to pay with shares of their startup’s stock—sometimes it even worked.
A South Korean firm wired us $5 million without first negotiating a deal or signing any documents. When I tried to return the money, they wouldn’t tell me where to send it.)
Google is a good example of a company that went from 0 to 1: it hasn’t competed in search since the early 2000s, when it definitively distanced itself from Microsoft and Yahoo!
opposite. 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.
CREATIVE MONOPOLY MEANS new products that benefit everybody and sustainable profits for the creator. Competition means no profits for anybody, no meaningful differentiation, and a struggle for survival.
We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it—even though the more we compete, the less we gain.
Why do people compete with each other? Marx and Shakespeare provide two models for understanding almost every kind of conflict.
Just as war cost the Montagues and Capulets their children, it cost Microsoft and Google their dominance: Apple came along and overtook them all. In January 2013, Apple’s market capitalization was $500 billion, while Google and Microsoft combined were worth $467 billion. Just three years before, Microsoft and Google were each more valuable than Apple. War is costly business.
Winning is better than losing, but everybody loses when the war isn’t one worth fighting.
Ellison sent truckloads of ice cream sandwiches to Siebel’s headquarters to try to convince Siebel employees to jump ship. The copy on the wrappers? “Summer is near. Oracle is here. To brighten your day and your career.”
If you can’t beat a rival, it may be better to merge. I started Confinity with my co-founder Max Levchin in 1998. When we released the PayPal product in late 1999,
So in early March we met on neutral ground—a café almost exactly equidistant to our offices—and negotiated a 50-50 merger. De-escalating the rivalry post-merger wasn’t easy, but as far as problems go, it was a good one to have. As a unified team, we were able to ride out the dot-com crash and then build a successful business.
ESCAPING COMPETITION WILL give you a monopoly, but even a monopoly is only a great business if it can endure in the future.
Simply stated, the value of a business today is the sum of all the money it will make in the future. (To properly value a business, you also have to discount those future cash flows to their present worth, since a given amount of money today is worth more than the same amount in the future.)
Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.
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.
A good startup should have the potential for great scale built into its first design. Twitter already has more than 250 million users today. It doesn’t need to add too many customized features in order to acquire more, and there’s no inherent reason why it should ever stop growing.
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.
Every culture has a myth of decline from some golden age,
Bacon caught pneumonia and died in 1626 while experimenting to see if he could extend a chicken’s life by freezing it in the snow.)
Eroom’s law—that’s Moore’s law backward—observes that the number of new drugs approved per billion dollars spent on R&D has halved every nine years since 1950.
A business with a good definite plan will always be underrated in a world where people see the future as random.
since small minorities often achieve disproportionate results.
An entrepreneur cannot “diversify” herself: you cannot run dozens of companies at the same time and then hope that one of them works out well. Less obvious but just as important, an individual cannot diversify his own life by keeping dozens of equally possible careers in ready reserve.
You can achieve difficult things, but you can’t achieve the impossible.
Kaczynski claimed that in order to be happy, every individual “needs to have goals whose attainment requires effort, and needs to succeed in attaining at least some of his goals.”
Recruiting is a core competency for any company. It should never be outsourced.
What nerds miss is that it takes hard work to make sales look easy.
All salesmen are actors: their priority is persuasion, not sincerity.
People who sell customers work in “business development.” People who sell companies are “investment bankers.” And people who sell themselves are called “politicians.”
Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true.
Nerds might wish that distribution could be ignored and salesmen banished to another planet. All of us want to believe that we make up our own minds, that sales doesn’t work on us. But it’s not true. Everybody has a product to sell—no matter whether you’re an employee, a founder, or an investor. It’s true even if your company consists of just you and your computer. Look around. If you don’t see any salespeople, you’re the salesperson.
1. The Engineering Question Can you create breakthrough technology instead of incremental improvements? 2. The Timing Question Is now the right time to start your particular business? 3. The Monopoly Question Are you starting with a big share of a small market? 4. The People Question
A great technology company should have proprietary technology an order of magnitude better than its nearest substitute.
real technologists wear T-shirts and jeans.
But the team insight—never invest in a tech CEO that wears a suit—got us to the truth a lot faster. The best sales is hidden. There’s nothing wrong with a CEO who can sell, but if he actually looks like a salesman, he’s probably bad at sales and worse at tech.
Just ask Israeli electric vehicle startup Better Place, which from 2007 to 2012 raised and spent more than $800 million to build swappable battery packs and charging stations for electric cars.
They deluded themselves into believing that an overwhelming social need for alternative energy solutions implied an overwhelming business opportunity for cleantech companies of all kinds.
great founder can bring out the best work from everybody at his company.
