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February 8 - February 22, 2024
EVERY MOMENT IN business happens only once. The next Bill Gates will not build an operating system. The next Larry Page or Sergey Brin won’t make a search engine. And the next Mark Zuckerberg won’t create a social network. If you are copying these guys, you aren’t learning from them.
Horizontal or extensive progress means copying things that work—going from 1 to n.
Vertical or intensive progress means doing new things—going from 0 to 1.
The single word for vertical, 0 to 1 progress is technology.
Properly understood, any new and better way of doing things is technology.
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.
Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalization without new technology is unsustainable.
Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can.
Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.
The most contrarian thing of all is not to oppose the crowd but to think for yourself.
Whereas a competitive firm must sell at the market price, a monopoly owns its market, so it can set its own prices. Since it has no competition, it produces at the quantity and price combination that maximizes its profits.
if you want to create and capture lasting value, don’t build an undifferentiated commodity business.
Non-monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets: British food ∩ restaurant ∩ Palo Alto
Monopolists, by contrast, disguise their monopoly by framing their market as the union of several large markets: search engine ∪ mobile phones ∪ wearable computers ∪ self-driving cars
In business, money is either an important thing or it is everything.
Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better.
Monopoly is the condition of every successful business.
Tolstoy opens Anna Karenina by observing: “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the 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.
Winning is better than losing, but everybody loses when the war isn’t one worth fighting.
Simply stated, the value of a business today is the sum of all the money it will make in the future.
If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now? Numbers alone won’t tell you the answer; instead you must think critically about the qualitative characteristics of your business.
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.
every startup should start with a very small market.
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.
Europeans just react to events as they happen and hope things don’t get worse.
Every other country is afraid that China is going to take over the world; China is the only country afraid that it won’t.
But in an indefinite world, people actually prefer unlimited optionality; money is more valuable than anything you could possibly do with it. Only in a definite future is money a means to an end, not the end itself.
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.
This implies two very strange rules for VCs. First, only invest in companies that have the potential to return the value of the entire fund.
This leads to rule number two: because rule number one is so restrictive, there can’t be any other rules.
every single company in a good venture portfolio must have the potential to succeed at vast scale.
For example, a world without secrets would enjoy a perfect understanding of justice. Every injustice necessarily involves a moral truth that very few people recognize early on: in a democratic society, a wrongful practice persists only when most people don’t perceive it to be unjust.
If you think something hard is impossible, you’ll never even start trying to achieve it. Belief in secrets is an effective truth.
“Thiel’s law”: a startup messed up at its foundation cannot be fixed.
Bad decisions made early on—if you choose the wrong partners or hire the wrong people, for example—are very hard to correct after they are made. It may take a crisis on the order of bankruptcy before anybody will even try to correct them.
A typical startup allocates ownership among founders, employees, and investors. The managers and employees who operate the company enjoy possession. And a board of directors, usually comprising founders and investors, exercises control.
The smaller the board, the easier it is for the directors to communicate, to reach consensus, and to exercise effective oversight. However, that very effectiveness means that a small board can forcefully oppose management in any conflict. This is why it’s crucial to choose wisely: every single member of your board matters.
A board of three is ideal. Your board should never exceed five people, unless your company is publicly held.
a huge board will exercise no effective oversight at all; it merely provides cover for whatever microdictator actually runs the organization. If you want that kind of free rein from your board, blow it up to giant size. If you want an effective board, keep it small.
Ken Kesey was right: you’re either on the bus or off the bus.
In no case should a CEO of an early-stage, venture-backed startup receive more than $150,000 per year in salary. It doesn’t matter if he got used to making much
“Company culture” doesn’t exist apart from the company itself: no company has a culture; every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.
Recruiting is a core competency for any company. It should never be outsourced.
defining roles reduced conflict. Most fights inside a company happen when colleagues compete for the same responsibilities. Startups face an especially high risk of this since job roles are fluid at the early stages.
internal peace is what enables a startup to survive at all.
But advertising doesn’t exist to make you buy a product right away; it exists to embed subtle impressions that will drive sales later. Anyone who can’t acknowledge its likely effect on himself is doubly deceived.
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.
