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July 3 - August 3, 2017
Make incremental advances
Stay lean and flexible
Improve on the competition
Focus on product, not sales
if you want to create and capture lasting value, don’t build an undifferentiated commodity business.
In business, money is either an important thing or it is everything.
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.
If you can’t beat a rival, it may be better to merge.
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?
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.
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.
Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets.
As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.
to succeed, “you must study the endgame before everything else.
“Shallow men believe in luck, believe in circumstances…. Strong men believe in cause and effect.
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.
Venture-backed companies create 11% of all private sector jobs. They generate annual revenues equivalent to an astounding 21% of GDP. Indeed, the dozen largest tech companies were all venture-backed. Together those 12 companies are worth more than $2 trillion, more than all other tech companies combined.
First is incrementalism.
Second is risk aversion.
Third is complacency.
Fourth is “flatness.”
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?
A great company is a conspiracy to change the world; when you share your secret, the recipient becomes a fellow conspirator.
OWNERSHIP, POSSESSION, AND CONTROL
“if men were angels, no government would be necessary.
• 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?
From the outside, everyone in your company should be different in the same way.
The best startups might be considered slightly less extreme kinds of cults. The biggest difference is that cults tend to be fanatically wrong about something important. People at a successful startup are fanatically right about something those outside it have missed.
All salesmen are actors: their priority is persuasion, not sincerity.
Like acting, sales works best when hidden. This explains why almost everyone whose job involves distribution—whether they’re in sales, marketing, or advertising—has a job title that has nothing to do with those things. People who sell advertising are called “account executives.” People who sell customers work in “business development.” People who sell companies are “investment bankers.” And people who sell themselves are called “politicians.” There’s a reason for these redescriptions: none of us wants to be reminded when we’re being sold.
Superior sales and distribution by itself can create a monopoly, even with no product differentiation.
A product is viral if its core functionality encourages users to invite their friends to become users too.
Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.
The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.
Better technology in law, medicine, and education won’t replace professionals; it
will allow them to do even more.
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 Do you have the right team? 5. The Distribution Question Do you have a way to not just create but deliver your product? 6. The Durability Question Will your market position be defensible 10 and 20 years into the future? 7. The Secret Question Have you identified a unique opportunity
that others don’t see?
Every entrepreneur should plan to be the last mover in her particular market. That starts with asking yourself: what will the world look like 10 and 20 years from now, and how will my business fit in?
The best projects are likely to be overlooked, not trumpeted by a crowd; the
best problems to work on are often the ones nobody else even tries to solve.
An entrepreneur can’t benefit from macro-scale insight unless his own plans begin at the micro-scale.
No sector will ever be so important that merely participating in it will be enough to build a great company.
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.
Apple’s value crucially depended on the singular vision of a particular person. This hints at the strange way in which the companies that create new technology often resemble feudal monarchies rather than organizations that are supposedly more “modern.” A unique founder can make authoritative decisions, inspire strong personal loyalty, and plan ahead for decades. Paradoxically, impersonal bureaucracies staffed by trained professionals can last longer than any lifetime, but they usually act with short time horizons.
Founders are important not because they are the only ones whose work has value, but rather because a great founder can bring out the best work from everybody at his company.
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.
