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

by Blake Masters

In the most minimal sense, the future is simply the set of all moments yet to come.

Silicon Valley the capital of “technology” in general.

Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.

The entrepreneurs who stuck with Silicon Valley learned four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. 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. 2. 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. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

And yet the opposite principles are probably more correct: 1. It is better to risk boldness than triviality. 2. A bad plan is better than no plan. 3. Competitive markets destroy profits. 4. Sales matters just as much as product.

The most contrarian thing of all is not to oppose the crowd but to think for yourself.

So-called perfectly competitive markets achieve equilibrium when producer supply meets consumer demand.

The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

“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.

result? Windows vs. Chrome OS, Bing vs. Google Search, Explorer vs. Chrome, Office vs. Docs, and Surface vs. Nexus.

Microsoft vs google

Sometimes you do have to fight. Where that’s true, you should fight and win. There is no middle ground: either don’t throw any punches, or strike hard and end it quickly.

the value of a business today is the sum of all the money it will make 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.

If you build something valuable where there was nothing before, the increase in value is theoretically infinite.

think bigger

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

Brand, scale, network effects, and technology in some combination define a monopoly; but to get them to work, you need to choose your market carefully and expand deliberately.

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

buyers go where the sellers are and vice versa.

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.”

Warren Buffett famously considers himself a “member of the lucky sperm club” and a winner of the “ovarian lottery.” Jeff Bezos attributes Amazon’s success to an “incredible planetary alignment” and jokes that it was “half luck, half good timing, and the rest brains.” Bill Gates even goes so far as to claim that he “was lucky to be born with certain skills,” though it’s not clear whether that’s actually possible.

some famous people's consider himself as lucky

A few, like Steve Jobs, Jack Dorsey, and Elon Musk, have created several multibillion-dollar companies. If success were mostly a matter of luck, these kinds of serial entrepreneurs probably wouldn’t exist.

luck is nothing

“Shallow men believe in luck, believe in circumstances…. Strong men believe in cause and effect.”

wrote: “Victory awaits him who has everything in order—luck, people call it.” No one pretended that misfortune didn’t exist, but prior generations believed in making their own luck by working hard.

CAN YOU CONTROL YOUR FUTURE?

must read

Come what may, he’s ready—for nothing in particular.

Scientists, engineers, doctors, and businessmen made the world richer, healthier, and more long-lived than previously imaginable.

NASA’s Apollo Program began in 1961 and put 12 men on the moon before it finished in 1972.

The indefiniteness of finance can be bizarre. Think about what happens when successful entrepreneurs sell their company. What do they do with the money? In a financialized world, it unfolds like this: • The founders don’t know what to do with it, so they give it to a large bank. • The bankers don’t know what to do with it, so they diversify by spreading it across a portfolio of institutional investors. • Institutional investors don’t know what to do with their managed capital, so they diversify by amassing a portfolio of stocks. • Companies try to increase their share price by generating free cash flows. If they do, they issue dividends or buy back shares and the cycle repeats. At no point does anyone in the chain know what to do with money in the real economy. 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.

indefinit finance

progress without planning is what we call “evolution.”

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” (Matthew 25:29).

we don’t live in a normal world; we live under a power law.

WHY AREN’T PEOPLE LOOKING FOR SECRETS?

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.” He divided human goals into three groups: 1. Goals that can be satisfied with minimal effort; 2. Goals that can be satisfied with serious effort; and 3. Goals that cannot be satisfied, no matter how much effort one makes.

Kaczynski argued that modern people are depressed because all the world’s hard problems have already been solved. What’s left to do is either easy or impossible, and pursuing those tasks is deeply unsatisfying. What you can do, even a child can do; what you can’t do, even Einstein couldn’t have done. So Kaczynski’s idea was to destroy existing institutions, get rid of all technology, and let people start over and work on hard problems anew. Kaczynski’s methods were crazy, but his loss of faith in the technological frontier is all around us. Consider the trivial but revealing hallmarks of urban hipsterdom: faux vintage photography, the handlebar mustache, and vinyl record players all hark back to an earlier time when people were still optimistic about the future. If everything worth doing has already been done, you may as well feign an allergy to achievement and become a barista.

ted kaczynski

You can’t find secrets without looking for them.

HOW TO FIND SECRETS

Beginnings are special. They are qualitatively different from all that comes afterward. This was true 13.8 billion years ago, at the founding of our cosmos: in the earliest microseconds of its existence, the universe expanded by a factor of 1030—a million trillion trillion. As cosmogonic epochs came and went in those first few moments, the very laws of physics were different from those we know today.

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?

ON THE BUS OR OFF THE BUS

what would the ideal company culture look like? Employees should love their work. They should enjoy going to the office so much that formal business hours become obsolete and nobody watches the clock. The workspace should be open, not cubicled, and workers should feel at home: beanbag chairs and Ping-Pong tables might outnumber file cabinets. Free massages, on-site sushi chefs, and maybe even yoga classes would sweeten the scene. Pets should be welcome, too: perhaps employees’ dogs and cats could come and join the office’s tankful of tropical fish as unofficial company mascots.

Dream company be like 🤭

When an imminent catastrophe requires the evacuation of humanity’s original home, the population escapes on three giant ships. The thinkers, leaders, and achievers take the A Ship; the salespeople and consultants get the B Ship; and the workers and artisans take the C Ship.

NERDS VS. SALESMEN

nerds are skeptical of advertising, marketing, and sales because they seem superficial and irrational. But advertising matters because it works. It works on nerds, and it works on you. You may think that you’re an exception; that your preferences are authentic, and advertising only works on other people. It’s easy to resist the most obvious sales pitches, so we entertain a false confidence in our own independence of mind. But advertising doesn’t exist to make you buy a product right away; it exists to embed subtle impressions that will drive sales later.

SALES IS HIDDEN