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If you are copying these guys, you aren’t learning from them. Of course, it’s easier to copy a model than to make something new. Doing what we already know how to do takes the world from 1 to n, adding more of something familiar. But every time we create something new, we go from 0 to 1.
My primary goal in teaching the class was to help my students see beyond the tracks laid down by academic specialties to the broader future that is theirs to create.
Brilliant thinking is rare, but courage is in even shorter supply than genius.
No one can predict the future exactly, but we know two things: it’s going to be different, and it must be rooted in today’s world.
horizontal progress is globalization—taking things that work somewhere and making them work everywhere.
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. Without technological change, if China doubles its energy production over the next two decades, it will also double its air pollution. If every one of India’s hundreds of millions of households were to live the way Americans already do—using only today’s tools—the result would be environmentally catastrophic. Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce
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New technology has never been an automatic feature of history. Our ancestors lived in static, zero-sum societies where success meant seizing things from others. They created new sources of wealth only rarely, and in the long run they could never create enough to save the average person from an extremely hard life.
In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work (if this describes your company, you should quit now). At the other extreme, a lone genius might create a classic work of art or literature, but he could never create an entire industry.
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.
what follows is not a manual or a record of knowledge but an exercise in thinking. Because that is what a startup has to do: question received ideas and rethink business from scratch.
“Madness is rare in individuals—but in groups, parties, nations, and ages it is the rule,” Nietzsche wrote
Conventional beliefs only ever come to appear arbitrary and wrong in retrospect; whenever one collapses, we call the old belief a bubble.
irrationality was rational given that appending “.com” to your name could double your value overnight.
When I was running PayPal in late 1999, I was scared out of my wits—not because I didn’t believe in our company, but because it seemed like everyone else in the Valley was ready to believe anything at all.
For PayPal to work, we needed to attract a critical mass of at least a million users. Advertising was too ineffective to justify the cost. Prospective deals with big banks kept falling through. So we decided to pay people to sign up. We gave new customers $10 for joining, and we gave them $10 more every time they referred a friend. This got us hundreds of thousands of new customers and an exponential growth rate.
These are hard questions, but the bigger problem is that you have an incentive not to ask them at all.
Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and to finance the ambitious research projects that firms locked in competition can’t dream of.
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.
Competition can make people hallucinate opportunities where none exist.
Winning is better than losing, but everybody loses when the war isn’t one worth fighting.
great business is defined by its ability to generate cash flows in the future.
any firm with close substitutes will see its profits competed away. Nightclubs or restaurants are extreme examples: successful ones might collect healthy amounts today, but their cash flows will probably dwindle over the next few years when customers move on to newer and trendier alternatives. Technology companies follow the opposite trajectory. They often lose money for the first few years: it takes time to build valuable things, and that means delayed revenue. Most of a tech company’s value will come at least 10 to 15 years 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.
Mark Zuckerberg’s first product was designed to get all his classmates signed up, not to attract all people of Earth. This is why successful network businesses rarely get started by MBA types: the initial markets are so small that they often don’t even appear to be business opportunities at all.
good startup should have the potential for great scale built into its first design.
It was much easier to reach a few thousand people who really needed our product than to try to compete for the attention of millions of scattered individuals.
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market.
Once you create and dominate a niche market, then you should gradually expand into related and slightly broader markets.
The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets—a part of their founding narrative.
As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.
being the first mover doesn’t do you any good if someone else comes along and unseats you. It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits.
If success were mostly a matter of luck, these kinds of serial entrepreneurs probably wouldn’t exist.
Jack Dorsey, founder of Twitter and Square, tweeted to his 2 million followers: “Success is never accidental.”
perhaps we’ve become too quick to dismiss anyone who claims to have succeeded according to plan. Is there a way to settle this debate objectively? Unfortunately not, because companies are not experiments. To get a scientific answer about Facebook, for example, we’d have to rewind to 2004, create 1,000 copies of the world, and start Facebook in each copy to see how many times it would succeed.
Ralph Waldo Emerson captured this ethos when he wrote:
“Shallow men believe in luck, believe in circumstances.… Strong men believe in cause and effect.”
To a definite optimist, the future will be better than the present if he plans and works to make it better.
In the 1950s, Americans thought big plans for the future were too important to be left to experts.
Only in a definite future is money a means to an end, not the end itself.
Definite optimism works when you build the future you envision.
Would-be entrepreneurs are told that nothing can be known in advance: we’re supposed to listen to what customers say they want, make nothing more than a “minimum viable product,” and iterate our way to success. But leanness is a methodology, not a goal. Making small changes to things that already exist might lead you to a local maximum, but it won’t help you find the global maximum. You could build the best version of an app that lets people order toilet paper from their iPhone. But iteration without a bold plan won’t take you from 0 to 1. A company is the strangest place of all for an
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It’s true that every great entrepreneur is first and foremost a designer.
But the most important lesson to learn from Jobs has nothing to do with aesthetics. The greatest thing Jobs designed was his business. Apple imagined and executed definite multi-year plans to create new products and distribute them effectively. Forget “minimum viable products”—ever since he started Apple in 1976, Jobs saw that you can change the world through careful planning, not by listening to focus group feedback or copying others’ successes.
The power of planning explains the difficulty of valuing private companies.
A business with a good definite plan will always be underrated in a world where people see the future as random.
A startup is the largest endeavor over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket.
In 1906, economist Vilfredo Pareto discovered what became the “Pareto principle,” or the 80-20 rule,
