Updated: May 21
Rating 5/5 ⭐️ (Must-Read)
Topic: Non-Fiction: Technology, entrepreneurship and startups.
“There is no reason why the future should only happen at standford, college, or in Sillicon Valley" - Peter Thiel
Main ideas - Great.
Examples & stories - Great.
Engagement - Good.
The Book In 10 Seconds
It's easier to copy a model than to make something new. Doing more of what we already know takes the world from one to end. Every time we create something new, we go from zero to one, the act of creation is singular.
New technology is usually created by new ventures. What follows is an exercise in thinking about how to succeed in the business of creating new things.
5 Key Takeaways
1) THE FUTURE OF PROGRESS.
"Progress does not come automatically. We have to imagine it and create it."
The future of progress can take two forms;
- Horizontal Progress by copying things that work.
- or Vertical Progress by creating new things.
Globalization (or horizontal progress): Is taking something that has worked somewhere and putting it everywhere.
Technology (vertical progress): Is creating a new or better way of doing things.
Silicon Valley has become the capital of technology. New technology tends to come from new ventures called startups.
Is hard to develop new things in big organizations but is even harder to do it alone.
"A startup is the largest group of people you can convince, that you can build a different future."
2) THE DOT-COM CRASH.
"The entrepreneurs that stuck in Silicon Valley after the dot-com crash learned four main lessons."
Make incremental advances: Grand visions inflated the bubble. Small incremental steps are the only safe path forward.
Stay lean and flexible: All companies must be lean. Planning is guessing. Instead, iterate and treat entrepreneurship as agnostic experimentation.
Improve on the competition: Don't try to create a new market prematurity. Improve on existing products.
Focus on product not sales: Technology is primarily about product development, not distribution.
"This lesson has become dogma in the startup world. But the opposite principles are probably more correct."
Is better to risk boldness than triviality.
A bad plan is better than no plan.
Competitive markets destroy profits.
And sales matter just as much as products.
To build the next generation of companies we must abandon the dogmas created after the crash.
"Instead ask yourself, how much of what you know about business is shaped by reactions to past mistakes?"
3) MONOPOLIES VS COMPETITION
"Monopolies are not the exception. They are the condition of every succesful business."
Economists use two simple models to explain the market. Perfect competition and monopolies.
- Perfect Competition: Competition is the ideology that prevails in our society and distortions our thinking. The more we compete the less we actually gain.
Every firm in the competitive market is undifferent and sells the same homogenous products. The market sets the price.
Competition means no meaningful differentiation, no profits for anybody, and struggle for survival.
"If you can recognize competition as a destructive force you are already more sane than most."
- Monopoly: To an economist, every monopoly looks the same, whether they eliminate rivals, secures a license from the state or innovate its way to the top. In this book, we refer to a monopoly as a company that is so good at what it does, that no other firm can offer a close substitute.
A monopoly owns its market and sets its own prices by maximizing profits. Creative monopolies mean new products that benefit everybody and sustainable profits for the creator.
“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.”
4) LAST MOVER ADVANTAGE, THE LAST WILL BE FIRST.
"Moving first is a tactict not a goal"
You have probably heard of the first mover advantage. Enter the market before the competition and secure market shares.
But what really matters is securing cash flows in the future.
Is much better to be the last mover. That is, to make the last great development in a specific market.
Google was the last mover in the search engine space, Facebook in the social media networks and Apple in smartphones. They are all monopolies. They all secured cash flows in the future (more than ten years).
So, how can we know that a business will still be around a decade from now?
Characteristics of a monopoly;
1) Proprietary technology: Make your product difficult or impossible to replicate (google's search algorithms). Proprietary technology needs to be at least 10X Better than its closest substitute in some important dimension. Anything less than that will look at as marginal improvement, and it will be hard to sell, especially in a competitive market.
2) Network effects: Create a product that is useful to its first users when the network is still small. Find a niche, then scale.
3) Economies of scale: A monopoly business gets stronger as it gets bigger. The fixed cost can be spread out example; software business. Service businesses are hard to make monopolies from, prioritize potential for growth.
4) Branding: Create a product so good that it creates a category of its own. Positioning a company with a strong product will eventually create a strong brand (reputation). Never begin with a brand, begin with a product, think Apple (iPod, iPhone, iPad).
There is no shortcut to a monopoly. Start with a small niche, secure cash flows in the future and scale from there. Remember to be the last best product in a niche.
5) THE FOUR VIEWS ON THE FUTURE.
"The future does not get built by chance."
What can you expect from the future? You can expect the future to take two forms.
A definite form or indefinite form.
A Definite future: Can be known and it makes sense to try to understand it and shape it.
An Indefinite Future: Is random and is a matter of chance. So you will give up on trying to master it.
You can also expect the future to be either better or worst.
Optimists welcome the future.
Pessimists fear it.
THE FOUR VIEWS OF THE FUTURE
Combining these four views you get four main views of the future.
1) Indefinitely Pessimists: See the future as oblique and do not know what to do about it. (We don't know what will happen so we live in the moment)
2) Definitely Pessimist: A definitely pessimist believes that the future can be known but since is oblique he has to prepare for it. (Something will happen and we have to prepare)
3) Definitely Optimism: To a definite optimist the future will be better than the present if he or she plans to work and make it better. (something will happen and we will make it our mission to make it so)
4) Indefinitely Optimisms: To an Indefinitely Optimism the future will be better but he or she does not know exactly how. So they don't make any specific plans, they see no reason to design the future. (Something good will happen, we just have to wait for it)
We need to find our way back to a definite future with an optimist take. The future does not get built by chance.
"A business with a good definitely plan, will always be underrated in a w