Preface

A book about how to build companies that create new things

The challenge of the future

Critical question: what important truth do very few people agree with you?

1.Globalization and technology

Globalization: copy from somewhere to everywhere
Technology: zero to one progress, not automatic
Startup, where new technology comes from

Party like it’s 1999

Prosperous
Malaise: 92-94
Dot-com mania: 98-00
Paypal mania: 99

1.Lesson of dogma
  • Make incremental advance: suspect and humble
  • Stay lean and flexible: try things out and be experimental
  • Improve on competition: start with existing customer
  • Focus on product, not sales: technology is primarily about product development
2.Opposite principles
  • It’s better to risk boldness than triviality
  • A bad plan is better than no plan
  • Competitive markets destroy profits
  • Sales matters just as much as product

All happy companies are different (monopoly)

Competition and monopoly

Lies people tell
  • Monopoly companies show their competition
  • Competitive companies show their monopoly

Competitive ecosystem pushes people toward ruthlessness or death

Monopoly is bad only in static world, world in dynamic enable companies to invent new and better things, creative monopolists give customer more choice

Because of historical relic, economists are obsessed with competition

The ideology of competition

Competition is an ideology that pervades our society and distorts our thinking

Competition causes us to overemphasize old opportunities and slavishly copy what has worked in the past, people are obsessed with honor and pride

Last mover advantage

Cash flow, importance of futher profits

1.Characteristics of Monopoly
  • Proprietary Technology: brings in 10 time improvement
  • Network Effects: start with small, significant spread
  • Economies of Sale: potential for great scale built into its first design
  • Branding, but not begin with brand rather than substance
2.Building a Monopoly
  • Start Small and Monopolize
  • Scaling Up
  • Don’t Disrupt, disruption: use new tech to introduce a low-end product at low prices. Disruption distorts self-understanding, attract attention from big companies

The Last Will be First

You are not a lottery ticket

Success is not luck not accidental

1.Control your future
  • Indefinite Pessimism: wait for it to happen
  • Definite Pessimism: future can be known, must prepare for it
  • Definite Optimism: future will be better if he plans and works to make it
  • Indefinite Optimism: future will be better, doesn’t know how
2.Our indefinite optimisim world
  • Indefinite Finance
  • Indefinite Politics
  • Indefinite Philosophy
  • Indefinite Life

Is it possible to be indefinite optimisim?
Darwin’s theory is not suitable for startup

We should make long-term planning

Follow the money

Power law: 80% & 20%
VC get profits from a small handful of companies, however every single company in a good venture portfolio must have the potential to succeed at vast scale
Why they oversee power law? it is clear only over time
What to do with the power law? One market can be better than all others,

Secrets

It seems that there has been no secret left in the world.

1.Why people believe that there are no hard secrets left?
  • Geography secrets are explored, we are taught to proceeds one very small step a time
  • Risk aversion, scared of being wrong
  • Complacency, comfortable enough
  • Flatness, high competitive market make the world “flat”
2.What if there is no secret?
  • No injustice
  • Economics, faith in efficient markets, HP stop innovative movement

Actually still many secrets left

3.How to find secrets?

Secrets about nature and secrets about people

Best place to look for secrets is where no one else is looking

4.What to do with secrets?

Only tell to specific people

Foundation

Beginnings are special, a startup messed up its foundation can not be fixed

1.Founding matrimony

Good co-founder

2.ownership, possession, control

Small board as possible

Everyone involved in your company should be full-time

Low CEO pay

Equity is a powerful tool, be careful with it
extending the founding

Company Culture

1.Beyond professionalism

Be tightly knit instead of transactional

2.Recruiting Conspirators

Give a good answer that is specific to your company to talented people

Everyone in your company should be different in the same way
be obsessed with same thing

3.Do One Thing

Everyone’s responsibility is unique

4.Like a Cult

Extreme dedication

Sales

Nerds are skeptical of advertising, while advertising is necessary
sale is hidden

1.How to Sell a Product

Different sales(according to price)

  • Complex sales, few each year, every detail requires close persoanl attention
  • Personal sales

Distribution Doldrums
Marketing and Advertising

2.Vital Marketing

in Paypal growth

3.The Power Law of Distribution

Even one working distribution channel is ok

Man and Machine
will machine replace human?

4.Substitution & Complementarity
  • Globalization means Substitution, compete for same resource
  • Technology means Complementarity, computer compete for none, human and computer are categorically different
5.Complementary Business

Example of Palantir

6.The ideology of Computer Science

People are enchanted by big data, however, computer can not solve problems alone

Green technology (Failure and example)

Mania and bust for green technology
Why fail?

  • The Engineer Question: can you create breakthrough technology instead of incremental improvements?
  • The Timing Question: is now the right time to start your particular business?
  • The Monopoly Question: are you starting with a big share of a small market?
  • The People Question: do you have the right team
  • The Distribution Question: do you have a way to not just create but deliver your product?
  • The Durability Question: will your market possible be defensible 10 and 20 years into the future?
  • The Secret Question: have you identified a unique opportunity that others don’t see?

The Founder’s Paradox

1.Distribution of Traits

Founder have extreme combination of traits