Zero to One envisions how entrepreneurs can start from nothing and grow into something. The next Billionaire entrepreneur will not come from creating Facebook, Google, Apple, Instagram, TikTok, or Microsoft.

If you are copying these ideas you are on a wild goose chase. The next visionaries need to create something new that does not exist yet. It is hard to develop new things and come up with new ideas. 

Leaps in Technology are enabling more new ideas and companies to be created. Horizontal progress relies on copying things that work and not much progress can be made using this model. Vertical Progress is harder to imagine since something new has to be created. This progress enables exponential growth for entrepreneurs.

An important question you need to ask is

‘What valuable company is nobody building?’

  1. The biggest leaps will be vertical, not horizontal.
  2. Monopolies are good, for both business and society.
  3. Founders need the vision to take their business from zero to one (create new things that do not exist)

Paypal and the Dot Com Bubble

Peter Thiel was one of the co-founders of PayPal in the late 90s. Paypal had the idea of creating a new currency to rival the us dollar. The founders quickly realized that this was not taking route fast enough and pivoted to money transfers via emails which were already becoming popular. Paypal was not growing fast enough and they decided to give $10 for every new user and $10  for any referrals. This gave the company exponential growth but with it an unsustainable customer acquisition cost.

The founders decided that the strategy was okay in the long run if users transacted on the platform. The dot com bubble in the late 90s created a lot of technology companies. Most never survived the burst. Investors were willing to back any company with a dot com on it. Paypal was one of the lucky companies that survived by raising $100 million in funding just before the dot com bubble burst.  

As a result of the dot-com boom and crash of the 1990s, the world of startups was shocked into believing that the big bucks of the future could be found in globalization, not new technology. This led to four unwritten rules in the startup world, rules that have now misguided entrepreneurs for years. Here they are:

  1. Make incremental advances – Don’t try to “change the world.” Take one step at a time and don’t get too caught up in a “grand vision.”
  2. Stay lean and flexible – Eschew the formal planning. Focus instead on “iterating” on your business model and learn as you go.
  3. Improve on the competition – Inventing something new is risky at best. Play it safe and build off a technology that has already proved itself.
  4. Focus on product, not sales – The right product should speak for itself, no wasteful spending on sales and marketing is needed.

Perfect Competition vs Monopoly

In perfect competition, many entrants come into an industry and eventually wipe out profits that attracted them to that industry in the first place. A monopoly on the other hand can set its prices, making it capture more value. Google is an example of a monopoly in the online search space where it commands over 70% market share. Monopoly businesses present themselves as small players in a competitive market to avoid attracting unwanted publicity or regulatory issues. It is clear that if you want to build create and capture lasting value, don’t build an undifferentiated commodity business.

Creative monopolies are good for everyone since they create more value for the entire market. The monopoly profits enable them to innovate. Enterprises in perfect competition don’t have the latitude to invest their time or capital in innovation due to fierce competition in their space. Therefore monopoly is the condition for any successful business. All failed companies failed to beat their competition.

Characteristics of a Monopoly;

  1. PROPRIETARY TECHNOLOGY
  2. NETWORK EFFECTS
  3. ECONOMIES OF SCALE
  4. BRANDING

You are not a Lottery Ticket

The most contentious question in business is whether success comes from luck or skill. Are we in a lottery and only a few get to win it? How can you plan your future on a path to success with definite plans and goals? Having a definite mindset means that you have firm convictions about the future. An indefinite mindset treats the future as hazy and uncertain. You can also expect the future to be either better or worse than the present. Optimists welcome the future; pessimists fear it. Combining these possibilities
yields four views:

For you to have success you need to follow the 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).

Compounding is considered “the eighth wonder of the world,” “the greatest mathematical discovery of all time,” or even “the most powerful force in the universe.” Never underestimate exponential growth. Pareto also discovered in 1906 in Italy that 80% of the land was owned by 20% of the population. How does a small group achieve disproportionate results?

This is why monopoly businesses capture more value than millions of undifferentiated competitors. The power law describes exponential equations that show severely unequal distributions and is the law of the universe.

Foundations and Mechanics of Mafia

A startup that is messed at the foundation cannot be fixed.

Choosing the wrong partner or team will be hard to correct midway. As a founder, your first job is to get the first thing right, because you cannot build a great company on a flawed foundation.

To anticipate likely sources of misalignment 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?

“Company culture” doesn’t exist apart from the company itself: no company has a culture; every company is a culture. Sales Matters, you can build the best product but if no one knows about it there will be no sales. How do clients get to hear your value proposition? Invest in marketing and advertising. This is the distribution strategy, figure it out at the beginning.

(Customer Lifetime Value, or CLV) must exceed the amount you spend on average to acquire a new customer (Customer Acquisition Cost, or CAC). Build a founding ‘Mafia’ team, these are people who have a cultic following for the company’s mission. Everybody sells: Everybody in a company sells. If you don’t see any salespeople around you, you’re the salesperson.

Man and Machine

While other industries have stagnated, the information technology space shows no signs of slowing down. There is a fear that machines might take over our jobs but is this the case? Where large amounts of data are concerned machines outperform humans. In 2012 Google supercomputer was able to pick thumbnails of cats from YouTube with 75% accuracy, now compare this with a 5-year-old who can do the same task with 100% accuracy. We need to view technology as complementary and not a substitute.

Seeing Green

At the beginning of the 21st century, everyone agreed that the next big thing was clean technology. Entrepreneurs started thousands of cleantech companies, and investors poured more than $50 billion into them. So began the quest to cleanse the world. It didn’t work. Instead of a healthier planet, we got a massive cleantech bubble.

Most cleantech companies crashed because they neglected one or more of the seven questions that every business must answer:

  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?

The Founders Paradox

Founders are considered eccentric or unusual. Most founders do not follow a normal distribution of traits. Normally we expect opposite traits to be mutually exclusive: a normal person can’t be both rich and poor at the same time, for instance.

But it happens all the time to founders: startup CEOs can be cash poor but millionaires on paper. Almost all successful entrepreneurs are simultaneously insiders and outsiders. And when they do succeed, they attract both fame and infamy. When you plot them out, founders’ traits appear to follow an inverse normal distribution.

Even the most farsighted founders cannot plan beyond 20 to 30 years. One of the possibilities of the future is take off. The end result of such a breakthrough could take a number of forms, but any one of them would be so different from the present as to defy description. The future won’t happen on its own.

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.

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Victor Botto

Victor is a Passionate Business Leader who is dedicating his life to help others reach their Full Potential. Need more details? Please check the About section of the www.victorbotto.com website

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