Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.
When a startup fails, we often imagine it succumbing to predatory rivals in a competitive ecosystem. But every company is also its own ecosystem, and factional strife makes it vulnerable to outside threats. Internal conflict is like an autoimmune disease: the technical cause of death may be pneumonia, but the real cause remains hidden from plain view.
Amazon made its first 10x improvement in a particularly visible way: they offered at least 10 times as many books as any other bookstore.
If you treat the future as something definite, it makes sense to understand it in advance and to work to shape it.
Superior sales and distribution by itself can create a monopoly, even with no product differentiation.
The lesson for business is that we need founders. If anything, we should be more tolerant of founders who seem strange or extreme; we need unusual individuals to lead companies beyond mere incrementalism.
If you think something hard is impossible, you’ll never even start trying to achieve it.
If you think something hard is impossible, you’ll never even start trying to achieve it. Belief in secrets is an effective truth.
Or you can radically improve an existing solution: once you’re 10x better, you escape competition.
Anyone who prefers owning a part of your company to being paid in cash reveals a preference for the long term and a commitment to increasing your company’s value in the future. Equity can’t create perfect incentives, but it’s the best way for a founder to keep everyone in the company broadly aligned.
Like acting, sales works best when hidden. This explains why almost everyone whose job involves distribution – whether they’re in sales, marketing, or advertising – has a job title that has nothing to do with those things. People who sell advertising are called “account executives.” People who sell customers work in “business development.
A new company’s most important strength is new thinking: even more important than nimbleness, small size affords space to think.
Most businesses get zero distribution channels to work: poor sales rather than bad product is the most common cause of failure. If you can get just one distribution channel to work, you have a great business. If you try for several but don’t nail one, you’re finished.
You should never assume that people will admire your company without a public relations strategy.
Our task today is to find singular ways to create the new things that will make the future not just different, but better – to.
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.
Instead of violent wars there could be violent video games. Instead of heroic feats, there could be thrilling amusement park rides. Instead of serious thought, there could be intrigues of all sorts as if in a soap opera. It is a world where people spend their lives amusing themselves to death.
Take the hidden paths.
Talented people don’t need to work for you; they have plenty of options. You should ask yourself a more pointed version of the question: Why would someone join your company as its 20th engineer when she could go work at Google for more money and more prestige?
The lawyers I worked with ran a valuable business, and they were impressive individuals one by one. But the relationships between them were oddly thin. They spent all day together, but few of them seemed to have much to say to each other outside the office. Why work with a group of people who don’t even like each other?
This leads to a second, less obvious understanding of the founding: it lasts as long as a company is creating new things, and it ends when creation stops. If you get the founding moment right, you can do more than create a valuable company: you can steer its distant future toward the creation of new things instead of the stewardship of inherited success. You might even extend its founding indefinitely.