Zero to One

EVERY MOMENT IN BUSINESS happens only once.

The act of creation is singular, as is the moment of creation, and the result is something fresh and strange.

Today’s “best practices” lead to dead ends; the best paths are new and untried.

if nothing about our society changes for the next 100 years, then the future is over 100 years away.

This age of globalization has made it easy to imagine that the decades ahead will bring more convergence and more sameness.

Spreading old ways to create wealth around the world will result in devastation, not riches. In a world of scarce resources, globalization without new technology is unsustainable.

The smartphones that distract us from our surroundings also distract us from the fact that our surroundings are strangely old: only computers and communications have improved dramatically since midcentury.

If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.

The conventional wisdom of the “New Economy” accepted page views as a more authoritative, forward-looking financial metric than something as pedestrian as profit.

Conventional beliefs only ever come to appear arbitrary and wrong in retrospect; whenever one collapses, we call the old belief a bubble. But the distortions caused by bubbles don’t disappear when they pop. The internet craze of the ’90s was the biggest bubble since the crash of 1929, and the lessons learned afterward define and distort almost all thinking about technology today.

four big lessons from the dot-com crash that still guide business thinking today: 1. Make incremental advances Grand visions inflated the bubble, so they should not be indulged. Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward. 2. Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” You should not know what your business will do; planning is arrogant and inflexible. Instead you should try things out, “iterate,” and treat entrepreneurship as agnostic experimentation. 3. Improve on the competition Don’t try to create a new market prematurely. The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors. 4. Focus on product, not sales If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

you can’t escape the madness of crowds by dogmatically rejecting them. Instead ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes? The most contrarian thing of all is not to oppose the crowd but to think for yourself.

what valuable company is nobody building?

Creating value is not enough—you also need to capture some of the value you create.

Entrepreneurs are always biased to understate the scale of competition, but that is the biggest mistake a startup can make. The fatal temptation is to describe your market extremely narrowly so that you dominate it by definition.

Creative monopolists give customers more choices by adding entirely new categories of abundance to the world. Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better.

If the tendency of monopoly businesses were to hold back progress, they would be dangerous and we’d be right to oppose them. But the history of progress is a history of better monopoly businesses replacing incumbents.

Students who don’t learn best by sitting still at a desk are made to feel somehow inferior, while children who excel on conventional measures like tests and assignments end up defining their identities in terms of this weirdly contrived academic parallel reality.

Higher education is the place where people who had big plans in high school get stuck in fierce rivalries with equally smart peers over conventional careers like management consulting and investment banking.

Professors downplay the cutthroat culture of academia, but managers never tire of comparing business to war.

For a company to be valuable it must grow and endure, but many entrepreneurs focus only on short-term growth. They have an excuse: growth is easy to measure, but durability isn’t.

Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.

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. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell, especially in an already crowded market.

If you build something valuable where there was nothing before, the increase in value is theoretically infinite.

Network effects can be powerful, but you’ll never reap them unless your product is valuable to its very first users when the network is necessarily small.

network effects businesses must start with especially small markets.

the initial markets are so small that they often don’t even appear to be business opportunities at all.

Software startups can enjoy especially dramatic economies of scale because the marginal cost of producing another copy of the product is close to zero.

A company has a monopoly on its own brand by definition, so creating a strong brand is a powerful way to claim a monopoly.

disruption has recently transmogrified into a self-congratulatory buzzword for anything posing as trendy and new.

This seemingly trivial fad matters because it distorts an entrepreneur’s self-understanding in an inherently competitive way.

If you think of yourself as an insurgent battling dark forces, it’s easy to become unduly fixated on the obstacles in your path. But if you truly want to make something new, the act of creation is far more important than the old industries that might not like what you create.

As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

Every company starts in unique circumstances, and every company starts only once. Statistics doesn’t work when the sample size is one.

“Shallow men believe in luck, believe in circumstances.… Strong men believe in cause and effect.”

luck is in the past tense. Far more important are questions about the future: is it a matter of chance or design?

Indefinite attitudes to the future explain what’s most dysfunctional in our world today. Process trumps substance: when people lack concrete plans to carry out, they use formal rules to assemble a portfolio of various options. This describes Americans today.

An indefinite pessimist looks out onto a bleak future, but he has no idea what to do about it.

A definite pessimist believes the future can be known, but since it will be bleak, he must prepare for it.

To a definite optimist, the future will be better than the present if he plans and works to make it better.

In the 1950s, people welcomed big plans and asked whether they would work. Today a grand plan coming from a schoolteacher would be dismissed as crankery, and a long-range vision coming from anyone more powerful would be derided as hubris.

To an indefinite optimist, the future will be better, but he doesn’t know how exactly, so he won’t make any specific plans.

Instead of working for years to build a new product, indefinite optimists rearrange already-invented ones.

Finance epitomizes indefinite thinking because it’s the only way to make money when you have no idea how to create wealth.

in an indefinite world, people actually prefer unlimited optionality; money is more valuable than anything you could possibly do with it. Only in a definite future is money a means to an end, not the end itself.

To increase discretionary spending we’d need definite plans to solve specific problems. But according to the indefinite logic of entitlement spending, we can make things better just by sending out more checks.

Definite optimism works when you build the future you envision. Definite pessimism works by building what can be copied without expecting anything new. Indefinite pessimism works because it’s self-fulfilling: if you’re a slacker with low expectations, they’ll probably be met.

Journalists analogize literal survival in competitive ecosystems to corporate survival in competitive markets.

A business with a good definite plan will always be underrated in a world where people see the future as random.

Whenever you shift from the substance of a business to the financial question of whether or not it fits into a diversified hedging strategy, venture investing starts to look a lot like buying lottery tickets.

Contrarian thinking doesn’t make any sense unless the world still has secrets left to give up.

the unknown seems less accessible than ever.

monopolists downplay their monopoly status to avoid scrutiny, while competitive firms strategically exaggerate their uniqueness.

“Company culture” doesn’t exist apart from the company itself: no company has a culture; every company is a culture. A startup is a team of people on a mission, and a good culture is just what that looks like on the inside.

If you can’t count durable relationships among the fruits of your time at work, you haven’t invested your time well—even in purely financial terms.

People at a successful startup are fanatically right about something those outside it have missed. You’re not going to learn those kinds of secrets from consultants,

The most fundamental reason that even businesspeople underestimate the importance of sales is the systematic effort to hide it at every level of every field in a world secretly driven by it.

If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product.

The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.

Americans fear technology in the near future because they see it as a replay of the globalization of the near past. But the situations are very different: people compete for jobs and for resources; computers compete for neither.

Gains from trade are greatest when there’s a big discrepancy in comparative advantage, but the global supply of workers willing to do repetitive tasks for an extremely small wage is extremely large.

computers are tools, not rivals.

We’re impressed with small feats accomplished by computers alone, but we ignore big achievements from complementarity because the human contribution makes them less uncanny.

if something is “socially good,” is it good for society, or merely seen as good by society? Whatever is good enough to receive applause from all audiences can only be conventional,

Progress isn’t held back by some difference between corporate greed and nonprofit goodness; instead, we’re held back by the sameness of both. Just as corporations tend to copy each other, nonprofits all tend to push the same priorities.

The best projects are likely to be overlooked, not trumpeted by a crowd; the best problems to work on are often the ones nobody else even tries to solve.

The famous and infamous have always served as vessels for public sentiment: they’re praised amid prosperity and blamed for misfortune.

Apple’s value crucially depended on the singular vision of a particular person. This hints at the strange way in which the companies that create new technology often resemble feudal monarchies rather than organizations that are supposedly more “modern.” A unique founder can make authoritative decisions, inspire strong personal loyalty, and plan ahead for decades. Paradoxically, impersonal bureaucracies staffed by trained professionals can last longer than any lifetime, but they usually act with short time horizons.