Zero to One: Notes on Start Ups, or How to Build the Future

I'd like to share my thoughts on the Turkish translation of "Zero to One: Notes on Start Ups, or How to Build the Future" first. I read the translated version and I do recommend it!

You can click here to order this great book!

Alright! let me start with my favorite part from this book as a Tolstoy fan: ''In the business world, unlike Tolstoy's observation in "Anna Karenina as ''Happy families are all alike; every unhappy family is unhappy in its own way''; Peter Thiel points out the following: "All successful companies are different. They each solve a unique problem and establish a monopoly. Conversely, unsuccessful companies are similar; they fail to avoid competition.''

Perfect Competition vs. Monopoly

In perfect competition, no firm can make economic profit in the long term. Competitive market firms are undifferentiated, selling homogeneous products at the price determined by the market. On the contrary, a monopoly is the opposite. While a competitive firm must sell at the market price, a monopoly has its own market, allowing it to set its own price. When we refer to monopoly firms, we mean companies that excel in their field, offering a product or service that no other company can closely match. Google is a good example of a company that went from 0 to 1, differentiating itself in the search engine market and avoiding direct competition with Microsoft and Yahoo.

The war between Microsoft and Google though, each growing and expanding into the other's territory, led to the rise of Apple, surpassing them both. In January 2013, Apple's market capitalization was $500 billion, exceeding the combined total of Google and Microsoft at $467 billion. Just three years earlier, both Google and Microsoft were more valuable than Apple. If you can't beat a competitor, the most logical choice is to merge with them.

Four Characteristics of a Monopoly:

1. Proprietary Technology: Essentially, proprietary technologies must be at least 10 times better than the closest substitute in a significant area to lead to a true monopoly advantage. Inventing something new is the clearest way to achieve a 10x improvement.

2. Network Effects: Like Facebook, where everyone wants to join if all their friends are there. However, network effects, no matter how strong, won't benefit you until your product is valuable for the first users when the network is still small.

3. Economies of Scale

4. Branding: First the product, then the branding. Trying to brand before having a tech led product is dangerous.

The history of progress is the history of better monopolies replacing what already exists. IBM's hardware monopoly was broken by Microsoft's software monopoly, and Apple is challenging Microsoft's monopoly with iOS. Monopoly is a condition for every successful business.

About Startups/Business:

Every startup/business must answer seven questions:

1. Engineering Question: Can you create a technological breakthrough rather than incremental improvements?

2. Timing Question: Is now the right time to start this business?

3. Monopoly Question: Are you starting with a big share of a small market?

4. People Question: Do you have the right team?

5. Distribution Question: Do you have a way to not just produce, but also sell your product?

6. Sustainability Question: Will your position in the market be defensible 10 or 20 years from now?

7. The Secret Question: Have you identified a unique opportunity that others haven't seen?

Side notes: Keep secrets. Every great business is built around a hidden secret. And a fundamentally flawed startup cannot be fixed.<

Defining the Market Correctly:

For instance, you want to open a restaurant in Izmir that sells snails. No one else is doing it! You declare, "We will dominate the entire market!" However, if the primary market in Izmir is the overall restaurant market, focusing solely on snail dishes might not be the right approach.

The perfect target market for a startup is a small group of people concentrated in a specific area who are underserved or not served at all by few competitors.

About Cash Flow

A good business is defined by its ability to generate cash flow in the future. Investors expect Twitter to capture monopoly profits in the next decade, even as the days of newspaper monopolies are over.

Let's consider nightclubs and restaurants. Successful ones can make a healthy amount of money, but cash flows will decrease over the years as customers shift to newer and trendier alternatives. Technology companies, on the other hand, typically lose money in the first few years. Building valuable things takes time, and the true value of a technology company often becomes apparent at least 10 or 15 years later.

Hiring, Company Culture, and Startup Company Structure:

No company has a culture; every company is a culture. Working efficiently and quickly (especially in startups) is much easier when everyone's worldview is similar.

Talented people don't have to work with you. Why would someone choose to work as the 20th engineer in your company when they can get more money and prestige at Google? Here you need to explain 2 main things.

1. Your mission and why it makes sense to make it build

2. The team

Building Teams

The most important decision when starting something is who you start with. Choosing a co-founder is like getting married, and founder disputes are as ugly as divorces.

You need good people who get along, but you also need a structure that will keep everyone aligned in the long term.

A Silicon Valley anarchist says that amazing alignment can only happen if you hire the right people without any guide structure. However, it is expected that workplace happy accidents and even informal chaos will help overturn all the old rules followed by the rest of the world.

Everyone you bring into your company should be full-time (except for cases like hiring an accountant or lawyer externally). Anyone without stock options or receiving an ordinary salary is fundamentally misaligned. They will be inclined to create short-term value rather than bring long-term gains to you.

Even remote work should be avoided because if colleagues are not full-time, in the same place, and together every day, discord can come into play at any time.

Defining roles reduces conflict.

Internal harmony is what keeps a startup alive. When a startup fails, it usually thinks it lost to a competitive rival in a hostile environment. Internal conflict is like an autoimmune disease: the technical cause of death might be pneumonia, but the real reason is not apparent

Career:

In the startup world, even if you are highly talented, you don't have to start your own company. Those who understand the power law hesitate more than others before starting a new venture, knowing how successful they can be by joining the best company during the growth stage. Working for a company with the potential for a monopoly is crucial.

Since time is your most valuable asset, spending it with people you don't plan to have a long future with is strange. If you don't trust sustainable relationships at work, you haven't used your time as a good investment.

In conclusion, this book has been a valuable source of learning for me. I hope this post encourages you to delve even deeper into its insights.