23 Dec, 2014
I read this book by Peter Thiel on the plane home from Sumatra. A few takeaway points:
Small companies try to pretend to be large (stable, impressive, investment), large monopolies try to pretend they are small (avoid anti-competition laws)
How is your company going to deliver 10x the value of the current solution?
Good to ask "what important truth do very few people agree with you on?". If you don't have a good answer, maybe you don't have a great idea for a business.
What valuable company is no-one building?
A bad plan is better than no plan, sales matter just as much as product, it is better to risk boldness instead of triviality.
Businesses should want to be monopolies, competition kills profits. Start small and monopolize (if you think the market might be to big, it almost certainly is).
What characteristics do monopolies have:
Proprietary Technology
Network Effects
Economies of scale - the fixed cost of developing the product should mean you get stronger and more profitable, the larger you get.
Branding - a company has a monopoly on its own brand.
You want last mover advantage - i.e. be the first person to dominate the market, not just to be the first person.
Good design is essential.
Power laws - people false assume most things are linear, they aren't, they are power laws. Double the effort means 4x the outcome. In investment 0.01% of Google is worth $35million.
Look for secrets to answer the question "what important truth do very few people agree with you on?" - secrets of nature, or secrets of humans. When thinking about what kind of company to build, ask yourself:
People ones can be the most useful (and maybe are easier to get to).
JG: One secret of humans is that they spend a lot of time curating their image.
What to do with secrets - tell only those that need to know. The golden mean between telling no-one and telling everyone is called a company.
"A startup messed up at its foundation cannot be fixed" - get these things right to start with:
A startup might allocate ownership amongst founders, employees and investors. The managers and employees posess the company, and the founders and investors on the board control it. Distributing these roles between different people makes sense, but it also risks misalignment.
Care about who you hire, they have to have the skills but also fit in.
Sales - distribution mechanisms can be plotted thus:
Viral Marketing Dead Zone Sales Complex Sales
Customer Aquisition Cost $1 $100 |---------| $10,000 $10m
Computers are great at things, humans are great at things. The best products use both together, they don't have machines replacing humans.
The Engineering 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 position be defensible in 10 and 20 years into the future?
The Secret Question
Have you identified a unique oppurtunity others don't see?
Peter Thiel says: "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 the 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."
What about a virtual equivalent to mauri shells from the Kula ring, you trade for art/value instead of money?
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