Thread by @LifeHornsWay

What To Know About Startups

Learnings From Peter Thiel's Zero To One

8 Key Ideas In 8 Tweets

[ THREAD ]

Let’s go 👇

1:

Make A Plan And Execute

Today, startup dogma incorrectly advises:

- The best ideas are taken...
- So incremental improvement is the safest bet
- Stay flexible (planning is unnecessary)
- 'Build it and they will come' (sales is unnecessary)

Unfortunately, this dogma is a flawed reaction to the excess of the 2000 tech bubble.

Don't be misled.

You should:

- Be opinionated about the future
- Avoid competition; do something new
- Make a plan to realize your vision
- Prioritize distribution (sales) as much as product

2:

Competition Is A Destructive Force

Highly competitive markets ensure your business life will be brutish and short.

“In business, money is either an important thing or it is everything.”

If you’re locked in fierce competition, you have no time for anything but protecting your slim margins.

Only by escaping competitive pressures can you afford to care deeply about higher-order things like:

- Environmental impact
- Mission impact
- Aesthetics
- People

3:

In A Dynamic World, Monopolies Are Good

Most people think: Monopolies = Bad

But your view of them depends on whether the world is static or changing...

If the world is Static, monopoly businesses are merely “rent collectors”

- They corner the market
- Then increase the price
- And because the world is static...
- These monopolies can never be unseated

If, on the other hand, the world is Dynamic, monopolies can be a force for good:

- They add entirely new categories of goods
- This increases consumer choice (Google, Amazon, etc.)
- Even the government acknowledges this...
- It actively promotes monopolies through patents

4:

How Great Businesses Are Built

Your business can escape competition through:

A — Proprietary Technology

Your technology is 10x better than the closest substitute and impossible to replicate.

Think Google for search. Or PayPal for payments in the early days.

B — Network Effects

Your product becomes more useful as more people use it.

If no one had text messaging, it would be useless. When everyone can text, it’s very useful.

Surprisingly, creating network effects requires starting with a small network (e.g. Facebook at Harvard).

C — Economies of Scale

As your business grows, you can spread your fixed costs over more sales.

This is what it means to "scale."

- Service businesses are harder to scale
- Product businesses are easier to scale

D — Branding

Branding should not substitute for strong underlying substance and technology.

But once you have those things, branding reinforces an existing monopoly.

5:

How To Build A Valuable Business

- Start with a small market
- If you think it's too big, it is
- Dominate a niche, then scale

Example:

- Amazon started with books
- Then CDs and videos
- Then everything

6:

Valuable Businesses Are Built On Secrets

Every valuable business believes something about the world that most people have yet to figure out.

Most people think there are no secrets left to find.

This leads to "incrementalism"...

Incrementalism implies that the only thing left to do is refine what’s already been done.

This leads to an uninspired future. And poor business outcomes.

You have to believe that you can contribute something unique.

(And you can!)

7:

Sales Matters As Much As Product

Current dogma says, “If you build it, they will come.”

This is wrong.

Most people underestimate the importance of sales

Why?

Because sales only works when it’s hidden...

As a result, there is a systematic effort to conceal it at every level, of every field.

Collectively, we deny sales works. Yet sales ability is what distinguishes the superstars everywhere.

Do not be misled:

Sales and distribution are just as important as the product itself.

8:

Summary:

- Make a plan and execute
- Competition is a destructive force
- Monopolies are beneficial in a dynamic world
- Valuable businesses are built on secrets
- Sales matters as much as product