May 31, 2018
Basically as I go through any book that I read, I underline interesting ideas/quotes/paragraphs and then later come back through the book to get the lessons gleaned from these underpinnings and try to figure out what they mean to me and apply them to my own life.
Here were the most interesting lessons in the book for me:
Today’s “best practices” lead to dead ends, the best paths are new and untried.
I have noticed that successful people find value in unexpected places, and they do this by thinking from first principles instead of formulas.
“What important truth do very few people agree with you on?”
Brilliant thinking is rare, but courage is even shorter supply than genius.
Technology is not limited to computers. Properly understood, any new and better way of doing things is technology.
What a startup has to do: question received ideas and rethink business from scratch.
If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth (name 10 delusional popular beliefs as an exercise)^
- It is better to risk boldness than triviality
- A bad plan is better than no plan
- Competitive markets destroy profits
- Sales matter just as much as product
Ask yourself: how much of what you know about business is shaped by mistaken reactions to past events? The most contrarian thing of all is not to oppose the crowd but to think for yourself.
Great Question: What valuable company is nobody building?
Google makes so much money that’s it now worth three times more than every US airline combined because airlines compete, but google stands alone.
Under perfect competition, in the long run no company makes an economic profit.
The lesson is clear for entrepreneurs: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.
(restaurant versus google)*
Every business is successful exactly to the extent that it does something others cannot.
All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.
If you can recognize competition as a destructive force instead of a sign of value, you’re already saner than most.
The value of a business today is the sum of all the money it will make in the future.
Every monopoly is unique, but it usually has: proprietary technology, network effects, economies of scale, and branding.
Proprietary technology: google’s search algorithm’s
Prop. Technology must be at least 10x better than it’s closest substitute.
The clearest way to make a 10x improvement is to invent something completely new.
A drug to safely eliminate the need for sleep, or a cure for baldness, for example would certainly support a monopoly business.
Or you can still radically improve an existing solution: once you’re 10x better, you escape competition.
Amazon made it’s first 10x improvent in a particularly visible way: they offered at least 10 times as many books as any other book store.
Network effects make a product more useful as more people use it.
They are very powerful, but you’ll never reap them unless your product is valuable to it’s very first users when the network is necessarily small.
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.
Once you create and dominate a niche market, you should gradually expand into related and slightly broader markets.
After amazon became the dominant solution for books, it had two decisions expand the number of people who read books, or expand to adjacent markets. They chose the latter and sold CD’s, videos, and software.
Sequencing markets correctly is underrated. It takes discipline to expand gradually. The most successful companies make the core progression—to first dominate a specific niche then scale to adjacent markets—a part of their founding narrative.
If your company can be summed up by its operation to already existing firms, it can’t be completely new and it’s probably not going to become a monopoly.
As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.
It’s much better to be the last mover—that is to make the last great development in a specific market and enjoy years or even decades of monopoly profits.
Business is like chess, grandmaster Jose Raul Capablanca put it well: “To succeed, you must study the endgame before anything else.”
Shallow men believe in luck, believe in circumstances….strong men believe in cause and effect.
-Ralph Waldo Emerson
Victory awaits him who has everything in order—luck, people call it.
-Roald Amundsen, first explorer to reach the South Pole
Four social trends have conspired to roout out belief in secrets.
One is incrementalism: we are taught the way to do things is to proceed one very small step at a time. We chase large numbers of trivial things as opposed to new frontiers.
Second is risk aversion. People are scared of secrets because they are scared of being wrong. If your goal is to never make a mistake in life, you should not look for secrets. The prospect of being lonely but right—is already hard. The prospect of being lonely and wrong can be unbearable.
Third is complacency. Why search for a new secret if you can comfortably collect rents on everything that has already been done?
Fourth is “flatness.” Anyone who might have had the ambition to look for a secret will first ask himself: if it were possible to discover something new, wouldn’t someone from the faceless global talent pool of smarter and more creative people have found it already? This voice of doubt can dissuade people from even starting to look for secrets in a world that seems too big a place for any individual to contribute something unique.
Very few people take unorthodox ideas seriously today, and the mainstream sees that as a sign of progress. We can be glad that there are fewer crazy cults now, yet that gain has come at great cost: we have given up our sense of wonder at secrets left to be discovered.
For example, a world without secrets would enjoy a perfect understanding of justice.
Every injustice necessarily involves a moral truth that very few people recognize early on: in a democratic society, a wrongful practice persists only when most people don’t perceive it to be unjust.
At first only a small minority of abolitionists knew that slavery was evil; that view has rightly become conventional, but it was still a secret in the early 19th century.
To say that there are no secrets left today would mean that we live in a society with no hidden injustices.
think of 10 things future societies will call us savages over
You can’t find secrets without looking for them.
If you think something hard is impossible, you’ll never even start trying to achieve it.
Belief in secrets is an effective truth.
The actual truth is that there are many more secrets left to find, but they will yield only to relentless searchers.
Few people imagined that it was possible to build a billion-dollar business by simply connecting people who want to go places with people willing to drive them there.
We already had state-licensed taxicabs and private limousines; only by believing in and looking for secrets could you see beyond the convention to an opportunity hidden in plain sight.
If insights that look so elementary in retrospect can support important and valuable businesses, there must remain many great companies still to start.
How To Find Secrets:
There are two kinds: secrets of nature and secrets about people.
Natural secrets are all around us, one must study some undiscovered aspect of the physical world.
Secrets about people are different: they are things that people don’t know about themselves or things they hide because they don’t want others to know.
What secrets is nature not telling you?
What secrets are people not telling you?
Secrets about people are relatively underappreciated.
The best place to look for secrets is where no one else is looking.
Physics= everyone looking
Astrology= no one looking, but doesn’t matter
Nutrition= no one looking, REALLY MATTERS.
The few who knew what might be learned,
Foolish enough to put their whole heart on show,
And reveal their feelings to the crowd below,
Mankind has always crucified and burned.
Unless you have perfectly conventional beliefs, it’s rarely a good idea to tell everybody everything that you know.
The best entrepreneurs know this: every great business is built around a secret that’s hidden from the outside.
A great company is a conspiracy to change the world.
“Thiels Law” states that a startup messed up at its foundation cannot be fixed.
Companies are like countries in this way. Bad decisions made early on—if you choose the wrong partners or hire the wrong people for example are very hard to correct after they are made.
As a founder, your first job is to get the first things right, because you cannot build a great company on a flawed foundation.
As a general rule, everyone you involve with your company should be involved full-time.
As Ken Kesey said “you’re either on the bus or off the bus.”
Aaron Levie was always careful to pay himself less than everyone else in the company, people saw this commitment to the company’s mission and emulated it.
Equity can’t create perfect incentives, but it’s the best way for a founder to keep everyone in the company broadly aligned.
You’ll be able to attract the employees you need if you can explain why your mission is compelling: not why it’s important in general, but why you’re doing something important that no one else is going to get done.
At Paypal, if you were excited by the idea of creating a new digital currency to replace the U.S dollar we wanted to talk to you, if not you weren’t the right fit.
You should be able to explain why your company is a unique match for the potential employee personally, if you can’t do that, he’s probably not the right match.
Just cover the basics like health insurance and then promise what no others can: the opportunity to do irreplaceable work on a unique problem alongside great people.
The best thing I did as a manager at PayPal was to make every person in the company responsible for doing just one thing.
Every employee’s one thing was unique, and everyone knew I would evaluate him only on that one thing.
Defining roles reduces conflict.
Like acting, sales works best when hidden.
Tom Sawyer managed to persuade his neighborhood friends to whitewash the fence for him—a masterful move. But convincing them to actually pay him for the privilege of doing his chores was the move of a grandmaster, and his friends were none the wiser.
Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.
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.
As we find new ways to use computers, they won’t just get better at the kinds of things people already do; they’ll help us do what was previously unimaginable.
7 Questions Every Business Owner Must Ask:
[*] Engineering Question
Can you create breakthrough technology instead of incremental improvement?
[*] Timing Question
is now the right time to start your particular business?
[*] Monopoly Question
are you starting with a big share of a small market?
[*] People Question
do you have the right team?
[*] Distribution Question
Do you have a way o not just create, but deliver your product?
[*] Durability Question
Will your market position be defensible 10 and 20 years into the future?
[*] Secret Question
have you identified a unique opportunity that others don’t see?
If you don’t have good answers to these questions, you’ll run into lots of “bad luck” and your business will fail.
If you nail all seven, you’ll master fortune and succeed.
Even getting five or six correct might work.
Companies must strive for 10x better, because merely incremental improvements often end up meaning no improvement at all for the end user.
Never invest in a tech ceo who wears a suit.
Every entrepreneur should plan to be the last mover in her market. That starts with asking yourself: what will the world look like 10 and 20 years from now and how will my business fit in?
Great companies have secrets: specific reasons for success that other people don’t see.
Doing something different it’s whats truly better for society.
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 lesson for business is that we need founders. If anything, we should be more tolerant of founders who seem extreme or strange; we need unusual individuals to lead companies beyond mere incrementalism.
The lesson for founders is that individual prominence and adulation can never be enjoyed except on the condition that it may be exchanged for individual notoriety and demonization at any moment—-so be careful.
Above all, don’t underestimate your own power as an individual.
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 our 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.