## Preface: 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. humans are distinguished from other species by our ability to work miracles. We call these miracles technology. Technology is miraculous because it allows us to do more with less, ratcheting up our fundamental capabilities to a higher level. they are easy to forget in a world where so much of what we do is repeat what has been done before. successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas. College students can become extremely skilled at a few specialties, but many never learn what to do with those skills in the wider world. ## 1. The Challenge of the Future “What important truth do very few people agree with you on?” Brilliant thinking is rare, but courage is in even shorter supply than genius. what makes the future distinctive and important isn’t that it hasn’t happened yet, but rather that it will be a time when the world looks different from today. it’s going to be different, and it must be rooted in today’s world. The single word for vertical, 0 to 1 progress is technology. any new and better way of doing things is technology. the world will be defined by globalization, but the truth is that technology matters more. In a world of scarce resources, globalization without new technology is unsustainable. New technology has never been an automatic feature of history. our surroundings are strangely old: only computers and communications have improved dramatically since midcentury. Today our challenge is to both imagine and create the new technologies that can make the 21st century more peaceful and prosperous than the 20th. together by a sense of mission have changed the world for the better. it’s hard to develop new things in big organizations, and it’s even harder to do it by yourself. Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can. a startup is the largest group of people you can convince of a plan to build a different future. A new company’s most important strength is new thinking: even more important than nimbleness, small size affords space to think. that is what a startup has to do: question received ideas and rethink business from scratch. ## 2. Party Like It’s 1999 If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth. Conventional beliefs only ever come to appear arbitrary and wrong in retrospect; whenever one collapses, we call the old belief a bubble. The most contrarian thing of all is not to oppose the crowd but to think for yourself. ## 3. All Happy Companies Are Different what valuable company is nobody building? your company could create a lot of value without becoming very valuable itself. Creating value is not enough—you also need to capture some of the value you create. Under perfect competition, in the long run no company makes an economic profit. by“monopoly,” we mean the kind of company that’s so good at what it does that no other firm can offer a close substitute. if you want to create and capture lasting value, don’t build an undifferentiated commodity business. 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. Non-monopolists exaggerate their distinction by defining their market as the intersection of various smaller markets: British food ∩ restaurant ∩ Palo Alto Rap star ∩ hackers ∩ sharks Monopolists, by contrast, disguise their monopoly by framing their market as the union of several large markets: search engine ∪ mobile phones ∪ wearable computers ∪ self-driving cars The competitive ecosystem pushes people toward ruthlessness or death. A monopoly like Google is different. Since it doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products, and its impact on the wider world. In business, money is either an important thing or it is everything. Monopolists can afford to think about things other than making money; non-monopolists can’t. In perfect competition, a business is so focused on today’s margins that it can’t possibly plan for a long-term future. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits. In a static world, a monopolist is just a rent collector. But the world we live in is dynamic: it’s possible to invent new and better things. 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. the reward for creating greater abundance, not artificial scarcity: the history of progress is a history of better monopoly businesses replacing incumbents. Monopolies drive progress they see individuals and businesses as interchangeable atoms, not as unique creators. the long-run equilibrium predicted by 19th-century physics was a state in which all energy is evenly distributed and everything comes to rest—also known as the heat death of the universe. every business is successful exactly to the extent that it does something others cannot. Monopoly is the condition of every successful business. 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. ## 4. The Ideology of Competition competition is an ideology—the ideology—that pervades our society and distorts our thinking. Our educational system both drives and reflects our obsession with competition. Grades themselves allow precise measurement of each student’s competitiveness; pupils with the highest marks receive status and credentials. We teach every young person the same subjects in mostly the same ways, irrespective of individual talents and preferences. 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. Elite students climb confidently until they reach a level of competition sufficiently intense to beat their dreams out of them. All Rhodes Scholars had a great future in their past. But really it’s competition, not business, that is like war: allegedly necessary, supposedly valiant, but ultimately destructive. Amid all the human drama, people lose sight of what matters and focus on their rivals instead. Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past. individuals with an Asperger’s-like social ineptitude seem to be at an advantage in Silicon Valley today. this can save you from getting caught up in crowds competing for obvious prizes. Competition can make people hallucinate opportunities where none exist. Winning is better than losing, but everybody loses when the war isn’t one worth fighting. If you can’t beat a rival, it may be better to merge. There is no middle ground: either don’t throw any punches, or strike hard and end it quickly. pride and honor can get in the way. If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most. ## 5. Last Mover Advantage a great business is defined by its ability to generate cash flows in the future. the value of a business today is the sum of all the money it will make in the future. Most of the value of low-growth businesses is in the near term. They often lose money for the first few years: it takes time to build valuable things, and that means delayed revenue. Most of a tech company’s value will come at least 10 to 15 years in the future. The overwhelming importance of future profits is counterintuitive even in Silicon Valley. 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. If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now? most substantive advantage a company can have because it makes your product difficult or impossible to replicate. 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. The clearest way to make a 10x improvement is to invent something completely new. Or you can radically improve an existing solution: once you’re 10x better, you escape competition. Network effects make a product more useful as more people use it. 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. A good startup should have the potential for great scale built into its first design. Beginning with brand rather than substance is dangerous. No technology company can be built on branding alone. every startup should start with a very small market. If you think your initial market might be too big, it almost certainly is. The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Sequencing markets correctly is underrated, and it takes discipline to expand gradually. 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. 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. to succeed,“you must study the endgame before everything else.” ## 6. You Are Not a Lottery Ticket When we debate historical questions like these, luck is in the past tense. Far more important are questions about the future: is it a matter of chance or design? ## 10. The Mechanics of Mafia “Company culture” doesn’t exist apart from the company itself: no company has a culture; every company is a culture. So we set out to hire people who would actually enjoy working together. They had to be talented, but even more than that they had to be excited about working specifically with us. answers about your mission and answers about your team. not why it’s important in general, but why you’re doing something important that no one else is going to get done. the opportunity to do irreplaceable work on a unique problem alongside great people. The startup uniform encapsulates a simple but essential principle: everyone at your company should be different in the same way—a tribe of like-minded people fiercely devoted to the company’s mission. that’s easier to do when everyone shares an understanding of the world. 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 reduced conflict. internal peace is what enables a startup to survive at all. The biggest difference is that cults tend to be fanatically wrong about something important. 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, and you don’t need to worry if your company doesn’t make sense to conventional professionals. Better to be called a cult—or even a mafia. ## 11. If You Build It, Will They Come? EVEN THOUGH SALES is everywhere, most people underrate its importance. Silicon Valley underrates it more than most. But customers will not come just because you build it. You have to make that happen, and it’s harder than it looks. Sales is the opposite: an orchestrated campaign to change surface appearances without changing the underlying reality. Like acting, sales works best when hidden. This explains why almost everyone whose job involves distribution—whether they’re in sales, marketing, or advertising—has a job title that has nothing to do with those things. Even university professors, who claim authority from scholarly achievement, are envious of the self-promoters who define their fields. 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. “the best product doesn’t always win.” It’s better to think of distribution as something essential to the design of your product. Complex sales works best when you don’t have“salesmen” at all. The challenge here isn’t about how to make any particular sale, but how to establish a process by which a sales team of modest size can move the product to a wide audience. A complex sales approach would have made Box a forgotten startup failure; instead, personal sales made it a multibillion-dollar business. In between personal sales(salespeople obviously required) and traditional advertising(no salespeople required) there is a dead zone. Every entrepreneur envies a recognizable ad campaign, but startups should resist the temptation to compete with bigger companies in the endless contest to put on the most memorable TV spots or the most elaborate PR stunts. I know this from experience. A product is viral if its core functionality encourages users to invite their friends to become users too. Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market. 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. You must also sell your company to employees and investors. Selling your company to the media is a necessary part of selling it to everyone else. Everybody has a product to sell— ## 12. Man and Machine AS MATURE INDUSTRIES stagnate, information technology has advanced so rapidly that it has now become synonymous with“technology” itself. 30 years from now, will there be anything left for people to do?“Software is eating the world,” the best way to create productivity is“to get rid of people.” computers are complements for humans, not substitutes. The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete. computers are tools, not rivals. Properly understood, technology is the one way for us to escape competition in a globalizing world. As computers become more and more powerful, they won’t be substitutes for humans: they’ll be complements. if humans and computers together could achieve dramatically better results than either could attain alone, what other valuable businesses could be built on this core principle? Better technology in law, medicine, and education won’t replace professionals; it will allow them to do even more. 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 to do what was previously unimaginable. ## 13. Seeing Green A great technology company should have proprietary technology an order of magnitude better than its nearest substitute. There’s nothing wrong with a CEO who can sell, but if he actually looks like a salesman, he’s probably bad at sales and worse at tech. selling and delivering a product is at least as important as the product itself. Great companies have secrets: specific reasons for success that other people don’t see. Whatever is good enough to receive applause from all audiences can only be conventional, Doing something different is what’s truly good for society—and it’s also what allows a business to profit by monopolizing a new market. 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. ## 14. The Founder’s Paradox why it’s more powerful but at the same time more dangerous for a company to be led by a distinctive individual instead of an interchangeable manager. founders’ traits appear to follow an inverse normal distribution: We alternately worship and despise technology founders just as we do celebrities. In some ways, Steve Jobs and Bill Gates were opposites. Jobs was an artist, preferred closed systems, and spent his time thinking about great products above all else; Gates was a businessman, kept his products open, and wanted to run the world. Jobs’s return to Apple 12 years later shows how the most important task in business—the creation of new value—cannot be reduced to a formula and applied by professionals. Apple’s value crucially depended on the singular vision of a particular person. A unique founder can make authoritative decisions, inspire strong personal loyalty, and plan ahead for decades. The lesson for business is that we need founders. If anything, we should be more tolerant of founders who seem strange or extreme; we need unusual individuals to lead companies beyond mere incrementalism. The single greatest danger for a founder is to become so certain of his own myth that he loses his mind. But an equally insidious danger for every business is to lose all sense of myth and mistake disenchantment for wisdom. ## Conclusion: Stagnation or Singularity? If we define the future as a time that looks different from the present, then most people aren’t expecting any future at all; But no matter how many trends can be traced, the future won’t happen on its own. We cannot take for granted that the future will be better, and that means we need to work to create it today. 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. 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.