This week we started to read the book “Zero to one” and summarized the first 3 chapters.
Hope you enjoy reading this and we advise you to read the entire book!
Chapter 1 – The Challenge Of The Future
- Progress can take two forms, horizontal and extensive.
- Horizontal: Expanding what already exists. (Making 100 typewriters).
- Vertical: Building something nobody else ever built. (Making a typewriter with a word processor).
- At a macro level, horizontal progress is globalization, vertical progress is technology.
- Most people believe globalization (horizontal progress) will define the future, but technology (vertical progress) is what’s really important.
- New technology tends to come from Startups.
- Big enterprises shy away from risk.
- A person alone doesn’t have the power to create an industry.
- A Startup is the largest group of people you can convince of a plan to build a different future.
Chapter 2 – Party Like It’s 19999
- Companies exist to make money, not to lose it.
- This should be obvious but there have been times where people ignore all the rules.
- Investors accepted page views as a more authoritative financial metric than profit and they lost money.
- Conventional beliefs only ever come to appear arbitrary and wrong in restrospect.
- Four dogmatic lessons from the bubble:
- Make incremental advances.
- Stay lean and flexible.
- Improve on the competition.
- Focus on product, not sales.
- Even though most business follow those principles, the opposite principles are probably more correct:
- It is better to risk boldness than triviality.
- A bad plan is better than no plan.
- Competitive markets destroy profits.
- Sales matters just as much as product.
- Ask yourself how much of what you know about business is shaped by mistaken reactions to past mistakes.
Chapter 3 – All Happy Companies Are Different
- Creating a lot of value is not enough, you also need to capture a lot of that value.
- S Airline companies, in 2012, brought in $160 billion.
- Google, in 2012, brought in $50 billion.
- Having a profit margin of 21% makes google worth more than three times more than every U.S airline combined.
- This difference is due to Perfect Competition vs Monopoly.
- Perfect Competition:
- Every firm offers an undifferentiated product.
- No firm has market power, so they all sell at market price.
- In the long run, no company makes an economic profit.
- Firm owns it’s market, so it sets it’s own prices.
- It comes from eliminating rivals, securing a license from the state or progressive innovation.
- Google is a good example of a monopoly.
- In the real world, every business is successful to the extent that it does something others cannot.
- Monopoly is the condition of every successful business.