Disclaimer

This is not a book summary. While reading, I occasionally take down notes in evernote. But they are mostly irregualar and unstructured. I just made notes of points, which I felt important or liked exteremely. Going through this will only give you a rough idea of what’s inside the book. At many places, I have not changed the lines from the book, so as to not reduce the impact!

Introduction

Brilliant thinking is rare. But courage is in shorter supply than genius. Progress in vertical direction when you do new things. Globalisation should be accompanies with technological advancements. If you try to achieve more with same old strategies it is possible that you might create an unsustainable future. Example producing more electrical energy with old methods that create pollution. Some new and innovative thinking needs to be introduced to achieve more in a sustainable manner

Its hard to blame people for dancing when the music is playing around (Refering to the dot com boom that resulted in the crash.People were excited so much about building companies on internet and investors were so exhuberant that they invested tons of money without caring out the plans and statergy of the company. A lot was learnt from the dot com crash!)

The most contrarian thing of all is not to oppose the crowd but to think for yourself.

if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

All happy companies are different

If a company manages to become a successful monopoly, it is because it has been able to solve a problem creatively which no one else in the past. If a company fails then it is because it could not face the competition. Because in a competition markets decide the price, and you need to sell at that price to get your products sold and consequently, you will make minimal profits.

Competition is bad

People do the same thing over and over resulting in no good. If you are less sensitive to social cues,  you are less likely to do the same things everyone is doing around If you’re interested in making things or programming computers, you’ll be less afraid to pursue those activities single-mindedly and thereby become incredibly good at them. Fighting  for getting too personal is bad and it makes no sense Because in the process you are focusing on beating your rival but not on your product Example Informix head was busy in making bill boards and adds to target Larry(Oracle’s founder) rather than focusing on better products If you cant defeat then merge - Musk’s X.com and PayPal

(An unconventional insight on competition)

Building a Monopoly

A great business is defined by amount of cash flow it can generate in future. Investors expect Twitter will be able to capture monopoly profits over the next decade, while newspapers’ monopoly days are over(Twitter vs Times). Simply stated, the value of a business today is the sum of all the money it will make in the future. (To properly value a business, you also have to discount those future cash flows to their present worth, since a given amount of money today is worth more than the same amount in the future.) Conventional Business tend to have a high revenue in the beginning. But as time passes the cash flows began to fall because of new players entry in the market its opposite to the tech companies. Initially they may have a low cash flow. But as time passes, a valuable product is being built at the company hence achieves max cash flow in future rather than immediately Hence it is advised for entrepreneurs to not focus on short term goals like weekly active users , monthly reports etc. The most important question to ask is  “will the business be around a decade from now” The answer to the above question requires you to look more than numbers and think critically about qualitative  characteristics of your business

Characteristics of Monopoly

  1. Proprietary technology: Tech that is at least 10 times better than its closest substitute. Google Search engine feature. Amazon’s ability to be able to become the largest book store, that no physical book store could actually store and compete.

  2. Network Effects: Large number of people should be able to use your product. The strange thing is such products should always start with a small number of users initially. Example Mark’s Facebook.

  3. Economies of scale: The startup should be able to grow quickly soon. It is possible if different components of product are built at different places.

  4. Branding: Doing this with superior tech, like apple having its own hardware and software. While this said, a company cannot be built on basis of brand alone. The product should always be at the top of the list.

Building a monopoly

In the beginning stage of your startup, you must target a small niche market. because it is easier to get attention of a small group of people who need your product than large group of people with scattered attentions. Expand after you have won your small targeted market. Example, Amazon first focussed on book readers initially and reached great success. Then after a point Amazon had 2 options - reaching to more number of people with books, delivering more than books It chose the second Don’t focus on disruption. The idea of disruption the existing technology is exciting. But you must focus on the beautiful process of creating something new. Avoid competition as much as possible.

The last will be the best

Being at the first can help you to acquire a large share of the market, but it is  possible that someone else comes up and unseats you. Being first should only be a tactic but not a goal. So to succeed you must study the endgame before anything else

You are not a lottery ticket

When successful people mention luck, they are being strategically humble. Ralph Emerson quote “Shallow men believe in luck, believe in circumstances…. Strong men believe in cause and effect”

Can u control your future

There are 2 kinds of people people who believe that future is

  1. definite
  2. indefinite

Those who believe its definite make plans in the present work on its execution the “indefinite” ones give up on planning.

Going furthur…

  1. Indefinite Pessimists: Those who see a bleak in future and do nothing to make it better. Just hope
  2. Definite Pessimists: Those who see bleak and prepare for it
  3. Definite optimists: Those who take big/good ideas seriously and work on it
  4. Indefinite optimists: Those who take a conventional path to make their life happy rather than planning and trying out a new things Since the regular paths have worked for our generations, they don’t see it as a way that it would fail for the next upcoming and pass on this ideology rather than  a process oriented carrier that is open for options by trying out several things.

The issues with the three

  • Definite pessimism works by building what can be copied without expecting anything new
  • Indefinite pessimism works because it’s self-fulfilling: if you’re a slacker with low expectations, they’ll probably be met.
  • But indefinite optimism seems inherently unsustainable: how can the future get better if no one plans for it?

As per Darwin’s theory adapting to the surroundings is the best way to survival. Build some MVP and iterate your ways to success, build it like people wants.  it helps u reach local maxima but not global maxima. Darwinism may be a fine theory in other contexts, but in startups, intelligent design works best.

More on definite optimism

Through careful design and planning you can change the world rather than listening to feedback of small group of people, When Yahoo! offered to buy Facebook for $1 billion in July 2006, I thought we should at least consider it. But Mark Zuckerberg walked into the board meeting and announced: “Okay, guys, this is just a formality, it shouldn’t take more than 10 minutes. We’re obviously not going to sell here.” Mark saw where he could take the company, and Yahoo! didn’t. A business with a good definite plan will always be underrated in a world where people see the future as random.

VCs investment

VCs should invest a huge sum of money in a handful of companies rather than diversifying. The judgement should be made on basis of unique fundamentals of the company and should not shift to financial questions ! The idea is to see the 80 20 rule. Maximise the investment in 20% of companies that produces the 80 % of profits.

Secrets

What valuable company is nobody building The answer to the such questions is not a convention, it means it is not an easy one. On the contrary its not also an impossible one. The answer is just “secret”, finding it is hard, but doable. Why people don’t put effort in finding answers to the secrets and working towards them is mainly because of

  • incrementalism: people believe and are taught to grow step by step hence they don’t tend to think big or try working towards it
  • risk averse: people are too afraid of taking risk. The prospect of being lonely but right—dedicating your life to something that no one else believes in—is already hard.
  • complacency: People are satisfied with what they achieve at a certain stage
  • Doubt that why hasn’t anyone else done this previously. If others can’t then how can I ? Secrets are hard. But sometimes require an elementary insight which has been proved in case of
    • Airbnb: connecting travellers and rental owners
    • Uber: connecting people who drive and want to move
    • Facebook: connecting people

If insights that look so elementary in retrospect can support important and valuable businesses, there must remain many great companies still to start.

Where to look for secrets

Place where no one else is looking. Most people think only in terms of what they’ve been taught; schooling itself aims to impart conventional wisdom. So you might ask: are there any fields that matter but haven’t been standardised and institutionalised?

A note on founders

When you start something, the first and most crucial decision you make is whom to start it with. Choosing a co-founder is like getting married, and founder conflict is just as ugly as divorce. Now when I consider investing in a startup, I study the founding teams. Technical abilities and complementary skill sets matter, but how well the founders know each other and how well they work together matter just as much. Founders should share a prehistory before they start a company together —otherwise they’re just rolling dice. Theiel’s Law: “A startup messed up at its foundation cannot be fixed”

Cash is NOT the king

A CEO must always try to pay as less as possible to himself Story of Aaron levie: Aaron Levie, the CEO of Box, was always careful to pay himself less than everyone else in the company—four years after he started Box, he was still living two blocks away from HQ in a one-bedroom apartment with no furniture except a mattress. Every employee noticed his obvious commitment to the company’s mission and emulated it.

Vested interests

You can offer your employees more than salary-equity. But it must be taken care to whom you offer. Sometimes it happens that large equity is offered to those who joined the start up early than those who join late but provide great value. So you need to be careful while providing equity to people. Some people are not interested in equity, rather they would prefer regular salary. It is because equity makes sense only if the company is profitable. People who show interest in owning part of company than being paid in cash  reveal interest and commitment toward’s company’s future

Extending the foundation

Bob Dylan has said that he who is not busy being born is busy dying. The founding moment of a company,however, really does happen just once. This leads to a second, less obvious understanding of the founding: it lasts as long as a company is creating new things, and it ends when creation stops. If you get the founding moment right, you can do more than create a valuable company

Recruiting

Why would someone join your company as its 20th engineer when she could go work at Google for more money and more prestige? The best answer to the above question is different for different companies as it would depend on the mission of the company and about the team. You probably can’t be the Google of 2014 in terms of compensation or perks, but you can be like the Google of 1999 if you already have good answers about your mission and team

Doing one thing

On inside , every individual should be sharply distinguished by her work. Every employee should be assigned one thing to work on and would be evaluated on that. This helps to avoid conflicts. Conflicts happen because the roles are fluid and people compete for the same responsibilities. By clearly defining the roles you ensure smooth functioning.

Importance of Sales

The engineer’s grail is a product great enough that “it sells itself.” But anyone who would actually say this about a real product must be lying: either he’s delusional (lying to himself) or he’s selling something (and thereby contradicting himself). If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product

Technology and its complimentary nature to Humans

Globalisation which includes supply of labour at cheap cost is a concern, because it leads to substitution.  While technology on the other hand, is complementary. Machines can do tasks faster while cannot make simplest of decisions that a child can, So with proper use of man machine synergy, we can experience rapid growth and solve great problems Consider linkedin, linkedin didn’t try to automate the process of recruit. To recruit a candidate, you have to scrutinise applicants’ history and effectiveness. So linkedin just offered a platform to connect. Search  and filtering job related opportunities with a powerful network made linkedin successful. The question you should be asking is not how humans will replace computers, the question is how computers will help humans solve hard problems

The questions to be asked

  1. The Engineering Question: Can you create breakthrough technology instead of incremental improvements? (Is it 10X better than the existing solutions. If not people might not show interest to buy it because they have been habituated to the old one. So to get the market, you need to be far better)
  2. The Timing Question: Is now the right time to start your particular business?
  3. The Monopoly Question: Are you starting with a big share of a small market?
  4. The People Question: Do you have the right team?
  5. The Distribution Question: Do you have a way to not just create but deliver your product?
  6. The Durability Question: Will your market position be defensible 10 and 20 years into the future? (Sometimes it might happen that there might be an already strong player in the market that might defeat you easily, no matter how good you are. For example, green tech companies in USA couldn’t compete with Chinese players as they had produced at a very low cost. It went on to a stage where these companies filed a suit against the Chinese companies. See that you predict and plan before hand. Here the entrepreneurs could have asked “what will stop China from wiping out my business?”)
  7. The Secret Question: Have you identified a unique opportunity that others don’t see? . Great companies have secrets: specific reasons for success that other people don’t see.

Failure of the most clean tech startups , yet an another buble

Clean tech gave people a way to be optimistic about the future of energy. But when indefinitely optimistic investors betting on the general idea of green energy funded clean tech companies that lacked specific business plans, the result was a bubble. The 1990s had one big idea: the internet is going to be big. But too many internet companies had exactly that same idea and no others. An entrepreneur can’t benefit from macro-scale insight unless his own plans begin at the micro- scale. Clean tech companies faced the same problem

Founder’s paradox

Consider the example of Apple, Steve Jobs, the co founder brought great success to the company in the initial stages of life. But when he was fired, it was about to go bankrupt. But later, when Jobs was back when they were about to sell the company, he introduced the most revolutionary products - ipod, iphone and ipad. 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. Above all, don’t overestimate your own power as an individual. Founders are important not because they are the only ones whose work has value, but rather because a great founder can bring out the best work from everybody at his company.

The Future ?

Many have predicted that the future is to be great. And yes it might be true. But no matter how many trends can be traced, the future won’t happen on its own. What the Singularity would look like matters less than the stark choice we face today between the two most likely scenarios: nothing or something. It’s up to us. 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. 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.