Create X dollar of value for the world and capture Y% dollar of value for yourself
X and Y are independent variables
Google – relatively smaller market but profit margins are great. Accumulates so much cash year or year
Airlines – large market but profit margin are shit. Companies go bankrupt often in that market
Companies are either operating in perfect competition or in monopolies. Nowhere in between. Avoid markets where you have a lot of competition
The last mover advantage:
Proprietary technology needs to be 10X of the closest substitute
Gain monopoly and maintain monopoly in that market segment as it grows in size
ability to have durability in a sector is more important than growth rate since the bulk of the revenue is really really far in the future
As a startup it is important
you want to start in markets that are so small it has almost no value and people don’t notice.
It becomes really easy to saturate the market to establish a brand
You want to be a one of a kind company in that small market versus a company in a very large market with lots of competitors it is hard to differentiate
You want to figure out how to expand that market after you have saturated it
Monopoly characteristics
Software – Google, Facebook, Amazon
Economics of scale
Network effects
Vertically integrated complex monopolies – Tesla, SpaceX, Standard Oil
Very capital intensive to build
Very complex coordination
Not easy to convince investors to fund to build
Avoid the psychological blindspot where you think competition is a form of validation
While competition gets you better at doing something
Too much competition is not profitable
Other thoughts
Skeptical about lean startup methodology
By the time you figure everything out the competition has came. There is always a risk element to going into unknown terrain
Asperger syndrome
people who have high conviction and uneasily swayed very introverted
versus Harvard people who are super-extroverted and low level conviction
