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.

startup → 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.

What a startup has to do: question received ideas and rethink business from scratch.

What important truth do very few people agree with you on?

If you can identify a delusional popular belief, you can find what lies hidden behind it: the contrarian truth.

4 big lessons that still guide business thinking today:

1. Make incremental advances → Anyone who claims to be able to do something great is suspect, and anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward.
2. Stay lean & flexible → You should not know what your business will do; planning is arrogant and inflexible. Instead, you should try things out “iterate” and treat entrepreneurship as agnostic experimentation.
3. Improve on the competition → The only way to know you have a real business is to start with an already existing customer, so you should build your company by improving on recognizable products already offered by successful competitors.
4. Focus on product, not sales → If your product requires advertising or salespeople to sell it, it’s not good enough: technology is primarily about product development, not distribution. The only sustainable growth is viral growth.

And yet, the opposite principles are probably more correct:

1. It is better to risk boldness than triviality.
2. A bad plan is better than a no plan.
3. Competitive markets destroy profits.
4. Sales matter just as much as the product.

The business version of our contrarian question is: what valuable company is nobody building?

Creating value is not enough-you also need to capture some of the value you create.

If you want to create and capture lasting value, build a differentiated commodity business.

💡 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.

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.)
→ Most of a tech company’s value will come at least 10 to 15 years in the future.

Will this business still be around a decade from now?

You must think critically about the qualitative characteristics of your business.

A good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage.
→ The clearest way to make a 10x improvement is to invent something completely new.

💡 The most successful companies make the core progression; to first dominate a specific niche and then scale to adjacent markets; a part of their founding narrative.

As you craft a plan to expand to adjacent markets, don’t disrupt: avoid competition as much as possible.

→ You must study the endgame before anything else.

Leanness is a methodology, not a goal.

In startups, intelligent design works best.

💡 You should focus relentlessly on something you’re good at doing, but before that, you must think hard about whether it will be valuable in the future.

The most important things are singular: One market will probably be better than all others.

One distribution strategy usually dominates all others.

Time and decision-making themselves follow a power law, and some moments matter far more than others.

What valuable company is nobody building?

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.

→ If you think something hard is impossible, you’ll never even start trying to achieve it.

There are 2 kinds of secrets: secrets of nature; secrets about people.

When thinking about what kind of company to build, there are two distinct questions to ask:

What secrets is nature not telling you?

What secrets are people not telling you?

💡 What are people not allowed to talk about? What is forbidden or taboo?

Sometimes looking for natural secrets and looking for human secrets lead to the same truth.

→ Are there any fields that matter but haven’t been standardized and institutionalized?

💡 Thiel’s Law: a startup messed up at its foundation cannot be fixed.
→ Bad decisions made early on, if you choose the wrong partners or hire the wrong people, are very hard to correct after they are made.

As a founder, your first job is to get the first things right.
→ You cannot build a great company on a flawed foundation.

💡 You need good people who get along, but you also need a structure to help keep everyone aligned for the long term.

→ A board of three is ideal. Your board should never exceed five people unless your company is publicly held.

💡 As a general rule, everyone you involve with your company should be involved full-time.

Without substance, perks do not work.

“Company culture” does not exist apart from the company itself: no company has a culture; every company is a culture.

💡 You’ll attract the employees you need if you can explain why your mission is compelling.
→ Why you’re doing something important that no one else is going to get done.

Promise what no others can: 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.

💡 Defining roles reduces conflict.

Entrepreneurs should take cultures of extreme dedication seriously.

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 is.

Two metrics for effective distribution.

The total net profit that you earn on average over the course of your relationship with a customer. → Customer Life Value, CLV must exceed the amount you spend on average to acquire a new customer → Customer Acquisition Cost, CAC.

💡 A product is viral if its core functionality encourages users to invite their friends to become users too.

The most valuable businesses of the coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.

Technology is the one way for us to escape competition in a globalizing world.

How can computers help humans solve hard problems?

7 questions that every business must answer:

1. Engineering → Can you create breakthrough technology instead of incremental improvements?
2. Timing → Is now the right time to start your particular business?
3. Monopoly → Are you starting with a big share of a small market?
4. People → Do you have the right team?
5. Distribution → Do you have a way to not just create but deliver your product?
6. Durability → Will your market position be defensible 10 and 20 years into the future?
7. Secret → Have you identified a unique opportunity that others don’t see?

Every entrepreneur should plan to be the last mover in her particular market.

What will the world look like 10 and 20 years from now, and how will my business fit in?

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.