One of the challenges of talking about, teaching, and writing about entrepreneurship is that there is something about entrepreneurship that is very unscientific.
Science involves things you can repeat. Things you can experimentally verify. In some sense things that are at least two of a kind. The great moments in business happen only once.
There is no formula for entrepreneurship: You can’t say follow these steps and you will succeed. Such a formula does not exist.
The contrarian business question: What great company is no one starting?
What I would like to do tonight is offer some of my answers to this question: What are some things that I think are true that very few people agree with me on.
That standard account of capitalism is that competition and capitalism are synonyms. My somewhat provocative thesis is that capitalism and competition are antonyms. In a world of perfect competition all the profits are competed away. A capitalist is someone who is in the business of accumulating capital.
As an entrepreneur, you want to aim for a monopoly. You want to be doing something so unique, so differentiated that you have some real pricing power.
There is this incredible distortion that happens. People who have monopolies pretend not to have them. And people who are in crazy competition pretend not to be in that great of competition.
People who come out of these incredibly powerful monopoly businesses they typically don’t understand what actually drives the business. Example: This is perhaps understood by the top 5 or 10 people at Google. But if you talk to the other 30,000 they would list things like this is the first company to appreciate smart people, free food, the perks etc...
There is a shockingly bad track record of people coming out of Microsoft and Google who start companies. I think part of it is they were intentionally misled by management in terms of what really made the businesses work. They try to emulate the fictional account that in practice doesn’t work. This idea is poorly understood.
Psychologically we are very powerfully attracted to competition.
Your goal is not to compete with and destroy large, existing companies. Your goal should be to create a valuable company in its own right.
The standard business school advice is go after big markets. The monopoly perspective is you want to go after big market share. So you want to start in very small market. That is how you get to big market share quickly.
Just about every trend is overrated. The buzzwords are a tell that the person is bluffing. The business is undifferentiated.
A deeper explanation of why we are so attracted to competition: In the time of Shakespeare the word ape meant both primate and to imitate. Aristotle said man differs from the other animals with a greater aptitude for imitation. Culture gets transmitted through imitation. [To learn more about this read Things Hidden Since the Foundation of the World by Rene Girard]
I like to contrast technology with globalization. Globalization is copying things that work. Technology is vertical, intensive progress. Going from zero to one. They are very different types of activities.
We have had much less technological progress than advertised. We have had some progress in the world of bit [computers, software, Internet]. We have had much less in the world of Atoms in the last 40 years.
Past books about the future are very interesting to look at because it tells you the perspective the people at the time had on the future. There is this book written in 1968 called The American Challenge. It said the United States was this technologically accelerating civilization. If you extrapolate that a few decades into the future America would leave the rest of the world in the dust. . . What happened instead was incredible convergence through globalization. It has made the world much more competitive.
One of the things that has become strangely dominant in our time is the idea of the future has collapsed. The idea that the future is a time and place that looks very different from the present. That can be a very powerful motivator for changing things.
There is a history of the United States one could tell where in 19th and 20th century America you had all types of these engineer, schemer type people. These people with complicated plans they tried to implement like a transcontinental railroad, or the Panama Canal. These very large projects. At this point that is just seen as ridiculous.
Speculation about why so many people that came out of PayPal ended up being quite successful: PayPal was not a business that worked automatically. There were a lot of tricky challenges. The general lesson learned was that it was hard to build a great business. That is a good mindset to have when you set out to start a new business.
Learn from founders who came before you. Every week I read a biography of a founder and tell you what I learned on Founders podcast.
