Zero to One

“Zero to One” is a book about how to build new companies. It teaches people how to create value in the world and can turn ordinary people into entrepreneurs. But it is not a secret recipe for entrepreneurship. Successful people can always find value in unexpected places; they follow basic principles, not secret recipes.

The core idea of the book is that every moment in the business world happens only once. Copying others’ models will only take society from 1 to n, without creating anything new, and will end in failure. Only unique innovation can create new things and win the future. The weapon for innovation is technology; humans rewrite history by creating new technologies.

Future Challenges

There are two kinds of progress in the future: globalization (copying) and innovation (technology). Humans think the future of the world is determined by globalization, but technology is more influential.

Due to the bureaucracy and dysfunction of large companies, startups are the birthplace of new technologies. But small companies also need teams. A lonely genius might create classic literary works, but cannot create an industry. Startups must cooperate with others to form a certain scale so that the organization can operate effectively.

A startup is the largest group of people you can convince to plan and create the future together using technology. Besides technology, startups must also take new ideas as the underlying system: question existing concepts, examine their own business from scratch, that is, think about what makes you different in your entrepreneurial field.

Party Like It’s 1999

In March 2000, the global dot-com bubble burst. The public concluded that we should abandon the extreme ideas formed during the irrational exuberance of Silicon Valley and Nasdaq and return to traditional business rules: companies should develop gradually, organizations should remain lean and flexible, do not rashly carry out disruptive innovation, adopt a follower strategy, and focus on products rather than marketing. But the fact is just the opposite. Compared with globalization from 1 to n, we still need to use technology to achieve from 0 to 1 and cope with many challenges. Startups must maintain independent thinking ability, try boldly, plan for the long term, carry out technological innovation to establish market monopoly barriers, and do a good job in products and marketing amidst the trend of traditional business rules.

All Successful Companies Are Different

Companies must not only create value but also be able to capture part of the value they create, that is, not only have revenue but also profit.

To obtain profit, one must strive to grow into a monopoly. Because fully competitive companies in fierce market competition only get the minimum guarantee to maintain the company’s survival, cannot provide good benefits to employees, cannot give shareholders good returns, and have no capital for business innovation.

This point is contrary to the perfectly competitive market imagined by economists. In the perfectly competitive market imagined by economists, supply and demand are balanced, and every company in the market provides homogeneous products at the same price. However, in reality, no company in a perfectly competitive market can make a profit. The reason economists are obsessed with competition between companies is that economic thought originated in the 19th century when William Thomson (1st Baron Kelvin) proposed the heat death hypothesis of the universe (the entropy of the universe increases with the loss of time, from order to disorder. When the entropy of the universe reaches its maximum value, other effective energies in the universe have all been converted into heat energy, and the temperature of all matter reaches thermal equilibrium).

However, in the business world, equilibrium means static, and static means death. If a company is in competitive equilibrium, its demise will have no impact on the world because competing companies will quickly replace your position. Therefore, the success of every company is precisely because it did things that other companies could not do. Monopoly is the portrayal of successful companies.

In the ideal static world created by economists, monopolists obtain profits from consumers, and monopoly is not good for the entire static world. However, the real world is dynamic. Creative monopolists create new things, provide consumers with more choices, and promote a better society. Historical progress is the process of monopoly companies constantly updating and replacing. In the 20th century, AT&T monopolized the telecommunications industry; in the 1960s and 1970s, IBM replaced it and monopolized the world relying on hardware; at the end of the 20th century, Microsoft monopolized the world relying on the combination of software and hardware. In the 21st century, Apple monopolized the world relying on the iPhone. Every new monopoly has promoted social progress.

The reason why monopoly companies can promote social progress is that monopoly companies can freely determine supply and price to maximize profits. Long-term accumulated monopoly profits are the driving force for innovation. They don’t have to worry about competing with other companies, and they have the ability and autonomy to plan for the long term and innovate boldly. In a perfectly competitive market, companies can only focus on short-term interests and struggle for survival every day.

If you want to create and obtain lasting value, do not follow the trend to build a company without characteristics, and there is no need to deceive yourself by defining the union of various smaller markets as your own big market. The fundamental thing is to boldly build a monopoly company.

Of course, due to the influence of long-standing economic thought, monopoly companies are not popular with the public. Showing off monopoly will invite inspection, audit, and even blows. So in order to continue to obtain monopoly profits without interference, one must try to hide this fact, usually by exaggerating (non-existent) competition. In March 1998, Bill Gates fought back at a US Senate hearing on whether Microsoft occupied a monopoly position, saying, “Monopoly means a company has the ability to restrict new companies from entering the market and unilaterally manipulate prices. Microsoft does not have these two abilities.” In September 2018, when Zuckerberg accepted the US Congress consultation on Facebook user privacy and data security, a congressman asked Zuckerberg “How do you make money”, and the latter’s answer was also simple: “Through advertising”. Similarly, Google also covers up its monopoly position in the field of search engines and Internet advertising by developing businesses such as autonomous driving and online office.

Competition Consciousness

Have competition consciousness, but avoid participating in excessive competition. Competition is full of destructive power. The fiercer the competition, the less we actually get. Competition in the business world occurs between two well-matched sides. Competition makes us overestimate past opportunities and blindly repeat past patterns. Competition causes hallucinations, making people grasp in vain at some “opportunities” that do not exist, and competition distracts people. Competition is inevitable. If you can’t beat your opponent, unite with them.

Last Mover Advantage

When investors invest in companies, they value the future cash flow of the startup the most. Therefore, we must think long-term and think about the company ten years later. That is, think seriously about the essential characteristics of the company.

A company with large cash flow in the future has four characteristics: proprietary technology, network effects, economies of scale, and brand advantage. Analyzing according to these four characteristics can build a monopoly career and ensure the company lives longer.

Proprietary Technology Proprietary technology is a company’s most substantial advantage. It makes your product difficult or impossible for other companies to copy. Proprietary technology must be 10 times better than its closest substitute in some aspects to have a true monopoly advantage (5G is hundreds of times faster than 4G). To achieve a 10x advantage, the best way is to create an unprecedented valuable new thing in a field, and the company’s value will grow infinitely. Or, you can improve an existing thing and make it 10 times better to avoid competition (Alibaba’s SKU is hundreds of times more than offline stores).

Network Effects Network effects make a product more useful as more people use it (data intelligence, platforms). Companies enjoying network effects must start from a very small market (Facebook initially started only among Harvard students).

Economies of Scale A good startup should consider the potential for large-scale development in the future when designing at the beginning. Software companies enjoy very large economies of scale effects because the product does not require repeated investment, and the marginal cost tends to zero.

Brand Advantage A company’s most obvious monopoly is the monopoly of its own brand. Building a strong brand is a powerful way to form a monopoly. A strong brand needs strong internal substantial technological power to support it (manifested as patents).

The combination of technology, network effects, economies of scale, and brand can build a monopoly company. To ensure the normal operation of the company, a prudent market strategy must also be pursued.

Occupy Small Markets Every startup should start in a very small market. It is better to be too small than too big. Dominating a small market is much easier than dominating a big market. If you think the market you are starting in might be too big, it really is too big. A startup’s perfect target market is a specific small group of people, and there are almost no other competitors competing with you. Any big market is a wrong choice, and a big market where other competitors already exist is even worse. In a big market, startups either cannot find a good entry point or fall into competition.

Scale Up Once you have successfully created or dominated a niche market, you must gradually expand outward from the core business and enter slightly larger related markets. For example, Amazon started with books, gradually entered other categories, and became the largest e-commerce company. When entering a new market, do not carry out “disruptive innovation” with low-price and low-quality products, so as to avoid attracting the attention of competitors and causing trouble prematurely.

In corporate development, there is no first-mover advantage or coming from behind. What really matters is to monopolize a small niche market and obtain monopoly profits for several years or even decades. Chess master Capablanca said: “To win, the first task is to study the endgame.” A brilliant chess player, when playing against others, always considers the overall situation, plans the whole board, balances offense and defense, and advances and retreats appropriately, so as to ensure victory. If you only pay attention to moving pieces, although the killing is happy for a while, you ignore the changes in the general trend. Even if you gain a little at the beginning, you will eventually lose the future because of limiting yourself.

Success is Not a Lottery

Facing an uncertain future, long-term planning is still the most important. Every great entrepreneur is first a great designer. Apple is Steve Jobs’ best design. Since Jobs founded Apple in 1976, he realized that only by precisely planning the future can the whole world be changed.

The role of long-term planning is often underestimated in our world where the future is unclear and short-term interests are pursued. In a world where everyone sees the future with confusion, companies with clear goals are always underestimated, but a founder with a clear plan for the future will not sell the company.

A startup is an opportunity that the founder can clearly grasp and do their best. You not only have the agency of your own life but also the agency of an important corner of this world.

Power Law

For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away. — Matthew Effect

80% of resources are in the hands of 20% of people. — Pareto Principle

Power Law: The most important things are unique. One market may outperform other markets. One distribution strategy is usually better than all other strategies. Timing and decisions also follow the power law; some critical moments are more important than others.

If you don’t think seriously about where your actions will place the company on the 80-20 curve, you really can’t afford the consequences.

The Role of Secrets

All successful companies are founded on little-known secrets. Keep the company’s secrets.

The very few who hold secrets, foolishly open their hearts completely and show their full enthusiasm to others, are always persecuted and burned at the stake.

Foundations Determine Destiny

The universe determined the spatial scale within a few microseconds of its birth. More than 200 years after the formulation of the US Constitution, it has only been amended 17 times.

The establishment of a company really only happens once. Only when it is first established is there an opportunity to set rules for everyone to unite and create value together. The founder’s primary job is to lay a good foundation for creating a great company.

Choose the Right Partner If there are irreconcilable contradictions between founders, the company will suffer greatly. Founders should have a deep friendship before starting a business together, otherwise it is just luck. There must be a tacit understanding between founders.

Properly Handle Ownership, Management Rights, and Control Rights

Ownership: Who legally owns the company’s assets? Founders, employees, and investors

Management Rights: Who actually manages the daily affairs of the company? Managers and employees

Control Rights: Who formally manages company affairs? Board of Directors

Assigning different tasks to different people is effective, but it also increases the possibility of disunity.

In early startups, the founder combines ownership and management rights. Most company contradictions appear between ownership and control rights, that is, between founders and investors on the board of directors. Board members may want the company to go public as soon as possible to make profits for the company, while founders would rather maintain privacy and expand business. Every member of the board is important. A problem director will make you miserable and may even endanger the future development of the company. A three-person board is ideal. If you want to get rid of the board’s control, expand its size as much as possible. If you want it to operate efficiently, reduce its size.

Hire Full-time Personnel Hire full-time personnel and work together in the office.

Cash Rewards Are Not King Full-time personnel should be given appropriate remuneration. CEO compensation should not be too high; a low-base-salary CEO can create more value for the company. The same applies to other employees. High cash rewards will make employees take away the value already existing in the company instead of investing time to create new value for the future. Any salary paid in cash is about the present, not the future.

Stocks Make Employees Go All Out Every individual has unique talents and responsibilities, and completely different opportunity costs, so equal distribution from the beginning is arbitrary and unfair. Giving everyone the same share is wrong. Since it is difficult to achieve absolute fairness in distributing ownership, founders need to keep details confidential.

Most people don’t want stocks at all. Precisely because of this, stocks are a powerful tool. If someone is willing to own part of the company’s ownership instead of cash wages, it indicates that they are willing to commit to increasing the company’s value in the long term. Although stocks are not the best way to motivate employees, they are a good way for the founder to keep the company united.

The most valuable companies always encourage invention and creation. As long as the company innovates, entrepreneurship is not over.

Build a Unique Company Culture

A startup is a group with the same mission. The quality of corporate culture depends on the connotation. On-site sushi, yoga classes, and pet cats are not company culture. “Company culture” cannot exist in isolation from the company itself.

Time is a precious asset, and wasting time on people who cannot cooperate for a long time is not worth it. The company should look for like-minded people. They must be talented, and more importantly, they sincerely like working with existing team members. Strong relationships make everyone happier and more efficient at work, and can make careers more successful.

Value Recruitment Recruitment is the core competency of every company and should not be outsourced. The employees you need are not just people who look great on resumes, but also need to cooperate with others after joining.

When recruiting, ask yourself: Why do excellent people give up the opportunity to get high salaries and prestige at Alibaba to come to your company and become the 20th engineer? The correct answer must be tailored to the company. First, about the company mission, you have to explain why the company mission is exciting. Explain to employees that you are doing important things that others have never thought of doing. This is the only way to make your reason unique. Second, the company team, you have to explain why your company is suitable for him. Do not fight a welfare and salary war. People who come for free laundry or pet care will not be qualified members of the team. You only need to provide basic benefits such as health insurance and provide them with the opportunity to work with excellent colleagues.

Employee Characteristics From outside the company, every employee of the company should have the same unique temperament. What makes startup employees different from outsiders is the company logo on T-shirts and hoodies. A consistent logo shows that a group of like-minded people are actively dedicating themselves to the company mission. Startups have limited resources and a small team. To survive, they must operate quickly and efficiently. If everyone has the same worldview, it is easier to do this. From inside the company, everyone must have a clear division of labor and be different because of bearing unique work. Internal harmony is the key to the company’s survival, and defining roles can reduce contradictions. Startups develop rapidly, and individual roles cannot remain unchanged for a long time. Startups must ensure that employees are extremely dedicated to work. Employees who cannot be dedicated may not be suitable for the team.

Sales Are Everywhere

Customers will not buy your product just because you produced it; you must sell it. The first priority of sales is persuasion. Unobtrusive sales are the most effective; no one wants to be reminded that they are being sold to.

Regardless of quality, the specific historical environment determines which products are popular. But once a new product is invented, effective ways must be used to sell it.

Regardless of the type of sales, Customer Lifetime Value (CLV) must be higher than Customer Acquisition Cost (CAC).

Complex Sales If the average sales are more than 7 figures, every detail of every deal needs close attention. Complex sales may take months to build a proper relationship with the customer, and a year or two to close a deal. Because complex sales only require a few deals a year, super sales masters like Elon Musk can spend time with the most critical figures - and even overcome political inertia. Complex sales without full-time salespeople work best. For large orders, customers usually don’t want to talk to the VP of Sales, but want to talk directly to the CEO. A company adopting a complex sales model is successful if its annual growth rate reaches 50% or 100% within 10 years. New customers may be willing to become your biggest customer, but they are rarely willing to sign large orders that far exceed your previous orders. Once you have accumulated a group of reference customers using your product, you can start long-term orderly work and strive for larger orders.

Personal Sales Most sales deals are under 1 million, and such sales are not complex sales. The CEO does not need to do all the sales personally. This kind of sales does not lie in a specific way of doing business, but in how to establish a process that allows a lean sales team to sell products to as many customers as possible. New products should start from a small pain point market.

Advertising For some products, the unit price is only a few thousand yuan. Sending a salesperson to negotiate with every potential customer makes it difficult to cover costs. At this time, it may be necessary to establish a distributor system or use advertising sales. Advertising is usually effective for big-brand fast-moving consumer goods, such as food, beverages, and household chemicals. For startups, advertising is usually only effective when other channels are ineffective. Advertising costs are high and effects are difficult to measure, so startups should not fall into endless advertising competition with large companies.

Viral Marketing If the core function of the product encourages users to invite other friends to become users, then this product can carry out viral marketing. Whoever first occupies the market segment with viral marketing prospects may become the settler of the market. Like WeChat for social networking, and Alipay for mobile payment.

Regardless of the business, it follows the power law. Only one of the above methods is effective for a specific product or service, and a sales mix does not have much effect.

Selling to Non-Customers The company needs to sell not only products but also sell your company to employees and investors. Selling the company to the media is a necessary prerequisite for selling it to others, and necessary PR skills must be used when selling.

You Are the Salesperson Everyone has a product to sell, whether it is an employee, founder, or investor. Even if your company consists only of you and a computer, this is also true. Look around, if you don’t see a salesperson, then you are one.

Man and Machine

The complementarity of humans and computers is the way to create great businesses.

Analyzing Seven Key Issues for Entrepreneurial Success Using Tesla as an Example

1. Engineering Issue: Is your technology breakthrough, not just slightly improved? Excellent technology companies should possess proprietary technology that is 10 times better than the closest technology. Tesla’s technology is very advanced, and other car companies rely on it, but Tesla’s huge technological achievement is not a single part or component, but the ability to integrate many components into an excellent product.
2. Timing Issue: Is it the right time to start a business now? In 2010, Tesla seized the opportunity and obtained a $465 million loan from the US Department of Energy. While in the same period, Solyndra fell into a financial crisis.
3. Monopoly Issue: At the beginning of the establishment, are you grabbing a large share in a small market? Tesla entered from the high-end electric sports car market, and then manufactured slightly lower-priced Model S cars.
4. Personnel Issue: Do you have the right team? Elon Musk described Tesla employees as: “Choosing Tesla is like choosing to join the special forces, choosing Tesla is choosing to accept the challenge.”
5. Sales Issue: Besides creating the product, do you have a way to sell the product? Most companies underestimate sales, but Tesla takes it seriously and has its own complete sales system.
6. Durability Issue: In the next 10 or 20 years, can you maintain your market position? Tesla has a first-mover advantage and develops faster than other companies. Its leading position will expand in the next few years, becoming the brand others dream of.
7. Secret Issue: Have you found a unique opportunity that others haven’t discovered? Tesla understands that fashion in the clean technology field stimulates interest. Rich people especially want to appear “green” enough, so Tesla decided to make cars that make owners look cooler.

Founder’s Paradox

Maverick personality is the engine driving the company’s progress. A unique founder can make authoritative decisions, inspire strong loyalty from employees, and make plans for decades ahead in advance.

Founders should not indulge in their own prestige and others’ praise, otherwise they will make themselves notorious or be demonized, so they must be careful. Bill Gates proved that highly focused success may bring highly concentrated attacks. He is a clumsy nerd dropout college student, and also the richest man in the world.

The greatest danger for a founder is being too certain of their own myth, and thus losing direction. Similarly, for the company, the greatest danger is to stop believing in the founder’s myth, and mistake disbelieving the myth for a kind of wisdom.

Published at: Oct 10, 2023 · Modified at: Dec 11, 2025