I hate business books. Most of them could be tweets, and pretty much all of them have no staying power. Can you name a business book from 100 years ago? I’ll wait.
In any-case, there is always exceptions to the rule. Peter Thiel’s “Zero to One” is one of those. As I gain more experience in business and working on products, the frameworks he provides in the book ring more and more true.
Three key principles from zero to one
Focus on a niche market then expand
“You need to choose your market carefully and expand deliberately.” In the book Thiel talks about the need to start with a niche market and dominate it. Retrospectively this makes a lot of sense. Uber started by monopolizing the on demand black car service niche, Amazon started with books online, and the list goes on.
The key here is to be strategic. I can easily pick any random niche like electric cars for real estate agents, but that misses the point. The point is that the niche needs to hit the three S’s. Secrets, Struggles and Scale.
Secrets: Is there some hidden insight that the world is not seeing, either about the present or the future? Staying with the Amazon example, it was secret (to most) that the internet would expand so large and become so habitual in people lives.
Struggles: Is there some high frequency or high magnitude pain that the audience in said niche consistently face? Again with Amazon, many book buyers across the world could not get the books they wanted in stores because the physical location of book stores could not afford to carry the long tail of books that some people may have wanted.
Scale: Can the initial secret and struggle be extrapolated into new audience groups / markets? Lastly with Amazon, the online commerce secret and the struggle to get long tail items in store quickly expands across pretty much every commodity product. Hence why the Seattle firm now has a market cap 1,600,000,000,000 (1.6T).
Distribution, distribution, distribution
“Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true.”
I love product. I am firm believer that a wonderful product experience is essential to a a sustainable business. But often people (myself included) forget about distribution as a core element of the product. What does that mean? That means that it key to recognize the inherent selfishness in human behaviour. A good way to think about this is the framework of human instinct. Basically, what ways does your product appeal to and subsequently enable humans abilities to show or share their skills to survive or thrive.
(Narrow) competition is for losers
Lastly, and perhaps most importantly is asking the question of who you are competing with. Most companies define themselves by a category and as a result end up competing for the diminishing profits of the self imposed zero sum game. Quite distinct from this, the best companies and the most impactful products choose not to look to their competitors and compete with much more broad and aspirational. A good example of this is Reed Hastings at Netflix explaining how the product does not compete with other streaming platforms, but rather competes with its users’ sleep.
Crypto assets
These are the big elephant in the room questions for crypto assets right now.
The Niche
(1) What is the niche that has the secrets, struggles and scalability?
My guess? Stablecoins.
Current market? Speculation.
The Distribution engine
(2) What is the human instinct by which the niche can grow?
My guess: Social and communication based. More send and receive.
The higher ideal
(3) What is the vision?
Bottom up finance, not top down.