When we think about the future, we hope for a future of progress. That progress can take one of two forms. Horizontal or extensive progress means copying things that work—going from 1 to n. Horizontal progress is easy to imagine because we already know what it looks like. Vertical or intensive progress means doing new things—going from 0 to 1. Vertical progress is harder to imagine because it requires doing something nobody else has ever done.

The single word for vertical, 0 to 1 progress is technology.

In a world of scarce resources, globalization without new technology is unsustainable.

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. Positively defined, a startup is the largest group of people you can convince of a plan to build a different future.

The internet had yet to take off, partly because its commercial use was restricted until late 1992 and partly due to the lack of user-friendly web browsers. It’s telling that when I arrived at Stanford in 1985, economics, not computer science, was the most popular major.

The internet changed all this. The Mosaic browser was officially released in November 1993, giving regular people a way to get online. Mosaic became Netscape, which released its Navigator browser in late 1994.

But it’s hard to blame people for dancing when the music was playing; irrationality was rational given that appending “. com” to your name could double your value overnight.

Make incremental advances

anyone who wants to change the world should be more humble. Small, incremental steps are the only safe path forward.

Stay lean and flexible All companies must be “lean,” which is code for “unplanned.” 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.

Improve on the competition Don’t try to create a new market prematurely. 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.

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. Bubble-era advertising was obviously wasteful, so the only sustainable growth is viral growth.

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

them. Instead ask yourself: how much of what you know about business is shaped by mistaken reactions to past mistakes? The most contrarian thing of all is not to oppose the crowd but to think for yourself.

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

The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business.

Imagine you’re running one of those restaurants in Mountain View. You’re not that different from dozens of your competitors, so you’ve got to fight hard to survive.

everything. Monopolists can afford to think about things other than making money; non-monopolists can’t.

outside? Do outsized profits come at the expense of the rest of society? Actually, yes: profits come out of customers’ wallets, and monopolies deserve their bad reputation—but only in a world where nothing changes.

But the world we live in is dynamic: it’s possible to invent new and better things. Creative monopolists give customers more choices by adding entirely new categories of abundance to the world.

Creative monopolies aren’t just good for the rest of society; they’re powerful engines for making it better.

Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT& T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers.

But every new creation takes place far from equilibrium. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot.

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.

We preach competition, internalize its necessity, and enact its commandments; and as a result, we trap ourselves within it—even though the more we compete, the less we gain.

Rivalry causes us to overemphasize old opportunities and slavishly copy what has worked in the past.

There is no middle ground: either don’t throw any punches, or strike hard and end it quickly.

you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most. The next chapter is about how to use a clear head to build a monopoly business.

Simply stated, the value of a business today is the sum of all the money it will make in the future.

If you focus on near-term growth above all else, you miss the most important question you should be asking: will this business still be around a decade from now? Numbers alone won’t tell you the answer; instead you must think critically about the qualitative characteristics of your business.

Every monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects, economies of scale, and branding.

As 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.

PayPal, for instance, made buying and selling on eBay at least 10 times better. Instead of mailing a check that would take 7 to 10 days to arrive, PayPal let buyers pay as soon as an auction ended. Sellers received their proceeds right away, and unlike with a check, they knew the funds were good.

Amazon made its first 10x improvement in a particularly visible way: they offered at least 10 times as many books as any other bookstore.

Every startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple: it’s easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is.

success. In late 1999, eBay had a few thousand high-volume “PowerSellers,” and after only three months of dedicated effort, we were serving 25% of them. It was much easier to reach a few thousand people who really needed our product than to try to compete for the attention of millions of scattered individuals.

The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.

This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $ 100 billion market.

Sequencing markets correctly is underrated, and it takes discipline to expand gradually. 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.

This is roughly what happened when the advent of PCs disrupted the market for mainframe computers:

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

What really matters is generating cash flows in the future, so being the first mover doesn’t do you any good if someone else comes along and unseats you. It’s much better to be the last mover—that is, to make the last great development in a specific market and enjoy years or even decades of monopoly profits. The way to do that is to dominate a small niche and scale up from there, toward your ambitious long-term vision.

If you treat the future as something definite, it makes sense to understand it in advance and to work to shape it. But if you expect an indefinite future ruled by randomness, you’ll give up on trying to master it.

they point to the power of a particular individual’s context as determined by chance. But they miss the even bigger social context for their own preferred explanations: a whole generation learned from childhood to overrate the power of chance and underrate the importance of planning.

It begins by rejecting the unjust tyranny of Chance. You are not a lottery ticket.

what valuable company is nobody building? Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable.

Most people act as if there were no secrets left to find.

“needs to have goals whose attainment requires effort, and needs to succeed in attaining at least some of his goals.”

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

founding teams. Technical abilities and complementary skill sets matter, but how well the founders know each other and how well they work together matter just as much.

• Ownership: who legally owns a company’s equity? • Possession: who actually runs the company on a day-to-day basis? • Control: who formally governs the company’s affairs?

You’ll attract the employees you need if you can explain why your mission is compelling: not why it’s important in general, but why you’re doing something important that no one else is going to get done.

On the inside, every individual should be sharply distinguished by her work.

impossible. Instead, LinkedIn set out to transform how recruiters did their jobs.

seven questions that every business must answer:

TESLA: 7 FOR 7

An entrepreneur can’t benefit from macro-scale insight unless his own plans begin at the micro-scale.

The tech bubble was far bigger than cleantech and the crash even more painful. But the dream of the ’90s turned out to be right: skeptics who doubted that the internet would fundamentally change publishing or retail sales or everyday social life looked prescient in 2001, but they seem comically foolish today.

The macro need for energy solutions is still real. But a valuable business must start by finding a niche and dominating a small market.

Almost all successful entrepreneurs are simultaneously insiders and outsiders. And when they do succeed, they attract both fame and infamy. When you plot them out, founders’ traits appear to follow an inverse normal distribution:

Primitive societies faced one fundamental problem above all: they would be torn apart by conflict if they didn’t have a way to stop it. So whenever plagues, disasters, or violent rivalries threatened the peace, it was beneficial for the society to place the entire blame on a single person, someone everybody could agree on: a scapegoat.

Jobs’s return to Apple 12 years later shows how the most important task in business—the creation of new value—cannot be reduced to a formula and applied by professionals.

Apple’s value crucially depended on the singular vision of a particular person. This hints at the strange way in which the companies that create new technology often resemble feudal monarchies rather than organizations that are supposedly more “modern.”

The lesson for founders is that individual prominence and adulation can never be enjoyed except on the condition that it may be exchanged for individual notoriety and demonization at any moment—so be careful.

The single greatest danger for a founder is to become so certain of his own myth that he loses his mind. But an equally insidious danger for every business is to lose all sense of myth and mistake disenchantment for wisdom.

But even if a truly globalized plateau were possible, could it last? In the best case, economic competition would be more intense than ever before for every single person and firm on the planet.

However, when you add competition to consume scarce resources, it’s hard to see how a global plateau could last indefinitely. Without new technology to relieve competitive pressures, stagnation is likely to erupt into conflict. In case of conflict on a global scale, stagnation collapses into extinction.

Our task today is to find singular ways to create the new things that will make the future not just different, but better—to go from 0 to 1. The essential first step is to think for yourself. Only by seeing our world anew, as fresh and strange as it was to the ancients who saw it first, can we both re-create it and preserve it for the future.