Zero to One_ Notes on Startups, or How to Build the Future ( PDFDrive )

CHARACTERISTICS OF MONOPOLY
What does a company with large cash flows far into the future look like? Every
monopoly is unique, but they usually share some combination of the following
characteristics: proprietary technology, network effects, economies of scale, and
branding.
This isn’t a list of boxes to check as you build your business—there’s no
shortcut to monopoly. However, analyzing your business according to these
characteristics can help you think about how to make it durable.
1. Proprietary Technology
Proprietary technology is the most substantive advantage a company can have
because it makes your product difficult or impossible to replicate. Google’s
search algorithms, for example, return results better than anyone else’s.
Proprietary technologies for extremely short page load times and highly accurate
query autocompletion add to the core search product’s robustness and
defensibility. It would be very hard for anyone to do to Google what Google did
to all the other search engine companies in the early 2000s.
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. Anything less than an order of magnitude better will
probably be perceived as a marginal improvement and will be hard to sell,
especially in an already crowded market.
The clearest way to make a 10x improvement is to invent something
completely new. If you build something valuable where there was nothing
before, the increase in value is theoretically infinite. A drug to safely eliminate
the need for sleep, or a cure for baldness, for example, would certainly support a
monopoly business.
Or you can radically improve an existing solution: once you’re 10x better, you
escape competition. 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. When it