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

3. Economies of Scale
A monopoly business gets stronger as it gets bigger: the fixed costs of creating a
product (engineering, management, office space) can be spread out over ever
greater quantities of sales. Software startups can enjoy especially dramatic
economies of scale because the marginal cost of producing another copy of the
product is close to zero.
Many businesses gain only limited advantages as they grow to large scale.
Service businesses especially are difficult to make monopolies. If you own a
yoga studio, for example, you’ll only be able to serve a certain number of
customers. You can hire more instructors and expand to more locations, but your
margins will remain fairly low and you’ll never reach a point where a core group
of talented people can provide something of value to millions of separate clients,
as software engineers are able to do.
A good startup should have the potential for great scale built into its first
design. Twitter already has more than 250 million users today. It doesn’t need to
add too many customized features in order to acquire more, and there’s no
inherent reason why it should ever stop growing.
4. Branding
A company has a monopoly on its own brand by definition, so creating a strong
brand is a powerful way to claim a monopoly. Today’s strongest tech brand is
Apple: the attractive looks and carefully chosen materials of products like the
iPhone and MacBook, the Apple Stores’ sleek minimalist design and close
control over the consumer experience, the omnipresent advertising campaigns,
the price positioning as a maker of premium goods, and the lingering nimbus of
Steve Jobs’s personal charisma all contribute to a perception that Apple offers
products so good as to constitute a category of their own.
Many have tried to learn from Apple’s success: paid advertising, branded
stores, luxurious materials, playful keynote speeches, high prices, and even
minimalist design are all susceptible to imitation. But these techniques for
polishing the surface don’t work without a strong underlying substance. Apple
has a complex suite of proprietary technologies, both in hardware (like superior
touchscreen materials) and software (like touchscreen interfaces purposedesigned
for specific materials). It manufactures products at a scale large enough
to dominate pricing for the materials it buys. And it enjoys strong network
effects from its content ecosystem: thousands of developers write software for