Notes on Startups, or How to Build the Future

FINDING VALUE IN UNEXPECTED PLACES

When you start a new business in an industry that already exists, writes PayPal founder Peter Thiel in his book Zero to One, you are adding more of something to the world that’s already there. You are going from 1 to n, he writes. But when you start a business that is unlike any other business on the planet, you are truly creating something new. In Thiel’s terminology, you are going from 0 to 1.

And you want to be the “one.” Thiel is not a fan of competition — not just because of the required battle for customers but because competition makes companies focus on competitors more than customers. “If you can recognize competition as a destructive force instead of a sign of value, you’re already more sane than most,” he writes.

Thiel uses the ongoing battle between Microsoft and Google as an example. Originally, he writes, there should have been no reason for a fight. Microsoft was operating systems and office applications, while Google was a search engine. Then the two companies developed an obsession about each other. “The result?” Thiel writes. “Windows vs. Chrome OS, Bing vs. Google Search, Explorer vs. Chrome, Office vs. Docs, and Surface vs. Nexus.” The battles were bloody, and the companies, Thiel writes, paid the price by watching Apple surpass them both in dominance. In January 2013,Apple’s market capitalization was $500 billion, while Google and Microsoft combined was $467 billion. “Just three years before, Microsoft and Google were each more valuable than Apple,” he writes. “War is a costly business.”

Building a Monopoly

For monopolies, the situation is quite different. You can charge the prices you need to make the profits you want. There are no competitors driving down those prices. It’s true, as Thiel explains, that monopolies would be bad if nothing changed: They could command any outrageous prices they wanted with no recourse for customers. But in the dynamic world of business, where unhappy customers represent an opportunity for a new competitor to enter the space, monopolies are motivated to create value for their customers, he writes.

There is no simple recipe for building a monopoly, but according to Thiel, there are several elements that entrepreneurs should look for. These include

Proprietary technology. As a rule, proprietary technology should be 10 times better than the nearest technology.

Network effects. This means other users are using the technology. Facebook works because everybody is on Facebook. But it’s important that early users still find the product valuable even on a small scale (e.g., Facebook was just for Harvard students at first), because it will take some time to scale any product.

Economies of scale. Not all businesses benefit from economies of scale. Going from one yoga studio to 10 doesn’t really yield economies of scale: you just need 10 times more instructors. The best startups have economies of scale built into the business model — Twitter, for example, can build up to 250 million users without making any significant changes to its operations.

Branding. You’ll want to create your own unique brand. But be careful to start with substance before brand.

To make these elements work in creating a monopoly, Thiel writes, you need to start small. Look for those groups of people who have a need that is not fulfilled by any one company. Avoid the big markets: Yes, there are lots of customers, but also lots of entrenched competitors. Once you have your niche market created, he writes, it’s time to scale up… carefully. eBay didn’t jump from Beanie Babies to industrial surplus. It continued at first to cater to small-time hobbyists until, Thiel writes, “it became the most reliable marketplace for people trading online no matter what the item.”

Beyond how-to steps, Thiel does not ignore the importance of mindset and thought processes. In one brilliant chapter, Thiel talks about those who have a definite view of the future (they know what is going to happen) and those with an indefinite view: the future is inscrutable, so why bother to prepare for it. To Thiel, indefinites rule the world. Entrepreneurs have a different worldview, however. They intend to make the future they seek.

Filled with insights ranging from financial advice to philosophical discussions, Zero to One is one of the most thoughtful books on entrepreneurship on today’s shelves.

Book Review: The Responsible Entrepreneur

The_Responsible_Entrepreneur

by Carol Sanford

Entrepreneurship goes beyond starting your own small business. Many larger businesses exhibit innovative and entrepreneurial ways of thinking. Anyone starting or bringing in new business fulfills the role of an entrepreneur. Carol Sanford brings her vast experience in helping executives and corporations to entrepreneurs looking to launch and scale a venture by mapping out four archetypes in The Responsible Entrepreneur. This book is now available as a Soundview Executive Book Summary.

“Archetypal roles provide a roadmap for taking on bigger challenges, making bigger promises, and focusing the energy and resources needed to get bigger results,” writes Sanford. The four archetypes are The Realization Entrepreneur, The Reconnection Entrepreneur, The Reciprocity Entrepreneur, and The Regenerative Entrepreneur. The archetype required to change an industry is a Realization Entrepreneur. The Reconnection Entrepreneur is the archetype required to change social systems. The Reciprocity Entrepreneur is the archetype required to change cultural paradigms. The archetype required to change connection to foundational agreements is the Regenerative Entrepreneur. By understanding what archetype aligns with your goals, you will learn how to grow your business into a powerful platform that can leverage change. Sanford provides readers with examples of how extraordinary people changed business for the better, including Kipp Baratoff, Annalie Killian, and Shainoor Khoja.

All four archetypes can be found in established organizations. Beyond learning how to leverage business with your archetype, you will learn how modern archetypes can alter the future. With The Responsible Entrepreneur, entrepreneurs can build businesses that will make the world a better place.

Purpose as the New Driver of the Economy

In my blog post on October 20th, I looked at a trend we’re seeing in business and business books focusing on purpose as the new driver of businesses and employees.

One book I featured was The Purpose Economy by Aaron Hurst. Aaron has experienced this trend first-hand as he developed into a purpose-driven entrepreneur, eventually launching Taproot, which creates a pathway for millions of professionals and Fortune 500 companies to volunteer for nonprofits.

Aaron introduced three types of purpose:
• Personal Purpose – we find purpose when we do things we love, attempt new challenges, and express our voice to the world.
• Social Purpose – relationships matter to humans. They reinforce our sense of value, require us to engage, and ultimately help us grow.
• Societal Purpose – purpose comes when we do something we believe matters – to others, to society and to ourselves.

If you long for purpose in your work and life, or if you want to engage your company in purpose-driven endeavors, then join us on September 30th as we talk with Aaron Hurst about purpose at our Soundview Live webinar The Purpose Economy.

How to Think Like an Entrepreneur and Thrive in an Unpredictable Economy

OWN YOUR FUTURE

Don’t Have a Career Plan!
In the past, long-standing, respected, industry-leading companies might disappear due to competition from nimble upstarts; today, as author Paul Brown describes in the early pages of Own Your Future, it is entire industries that keep unexpectedly and jarringly disappearing: “Been to a music store lately? Drop off any photos to be processed? Used a pay phone? … Used a travel agent to book a routine vacation? Probably not.”

What does this mean for building careers? It means, according to Brown, that career plans are often useless. If you were an associate marketing manager for TomTom and had a plan to work up to regional manager and, some day, director of marketing, those plans ended when the unthinkable happened to the stand-alone GPS market: car manufacturers started including them in their cars. The same holds true for the ambitious low-level manager at Blockbuster.

The bottom line, according to Brown, is simple: don’t have a career plan! Brown has a better idea for dealing with the uncertainty of today’s world: a methodology known as ALBR.

What Serial Entrepreneurs Do

Nobody knows more about uncertainty, writes Brown, than serial entrepreneurs. Launching a company is always an exercise in terrifying uncertainty: Will my products or services attract customers? Will they be willing to pay the price that I need them to pay? Serial entrepreneurs – those who are always looking for the next business to start -thrive on such uncertainty. And for that reason, he writes, thinking like a serial entrepreneur is the best way to succeed in an uncertain economy.

Writing with Charles Kiefer and Leonard Schlesinger, his collaborators on his previous book Just Start, Brown describes in Own Your Future the path that serial entrepreneurs take as they launch their latest business.

  1. Serial entrepreneurs set out to do what they want to do. Passion is a word that is sometimes overused. Indeed, not every company launched by a serial entrepreneur was based on a passion. But at the very least, there was desire: serial entrepreneurs start companies doing something they want to do.
  2. Serial entrepreneurs act. Serial entrepreneurs don’t spend decades pondering an idea. No company was thought into being. But when they do act, they take a small step toward their goal. They don’t overcommit. They don’t risk everything. And they don’t become paralyzed by thoughts of “what if ” or “what might happen.”
  3. Serial entrepreneurs learn. After taking the small step, they stop and see what they have learned from that small step. Is the market response suggesting a different course? Do they still have the desire to move forward, or do they think they would like to do something else?
  4. Serial entrepreneurs build on what they’ve learned. After taking a small step and pausing and reflecting on that small step, they use the lessons of the first step to develop the next step.
  5. With the next step, they start the process all over again. Brown summarizes the process as Act, Learn, Build, Repeat – or ALBR. According to Brown, ALBR is the methodology that serial entrepreneurs use to deal with the endless uncertainty of launching new companies, the methodology that in Just Start helped organizations deal with uncertainty and, in Own Your Future, the methodology that will help individuals build successful careers no matter what their job.

The power of ALBR is that it turns career planning on its head. Instead of imagining the perfect job of the future and then figuring out how to get there, through ALBR you slowly create your dream job. This is a vital difference for the simple fact that the perfect job of the future on which you have set your sights may suddenly disappear from the horizon.

Own Your Future is a career and success book that, unlike many others in its category, is adapted to today’s realities. Brown and his coauthors are not afraid to dispute some of the most basic advice often seen in other books. (e.g., the oft-repeated maxim that if you do what you love, the money will follow is false; the money may not follow). From overcoming obstacles and choosing between love and money to how to act entrepreneurially without starting a company, Own Your Future is packed with advice and keen insight for those looking for their next job… which should be everybody.

What is a Responsible Entrepreneur?

“Responsible entrepreneurs are a special breed, seeking to transform industries and even society itself. They challenge and refine cultural assumptions, laws, regulations, and even the processes of governance. This requires them to do and think far beyond what is usually required of business leaders.” Carol Sanford

In Responsible Entrepreneur, Carol Sanford, one of the most trusted names in responsible business development, offers a blueprint for this new kind of business leadership, describing the means by which any entrepreneur can pursue a higher order of work.

Sanford maps this journey through four archetypes:

•The Realizing Entrepreneur:  Industry Game-Changer (Steve Jobs, Sarah Slaughter)

•The Reconnection Entrepreneur: Society Game-Changer (Richard Branson, Cheryl Contee & Kipp Baratoff)

•The Reciprocity Entrepreneur: Culture Game-Changer (Oprah Winfrey, Michiel Bakker & Annalie Killian)

•The Regenerative Entrepreneur: Governance Game-Changer (Larry Page, Jay Coen Gilbert & Shainoor Khoja)

We have invited Carol to our upcoming Soundview Live webinar, The Responsible Entrepreneur, to give you a better understanding of which archetype most aligns with your goals, so that you can learn how to grow your business into a powerful platform that can leverage change, and even change the foundations that create our most pressing problems and issues.

For entrepreneurs seeking to pursue world-changing results, or impact investors looking to align their capital with their values, The Responsible Entrepreneur provides the frameworks to build a business and to evaluate and direct investments to create the greatest benefit for all stakeholders. For anyone who wants to make a difference in the way businesses affect the world, The Responsible Entrepreneur lays out ways to make that aspiration focused and doable.

Join us on July 24th for our webinar with Carol Sanford, and bring your questions to post during the live event.