Zero to one-|||
(All happy companies are different)

What valuable company is nobody building?

In this chapter Peter Andreas Thiel is talking all about two simplified models to explain the difference in a market: Monopoly and perfect competition.

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. In such condition the monopolist has control over the whole market. 

While perfect competition is a situation in which there are many sellers of one commodity. So that every seller has to sell the products according to the market rates. No one can rise their prices in a higher level. Because in that case customers can buy the same product from another seller in less prices. Under perfect competition, in the long run no company makes an economic profit . 

As it is said that monopoly is not good for us because in such case customers have to pay face value of that product. And because of monopoly other small businesses can never take place in the market. While in perfect competition the prices are in control and every seller gets approximately equal profits too. So that perfect competition is good for us .

But this statement is totally wrong.

Perfect competition falls the prices so that the profit starts being lesser by the time. In such case businessmen earn lesser and provide lesser salary to their employees. While in monopoly business is not facing any competition so that the businessman thinks about their employee’s welfare too. 

When a business is providing very superior quality of a product only then the customers be convinced to buy their products in a high price instead of buying low price products from the small businesses. 

It is not like small businesses can not take the monopoly away from market. For monopoly constantly innovating the good quality products is very important otherwise any small business can create the good quality products and sell them in lower rates and take the monopoly in their control.

Every business should try to create a monopoly in the market.

Microsoft is a Computer and software manufacturing Company. It holds more than 75% market share and is the market leader and virtual monopolist in the tech space.

Google has become a household name and whenever we don’t know any answer probably googling is the answer. The biggest web searcher with their secret algorithm controls more than 70% market share. The Company has grown into a web of services interlinked with each other like the maps, Gmail, search engine, etc. The Company has left its competitors – Yahoo and Microsoft behind with its innovation and technological advancement.

Monopoly lies

Monopolists know that bragging about their great monopoly invites being audited, scrutinised and attacked . They tend to do whatever they can to conceal their monopoly. 

   Competitive lies

Non monopolists tell the opposite lie that we’re in a league of our own. Entrepreneurs are always biased to understand the scale of competition, but that is the biggest mistake a startup can make. 

Characteristics of business going from zero to one-

These are some characteristics that businesses must have to create a monopoly in the market.

1. Proprietary technology- A technology of your own. You must have it’s trademark and copyright everything with you. So that any other can not create the products like you. And they can not make the copies of your products. But in such case your technology must be ten times better than others. If your technology is just a little different from other’s then there will be no major difference between your and other’s products. And you will have to face problems in selling your products. For example we can see that companies like Amazon , Flipkart and all are providing more products than any store.

2. Network effect - A phenomenon in which greater will be the number of users greater will be the value of the product. Facebook is very good example of it. When it was started and people started using it they liked to share it with their friends too. And by the time it made a big place in the world wide market.

3. Economy of scale - There should be no limit of your business growth. If your business will stop growing after a limit then you will have limited profit too. Economy of scale of your business should be like fixed cost should remain same but business should keep scaling. For example as we can see most of the people are selling their products online . They click pictures of their products , post them with details and people can buy them from anywhere. And if the seller is offering world wide shipping than the products can be sold in any area of the world too . And the another example we can see is of E-books. People can buy and read books from any area of the world . And in such cases when people like the products they share them as well .

4. Branding - Your business must have a brand . But your products must be of good quality too otherwise it will not matter how much you spend in advertising your products. People like to connect themselves with a brand and they start being loyal customers of your business if you have a brand image and supply good quality products too. As FastTrack has made it’s place among college students while Micromax spent huge amount of money in advertising but without good quality products it couldn’t be stand in the market. 

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To be continued.....

-Bani Singh.

Click here for Part-1st

Click here for Part-2nd

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