Building Yourself as a Monopolies
Wednesday, 9/30/2020
This Wednesday is a little different as I am presenting a long-form essay. As always, feel free to share it with anyone just by a simple forward, and let me know what you think! Here we go...
Building Yourself as a Monopoly
What is a Monopoly?
I’ve read a lot of Peter Thiel lately (co-founder of PayPal, Palantir; first investor in Facebook). I recently finished his book Zero to One (go get a copy right now, carve out four hours, grab a pen & paper, then read it). In the book, he introduces the idea that business as a monopoly is the only way to separate your business from competition. Whereas we see monopolies as this intimidating concept, he proposes it’s the singular way to launch a successful startup. When we do this, we take our new startup and create a single instance, or we take the world from “zero to one.” It got me thinking, today, more and more people are positioning themselves as a business. Can you take Thiel’s business monopoly principles and apply them to yourself?
First, let’s lay the groundwork for what exactly a business monopoly is. According to Investopedia, it refers to when a company and its product offerings dominate one sector or industry. When we take the concept of a business monopoly, immediately the tech giants come to mind, but do they operate in one sector or industry? Thiel philosophizes on this in a fascinating way, in that monopolies don’t actually want to be viewed as monopolies. Companies, such as the tech giants, paint the picture that competition is immense, and they are always looking for ways to stay ahead in the marketplace. While we are often convinced by this façade, those companies know these statements are not true.
On the flip side, companies that have enormous amounts of market competition spend their time portraying that they offer “superior products” that are “unlike anything else.” In reality, they are, what Thiel refers to as, “zero to n” entities. When was the last time Apple made a commercial taking a shot at the Samsung Galaxy? Never. How about Samsung taking a shot at Apple? This Samsung commercial aired for months.
In sum, monopolies spend time talking about competition they don’t really have; companies competing for market share spend time talking about their superior products. Seems backward, right?
Thiel explains this backward practice, where monopolies start with one small niche they end up forming a “monopoly” around. Take Google with search engines. Yes, it owns that sector pretty whole-heartedly, but would anybody view Google solely as a search engine company anymore? Of course not; that might be the first thing you think of, but it is much broader than that now.
Why is that? Why didn’t Google just stay put and flaunt its “superior search engine”? Because there is a fast approaching ceiling. All growth from any single market or technology will end. At some point, another entity will challenge your business and move you toward zero to n. If an entity truly believes it has a monopoly, it will continue to develop its business and grow to other areas keeping its zero to one status.
Unfortunately, might want to take a seat for this one, you’re probably not going to be the next Mark Zuckerberg. Is it doable? Absolutely, but chances are, you are content with your current job or, at least, your current career path. Entrepreneurship isn’t for everyone (it’s more fun to watch Shark Tank than be in it). While you might not ever build a business monopoly from the ground up, you, yourself, are a monopoly. That means you are a zero to one instance.
You are a Zero to One Instance
When you are born, you also take the world from zero to one. There is no other person like you. You have incredibly unique DNA that formulates everything about you. Thiel argues that, in the quest to find the idea that takes an instance from zero to one, many businesses will often end up re-branding something already existing, creating a zero to n instance. For example, Yahoo! created its search engine, Bing, in hopes of competing with Google. This is going from one to n. Many entrepreneurs will spend their entire life chasing that one idea that takes an instance from zero to one, but as a living, breathing human being, you have effectively erased the hard part. It’s already done.
Even twins are perpetually different. Take this article from Time on the story of “The O. Brothers” (German police never released their full names). In 2009, three masked men perpetrated a jewelry heist in Berlin stealing $6.5 million. During the escape, one of the criminals left behind a sweaty rubber glove. Police ran a DNA scan on the operation and found a match for the O. Brothers. Since their DNA was 99% identical, German police had no way to indicate one or the other. The investigation went on to dead ends, so the authorities had no choice but to release both O. Brothers.
Sure, they both could have been involved, but there’s also a possibility one was sipping tea at brunch while the other was throwing diamonds in a bag. Anyone who knows twins understands that, while looks may deceive, they’re different individuals. Why do you think the term “evil twin” exists? They might share a high genetic makeup, but it’s not enough to make them the same person. Even twins are a zero to one instance.
We as people are a monopoly and that means every single one of you 7 billion people (yes, I expect every person on Earth to read this). We share 0% identity with virtually everyone on Earth. There will never be another you. I know you know this, but you also need to hear it again and again. I need to hear it because I don’t know if I truly believe it, and if you’re anything like me, it’s awfully easy to slip into the feeling of one to n. Even though the forever chase to find that zero to one feeling is long over, we continue the journey.
Losing Our Identity of Zero to One
When does this happen? It seems like we push ourselves into the one to n category without ever even knowing it. In some cases, we completely embrace our idea of zero to n. This is evident when we compete for the same jobs, buy the same things, watch the same things, and the list goes on. We seem to embrace the role of fitting in. Of course, it’s no secret where this feeling of conformity comes from.
Thiel goes on to explain in the book that, if you grew up in the United States, you were subjected to a similar school system as everybody else. What’s the constant in this system? Conformity. Everyone learns the same thing, the same way, in the same setting. The kids who excel are vastly superior under these circumstances, where the kids who fail can’t say the same. By middle school, we see the ones who will shine in this system; meanwhile, we continually force the same system upon the kids who clearly won’t achieve.
For those who struggle with traditional primary and secondary education, it doesn’t take long to realize it. For the ones who achieve in the school systems, it might take until college to realize it. For those that were extraordinary in college, it might take until getting on the job to realize it. What is it? That there is always someone better than you are at something. Conformity spotlights this.
For me, it came right around high school. There were better athletes, students, leaders, musicians, etc. I succumbed to the idea of measuring myself against others, so I felt like I was just another one to n. After you let this connotation develop, it takes control of your decision-making. “I’m not good at math, so I don’t know why I’m even trying anymore.” Then, like many who fall under this spell, we get to college without ever realizing our full potential. Boy is that not the place to come with bad habits formed. Nothing will make you feel like you’re one to n quite like being thrown on a 2 miles radius with 20,000 students.
If we make it through college, it’s time to undertake the workplace, or “Excel’s Empire” as I like to call it. Here, again, some people will do really well in their line of work while others will struggle. It’s easy to think we’re just another salesman, marketer, accountant, engineer, *insert any*. We’re all competing for the same jobs, working to get that next promotion, looking for the next career opportunity. As Thiel puts it, competition in business produces “no profits for anybody, no meaningful differentiation, and a struggle for survival.” In the race to compete, we end up conforming to what we think we need to portray to beat the rest, embracing zero to n.
How to Build Our Monopoly
Programming our minds to get back to a state of zero to one is tough. In a world where we obsess about other coworkers, companies, social influencers, you name it, this is time spent training our minds to a zero to n state. Thiel outlines four characteristics of business monopolies that, in principal, we can apply to ourselves:
1. Proprietary Technology
Every monopoly starts out with one piece of unique information that makes it valuable. Again, look no further than Google’s search engine algorithm. Google didn’t set out to capture the billion-dollar tech market. Since monopolies are billion-dollar businesses, it’s easy to think that that was the plan to start. For Google, getting a big piece of the tech market revolved around if its proprietary technology took off. What is your personal proprietary technology? In other words, what makes you a monopoly?
It’s easy to confuse this with your interests, but your personal interests are the billion-dollar market. I’m interested in music, but I can only play a few chords on guitar along with millions of other people. If I was really good at guitar, then I would be called a musical “artist”; meaning, I create music. If I create music than we’re on track to proprietary technology, or our zero to one instance. Your interests lead you to find your proprietary technology; they are not your proprietary technology.
Therefore, there are millions of good piano players, but do you have the ability to create music? There are millions of good video game players, but do you have the ability to see and create stories? There are a million good writers, but do you possess the ability to invoke action? There are millions of good salesmen, but can you also find innovative ways to leverage your products?
The answer to all of this is yes, but we suppress our proprietary technology because we buy into the concept of conforming to beat the competition, going from zero to n.
I’m entering into the public accounting profession. Do I have an interest in public accounting? Yes, that’s why I chose to do it, but there are a lot of public accountants walking planet earth right now. What separates me from the rest of them? For starters, I’m probably one of the least technically skilled accountants. On the other hand, I would say not many accountants are running a newsletter. That’s a unique prospective that I can bring to public accounting. I can think up ideas and then generate ways to rally enthusiasm behind them. A zero to one characteristic.
You might say, “Davis, that’s still not a zero to one characteristic. There are plenty of people who like to write in public accounting.” You’re right, but ask me and five other accountants to write 500 words on tax laws, and you’ll see we have different perspectives. Look at it this way, if Jimmy Page and Eric Clapton (viewed as two of the best guitarists) were tasked to write a song tomorrow, sure they might use some of the same guitar chords, but the songs would be incredibly different.
Whatever the interests you pursue, no one has the perspective you own. Millions of people might share that interest, but not a single person breathing oxygen right now can articulate it the way you can.
2. Networking Effect
Thiel explains how Facebook dominated the networking effect for startups. In the embryonic stages of Facebook, people could barely see a need for what Zuckerberg was offering, which is usually how monopolies start. Now, we look back and think, “How did nobody else think of that?” The “how did I not think of that” mindset comes from perceiving something as simple.
Facebook started out so beautifully simple. An online community for Harvard students to go and connect. That’s it. The biggest asset it possessed was a massive growth opportunity. Place yourself in the shoes of a Harvard student (ha ha) in 2004. You sit down for lunch at the dining hall, and all of a sudden, everyone is talking about an occurrence on this new internet platform. Your FOMO kicks in, so you decide to sign up.
Your network begins the same way that every other monopoly begins, simple and small. It begins with your family (Harvard students), and then, it slowly progresses into a global outreach (Facebook today). Networking is the “why didn’t I think of that” characteristic of monopolies. Unlike your proprietary technology which is innate to you, networking is purely external. You control your network. Whatever you do, you’re building contacts. You can burn or build as many contacts as you would like, and it’s your choice.
Take the phrase, “Wow! Small world,” for instance. This is usually reserved for when you meet a stranger that somehow knows your second cousin or roommate from college. Why do you freak out about this? Because you don’t see your network as being as large as it is. Your personal network is unique from everyone else’s in the world. I would be curious to see if there is a single person with an iPhone contact book, over 50 contacts, that is identical to someone else’s. Vegas would put this percentage likelihood at 0.001%. Regardless of whether networks are even similar, not a single person has the exact same contacts in the same facets as you do.
Plus, your network allows you to use your proprietary tech. Facebook developed a lucrative algorithm to be able to display preferences to its users. This would be useless without having users on the network. “Oh, Brad? Yeah, he was a great employee. He even used his graphic design skills to help create our logo.” Boom! An example of your proprietary technology coupled with the networking effect that advances your monopoly, also known as “scaling it.” Speaking of scaling…
3. Economies of Scale Qualities of Scale
Let’s modify Thiel’s “economies of scale” to “qualities of scale.” Once a startup effectively networks its proprietary technology, the growth begins. Monopolies aim to achieve a level of scaling or “economies of scale.” In essence, as your production output grows, your fixed costs remain the same. Scaling allows companies to broaden their horizons and pursue different strategies.
After Amazon captured the online book marketplace, they were able to tap into, well, everything else. They could have just hung their hat on, “We sell books and shoes and dog food and whatever else you need.” Only, hundreds of other online retailers already do that, so what put Amazon above the others? Its economies of scale through the technology it created; you know it better as Amazon Prime. Thus, as its production grows (more people subscribe), it can put that revenue towards other opportunities.
Which do you think Amazon would put on a resume? “We sell goods” or “We have four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.” The latter is straight out of their 10k so we’ll go with that. Those are the areas they can continue to pursue that will scale, not selling toilet paper.
We all have a resume where we could babble on for pages about all the things we’ve done (in Amazon’s case, all the products they sell). Instead, we usually reserve it for stuff like: “I sold copiers for 5 years; I led my team in sales for 9 consecutive quarters; I managed a team for 3 years.” Even if it seems impressive, it’s all competitive-natured stuff that doesn’t give us “qualities of scale.”
Every time you meet someone, you’re handing them a resume while simultaneously receiving one from them. However, you do not exchange the typical cliché business resume. You wouldn’t bring up meeting your sales quota to some stranger. What do you give them? You give them information about your spouse/kids, trips you have taken, things you have tried, ideas you have. Having experiences and then living to tell about them are your qualities of scale. They work for your benefit without any additional cost.
Monopolies can hone in on their proprietary tech, but if they do not scale, then it means competition caught up to them. Going back to the musician example, most songwriters get their inspiration for music from experiences. These experiences help musicians scale their songwriting ability where they can deploy their proprietary technology to greater levels as musical artist. This is impossible without gaining qualities of scale.
No one on Earth has the same resume as you do. You have a diverse set of experiences that can scale with various people. I can be talking about my trip to Glacier with a climber, and then turn around to discuss my interest in theater through improv with a thespian. These are the qualities that scale for you in any environment; use it to take your monopoly to the next level.
4. Branding
Branding is the final monopoly characteristic that Thiel mentions. The first sentence from Thiel on this is,
“A company has a monopoly on its own brand by definition, so creating a strong brand is a powerful way to claim a monopoly.”
This perfectly encompasses what we’ve already discussed. We as humans, by definition, are already a monopoly. To claim your monopoly and captivate your zero to one identity, look no further than branding.
First, before we begin branding, I should say that a lot of this will revolve around social media. Without a strong understanding of yourself in the other previous characteristics, branding can sometimes be harmful. Just like a company can destroy its image with one bad marketing campaign, so can you with one jest social media post. This happens when companies are so engulfed by their competition that they believe the only way to prevail is through slander or other obscene marketing. We fall into the same tendencies personally when we’re threatened. To understand how to market yourself, you first have to understand who you are.
The example Thiel uses in branding is Apple. Apple has always been the best at designing technology and then taking it to market in the most effective ways possible. It has these extravagant product releases that produce fascination unparalleled in business. Again, Apple doesn’t have to entertain to competition, so it can focus solely on the product. The Samsungs of the world has to come after it.
Your brand is more critical to your identity now more than ever. People form their opinions on social media. If you know you are set to meet a stranger, 99% of the time we’re going to do a quick social media search of that person. This means first impressions often take place on your Facebook profile.
I’m not one to give any social media branding tricks because my profiles are nothing special, but they still say something about me. As it stands, I have 10 pictures on my Instagram from 2020: two of causes I support (shout out Tim Tebow Foundation’s Night to Shine & The End it Movement), one of an achievement, four with friends, & three of travels. You don’t have to be a social media wizard to brand yourself effectively. You just have to have enough to where people have a general positive idea of you when they leave your profile because if it’s the other way around, you might not have a chance to network your proprietary technology.
At some point, you might encounter a Samsung, someone who might attack your brand. What do you think the immediate reaction from Apple’s marketing team is? If I had to guess, at first, there has to be some haste to respond, but as the initial emotions wear off, Apple knows it is in a tier of its own. Apple can laugh it off, and go about its day. Way easier said than done, but if you are self-aware of your monopoly, no one can touch your zero to one brand.
Conclusion
Google spent years trying to develop it. Facebook faced numerous trials and errors trying to find it. Amazon had to scale to obtain it. Apple had to go to market effectively to capture it. The it, of course, is their monopoly.
Even though you are already cemented as a monopoly, the world can force you to think otherwise. We idolize celebrities, athletes, and politicians to the extent that they are the only ones who can obtain zero to one status. Falling victim to a zero to n mindset exposes you to competition that only produces short-term results. Monopolies always think long term, but they must start small, and there is no place smaller to start than yourself. Regain your identity in your proprietary technology and then scale up through networking and branding. Like I said, the hard part is over. You just have to realize that it is.
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