About these notes

Characteristics of a monopoly


  • proprietary technology: A business needs 10x technological improvement to have real monopolistic advantage
  • network effects: Network effects make a product more useful as more people use it. Your product needs to be valuable when the network is still small, otherwise it will never become a big network. Therefore network effect businesses must start with very small markets. Successful network effects businesses rarely get started from business people because the initial markets are so small that they don’t appear to be business opportunities at all.
  • economies of scale: Economies of scale work best when the cost of production, distribution, operation etc. doesn’t scale with the customer base. Software startups are exemplary examples since producing copies of the product has near zero cost. Service businesses are hard to make monopolies since they are hard to scale.
  • branding: A strong branding can be a powerful ace in claiming a monopoly. Branding only works with strong underlying substance. Apple has superior materials, hardware, better software integration etc. Their branding only binds and strengthens everything else.


  • Zero to One, Peter Thiel

← back

Links to this note

Zero to One: Notes on Startups

Aim for 0 to 1 improvements - The dot-com bubble made people cautious of innovation and big thinking - Competition is usually bad for a business - Monopolies exaggerate their...