Zach Grannis

No, AI and LLMs are not making us stupider: thefp.com/p/tyler-cowen-…

Hamilton Helmer (@hamiltonhelmer) is the author of 7 Powers: The Foundations of Business Strategy, which outlines a framework for identifying and developing sustainable competitive advantage. It’s widely considered to be the most important book on business strategy. Folks like @patrickc @peterthiel @reedhastings @eldsjal and @jeffiel credit the book and Hamilton’s teachers for helping them build their companies. In our conversation, we discuss: 🔸 When to start thinking about power 🔸 Which sources of power to prioritize 🔸 The difference between moats and power 🔸 Common misconceptions among companies about the types of power they possess 🔸 How power relates to strategy 🔸 How ICs can leverage insights about power in their work 🔸 AI’s impact on competitive advantages and barriers to entry 🔸 Much more Listen now 👇 - YouTube: youtu.be/hKq1_KPSqy0 - Spotify: open.spotify.com/episode/3LkQhK… - Apple: podcasts.apple.com/us/podcast/bus… Some key takeaways: 1. The 7 sources of power: a. Brand: Your unique brand identity attracts and retains a significant number of customers. b. Process power: You can produce something more efficiently than competitors, and the competitors can’t easily copy the method. c. Cornered resource: You have exclusive access to a vital resource, such as the only rights to a patent. d. Counter-positioning: Your business model/strategy is so counter to that of incumbents that if they copied you, it would hurt their own business. e. Scale economies: You can produce something more cheaply than competitors, on a per-unit basis, because of the scale of your operation. f. Switching costs: Your customers can’t switch to competitors without bearing a significant cost(s). g. Network economies: Your product or service provides more value because of how many other people are already using it. 2. Power requires both a benefit (e.g. lower cost) and a barrier (e.g. switching costs) that prevents others from imitating or neutralizing that advantage. Beware of common delusions, like overestimating the power of branding, data scale effects, or operational excellence. 3. You should always be thinking about strategy, even before product-market fit. This doesn’t mean writing detailed plans about every element of your business. It means thinking about what your “source of power” could be and how you’ll establish it. 4. Power is at the heart of any good strategy. It’s something that gives you a material advantage over competitors that is impossible for them to mimic. It requires a benefit and a barrier. As Warren Buffett famously said, “I look for economic castles [benefit] protected by unreachable moats [barrier].” It would be pointless having a moat around an insignificant shack. And it would be pointless having a castle with no moat or protection around it. 5. For tech startups, it’s common to move from (c) to (g) in chronological order. They start with counter-positioning in order to survive competition from incumbents with many more resources. Then they unlock cost/price advantages as a result of scaling. Eventually their customers face switching costs because of the way they’ve used and invested in the product. And finally, tech startups can establish network economies with a critical mass of users. 6. The first 3 sources of power are rare for tech companies. The company is usually too young to have built sufficient brand love or uniquely efficient processes, and cornered resources are uncommon unless operating in a highly regulated industry. 7. Network effects refer to the increase in value or utility of a product or service as more people use it. Network economies go further by indicating whether these effects translate into significant financial advantages for the business. 8. Despite macro risks, the entrepreneurial creativity and bias toward action found in the U.S. and places like Silicon Valley remain a vital source of economic advancement. Founders should focus on leveraging their unique strengths and “just do stuff” rather than get paralyzed by over-strategizing.