In this chapter, Theil speaks about great businesses and their abilities to generate cash flow. He says, “A great business is defined by its ability to generate cash flow in the future”. Startups in innovative markets are more likely to have monopolies, their good days are still ahead of them, so even if they lose money, it may be more valuable than the established company that turned a profit last year.
A company with large cash flows far into the future/ monopolies, usually have a combination of proprietary technology, network effects, economies of scale and branding.
Brand, scale, network effects, and technology in some combination define a monopoly. But to get them to work you need to choose your market carefully. The trick is to start small, find your niche and scale up. Your strategy is important, you have to consider the end game in order to succeed.
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