🔎 Strategic Cooperation (Musk & Thiel)

Topic
Curriculum

Zero to One is a popular book on successful entrepreneurship.

The author is billionaire and PayPal co-founder Peter Thiel.

Thiel says that monopoly is the goal of any successful business.
His advice to create a monopoly mimics our strategic collaboration approach:

  1. Seek alliances rather than mutual destruction. Instead of fighting his former competitor Elon Musk, they merged.
    🟰 Make friends, not enemies
  2. Avoid competitive frames such as the popular “disrupt” startup approach. “Disrupting” creates competition against the most powerful and established players, says Thiel.
    🟰 ‘Avoid unnecessary enemies and fights’, a corollary of ‘make friends’
  3. Develop business cultures based on cooperation and win-win, shared values, and shared meaning.
    🟰 Internal collaboration to get the most out of teamwork
  4. Act with leverage in mind, when he ousted Elon Musk during Musk’s holiday trip
    🟰 Attack when your leverage is highest and theirs is lowest

Thiel & Musk: Cooperation Over Betrayal

Business cooperations create larger entities.

Groups and bigger entities are higher power and can offer better payoffs to the individuals within them.

However, individuals within the group can still compete with each other.

Thiel and Musk’s cooperation reflects the constant tension between cooperation to enlarge the pie, and competition to gan a bigger slice of that bigger pie.

Musk was CEO of PayPal.
But Thiel worked in the background to oust him.

And guess when he did it?

When he had highest leverage, against Musk’s lowest leverage.
Thiel executed his board putsch while Musk was away -on his honeymoon-.

Musk was dumbfounded and angry.

But…

Musk & Thiel Still Maintained Cordial Relationships

But he was smart to avoid an all-out, lose-lose war.

Instead, he kept cooperating for the common cause… And his own good.

That helped PayPal succeed, and Musk walked away with $180 million when PayPal sold to eBay.

Then Musk went his own way and left Thiel in the dust.

But without making an enemy.

Also helped by Thiel’s approach, who knows better.
Thiel is an astute power player.

And even when PayPal was behind them, he always spoke well of Musk.

It’s Thiel was famously said ‘You never bet against Musk’.

📚 (Optional Theory) Cooperative Collusion: Winning At Society’s Cost

Win-win collaboration isn’t always win-win-win.

Thiel’s approach to collaboration was good for him and Musk.

Stronger companies can innovate more, and produce better products. In that case, everyone would gain.

But cooperation can turn into collusion, for example with cartels to keep prices higher.
Cooperation can also create powerful monopolies. How that power is used is all to be seen. But since corporation dynamics push for profit maximization, they tend to be used against the consumers’ and citizens’ best interests.

Thiel wasn’t too concerned about that though.
He recommends readers go for monopolies. And to develop tie-knit collaboration that he calls “mafia”.
They even took a picture of themselves posing as mafia members:

(Elon Musk couldn’t attend the photo shoot for conflicting schedule)

A good quote from business guru Alex Hormozi to highlight this point (rephrased for effect):

Small businesses stay small thinking competition.
Big businesses get big thinking consolidation.