Peter Thiel Highlights 'Complex Coordination' as a Novel Path to Monopoly in Startup Strategy
Peter ThielPeter·Tylenol isPaypalCo-Founder,FacebookAngel investor, foundedFounders FundFund, investedLinkedIn、SpaceX、Yelpand other well-known companies, is the bestselling book “Zero to OneAuthor of *Zero to One*, the most renowned entrepreneur and venture capitalist in Silicon Valley.
Peter Thiel
In mid-March, Peter Thiel delivered lectures at the School of Economics and Management, Tsinghua University, offering an open course titled “Startup Thinking: New Perspectives from China and the United States” to Tsinghua students. During the same period, he also engaged in exchanges with Chinese startups, sharing some novel insights.
Notably, compared with Zero to One, Peter Thiel introduces a new perspective on corporate monopoly: Complex Coordination.
What is the concept of “Complex Coordination”? Peter Thiel believes that if a startup can engage with various stakeholders, such as engineers and regulators, effectively integrate diverse cross-disciplinary resources, and operate in the right manner to create a new “product,” it achieves “Complex Coordination.” Establishing complex coordination requires startups to invest significant time and possess strong capabilities, resulting in high barriers to entry. Competitors cannot easily replicate this model in the short term, making it a pathway to achieving monopoly power—a dimension previously overlooked by investors. In Silicon Valley, people widely recognize the value of monopoly-type attributes such as brand, network effects, and distribution channels, but often underestimate the investment value of companies built on Complex Coordination. As an investor, I primarily seek out unnoticed value and identify unrecognized characteristics in potentially great companies; therefore, I pay close attention to this type of monopoly-oriented startup.
Most people tend to attribute Apple’s success to its brand. However, Peter Thiel argues that the true driver of Apple’s success is “complex collaboration.” Take the iPhone as an example: none of its individual components required a major technological breakthrough. Instead, Apple effectively integrated multiple elements—such as hardware, the operating system, and the App Store—to establish a new value chain. This integration is the key reason for Apple’s success.
Peter Thiel believes that Elon Musk, the co-founder of PayPal, established the electric vehicle company Tesla and the aerospace enterprise SpaceX. According to Thiel, the key to both companies lies in their ability to build organizations capable of complex collaboration. Musk’s philosophy is that if a car or rocket component has only one supplier, he will choose to develop in-house production capabilities rather than purchase from that sole-source supplier. This is because a monopoly by a single supplier would leave Tesla or SpaceX with no bargaining power, placing them at a significant disadvantage in procurement.
Peter Thiel’s philosophy is that companies should collaborate with external suppliers only in areas where there is ample competition among those suppliers, thereby leveraging inter-supplier competition to drive down prices. Adhering to this business philosophy, Tesla and SpaceX manufacture a significant number of components in-house. Both companies have established extensive manufacturing supply chains and continuously improve their products and production capabilities. In contrast, traditional U.S. aerospace manufacturers, such as Boeing, rely heavily on Tier 1 and Tier 2 suppliers. Once these supplier relationships are established, it becomes difficult for Boeing to optimize product design and production processes. Startup ventures like Tesla and SpaceX were previously perceived as overly aggressive and high-risk. However, once they effectively integrate various resources and establish complex collaborative systems, their impact on the world is profound.
Complexity Collaboration is a form of entrepreneurial venture whose core philosophy differs from that advocated by the Lean Startup methodology. While Lean Startup promotes the Minimum Viable Product (MVP), encouraging startups to begin with a simple product and expand gradually, one might argue that the iPhone and Tesla electric vehicles are also MVPs. In reality, however, their complexity far exceeds that of typical minimum viable products. Silicon Valley tends to encourage launching startups with very simple MVPs, thereby undervaluing new products created through Complexity Collaboration, such as the iPhone and Tesla vehicles. These products are difficult to replicate or copy.
Peter Thiel stated that Oscar Health, in which he has invested in the United States, is a typical example of “Complex Coordination.” With extensive expertise in healthcare IT, Thiel notes that the integration of healthcare IT and medical services can target five types of customers: physicians, patients, hospitals, insurers, and government agencies. Startups must carefully consider which customer segment to serve. Thiel believes that many startups adhere to the Lean Startup methodology and prefer to enter the market through physicians or patients, as these segments are subject to fewer regulatory constraints, present lower barriers to entry, and facilitate easier user acquisition. However, because other startups can also easily enter these segments, competition becomes intense, making it difficult to establish a monopolistic advantage. In contrast, health insurance and hospitals are far more complex sectors, yet they offer greater potential for value creation.
Oscar developed an internet-based healthcare management system. If patients agree to let Oscar monitor their health conditions and track their medical visits, surgeries, and rehabilitation processes via the internet, their health insurance premiums will be reduced. Although this product offers highly effective and transparent medical services, no existing health insurance companies were interested in purchasing it. Consequently, Oscar Health established its own online health insurance company, launching a novel insurance product that integrates the internet, healthcare informatics, market operations, and health insurance. The value derived from such complex collaboration is significantly higher, which is the primary reason Peter Thiel invested in Oscar Health at a high valuation.
(This article is authored by Liu Weiqi, CEO of Tongxin Yilian. Established in 2014 as an enterprise within Tsinghua Science Park, Tongxin Yilian positions itself as an internet-based platform for sharing diagnostic resources. By integrating underutilized medical resources from hospitals, the company matches patients with more efficient and convenient healthcare services, improves physicians’ clinical efficiency, and promotes tiered diagnosis and treatment.)