How Paypal, Tesla, and Apple Used a Chess Strategy to Avoid Competition and Thrive

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I recently wrote an article about how chess strategy can be used in business. A very smart Master level player who is high ranking in Paypal wrote me disagreeing with my conclusions. In my explanation of how I saw that chess can indeed help I used the example of Apple and Paypal *thanks to his inspiration) and what chess strategies they used. Two very different strategies but two powerful ones. Here I also added another from , also a member of the Paypal mafia.

Apple used the difficult yet effective sacrifice technique to avoid being checkmated by the Grim Reaper that was one move away from checkmating it out of existence. When Steve Jobs took over Apple it literally had death at its doorstep. He being a bold and aggressive player, gutted Apple and left only the most crucial talent (pieces) on the board. By doing this he simplified the board and made it easier for him to see the very critical moves he needed to make to keep the Reaper from taking him. Using the principle of Zwischenzug he kept making intermediated moves to buy Apple time while sacrificing jobs, holdings, and products.

He finally found a line of attack that not only took Apple out the Reaper’s hand; it won him the game. Today Apple continues playing the game from a position of strength even after the Grandmaster’s departure and even with very few pieces on the board it is poised to be the highest ranked Grandmaster of all times as it approaches a trillion dollar valuation. Through Zwischenzug, great sacrifices, and finally maintaining a simplified game with very few pieces at play, Apple rescued itself from great doom and is now in control of its destiny and can even afford a few missteps without faltering. The hand of the Grandmaster having left a pristine board and an overwhelmingly strong position for anyone to follow.

Paypal was started through one of the most difficult decisions that any business can make. Create a truth and play to a draw. It is particular difficult to make because it was headed by two Grandmasters of businesses. They were Godfathers of their mafia and they had to agree to join forces and one of them had to give up control so the other could guide them through to a resounding win. The chess strategy of negotiating a draw was used here. Elon and Peter met over coffee and like great Grandmaster strategists recognized their game was a draw and that continuing separate could only hurt them. Unlike chess the game continued after they declared a draw but the principle still applied. They could continue playing and end up in a draw or worse yet allow a third competitor to overtake them as they wrestled on a drawn game. They were both too good to make a terrible move that would make them lose, yet unlike regular chess; business takes place over several boards and with many players so by not declaring a draw and joining forces they simply put themselves at risk of losing everything when a new player entered and took over because they were locked in a drawn game. Obviously the merger was not easy to implement but it was that decision and recognition of having a drawn game that made them a success in the end. Chess teaches that it is not always about winning, if you ignore the possibility of a draw you can blind yourself into losing. Draw and live to win another day is a great principle it teaches us.

Later on Elon used the principle of timing that chess teaches so well to start two companies that could not have been started today. He started two green companies, Tesla and Solarcity that were helped by government subsidies which have since virtually disappeared. In fact the only way to make Tesla survive was using the credits they gained from making an electric car. Without the right timing, these companies could not survive today. Tesla especially would have never survived as the loan from the government that kept it going would not be possible today. Even Space X came with perfect timing. Many can argue that Elon was just lucky but I believe it was not luck by strategy on his part to ambitiously start these companies when he did—and his timing, which is one of the biggest principles of chess was impeccable! Elon won by accepting a draw and by having flawless timing, two principles well established in chess.

Applying chess principles really does take a mind that can see patterns beyond the board and recognize the business patterns that can be helped by chess strategy and how to apply them. Chess does not apply to everything in life and in business, but with the right mindset it can help in most cases. As I explained in my response to him, military strategist are using tactics that are thousands of years old in today’s fly-by-wire wars because strategy with the right mindset and adaptation is universal and can apply even when technology seems to make it irrelevant. Because there is still a human factor in all we do, there is room for thousand year old military strategy and chess strategy to help us in our lives.

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