The big story in tech this morning is that Uber and its Chinese rival Didi Chuxing are officially calling a truce, and Uber is selling its Chinese subsidiary to Didi.
The Uber-Didi deal is straight out of Peter Thiel’s playbook
Here’s what the Gawker destroyer said in 2014.
Both companies lost billions of dollars on subsidizing rides on ultimately futile efforts to outflank one another, and what was previously a market dominated by two companies (a duopoly) is now a monopoly.
Though chatter about this kind of deal began surfacing in recent weeks, one guy had the right idea about it long before anyone else: Billionaire investor, vampire-like life-extension enthusiast, Trump delegate and Gawker destroyer Peter Thiel.
In a September 2014 op-ed for the Wall Street Journal, Thiel basically argued that any smart entrepreneur really wants to create a monopoly; the article was titled “Competition Is for Losers,” and it was drawn from his book of startup wisdom, “Zero to One.”
Here’s his case, in his own words:
Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away. The lesson for entrepreneurs is clear: If you want to create and capture lasting value, don’t build an undifferentiated commodity business.
To put it in terms of Uber and Didi, Thiel is saying that all their “profits” were being eroded by their expensive war of ride subsidies and new driver incentives. And because both Uber and Didi Chuxing have raised seemingly endless amounts of money, this fight in China could have gone on for a long time, and it would have been a while before either of them saw an actual “profit” in the Chinese market.
The rest of Thiel’s argument relates to what would come next for Uber and Didi, now that they each have their own area to dominate (Uber, the U.S. and Europe; Didi, mainly China). He thinks that “creative monopolists give customers more choices by adding entirely new categories of abundance to the world.”
We already have an idea of what Uber and Didi think their “entirely new categories of abundance” might be. In fact, Uber’s driverless categories of abundance are currently cruising around the streets of Pittsburgh.
Of course, the biggest and best (or baddest, in Thiel’s libertarian eyes) monopolist of all is the government.
And Uber’s long-term goal, according to CEO Travis Kalanick?
This article originally appeared on Recode.net.
