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1992 Debate with Ross Perot, Bill Clinton, and George H. W. Bush

Controlling Outcomes by Controlling Table Stakes

Nielsen estimates that 84 million people watched the first presidential debate of the 2016 election. That was 36.4% of eligible voters and 60.5% of actual voters. Given how many US voters watch the presidential debates, participating in the televised debates is considered a table stake for having a shot at being elected president.

The official sounding ”Commission on Presidential Debates” decides who gets to be on the debate stage. It’s formation and stated purpose is interesting:

After studying the election process in 1985, the bipartisan National Commission on Elections recommended “turning over the sponsorship of Presidential debates to the two major parties”. The CPD was established in 1987 by the chairmen of the Democratic and Republican Parties to “take control of the Presidential debates”. The commission was staffed by members from the two parties and chaired by the heads of the Democratic and Republican parties… (wikipedia)

The League of Women Voters had been the previous host of the debates.

In 1988, the League of Women Voters withdrew its sponsorship of the presidential debates after the George H. W. Bush and Michael Dukakis campaigns secretly agreed to a “memorandum of understanding” that would decide which candidates could participate in the debates, which individuals would be panelists (and therefore able to ask questions), and the height of the lecterns. The League… released a statement saying that it was withdrawing support for the debates because “the demands of the two campaign organizations would perpetrate a fraud on the American voter.” (wikipedia)

Ross Perot’s 1992 bid for president as an independent was disruptive. Perot took 19% of the vote and many believe that had he not run, Republican incumbent George H. W. Bush would have been re-elected instead of Democrat candidate Bill Clinton.

The CPD excluded Perot from the televised debates in 1996.

Changing the Table Stakes

Four years later, the commission changed the rules of the game entirely, requiring that candidates have at least 15% in 5 national polls in order to get on the debate stage. Which polls count are consider to be “national polls”? The CPD decides.

The creation of the Commission on Presidential Debates (a cartel) and the 15% rule clearly benefit the candidates of the two major parties in the United States at the expense of all third-party (or independent) candidates and the voting populace. This legal collusion has been extremely effective at controlling who has a serious shot at running for president and who ultimately becomes president.

So not only is being on the debate stage a table stake, but having 15% in “5 national polls” approved by the CPD is considered a table stake as well.

When structured in this way, table stakes can be a form of moat or barrier to entry. So whoever controls the table stakes can have tremendous control over the outcome. Check out Jeffrey Pfeffer’s Power: Why Some People Have It and Others Don’t for a few great examples of establishing and controlling tables stakes in corporate environments – even if you’re at the bottom of the power hierarchy.

The Relationship Between Secrecy & Competition

In What Is Strategy?, I define a strategy as “a set of well-aligned activities with the aim of occupying a valuable position within a competitive landscape.”

Surprise is an incredibly useful tool during competition since telling our competitors what we’re going to do before we do it gives them a chance to devise a better course of action than they would have made otherwise. And since there’s always a competitive element to strategy, it seems like we would always want to keep our strategies a secret until we execute on them.

For example, it would be foolish for Apple to tell the world that it’s entering the content creation space 12 months before they’re ready. Netflix, Amazon, and the entire Hollywood machine would have time to adapt and make it harder for Apple to successfully enter the space. Having early access to this information would give competitors the chance to form alliances with one another, sign exclusive deals with producers, writers, actors…etc, and even lobby legislative bodies to make it harder for Apple to enter the space.

Secrecy is a requirement for the success of many strategies.

Just Between You and Me

However, there are scenarios when making our strategies well known is actually better than keeping them a secret – particularly when the competition isn’t fierce.

Since fierce competition destroys profits, it’s often wise to try to avoid it anyway. Signaling our high-level strategy is a good way to let nearby competitors know which battlegrounds are important to us and which are not.

Tesla’s Strategy

Tesla’s original master plan, written in 2006, clearly states: “The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”

Musk continues:

So, in short, the master plan is:

– Build sports car
– Use that money to build an affordable car
– Use that money to build an even more affordable car
– While doing above, also provide zero emission electric power generation options

In announcing this, Elon Musk put his cards on the table. None of the existing car manufacturers or any of the new upstarts made a serious effort to copy this strategy. And it took years for anyone to try to compete directly with Tesla in the high end market – which Tesla temporarily vacated as they began to move down market.

Even now, 12 years after Musk publicly announced Tesla’s master plan and strategy, no all-electric car has copied Tesla’s models and started a fiercely competitive war.

In fact, Tesla has succeeded and the company has entered a new strategic phase which Musk described in another blog post.

Musk knew that no other car company would copy his strategy and that Tesla would benefit more from announcing their plans than from keeping them secret.

The Competition

While Tesla didn’t broadcast every strategic move they were planning, Musk was very explicit about the company’s overarching strategy. It makes me wonder how the rest of the auto industry thought about Tesla and all-electric cars at the time.

Maybe some direct competition – real or even just announced – would have forced Tesla to play their cards a little differently and given one competitor an edge? Maybe not.