The Cooperative Network Charter
How to unite bitter competitors into one network that's worth more than any of them alone
- Difficulty
- Expert
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 86%
This is the governance architecture Dee Hawk designed in Sausalito to turn hundreds of competing banks into co-owners of a single payment network. Rather than trying to own the asset outright or force compliance, Hawk built a legal and incentive structure where competitors keep competing with each other on the surface while being contractually bound to grow one shared system underneath. The core insight is that a bigger, shared pie beats a fully-owned smaller one, but only if participation is tied to contribution (not tradable equity), governance is democratic but hard to trigger, and everyone commits to routing all relevant activity through the same rails. It explains how Visa was born out of a for-profit, non-stock membership corporation rather than a normal company.
Origin
Born out of the October 1968 Columbus, Ohio summit where furious Bank Americard franchisee banks confronted two junior Bank of America managers over chaotic, money-losing operations; Dee Hawk hijacked a placeholder 'grievance committee' into a mandate to redesign the entire system.
Core principles
- 01A bigger shared pie beats a fully owned smaller one
- 02Ownership should equal contribution, not capital invested
- 03Governance must be democratic but hard to invoke, so it doesn't stall the network
- 04Exclusivity to the collective system prevents fragmentation into side networks
- 05Rules must bind members to future changes they haven't seen yet, like a constitution
How to run it
- 1
Sell the bigger prize, not the smaller asset
Reframe the pitch from 'give me your valuable thing' to 'the value this creates outside any single owner's hands will dwarf what you have today.' Hawk used this exact framing with Bank of America's board to get them to hand over the Bank Americard program.
Pro tip Quantify the addressable prize (Hawk estimated the combined resources of all the world's banks) to make the opportunity cost of staying small vivid.
- 2
Replace equity with contribution-based rights
Make ownership 'irrevocable, non-transferable rights of participation' tied to the volume each member contributes, not purchasable or sellable stock. This removes the incentive to flip your stake and prevents a cascade of exits.
Watch out If members can sell their stake, the first opportunistic seller can trigger a value-destroying rush for the exits.
- 3
Govern by supermajority, not simple majority
Give every member a vote and the right to call one at any time, but set the passage threshold very high (Visa used 80%) so that governance is real but rarely invoked, effectively concentrating practical control with the operator everyone trusts.
Pro tip A high threshold discourages members from wasting collective time on votes they can't realistically win.
- 4
Ban side networks
Require members to route all relevant transaction volume exclusively through the new collective system rather than participating in competing networks. This is what forces the network to actually consolidate volume instead of fragmenting.
Watch out Watch for antitrust exposure; get regulator sign-off in advance if the restriction touches an entire industry.
- 5
Write a living constitution
Adopt one universal set of operating rules that binds all members now and to future amendments they haven't seen yet, decided by the same supermajority vote, so the system can evolve without renegotiating with every member every time.
In the wild
Every one of the roughly 200 existing Bank Americard franchisee banks agreed to dissolve their old franchise agreements and sign the new charter Hawk designed at Sausalito, giving up territorial exclusivity in exchange for a share of a much bigger network.
→ Not a single bank refused; the resulting entity became Visa, eventually worth more than every bank that helped create it.
Individual NFL teams like the Jets could have made more money doing their own local TV deals, but the league centralized broadcast rights negotiation across all teams.
→ Every team, including reluctant ones, ended up far wealthier from a share of the league's $14 billion national TV deal than they would have alone.
Common mistakes
Assuming your own setup is the market pattern
Bank of America assumed every transaction would involve its own bank on both sides, because that was true in California. That assumption broke instantly once the network expanded nationally, since issuing and acquiring banks were now usually different entities.
Selling a marketing license instead of an operating system
Bank of America thought franchisees just needed the brand and mark; franchisees assumed they were buying a fully operating network. The mismatch nearly killed the program before Hawk's committee stepped in.
Is it for you?
Not ideal for
Situations where one party can and should simply dominate the market outright, or where regulators won't grant any cooperation allowance among competitors.
From the transcript
“It would require a transcendental organization linking together in wholly new ways, an unimaginable complex of diverse institutions and individuals.”
“there will be a singular universal set of operating and governing procedures that, much like the US Constitution, is infinitely modifiable by a threshold vote…”
From the episode
Visa