eBay

How do you get millions of strangers to trust each other enough to exchange money for goods they can't see? eBay solved this in 1995 with a revolutionary insight: make cheating reputationally costly. Founder Pierre Omidyar created artificial versions of the repeated interaction and memory that enable cooperation in nature - public, permanent feedback where cooperators get rewarded with good ratings while cheaters face permanent reputational damage.

The platform demonstrated that reputation systems create tit-for-tat dynamics at scale. But eBay also learned that reputation systems alone don't guarantee success. When Alibaba entered China with Taobao's free-for-sellers model, eBay's transactional fee structure (charging both listing and transaction fees) couldn't compete. Taobao attracted millions of merchants who couldn't afford eBay's costs, forcing eBay's exit from China by 2008.

eBay's biggest strategic move was recognizing when to let go. By 2014, PayPal wanted to expand beyond eBay's marketplace while eBay wanted to focus on its core business. Rather than wait for crisis, eBay executed a controlled spinoff in 2015 with 0% retained stake, creating $50+ billion in shareholder value. The lesson: controlled separation before stress accumulates beats crisis-driven divorce.