Zero-Sum Mindset, Positive-Sum Mindset… Exponential-Sum Mindset?

At Bigelow we are always all about practical application, but…sometimes it’s useful to gain a little perspective by refreshing our scholarship on pure theory to put our empirical and practical day-to-day Entrepreneur Owner-Manager scar tissue in context. The mental model I want to reflect on today is Game Theory.

As high-performing Entrepreneur Owner-Managers, all of us are familiar with the concept of the Zero-Sum Mindset (or Zero-Sum Game) where your gain always results in your competitor’s loss. It is a domain of scarcity, where one is competing over a fixed pie of resources that is awarded to either you, or to the competitor and the outcome is fixed—someone wins and someone else loses. Tennis. The maximum gain for you results in the maximum loss for your competitor, and the sum of your gains and losses is exactly zero.

A Positive-Sum Mindset (or Positive-Sum Game) on the other hand, is the notion that our engagement with others is in the domain of abundance, which actually results in a larger pie we each get a piece of, so that we are both better off. In a Positive-Sum Mindset, when we act in a coldly rational, self-interested manner, it advantages the other party the same amount that it benefits ourselves. In a way, we aren’t really even in “competition.” I cannot think of a single seasoned, successful high-performing EOM who doesn’t approach the world with a Positive-Sum Mindset. Most of us would say that specific mindset is the only way to have sustained success when we create value for all the parties in our enterprise.

Okay. So, a Zero-Sum Mindset is win-lose for competitors, and a Positive-Sum Mindset is win-win for both participants. But what about the rest of us in society? Are we benefited, harmed, or even at all affected by Zero-Sum or Positive-Sum Games?

I am inspired by the actions I witnessed recently by one of our friends/clients who is a super-successful, high-performing EOM in her domain. She described competitors moving in “down the street” (metaphorically speaking).  When I expressed some regret that her success had attracted aggressive new competitors, she said, “Hey Pete, I love new competitors in our space. Why? We are trying to make a positive contribution to our customers here, trying to be useful in employing new, completely new, original techniques and technologies and…it’s hard work. If anyone else wants to try that I am all for it, because the more they invest in this area the more benefited our customers—and all of society—will be.”

Another example. Decades ago, in the beginning of my career with Bigelow, I was meeting one spring afternoon in Marblehead with world-renowned yacht designer and sailor Ted Hood (winner of the America’s Cup 1974), founder of Hood Sailmakers, Hood Yacht Systems, and Hood Yachts (and uncountable other entrepreneurial creativity). I was in my 20’s and I am guessing Ted was in his mid-50’s. Ted was incredibly creative and inventive, and among other inventions, had conceived and developed the Hood Stoway mast, an ingenious in-mast main sail furling system which allowed the main sail in a larger sailboat to roll into the mast with the push of a button, making it effortless to set, or reef, or furl. I admired the design and innocently commented to Ted, “I think the company’s Enterprise Value will be enhanced when you get a patent on this.” Ted looked at me in annoyance and said, “No patents, Pete. The thing is, we want all cruising sailors to adopt the Stoway idea. It makes it safer and easier for single-handed sailing, short-handed cruising, or just a husband and wife running a big boat by themselves. I am not worried about people copying us. They will. Maybe they’ll even improve it. But the thing is— it’s not “easy” to design, execute, or make work correctly consistently.”

I am tagging this the Exponential-Sum Mindset. These are the mindsets or games where the participants invite collaboration from all other parties (even competitors) with the belief that some/all of our gain will result in our societies or culture’s gain. It’s an Abundance Mindset. This mindset actively requests the participation of competitors and collaborators, in order to increase the size of the pie for all of us, with the positive externalities from that spilling over to the mass popular culture.

In my experience, all of the best Entrepreneur Owner-Managers are Exponential-Sum Game creators who through their own achievements, end up enriching others’ lives at the same time.

This spectrum of concepts of interactions (zero-sum, nonzero-sum, positive-sum, negative-sum, constant-sum, and variable-sum games) was introduced by John von Neumann and Oskar Morgenstern when they invented the mathematical theory of games in 1944.  They didn’t mention Exponential Sum Games. The author Robert Wright sketched a similar arc in his book Nonzero (1999) (which I loved) and extended it to the deep history of human societies. Wright believes there is an explicit recognition among literate people of the shorthand abstraction “Positive-Sum Game," probably responsible for extending a process in the world of human choices that has been operating in the natural world for billions of years.