Wednesday, August 10, 2016

Zero-Sum

In a Zero-Sum trade, one person's gain is another persons loss. One Winner. One Loser. Nothing is added.

The idea behind cooperation is that both people gain. When a trade happens at a certain price, both people gain. This is because the buyer thinks the value is higher than the price, and the seller thinks the value is lower than the price. Value is personal, warm and fuzzy. Price is ambivalent, cold and clear.

After the exchange the sum of the perceived value is higher. When both people are happy, the trade is a Positive-Sum. Wealth has been created. A Negative-Sum game would mean after a trade, wealth has actually been destroyed.

Good rules steer interactions away from Zero- and Negative-Sum trades (Wealth Capture) and towards Positive-Sum (Wealth Creation). Trade beats War.

Poker War
Someone's Loss = Someone's Gain
Gain - Loss = 0
A Zero-Sum Game
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