Episode 16: Zero Sum Games

Dream Toolbox - Zero Sum Game.jpg

Welcome back. We need now to talk a bit about one of the most important concepts you can ever learn about building wealth and financial freedom. It is actually quite simple and can be summed up in one phrase: “Success is not a zero sum game.”

What does that mean? Think about any sports contest. Whether it is baseball, football, or any other competition, there is only one winner. Second place is only the first loser. But financial success is not like that. Think about Apple Computer, the most valuable company in the world as I am writing this. One of the reasons that Apple is so successful is that it has created platforms for apps on which independent developers can produce and distribute apps that
can make their creators very wealthy very fast.

But consider this: everytime one of those app developers creates a successful app, Apple computer gets richer. But this is an important distinction. Apple does not get rich by making the app producer poorer. It gets rich by making the app producer richer. This is the exact opposite of a zero sum game. It is a game in which success by one party increases the success and wealth of the other. That is how business in a free society works at its best.

Are there exceptions? Sure, in some rare cases there is competition in which there is only a winner and a loser. I own interest in a company that frequently bids on US and foreign contracts. These can result in revenues of 10’s of millions of dollars. In those bids, there is only one winner. But notice something even here. In order to increase our chances of success, we often form partnerships with companies who have skills our people lack. That increases our chances of winning the contract. But it also means we have to share the income from the contract if we win.

Is that bad? No, quite the opposite. By sharing the wealth and the skills of two companies, we increase our chances of winning more contracts. Thus, even where there is a clear winner and loser, the players who share skills and profits are more likely to be successful than those who do not.

Let me give you another personal example. Many years ago I was part of a team that was helping and owner decide which of several bidders was going to acquire some real estate worth hundreds of millions of dollars. One investor was the clear favorite, but he made a crucial mistake. He tried to drive such a hard bargain that no one else could benefit. My clients heard his pitch and walked away from the negotiations. In business you often hear the saying, “you have to leave something on the table for the other guy”. This bidder did not understand that. He wanted it all. What he got was nothing and another bidder, who offered some attractive benefits to the seller, my client, won the contract. He gave up something in the beginning but ended up one of the richest men in the world as a result. He understood that Life (and business) is not a zero sum game.

If you can apply that principal in life and business, always looking for ways to make those around you wealthier as well and looking for ways to make the result of your efforts greater by cooperating instead of wanting everything for yourself, you have taken a giant first step toward success.

Success in business is not a Zero Sum Game. If you try to make it one, you are almost guaranteed to lose. Help others succeed and you will help yourself.