Seeing the World as a Zero-Sum Game May Be Costing You More Than You Think
If a big corporation opens a branch in your local community, how you see that move on a transactional level may tell about you more than you think. There are three ways to view the start of the new business in your community.
- these “rich” folks are here again to exploit our people and make more money for themselves.
- this is an opportunity for my people to play the game smarter and gain more from this interaction.
- this is an opportunity for the corporation to expand and achieve its financial goal. And also an opportunity for the people of my community to gain employment and development.
The first two ways of seeing economic and social transactions are what economics call zero-sum thinking in the game theory. The third way of seeing the transaction is positive-sum thinking.
Zero-sum thinking is simply thinking of the world as a zero-sum game. What is a zero-sum game? You might ask. A zero-sum game, as used in economic theory, is an economic or social transaction in which no new wealth is created or destroyed. It maintains the conservation of wealth. This means in a zero-sum transaction, one party wins, and the other party loses. The net gains and losses in a zero-sum game are equal to zero.
A good example of a zero-sum game is gambling. If you and I bet $10 on the outcome of a coin flip. After the flip, there can only be one outcome, head or tail, and therefore, one winner (with $10) and one loser (with $0). There can be multiple layers of this in the betting industry. The total money made by winners is the sum of the money made by the losers.
Zero-sum thinking is approaching all social and economic transactions like there would be a winner and loser. Hence, seeing all transactions as a competition.
A positive-sum game, on the other hand, is a game where all parties can win and no one wins at the expense of the other. In a positive-sum game, new wealth is created. The net outcome (positive and negative) of the transaction may be greater than the sum of individual contributions.
Therefore, positive-sum thinking is approaching economic and social interactions with the mindset of mutual gain (win-win) for all parties involved.
How Zero-Sum or Positive-Sum Thinking Affects Us?
Anthropologists have noticed that people of rural societies and peasants typically see the world through a zero-sum lens. According to George M. Foster, who studied this behavior amongst the rural people, Zero-sum thinkers have an “image of limited goods.” With an image of limited goods, when a neighboring farmer has a good harvest, others (zero-sum thinkers) see it as a sign of low yields for themselves. Then comes jealousy, envy, and then resentment.
While we are not peasant farmers today, this kind of limitation mindset still exists in our society. And for some, it might be the difference between their financial, relationship, and business success or failure.
How Zero-Sum Thinking May Be Affecting Your Finances
The stock market has always been misconstrued, by many, to be a multiplayer zero-sum game. They assume what the gainers gain is equivalent to what the losers lose. That means, for one person who makes money in the market, there are one or more persons who lose money. And that is not true. This has also prevented many people from investing in the market because they think Wall Street and other major financial players are out to swallow their investment.
It’s hard to see how everyone can gain in the stock market, so it’s probably the big banks and institutions that will make all the money while the average guy loses all of his money to the banks and institutional players.
As of 2020, according to a Gallup report, only 55% of Americans are invested in the stock market, despite the market boom over the last decade. While there are various reasons for the low participation in the stock market, over 10% claim distrust for the banks and the financial advisors prevent them from investing in the market.
People who see the world as a zero-sum game are less likely to trust others, even when it might be of benefit to them. They assume people want to make money off them and that inevitably affects their finances.
How Zero-Sum Thinking May Be Affecting Your Business and Inventiveness
Legitimate businesses are founded on the premise of providing value and mutual benefits for the business owner(s), workers, and consumers. People who see the world through the lens of a zero-sum game are less likely to be innovative.
They think, If they get ahead, it is at the expense of someone else. They might also think their business growth will elicit envy from the people who might not be fortunate to have what they have.
According to Joseph Henrich, author of WEIRD people,
Individuals who see the world as zero-sum are unlikely to waste time working to improve a tool, technology, or process because they implicitly believe that any productivity gains they might achieve will be at the expense of someone else (this, of course, is sometimes the case in the short run) and others will think badly of them.
And when they are in business, they are always looking for ways to outsmart their business partners or customers because they don’t see how all parties can mutually benefit from the transaction.
How Zero-Sum Thinking May Be Affecting Your Relationships
Relationships, just like businesses, are built on trust, respect, and mutual benefit. People with zero-sum thinking seek ways to be “winners” even in their social and sexual relationships. They may give less of their time, effort, and other resources because they don’t want to be the losers if things go south.
Like a self-fulfilling prophecy, the relationship goes south because of their zero-sum competitive way of thinking.
The world is not a competition. For most people, it is a place to find avenues for mutual benefits, whether in casual or business relationships. Seeing the world through a positive-sum lens fosters cooperativeness, which produces a better outcome than what we can achieve singly.
Seeing the world as a positive game is not synonymous with blind trust or gullibility. On the contrary, it is the courage to transact even with strangers. Wealth is created, opportunities are created, and no one has to be on the losing end.