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Competition, zero-sum games, and the creation of wealth

Competition, zero-sum games, and the creation of wealth

2. January 2016 By Timm Richter

I find it fascinating when people come to the same conclusion from different starting points.

Today I read ‘Redefining work‘ from Esko Kilpi. He talks about the way we work and describes that we are used to play competitive games under the assumption of zero-sum thinking and winner-takes-all philosophy. In his opinion, this competitive processes leads to exclusion of the ‘loosers’, thereby weakening the whole system, at least with regard to long term viability. He proposes that our most underutilized capability is our ability to cooperate.

What a coincidence! Just a couple of days ago I stumbled upon a critique from Steve Denning about Michael Porter’s strategic thinking. In 2012 Denning claimed that Porter’s thinking is based on the idea that strategy is all about coping with competition. And that this is just wrong because business is not about winning as much as possible from a fixed profit potential from an industry. Instead, any business should seek to increase value to its customers (and profits will follow, allowing the company to stay in the game).

Reading both posts side by side, the following take aways and thoughts come to my mind:

  • Any business should serve society, not the other way around.
  • The way companies serve societies is by providing value to their customers. Only constant improvement and innovation will secure the survival of the company.
  • Competition – in the Darwinian sense – is not about winning, but being good enough. As a corollary, it is not about maximizing profit, but securing the MVP (minimal viable profit). This must cover – according to Peter Drucker’s article in the WSJ from 1975 capital cost, insurance premium for business uncertainty, and jobs and pensions of tomorrow.
  • Not sports or war, but performing arts are a better mental model for business. Denning quotes Joan Magretta: ‘There can be many good singers or actors – each outstanding and successful in a distinctive way. Each finds and creates an audience. The more good performers there are, the more audiences grow and the arts flourish.’
  • Competition, non the less, is valuable – when it is not about winning, but striving for excellence and learning from the best.

Links:

Redefining work

What Killed Michale Porter’s Monitor Group? The One Force That Really Matters

The reason for any business

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