Game theory is a conceptual framework for dealing with competitive
situations in conditions of uncertainty. Making money and creating
wealth are certainly within this realm.
Game theory makes an essential conceptual distinction between "zero
sum games" and "non zero sum games".
Making money is often associated with "zero sum games", where winners
gain at the expense of the losers. This must involve some kind of
deceit or trickery which works against the establishment of sound
cooperative situations. In terms of any sensible strategy to create
wealth this is the worst possible kind of situation to get into.
Real wealth creation is about playing "non zero sum games" where
wealth is created as a result of cooperating in a game where every
player can be a winner. Cooperation improves efficiency and wealth
comes about as a direct result of improved efficiency.
A book by Thomas Schelling, "The Strategy of Conflict", was the
trigger which allowed me to see how the setting up of profitable
systems of cooperation could be considered a game. By turning his
pay-off matrices around (applying cooperation instead of conflict)
the game of creating wealth can be viewed in terms of a strategy for
setting up arrangements for cooperation.
Using this inversion of Schelling's model, the basic premise of
Keynes's famous work on "The General Theory of Employment, Interest
and Money" can be interpreted as being about the competitive game
played by employers competing with each other for the cooperation of
employees.
Using the financial trick of converting incomes into capital and
capital into incomes it became patently obvious that long term secure
cooperations have immense value. This is the underlying principle of
creating wealth and making money .
It is the "secret" of wealth creation: becoming skilled in "non zero
sum games" of cooperation which result in increased efficiency.
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Peter Small August 1996
Email:
peter@petersmall.com
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©Copyright 1996 Peter Small