The big business model debate: zero-sum game or expand the pie?

zero-sum vs expand the pie
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We’re seeing an increasingly polarized debate over business models: the zero-sum game vs expanding the pie. But it’s more complicated than labeling a given model one or the other.

We often have a tendency to divide people to two groups. There’s even an old joke about it: “There are two kinds of people: those who divide people into two groups of people, and those who don’t.” But it does seem that the world is quite polarized over all kinds of important questions, whether they’re political or more business oriented.

Consequently we tend to label people who support one side or the other as though they are polar opposites to each other. For example:

  • Conservatives vs liberals
  • Right vs left
  • Establishment vs anti-establishment
  • Corporate giants vs entrepreneurs
  • Globalist vs nationalists.

But many times these titles fail to really describe the differences between viewpoints. For example, there are many types of conservatives and liberals – social conservatives and free-market liberals. The Left and Right comparison also has its issues. Some corporate people are very dynamic and open to new ideas, and some entrepreneurs very traditional and fixed to old models.

There is one important concept that seems to explain many differences of thinking between different groups in various areas: the zero-sum game (i.e. slicing a pie of finite size) vs the win-win game (i.e. expanding the pie).

Before we get to that, let’s first think about some of the biggest issues in the world at the moment:

  • Immigration: Anti-immigration people say immigrants take something you have, while pro-immigration people say immigrants boost the economy and everyone wins
  • Free trade vs protectionism: Free trade people believe trade helps all economies and everyone gets more, while protectionists believe local businesses lose due to global competition
  • Corporations vs startups: Some corporations see startups threatening their business, so it’s better to keep them down, but others believe cooperation with a healthy startup ecosystem helps their business
  • AI vs humans: Some believe AI will come to take our jobs, while others believe that AI will create more jobs and boost our economies and welfare.

We could continue this list with many other things.

So we can say that zero-sum vs win-win has become a rather divisive question in many areas of business and politics. One example often mentioned in this context is President Trump. It’s been said before that he learned to play the zero-sum game in the New York real estate business in the 1980s (read more in this report) and now runs the US based on that model.

Ways to expand the pie

When I attended business school in Austin, Texas, we were taught to never focus on slicing the pie, but finding ways to expand it. Another piece of advice was to never look for a compromise but rather a trade-off – i.e. to trade things so that all parties can get something more, not merely find a middle ground between the original positions.

This concept is also linked to many new businesses and business models. For example, we have the traditional software licensing and open source models. Then we have also freemium models. Open source and freemium are not zero-sum models as such, but the problem is that sometimes no one wins if no monetization model exists, or if freemium is used to kill the competition – in which case we cannot call it a real win-win model. On the other hand, traditional software licensing models could also be win-win with open APIs. So in that sense, it is not about what your basic model is, but rather how you operate it.

But there are definitely models that enable win-win structures easier than others. At the moment, for example, blockchain, open APIs and new data models offer an excellent basis for many parties to cooperate and monetize their business – in that way they have real win-win models.

A good example is blockchain with distributed FinTech models, where many parties get their services to work together. There are also models to charge transaction fees per use. We already see how blockchain enables better models to collect copyright fees, monetize data and handle micro-payments in a cost-effective way. It is the same with genuine open API models and marketplaces.

In international affairs and trade, we now see a high-level battle between the zero-sum and win-win models. But we witness the same battle daily with new business models, new technology and digitization. We see opposing developments, where some companies build a leading central position and then cause harm to potential competitors. We also see models that really can enable better win-win businesses globally for all kinds of parties.

The zero-sum game can offer nice short-term wins, but can you name a single case where the zero-sum thinking has brought a sustained, long term business and capability to create new innovations?

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Jouko Ahvenainen
About Jouko Ahvenainen 32 Articles
Jouko Ahvenainen is a serial-entrepreneur and co-founder of Grow VC Group, a holding entity including over 10 companies, a pioneer in digital finance, FinTech and data analytics solutions. Jouko started his work with digital finance and FinTech models in 2008 and is a listed world-class influencer. He participated in changing US finance regulation, getting the Senate and President to pass the JOBS Act, and has worked with EU and Asian finance regulators.

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