“Create value so that you can capture it, but don’t feel obligated to capture all the value you create. If you capture all your value, your transactions benefit only yourself, and others have no motive to participate. If you have negotiating leverage, use it to drive a good bargain for yourself, but not a hateful one—someday you’ll be on the other side of the table.”
is a real capitalist value. I think that the capitalist value is to strike the best deal that you can, no matter what. In game theoretic terms, there’s no reason to assume repeated play, or that one day you will be on the opposite side of the table. You should encourage the people you are transaction with to want to come to the table again, true, but I don’t see why the word “hateful” has to enter the conversation.
In game theoretic terms, there’s no reason to assume repeated play, or that one day you will be on the opposite side of the table.
Stipulating your assertion—which I don’t think is true in general—there’s also the fact that people with whom you deal once can communicate with one another, leading to the concept of ‘reputation’, which is another kind of asset. A strict but enlightened portfolio-maximizer should prefer, under fairly general circumstances, a combination of money and positive reputation to somewhat more money but negative reputation.
In game theoretic terms, there’s no reason to assume repeated play
There is this reason to assume repeated play: in fact, almost all business is a game of repeated play. There are very few businesses that can survive without either repeat custom or word of mouth (which is indirect repeat custom). The ones that do are things like airport taxis ripping off incoming tourists, and spam fraud.
Good post. I don’t think that #18,
“Create value so that you can capture it, but don’t feel obligated to capture all the value you create. If you capture all your value, your transactions benefit only yourself, and others have no motive to participate. If you have negotiating leverage, use it to drive a good bargain for yourself, but not a hateful one—someday you’ll be on the other side of the table.”
is a real capitalist value. I think that the capitalist value is to strike the best deal that you can, no matter what. In game theoretic terms, there’s no reason to assume repeated play, or that one day you will be on the opposite side of the table. You should encourage the people you are transaction with to want to come to the table again, true, but I don’t see why the word “hateful” has to enter the conversation.
Stipulating your assertion—which I don’t think is true in general—there’s also the fact that people with whom you deal once can communicate with one another, leading to the concept of ‘reputation’, which is another kind of asset. A strict but enlightened portfolio-maximizer should prefer, under fairly general circumstances, a combination of money and positive reputation to somewhat more money but negative reputation.
There is this reason to assume repeated play: in fact, almost all business is a game of repeated play. There are very few businesses that can survive without either repeat custom or word of mouth (which is indirect repeat custom). The ones that do are things like airport taxis ripping off incoming tourists, and spam fraud.