Caldwell defines a zero-sum game as one where one person’s gain comes from another’s loss, using a $20 bet as an example. Building a house together creates lasting value that can generate rent, so he describes it as positive-sum.
What Basic Game Theory Teaches Us About Startups
Speakers
Michael Seibel and Dalton Caldwell of Y Combinator discuss zero-sum and positive-sum games, with Seibel hosting Caldwell.
Seibel and Caldwell connect gambling to practices that reward bluffing and manipulation. They discuss confidence games and banks selling bad debt to ordinary Americans before financial regulations limited such behavior.
Seibel argues that people who create value can build up resources that others later extract through zero-sum games. During market booms, easy gains can create FOMO; when conditions turn, leveraged players may lose quickly, while founders who learn from failed attempts still gain experience.
Seibel advises founders to resist FOMO and ask whether a business creates lasting value for people. He points to startups that keep running and growing despite a difficult fundraising market, and to companies solving problems customers still have when the economy weakens.
Caldwell connects lasting impact and legacy with personal satisfaction, noting that making money and making an impact are not the same. He suggests founders consider what example they would set for employees or children, and apply the positive-sum framework to work, friendships, and romantic relationships.
Takeaways
- Ask what lasting value your startup creates and who benefits from it.
- Treat FOMO around easy gains as a cue to examine whether those gains are sustainable.
- Check whether customers still need your product when market conditions worsen.
- Use the example you would set for an employee or child to guide hard decisions.
- Look for relationships and work that make both sides better off.
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