Win/Win Transactions

*   Contents

1  Example: Peas and Beans

1.1  A Win/Win Transaction

Once upon a time there were two farmers, namely Brown and McDonald. They lived next to each other, but far away from everybody else. Brown grew nothing but peas, while McDonald grew nothing but corn, i.e. maize.

McDonald learned the hard way that eating nothing but corn leads to horrible deficiency disease. Corn is an incomplete source of protein. Similarly, Brown discovered, to his sorrow, that peas are also incomplete.

One day, before they became too gravely ill, they met along the fence line. Farmer Brown said: How about I give you half of my peas, and you give me half of your corn? Old McDonald readily agreed. Peas and beans are incomplete in different ways, and the combination of the two is complete. Both of them regained their health and lived happily ever after.

Think about the economics of this transaction: Brown gave away something that was worthless to him in exchange for something that was infinitely valuable. McDonald thought the same thing, from the opposite point of view. The transaction was enormously profitable for both parties.

This is the essence of commerce, and indeed of civilization in general: Find something that is more valuable to the buyer than it is to the seller. The difference between the two valuations represents wealth that is created by the transaction. It’s not a zero-sum game. The two parties get to argue over who gets what fraction of the created wealth.

Figure 1: Win/Win Peas and Corn

1.2  The Sequel

By the way, a week later, the two farmers met again. They remarked on how profitable the previous transaction had been. Brown said, How about we do it again? I give you the second half of my peas, and you give me the second half of your corn. McDonald explained what a terrible idea that would be. Both parties would be immeasurably worse off. Each would be trading away something he needed for something he didn’t need.

1.3  Discussion

Section 1.2 demonstrates that value is not just different from person to person, but also different from time to time, depending on circumstances.

Some big-name economists – e.g. Adam Smith and Karl Marx – claimed each and every thing had a definite value, and they set forth elaborate theories and rules for determining “the” value. This strikes me as insane. In reality, there is no such thing as “the” value. Commerce and civilization depend on the fact that Brown and McDonald value things differently.

2  Another Example: Retail Oranges

Sometimes I go to the store and pay money in exchange for a bag of oranges. That is a win for me, because I want the oranges more than I want the money. It does not bother me that the transaction is also profitable to the store, and to the grower. In fact, I prefer it that way, because it means that there will be more oranges the next time I want them.

Consider the alternative: Suppose shoppers demanded a much lower price, or simply stole the oranges. It might seem this would make them better off in the short run. However, the store and the growers would soon go out of business, and everybody would be much worse off.

Let’s be clear: Ordinary transactions produce a win/win outcome. It is not a zero-sum game. You want your suppliers to make a profit when they sell to you. You want them to get some of the created wealth. (Not all of it, but some of it.) Otherwise they will go bankrupt, or just refuse to deal with you, whereupon your own business collapses.

Figure 2: Oranges

3  Other Examples

Win/Win deals are not limited to foodstuffs. The same idea applies to capital goods (e.g. appliances) and services (e.g. dentistry) and everything else.

4  Counterexample: Current Events

The #fakepresident touts himself as a great dealmaker, but in fact he doesn’t understand the first thing about deals. He views every interaction as a zero-sum game – or worse, as a fight – where the only way you can get ahead is by hurting the other party. This makes him unqualified to hold any position of trust or responsibility. I wouldn’t trust him to run a lemonade stand.

What’s worse, he is teaching his followers to think the same way. This is not a surprise. Like all authoritarian demagogues, he loves to stir up fear. He depends on it to obtain and maintain power. He wants his followers to be afraid that literally everybody is out to screw them.

The salient fact of American politics is that there are fifty to seventy million voters each of whom will volunteer to live, with his family, in a cardboard box under an overpass, and cook sparrows on an old curtain rod, if someone would only guarantee that the black, gay, Hispanic, liberal, whatever, in the next box over doesn’t even have a curtain rod, or a sparrow to put on it.”
— Davis X. Machina (2009)
Figure 3: Predatory Zero-Sum Game : Not Normal

This works to his advantage politically. It is however wrong (as in technically wrong), because most deals are win/win. It is also Wrong with a capital W (as in morally Wrong and evil), because it undermines the foundations of civilization.

That’s bad enough, but he takes it a step further: He simply enjoys hurting people. If he is hurting somebody else, he feels he must be winning (even if by any objective measure he is hurting himself in the process). This explains many of his policies; for example:

This is not normal. We must put a stop to this. Now.

For more on all this, see reference 2 and reference 3.

5  More to the Story: Both Cause and Effect

The foregoing is of course not the whole story.

He’s like the infection in a wound: He makes it worse, perhaps fatally worse, but he never would have gotten in if the system hadn’t been badly broken already.

He is both cause and effect. Getting rid of him personally is necessary but nowhere near sufficient. If we don’t fix the underlying problems, the next narcissistic demagogue who comes along might well be worse.

*   References

“An Explanation of the Federal Coronavirus Non-Response”
“Fundamental Character Flaws”
“Why People Vote for the Bully”
“The Real World is Not a Zero-Sum Game”