Friday, April 11, 2008

Finite and Infinite Games and the Credit Crunch

For those who have not come across this gem, Finite and Infinite Games is a small book with a small but powerful idea. That there are at least two types of game, Finite games are played to win, Infinite games are played to keep playing. He gives the example of a causual softball game on the street that is started by two kids. More come and join and some leave, and this can go on all day. The point of the game is to have fun and to keep playing, so rules change to prevent anyone winning and the game coming to an end. Finite games are played on the games field, the rules and known and do not change to suit the game and at the end there is a winner and a loser.

When I first read this book, it resonated with another book I had read called The Living Company: Growth Learning and Longevity in Businessby Arie de Guess about why some companies survive for hundreds of years, but most only for a few. The long lived companies did not have making profit as their purpose for being, their purpose was to be in business (which requires being profitable). This change of emphasis makes all the difference because it shifts time horizons. Companies wanting to be in business for the long term, think long term, they play the infinite game. Most companies play a finite game, be successful enough to be bought out, increase share price so I get a bonus, make lots of money!

Maybe because so many companies and governments have been playing a finite game, that game is coming to an end, with few winners. Maybe we need to understand how the rules would change if we want to play the infinite economic game?