What Basic Game Theory Teaches Us About Startups

Dalton Caldwell and Michael Seibel discuss the problems with zero sum games within tech culture. Is your startup making a positive impact on the world or are your business practices a net negative in society?
Apply to Y Combinator: yc.link/DandM-apply
Work at a Startup: yc.link/DandM-jobs
Chapters (Powered by bit.ly/chapterme-yc) -
00:00 - Introduction
00:29 - Zero sum definition
02:09 - Gambling
04:08 - Fooling other people
05:12 - Extreme zero sum
07:53 - Positive sum game
08:48 - FOMO economy
10:00 - Losing lessons
11:03 - Build enduring value
14:22 - Your legacy
17:09 - Support positivity
#startups #gametheory #tech

[@ycombinator]

How is your startup making a positive impact on society?

[@NilsWestgardh]

At Semble we're helping game devs build connections, teams, and skills so they can build the next generation of games together.

[@lucasgmolina]

@@NilsWestgardh Hey, I'm a game dev looking to build connections, teams and skills! I'll look into Semble, thanks!

[@harrys392]

Currently in disability it's all providing services to the individual rather than that individual being empowered to provide value to others. I'm at a social enterprise where we try to provide value to both businesses and people with disabilities by connecting them together for projects.

[@JulianJagtenberg]

At Somnox we help the world sleep better 💤

[@CharlesWeill]

At CreatorML, we help KZbin Creators better understand the KZbin algorithm and their audience, leveraging the power of machine learning. This allows creators to be data-driven in optimize their video packaging in a way that better resonates with their audience.

[@grepLeigh]

I feel like this video is about a certain industry that rhymes with "grift-o" 😂 One of my favorite books about this subject is "Finite and Infiite Games" by James P. Carse. Zero-sum games are a type of finite game, with a clear winner and a loser. The book is about structuring life to be an "infinite game" driven by intrinsic rewards. Continuing to play the game (and inviting others to play with you) is the reward, not winning. "Although it may be evident enough in theory that whoever plays a finite game plays freely, it is often the case that finite players will be unaware of this absolute freedom and will come to think that whatever they do they must do."

[@ericrivera6779]

"For these zero sum games often the lesson just comes fast and hard at the end" story of my life lmao 🤣

[@sommjes]

I like that this podcast models an iterative process. From the development of the name to the little chapters on the video being highlighted versus popping up.

[@RajivKumar-kn6sk]

"Zero sum Game" is actually a "negative Sum game" because people involved could have done something productive if they were not playing this game.

[@hanselmckoy4062]

First time watching this channel, very impressed at the level of insight in this conversation. I finished this video more intelligent than I was when I started it. Well done

[@TheCornField_]

my mom sent me this channel lol. am so grateful for that! these guys rock and they seem very reasonable and level headed which is a nice change on youtube i feel like lol

[@toofy7253]

This is my favorite KZbin video of all time. It clearly explains what I've been trying to tell people for years, but couldn't articulate it very well. It has been frustrating trying to explain to others what my purpose is for creating a lot of future value. Thank you for providing a video that will help others better understand me, which improves my relationships with others

[@PigOnRye]

This was a fascinating talk. It's different from your other talks in that you guys shared your values as founders as opposed to strategy. Loved listening and I 100% agree.

[@neugey]

This video hits so close to home and bolsters my confidence. I've chosen to build a startup in a market sector where my company will probably be making pennies on the dollar compared to many big corp's who are now all/mostly playing zero sum. So I'm focused on building community and loyalty while entertaining the customer and solving problems which will be more stable and endure when/if the zero-sum bubble in my sector collapses.

[@gordon2766]

Enjoyed the video as always, but wished for more specific examples

[@free_spirit1]

I think this is one of the most important videos on this channel.

[@tombus8308]

REAL discussion. REAL topics and impactful questions. This is why I'm here. Thank you for this.

[@TheCornField_]

fax

[@TheCornField_]

They talk about weird stuff most people don't. It's so nice, its like actually people talking about the real world and how to help. It's nice

[@panos4662]

3:40 the example of the dead buffalo is right spot on; why? It shows both sides of the bet. 1) either you eat it and stop being hungry, or 2) you eat it, and you get sick/poisoned because it was dead, in warm temperature for more than the allowed time. That's the point with hard bets; sometimes, you risk more than you think for an easy victory.

[@arjungupta-inventor-iaq]

Thanks for posting this! So many people believe in the "I am intelligent so I can cheat people out of Money" being not morally wrong. The way I see it always is if you are playing zero sum games somewhere you don't believe in yourselves..

[@StrandedKnight84]

Whenever Dalton speaks, I get the sense that he's really, really smart. He just articulates things so clearly.

[@gregpev]

These videos are still amazing. Not only great advice but they are a constant source of motivation for pursuing entrepreneurship, thanks guys

[@ricecak3]

Hey just wanted to say thanks so much for the video. Been watching all your content and it’s helped me a lot. In the spirit of the video, BIG thanks for pushing the bar when it comes to positive sum games

[@subrahmanyamv]

Found deeper meaning about applying this to relationship.. Good thought provoking session. Will try to use this lens more often now. Thank you.

[@cherubin7th]

Many people combine zero sum games with positive sum games. Like creating value, but boosting income by putting a zero sum game on top of it.

[@mxsaa45]

Wow!

[@alexbloomberg4221]

@@mxsaa45 Wow! Wow!

[@nathi.masuku]

This is amazing, it just helped shift my way of thinking about my startup. Thank you. By the way, my startup helps random people start side hustles.

[@HappyMathDad]

Guys, I just played this video to my 11 year old boy. And he liked it. When you speak in a way that an 11 year old kid learns a life lesson. I think you should feel happy. I did have to explain FOMO.

[@chaitanyavaidya7783]

Prolly the most important YC video so far

[@matthewmolinar220]

Wow. I feel like this was one of the most consequential videos y'all have published. This really delves deep into the 'Why' of startup.

[@hsuyuting1993]

That's one great lesson. Please bring more content.

[@tarek7451]

I love the conversation and the positive energy.

[@aidanbraski]

so much value packed into 19 minutes

[@giovannicordoba5282]

This podcast is creating value beyond zero sum game

[@aytunch]

Crypto Market & NFTS in a breeze.

[@DungeonMarshal]

Though crypto was a good idea initially: a currency that doesn't depend on governments and central banks. It became zero sum game when many people who don't get it entered the market just trying to make money

[@ericrivera6779]

Thank you for this enlightening video it truly opened my eyes and made me reflect because it is true for me personally at the end I think about my legacy what will I leave behind and I would rather leave friends for my children than enemies of who I took advantage of to who then hold it against them, the zero sum game for me was NFT'S it was a rush winning I was at my "peak" but always unsatisfied because not only did I want more but that negative feedback loop that you spoke about I would get wasted then wake up to money so it was "alright" since I could do it all over again and this time with "friends" after everything fell apart those friends weren't there anymore, I'm better now slowly sobering up and in tune with my inner peace although I did have that nagging feeling of What was I doing why am I not making or focusing on money how I used to but I look where I am now its way better I'm passionate about learning making the world better and becoming the person who I wanted to be that I wished of so much when I would be depressed and so egotistical, Thank you for posting these videos I'm glad you saved me today I don't have that nagging voice anymore I'm just grateful I got away from the game and able to live In this peace while knowing I'm on the part of pushing society forward and money wasn't everything in the end. THANK YOU 💛

[@Cyprianous]

Profound episode! ❤

[@LocalizationAcademy]

Nice convo, thanks!

[@ZAD959]

Great thought....when it comes to positive sum games, what are peoples thoughts on NFT? Is that playing a positive sum game?is that creating real world asset?

[@DeclanMBrennan]

Thought provoking chat. You could do an addendum to this, talking about the Iterated Prisoners Dilemma and Robert Axelrod's tournament to evaluate different strategies (actors) implemented in software. At the danger of being simplistic, having a strategy of being honest and fair while guarding yourself against being taken advantage of by bad actors seems like a combination that can promote success both for the individual and the group. Of course we should focus on money capital if we want to survive, but social capital is just as important in its own way, particularly when the money kind is in short supply. 🙂

[@waymanharris1284]

"Theranos" comes to mind. Awesome video.

[@chapterme]

Chapters (Powered by ChapterMe) - 00:00 - Introduction 00:29 - Zero sum definition 02:09 - Gambling 04:08 - Fooling other people 05:12 - Extreme zero sum 07:53 - Positive sum game 08:05 - Zero Sum Game People 08:48 - FOMO economy 10:00 - Losing lessons 11:03 - Build enduring value 14:22 - Legacy 17:09 - Support positivity

[@gunzithanzo]

You never miss. Top G👊🏾🤝🏾

[@carlatashkadeh5890]

Beautiful video and lesson

[@michaelschoeffler3771]

So excellent. The only thing that’s missing is a detail - the higher level of this - setting up the game. Our society was built on positive-sum games because we allowed zero-sum (and even negative-sum). The example of Morgan Stanley is instructive. We restricted the ability to rip others off, but we also gave up a lot of flexibility (and economic growth slowed in a massive way). Not suggesting zero regulation, just consider what happens as we move from caveat emptor. On the main content (how we should individually approach these games), spot on. And thought-provoking.

[@thatryanp]

There is another video where Dalton talks about bubbles being an being an evolutionary mechanism for the market, despite the chaos of the bust. However, when finance gets in a position to dominate political governance, I can't see how any net positive will occur.

[@declangoncalves9373]

Loved this episode, you guys are🔥

[@zackonstas9408]

The start of this discussion didn’t seem like it was going anywhere. But the relationship between PSG/ZSG mix and the total economic cycle, is quite profound

[@testpurpose5845]

the ending punch line suddenly brightens up the mood .

[@Majammaz]

Have you thought of making this available in podcast form as well?

[@HUSTLE_Magazine]

YC is goated! 🐐🏆🙌

[@SvenReinck]

What helped me with the FOMO situation was the insight that… yes, some people make millions in these zero sum games… But it’s the positive sum people who make billions 💰

[@Leto2ndAtreides]

With regard to bank regulations on bad debt, I think the key issue there is not so much regulation as transparency. You normally want to enable people to make better decisions. And it's not that the bad paper is universally bad, it's just worth less. And if you have transparency, you can guess how much you should pay for it - and that is still better than not being able to sell that paper at all.

[@KandiMan]

Seems especially relevant now.

[@arick2050]

priceless info

[@emmanguyen3808]

Hey, is there any body setup a scene for this pod? It looks pretty interesting.

[@lochielifts]

It's always been my nature to play the positive sum game. Anything else just feels wrong, but at the same time, I often feel like a sucker for never playing the zero sum games, because it seems like that's how so many people "win" nowadays, as it's much easier to do than put in the work required to build something and create value. Sometimes it sucks having morals but I think it will pay off in the long run.

[@harrison6082]

7:54 That's a really good point

[@shahhussainkhattak]

Positive sum games! love you guys :)

[@shermanmcdermott4211]

I agree that the second that the zero sum people get ahead the trust that underpins everything, disappears. The loss of trust in systems and institutions is a dangerous thing, and i cant say that im optimistic.

[@nomiiqbal3573]

I wish KZbin has a Love ❤️ button for this video📹!

[@Richard-ek8tp]

Dalton & Michael always hint at that industry but they never name it 🤣

[@omarzaragozag]

Describing Sam Bankman Fried

[@ayoopopoola439]

Basing on 12:53 ,I think everyone has some justified perspective of why they do what they do (even if it's not in the interest of others.) In the example of gambling versus the banking system, you could see that on the poker table everyone knew it would be a game of wits and tricks whereas for the banking example a larger percentile of the populace aren't aware they're being played especially when banks stand as the seemingly better option.

[@angelas8451]

Could not have jumped on this faster. Also #1st 🤩

[@boringmanager9559]

I tried to win zero sum games when I was in my early 20s, but soon realized it required to either be too lucky or to cheat. I can't rely on former and didn't want to resort to latter. So I have to work on something positive 😏

[@codemeup9480]

11:21 - Definitely a lot of grey area whether or not people know they are providing value to the system - it's hard in some cases to know

[@vaibhavgeek]

Jeez. I think another indicator of zero sum game is how insecure you are about the information you share. But Venture Capitalists while evaluating ideas at seed stage are playing zero sum game as they have very little information to bank on (almost gambling) but with the hopes of random probability that few might create actual value. YC should work harder on ways that they can impart real value more than just money they shill out. Loved this discussion!! Greed attracts greed and value attracts value.

[@clan8068]

How would you address the short sight view like "Well let me get some $$$$ before I consider my legacy"?

[@julianbenjamin1552]

Positive sum games are almost like compound interest. The earlier healthy habits are instilled the greater benefit there is to be gained.

[@Alpange]

Did YC finance any bitcoin based company?

[@alysiawu3031]

So true

[@mozhu888]

Massive sub-tweeting energy here.

[@Leto2ndAtreides]

Gambling... If we take it as moderate risk coupled with high reward, then all kinds of old things might have fallen into that category to some degree. From learning skills like using spears, to trying to capture an animal. Failure and pain are just generally part of getting rewards... The problem with gambling specifically might be that people's reward prediction calculation might be wrong since over time most gamblers are losing out more than winning, even if the reward they can get is large. Gambling likely also suffers from the sunk cost fallacy problem, where because you've invested in a path already, you want to try harder to get an actual win. But unfortunately, unlike many things in normal life which may bow to continued effort and risk taking, gambling comes with no guarantees. In that way, it may be a type of game that does not teach you good life lessons. Since in other circumstances, that instinct will often serve you well and is likely worth maintaining. Further considering gambling, one of the factors that makes it easy to fall into might just be its simplicity. So you have the opportunity for a meaningful win, but without the need for complex learning or skill development. So it may seem more achievable - even though the underlying game may not be fair to you... Which raises the question of whether gambling more often ruins people who are doing badly and thus looking for quick wins to get them back to a normal position.

[@SiyaMaliChannel]

This session feels like one big parable. Facebook FELT and LOOKED like it’s winning for a solid decade. Can anyone name a single former Facebook exec that remains proud of what they did, the effect of their work and where their contribution pushed society to? They all move on to do something away and unrelated…that’s telling.

[@entalpa]

Do we need a college or university degree to build a successful startup? Do we need persistence? Do we need to work hard? How can we be lucky?

[@jaredbeckwith]

My company is making a positive impact by solving seizure detection

[@Leto2ndAtreides]

In some cases the value is up for debate. Like, let's say you build a better TV and charge more. The user is entertained better, but how do you really judge the value that they are gaining? Is it a benefit, or is it that you're exploiting a bug in their programming by selling something that usually won't create any real world advantage? I think that improvement in lifestyles often has more to do with basic efficiencies, and cheaper production so that everyone can have more (of at least the basic stuff?) But after the basic needs are all met, it's mostly all just a form of entertainment. Some people want to actively build more, but most people do not.

[@harrys392]

This speaks to business models like social enterprises where there's some kind of mutual benefit. I think a vid on social enterprise would be great!

[@HiraSaeed]

I love Michael but every time he laughs my heartbeat starts running. Or maybe I had seen too many horror and evil cartoons when I was a kid :D

[@peterzhang9492]

You guys might also want to focus on morality system and shame system. I feel the psychological underpinning of the zero sum mentality is self centeredness and shamelessness associated with it in certain cultures. Especially the startup world. I get it you need that focused energy to power through difficulties but a lot of it tended to stay after.

[@alexforget]

Spot on of unhappy rich people. We think we are looking for money but what we really want is meaning. We need to create something that make our life worthwhile. I like the religious image of false idols, things that you pursue but will that will not fulfill you: money, fame, etc.

[@the_raji]

Is crypto a zero sum game? If it isn't, please share your thoughts on why you believe it isn't.

[@liquidhammer1134]

6:07 are you taking about naked shrtslling?? Then I think you have the mind to figure out a way to fix it. I am down to help. If not nvm

[@kingnick6260]

"Extreme Zero Sum" Are you guys talking about Crypto? It really sounds like you're talking about Crypto 😆

[@alysiawu3031]

Stay strong, resist the FOMO lol 😂

[@crazieeez]

Gambling can be made a positive sum game. For example, blackjack can payout 2:1 for blackjack instead of 6:5, and if someone has two 8, two 7, two 6, a bonus of x amount would be given such that if the games were to be played 1million times, the players get a 51% edge. Poker as well. It could be setup such that it is a positive sum game. We are so fixated on believing that a game cannot be changed to induce positive sum game. Take for example, capitalism by Adam smith and communism by Karl Marx, the structure they setup for society is a negative sum game. If you work out the math on capitalism, it will reach late stage capitalism, then socialism, then communism then totalitarianism then genocide then civil war. If you work out the math on communism, it just skipped late stage capitalism and socialism and jump to totalitarianism. Now the question is how to do you restructure society such that the math will show a happy futures for all. It is an exercise for this generation to figure out. Dead people aren’t smart enough to figure it out.

[@redditrecap7]

Wolf of the Wall Street. 🐺🐺🐺

[@Ai_Monk]

I wonder...would creating an online poker website be a zero sum game from a creator's perspective?🤔

[@thatryanp]

It's second-order zero sum, maybe like inventing a new way to ingest cocaine, or making biological weapons. There is something new created. Sorry for the extreme comparison, it's what came to mind. Although I suppose the family of an online gambler might approve the simile.

[@SuperNovaJinckUFO]

6:40 idk why, but I find the idea of millions of voters going "this doesn't scale" to describe a political issue really funny XD

[@richban100]

web3 and blockchain: its a zero sum when people think it is zero sum. a lot of it is in the pudding of how people react and people push judgements of the future. no one should push to make the world absolutely in its image. the world doesnt play god and fears those that play chess.

[@kdietz65]

I've always tried to create value and play positive sum games. It takes time and investment though. It frustrates me that the startup world is so infected with Lean Startup thinking, of which Y Combinator is obviously a part of, that value creation happens by magically materializing MVP products over a weekend, basically for free, and the founders not only build the product for free but have customers lined up around the block with no marketing dollars invested. It seems to me that society expects startup founders to create billion dollar companies for less money than it would take to open an average restaurant, and then mocks founders who can't manage to do it.

[@snippletrap]

Whoa, based YC bros chatting about financial parasitism.

[@whom4751]

Oxford physicist unloads on quantum computing industry, says it's basically a scam.

[@andreasv9472]

Cutting CO2 from ecommerce shipping with 90% per order.

[@Grundalizer]

All startups should be screened for psychopaths

[@InteliDey]

Everything in life is a zero sum game. Even when we build a house on a plot of land, we use energy or money or person power to build that house and not created by magic. That is also a zero sum game. Follows the laws of energy where energy is neither created or destroyed, it can only transform. And so is Money. 😉😉😉

[@absbi0000]

In Summary :) 'Bear in mind that the present life is just a game, a diversion, an attraction, a cause of boasting among you, of rivalry in wealth and children. It is like plants that spring up after the rain: their growth at first delights the sowers, but then you see them wither away, turn yellow, and become stubble. There is terrible punishment in the next life as well as forgiveness and approval from God; the life of this world is only an illusory pleasure.' [Qur'an 57:20]

[@moonstone468]

Why you hate sugar 😱 Our body runs on sugar... You put sugar first, cigarettes second Sugar is the nutrient, Nicotine is a drug

[@vlogmoinc5597]

Didn't twitch turn a blind eye with illegally streamed content in the early days. The irony lol .

[@CaliforniaRussianRiverBees]

Thank You..

[@Gtex555]

Lots of strawmanning going on in this video