When I was an economics professor (which was a long time ago), I often invited students in introductory classes to play a simple game. They were instructed to choose “Heads” or “Tails” and secretly write their choice on a sticky note, while I randomly sorted the class into pairs. If the choices made by any pair of students turn out to be the same (i.e., Heads/Heads or Tails/Tails), according to the rules, I would give them both chocolate bars. Otherwise, they would receive nothing.
What would you choose?
After playing things out and recording the results, I worked with the class to model the game using a simple 2×2 payoff matrix (see below). Then we talked about what happened.
I recall getting a lot of mileage out of this simple exercise. We frequently talked about the inadequacies of our model. For example, it fails to predict the outcome or recommend a particular strategy to players. Both Heads/Heads and Tails/Tails are (pure strategy) equilibria and neither is superior (the payoffs are the same). The point is that Tails/Tails is just as good as Heads/Heads.
Yet, over time, nearly all my students chose Heads. And I gave away a lot of candy! It’s reasonable to ask why economists have a difficult time explaining such a simple and obvious outcome. In advanced classes, we turned to repeated games and refinements to our definition of equilibrium.
For our class, however, the observation most often led to a discussion about the importance of norms, conventions, standards, and rules (e.g., driving on the right side of the road in the U.S.) in generating better results (e.g., not crashing into each other). We talked about the importance of information and communication, and how uninteresting the game would be if choices were made sequentially, with perfect information about the choices already made.
Besides being an easy and fun discussion starter, I was anxious to include the exercise for another reason, which was to show students that in business and life, one person’s gain does not have to mean another’s loss, as so many of our models seem to suggest. I noted that by then, we considered zero-sum games, as well as prisoner’s dilemma type games and more standard models of oligopoly. Look, I would explain, it’s still about winning the game and maximizing your payoff, but the winning strategy and behavior can be very different depending on the rules of the game. Coordination games, like the one we played, gave students a fresh way to think about business.
I have been thinking about the differences a lot lately, especially in a world that seems to be getting more complex and unpredictable. Where it is getting harder to distinguish friends from enemies and to stress long-term needs as well as short-term interests. In recent months it seems politics and economics are colliding to make underlying assumptions less universal. It’s getting harder to tell what winning looks like.
But it is also a world in which “coordination” and generating mutual benefit by aligning strategies is more relevant than ever. The digitalization of the economy, globalization of value chains, and expansion of platform-based business models have created environments where the payoffs for businesses are more interdependent. Success in these markets often depends on aligning actions with others, including competitors and consumers, as well as collaborators. Take technology standards, for example. The adoption of a common protocol benefits all firms that follow it, as it enhances interoperability and customer satisfaction.
The world economy is more interconnected than ever. Businesses, even small ones, no longer operate in isolated markets but as part of vast networks that span across geographies and sectors. Coordination across these networks can lead to collective gains. For instance, multinational corporations need to cooperate with local partners, governments, and other stakeholders to enter new markets and create value—and to increase visibility into their value chains.
A big motivator for me, and the work we do at GBSN, is that coordination, as well as competition, paves the way to more inclusive and sustainable growth. Transformation requires systems-level thinking and platforms that facilitate collaboration across sectors, as well as within industries. My favorite chapter in a book titled Net Positive is called “It Takes Three to Tango.” In it, Paul Polman (former Unilever CEO) describes the need for governments, the private sector, and civil society to “dance a complicated tango.” Businesses, consumers, and society can all benefit over the long term from pre-competitive standards and coordinated action to reduce environmental impact.
Yes, it’s getting more complicated and difficult. As I explained to my students, it’s not only about winning but also the implications of winning for society—the planet and its people. It’s not only about the present, but also about the future. And, as I tried to demonstrate using the simple game, enabling mutually beneficial solutions is not only about strategy and competition, but also about shared mindsets.
Business schools can play an important role. We can transform people and mindsets, convene leaders across sectors and borders, and create new insights that illuminate the path forward. We can continue to build platforms that bring together different people from different places to create shared experiences that enhance future cooperation—and provide learners across generations with the knowledge skills to build industry-wide frameworks and public-private partnerships to establish common goals and frameworks, as well as transform their companies. Most fundamentally, we can each take steps to reduce zero-sum, short-term thinking in favor of win-win-win, long-term thinking in our classrooms.