Partnership Economics - “the best things are selfless and selfish”

By Duncan Anderson. To see all blogs click here.

One Sentence Summary: a good partnership produces excess value (ie more value from partnering than not), good partners share the excess value fairly, and the best partners give more than their fair share (selfless); this in turn means they get more and better partnership opportunities over their life (selfish).

Summary:

One lens I believe you can view life through: life as a series of partnerships

• Partnership = any interaction you have with another party

  • Partnerships can be small or large. eg a single meeting is a partnership, eg a friendship might last a lifetime and be a 'partnership', starting a business, being a citizen of a country, etc

• Partnerships can be:

  • Negative sum

  • Zero sum

  • Positive sum

    • Mutually positive sum - Unfair = this is where both parties in the partnership are better of because of having done the partnership that if they hadn't done it  but one side takes an unfair amount of the economic surplus

    • Mutually positive sum - Fair = where the excess value created from the partnership is split fairly

    • Mutually positive sum - Selflessly Selfishly = where you give ~10% more than is “fair” to the other party

• Jingle: The best things are selfless AND selfish.

• Through some math I’ll attempt to show you that IMO the goal is ‘Mutually positive sum - Selflessly Selfishly’. To maximise the amount of ‘excess value’ you accumulate over your life you give aware more than is fair in any individual partnership.

• Being a good partner isn’t just the right moral thing to do, it’s the right financial thing to do! Yay!

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Food for thought:

• Have you ever worked with someone and thought “I really enjoyed that.”

• And have you ever worked with someone and thought “Nope, never want to do that again.”

  • Why? What was the difference?

• Furthermore, have you ever wondered how others have found working with you?

• What is the ‘optimal partner’?

  • Partnerships can be small or large.

Delicious details:

Some examples of good versus bad partnerships:

• Schools

  • A good school is a community

  • A bad school is a ‘prison’ (it’s not actually a prison, but ‘kids are fighting against the system’)

• Sports team - “a champion team will always beat a team of champions”

  • In a good sports team, the players work well together

  • In a bad sports team, the players don’t work well together

• Company

  • A good company is a community

  • A bad company is a place workers resent (people are only there for money and can actively work against each other)

The Model: Partnership outcomes = 1. Partnership is good + 2. Know what is good for different parties + 3. Is a good partner

• 1. Partnership is good (size of the pie)

  • Taxonomy:

    • Negative sum

    • Zero sum

    • Positive sum

  • Commnet:

    • Good partnerships create more value from the partnering than from not partnering.

    • Let’s say there is Party 1 who makes 1 unit of output and Party 2 who makes 1 unit of output.

    • They partner together:

      • Negative sum = Party 1 + Party 2 = 1 + 1 = 1.5 (shrinks the pie)

      • Zero sum = Party 1 + Party 2 = 1 + 1 = 2 (pie is the same size)

      • Positive sum = Party 1 + Party 2 = 1 + 1 = 3 (grows the pie)

• 2. Know what is good (can see the whole pie)

  • Taxonomy

    • L1: Doesn't know what is good for self

    • L2: Knows what is good for self BUT not the party you are in a partnership with

    • L3: Knows what is good for self AND the part you are in direct partnership

    • L4: L3 + knows what is good for parties not directly in the partnership

    • L5: L4 + helps other parties know what is and isn't good for them (ie move up L1=>L5)

  • Model (if you can’t make something into a model you don’t understand it ;P)

• Why do I like this model I made? Because it is shaped like a pie!!!!! This… is no pie in the sky idea!

• Do you know only about yourself, or can you expand the circle of care :)  

• … Also, many people use the example of a pie for an economy. Good partnerships grow the size of the pie… good partners split the pie in a fair fashion. Yes, so many many many metaphors here, me happy… and now also hungry ;P

• 3. is a good partner (splits the pie up fairly)

  • Taxonomy (yeah i know this is joining variables 1 & 2 but I think it’s the right thing to do, technically negative sum shouldn’t be here)

    • L1: Negative sum - one party enters a partnership where they win however other side would be better off without doing partnership

    • L2: Zero sum - one side wins, the other side loses

    • L3: Mutually positive sum - Unfair = this is where both parties in the partnership are better off because of having done the partnership than if they hadn't done it but one side takes an unfair amount of the economic surplus

    • L4: Mutually positive sum - Fair = where the excess value created from the partnership is split fairly

    • L5: Mutually positive sum - Selflessly selfishly = where you give 10% more than is fair to the other party

  • Instead of a model for this one I’m making names, yay, names!

The model from another lens:

• Partnership outcomes = 1. Partnership value is good (how is the overall environment?)  + 2. Know what is good for different parties (how is the partnership for others?) + 3. Is a good partner (what is your contribution to the partnership?)

Rearticulating examples of good versus bad partnerships:

• Schools

  • A good school is a community

  • A bad school is a ‘prison’ (it’s not actually a prison, but ‘kids are fighting against the system’)

    • A good school is mutually positive sum, where some people will be adding more value than others (assumably the teachers!), whereas a bad school is negative sum

• Sports team - “a champion team will always beat a team of champions”

  • In a good sports team, the players work well together

  • In a bad sports team, the players don’t work well together

    • A good sports team is mutually positive sum, whereas a bad sports team is negative sum.

• Company

  • A good company is a community

  • A bad company is a place workers resent (people are only there for money and can actively work against each other)

    • A good company is mutually positive sum, whereas a bad company is negative sum.

    • Ie a good company is greater than the sum of it’s parts.

• I sense a pattern!

Detailed examples:

Example 1 - Partners have equal value they are bringing to the partnership (demonstrating things with numbers can make things far more Stark :)... even though it's the Lannisters who are always on about money)

• The conditions of the partnership

• Possible set of outcomes:

• Possible set of outcomes with commentary

• Outtakes

• Yes, empirical proof that being selfless = being selfish. God i love this :).

  • This is important to understand IMO. Basically you want to collect as much excess value as you can in life.

  • The way for this is to be the best partner possible as then you’ll get more quantity and quality partnership opportunities brought to you.

  • You be the best partner by 1. Doing positive sum partnerships and 2. Giving more than is fair to the other party.

  • So while you get less from this one partnership it means you get way more partnerships! Yay!

• try only to do positive sum partnerships and try to split the excess value created from the partnership selflessly in a way the other party understands this :)

• side note: if you can properly explain this then the other party will be 'no, i don't want more than is fair, selfishly I want to be the selfless party. then you smile and split this fairly'.

Example 2 - Partners have equal value they are bringing to the partnership (equal is not necessarily fair)

• The conditions of the partnership.

• Possible set of outcomes

• Possible set of outcomes with commentary

Outtakes

• It's unlikely that in a partnership both parties will be bringing the exact same value, as such splitting the excess value is fairly doesn't mean 50:50.

• However still try to give more than is fair IMO, likely you’ll need to explain what you think is fair and why.

• The exact details are too hard normally to predict, so just try to make sure there is excess value created with a significant margin for error built in and try to then see how much value each side brings, then give more than is fair!

Example 3 - giving feedback to coworkers

• One key type of partnership is 'giving another person feedback', AKA helping them grow.

• Quotes

  • “a wise person can learn from the mistakes of others, a fool not even from their own.” Will Durant

  • "it's good to learn from your own mistakes, it's better to learn from others." Buffett

  • “Everything that irritates us about others can lead us to an understanding of ourselves.” Carl Jung

• Possible outcomes from feedback interaction

• The goal:

• How do you know if this is working? That each time you catch up with someone you grow more AND you look forward to seeing them again more after each meeting. aka a proper positive feedback loop is setup

• How do you know it isn't working? You look forward to catching up with them less and less

• You will grow far more if you have others helping grow than if you are just trying to grow yourself.

• For more details on this see: “it’s not about strengths and weaknesses, it’s about trajectory and levelling up”