Zero-Sum Game

A zero-sum game is a game where the gains of one player correspond exactly to the losses of the other player.

A zero-sum game is an economic scenario where the gains and losses of players are directly related. Put another way, your gain in the game is the exact opposite of your opponent's loss. The sum of total gains and losses from all participants in a zero-sum game will always equate to zero.

An example of a zero-sum game would be a game of chess, where each piece the one player captures is lost to the other player. Another example is a simple poker game, where the amount one player wins is the exact amount that the other player loses.

The concept of a zero-sum game is important for startup founders to understand, as it is often used as a frame of reference when understanding business decisions and the trade-offs. For example, when making product decisions, it helps to understand the dynamics between user experience and monetization. In other words, when enhancing the user experience, the gains the user receives need to be weighed against the potential losses or trade-off the company has to make (e.g. a decrease in monetization).

Product Feature A has been requested by a large group of users, and it would significantly enhance their experience with the product. However, adding this feature would require an investment of resources and a decrease in product monetization. In this case, the user experience gain is the same amount as the loss of monetization. This situation can be framed as a zero-sum game. The founder now has to decide whether to invest in the feature to gain in user experience and suffer from a decrease in monetization, or to forgo the feature and retain the current monetization levels.