The Dangers of Zero-Sum Thinking

The Dangers of Zero-Sum Thinking

If you’ve ever seen the movie A Beautiful Mind (filmed on campus while I finished my degree in economics!), you’ll remember the pickup scene in the bar. John Nash (played by Russel Crowe) stumbles upon one of the greatest mathematical theorems in his field — what later came to be known as a Nash Equilibrium. It revolutionized game theory:

 

The idea was that Adam Smith’s economic theories were incomplete. The participants in the market don’t create the best outcomes for everyone by only doing what’s best for themselves. In the scene, Nash realizes the group achieves the best outcomes when participants do what’s best for themselves AND the group. 

In the Nash equilibrium, each player’s strategy is optimal only when considering the decisions of other players (aka, every player wins because everyone gets the outcome that they desire).

So what does this have to do with the tariffs and the global order?

The current administration either hasn’t seen the movie, or doesn’t believe in the bedrock of modern game theory.

If you look at President Trump’s personal and business life to date, everything is zero sum. In negotiations, relationships, trade, whatever, there is a winner and a loser. If you listen to the President speak about almost anything, it’s in terms of winners and losers.

The entire post-WWII order is built on a foundation of trying to create “win-win” scenarios. President Trump doesn’t really believe in those.

This “zero sum” thinking has taken a sledgehammer to the global economy this week. His proposed new tariffs — a 10% blanket tariff on all imports and a 60% tariff on Chinese goods — has wiped out trillions in market value. It’s being sold as a way to correct “unfair” treatment and bring jobs back to the U.S. But it’s built on a profound misunderstanding of the global order that the U.S. helped create (and has benefitted from more than any other country).

After World War II, the United States didn’t just win the war — we designed the peace. We built a system based on free trade, mutual defense, and liberal democratic values. These were Wilsonian ideals, grounded in the belief that global cooperation and American prosperity could reinforce each other (my daughter just wrote a research paper on Woodrow Wilson, so we’ve been talking a lot about this at home).

A Nash Equilibrium on a global scale — the group (aka, the world) achieves the best results for everyone if they do what’s best for both themselves AND the group.

But in order to facilitate that, the U.S. gave more than others to support the new world order. We were the richest, most powerful, and had the most to gain from entrenching that order. And we did get more for those contributions: economic primacy, the dollar as the global reserve currency, access to markets, cultural influence, and unmatched geopolitical power. 

The postwar American Century wasn’t an accident… it was the result of the system we built and led.

Turning away from that system now — driven by misguided zero sum thinking — doesn’t just ignore history; it risks weakening the very foundations of our strength. Rather than abandoning the global order we helped shape, we should be focused on updating and improving it for the challenges ahead.

Tariffs may sound like a quick fix, but I can’t escape my economics training. The long-term costs will outweigh any potential benefits. 

A better path lies in confidence, cooperation, and leadership focused on achieving win-win outcomes… the same principles that guided us after World War II and helped build decades of prosperity.

At City Different, we know how hard it is to predict what comes next. Maybe the administration will bend to market pressure and revise these proposed tariffs before this even goes to print. Either way, we remain focused on the long term — investing in businesses built to thrive, no matter the short-term noise.


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