Zero-sum game

Author: Alfredo Colunga 

Energy does not only have an “Objective value” in Jules or calories. For each animal, for each of us, for each company, the value of the consumed energy is, above all, the value of an opportunity to consume more future energy. If today I eat, such food does not only have the energy value represented by its calories, but the value of all the future meals it will allow me to have. In other words: each of us projects, on the remaining energy available, a shadow corresponding to our future energy needs. A type of growing cone, because if everything goes well, we will grow and multiply ourselves and so our energy needs and our descendants’’ ones (with their own cones for the future energy needs) will grow as well.

If these shadows project over a kind of horizon with apparently unlimited energy availability there will appear a sphere with a really big radius, so big that it has not been measured yet, then people can live together. That is, if we speak about chicken and consider that we can produce as much as we want, then there is no problem. The shadows of the future energy needs from the other chicken producers are compatible. It will be the consumer who will decide what chicken to buy and efficiency will succeed.

However, if the shadow of the future energy needs of the different agents is projected on an energy horizon of known dimensions, there will appear a sphere whose radius won’t grow and these shadows start to overlap. And each overlap will sooner or later mean a “you or me”.

It is not difficult to distinguish among products which, at least in appearance, can be obtained without limitations and others which won’t. They are different cases to chicken or oil. Chicken can be regenerated, we can apparently produce as much as we want to, but we can’t do it with oil.

The economists know that in the Theory of Games there is a name for each thing, a name for chicken and a name for oil. While oil seemed to be unlimited, players, even the smallest ones, could always reach agreements (as long as they were efficient) such as “I keep these oil fields and you those”, “I will continue to exploit here and you there”, with possible future increases in consumption for both competitors. These situations are called “Non-zero-sum games”, those in which both competitors can obtain profits. In this case, the neoliberal rules do make sense.

However if the limits of the object in competence have been found, then what I intend to consume in excess will necessarily be something you will stop to. If I win, you lose. The Game Theory also has a name for this. The Game will have become a Zero-Sum Game.

Let’s imagine that only ten companies remain in the oil market and there is only one million barrels to be sold. Each company has already been assigned, approximately, the barrels they can sell, so the rules of the game are now as follows: In order to grow each company does not have to be more or less efficient. This is now, within some reasonable margins irrelevant, as a more efficient company will increase profits but will not grow (in any case the opposite), because the number of barrels to be extracted does not grow. The new rule is: If it wants to grow, a company shall have to take over a competitor.

All the companies want to grow; this is their reason to be, so they will all try to take over the others. If one doesn’t, it will be worst for it.

The best strategy for each company, therefore, the priority strategy, will be –or should be- absorbing smaller companies with the intention of reaching a size which allows it to later absorb companies which are currently bigger in size. And this makes other follow the same steps. The smallest company, except in the case that it starts a very fast fusion process will have no opportunity for survival, independently of its efficiency or profitability.

So the game stops being about efficiencies and starts being about sizes, and speed, which leads to an acceleration of the process. And there is one more thing: the best strategy for each company regarding the availability of the object in competence, once the limits have been discovered, is identical being there reserves for 20 or 100 years.

The definition of profit itself has changed. While oil seemed unlimited enough profit was the difference between income and expenses which allowed to maintain the structure of the company, which allowed, in overall, a “healthy growth”. Now enough profit will be to acquire such size to avoid the absorption by others. There are no fair game rules, there is no healthy competence and of course the consumer has no choice or profit possibility. Size and not efficiency, has become the engine of competence. The company which focuses on efficiency, on good service, will be competitive, but if it doesn’t have enough size it will be eliminated.

On top of everything else, the process which starts with oil extends like an oil stain all over the productive processes. Energy limitation limits in turn our definition of raw materials, which are nothing else that the materials needed in the productive processes…and which fulfil the condition of being accessible depending on the energy available. The appearance of a limitation in energy availability means a limitation in our valuation of the raw material availability, so these –and later their derivatives, etc- come into the Zero-Sum Games.

Summing up: once a limitation has been discovered in the availability of the energy source, the main economic variables are size and absorption speed. And NOT business efficiency or benefits to the consumer. Once the limitation regarding the availability of the energy source has been discovered, economic liberalism stops working. The only processes which slow the fusion processes are connected with state control: “golden action” or with strategic characteristics of the property of a company which avoids the absorption (specific composition of shareholding).

These situations are as old as the mountains. However, now we happily know much more than before. What to do? In my opinion, the following:

Above all, it shouldn’t be forgotten that it is an increasingly accelerated process, which being Zero-Sum is doomed towards conflict and completely independent from the fact of still having oil for ten or two hundred years.

Obviously, giving maximum priority to locating a new apparently unlimited energy which can generate new Non-Zero-Sum games. Having this energy available will mean the generation of a technology which in turn will mean the re-evaluation of the raw materials available.

And while this energy is located the process rhythm shall be managed, among other things by observing before each great fusion, if it will benefit the consumer –if it really pursues efficiency- or if this is a simple case of Zero Sum.