The Iterative Game

Hello Friends,

In the last post, we established that Civilization is a flat platform resting on vertical Pillars.

We learned that the “level playing fields” we crave—the stock market, the voting booth, the open marketplace—are artificial. They are luxuries that can only exist because Great Houses (the Pillars) are bearing the weight of the unequal and uneven reality underneath our beautiful flat places.

But this raises a critical question: How do the Pillars hold together?

If generational continuity is the means by which a Great House grows tall enough to “make the low places high” how does that continuity operate? The answer lies in understanding that there are two fundamentally different ways to interact with other human beings: The Transactional Game and The Iterative Game.

The “flat space” is built for the Transactional Game. Think of a flea market. You walk up to a table. You see an item. You ask the price. You haggle. You hand over cash. You walk away.

In a purely transactional game:

• The relationship ends the moment the deal closes.

• Memory is irrelevant. It doesn’t matter if you like the guy. It doesn’t matter if he’s a good father. All that matters is: Is the item worth the cash?

• There is no future. You never have to see him again. If your transactional win causes this man to fail at life you will likely never know, let alone be forced to deal with the societal burden (except when it comes time to pay your taxes).

This is efficient for buying commodities. It is efficient for a stock market. But it is a terrible way to build a life, and it is an impossible way to build a civilization.

The problem is that modern culture has convinced us that everything should be a transaction. We treat our employers, our neighbors, and even our spouses like vendors at a flea market. We are constantly asking, “Am I getting the best deal right now?”

This inevitably leads to short-term thinking and breaches of the deep moral obligations (which an earlier culture called covenants), that a man or woman of virtue has to the people around them. These breaches cause resentment in the “loser” who as Jordan Peterson notes, “tends to stack up at the bottom.” The transactional mindset frequently translates into treating PEOPLE as interchangeable cogs in the machine, leading an ever growing underclass whose dependence on the financialized winners feels very much like ownership. They even call themselves “wage-slaves.”

When the inefficiency of our modern incentive structure starts to expose itself (threatening to bring housing prices down or wages up in that natural cause and effect pattern that an earlier generation called capitalism) suddenly it is of vital importance to the powers that be that we import millions of immigrants who don’t know the score and are happy to take ANY deal that the modern welfare state can offer them.

To paraphrase a Game of Thrones line, “A man can own a wife or a knife, but not both.”

Or as my own grandfather was fond of saying: “You have to sleep sometimes.”

While the consequences of a short-term transactional mindset may not appear in a quarterly report or even a 5-year plan, not all games allow you to run away in a golden parachute and leave the shareholders holding the bag. Especially not games involving family.

To make the point explicit, if you play transactional games with your family or your legacy, you will lose.

Even if by some strange miracle you really can fool all the people all the time, if you make your money creating losers your children will NOT want to play the same game you did.

Because the reality is that there ARE always consequences for transactional behavior, whether that is an individual person going bankrupt or a productive business being chopped up by private equity with the debts pawned off (through the miracle of modern bankruptcy laws) on the US Taxpayer. Many successful Transactional Players do not see those consequences, because success in transactional games almost requires them to narrow their vision to the “level playing field” which they consider their domain, without acknowledging that when players drop out of the field they rarely cease to exist entirely.

As a cautionary tale, I will note that their children are unlikely to be so blinkered in their perception of reality. The Next Generation sees, and have likely ALWAYS seen the people whom the Transactional Players are hurting and ignoring, and they by and large want no part in it.

Now being transactional is NOT the same as having healthy boundaries and limits on who is allowed to join the flat spaces that you (or more likely your Great House) is a guardian over. One of the worst tragedies about modernity, is that sometimes the older generation DOES sacrifice greatly to be virtuous and their descendants are brainwashed into believing the worst about them. But let us not kid ourselves, sometimes the reason why the next generation leave in disgust is because their parents had no moral center beyond the very next short-term dollar.

By contrast, those who are Pillars of Civilization—the Great Houses—play by a different set of rules. They play an Iterative Game (or what Simon Sinek calls the “Infinite Game”).

In an iterative game:

• The players repeat. You are going to see this person tomorrow, next year, and in ten years.

• The roles switch. Today you have the money, and he needs the job. Tomorrow, you need the favor, and he has the skill.

• Reputation is the currency. Because you have to play again, your ability to keep promises is worth more than the profit from any single deal.

The Psychology of Risk: Secure and At-Risk Success Strategies

To understand how iterative business relationships actually work, a useful place to start is the psychological framework of Love and Respect. In a marriage, we often say that men primarily need Respect (honor) and women primarily need Love (security and safety). Likely a more productive way to frame this dynamic is that the success strategy of the Husband (the Secure Partner), the way for him to get what he wants, is to show love to his wife (which gives her feelings of safety and security), and the success strategy of the Wife (the At-Risk Partner) is to show honor and respect to her more powerful husband.

Furthermore this dynamic applies to far more than just husbands and wives; it applies to every partnership where there is an imbalance of power.

Imbalances of power occur in basically every useful business relationship. In a business context between men, the success strategy of the Secure Partner is to credibly offer safety and security to the At-Risk Partner, while the success strategy of At-Risk Partner is to give honor to the Secure Partner. But the nature of counter-party risk means that these roles will switch and switch back over the course of the contractual cycle.

Let me give you a practical example:

When you hire a contractor, you start with the money. In our culture, we say you have the “whip hand.” You are in the dominant position, psychologically occupying the Secure Party role. You have the power. Because you hold the power, the contractor (in the At-Risk position) instinctively knows he needs to show you Respect. He signals honor to you to get the job. Conversely, for you to get him to agree to the work, you have to offer him Safety—you have to make him feel secure that the job is real and he won’t be stiffed.

But to get the job done, you have to write a large check to get the job started (usually for materials). The moment you hand that check over, the power dynamic flips. Now the contractor has your money, but you have not yet received the commensurate benefit. You are now in the vulnerable position; you have psychologically flipped into the At-Risk role. You are relying on him to show up. This is what called counter-party risk.

Because you are now vulnerable, your needs change. You no longer need him to bow to you; you need reassurance. You need him to create a sense of safety and security. You need him to say, “I’m taking care of you. The crew is coming. It’s going to be alright”. If he fails to provide that “Love” (security), you will panic.

In a Transactional Game, this is a moment of terror. Will he run off? Will he do a bad job? The rookie move is for the Homeowner is to attempt to assert dominance over the Contractor, not realizing that he is currently the At-Risk Party. Meanwhile in a counter-intuitive way, those players who can mentally switch into Respect Mode, showing honor to the contractor and to his workers, praising even the smallest things that they do right, and graciously overlooking their faults (when possible) tend to get work that is good, fast, AND reasonably priced. They have invoked a fourth element that transcends the transactional paradigm, “being a good deal partner.”

As we have all been told, financial leverage summons economic production from the future and brings it into the present. Being a good deal partner does the exact same thing by summoning social capital from the future. Because others desire to do future business with you, that potential future regulates their current behavior. This puts you at the front of the line for quality work, without requiring the incredible markup that the arrogant “rich guy” tends to get stuck with.

So to summarize, you start with the dominant position, and negotiate terms. Then you hand the contractor the power (the money). He provides the safety (the assurance and the work) and hands the power back (the finished product). To get the best work out of him while he holds the power, you continue to send Respect up the chain—honoring his skill and his crew—while he sends Love (security) down to you. Then you complete the transaction, concluding what folks call the contractual cycle.

If you want to be successful in business, you must learn to play both roles—to flawlessly switch between the dominant partner providing gracious security and the vulnerable partner conveying requests with noble admiration, WITHOUT losing your identity. In general, the faster and more frequently you can engage in this switch in roles, the MORE SUCCESSFUL you will be in business and in life.

There is a word that is used to describe someone who is capable of playing both roles without compromising their internal character, and that word is HONOR.

This brings us to the core secret of the Great House:

Honor is not just a moral sentiment; it is a power strategy.

If you are playing a game that lasts longer than 10 years, strategy and honor are indistinguishable. You cannot possibly predict who matters, and who will matter, longer than the next three months. Because of this you likewise cannot predict which players will be occasionally involved in your world, or even a major partner. Remember any kind of iterative game means that you will find yourself the At-Risk Partner, at the mercy of the other party at least for some period of time for each deal.

You cannot win a multi-generational game by cheating, cutting corners, or maximizing short-term profit. You can only win by being the kind of person (or House) that people want to play with again and again. And because you DO NOT KNOW which are the “special people” that you will be dependent on (or in power over) in the future , you have to basically be that honorable person ALL THE TIME.

This is why people playing iterative games care deeply about how you treat your wife and children, and how your family feels about you. Those relationships are likely longer-term than the business or other social connections in your life. The incredible frequency (and incredible social and financial incentives) of divorce means that it is no longer rational to just exclude people based on that. It is also impractical and arguably illegal for employers to meet people’s families and evaluate their put-togetherness.

But, high-trust partners playing iterative games DO use your domestic conduct as a primary vetting mechanism. On some instinctive level, they know that a man who cannot empower and entrust things to the wife who shares his bed is incapable of maintaining honor with a business partner. The reality that you probably can only have one decision-making framework for long-term relationships with authority figures and dependents, makes the mistreatment of family a catastrophic signal of unreliability.

A Great House is much more than one businessman who has recognized the need for personal honor in playing iterative games. A true Great House requires a group of people who have decided to stop playing the “Death Game” of the market—where losing means starvation—and start playing a “Game of Life” with each other (more on that in the next post). They say, “We are going to be here in 50 years. Our sons are going to work with your sons.”

But the journey to a Great House always STARTS with a commitment to an Iterative Game.

If you want to build a Great House, you have to stop treating your people like transactions.

• You cannot treat your children like employees who can be fired if they don’t perform.

• You cannot treat your business partners like lemons to be squeezed.

You have to build Covenantal Relationships. You have to signal to the world that you are playing the Long Game. Because in a world of crumbling sand and shifting markets, the only thing stable enough to hold up the roof is a promise kept across generations.

Do you want to build a Great House? Then stop measuring “wins” by how many people felt like they “lost” when dealing with you and start building a reputation for stability.