Co-Opetition - Adam M. Brandenburger [24]
Losing three cards was no accident. Barry was a little Machiavellian. True, he made the pie a little smaller, but he understood very well how losing three cards would change the division of the pie. He knew that getting a sufficiently large slice would more than compensate for the reduction in the size of the pie.
Just a card game? No, a strategy employed by video game giant Nintendo, which, it just so happens, was originally a manufacturer of playing cards. In 1988–89 there was a shortage of Nintendo’s video game cartridges. Nintendo chose to play Barry’s version of the Card Game rather than Adam’s, but with one big difference—it made a lot more money than either Adam or Barry. More on the story of Nintendo in the Added Values chapter.
Sacking the Cities The National Football League (NFL) scores big by playing Barry’s version of the Card Game. By deliberately restricting the number of teams in the league, the NFL ensures that there are always more cities wanting football teams than there are teams. In 1988 the St. Louis Cardinals moved to Phoenix, leaving St. Louis with a football stadium but no team. In its bid to attract a replacement, St. Louis made several overtures to teams. It didn’t have much success; all it accomplished was to force cities with teams to match its generous offers. Finally, in 1995, St. Louis persuaded the Rams to move from Anaheim to St. Louis. Now Los Angeles has two empty stadiums, having previously lost the Raiders to Oakland. When the Baltimore Colts bucked Maryland and moved to Indianapolis, that left Baltimore eager to find a replacement. It took a new, publicly financed $200-million stadium and a $75-million up-front payment before the Cleveland Browns decided to make the greener pastures of Baltimore their new home. Where does that leave Cleveland? With an empty stadium.
More and more teams are now acting as free agents. With the lure of a $300-million state-of-the-art stadium and a $28-million relocation fee, the Houston Oilers want to move to Nashville. Then Houston will have—guess what—an empty stadium. Meanwhile, the Chicago Bears are thinking of moving to Gary, Indiana. The Tampa Bay Buccaneers may take a hike to Orlando.2 The Seattle Seahawks are considering flying the coop, as are the Phoenix Cardinals, yet again.
There are many cities chasing after not-so-many teams. That’s why the teams do such a remarkably good job of negotiating stadium deals with municipalities. The teams have all the power; cities that want teams have comparatively little. As a result, even cities with teams don’t see most of the benefits. A 1992 estimate put state and local government subsidies to team owners at $500 million annually. And that was when the competition for teams was only just beginning.
By playing Barry’s version of the Card Game, the NFL has made money, but at a cost. As teams become less loyal to their hometowns, fans become less loyal to their teams. In the long run, that’s bad for the NFL. We’ll talk more about the pros and cons of undersupplying the market in the Added Values chapter.
The Card Game is a good story to bear in mind whenever you’re trying to understand who has power in a game. We’ll refer back to it several times in the chapters that follow.
1. Added Value
In the Card Game, we were able to argue our way through to who gets what. Game theory provides the general principle that explains who gets what in everything from the Card Game to the game of business to the game of life. The key to understanding who has power in any game is the concept of “added value.”
Added value measures what each player brings to the game. Here’s the formal definition: Take the size of the pie when you and everyone else are in the game; then see how big a pie the other players can create without you. The difference