A hard truth about Pittsburgh’s regional economy and more specifically the entrepreneurial ecosystem: If in fact the early stage business community is going to be a major economic driver in this region, it is going to take a new approach to get buy-in from the monied interests in the region. I believe the current stakeholders in the ecosystem would greatly benefit from developing a clearer understanding of each other’s interests. Let me use the concepts of Game Theory to support my hypothesis.

In James Carse’s book, Finite and Infinite Games, he lays out a framework for thinking about the world in which we live and how we spend our time. By understanding the distinctions he draws between finite and infinite games, and applying those to “players” in our regional economy, we can better understand the current state of Pittsburgh’s entrepreneurial ecosystem and how people’s perceptions and motivations shape it.

To summarize briefly, Carse explains,  

“There are at least two kinds of games. One could be called finite, the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.”  

Attributes of Finite Games: Known players, fixed rules, and an agreed upon objective.

Attributes of Infinite Games: Known and unknown players, rules are changeable, and the objective is to perpetuate play.

Now that we have defined the games as they are played, from a game theory perspective, we can think about our region through this prism, to inform what is going on in our regional economy, specifically, to understand what motivates people’s behavior. Starting with the entrepreneurial ecosystem is both important, and relatively easy. It is important because our goal must be to engage more people in the economic future of the region. It is easy because, I believe, there are more finite games at play here. To begin a regional analysis we must first define the players, the agreed upon objective, the fixed rules, and an important component for any finite game, common knowledge. 

The Players: Entrepreneurs, Universities, Accelerators and Incubators, Angel Investors and Angel Networks, Venture Capitalists, Government at multiple levels.

The Agreed Upon Objective: Create an ecosystem fed by growing companies for the purpose of large exits that lead to more players who can reinvest their winnings and knowledge back into future exit-able businesses.

The Fixed Rules: Focus on large, addressable markets that can be disrupted via technology and innovation. Utilize the resources of the universities, accelerators and incubators to present a plan for growth that is attractive to funding sources. Raise money with the growth plan to deploy the money into actionable milestones that allow you to raise the next round of financing at a higher valuation so you may unlock the next level of growth. To grow larger is to win, and celebrating rounds of financing is to celebrate a small win on the way to the ultimate objective.

Common knowledge: A necessary component of game theory, needed for a finite game to exist. It is not enough for there to be rules. It is not enough that all the other players are aware of the rules. Stay with me here. All players must be aware of the rules. Additionally, all players must be aware of the other players’ awareness of the given rules. A bit ridiculous, I know, but now let’s parse through some common knowledge in the ecosystem:

“There is no money here”.

“There is so much money on the sideline”              

“People here are so risk averse.”

First, and foremost, there is an immense amount of wealth in this region. Second, and a huge pet peeve of mine, there is no such thing as money on the sideline. Not in public markets, not in startups, not in cities. There is only money that is invested in something else, expressing different preferences. Finally, people here are not risk averse, but they frequently have an aversion to the risk they are being sold by the early stage ecosystem.

I’ve come to believe that the root cause of many of these misconceptions is how engrained we have become in the playing of the finite game. When you are playing a game with known players within the entrepreneurial ecosystem, by fixed rules, toward an agreed upon objective, money becomes a commodity within the field of play. In the real world of infinite play, money is not a commodity. Money is attached to people. If money is attached to people who are playing a different game than you, an infinite game, it would behoove you to understand their particular boundaries and rules, as your boundaries and rules may mean nothing to them.

That the entrepreneurial ecosystem is playing a finite game in and of itself isn’t a bad thing. The failure to recognize the game being played, however, in the context of the broader infinite game at play can leave one feeling confused and frustrated. Remember, finite games are about utilizing resources to win. Infinite games are about sustainability and utilizing your resources to perpetuate the game. Players focused on the infinite game may engage in finite games from time to time, but only by choice.

In summary, I would posit that we should present the uninvolved players with the opportunity to engage in the ecosystem in a fashion that is not antithetical to the game they are already playing.