Finite and Infinite Games

I recently discovered Alex Danco’s newsletter and read his essay on why the Canadian tech scene doesn’t work. It’s a long essay, but a thoughtful one. He introduces the concept of finite games and infinite games:

First, finite games are played for the purpose of winning. Whenever you’re engaging in an activity that’s definite, bounded, and where the game can be completed by mutual agreement of all the players, then that’s a finite game. Much of human activity is described in finite game metaphors: wars, politics, sports, whatever. When you’re playing finite games, each action you take is directed towards a pre-established goal, which is to win.

In contrast, infinite games are played for the purpose of continuing to play. You do not “win” infinite games; these are activities like learning, culture, community, or any exploration with no defined set of rules nor any pre-agreed-upon conditions for completion. The point of playing is to bring new players into the game, so they can play too. You never “win", the play just gets more and more rewarding. 

Alex’s claim, briefly, is that the Bay Area is an “infinite games” kind of place, and many other regions including Toronto are “finite games” kind of places, which is why they struggle to replicate the success of Bay Area startups.

Dividing finite and infinite games is one way of dividing people by mindset: is this person building (or investing in…) a startup with the idea of winning at some particular finite goals and milestones, or are they on a broad search for something valuable and interesting?

I can understand why this distinction is difficult. At a fundamental level, every company must get and keep customers, and must make money. So how can you go about building a real business if you’re not focused on getting to the next milestone?

I think the answer is that you can play an infinite game while remaining focused: early-stage VC-backed startups need to find some kind of proof-of-reality that demonstrates they’ve found something that’s going to become a real business. So the entrepreneur needs to make difficult and correct trade-offs about what they spend their time on and what they spend their money on, so that they can deliver something compelling to their customers.

But game of focused execution is not the goal. It’s the method, designed entirely to let the entrepreneur keep playing. And that’s the mindset difference between entrepreneurs playing infinite games and founders playing finite games.

Alex explores this a lot more in his essay, and it’s worth a read if you’re interested in this kind of thing.