Last Updated on November 17, 2022 by Dave Farquhar
In the midst of the COVID-19 crisis, I’ve heard some business consultants speak of something called an “infinite game” or “infinite mindset.” This, they say, is the key to surviving setbacks or even thriving in the midst of them. What is an infinite game, and what’s special about it?
The infinite mindset, or infinite game, simply means not caring about winning or losing in the short term. An opponent who is just playing to stay in the game is hard to defeat.
Tesla’s infinite game play
The auto maker Tesla is successful because it realized it was playing an infinite game. It couldn’t succeed if it wasn’t selling electric cars that would appeal to the people who buy conventional automobiles. And the car market is a market no single company can dominate. Toyota is as close as that industry has to a dominant player, and it has 10 percent of the market.
Tesla is nowhere near dominant, but it has a cult following. And that cult following includes people you’d never think of as environmentalists. I’m sure Tesla knows how many environmentalists can afford a Tesla. The stereotypical environmentalist cannot. Knowing that its cars would cost a lot of money, Tesla built a $60,000 car that would appeal to people who would buy $60,000 cars, regardless of make. It just happened to be electric.
Tesla has 2 percent market share and has only posted four profitable quarters in its history. But it’s managed to stay in the game since 2008. Its market share rivals that of the BMW and Mercedes nameplates, so it has enough market share to survive. It either has to figure out how to be profitable selling that many cars, or grow its market share to a level that makes it profitable.
Tesla’s success isn’t guaranteed, but by not getting wrapped up in quarter to quarter profitability and not chasing unrealistic market share figures, the potential is there. Of course, if anyone can mess Tesla up, it’s Elon Musk. But if Tesla implodes and people wonder why it was successful in the first place, playing the infinite game for around a decade and a half is why.
The infinite game is why we have two kinds of smartphones
The best example of the infinite game in today’s world, I think, is the smartphone. There are only two kinds of smartphones on the market. Either you buy a phone from Apple, or you buy a phone that runs Android. There is no third choice anymore.
Some people want a third choice. Some people desperately want a third choice. There seems to be room in the market for one, too. Some people can’t or don’t want to pay $1,000 for a cell phone. They also don’t want a phone that tells Google every time they go to the bathroom.
For those of you who didn’t immediately leave when I dared to insult the platform of their choice, I know that’s a slight exaggeration. Not every Apple phone costs $1,000, but the one you want does. You have to admit that.
And while Google doesn’t specifically track when you go to the bathroom, Google collects enough data that it can certainly infer which room in your house is the bathroom, unless you never take your phone (or tablet) in there.
A reasonable person would ask why there isn’t room in the market for a phone that costs less than Apple and tracks less than Google. Someone else thought the same thing. A little fly-by-night named Microsoft. You might have heard of them.
Why Windows Phone failed
I know people with Windows phones. And they really, really like them. They aren’t as outspoken about it because they know it isn’t cool. Windows Phone was the Nickelback of phones. I’ve met exactly two people in my life who admit to liking Nickelback, but they sold 50 million records and they’re still playing big venues.
Windows Phone failed because Nickelback is perfectly happy being the Nickelback of bands. Microsoft was not happy being the Nickelback of phones. Nickelback is playing the infinite game. Microsoft never does.
I can rattle off any number of bands more talented than Nickelback that you’ve never heard of. Take a listen to Cleaners From Venus and tell me those guys aren’t a million times better than Nickelback. But the members of Nickelback are millionaires and the guys from Cleaners from Venus are great artists you never heard of.
That’s the infinite game. Nickelback isn’t in the game to become Elvis or the Beatles. Nickelback is just trying to stay in the game.
Microsoft’s attitude toward phones was they were in it to win it. They didn’t just want to beat Apple or Google. They wanted to beat both of them. When they didn’t beat either of them, they discontinued it after 5 years.
Apple’s tell it was playing the infinite game
Only 3.6 percent of the market bought a Windows phone. And that’s probably about the same number of people who know Apple wasn’t always a mega-successful company. Apple nearly went out of business in the mid 1980s and again in the late 1990s. Technology columnist Robert X. Cringely, a huge Apple fan, had a picture of an apple core at the top of his blog in the late 90s with the caption “What remains of Ye Olde Apple.” Microsoft had Apple on the ropes. And then Steve Jobs played Bill Gates.
On August 6, 1997, Apple stock was trading at the equivalent of 86 cents per share. It was a dark day.
That day, Steve Jobs made the first of what would become his famous major public announcements. He got up on stage, and then, on a giant screen that dwarfed Jobs, up popped Bill Gates. They jointly announced that in exchange for a $150 million investment and a promise to continue producing a version of Microsoft Office for the Mac, Apple would make Internet Explorer the default web browser on Macs.
The audience booed. This was a deal with the devil if there ever was one.
“We have to let go of the notion that in order for Apple to win, Microsoft has to lose,” Jobs said.
Jobs knew Apple wasn’t likely to ever have more than 10-15% of the computer market again. But after a decade languishing in obscurity trying to sell Unix workstations nobody wanted, 10 percent marketshare sounded awfully good.
Microsoft’s finite game
Microsoft struggles against Apple because Microsoft isn’t used to succeeding with a 10 percent market share. Microsoft’s rise came from entering markets and dominating with more than 50% market share, and ideally collecting more like 90 percent. Sometimes it took a few years to do it. But Microsoft’s whole business model was to build near-monopolies, then use those near-monopolies to fund new ones or, eventually, leverage one near-monopoly to build the next one on top of the previous one.
Being a monopoly is perfectly legal. Using the monetary proceeds from one monopoly to build a second is also perfectly legal. Directly using one monopoly to get another is not. That was what got Microsoft in legal trouble and it’s what left Microsoft vulnerable to Apple’s play. If Apple went under, Windows would have been a monopoly and Microsoft’s whole strategy would have been illegal.
In a finite game, there are agreed-upon rules and winners and losers. The reason this mindset rarely works in business is because there aren’t agreed-upon rules. Apple won’t agree to play by Microsoft’s rules. Apple frustrates Microsoft because Microsoft focuses on beating Apple, and Apple never bets enough to lose big.
Playing the infinite game in a finite game
Indeed, the infinite mindset even works in finite games. Baseball is absolutely a finite game. There are 9 innings unless there’s a tie, in which case whichever team manages to stay ahead for a full inning wins. There are 162 games in a season, followed by a postseason. Whoever wins the last series of the postseason is the champion.
Look at the Los Angeles Dodgers and New York Yankees. They win a lot of games every year. They spend as much money as the game allows them to spend every year. As the oldest teams playing in the two biggest markets, they have more money to spend than everyone else. And yet the scrappy Tampa Bay Rays for the last 12 years have been nearly as good as the two of them. They’ve contended every season for those 12 years and made it to the postseason three times. Sure, they’ve had seasons where they weren’t great, but they were never bad.
Their secret is that while the Yankees and Dodgers overpay for superstars, the Rays target slightly above-average players. This keeps them competitive every year on a much lower budget. They’ve never won a World Series, but with a lucky break they could. Especially if no one else catches on to what they’re doing.
How Microsoft could have played the infinite game with phones
Windows Phone didn’t have to be a failure. After five years it only had 3.6 percent market share, but it took Windows itself five years to become successful. Microsoft is used to waiting five years for success. Windows Phone could have been successful, but it would have required a shift in approach and expectations.
First, there was no way Windows Phone would have achieved 90% market share. Exactly how much it could achieve is hard to say, but Microsoft really needed to figure out how to be profitable in the phone space with more like 10 percent market share. Apple and Google have about 10 percent of the computer market and they’re profitable and happy with that. They’ve accepted that the PC market is Microsoft’s turf and they just need a small piece of that pie. Microsoft needed to make the same concession with phones. Define success as being profitable and having 10 percent of the market, and you’re good.
Second, Microsoft needed to adjust its message. Something like this.
We believe a phone shouldn’t cost as much as a mortgage payment on a house in the suburbs.
We believe it’s none of our business if you take your phone into the bathroom.
Our phone is affordable, doesn’t invade your privacy, and if you’re one of the 500 million people who use a Windows PC every day, you already know how to use it. Windows Phone. Starting at $299.
Would it set the world on fire? Probably not.. This targets people willing to pay a premium for privacy, but can do without Apple’s glitz and is glad to save some money doing so.
It’s a Toyota Camry play. It’s a safe bet the majority of people who drive a Camry would rather drive something else. But it’s an affordable, practical choice.
Microsoft didn’t make that play, and that’s why you only have two choices when you buy a smartphone.
Aging companies and the infinite game
In some ways, I think IBM is still playing a finite game. They were a dominant player in their industry for several decades ending around 1990, and even though there’s no logical path to get back to that place they don’t seem to have given up on that dream.
I get a lot of web traffic from people who wonder what IBM does and whether they’re still in business. And many of IBM’s competitors fell by the wayside over the years.
I remember through the 90s, people older than me poked fun at Unisys. Unisys is an old IBM competitor who made mainframes. Unisys even still makes mainframes, even though almost nobody talks about them. They tried and failed to get into the PC market in the 1990s, and if anyone is surprised IBM is still around, they’re probably even more surprised Unisys is.
But Unisys is still a Fortune 1000 company with 21,700 employees. Even though they still sell computers, it’s been more than two decades since I’ve seen one personally. Unisys doesn’t care. I did see the Unisys logos on cubicles when I worked government contracts. Unisys sold off that business in early 2020, but still sells software and services to both government and industry, in addition to mainframes no one talks about.
It’s been years since the name crossed your mind, if you’ve ever heard of them at all. But they’re a $2.5 billion company and made $75 million in profits last year. They’re in the game. They got forced into an infinite game, but that’s infinitely better than going under, isn’t it?
4 thoughts on “Infinite game: What does it mean?”
I loved my Windows smart phone, although only had it for a couple of years. It was the easiest for me to adjust to in using the directory menu, plus it was very compatible at the time in transferring pictures and files. I treated it like a PC purposely rebooting on occasion, whereas my three daughters would have issues with their iphones and I would ask when was the last time they shutdown. 🙂 They had Mac Pros during college and so are in the Mac mindset. When they upgraded I inherited one of their iphones so I could be included in some of those shared apps so to participate receiving grandson snaps and group chats. When that iphone died and I couldn’t transfer my contacts list, I happily moved to a nice affordable Android. All those apps are now available. Now I quietly laugh at those who think they need 3 or 4 cameras on their gigantic phone.
When Jack Welch took over GE, his policy was that they had to be #1 or #2 in any market that they competed in, or that division would be sold off/shut down. Clearly he was playing finite games, by this rubric. But clearly GE is also around and relevant, moreso than Unisys (I assume).
Any further thoughts regarding GE?
GE is a lot like Microsoft, just older. Having worked for a company that set out to emulate GE as closely as possible, in a different industry, the approach can work for a time. But once some key figures leave, it can fall apart quickly. And what I found working for that company was that there was quite a bit of corruption inside to goose numbers. A project would get cancelled to create the illusion of savings one quarter. Then, a few quarters later, the project gets respun because it’s necessary. The stop-and-start creates additional overhead and waste. I’m not saying that went on inside GE because I don’t know, but it sure happened in this other company that tried to emulate them. And GE’s stack-rank system is an outstanding way to bleed talent. I had a year that was so good it was mathematically impossible for me to repeat it. But rather than get a promotion and the kind of bonus a high performer gets, I got a 3% bonus, no raise, and was told I was average. Needless to say I got better opportunities very quickly, so I left and I’m doing the same thing for someone else now. That was an annual ritual–there was always a flood of talent who left right after bonus time. That was why.
There is one huge difference between Windows Phone (or any computer operating system) and Nickelback: network effects. The network effect essentially says that things are popular because they are popular. The fact that other people use them makes them more attractive to others.
The first notable example of the network effect came in the early days of the telephone. Some places legislated a telephone monopoly (only one company was allowed to string wires) while others allowed competing companies to operate. Almost without exception, phone service was more widely adopted (and cheaper!) in the places with only one phone company. One problem with having two or more is that you might not be able to call the person you wanted to talk to because they got service from another company, or would have to pay an exorbitant toll charge to make that call. (Nowadays we solve that problem with government mandates that require phone companies to play nice with each other.) The other problem was that putting up all that infrastructure was costly, and having competing companies meant that each one was dividing the costs among fewer subscribers. It’s the same reason we have regulated monopolies for electric service; in many places you can now choose an alternative generation provider, but getting the volts to your house is still a monopoly.
Getting back to the more direct application of the network effect, being served by the same telephone company as your friends made that company’s service more appealing. So people ended up being marketing tools for the provider they chose. In some cases the effect was strong enough that one of the companies died off. In other cases, each one managed to rope in a group of happy subscribers, but with the side effect that those subscribers were kept away from the customers of the other company. (You might be seeing some parallels with the iOS vs Android divide here.)
In the case of operating systems, the network effect is especially strong because it changes the decisions of software developers. A phone platform that has a 5% or 10% market share isn’t going to attract a lot of app developers. In turn, that means people won’t want to buy it. That leads to more developers abandoning it, and the downward spiral continues. Desktop Linux has the same problem; not enough market share to attract developers. (It also has the additional problem that the people who DO choose to use desktop Linux generally don’t want to pay for applications; software that is both free and libre is part of the appeal.)
Apple does OK in laptops because it has specific market niches where it has far more than 10% of the market, notably music makers and graphics professionals. Application availability for those niches is excellent, often exceeding what you can get for Windows. Apple doesn’t do nearly well in the mainstream business market because they don’t target it, and in fact do things that antagonize business customers like killing compatibility with older applications. Businesses often depend on some application that they can’t update for a newer OS because they don’t have the source code.
But there was no identifiable niche where Windows Phone was strong enough to allow it to survive on that basis. It needed more app support to have any appeal to mainstream customers and Microsoft wasn’t getting it, even though they offered incentives to developers to write apps for the platform. Microsoft also shot itself in the foot by going through so many generations of mobile operating systems and not maintaining any sort of backward compatibility; that history made it harder for them to attract developers and customers. Perhaps the most egregious one was the transition from Windows Phone 7 to Windows Phone 8; all the apps were incompatible and no option to upgrade your older device from 7 to 8 was offered. (Not that many Windows Phone 7 devices were sold. If Microsoft had been serious about making 8 a success they would have GIVEN a new phone to every owner of a device running 7; it would have been a modest marketing expense by their standards.
Nickelback? Network effects exist in music as well; there are musical fads and rabid fandoms. But they are not as strong as in operating systems. If you like Nickelback you may lose out on the pleasure of talking about them with your friends, but in the end the music is still the music and the choices of others don’t have any effect on what you hear. (Though sometimes people seem to care anyway. When the story came out that Milli Vanilli was a fake, many people demanded refunds for their records and CDs even though the music on them had not changed at all. I had never been a big fan, but if I had been the story would not have had much effect on my love the music. If it had come out that they were something worse like child abusers I would have been more torn.)
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