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Auction theory confirms humans are programmed to abuse (& why we must learn power dynamics)

We are sometimes governed by selfish genes that seek to maximize our returns even if that means taking advantage of others.
And auction theory confirms that.

I am not a big fan of negotiation theory based on numbers and "rational parties" because, well, it's been proven beyond any reasonable doubt that humans are not rational (just three resources: Kahneman, Ariely and "Fooled by Randomness").

But Gregor Berz does a great job of mixing the theory with real-life scenarios and psychology in "Game Theory Bargaining".
As a matter of fact, I was surprised at how much psychology, evolutionary psychology and even life philosophy we can all learn from game theory.

How Utility Function Enables Social Abuse

Specifically, I was blown away by the implications that the "concave utility function" has on human socialization and the fundamental values and "WHY" behind this website.

In a nutshell, the utility fucntions dictates that the more you need something, the more utility you get from a single unit of whatever you need (for example: a dollar).
The party who does not need dollars so much instead needs more of them to reach the same level of utility.

What does this all mean to negotiations?

Writes Gregor Berz (italic is mine):

When there is different utility it is usually not the pie that is divided but, instead, the utility

Keep in mind that utility is measured by how much you need something.
That means that when you need something desperately, you don't get your share of the pie (ie.: your fair share of what's being negotiated), but you get your "fair" share of the utility.

The result?
You lose the negotiation.

But that's not the most important point here.
You wanna know what the craziest thing is?

The craziest thing is that people feel it's fair that the person who needs the pie the most get the smallest slice!

Gregor Berz keeps writing:

(...) has been confirmed in experiments with students time and again. If both negotiation parties are aware of the assessment of utility of the counterparty, then they divide it “fairly” based on the utility and not the pie itself

Being aware of the "assessment of utility" basically means "being aware of how desperate you are".

And dividing "fairly" based on the utility means giving less to the one who needs it the most.
From a purely rational point of view, it's not wrong.

Because, well, a dollar to a starving fellow does matter more than a dollar to a rich fat-cat.
But this is the same psychology that grows disparity and legitimizes abuse.

And the author keeps writing:

As a result, the person who needs negotiation success more urgently gets even less in his share of the pie.

Learn Psychology of Power to Avoid Abuse

To me, this was the confirmation that even if we want to live an honest life it's not enough to consciously avoid taking advantage of others.
Because our subconscious will lead us into abuse anyway.

Even if all we want to lead a good and honest life and see real win-win, it's imperative that we learn the darker side of human nature.

And of course, that goes both ways: both for not abusing others and to avoid being abused.

And we go back to one of the founding principles of this website:

To be good, we must learn how to be bad.
-The Power Moves

Matthew Whitewood has reacted to this post.
Matthew Whitewood
Have you read the forum guidelines for effective communication already?

Oh, P.S., lesson learned for you?

Never tell anyone you really "need" a deal, never plead for the transaction to go through and don't tell people you need to feed your family.

Sad truth, but you're much more likely to be taken advantage of when you do that.

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Matthew WhitewoodTransitioned
Have you read the forum guidelines for effective communication already?

This is such an interesting post!

I always thought that the rich get richer and the poor get poorer because the rich can invest and multiply their resources while the poor cannot keep up with rising costs and inflation. Now that I think of this, the concept of utility may be the underlying principle of those macroeconomic phenomena.

Inflation helps the rich because the rich hold the majority percentage of wealth in assets, and asset prices increase.
The poor keep the majority percentage of wealth in cash.
I think this is a macroscopic emergent phenomenon resulting from the concept of utility.

When applied to power dynamics, the people who need to learn power dynamics the most are those who are poor at it.
The ones who are savvy already have good social networks and power.

Is A Fair Transaction About Getting Fair Utility Or Amount?

Being aware of the "assessment of utility" basically means "being aware of how desperate you are".

And dividing "fairly" based on the utility means giving less to the one who needs it the most.
From a purely rational point of view, it's not wrong.

Because, well, a dollar to a starving fellow does matter more than a dollar to a rich fat-cat.
But this is the same psychology that grows disparity and legitimizes abuse.

Often the rich fat-cat bullies the starving fellow because of this principle.
I was thinking if the rich fat-cat and starving fellow gain after the utility exchange despite the imbalance in terms of absolute value, would that be considered a fair exchange?

Maybe this boils down to whether relative value like status is important.
Or, if a poor man is doing better in his life today compared to his life yesterday, would that be good on its own?

Personally, I think equality goes against this concept of utility and the fundamental driver of collaboration (it is good for the individual first).
Hence, we should let the rich continue to multiply their wealth while setting up systems to pull up the poor.

There could even be a crossing point where a disadvantaged person can start to grow by himself.
In other words, he escapes the poverty cycle.

Is A Beggar on the Street Today Doing Better Than A Lone Caveman in the Past?

This is a challenging question that I am thinking about.
I'm really not sure.

If you have nothing in today's modern society, it is incredibly challenging to do any sort of value trade with anyone else.
As a lone caveman, you could run into another caveman and team up more easily to hunt for example.
Physical appearance plays less of a role as well.

Although I would say a savvy beggar on the street can probably get himself out of his situation.
Though it may require some manipulation and value-taking actions.

So that's the downside.
Relative value does matter because it affects what you get out of any value negotiation.
The upside is that you may still have access to medical facilities, welfare, and other societal perks.

Analogy With Chess - Trade Pieces When You Have Material Advantage

For those who play chess, it is a known rule of thumbs to trade pieces when you have a material advantage.
Generally speaking, any single pawn is more significant when there are fewer pieces on the board. (many exceptions apply of course)

Lucio Buffalmano has reacted to this post.
Lucio Buffalmano

If you have nothing in today's modern society, it is incredibly challenging to do any sort of value trade with anyone else.
Although I would say a savvy beggar on the street can probably get himself out of his situation.

Yes, both are valid points.

The harder part is getting you off the ground.

But it's doable.
For the simple fact that it's been done -and it's been done-, it means that it's doable.

It just means you might have to go through a lengthrier grind. But not even that long.

Do menial jobs until you can buy a suit and pay for a shower.
Then seek a better employment, then focus on learning and growin, then take it from there just like anyone else.

Matthew Whitewood has reacted to this post.
Matthew Whitewood
Have you read the forum guidelines for effective communication already?
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