Pies
wed24sep2008—39w268d73%— 07h55m00s—0utc
Liking David Friedman’s Hidden Order a whole lot. Not trivial reading, but rewarding. Through intuitive graphs and simplification he comes up with some interesting economics theory (with my math background the hand waving and naivete of the presentation’s obvious but I’m still rather unconvinced of a formal, math-based economics).
But perhaps the part I liked most is this inspiring little quote, awfully important in an age when technology allows contracts to make the dreams and nightmares of both sellers and buyers to come true, from DRM to discography torrents.
Suppose you are a businessman or an attorney negotiating a contract. It is tempting to go through the contract term by term, trying in each case to get whatever term is most favorable to you or your client.
But a more profitable strategy may be to go through looking for the contract terms that maximize the combined gain to both parties. Only when you get to the final term — the price — do you shift back to trying to make it as favorable as possible, thus collecting as much as possible of the gain produced by your well-designed contract. Most of your job is maximizing the size of the pie. The bigger the pie, the bigger you can make the slices for both sides.