Zero-sum games

5 areas in the wine and spirit industry where one party's win is another's loss

If you ever want to know if an opinion is popular, simply Google it and look at the number of results.1 Then Google the opposite and see if your contrarian search yields greater returns. Remember, that Google is not an engine of truth so much as it’s a popularity machine.2 In this way, it can serve you well in sussing out how the world feels about something.

When you perform this exercise with the phrases “business is a zero-sum game” and “business is not a zero-sum game,” you’ll get 668,000 and 746,000 results, respectively. A zero-sum game is, quite simply, a situation where, if one party wins, the other loses.3 The majority opinion is understandable given that many would define a business as a means of value creation; people who believe that business is not a zero-sum game feel that parties that engage in transactions with one another both walk away winners.

I don’t share the popular opinion, at least not when it comes to the wine and spirit industry. Regulation and the concentration of capital have produced inequities that provide leverage to one party over another. This doesn't mean those in power take all the cake; they just tend to cut themselves larger slices.

Here are five areas in the wine and spirit business where not everyone wins:

  1. Salaries

    Every penny an employer doesn’t pay its employees is an extra cent in their pocket. Aggregate these savings across a company’s staff and the savings are significant enough to warrant heal-dragging when an employee asks for a raise. It’s also why companies prefer giving bonuses as opposed to raises.

  2. Margins

    The difference between the cost of goods sold and the suggested retail price is finite. Suppliers, distributors, and retailers all make a relatively similar margin, percentage-wise. However, if one party takes a higher margin, it usually forces another to take a haircut.

  3. Land

    There are only so many acres in Napa or Champagne.

  4. Allocations

    If one rep or one account gets more of a limited item, someone else might not get any. Most systems for allocating items favor seasoned reps and long-time accounts over new ones.

  5. Time

    Whether you dealing with port delays or an order board deadline, someone else using up the clock usually translates to you having to do more with less time.

    Share Ah So Insights


What I’m reading this week

1

Don’t forget to use quotation marks.

2

For instance, a low opinion of Merlot—famously articulated by Paul Giamatti’s character, Miles, in the 2004 film Sideways—is held by fewer folks than those who view it positively. “Merlot is bad” returns 5,750 results, while “Merlot is good” yields 14,700.

It should also be noted that if you want to track the popularity of something over time or specific to a particular geography, Google Trends is an incredibly powerful tool.

3

Zero-sum games are something humans are cognitively biased toward. We seem to overjudge a situation as one where winner-takes-all even when that’s not the case. This innate bias may be what predisposed me to write this piece.