Imagine I am going to sell a $100 bill by auction. The bidding starts at $1.
Here's only rule of the game — and pay attention carefully: If you are the second-highest bidder, you still have to pay what you bid, but you don’t get the $100 bill.
I get bids for $1, $2, $3. Why not? They might win $100 for only $3! But the bids keep coming.
Once they get to $99, the person offering $98 thinks, “Uh oh. The other person isn’t backing down.” They raise their bid to $100, so as not to be second-highest bidder and lose it all.
But now the person offering $99 raises their bid to $101. Better to lose only $1 than $99, right?
Soon they’re offering me well over $100 to buy a $100 bill, just hoping the other person quits first.
The real problem was not thinking it through in advance.
When the game starts, it’s easy to think short-term and say, “Ooh! Good deal!” Then when it’s too late, you slowly realize, ”Uh-oh. What have I done?”
A lot of people get into life situations like this. The homeowner buys a house at the top end of their budget. The romantic gets into a relationship with someone who is already in a relationship. You can hear them complaining about how they’re so in debt, or their sweetheart is cheating. The situation was stacked against them, so the smart choice would have been to not play that game at all.
We should always ask, “How will this game end?” It’s hard to think through the long-term implications of our actions, but it’s worth the effort.