Episode 68: Playing The Long Game: Delta One vs Delta Zero Thinking

Are you accidentally handing your practice over to the wrong person? I'm going to cover one of the most powerful (and often overlooked) concepts in behavioral game theory.

If you've ever felt like you're carrying all the weight while someone else reaps the benefits, this is why. And more importantly, I'll show you how to spot it before it costs you.

This one has the potential to change how you see everyone around you.

If you're a dentist and looking for more dental specific content, I have another podcast called, The Sovereign Dentist. I'd love to see you there. 

More can also be found on my YouTube channel. 

Transcript

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0:01

Welcome to The Sovereign Guide. I'm your host, Alistair MacDonald. Let's get started

Speaker 0:10

No serious student of incentive systems is gonna go very far without slipping into the eternal rabbit hole of game theory. I can tell you, I am a recovering game theory fanatic, and over the course of our time together, I'm gonna pull you into those rabbit holes to truly deepen and broaden your understanding of why people do what they do the way they do it Game theory has many, many aspects to it. We're speaking for now about the core essence of what is called behavioral game theory. Inside of behavioral game theory, there is a formula. There's a number of them, but one in particular that contains a critical factor in anticipating and literally running the mathematical probabilities of different outcomes. This is the concept of delta. Delta is assigned a value of zero or one. What is that delta? Delta is the measure of an individual's value of reward in the short term or the long term. It's essentially the difference between what can I get now and what is possible for me in the future. You might have noticed the one leans more toward employees. I want certainty and a guarantee that if I just sit in this chair for eight hours, I'm gonna get paid, I'm gonna be rewarded. Whereas you as an owner know that the real bigger vision and future lies in the hands of those that believe in the long term, that are willing to actually pay a price today, not for a reward today, but a potential bigger price tomorrow. For this reason, we assign one of two values. Delta zero is a person that lives in the world of immediate benefit and gain. Delta one is somebody for whom tomorrow's opportunity is just as valuable and important as today's. This is the difference between a transactional way of going through the world, what have you done for me today, and a relational viewpoint on the world, what can we create over time? The difference is profound. The one shows up like you're being-- you're only as relevant as the paycheck that you cut for them, and the other shows up as, what can we create over time together? The second feels like loyalty. Delta zero feels like you're being used for a paycheck. Why is this so important when we consider partnership? It's important because the vast bulk of our associates are inherently incentivized to prioritize production today, to hit today's goal, this month's, this quarter's, this week's production goals. And it is that number that they live or die by. You may have created an incentive system that induces exactly that. I'm not saying it's bad, but the danger happens when we take somebody that is a high performer in the practice. They are showing up and doing two hundred K a month in their practice, and you associate that value with the qualities and qualifications of practice ownership. This is the big piece you're missing. They are a delta zero person right now, and you are a delta one person. Practice and business ownership requires somebody willing to forfeit an immediate gain just for the hope of a bigger potential reward in the future. Now, as you would have heard from our conversation about the pajama people, this is not universally true for everybody. In fact, the danger is that you could take somebody who is truly a dyed in the wool delta zero thinker and try to induce them into playing a longer game. You will fail. Game theory proves mathematically that you cannot incentivize somebody who is being rewarded in a repeated daily short-term game to forego that for the possibility of something different. Why would they do that? Yet in your fear of losing that high impact associate, you overlay and project your expectations and your offer on top of that. What happens? You look up a year, two, three, five years from now and all that your business partner is doing is all they've ever done, just showing up and producing and taking a paycheck and going home. And where are you? No further along. You still have all the brain damage and burden of performance and responsibility for management and shepherding the practice, the culture, overhead, etc. Because they have been rewarded in a way that is asym-asymmetric to your actual business incentives. What do we do about this? First of all, we need to use this as a filter to identify the kinds of candidates that we are going to invite into practice ownership with you. This is very important. Now, in doing so, you heard me speak about the rule of threes and the pajama people, you will now start to see that this person is in fact a pajama person, and they don't want any more upside nor any more downside. They're more than happy where they are, and your fear of loss, lose-- person moving to another practice, can be solved very easily and permanently at a fraction of the price that it would have been if you had offered them equity. I'll show you exactly how to do that. It is ridiculously easy. But that second group of individual that is seeking to avoid pain, discomfort, loss of status or leverage or influence, that person will be induced to behave differently. Is ownership right for them? Just have to ask ourselves, do they want to show up on a Saturday night when the pump breaks and the practice is flooding? No. Will offering them more money do that to them? Again, no. They'll say yes, but it won't be sustainable. And what will be sustained is your ongoing resentment for them. But then that first group of three discussed in the pajama people conversation we had. These people are confident that they are willing, confident and willing to do the work, pay the price to get the upside benefits. Now, sometimes individuals can be through a conversation that I will frame out for you that is incredibly easy and only works all the time, where an individual can realize that they're operating in zone two, but they would like to move into zone one. They're actually interested in creating a bigger future. And those that are in zone one, those that are incentivized by upside and willing to pay the price, will have their own framework that you will help them with, this delta zero, delta one understanding, for them to look at the decisions that they were making as an employee and seeing how those would need to change as an employer. What does this look like? Any number of things. Actually letting go of old Mrs. Smith because she's actually a really bad patient, and we live under the constant threat of her eternal one-star reviews or whatever the case might be. Now, a high-performing producer would just show up and say, "Let's just take care of her and do whatever dentistry we can get done today." Somebody playing delta one would understand the long-term risk that old-- this old lady represents to the practice, and they would realize it's a price that the practice is paying for one person's benefit. As I say, the difference between transactional way of moving through the world and a relational one. So this is delta zero, delta one, a critical component in our designing incentives and also filtering the types of behaviors we can expect for and from people. It's gonna save you a lot of brain damage. Now that you've seen it, I invite you to notice how you see it everywhere. Totally different philosophies of moving through the world, short-term and long-term, willing to pay a price today and those that are not for upside benefit. As we go forward, you'll see that this is really a filter in and of itself, that not just filters in the right candidates for ownership, but as importantly, maybe more importantly, filters out those that will not change regardless of what constructs you create. For now, this is your focus. Shifting the thinking about how we see the world and making sure that we check ourselves, that we remain delta one players in an iterative, endless game that we are happy playing intergenerationally. More to come. Cheers.

Speaker 3 9:02

That's it for this episode. Thanks for being here. Hey, there's only two things that you have in your life, your time and your attention. That you've given both to me for these few minutes of today means

9:13

everything. Cheers.