Be Long-Term Greedy
The Prisoner’s Dilemma, Reputation, and Why Trust is the Currency of the World
There’s a game theory thought experiment called the prisoner’s dilemma. It involves two rational agents, each of whom can either cooperate with their partner for mutual benefit or betray their partner (known as “defecting”) for individual gain. The catch is that the best outcome for both players only happens if they cooperate, but the temptation to defect is always there because betrayal offers the chance for a bigger personal payoff, provided the other person doesn’t betray you first.
It’s a simple setup, but the prisoner’s dilemma is more than just an academic problem; it’s a metaphor for life. Because, really, every day you face your own little prisoner’s dilemmas. You’re constantly deciding whether to cooperate with the people around you—your friends, colleagues, customers, investors—or to defect on them for short-term gain.
Examples: defect or cooperate?
Do you sell your customers a shoddy product at a high profit margin, or do you sell them a quality product at a lower margin, hoping they’ll come back and spread the word about your business?
Do you take credit for your collaborator’s work to make yourself look good at their expense, or do you share the praise so that they’ll want to work with you again?
Do you chase fleeting pleasures, sabotaging your long-term happiness for a moment of immediate gratification? Or do you dedicate yourself to your spouse, work through the inevitable challenges, and build a lasting, committed relationship?
Do you spread gossip that someone has confided in you to gain social status, or do you keep the secret and remain a trusted confidant?
In each of these scenarios, you’re playing a game of trust. And trust—the ability to convince others that you will cooperate more often than you defect—is the most valuable currency in life.
The Reputation Economy
The accumulated result of these decisions—whether to cooperate or defect—is your reputation. Every time you cooperate with someone who matters1, you add a little bit to your reputation. Every time you defect with someone who matters, you subtract from it. Over time, your reputation compounds.
Think of it like an investment portfolio: small, consistent deposits of cooperation build up over time, creating a reputation that attracts more opportunities, more connections, and more trust. But if you start making withdrawals—if you defect too often—your reputation account runs dry. And when it does, the people who matter most to you will stop working with you, investing in you, or trusting you.
This is why long-term success isn’t about being purely altruistic or purely selfish—it’s about being long-term greedy.
What Does It Mean to Be Long-Term Greedy?
The phrase “long-term greedy” might sound like an oxymoron. After all, isn’t greed bad? Isn’t it selfish and short-sighted? Well, yes, but only if you’re thinking short-term. Short-term greed is trying to make a quick buck by ripping someone off. It’s betraying a partner to get ahead in the moment. It’s defecting in the prisoner’s dilemma.
Long-term greed is different. It’s the understanding that the best way to maximize your success over time is to build trust with the people who matter. It’s underpromising and overdelivering. It’s cooperating more often than you defect—not because you’re a saint, but because you realize that the compounding returns on trust are worth more than any one-off gain.
Why the World Runs on Trust
Let’s take a step back for a second. Why does trust matter so much?
The simple answer is that the world runs on it. Every interaction you have—whether it’s with a customer, a colleague, or your spouse—is built on the assumption that both parties will cooperate. When that assumption breaks down, everything else breaks down with it.
Think about your favorite brand. Maybe it’s a car company, a restaurant, or a tech company. Why is it your favorite? Probably because it consistently delivers a great experience. In other words, it cooperates with you. It gives you something of value instead of leaving a bad taste in your mouth.
This is what a brand is, at its core: a reputation. It’s the collective opinion of everyone who’s ever interacted with the company. And the best brands are the ones that consistently choose to cooperate, building trust over time.
The same is true for people. Your personal brand—your reputation—is what those who matter in your life think and say about you based on their interactions with you. And just like with companies, the people who have the best reputations get a disproportionate amount of interest and opportunities.
This is why inequality is inevitable. The rich get richer, and the poor get poorer, not just in terms of money, but in terms of trust. Everyone wants to work with the people who have the best reputations, and no one wants to work with the people who have bad reputations. Over time, this creates a kind of feedback loop where the trusted become more trusted, and the untrusted become even less trusted.
The Problem with Short-Term Greed
Of course, not everyone plays the long game. Some people get greedy—short-term greedy—and try to profit at the expense of those who matter to them.
Take the finance industry, for example. It’s full of people who tricked their clients out of their savings to pad their own wallets2. Sure, they made a quick buck in the moment. But what happened next? Their clients left and told everyone about their bad experience, ruining the advisors’ reputations. Eventually, the advisors ran out of people who were willing to work with them.
Compare that to the investors who take a long-term greedy approach. They don’t try to squeeze every last dollar out of their clients upfront. Instead, they focus on growing their clients’ wealth over time, knowing that if their clients succeed, they’ll succeed too by earning performance fees and getting new client referrals from existing happy clients.
This isn’t just good ethics—it’s good business. Because reputations, like investment portfolios, compound.
The Long-Term Benefit of Cooperation
The thing about the prisoner’s dilemma is that, in the long run, cooperation with those who matter is inevitably more rewarding. If you keep defecting, eventually no one will want to work with you. But if you keep cooperating, you’ll build a reputation that attracts more and more opportunities.
This is why the most successful people are long-term greedy. They understand that the way to win is not by taking advantage of the people who matter to them, but by cooperating with them—even when it’s hard, even when it’s inconvenient, even when it doesn’t offer an immediate payoff.
What Can We Learn from Successful People?
So, what can we learn from the people who play the long game?
First, they understand the value of trust. They know that trust is the foundation of every relationship—personal, professional, or otherwise—and they work hard to build it.
Second, they underpromise and overdeliver. They don’t make big promises they can’t keep. Instead, they set realistic expectations and then exceed them.
Third, they’re selective about who they cooperate with. Not everyone is worth trusting, and not everyone is offering something they need. But for the people who matter—the people they want to build long-term relationships with—they almost always choose cooperation over defection.
Finally, they understand the power of compounding. They know that every interaction is an opportunity to add to their reputation, and they treat it as such.
The Bottom Line
At the end of the day, life is just a series of prisoner’s dilemmas. Every decision you make—whether to cooperate or defect—adds to or subtracts from your reputation. And your reputation, more than anything else, determines the opportunities and relationships that come your way.
So, be long-term greedy. Build trust with the people who matter. Underpromise and overdeliver. And remember: reputations, like investment portfolios, compound.
About
Inverteum Limited (HK) is a trading firm that specializes in long-short algorithmic strategies to generate returns in both bull and bear markets.
Inverteum has generated 52% annualized returns (39% after fees) since inception.
How We Invest
1. Minimize allocation to individual stocks due to their unpredictability
2. Build the most suitable trading strategy and go all in. Here's an example.
3. Be prepared for bear markets and ensure profitability during bad times by implement a short selling component to the strategy
Those who matter: I’ll keep going back to this term “those who matter” because it isn’t the case that you should always cooperate and never defect. There are tons of unscrupulous people in this world who you should never cooperate with. Others just offering what you’re looking for, in terms of skills, experience, resources, talent, or connections, but cooperation with those who matter is inevitably more profitable than betrayal over the long term. Who matters the most in your life and career?
“A stockbroker is someone who invests your money until it's all gone.” - Woody Allen
Stock brokers usually get the highest commission from selling crappy stocks that cause investors to lose money, which is probably how Woody Allen’s quote originates.
Interesting read!