5x1: Design Systems Where Everybody Wins | Wednesday, March 12th, 2025

by Monti Pace

The​ 5x1 newsletter​ is a concise and insightful resource around a simple concept: systems achieve goals.

sys·tem [ˈsistəm]
a set of things working together as parts of a mechanism or an interconnecting network.
a set of principles or procedures according to which something is done; an organized framework or method.

1 x Principle of Systemization

Game Theory is the study of how people make decisions when their choices affect each other and when they must consider how others might respond. It helps us understand strategic behavior in competitive and cooperative situations where the outcome depends on everyone's choices, not just your own.

I came from the world of politics, where everyone assumes hidden motives 100% of the time. It's exhausting - people constantly plotting to avoid being outmaneuvered. While there's some truth to hidden agendas existing, they're rarely as prevalent or well-orchestrated as we imagine. Staying on constant high alert leaves you tired, on-edge, and unable to create meaningful change.

Political actors operate in zero-sum games. In the famous Prisoner's Dilemma, two suspects would benefit from cooperation, but self-interest drives them to worse outcomes. Many business owners make the same mistake - treating markets as pure competition when they're actually environments where multiple players can win simultaneously.

Game Theory explains these strategic interactions and reveals something powerful: when incentives align individual rewards with collective benefits, cooperation becomes the rational choice. The best systems don't rely on goodwill - they create structures that make desired behaviors advantageous for everyone.

How to Apply Game Theory to System Design:

• Map decision landscapes: Identify all possible choices and how stakeholders might respond to each scenario
• Align incentives: Design reward structures where individual success contributes to collective goals
• Create win-win scenarios: Form strategic alliances with vendors, partners, and even competitors through complementary offerings
• Think moves ahead: Consider not just immediate reactions but second and third-order effects of system changes
• Eliminate misalignments: Identify and address any system elements that create counterproductive incentives
• Structure for long-term thinking: Design engagement models that reward ongoing relationships over one-time transactions

1 x Systemization Quote

"When incentives are aligned, you don't have to rely on goodwill or friendship—self-interest will drive the behavior you want to see." — Daniel Pink, author of Drive

1 x Reflection Question

How might your current incentive structures be driving behaviors that conflict with your stated goals?

1 x Personal System Idea

Personal Negotiation Playbook: The 3-3-3 Method

Game theory teaches us that understanding other players' motivations and creating win-win scenarios leads to better outcomes than pure competition. This simple system applies that principle to everyday negotiations by helping you strategically map the decision landscape and align incentives before important conversations.

Before any negotiation (e.g. salary discussions, home purchases, client contracts, family decisions), take five minutes to jot down:

3 Priorities:

• Your top three must-haves, ranked in order
• What you think are the other person's top three priorities

3 Proposals:

• Create three different ways to structure an agreement
• At least one should give the other person their likely top priority

3 Questions:

• Prepare three open-ended questions to better understand their position
• Example: "What aspect of this matters most to you?"

After each negotiation, capture one key learning for future reference. This system forces you to think from multiple perspectives and creates options that benefit both parties. By focusing on the other person's priorities alongside your own, you naturally shift from competition to cooperation - turning potential zero-sum situations into opportunities for mutual gain.

1 x Business System Idea

Strategic Market Positioning for a Launch

Game theory can help you strategically position a new product or service offering in the broader market ecosystem before launching. This system helps you identify the optimal position for your product or service by understanding how it fits into customers’ existing decision-making processes.

Core Components:

1. Decision Alternatives Mapping

Identify the top 3-5 alternatives customers currently use to solve the problem your offering addresses. These alternatives might include:

• DIY solutions
• Hiring non-specialists
• Using adjacent product not designed specifically for their need
• Simply living with the problem unsolved

2. Strategic Differentiation Points

For each alternative, determine:

• Where your offering clearly wins (your advantage points)
• Where your offering may fall short (vulnerability points)
• The switching costs for customers to adopt your solution
• Prioritize which advantages to emphasize in your launch messaging

3. Incentive Structure Design

Creative specific offers that address:

• The main friction points preventing adoption
• The strongest benefits relative to each alternative
• The proof points needed to overcome skepticism
• Design your pricing and packaging to highlight these elements

This approach helps you understand the strategic choices your potential customers make when evaluating solutions. You’re addressing the broader decision landscape to maximize your offering’s perceived value and position yourself optimally within the existing market ecosystem.