In a coordination game, players win only if they choose the same strategy. Unlike the Prisoner’s Dilemma, there is no incentive to “defect”—the goal is simply to align. The problem is that without communication, it is often impossible to know which of many possible “meeting points” to choose.
- The Schelling Point
Named after Thomas Schelling, this is the “focal point” that people gravitate toward in the absence of communication because it seems natural, special, or relevant.
The Classic Example: If you are told to meet a stranger in New York City on a specific date but can’t talk to them, most people will go to Grand Central Terminal at noon. Why? Because it’s a “heavy” landmark. It stands out as the most “obvious” choice in a sea of millions of possibilities.
Application: This explains why Bitcoin holds value or why Gold has been a standard for millennia. They are Schelling Points for “store of value.” People hold them not necessarily because of their chemistry or code, but because they expect everyone else to expect everyone else to hold them. It is a self-reinforcing loop of expectation. - The Platform Trap
The Schelling Point logic explains why social media platforms survive even when users hate the new updates or the leadership. If everyone stays on a platform just because everyone else is there, it remains the Schelling Point for “the conversation.” To leave alone is to lose the ability to coordinate; you must move the entire focal point at once, which is incredibly difficult.
Question: If we couldn’t talk, where would we both go to find each other?
Part 4 Reinforcement: The Reality Check
Coordination is powerful, but it is highly susceptible to the structural failures we identified in Part 4.
Complexity Ceiling: In a global economy, there are too many potential Schelling Points. This leads to disequilibrium where different groups coordinate around different “meeting spots” (e.g., different cryptocurrencies, social networks, or cultural norms). This prevents a single, stable Nash Equilibrium from forming. The game becomes so complex that the “obvious” choice for one group is completely invisible to another.
Misidentifying the Game: This is a common failure for those in power. A leader might think they are in a Coordination Game (trying to get the whole team to agree on a single software or strategy), while the subordinates are actually playing a Hidden Bargaining Game. They may pretend to coordinate while secretly sabotaging the plan to gain individual leverage or protect their own “assets” within the old system.
The Information Gap: Coordination relies on “Common Knowledge.” If the “map” is broken—if some players think the focal point has shifted while others do not—the coordination fails. You end up with stranded assets and failed initiatives because players were acting on different intelligence.
The Rationality Assumption: We assume people will coordinate on the most “efficient” point. However, human spite or tribalism can create “anti-Schelling Points.” People may refuse to coordinate on a superior technology simply because it is associated with a rival “team,” choosing a lower payoff just to avoid aligning with the “enemy.”
The Key Takeaway
Successful coordination is about anticipating the anticipation of others. If you find yourself stuck on a platform you hate, or using a currency you find inferior, you aren’t necessarily being irrational. You are acknowledging a structural reality: the Schelling Point is a gravity well that is difficult to escape without a massive, simultaneous shift in common knowledge.
