This Blog Is Exactly Like (Strikethrough) Kinda Like (Strikethrough) Sorta Like…

 

I remember reading about one aspect of human intelligence having to do with the ability to encounter novel situations and dealing with them appropriately by remembering a similar circumstance, and either engaging the actions or decisions (with or without some level of adaptation) that were made in the recalled instance that resulted in a successful outcome, or avoiding those decisions that ended in failure. This aspect is actually the basis for the utility of Game Theory. When we learn about the Nash Equilibrium in, say, the Hawk/Dove Game, we’re not studying the various scenarios involved in order to get a handle on the amount of food ingested by a population of entirely fictitious birds, as fun as that might sound. No, the point of performing this type of analysis rests entirely on the assumption that, at some level and capacity, the interactions of the particular games’ players are analogous to real-life interactions among human players, typically in a business setting.

Some of these games can have a strong analogous relationship with their real-life counterparts. In the movie Midway (2019), a scene has Admiral Yamamoto walk in on a war game conducted by Admiral Nagumo, who is sharply criticizing his junior officers for not following some of the basic guidelines stipulated at the beginning of the game. Yamamoto asks for an explanation, and one of the offending officers explains that they had arranged for the American carrier forces to be positioned northeast of Midway, and from that vantage point those forces had surprised and sunk three of the four Japanese carriers. Nagumo points out that the only way the American forces could be so positioned would be if they had advanced notification of the Japanese intent, which was held to be an impossibility. Yamamoto orders them to re-start the war game, this time working under the assumption that the Americans did not know the Japanese intent, and could not position their forces accordingly. Of course, at the actual Battle of Midway, the Americans had intercepted almost the entire Japanese order of battle, their carrier forces were positioned northeast of Midway, they did surprise the Japanese forces, and actually sank three of the four carriers in the first attack wave.

Conversely, I also remember reading an article that described the reasons why the Tit-for-Tat strategy is so successful in multiple iterations of the Prisoner’s Dilemma, and then went on to use that analysis as an explanation for why entire nations go to war. While the Prisoner’s Dilemma may be the go-to game for analyzing cooperation and defection among non-related biological units in a common environment, I’m not at all sure insights gleaned from it can be reliably used in identifying appropriate geopolitical conflict strategies.

Even within some of the games, extracting an insight on a usable approach can prove to be very tricky. Take the Ultimatum Game as an example. In this game, the researcher/game coordinator approaches two people (who presumably know each other) with the following offer: he will give them $100 (USD) if Person #1 can propose how the money will be distributed among them and have Person #2 approve of that distribution scheme on the first try. Some Game Theory experts predicted that, in order for Person #1 to maximize their payout, they should name a distribution of $99 for themselves, and only $1 for Person #2, on the grounds that Person #2 is essentially looking at receiving either $1, or nothing at all.  When this game was tried with real people, however, that distribution was virtually never accepted. Instead of taking away from this the rather obvious challenge to the Economic Man theory (that people are rational, and will always act in their own self-interest), analysts were content to blame other factors, such as “culture.” But that’s the real irony here – that the results of using the 99-to-1 strategy, predicated on the Economic Man theory, failed repeatedly, meaning that, apart from the obvious takeaway, this game really had very little similarity to its real-life application. It wasn’t very analogous at all. 

I can almost hear GTIM Nation now: “Actually, Michael, you’re the only person I hear going on and on about Game Theory, suitable to the business environment at hand or not.” Fair enough. But the decision-makers who are carrying with them ideas, strategies, and business models that may or may not be applicable to their new surroundings aren’t announcing their thought processes as pertaining to Game Theory per se. They’re usually working off of a combination of education and experience. I can’t count the number of times I’ve encountered a new manager or co-worker who makes it a point to describe how “things” were “done” at their previous assignment, to great success, slyly cruising past any discussion of (1) if things were so swell at their previous assignment, why did they leave?, (2) even within the previous environment, was any thought given to evaluating (much less scoring) other ideas, strategies, or business models to help ensure the one used was the optimal one?, and (3) why is this person convinced that, even if the previous questions could be answered satisfactorily, the current situation be considered analogous to the point of an idea/strategy/business model being given the assumption of automatic success?

Strategies gleaned from previous successes are great, when the circumstances re-present as highly analogous to that managerial victory. When the analogy is weak, however, the new parallel being drawn may very well be sort of exactly like failure.