Game Theory in Management

I think one of the best lines from Indiana Jones and the Last Crusade (1989) occurs fairly early on in the movie, when a teenaged Indiana Jones emerges from a pirate archaeological site expecting to see the boy scout troop with whom he had arrived, only to see nobody at all, and blurts out “Everybody’s lost but me!” It’s similar to a meme I’d seen previously, along the lines of everybody who drives slower than me is an idiot, and those faster than me are maniacs. Using yourself as the baseline for the frame of reference with which others are evaluated is part of human nature, I suppose, but it does have implications for the management sciences, particularly PM.

In a blog from last month I asserted that a precise and comprehensive codex of how Project Management ought to be conducted is elusive, due to the broad nature of the kinds of work that fall under the PM rubric. I also pointed out by way of contrast that this is very different for our friends, the Accountants, whose Generally Accepted Accounting Principles (GAAP) are specific and comprehensive, able to address almost all scenarios involving quantifying and managing assets. Given that we PM-types are bereft of a codex that could come close to addressing almost all (or even a plurality) of the scenarios we face, what should serve as the basis for reliable analysis and decision-making where the PMBOK Guide® is lacking, or even silent?

Before I take on that question, I wish to discuss what we should not do. We should not arrive at the Project Team technical issues eval meeting with an attitude of “everybody’s lost but me.” Human nature or not, using one’s education and experience as the nominal baseline for evaluating potential strategies going forward is always going to be a risky proposition. Part of the very basis of intelligence is the ability to encounter novel situations, remember a (validly) analogous previous situation, and derive an approach to the new one based on what worked in the previous circumstances, or avoiding a known failed strategy. But when it comes to working out a technical approach on a project, given that projects are, by definition, unique ventures, everybody on the Project Team is likely to have in their experience database some event that they believe to be analogous to the present one, but virtually none of them will have the same event in mind.

Then we have those outside the Project Team, but are nonetheless weighing in on things like the appropriate technical approach. I’m referring here to consultants who, for the reasons stated above, might not only fail to advance the Project’s technical agenda, but could even detract from it. One of the first things they teach you in auditor’s school is that you never walk into the target organization/Project Team and just start carping about things being done in a way you don’t like. If you are going to issue any kind of finding at all, it must be (a) something that’s objectively (any other person can observe) going on, (b) is in direct violation of a specific rule, procedure, regulation, etc., and (c) attachable to the exact date/time/circumstances of the observed alleged violation to the exact rule, procedure, regulation, etc. being transgressed. I think this basic rule is used to avoid the very phenomena of an auditor waltzing into the middle of the target organization and starting with the whole “everybody’s lost but me” business. 

So, if that’s the approach to be avoided, which is to be embraced? Well, for that I’ll point to the character of Mr. Spock, from Star Trek. Spock is a Vulcan, a people whose entire basis for interacting with reality is based on a mastery of logic. Back here on Earth, the practice of engaging logic in the pursuit of analyzing the nature of these novel situations has consistently shown itself to maximize the odds of identifying the true nature of things, and informing the selection of workable (or even optimal) strategies to attain a solution. To illustrate what I’m talking about, I can’t recall a single instance where Mr. Spock draws a conclusion or makes a recommendation based on his educational background, or widely-perceived superior intelligence, and I’ve watched a lot of Star Trek (the original series – not so much the following stuff). Conversely, a person could read hundreds of pages of auditors’ or consultants’ findings/corrective action requests, and not see a single solitary reference to an academic study, or even refereed professional journal article. They will point to verifiable facts (the WBS Dictionary has a different title for Activity 1.4.3.2 than what appears in the Schedule Baseline), but then draw not-entirely-plausible conclusions from that little factoid (…showing a profound lack of Scope and Schedule Baseline integration).

The solution, of course, is to conduct the analysis of the Project’s central technical challenge in such a way as to reduce each of the assumptions to basic premises, which can be verified objectively or, at the very least, widely agreed to and supported. Place these premises into a valid logical structure, i.e., one that can be Venn diagrammed. If a known-successful approach is to be furthered, make sure that that success was based on a strongly analogous piece of scope.

Otherwise, you’ll be lost … and illogical.

I think I’ve detected some elements common to the horror stories based on some form of Artificial Intelligence (AI) fulfilling the role of antagonist, namely:

• An advanced computer, more advanced than the kinds of machines with which we’re used to interacting,
  • A quick side note – this advanced status can be due to some technological breakthrough in computer science with capabilities implications not fully understood by those who accomplished it, or some form of accidental merging of software, or even accidental exposure to an electrical field.
• This computer has been tasked with something specific, but somehow manages to make decisions outside the original boundaries,
• …decisions or choices that should have never been selected due to a lack of an overarching moral code,
• …and is in a position to implement those decisions in a way that can’t be stopped or mitigated by humans.

I’d like to take a look at these premises, one at a time, because they’re all pretty dopey. Let’s start with the second bullet, that the AI-based machine is, somehow, making decisions outside its original set tasks. In PM parlance, this would be Scope Creep, but to Cecil B. DeMill proportions. Recall my blog entry from August, The Ultimate AI Primer Came From ... Reader's Digest!, where I discussed creating an Hexapawn Robot. Briefly, one plays the Hexapawn Robot by retrieving a colored bead from a matchbox with the possible moves printed on the top, with corresponding-colored arrows on those maps indicating which move to make. Now, consider a scenario where the human involved in the game with the Robot makes a move, identifies the position on the appropriate matchbox, opens the matchbox to retrieve a colored bead, and instead pulls out a tightly-folded piece of paper that instructs the player to grab a weapon and attempt to take over the world. In order for any computer to engage in Scope Creep, somebody would have had to make that available as an option beforehand. The computer/robot simply cannot do such a thing on its own.

Next up let’s take a look at the decisions being made being outside any kind of a moral code, or even common sense. True, the value of using AI lies in its ability to uncover useful strategies based on multiple iterations of trial-and-error tests, and by “multiple” I mean, based on the complexity of the problem, potentially millions and millions of tests. That’s kind of the point – by limiting the number of parameters that create the boundary structures for the random generation of solutions, an approach that would have otherwise been overlooked due to the ethical mores of the people seeking a solution have a chance to show themselves, and re-enter the consideration pool. But if you ask your AI app to assist with blending pixels in a photoshop project, and it comes back and tells you to grab a weapon and attempt to take over the world, clearly the app’s programmer has failed to put an essential potential-solution guardrail in place. It’s not the app’s fault – the error belongs exclusively to the programmer who failed to include that little limiting factor in the tested scenarios generated.

Then we have the scenario where AI has furthered a possible strategy for addressing a given problem via multiple (again, potentially millions) of trial-and-error tests, but this time is in a position to actually implement said strategy. I mean, it’s one thing to drive a virtual car on a city street in a computer-generated simulation, but something very different when that same AI app is navigating an actual Honda Accord in downtown Dallas, Texas. The people in the buildings, other vehicles, and, yes, walking in the crosswalks being “hit” in the simulation don’t file massive lawsuits against the AI-driven vehicles’ manufacturer and software engineers. Essentially, there’s a big difference between an AI app arriving at and promoting the take-over-the-world strategy and being able to put such a strategy into motion.

Finally, let’s loop back to the first bullet, that some technology breakthrough, attained either through dedicated research or some accidental confluence of events and people, has led to the creation of the hardware piece of an AI system, and that’s to blame for the unexpected and unauthorized attempt at taking over the world. While mankind’s ability to develop technology that can prove to be extremely dangerous is a common plot driver in movies and novels, I think part of the intrigue here is that this is happening with (gasp!) computers. It’s easy to forget that these are the same kinds of machines that inexplicably fail right as you send a slide deck to the networked printer just moments before your huge presentation before your boss’ boss’ boss. I mean, nobody’s worried about a sudden technological advancement in microwave ovens leading to an unexpected and unauthorized takeover of the world, so why would calculators or word processers be any different?

Due to these factors, I’m fairly confident that we have nothing to fear from AI, at least not for the foreseeable future. Unless, of course, our AI-assisted PM software generates a Variance Analysis Report that reads “Cost Account is showing an out-of-threshold negative Cost Variance, indicating that IT’S TIME TO GRAB A WEAPON AND TAKE OVER THE WORLD!!!”

I started last week’s blog by quoting Elliot D. Cohen, Ph.D., in Psychology Today, from a piece entitled How Contradiction Can Generate Mental Disorder, specifically:

The human brain is hardwired to seek consistency; when persistent, unresolved internal contradictions arise between people's everyday decisional premises, it can generate mental stress that manifests in mental dysfunction.[i]

I went on to discuss the “persistent, unresolved internal contradictions” between Asset Managers’ vision, and that of Project Managers’, and how that difference of visions manifests itself in business models that reflect those very contradictions. But there is another set of these paradoxes that have nothing at all to do with the other types of management. They are, in fact, entirely internal to PM, and will tend to become apparent whenever an organization experiences a new Project Management Office (PMO) director, or even management team.

In most new-PMO-Director circumstances I’ve been a part of, and in all new-PMO-Team ones, the newcomers will carry with them a particular narrative, that goes something like this: I’m the best person for this position, otherwise I would not have been offered the job. The change took place because the owning organization perceived that it needed to take place, meaning that the previous technical approach to advancing PM in the macro-organization was found wanting. Since I’ve set up and/or led a successful PMO, anything that I come across that’s inconsistent with my previous successes will need to be rooted out, and then things will improve similarly to my already-experienced victories. By no means should this narrative be considered confined to new management – consultants are also highly vulnerable to adopting it, and poorly-trained auditors as well.[ii]

This entirely understandable narrative, unfortunately, will invariably run head-long into Chesterton’s Fence, which is

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.[iii]

When a new PMO Team is brought in from outside the organization, it’s been my (highly frustrating) experience that the extant staff is almost never evaluated with respect to their capabilities or talent. New executive teams tend to value one characteristic in the already-existing staff above all others: loyalty. The meek mediocrity who enthusiastically and unquestioningly embraces all of the newcomers’ changes will fare wildly better than the truly talented Team members who dare to suggest a pause before the new execs tear down the fence erected across the road.

PM as a discipline is more vulnerable to this effect than our friends, the Asset Managers, because of Generally Accepted Accounting Principles, or GAAP. GAAP is a rather precise codex, since, among other things, it serves as the basis for how governments collect taxes from corporations. Project Management, on the other hand, does not have generally-accepted anything (and for those purists who would point to the PMBOK Guide® as refutation, I would counter by pointing out how many revisions it has gone through). I’ve often asserted that you could put fifty PMs in a room, and they won’t agree on the color of an orange. With such a wide variance in what constitutes valid (let alone optimal) practices within the realm of PM, it’s small wonder that new PMO managers or teams not only have wide latitude to set up the strategies for advancing the capability within the macro-organization, it’s next to impossible to even-handedly evaluate their progress (or lack thereof) short of complete system failure. Accountants become aware that something’s amiss whenever they perform a trial balancing of the books. PMO Directors and/or their superiors won’t know if things are getting ready to fail catastrophically until a majority of the projects in the portfolio are coming in late and over budget, by which time it’s probably too late to correct.

But that’s kind of the nature of the PM beast. There are many more ways of successfully bringing in the highly varied types of projects than there are of setting up a chart of accounts in a general ledger. PM is somewhat resistant to formulaic approaches, and that’s okay. Kind of attractive, even.

[i] Retrieved from https://www.psychologytoday.com/us/blog/what-would-aristotle-do/202105/how-contradiction-can-generate-mental-disorder on October 14, 2023, 20:55 MDT.

[ii] Well-trained auditors know to never simply walk into a PMO and criticize anything and everything that doesn’t match their conception(s) of a ”properly” functioning organization.

[iii] Chesterton, G.K., The Thing (1929), retrieved from https://www.chesterton.org/taking-a-fence-down/ on October 24, 2023, 20:47 MDT.

Writing in Psychology Today, Elliot D. Cohen, Ph.D., began a piece entitled How Contradiction Can Generate Mental Disorder, with this paragraph:

The human brain is hardwired to seek consistency; when persistent, unresolved internal contradictions arise between people's everyday decisional premises, it can generate mental stress that manifests in mental dysfunction.[i]

GTIM Nation knows of my respect for Thomas Kuhn, particularly in his book The Structure of Scientific Revolutions (University of Chicago Press, 1962), in which he describes a recognizable pattern that manifests when a new scientific theory is introduced, and ends up displacing a commonly-held one. Kuhn asserts five phases, where a new “paradigm” (yes, The Structure of Scientific Revolutions was the book that introduced this term) either leads to a commonly-held structure where there was none before, or else replaces an existing paradigm.

Okay, so, stand by everybody – I’m about to combine the content of the previous two paragraphs into a potentially explosive management science assertion. It might look, well, crazy.

I believe that Project Management, as a distinct course of intellectual study, represented and currently represents a paradigm shift in the way business models are constructed. This is due to the fact that PM’s emphasis on techniques and Management Information Systems (MISs) that are dedicated towards delivering a specific customer-directed scope, within customer-directed cost and schedule parameters, is decidedly different from the more commonly-held theory that the purpose of all management is to “maximize shareholder wealth.” PM has different goals, techniques, methods, approaches, and supporting MISs from the other types of management, specifically Asset and Strategic management. To engage in a bit of hyperbole, the Asset Managers don’t concern themselves with how happy the customers are. They’ve been taught to maximize shareholder wealth and, to the extent that they have been educated to take customer satisfaction into account at all, it’s virtually always within the context of determining a Return on Investment (ROI) which, of course, gets back to maximizing shareholder wealth. Strategic Managers are focused on increasing market share. If they become convinced that spending money on an advertising campaign would yield greater increases in market share than the same amount invested in improving project performance, they will, in all probability, opt for the former.

This environment of competing visions for what constitutes a valid basis for constructing and maintaining a specific business model will quite often lead to “persistent, unresolved internal contradictions,” which, in turn, can and will “generate mental stress that manifests in mental dysfunction.”[ii] I’ll take Dr. Cohen’s assertion further, and argue that the same effect applies to the macro-organization. The organization that is pursuing a strategy that contains inherent contradictions is going to experience some level of dysfunction sooner or later, leaving itself vulnerable to its more dysfunction-free competitors.

A simple example of this can be based off of the axiom Quality, Affordability, Availability: pick any two. The executive who doesn’t understand her organization’s place in the particular market where they do business with respect to this axiom is unlikely to make decisions that maintain a high level of internal consistency, which is going to make the Team members crazy extremely frustrated. The manager who believes that his Burger King® restaurant (availability, affordability) will take away market share from a Ruth’s Chris® steakhouse (availability, quality) in the high-end restaurant market is delusional. Making the attempt would be ipso facto evidence of a business strategy rife with internal contradictions, meaning that the organization pursuing it will likely become dysfunctional. Note that I am not saying that Burger King® restaurants do not serve quality food, nor am I saying that Ruth’s Chris® steakhouses are not affordable. But I do not believe that the former can prepare a steak the way the latter does (even if it was on the menu), nor do I expect their menu prices to be even remotely similar.

Eateries make for clear examples, but the same effect is everywhere business is conducted. Without a clear understanding of the organization’s place within a given market, self-contradicting guidance in business model construction is virtually automatic. Which brings us back to our friends, the accountants. Because their point of view is the most common predicate for building these business models, and their approach is distinctly different from PM’s, the talent that makes up the Project Management Office is highly likely to have to perform their advances in a sea of internal contradictions in the overarching business strategy most of the macro-organizations have adopted. In other words, I believe that yes, we PM-types are being driven crazy frustrated by our organizations, and it’s largely the Asset Managers’ business/worldview at fault.

Next, I’ll begin experiments to ascertain if aluminum foil hats thwart the Asset Managers’ intrusive brainwaves. I’ll keep GTIM Nation posted.

[i] Retrieved from https://www.psychologytoday.com/us/blog/what-would-aristotle-do/202105/how-contradiction-can-generate-mental-disorder on October 14, 2023, 20:55 MDT.

[ii] Ibid.

I have to admit up front that I don’t care for the music of American pop music group REO Speedwagon. I either change the radio channel or turn it off altogether whenever their songs are aired.  Their lead vocalist sounds like he’s singing through his nose, the guitarist’s solos are uninspired, but perhaps their most off-putting characteristic is that their lyrics lack internal consistency in the message. Exhibit A in the inconsistent-lyrics charge has to be the song Take It On The Run, from the album Hi Fidelity (1980). The song’s narrator keeps bouncing back and forth between providing evidence for his girlfriend’s infidelity, and claiming that he doesn’t believe that she’s being unfaithful. Check out the back-and-forth as shown in Table 1.

I could go on (and often do), but you see my point. The remaining lyrics show another three reversals, bringing the grand total by my count to ten internal contradictions in a little over four-minute song.

Meanwhile, Back In The Risk And Resilience World…

I happened across an interesting post on the Express Analytics website when I did an internet search on the question “can risk management predict the future?” The article, entitled “Everything You Need To Know About Risk Prediction Models,”[ii] made several interesting assertions, but I kept being reminded of Take It On The Run for some reason, when it struck me: the author keeps contradicting him/herself when it comes to risk management’s (no initial caps) ability to actually predict the future. Before I get specific, a little clarification on terms. If I predict something is going to happen, it means exactly that: I’m stating that something that has not occurred will occur. If I state a probability of something happening in the future, I’m not predicting anything. As an example, if I state that a (fair) coin flip will result in heads, I’m making a prediction. If I state that the odds of a fair coin flip being heads is 50%, I’m not predicting anything, I’m revealing the results of a calculation. With that in mind, let’s take a look at some quotes from the above-referenced article.

I don’t mean to pick on this particular article. It is, in fact, highly consistent with most of the other literature on the subject. By using the terms “predict” and “calculate risks” interchangeably, the risk management (no initial caps) aficionados can switch back and forth between kind-of asserting that risk management techniques can predict the future, and then stating that they are merely calculating the odds of a future event occurring. It’s this very back-and-forth type of thematic variance that points to the vacuousness of the risk manager’s (no initial caps) theoretical foundations.

Put another way, if your specialty is displaying all the thematic consistency of an REO Speedwagon song, it’s probably time to reevaluate your underlying codex.

 

[i] Retrieved from https://www.musixmatch.com/lyrics/REO-Speedwagon/Take-It-on-the-Run on October 10, 2023, 20:07 MDT.

[ii] Retrieved from https://www.expressanalytics.com/blog/everything-you-need-to-know-about-risk-prediction-models/ on October 9, 2023, 18:57 MDT.

[iii] Ibid, for each quote.