Game On! Game Theory in the Game of Life, Game of Business and the Game of War

Life is a game. Every instance or action that includes the response of one party considering that of another falls under the realm of game theory. And in game theory, a game doesn’t have to be fun, it can even be deadly.

And every setting that includes a decision is simply called a game.  Life is a game, business is a game and war is a game. The simple requirement for anyone to call any action as a decision is the presence of alternatives. If you have alternatives and if you are selecting one of them against the others, then you are making a decision.

The word decision contains the prefix de- (meaning off) followed by cis (word cis comes from a Latin root meaning to cut). The word simply means cutting off all the edges and leaving a well-cut piece in the middle. And in life, every decision simply cuts away a piece from all the fuzz and hassle and when you have made a decision, you simply haven’t selected all other options but only one. And the essence of managing is making decisions. Where there are no decisions, there is simply no management.

And it is these decisions that comprise life. As Tony Robbins states very clearly: “It is in your moments of decision that your destiny is shaped.” When you decide to take a journey of more than a 100 kilometers (or miles!) you take a turn maybe 5 times on the road. If you take the right ones you reach your destination. The rest is following the road and taking actions according to the traffic. The crucial part is the determination and the capacity to make correct decisions. And never forget that even if you take pretty wrong turns you can still reach your destination, but of course it might take more time or more fuel.

One of the most prominent names in Game Theory is John Nash who we watched admiringly in “A Beautiful Mind”. In the movie there is a bar scene. In order to explain his theory in practical terms, Nash turns to his university friends where they encounter a rather beautiful blonde and her lady friends. He tells that if they all go to the blonde, in the best possible outcome she will accept only one of them. And as a second action the rejected guys will go to the girls around her, where the girls will not want the guys because they have indeed become the second choice. Therefore he concludes that the best action for the gang is to go to the girls surrounding the blonde as their first choice so that they have a better chance of finding a girlfriend and thus they had better leave the blonde alone… We lost John Nash on May 2015 in an unfortunate accident. He was one of the most remarkable mathematicians of our time. And I recall this bar story a lot whenever I am considering who to give a difficult assignment to, in the headquarters back at work.

No less than John Nash is Alan Touring. He invented the first computer to solve the Enigma code of the Germans. When he cracked the code, he didn’t inform the British officials of all the daily messages but rather about the ones that would have the biggest impact. His idea was if they acted on all the intelligence, at first they could have saved more lives, but the German side could have understood that the English knew the algorithm and they could have changed the coding scheme resulting in the English failing to ever crack it again. With Turing’s correct decision, after considering possible responses from the German, the British have saved millions in World War II.

And before the term Game Theory was coined, it was already in practice. The best decision makers, businessmen, warriors and politicians always thought about the actions of their opponents beforehand and took actions accordingly. On preparing for the conquest, his commanders discussed with Mehmed the Conqueror (Fatih Sultan Mehmet), the conqueror of Istanbul, about where to attack first, telling about weak points in the walls that surround Constantinople at that time. He decided to attack through the strongest points stating that it is where the Byzantines will least expect them. And as he executed the plan, when the Bosphorus was fully blocked by ships, he had to find an alternative route. He decided to take Ottoman ships over the land with rolling oiled timbers underneath ships pulling them with muscle power and tied ropes around the ships. His approach has resulted in the capture of the city and the beginning of a new epoch. He was 21 years old at that time. After more than 500 years, generations still talk about the ingenuity in his tactics.

In today’s world in business we have to be talented game players. And we have to select which games or battles we need to take. We have to anticipate what our opponent is willing to do and if possible we should take such actions that we win the war without any need to fight. That is what Lao Tzu tells people in his teachings. He wrote those words about 2500 years ago.

A very famous game from movies is in James Dean’s Rebel without a Cause movie. There, two guys drive two cars toward the edge of a cliff in a rather speedy manner. In order for them to win the game they have to be the more fearless one, i.e. the one who jumps last off the car is the ultimate winner. If they jump too soon they lose, but if they jump too late they will fall from the cliff together with their cars. With a little luck James Dean wins in that scene. You might have also watched it in the video clip of “Rush Rush” by Paula Abdul where young Keanu is in lieu of James Dean. Similar games are called Games of Chicken and are widely adapted to many industrial and marketing settings. When there are two rivals fighting for market share on price, the one to reduce the price more and to tolerate the loss better might drive the opponent out resulting in a market winner position. According to some experts that is what is happening in global oil prices. It is a dangerous and harmful approach, but it is the correct strategy for financially strong corporates at dire times.

Yet another application of Game Theory is in Game of Location (better known as Hotelling’s Law). If there are already two bakers in a town and if another entrepreneur plans to open a new one, where should he select to locate in order to maximize his profits? This question is what Hotelling tries to answer. The same principle is applied in voting for elections. If there are already two candidates running for presidency and say they are located on a line (left side of the line presenting a leftist view and the right side presenting a rightist view), where should the third one be located? And it is ultimately location, location, location that makes or breaks in many industry setting: bank branches, retail stores and even in hospitals….

And coming back, when it comes to your own life and your own business, the first question is what game are you in? And the next one is, which battles are you willing to take on? And third one is of course, who are the players on the game field? And what are their strong and weak points? And then checking your repository again, are you fit for the purpose at hand? If you say yes, set and go. And if you are going to fail, then fail fast and head on to the next challenge. But of course don’t spend your ammunition all at once, whether it is your youth, financials or desires. You might need it in your next adventure.

As a final word, game theory and its applications are important tools in analyzing any situation at hand. It helps to structure your thinking and to utilize a framework for making decisions. It can easily be applied to business life, personal matters and negotiation issues as well as personal relations. Use it wisely in your toolkit which will also include your personal attributes, stamina, leadership style and your reputation. And always try to have the best understanding of the other players’ desires, ambitions, feelings and their perceived alternatives.

Have a very good new year!