Game theory is a useful tool for decision-making in situations where the outcome depends on multiple parties. It provides a systematic way to analyze the interdependence of individuals or organizations and their potential strategies.
Not only does game theory help you identify the optimal strategy for achieving your goals, it can also help you avoid the sunk-cost fallacy — the tendency to persist in an endeavor because of the resources you’ve already invested.
By considering other players’ potential actions and responses, game theory allows you to minimize your losses and make informed choices that lead to better outcomes. Whether you’re negotiating a business deal or making investment decisions, game theory can be a valuable asset in helping you make smarter choices and achieve your objectives.
3 Game Theory Tactics, Explained
My Takeaways
In a previous post, I talked about how designers and strategists can respond, prod, encourage, guide, coach, and teach as they guide individuals and groups to make good decisions that are critical in the business. I’ve briefly mentioned that any decision-making approach should involve creating choices.
What I liked about the Game Theory principles discussed in the video are a couple of points that reinforce the need for collaboration as part of success in the business world:
- In part, we fail to make good decisions because of glitches — or traps — in our thinking, including deep-seated biases that produce troubling logical lapses (especially the Sunk-Cost Fallacy). One way to avoid such traps is to beware of such biases and keep asking questions.
- I’ve seen too many teams that a lot of their decisions seem to be driven by the question “What can we implement with the least effort” or “What are we able to implement,” not by the question “what brings value to the user.” The mistake I’ve seen many designers make is to look at prioritization discussions (which is the most typical negotiation dynamic in the Product Development Lifecycle) as a zero-sum game: our user-centered design tools set may have focused too much on the user’s needs at the expense of business needs and technological constraints.
- To avoid the zero-sum game thinking for the benefit of collaboration and cooperation, we must train ourselves to look for options for both parties to win! That said, when you find yourself in a Zero-sum game kind of negotiation, the interesting insight from the video is that you should adopt a Mimimax Strategy to minimize your maximum loss.
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About Kevin Zollman
Kevin Zollman is an associate professor in the Department of Philosophy at Carnegie Mellon University. He is also an associate fellow at the Center for Philosophy of Science at the University of Pittsburgh, visiting professor at the Munich Center for Mathematical Philosophy (part of Ludwig-Maximilians Universität), and an associate editor of the journal Philosophy of Science. His research focuses on game theory, agent based modeling, and the philosophy of science. Zollman is the co-author of The Game Theorist’s Guide to Parenting: How the Science of Strategic Thinking Can Help You Deal with the Toughest Negotiators You Know–Your Kids, with Paul Raeburn.
About Annie Duke
Annie Duke has leveraged her expertise in the science of smart decision-making to excel at pursuits as varied as championship poker to public speaking. For two decades, Annie was one of the top poker players in the world. In 2004, she bested a field of 234 players to win her first World Series of Poker (WSOP) bracelet. The same year, she triumphed in the $2 million winner-take-all, invitation-only WSOP Tournament of Champions. In 2010, she won the prestigious NBC National Heads-Up Poker Championship. Before becoming a professional poker player, Annie was awarded the National Science Foundation Fellowship. Thanks to this fellowship, she studied Cognitive Psychology at the University of Pennsylvania.
About Liv Boeree
Olivia “Liv” Boeree is a poker player, TV presenter and model from England who won the 2010 European Poker Tour in Sanremo. Born in Kent, Boeree studied at Ashford School before earning a First Class Honours degree in Physics with Astrophysics at the University of Manchester. She was the #1 ranked female player on the Global Poker Index as of November 2015, and #6 on the female all-time live poker winnings list.
About Julia Galef
Julia Galef is a New York-based writer and public speaker specializing in science, rationality, and design. She serves on the board of directors of the New York City Skeptics, co-hosts their official podcast, Rationally Speaking, and co-writes the blog Rationally Speaking along with philosopher of science Massimo Pigliucci. She has moderated panel discussions at The Amazing Meeting and the Northeast Conference on Science and Skepticism, and gives frequent public lectures to organizations including the Center for Inquiry and the Secular Student Alliance. Julia received her B.A. in statistics from Columbia in 2005.
