www.pipelinepub.com/0207/pdf/Pipelinev3i8Ariticle3.pdf

Above is a link to an article published in Pipeline magazine (http://www.pipelinepub.com/) called “Avoiding Future Schlock: The Real Life Application Of ‘Game Theory’” by Alana Grelyak and Tim Young. It’s a pretty quick read, and the most important thing to know before you get into it is to not get intimidated or give up on it if you don’t recognize a bunch of the terms used in the body of the paper. There are a lot of insightful points in the article, and the take home themes in particular can be (and in some cases, are) applied to many sectors in business and economics. The article analyzes how game theory applies to you first from a micro perspective (”how can I play games”), then takes a more macro stance in predicting trends in certain business sectors and giving advice to anyone who plans to pursue a career where knowing the market is helpful.

A particularly interesting comment that Grelyak and Young make is in reference to the role that Game Theory plays in both evolutionary biology and modern business. “Each kind of ecology/environment and period of time had specific winning strategies, so to use this game

theory, you just need to match the biological game conditions to a comparative economic environment and period.” The theory behind this is that if you look at the history of organisms on this planet, accepting Darwin’s “Survival of the Fittest” notion, the battle between any two (or more) species for dominance and/or survival in an ecology is basically a game, and if you take all of the games played between species throughout history, the winning “team” generally follows a strategy (or set of strategies) that can also be applied to business trends. For example, Grelyak and Young talk about “following proven success” and how it has worked well both for evolution as well as business, but also make a point of knowing when it’s time for something new. Some other metaphors that the authors use to describe strategies include, “Joining a herd”, “Injuring the competition”, and “boxing in the water hole” (having a regional monopoly and hoarding a resource).

The authors then apply these thoughts to mostly technology-based trends in business and try to predict where the world will go based on the theory that the new strategy taken by businesses will be “out with the old… this is the year of…” It’s cool to realize that with at least some of their predictions or realizations, they seem mostly right. So it’s great that Grelyak and Young are providing us with an understanding of many different strategies that can be adopted in game theory, but how do we know which ones to choose when? This seems especially important when considering a game where you opponent(s) either have some information about how you’re going to play (and vice versa) and/or the game will be played multiple times - the answer is to pay a lot of attention to the factors and players that matter in the game. This includes your competition, customers, partners, etc. Say you’re a project manager for Apple, and you had the idea for the iPhone. You have to decide whether to go with this new, risky strategy that could either be a great success or a embarrassing failure. If you do some market research and get the opinions of potential customers, you’ll have a much better idea about how it’ll be received. Also, if you look at past successes and failures and those of other competitors, you’ll get a better sense of what needs to be done.

“Collaboration is the essential strategy to having all parts of the product definition, launch, operation and management environment in place to win the futures game”