EVER WONDERED WHAT A GAME THEORIST’S SUBCONSCIOUS MAY LOOK LIKE?

Driven by the reputation of a strong mathematical foundation, combined with its incentive-led economic applications, game theory is continuously establishing itself as a key way of thinking within the wider business world. In this article we wish to focus the spotlight beyond just another ‘behavioural nuance’ of game theory and examine the psychological impact of its application. Ever wondered what a game theorist’s subconscious may look like? How do we think about thinking? Can the way we think affect our mood and productivity, especially in such unprecedented times?

Let’s dig in.

BUSINESS EXAMPLE

Let us review one of the most challenging endeavours an organisation tackles every now and then: reviewing and updating an internal process. Moreover, in a dynamic environment, continuous evolution of structures can be key to maintaining a competitive edge.

The classic approach would involve the stakeholders of this process to kick-off with a ‘current state’ analysis, independent of whether the final conceptual status is already known or not. This analysis is usually a long discussion exercise focused on error states within the current process. When all participants focus only on the details of a current sub-optimal process for extended periods of time, they collectively suffer from the underestimated inertia that this analysis can result in. Focusing on error states of today, especially with the current process owners who may have been involved with the inception of the existing process, typically generates stress. Stress then leads to a constant rush of adrenalin. From an evolutionary perspective, adrenaline is key to protect us from risky situations. The instinctive behaviour driven by it is either fighting (protecting the current process), hiding (no change will lead to an improvement), or running away (distracting the discussion into error states that are out of the scope of the underlying process).

FLIP THE SWITCH – BACKWARDS INDUCTION AND ITS IMPACT ON THE GROUP DYNAMIC

A game theorist would approach the scope of work completely differently, using backward induction as the key guiding tool through the discussion with the involved parties. As its name suggests, backward induction starts at the end. For example, in the case of a desired process update, it starts by precisely defining the benefits the new process should deliver and delves deeply into the description of this future state.

The ability of conceptually defining a non-existent future outcome and the development of back to front scenarios, requires either experience or neutral subject matter knowledge about the underlying business question, or at least a neutral position that opens the mindset of the involved group towards that way of thinking.

What does this do to the group dynamic and each individual person participating? Thinking about a positive future status and focusing on the benefits, turns the participants’ pain points (of the current process) into a forward-thinking fruitful discussion (with some objective guidance of course). This generates an upwards spiral of a positive environment of thinking. Each individual participant looks to a bright(er) future state at the start of the project. A positive reception at the start, generates dopamine in our brains which fuels focus, creativity, and longer attention spans, leading to a more thorough content discussion and relatively smoother future sailing.

Dopamine has a significant impact on our brain‘s activity. Amongst other things, it helps motivate you to work towards achieving a reward – a key aspect of incentivisation and thus game theory at its core.

So, instead of initial adrenalin-driven fight-or-flight panic behaviour, dopamine allows for progressive scenario thinking, planning, and applying a game tree logic to find the path to the optimal solution.

Having achieved that kind of group dynamic, the backward induction covers all aspects of the standard as-is analysis. Neutral evaluation of the risks and opportunities of an action is required to maintain the initiated positive willingness for change to approach the future state.

THE GAME THEORY WAY TO KEEP MOTIVATED DURING THE LOCKDOWN PERIOD

Now, any reader who tries to avoid running into the next coronavirus-related article can stop here, hopefully with some takeaways about the cognitive impact of applying the game theory tool set.

For everybody else, here is the thought process of how backward induction can help you to deal with the almost globally applied rule of social distancing by staying at home.

Uncertainty drives an onslaught of information, fake news and data into our homes and minds. Repeated information flows with insignificant insights drive our focus into a purely cognitive counting exercise. We almost forget that the information we receive is riddled by selection bias and guessing the future, especially now, which is a statistician’s nightmare.

In times when all of us individually can contribute to fighting the coronavirus by reducing our social contact and, as simple as it sounds, by staying at home, it often leaves us feeling both overwhelmed and underutilised simultaneously. In addition to all the human creativity we have seen to brave the crisis (singing on Italian balconies, initiatives to protect the elderly in our society), you can use backward induction on a global scale.

Imagine it is the year 2021. Let’s assume it is springtime …and let us assume more positive circumstances, like a warm sunny morning. Go further into the details, e.g. you take out your sunglasses and use your bicycle to go to the office. Continue to define this day in even more detail.

And now… walk back from spring 2021 and try to understand what needs to happen globally, to ensure we reach this status that you imagined. Actions such as a global heavy lifting fight against the pandemic; keeping up supply-chains and a functional health system despite the restrictions; a supranational medical initiative to fight the pandemic, where it will probably have the most enduring impact, such as in less developed countries. In addition to all these afore-mentioned actions, a key one remains – strict social distancing as is currently requested by most experts and all governments in the northern hemisphere.

The answer from the backward induction logic, for this topic, might be the same as in the current state perspective. But the backward induction reduces our inner panic mode regarding underutilisation. It moves us away from the downward spiral of incomplete data and bad news, and instead increases our individual motivation to stick to the rules and enable us to look forward to a better 2021.

_{Title image by Tengyart on Unsplash}