What does Game Theory have to do with your Career and Life Decisions?

Happy Thursday everyone, from a very autumnal morning from London Business School !

It’s been hard to keep up with the writing with so much that has been going on but I want to try and keep the frequency of the articles here. 

One of my recent classes at LBS has been about Thinking Strategically and very practical and numerous examples on Game-Theoretic and Decision-Theoretic approach to all sorts of different real life situations from pricing products to advertising to grades and rankings overall in society to how pigs and cats behave in groups. It’s been definitely a very rich set of examples on all different setups of games that might possibly admit. And guess what? Every single day life throws at us so many different versions of “games” especially with how fast things are changing and the speed information is shared nowadays. 

Besides understanding Nash Equilibrium scenarios and assessing best strategies given specific assumptions and types of games, this class has given me valuable lessons which can get out of the classroom to our careers and business challenges - and maybe even for making life decisions in a more structured and objective way. Here are they:

1. First of all, you need to make sure you know the game you are playing - always! If you have a team with different needs, priorities, preferences or are negotiating something with someone or even are preparing a presentation or paper to convince a specific audience - you need to understand what are their underlying (and mostly not obvious) criteria to evaluate or judge you. The obvious things we think about are usually prices/monetary value, getting to the “right” answer, saving more costs, and so on. However, many times we fail to acknowledge that oftentimes that’s the least of the other person’s concern. If they have personal things going on, personal stakes on the matter that don’t align with your organisations’ goals perfectly, or have to then use your information in another way you don’t know or have any other constraints you don’t know about, you are clearly playing the wrong game - because you are optimising for the incomplete set of things. No matter how good your work is, if it doesn’t directly solve what the other person really cares about, it will never be enough. And you’ll never get to the best outcome possible if you’re playing a different game!

2. What defines a game (and by all means you should make sure you assess in most of the situations you are in):

3. What someone says and how they act can be very different things. Information asymmetry can lead you to choose very suboptimal outcomes so you need to find a way to get the right information before making your decisions or choosing one course of action - or at the very least acknowledge the effect the uncertainties might have on your outcomes given different actions from the other parts involved in the “game”. 

Some people might say it’s a very objective or cold way of thinking and making decisions but all of our discussions actually made me think a lot the other way around. It’s very clear that people decide on the games they are playing and strategies based on so much more than quantifiable factors and sometimes wrong assumptions and clouded judgements by incomplete information, so that leads me to keep thinking that deeper connections and stronger bonds can always lead to best outcomes and get people closer to win-win scenarios - both in business and in life. Clear communication can surely go a long way on this. 

Hope you all can reflect better on how you’re making decisions and assessing if you truly know the games you’re playing both in life and on your careers - it can be harsh especially if you realise you have been misled by any of those imperfect information cases but also very much relieving and insightful to clarify your next set of actions and hopefully also give some peace of mind!  

And one last thought for the resilient ones who made it through here, this Financial Times article also popped up here in the last couple of days and was part of my many reflections on how game theory plays a part in our lives and careers over the next couple of weeks: https://www.linkedin.com/posts/financial-times_the-favourite-employee-evaluation-tool-of-activity-7252391228971925505-lsCf. The title and headline reads “The problem with 360-degree performance reviews. Investment banks’ favourite employee evaluation tool is easily gamed and frequently undermined”. If you think about it, this is just another game-theory decision. People usually have a set of needs and preferences: salaries, job titles, areas they prefer to work on, people they prefer to work with, locations, if they want to work remotely or not, how many extra hours they work and so on. Each person is optimising for a specific combination of these and when it comes to some failed performance evaluation/promotion systems - people who understand this better usually can “game” the system in various ways just because yes they do understand where people’s real interests lie and can assess the best course of actions to work with that and get to theirs. I’m not getting into the discussion if this is fair or not - maybe something to be dived in on another post. But it clearly gives me a lot of clarity on how many things especially women over-hypothesise about regarding their performances can have little to do with their actual work and a lot to do with their relationships, communication skills and how well they understand the corporate game - which, yes, on many different areas was designed with another demographic in mind.

Happy to hear about any feedback and comments!

Leaving my thank you to our professor Jean-Pierre Benoit too for such an insightful class!

Cheers,

Fernanda.