The Art of Strategy: A Game Theorist's Guide to Success in Business and Life

October 9, 2008

It is a while since I studied economics. It was during the 1980s, and game theory commanded a significant part of my syllabus. The Art of Strategy is evidence that it remains as vibrant today.

Game theory is a study of decision-making where players make rational, optimising choices that will also have an impact on fellow players' interests. Such situations continually (re)surface in life, some embroiled in conflict but others with co-operation.

The book's motive is to achieve better understanding of what the authors call - although I wouldn't - the "art" of strategic thinking. That is, being able to anticipate your opponents' next moves, assuming they will try to do the same to you.

This is an insightful read, and the authors are very passionate (and extremely knowledgeable) about their subject. Real-life illustrations of game-theory concepts and decision-making scenarios are plentiful as well as entertaining in their execution. I was happy, however, to be spared the over-complicated mathematics that I had expected.

Our everyday lives are complex, a web of interrelated social and economic processes. Game theory is one particular heuristic that might assist us to grapple with cumulative life complexities. But it is one particular view of the world. It is not the only one, nor the best. Game theory has its limitations.

Neither is it a recipe for, nor a guarantee of, "success". Indeed, I am uncomfortable with the book's (at least implied) notion of "success".

On its cover, the book claims to offer "a guide to success in business and life", yet its preface claims that the book "is not an airport book" of success pointers.

I appreciate that there is probably some marketing rhetoric here, and I don't really have a problem with that - I suspect it's just part of the publishing game! The book represents a rich array of decision-making stories that might (or might not) assist people to cope with life's unfolding challenges.

But the book doesn't have solutions. "Solutions" are temporary at most; life's processes move on and new challenges will (re)emerge.

Game theory fails to endogenise sufficient attention to so many aspects of life that really matter, owing to its unfailing allegiance to formalism and technique over practical relevance. Decision-making is a mishmash of interwoven influences.

Its process of becoming is shaped by people's habits, routines, things we take for granted, gut feeling, trust (and distrust), tacit knowledge, history, cognition, power, addiction, fashion, emotion, morals, religion, values and considerably more. Game theory still affords too little attention to such stuff of life.

We should also not assume rationality in our (or others') decision-making. Nowadays, decision-making frequently occurs at lightning pace. "Strategic" thinking is significantly shorter than it used to be, and the same decision-maker will normally work on multiple strategies at the same time without optimal information or the brain capacity to use it.

Notwithstanding, game theory is useful for its theoretical purpose at hand, which, I think, is partly to augment decision-makers' armoury and acumen to the point where they might beneficially predict the outcome of their decisions (as long as they are also content with extreme simplifying assumptions concerning the decision context).

In conclusion, I would recommend that you read this book for what it is. And what it is, I believe, is a particular way of looking at decision-making situations backed by a rich collection of real-life illustrations.

It is an easy read and is written in a lively tone - which is not something I particularly recall from my lectures in the 1980s. Long live economics!

The Art of Strategy: A Game Theorist's Guide to Success in Business and Life

By Avinash K. Dixit and Barry J. Nalebuff. W. W. Norton. 512pp, £16.99. ISBN 9780393062434. Published 1 October 2008

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