Game Theory and Business
Game Theory: The Silent Keeper of Business World
It’s an infinite war. Infinite.
“Perspective”. A powerful word, isn’t it? Trust me, it is much more powerful than we believe it to be!
Have you ever wondered how business tycoons like Apple and Harley Davidson find it almost effortless to run their companies while competitors like Microsoft struggle hard to keep their calm?
You guessed it right! Perspective.
And this Perspective has a lot to do with Game Theory. Let’s dive deeper into the realm of Game Theory to witness how it has impacted and still impacts businesses.
Let’s gain some perspective!
In Game Theory, there are two kinds of games - Finite Games and Infinite Games. Both are explained as follows.
Finite Games: Games in which we have Fixed Players, Fixed Rules, and an Objective which everyone agrees upon. For example, Baseball. We have a fixed number of players agreeing upon certain fixed rules and the team scoring the highest runs is the winner! That’s it. Game Over.
Infinite Games: Games that have Known and Unknown Players, the Rules are Changeable and the Objective is to keep the game in play, to perpetuate the game. For Example, the cold war, which is an infinite game and has no stopping.
When a finite player (player with the perspective of playing a finite game) plays with a finite player, the system is stable, just like a basketball match. Similarly, when an infinite player (player with the perspective of playing an infinite game) plays with an infinite player, the system is still stable, just like the cold war. This is because there can’t be a winner or loser in an infinite game. The objective is to keep the game going. What actually happens is that the players drop out due to a lack of resources to continue to play the game or due to lack of will.
The problem surfaces when an infinite player is playing the game with a finite player. The finite player is playing to Win, whereas the infinite player is playing to actually keep the game going.
Now consider ‘Business’ to be a game that is played by different companies that exist today. The game of business has been at play long before any of the companies that exist today were even founded and will continue till eternity. Hence it is an Infinite Game.
No Winners and No Losers, Really?
Do you remember, there are no winners or losers in Infinite games? Yeah, that’s where ‘Perspective’ comes into play.
Let’s start with what companies want to be. Number one. They want to beat their own competition. They want to be the best company. They want to win the competition. Ironically, the competition doesn’t actually exist.
In other words, companies are still trying to play Finite Games when all they are but in an infinite game! This is interesting and horrifying at the same time.
Let’s go back to our example of Apple and Microsoft.
What do you think Apple does? It tries to outlast and frustrate its competition, trying to make them believe they are in a finite game of winners and losers.
What a Move! I mean what a Perspective!
Microsoft has beautiful products that are seamless and beautiful in design. Apple doesn’t always have the best products in the market. But there is a reason why Apple is a more reputed brand than Microsoft. One company focuses on keeping the game going on, to survive as long as they can in the game, while the other tries to compete with their competition.
Companies like Apple (the infinite player) are not trying to be number one every day and for every product that they launch. They are trying to outlast the competition by improving and focusing on themselves.
Thus unlike popular belief, it is not a battle, but a war of the businesses!
And how do we win? Need we remind you? There are no winners. Only the ones who can outlast the other. So what can one do? Change Perspective.
That’s all for today! Stay tuned for more interesting insights on how Game Theory is controlling the world.
Author —Game Theory Enthusiast Maulik Khanna, The Indian Game Theory Society - Delhi Technological University
