Managing Leadership^®

This is pretty intimidating stuff, game theory. All you have to do us use the expression and people start becoming concerned about competing with you. Mention that it was employed to help analyze and develop options for various Cold War scenarios and you are approaching expert status. Finally, toss something into the mix like “this is a classic prisoner’s dilemma situation” and the game is over - people will start quietly folding their hands; you’ve won.

And you can accomplish all of this without even showing your cards; that is, without actually understanding game theory at all, much less what it really is. And guess what: That is precisely what most of the people you hear talking about it are doing. In some cases, though, as so often happens, they simply interpret it to be illustrating a theme they wish to promote, themselves.

Take the prisoner’s dilemma, for example. I’ve heard it characterized variously as describing how, in certain circumstances, two people are driven to the least optimal decision for both, suboptimal for one and optimal for the other, or optimal for both. Only one of these is always correct, but you’d be surprised at who can get it wrong; you may even have read books written by some of them.

Game theory is worth getting right. It is a branch of mathematics that can be difficult to explain in non-mathematical language. And yet, it does indeed provide useful insight into understanding how people comprehend and react to each other in environments of imperfect information and communication. An intellectual tool like this is well worth the effort to acquire.

Fortunately, you can do that with this excellent book by Morton Davis, and I highly recommend that you do. It is well written with the non-technical reader in mind. Intelligently organized, it begins with an overview, and then builds your theoretical knowledge and practical capability with chapters building from the 2-person zero-sum game to multi-person games.

As you go, you encounter exercises designed to test your comprehension. With the aid of these, you grow in real and practical understanding of game theory. You will come to a new appreciation of the complexity of decision-making in environments of imperfect information and communication. Moreover, you will thus develop new insights into how to remove or overcome these shortcomings.

This is best book on this topic that I’ve found for the non-technical reader, and should definitely be on the reading list of any professional manager. Then, the next time someone starts tossing game theory flack around, you can pose them a real dilemma by advancing the conversation based on real knowledge.

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Today’s tip: Speaking of making decisions on the fly with imperfect information, and communication impeded by high anxiety, see this collection of BNET articles on how to hire brilliant people.

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