Patterns & Predictions
Playing to win v playing not to lose
PATRICK MCNUTT, FRSA
FOLLOW ON @TUNCNUNC
WEB: WWW.PATRICKMCNUTT.COM
DECODING STRATEGY (2014) MCGRAW HILL
CREATING PATTERNS & DISCOVERING PATTERNS
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Information embedded in observed behaviour
Information filtering and Individual memory is ‘outsourced’ stored in a
computer or tablet
•
Social life is stored in portable gadgets
•
Behaviour is a ‘vibrational pattern’ in time and space
•
What is your best friend’s mobile telephone number?
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We have become our ‘digital self’
Find the pattern EXAMPLE: Daily Routine.
Coffee stop 8.25
Texting, FB and
‘Googling’ the weekend
plans.
‘Latte to go’ NFC
payment at 832am
walk to office
At office Log in PC 845
NFC at coffee shop 825
Smartphone Wake Up
7am
Leave the house
725am
Transit Smartcard at
745am
Check text messages
Social media
At desk: 845am Log On
PC, search web. &
texting
925 Receive text
message confirm lunch
1230 for lunch, CC
payment 13.45
1730 Log off PC;
Returning home, smart
card 1814; send text;
at home by 1855 surf
the net, final texts, web
browsing.
Texting, surfing ‘lights
out’ by 23.55
OBSERVED: KEEPING TO THIS PATTERN
…..MONDAY, TUESDAY, WEDNESDAY, THURSDAY
ON FRIDAY ………….?
WEEK1, WEEK 2, WEEK 3
…….WEEK 4 ……………………………… ?
WHY FOCUS ON PATTERNS?....
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We live in an information age so filtering information from the patterns
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Understanding the pattern: is there order? Is there chaos?
Discovering a pattern from a sequence of moves [everyday actions, everyday decisions].
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Observational learning: moves = signals = information.
We live in a connected world: Less Independence v More interdependence
Like the Oracle in The Matrix : ‘we cannot see beyond the choices we do not understand’
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EXAMPLE: Hegazy-McNutt Non-Linear Thinking
Hegazy-McNutt ‘Non-linear thinking’ image…
time continuum
LEARNING VIA EXPERIENCE & BELIEF
 In context’: meaning that in time you are observing a trade-off between
departing from self-interest behaviour v empathetic behaviour & reasoning.
 Like Samurai in a maku or the Roman castrum the players in a game are
enveloped by the game dimension.
 Cascade effect: meaning that at a point in time, observations and signals
influence your belief system.
(i) ‘broken windows’ = signals disorder
(ii) queues for restaurant = belief system.
RULES OF OBSERVED PLAY
We learn how to play the game using information rather than evolution
(playing curve or learning curve].
Defection, dishonesty and cheating are the norm.
Co-operation [even with highest cardinal payoff] is not the norm..why?.......
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Dominant strategy to betray in a PD game
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Regret is irrational in a game
Fooling (emperor moth) behaviour
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Dark strategy and belief system
Playing ‘in context’; EXAMPLE: theatre tickets
LOSS AVERSION ‘IN CONTEXT’
DECISION A:
You enter the theatre
but you have lost
your $10 ticket.
Would you pay $10
for a new ticket?
TOTAL COST $20
DECISION B:
You enter a theatre to
buy a ticket. But you
have lost a $10 bill.
Would you continue
to buy a $10 ticket?
TOTAL COST $20
Poker, Chess, Soccer, Business Decisions, Everyday
life - ANY INTERACTION IS A GAME SITUATION
Playing a game without information
Playing a game with ‘good’ signals & a player’s type
What is the optimal move, given X?
How does the value of the signal vary with X under different actions?
Playing to win v Playing not to lose
Short term gain [compete] v long term benefit [co-operate]
Today’s decision depends on the one we shall make tomorrow. EXAMPLE
Where to host the BBQ?
HOUSE
SUN
RAIN
Regrets
Disappointment
OKAY & YES
GARDEN
Preference
Disaster
AVOID & NO
GEMS AND T/3: OBSERVE SEQUENCE OF MOVES
1. Moves observed by rivals as a pattern, revealing your ‘type’ as a
player…reveals insight into the company’s or organisation’s strategy
2. Can I trust you? Private information is not observable, only actions are.
EXAMPLE: US$ V RMB/Yuan
Economic & Financial Signals between US Fed (Bernanke [Yellen v Kohn or
Yellen v Summers]) and China’s PBC (re-appointment of Mr Zhou)
EXAMPLE: Sony v Microsoft
Price Signals on entry of MS into video consoles/game.
SIGNAL GAME US$ V RMB/YUAN
Weak RMB
Strong RMB
Weak $
Strong $
NO
For ASLEEP:
unable to export.
YES
Signals from PBC:
when the period is
right.
No
US Congress:
costing US jobs
NO
No QE: risk-off
would impact.
TIMELINE – Pre 2006
PS2
launched
at $299
PS2 at
$199.99
PS2 at
$179.99
14 May 02 13 May 03
26 Oct 00
PS2 at
$149.99
11 May 04
100 million
PS2
shipped
Announcement
PS3 production
schedule to ship 6
million units by 31
Mar 07 at $499
PS2 at
$129.99
20 April 06
1 Nov 05
8 May 06
15 Nov 01
15 May 02 14 May 03
29 Mar 04
22 Nov 05
22 million
Xbox
shipped
Microsoft Xbox
launched at $299
Xbox at
$199
30 Oct 05
Xbox at
$179
Xbox at
$149
Xbox 360
launched
at $399
6 Feb 06
27 April 06
Xbox at
$179
Revised production
schedule for Xbox
360 to 5- 5.5 million
units by 30th June
2006
LEARNING IS A ‘STRANGE LOOP’
Schelling move is to cooperate early in a sequence of moves and
defect or cheat late.
Co-operation secures a win-win outcome
Turing Test: adapted for humans as homo ludens: ‘if a player
convinces observers he might be rational, then it is fair to
describe the player as rational’
People learn from (i) observing the decision of others, (ii) observing
the behaviour of others and (iii) from private information + (i) and
(ii).
Cascading towards a cartel…I think-you think-I think loop
High Price
Player A
Low Price
Player A
High Price
Player B
Cartel,
cooperation
B’s loss
Low Price
Player B
A’s loss
Competition
• Type & Private
information
• Action observed
as a signal
Move 1
Move 2
• Belief system to
exploit
• Filter information
content in signal
• Noise
• Reputation:
keeps to type
• Pattern
Observed
Move 3
Thank you for listening………
MARK
TWAIN
‘IF YOU TELL THE TRUTH YOU
D O N ’ T H AV E TO R E M E M B E R
ANYTHING’