PATTERNS PREDICTIONS PLAYING TO WIN V PLAYING NOT
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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 • • 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? • • 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 832 am walk to office At office Log in PC 845 NFC at coffee shop 825 Smartphone Wake Up 7 am Leave the house 725 am Transit Smartcard at 745 am Check text messages Social media At desk: 845 am 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 …………. ? WEEK 1, WEEK 2, WEEK 3 ……. WEEK 4 ……………… ?
WHY FOCUS ON PATTERNS? . . • We live in an information age so filtering information from the patterns • • Understanding the pattern: is there order? Is there chaos? Discovering a pattern from a sequence of moves [everyday actions, everyday decisions]. • • • 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’ • EXAMPLE: Hegazy-Mc. Nutt 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? . . . . • Dominant strategy to betray in a PD game • • Regret is irrational in a game Fooling (emperor moth) behaviour • Dark strategy and belief system Playing ‘in context’; EXAMPLE: theatre tickets
LOSS AVERSION ‘IN CONTEXT’ DECISION A: You enter 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 $20
ES M A G L B A N T I EN ES M Y I R ND E P A X E NA IN O I N M D E G P IN O E IN P A G L IS L IK E L O S IN G O R E T H S I T I A N T H E Y L IK E
POKER, CHESS, SOCCER, BUSINESS DECISIONS, EVERYDAY LIFE - ANY INTERACTION IS A GAME SITUATION Playing a game without information Playing a game with ‘good’ signals & a player’s type What is the optimal move, given X? How does the value of the signal vary with X under different actions? Playing to win v Playing not to lose Short term gain [compete] v long term benefit [co-operate] Today’s decision depends on the one we shall make tomorrow. EXAMPLE Where to host the BBQ?
HOUSE SUN RAIN Regrets Disappointment OKAY & YES GARDEN Preference Disaster AVOID & NO
GEMS AND T/3: OBSERVE SEQUENCE OF MOVES 1. Moves observed by rivals as a pattern, revealing your ‘type’ as a player…reveals insight into the company’s or organisation’s strategy 2. Can I trust you? Private information is not observable, only actions are. EXAMPLE: US$ 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 $ Strong $ Weak RMB 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. Strong RMB
TIMELINE – Pre 2006 PS 2 launched at $299 PS 2 at $199. 99 PS 2 at $179. 99 14 May 02 13 May 03 26 Oct 00 PS 2 at $149. 99 11 May 04 100 million PS 2 shipped Announcement PS 3 production schedule to ship 6 million units by 31 Mar 07 at $499 PS 2 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 million Xbox shipped Microsoft Xbox launched at $299 Xbox at $199 30 Oct 05 Xbox at $179 Xbox at $149 22 Nov 05 6 Feb 06 27 April 06 Xbox at $179 Xbox 360 launched at $399 Revised production schedule for Xbox 360 to 5 - 5. 5 million units by 30 th 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
U LL O I T Y IF U W NO D YO O E IV UT U D E C , B O E D CH IF Y BE MU NT AY OO ME M T R GH U T TO U O Y US IN NO TR VE T E LI US TR C F R A N K R A N E
THANK YOU FOR LISTENING……… MARK TWAIN ‘IF YOU TELL THE TRUTH YOU DON’T HAVE TO REMEMBER ANYTHING’
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