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Patterns & Predictions Playing to win v playing not to lose

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

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Patterns & Predictions Playing to win v playing not to lose

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  1. Patterns & PredictionsPlaying to win v playing not to lose Patrick McNutt, FRSA Follow on @tuncnunc Web: www.patrickmcnutt.com Decoding Strategy (2014) McGraw Hill

  2. 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.

  3. Observed: Keeping to this pattern …..Monday, Tuesday, Wednesday, Thursdayon Friday ………….?Week1, week 2, week 3…….week 4 ……………………………… ?

  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 Oraclein The Matrix :‘we cannot see beyond the choices we do not understand’ • EXAMPLE: Hegazy-McNutt Non-Linear Thinking

  5. Hegazy-McNutt ‘Non-linear thinking’ image…time continuum

  6. 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 castrumtheplayers 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.

  7. 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

  8. Loss Aversion ‘in context’ • 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 • DECISION A: • You enter the theatre but you have lost your $10 ticket. Would you pay $10 for a new ticket? • TOTAL COST $20

  9. In Experimental games it is No in A and Yes in b People dislike losing more than they like gaining

  10. 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?

  11. 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 [Yellenv Kohn or Yellenv Summers]) and China’s PBC (re-appointment of Mr Zhou) • EXAMPLE: Sony v Microsoft Price Signals on entry of MS into video consoles/game.

  12. Signal Game US$ v RMB/Yuan

  13. TIMELINE – Pre 2006 Announcement PS3 production schedule to ship 6 million units by 31 Mar 07 at $499 PS2 launched at $299 PS2 at $199.99 PS2 at $179.99 PS2 at $149.99 100 million PS2 shipped PS2 at $129.99 11 May 04 20 April 06 8 May 06 26 Oct 00 15 Nov 01 14 May 02 15 May 02 13 May 03 14 May 03 29 Mar 04 1 Nov 05 30 Oct 05 22 Nov 05 6 Feb 06 27 April 06 Xbox at $179 22 million Xbox shipped Microsoft Xbox launched at $299 Revised production schedule for Xbox 360 to 5- 5.5 million units by 30th June 2006 Xbox 360 launched at $399 Xbox at $199 Xbox at $179 Xbox at $149

  14. 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

  15. You may be deceived if you trust too much, but you will live in torment if you do not trust enough Frank Crane

  16. Thank you for listening……… Mark Twain ‘If you tell the truth you don’t have to remember anything’

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