Customer Reviews

Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life

5 star:		(33)
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3 star:		(8)
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1 star:		(2)

 

 

Larry, Mo and Curly have undertaken a three-way duel. There will be two rounds. In the first round, each player gets one shot - first Larry, then Mo, then Curly. At the end of the first round, each survivor gets a second shot, in the same order. Larry is a poor shot, with a 30 percent success rate. Mo is better: he hits 50 percent. Curly never misses.

What should Larry do? The answer is that he should shoot into the air. By wasting his shot, he maximizes his chances of survival. Such is the analysis of the authors of this remarkable introduction to game theory.

One virtue of this book is its geniality: For Dixit and Nalebuff, game theory is full of anecdote and surprise, and they give you the sense that they like nothing better than to share their enthusiasm with others. (Geniality footnote: I probbly shouldn't noise this around, but one day I ran into a problem with an equation in a (different) Dixit book. I sent him an email; I got a response in an hour). A tradeoff for geniality is that they pay a price in structure: to get a coherent framework - even for some of their own best stories - you may have to go elsewhere (Professor Rappaport's textbook may be a good second choice). But it is hard to find any book that does better at conveying a sense of the excitement and challenge of game theory as a discipline).

Comparison shopper's note: I've used this in working with law students. Game Theory for Lawyers, by Baird, Gertner and Jackson, might seem closer on point. But it lacks those little four-block boxes that are a staple of game theory instruction, and for a beginner is bound to be pretty impenetrable without them.

CONTENTS: Professors Avinash Dixit and Barry Nalebuff begin the book with explanation of sequential-move games governed by the principle `look ahead and reason back'. Then simultaneous-move games are introduced by means of prisoners' dilemma, the situation when by playing their dominant strategies (thus theoretically maximizing their payoff) both sides get the outcome that is jointly worse than if they followed the strategies of minimizing their payoff. The paradox lies in interdependency of sides' outcomes. To resolve the problem the competitors have to cooperate i.e. follow their less desired strategies. Temptation to brake rules unilaterally is very strong, to make it worse you cannot control your opponent's move in the game. The rule `look ahead and reason back' does not work either. But one can manage this.

To tackle the problem strategists transform simultaneous-move games into sequential-move games. That is where the notion of strategic move comes into play. Strategic move is an action designed to alter beliefs and actions of others in a direction favorable to yourself. Strategic move will purposely limit your freedom but in return it will limit your opponent's freedom. Threats and promises are examples of strategic moves that are widely used. Another example of strategic move explained in the book, brinkmanship, consists in creating and maintaining risk of mutually bad outcome. Unlike the compelling threat, brinkmanship does not secure bad outcome, it does not even tell when it may occur. It is left to your opponent to guess at any point in the game if you are on the brink of disaster. By defying yourself an opportunity to influence the situation and making your opponent understand that he is the only capable to resolve the conflict you induce him to compromise.

Then it comes to multi-person games where interdependence is so complex that the outcome seems absolutely unpredictable. Voting is an example of an imperfect system that cannot aggregate up individuals' preferences into a will of the people. The authors show how result of voting depends on the scheme of voting that gives way for manipulation.

When discussing bargaining the authors explore how different schemes of bargaining change sides' power and affect the result. Time is money for both sides but it is likely that they discount future at different rates thus one side gets competitive edge. Simultaneous bargaining can open up possibility for mutually beneficial trade-off, especially when sides value items differently.

OVERALL: The book is well structured and written in an easy-to-understand language, though in some cases it shows contradictions and some explanations seem oversimplified. It is rich in examples and offers cases from different spheres of life. This book instills mathematical approach to problems without going deep into mathematics. So the book will not put off `mathematically disadvantaged' readers. Even in case this book is the only you read on strategy, you will acquire knowledge that is indispensable nowadays. The book changed my perception of conflicts, games and bargaining.

This is my first contact with game theory reading, and i enjoy it very much. It is a required reading at University of Chicago Executive MBA program, Competitive Strategy course.
The content is quiet condense and within everybody's grasp. There is not much mathematical stuff inside, which is good ;-).
It is true that there is much simplification in any game theory, but up to know that is the best possible explaination into the real world, there is no other way to understand the things better. It you are like me, with no prior economic academic background, this book is an eye openner. I enjoy reading it very much. Most of you will.

By giving extensive examples from real business strategy, Dixit and Nalebuff have created and amzing book on Game Theory for the layman (and MBAs, for that matter).

What I like about the book is that they introduce a new way of looking at strategy by using elements of Game Theory. I particluarly like the many examples where on first sight what looks like a good case for a new business falls flat (and bleeds a lot of money) because the competitive actions of other players are not taken into account.

Nalebuff wrote another book called "Co-Opetition", but I like this one much better. That said, an interested person would still have to learn a lot about game theory and strategy in order to try to avoid some of the mistakes highlighted in this book!

Interesting game theory book without the math. Too much stuff about labor strikes. A bit too theoretical to be applied directly, but definitely some interesting things to think about. One interesting theoretical proposition, in a 2 person race the leader should mimick all of the moves of the follower, that way the follower will never gain any ground. Best part of book is cited to some journal...

"In 1890 there were three ways to power automobiles - steam, gasoline, and electricity - and one of these was patently inferior to the other two: gasoline... A turning point for gasoline was a 1895 horseless carriage competition sponsored by the Chicago TimesHerald. This was won by a gasoline-powered Duryea - one of only two cars to finish out of six starters - and has been cited as the possible inspiration for R.E. Olds <Oldsmobile> to patent in 1896 a gasoline powered source, which he subsequently mass produced. Gasoline thus overcame it's slow start. Steam continued viable as a power source until 1914, when there was an outbreak of hoof-and-mouth disease in North America. This led to the withdrawl of horse troughs - which is where steam cars could fill with water. It took the Stanley brothers about three years to develop a condenser and boiler system that did not need to be filled every thirty of fourty miles. But by then it was too late. The steam engine hasn't recovered. "

" While there is little doubt that today's gasoline technology is better than steam, that's not the right comparison. How good would steam have been if it had the benefit of seventy-five years of research and development? "

Wow.

My college professor used this as one of the books for our game theory course. I was instantly taken by the book. It applied the most common game theory examples to very ordinary circumstances.

For example, it explains that a baseball pitcher does not always want to throw his #1 pitch in a key situation -- there's a percentage of times that he wants to throw it and the book explains how to get that percentage.

It also explains how to outline the various outcomes, think backward and use that to achieve the outcome that you desire.

This is not an academic book, but it teaches. If you're looking for serious acadmic work, you'd do better to look to James Buchanan or Mancur Olson. For the average reader, though, this book is outstanding.

Strategic thinking is the art and science of determining how you should act in a competitive environment, that is one in which you are playing a "game" with other players and your actions influence their actions and vice versa. The core of strategic thinking is game theory and it applies to a very wide range of situations, from classic examples like chess to far more practical business, sports, and relationship examples.

This book provides a very fair introduction to strategic thinking. It is easily accessible, but at the cost of being sometimes overly simplified and perhaps sacrificing too much of the theory. It is also a little drawn out sometimes, being a bit long for such a simplified introduction.

After reading this book I felt like I had a grasp of the basics of strategic thinking, and that I would be able to analyze perhaps the simplest of competitive situations to determine how to improve my odds of achieving whatever my objective is. However I wouldn't dream of applying strategic thinking very far beyond the most simplistic situations, especially not in any modern business / entreprenurial context. There was too little theory or overaching tying together of themes. Some of the examples stretched so far for pedagogical purposes that any connection to reality really was lost. I think the best value of this book would be to ease the reader into the realm of strategic thinking so that they would be better able to absorb the concepts of a more coherent, more thorough presentation of competitive strategy and how to apply it to the real world.

The by-line of this book is "don't compete without it." Well, I would add "don't compete with just it." It does a good job of getting you halfway to being able to apply strategic thinking to the real world.

The authors explain what Game Theory is and HOW it can be applied to REAL life challenges. Quantitative stuff is left out. Loads of examples make you "thinking and understanding" Game Theory, but you have to re-read and re-read it... Nalebuff had "Getting to Yes" (as interviewed)in mind: simplicity, readbility, and knowledge that is of practical relevance. They totally succeeded! One of my MBA mates remarked "That's the thinking they try to teach you at business schools".

Thinking Strategically appears to be the book that attempts to break game theory down so that it can easily be grasped by the average reader.
Not being an expert in game theory, I'd say it largely succeeds in this respect and is a very enjoyable read into the bargain.
Basically game theory is the science or mathematics of competitive encounters.
What is your best move to win when knowing that you are being competed against by others who also wish to win against you?
It's an interesting concept and one that we face every day in even simple transactions, such as getting a parking space or choosing the fastest-moving queue in the store.
This book, of course, doesn't have all the answers, but it does lay out in relatively simple terms processes that you can try to apply to situations.
Like other reviewers, I would not attempt to use game theory to resolve complex or high-value situations, but I think this book does add to the mental tools you can use for tackling challenges.
The human condition is often one where decisions are based on emotional reasoning. By applying this kind of thinking, it may help to see "the bigger picture" and make our decision-making more strategic.

Superlative book. Sound introduction to the topic without too many technicalities to trouble a reader more interested in insight and application.