Game Theory Patterns at Work (2016)
3 months ago
- #Leadership
- #Game Theory
- #Organizational Behavior
- Organizations rely on interdependent strategies and execution, influenced by others' actions and expectations.
- Game theory is essential for understanding real-world interactions beyond individual optimization.
- Chess is a computational problem, whereas real-life involves bluffing and deception, highlighting the complexity of human interactions.
- The goal in strategic interactions is to avoid traps and unwinnable positions, not necessarily to find perfect moves.
- Behavior in organizations is shaped by incentives and rules, not intentions, leading to stable but sometimes undesirable equilibria.
- The Prisoner’s Dilemma illustrates how rational individual choices can lead to collectively worse outcomes.
- Organizational failures often stem from locally rational decisions within poorly designed incentive structures.
- Promotions without clear criteria can favor likeability over impact, creating zero-sum dynamics and internal competition.
- Firing policies, like removing the bottom 10%, can incentivize sabotage and harm company culture.
- Hiring processes benefit from role separation to avoid bias, with structured interviews and clear standards.
- Salary matching external offers can create inequities, while retention strategies should focus on growth and impact.
- Products often reflect organizational structure, with unclear ownership leading to avoidance and turf wars.
- Data teams need independence for objectivity but proximity to remain relevant, balancing technical and business needs.
- Metrics can become misleading targets due to Goodhart’s Law, emphasizing the need for balanced success measures.
- Leadership requires balancing peacetime growth with wartime focus, grounded in customer impact.
- Middle managers may expand scope rationally but unchecked can lead to inefficiency without increased impact.
- Creating new opportunities reduces zero-sum pressure and fosters innovation within organizations.
- Clear, consistent rules and objective criteria in hiring and promotions prevent favoritism and unproductive hires.
- Optimizing for the actual game being played, rather than idealized scenarios, leads to better organizational outcomes.