The Art of Manliness - #250： The Art of Strategy

00:00:00.000 Brett McKay here and welcome to another edition of the Art of Manliness podcast. Whether you're

00:00:18.700 a businessman, a statesman, a general, or a parent, you're strategizing on a daily basis.

00:00:24.460 So how can you do it better? Well, my guest today will provide some insights. His name

00:00:27.740 is Barry Nailbuff. He's a game theory expert and the author of the book, The Art of Strategy,

00:00:32.240 A Game Theorist's Guide to Success in Business and Life. And on the show today, Barry and

00:00:36.600 I discuss how game theory can help you make better strategic decisions in all sorts of

00:00:40.700 situations. For example, we explore why threatening to punish your child's sibling for bad behavior

00:00:46.040 might be a more effective strategy than threatening to punish the child himself. I know that sounds

00:00:50.640 Machiavellian, but we'll explain the reasoning behind that. We'll discuss what Donald Trump

00:00:54.780 can teach us about the promise and perils of injecting randomness into your strategy.

00:00:58.920 We also talk about how you can employ game theory against yourself to lose weight or even quit

00:01:03.380 smoking. After the show's over, check out the show notes at aom.is slash game theory.

00:01:17.420 Barry Nailbuff, welcome to the show. 0.85

00:01:19.700 Thanks for inviting me.

00:01:20.780 So you're the co-author of a book called The Art of Strategy. It's about strategic thinking,

00:01:25.920 particularly game theory. It's a topic I've long been interested in. But before we get into the

00:01:30.580 specifics of game theory, what it is, let's talk about strategy broadly. How do you and your co-author

00:01:36.620 define strategic thinking in your book? I mean, what is strategy really?

00:01:41.900 Strategy is different from decision-making. And the reason is that there are other people's

00:01:48.800 decisions that end up mattering. So when a lumberjack cuts down a tree or an engineer builds

00:01:53.580 a bridge, that bridge isn't responding, isn't thinking. The tree isn't a strategic player.

00:01:59.560 But when you make decisions in the real world, the success of your actions depends on how other

00:02:04.900 people will respond. And so that interactive aspect of the decision-making is what makes for

00:02:11.160 strategy and game theory.

00:02:12.680 Okay. And I mean, I can understand why business people or military strategists need to understand

00:02:18.080 strategic thinking or game theory, but why is it important for even lay people? Like just people

00:02:22.740 who are mom and dads, husbands, wives, and why is it important for them to understand strategy?

00:02:27.740 I think everyone is interacting with decisions you make. Certainly kids, whether or not they want to

00:02:34.100 eat something or not eat something or stay up late,

00:02:36.980 or how one divides up chores in a household, people are interacting with each other. And you don't

00:02:45.440 make decisions in a vacuum. In physics, they say that for every action, there's a reaction equal and

00:02:51.680 opposite. But in game theory, that reaction can be changed. It can be influenced. And since we don't

00:02:58.000 act in isolation, we better figure out how other people are going to respond to what we're doing.

00:03:03.000 Right. But the thing is, I think strategy has a bad, has a PR problem, right? Ever since ancient

00:03:08.760 Greeks, you know, Odysseus was the wily one, and his strategic thinking was often looked down upon as

00:03:14.840 sort of, you know, unmanly or wily. And, you know, we think of strategy, we think of Machiavelli and being

00:03:19.820 manipulative. Is that what strategy is? Or is that, can strategy turn into that? Or can strategy actually

00:03:24.340 be benevolent?

00:03:26.460 Well, another one of my books, co-authored with Adam Brandenberger, is called Co-Opetition.

00:03:31.020 And it's about competing and cooperating at the same time. And so you need to understand strategy

00:03:37.000 for how to compete more effectively, but you also need to understand it for how to cooperate more

00:03:43.080 effectively.

00:03:44.440 Okay. So let's get into, you know, what makes up strategic thinking. You focus on game theory.

00:03:49.600 And I think a lot of people might have heard of game theory if they've seen A Beautiful Mind

00:03:52.820 about John Nash. But what is game theory? And what's the history of its development?

00:03:58.740 Sure. Well, game theory was started, created by a brilliant polymath at Princeton named John

00:04:06.320 von Neumann. And of course, John Nash, also at Princeton, less than 100 years old. So it's a

00:04:14.860 relatively speaking, pretty new science. And initially, it started out thinking about everything

00:04:19.980 from how one would hide and find submarines in warfare, to now anything from how to raise

00:04:28.320 kids, to bid in auctions, to find smart compensation contracts for executives. I thought it might be

00:04:35.500 worth playing a little game with you.

00:04:37.400 Sure.

00:04:37.820 That could illustrate how to do this, what's going on. But it depends, actually, to the extent you've

00:04:46.220 read the book.

00:04:47.160 Correct.

00:04:48.040 Then I can't really do it.

00:04:50.180 Oh, no.

00:04:50.920 No.

00:04:51.100 It's been, it'd be ruined as a result.

00:04:53.760 Well, maybe we can link to something, an online game that people can play online if they haven't

00:04:59.940 done it. Well, I mean, okay, so it started off primarily math driven. But as I read your book,

00:05:04.400 it seems like game theory has developed in something more interdisciplinary. Is that correct?

00:05:08.880 Well, since political science, sociology, law, all of that requires thinking about interactions,

00:05:17.460 it does actually cross many disciplines. Yes, indeed.

00:05:20.740 Yeah. It seems like a lot of behavioral science is influencing it, psychology as well,

00:05:25.380 cognitive science.

00:05:26.500 Well, remember, if you think that economics is supposed to be a social science, as opposed

00:05:32.680 to asocial, we're supposed to understand how other people interact with us. And in that

00:05:37.660 sense, we have to take them as they are, not as you wish they would be. And so, in that

00:05:44.040 sense, it's certainly, we don't have a behavioral game theory, but a simple reason that that would

00:05:49.860 be redundant, that how other people behave is intrinsic and central to any discussion of

00:05:57.420 game theory.

00:05:58.480 Okay. And I'm sure we'll get into some games I'm sure people might are familiar with, but

00:06:03.140 let's start getting to the nitty gritty here. So, you start off saying in the book that the

00:06:09.020 first step when you find yourself in a strategic game. So, let's start, how do you know you're

00:06:14.220 in a strategic game? Like, is it just whenever there's someone else or other people in a decision

00:06:19.420 making process? Is that a strategic game?

00:06:22.040 If you're acting with other people and they can react to what you're doing, or their actions

00:06:28.380 influence your success, then you're pretty much in a game. So, to give you a couple recent

00:06:34.420 public policy examples, much of the debate about the ACA or Obamacare actually is really

00:06:40.900 a game theory discussion. So, whether or not you require people to buy healthcare, well,

00:06:49.720 if you don't require healthy people to buy healthcare, then the only people who will end

00:06:55.520 up buying it are those who have pre-existing conditions, who aren't healthy. That means the

00:07:01.240 premiums are going to have to be very high. That means that only the even sicker people will end up

00:07:06.540 buying healthcare, which means the premiums will have to be higher still. And the end result is

00:07:11.780 you'll get what's called a death spiral, and nobody will end up being able to afford healthcare.

00:07:17.260 And so, the idea of understanding the interaction between who will buy and what the effective premium

00:07:24.440 is would be a classic example of what George Ackloff won a Nobel Prize for, something called the

00:07:31.260 market for lemons. And so, I mean, game theory, games can get very complex or very simple. I mean,

00:07:36.600 a simpler one would be just negotiating what time your child's going to go to bed, right? That's a very

00:07:41.580 simple one, but the Obamacare instance, that's very complex. There's a lot of different people

00:07:46.360 involved, a lot of different factors. So, you say that whenever you find yourself in a strategic

00:07:52.620 game, when there's decisions being made that involve other people, the first thing to do is figure

00:07:57.560 out what kind of game it is, and it's either simultaneous or sequential. What are the differences

00:08:02.800 between the two, and how will your strategy change based on what kind of game it is?

00:08:08.840 So, let me just go back for a second. I don't think the game with your kid about bedtime is so simple,

00:08:14.140 because remember, it's not just one night. This is a classic repeated game, and you might decide that

00:08:20.000 today it's not worth fighting it, but you need to be tough to have a reputation, because otherwise,

00:08:24.740 in the future, you won't have any credibility. And so, most games are neither simply sequential or

00:08:35.500 simultaneous. They're mixtures of both. They're not single shot. They go on again and again, so they're

00:08:41.480 repeated. In a sequential move game, it's much like checkers. I make a move, you make a move,

00:08:48.500 I make a move, and we alternate making moves. So, when I'm making a move, I have to think about how

00:08:54.680 you're going to respond. When your response is taken into account, it's thinking about what I'm

00:08:59.460 going to do in response to your response, and so on. In contrast, a simultaneous move game doesn't

00:09:07.420 really require us to move at the exact same moment, but it means I have to make a move without

00:09:13.380 knowing exactly what it is you've done at the time I'm making my decision. So, a very simple example

00:09:22.420 of that would be, I am placing a bid in an auction, and I'm bidding without knowing what your bid is.

00:09:30.280 Another example could be, quite soon, I'm voting. And when I place my vote, I don't know what the other

00:09:36.620 people have done in their voting booth. And so, when I'm thinking about, do I want to support the

00:09:41.360 candidate who I really like, or make a protest vote, I don't really know what other people's

00:09:48.280 decisions have been made at the same time. So, it sounds like with simultaneous games,

00:09:52.940 there's a lot more uncertainty. With sequential games, there's a bit more certainty than simultaneous.

00:09:57.840 Exactly. Note, again, just in voting, it's not that we're literally all voting at the exact same

00:10:02.560 moment. But when I'm voting, since I don't know what you've done, it's as if we're moving at the

00:10:08.600 same time. And you're absolutely right that in sequential move games, it's much, much easier

00:10:13.780 to solve, because I know everything in terms of what you've done.

00:10:19.380 Right. So, with sequential games, you can look forward and start reasoning backwards,

00:10:25.820 I think is what you say in the book.

00:10:27.960 Exactly. So, the nice thing about sequential move games is we know how to solve them.

00:10:31.660 Yeah. And essentially, you can play out every possible scenario, and you can figure out what

00:10:37.500 is the best way of playing the game. And so, that's really easy to do in tic-tac-toe, which

00:10:44.980 is why nobody plays tic-tac-toe once they're above seven, because you can figure out going

00:10:49.920 to the center means we're always going to get a tie. In contrast, for a while, it was thought

00:10:55.660 that chess was too hard to solve, or Go was too hard to solve. And so, even though, in theory,

00:11:02.660 there was an optimal way of playing it, a way of guaranteeing either a victory, a tie, or a tie,

00:11:10.840 since nobody knew what that was, we could still enjoy playing the game. Pretty soon, I'd say that

00:11:17.820 that's not going to be the case.

00:11:20.160 Right. Because computers will allow them to map out all the sequences, possible sequences.

00:11:25.660 Right. I think the top six or seven best chess players in the world are all now computer

00:11:30.020 programs.

00:11:31.280 That's crazy. So, I mean, so I think we can all intuitively do this, you know, sequential,

00:11:37.060 you know, forecasting, right? You know, looking forward to reason backward, when things are

00:11:40.740 pretty simple. But, I mean, some of these sequential games can get really complex. I mean, chess is a

00:11:44.720 perfect example. There are millions upon millions of different sequences. So, how do you, as a game,

00:11:52.080 you know, as a game theorist, track those sequences and then figure out which sequence will probably

00:11:57.540 be the one that will play out in the real world?

00:12:01.340 Well, when we didn't have computers, you use heuristics. You say, I think that owning certain

00:12:09.580 parts of the board, certain positions are stronger than others. Certain pieces are worth more than other

00:12:14.980 pieces in terms of power. And so, you look for simple rules that are usually right. Maybe they're

00:12:22.420 not always right. In other cases, you can do simulation. In other cases, you base this on

00:12:29.720 experience. Depends a little bit on how important the game is and how often it's going to be played

00:12:36.560 in terms of how much you want to go and figure out how to solve it. A classic example, though,

00:12:43.800 sometimes failure to understand the right strategy occurs in sports, where when teams are thinking

00:12:52.440 about when it is to go for a two-point play rather than a one-point play after a touchdown,

00:12:59.940 sometimes they fail to look forward and reason backward. So, if you're down by two touchdowns

00:13:06.160 with not that much time left to go and you score one touchdown and make the extra point,

00:13:13.940 there are cases where the coach has then gone for the two-point play on the second touchdown

00:13:20.280 with just a few moments left to go so as to win rather than tie the game. And it turns out that that's

00:13:27.160 a fine strategy. You might argue it's worth taking that risk. But if you thought that's what you'd want

00:13:32.880 to do, then you should have gone for the two-point play on the penultimate touchdown. The reason being

00:13:38.580 that you have to make both a one-point and a two-point play. It doesn't really matter which order you make

00:13:43.680 them in. But if you miss the two-point play on the first shot, then you have another chance to make a

00:13:48.880 two-point play on the second one and still get a tie. Ah, okay. That makes sense. I didn't think about it

00:13:54.500 that way. I've had those moments where my coach decided to go for it later on and we ended up

00:14:00.000 losing. So, it sounds like sequential games. Are there any examples like real-life examples of like,

00:14:06.180 you know, I'm talking about, you know, parent to child or business to business where there's

00:14:10.440 sequential games? It seems like the examples we've been talking about are very, you know,

00:14:13.540 they're games, like literal games, tic-tac-toe, football, chess. Any examples where there's less

00:14:20.040 structure, but there's still a sequential game involved? Well, I'd say if you think about

00:14:25.840 appointing a Supreme Court nominee, the president goes and suggests a candidate. The Senate then,

00:14:33.720 in theory, advises and confirms. And so, sure, there are discussions and movements ahead of time,

00:14:42.600 but essentially the Senate doesn't get to, well, they can try and change this and preempt it by

00:14:50.720 saying, unless you pick X, we're not going to accept anyone. But essentially, the president moves

00:14:58.540 first and then the Senate moves second. In other cases, Congress and the Senate will pass a bill and

00:15:05.900 then the president decides whether to sign it or to veto it. And if vetoed, the Congress decides

00:15:13.360 whether to override the veto. So, it's still obviously a simplification, but various laws have

00:15:22.460 created a structure which puts some sequentiality into the moose. Right. But there's still some

00:15:27.920 simultaneous things going on. As you said earlier, games are usually a mixture of the both,

00:15:32.020 simultaneous and sequential. Absolutely. But I'd say in this case, there's still a predominant

00:15:37.840 aspect of sequentiality. Okay. So, let's move into specific games that I think people might have

00:15:43.320 heard or have experienced with that kind of highlight some insights into game theory. One

00:15:50.020 of them, I think a lot of people have heard of, is the Prisoner's Dilemma. For those who aren't

00:15:54.440 familiar with it, can you briefly explain what the Prisoner's Dilemma is and then what insights

00:15:58.560 about game theory does it provide us? I think there's a sense in which people think

00:16:05.500 the Prisoner's Dilemma and game theory are synonymous, which is unfortunate because game

00:16:10.880 theory is a lot more than the Prisoner's Dilemma. But to the extent that anybody has watched a crime

00:16:16.720 thriller or the wonderful English TV show Golden Balls, what you have is a situation where both

00:16:26.820 individuals, each individual, has an incentive to cheat or to confess no matter what the other side

00:16:33.360 does. So, here you're interviewing two prisoners in separate rooms. A crime has been committed. If

00:16:40.000 neither prisoner confesses, then they both get off. But if one confesses while, or they actually don't

00:16:46.520 quite get off, they get a light sentence. If one confesses while the other keeps mum, the one who

00:16:52.680 confesses gets off and the other one gets a very tough sentence. While if they both confess, then they

00:17:00.160 each get a medium sentence. And so, the idea is that if one side keeps mum, then I can get off by

00:17:07.320 confessing. And if the other side confesses, then I really had better confess, because otherwise I'm

00:17:12.520 going to get a really severe sentence. And so, since no matter what I think the other side is going to

00:17:19.760 do, I have an incentive to confess. But of course, when both confess, they're both worse off than if

00:17:25.920 neither one does. And this is this paradox, because in some sense, when we each act in our individual

00:17:32.220 interest, the end result is bad for us in a collective sense.

00:17:37.260 Right. And any instances where, I mean, the prisoners don't look off, you know, obviously

00:17:41.200 happens whenever you're doing the separating the prisoners and trying to negotiate confessions. But

00:17:45.460 any other like real life examples where you see prisoners dilemmas act play out?

00:17:50.100 Well, I think there's the tragedy of the commons, which is a multi-person version of this. And so,

00:17:58.920 if you think about global warming or air pollution, it's in my interest to not change my lifestyle,

00:18:07.640 to continue driving cars or flying planes or to support industry. And each of us does this.

00:18:20.100 And the end result is that we end up with global warming and we're all worse off. And so,

00:18:25.400 we need to somehow collectively agree to work and cut back carbon emissions as opposed to do this on

00:18:32.200 an individual basis. Now, the advantage that we have here is that we can actually talk to each other

00:18:38.460 and monitor what the other side is doing. So, if we had to make these decisions in isolation and not

00:18:44.040 do treaties, then we'd find ourselves in the multi-person version of prisoners dilemma. And the result

00:18:49.700 would be disastrous. And so, the good thing is we don't let prisoners talk to each other and make

00:18:54.880 a pact, but we do let countries do that. And that's why we need to actually do it via treaties

00:19:00.800 and alliances as opposed to counting on people acting in their own self-interest.

00:19:08.000 Right. So, it sounds like if you find yourself in a prisoner's dilemma situation is to open up

00:19:13.460 communication. That's how you avoid those scenarios.

00:19:15.920 Exactly. And of course, sometimes the goal is to put other people in a prisoner's dilemma and prevent

00:19:22.140 them from being able to communicate. So, you've hit on a key point, which is sometimes the best way

00:19:28.660 to play a game is to change the game. That if the game isn't working out for you, don't accept it the

00:19:35.100 way it is.

00:19:35.600 And how would you, I mean, so what's an example of changing the game so you can make things better?

00:19:45.220 You can add more players to the game. You can say, okay, if in fact I discover that you snitched,

00:19:55.900 or you discover I snitched, and we go to prison, people will beat up snitches. And so, it may look

00:20:01.100 like it's a good idea to do the confession, but actually the game isn't over yet. And that we,

00:20:07.860 in fact, want to make sure that there are other players who will end up punishing us for doing

00:20:16.840 the strategy that at the short run seems to be in our interest.

00:20:21.540 Okay. So, you extend the game, make it longer. Yeah. I mean, I guess that you bring that,

00:20:26.340 that ties into you bringing the tit-for-tat approach that one game theorist developed back,

00:20:32.260 you know, a couple decades ago. One of these sort of prisoners dilemma type games where there was

00:20:36.960 multiple prisoner dilemma games. So, like, you know, you would confess one time, and the other

00:20:42.160 guy would confess, and then the other guy would know what you did, and then he would retaliate

00:20:47.240 for, you know, sticking it to you. And at the time, they thought that this tit-for-tat approach

00:20:53.380 was a good way to solve the prisoner's dilemma. But you argue in the book that it's actually not

00:20:58.600 that great of an approach. So, it's probably not the case that we're going to play tit-for-tat

00:21:03.100 with prisoners because they would have to be serious recidivists to be doing this tens or

00:21:09.960 hundreds of times in a row. Or it's more likely, the prison dilemma exists when companies are trying

00:21:19.080 to find ways to circumvent competition and to come up with, say, implicit, sometimes even explicit,

00:21:26.240 collusion. So, firms, let's take airlines as a case, might want to keep prices high.

00:21:32.800 And so, the question is, I want to go and do a little bit of a price cut and steal some market share

00:21:40.480 from you. And it may not be in my rival's interest who has a larger fraction of that particular route

00:21:49.520 or has more to lose by coming down and matching me. But if I understand that the person is going to do

00:21:57.280 that, they will do a tit-for-tat strategy. And if I come down, they're going to come down.

00:22:01.280 Then, I don't get the gain from doing any type of price cut. They're going to punish me. And as a result,

00:22:11.780 I will learn that this type of cheating, and cheating, by the way, here is, in some sense, cheating on the

00:22:17.920 collusion. So, it's cheating on the cheating, if you want. It doesn't actually pay off. Now, the problem with

00:22:27.140 simple, mechanical responses to when you think somebody else is cheating is that every now and

00:22:33.340 then, you're going to make a mistake. And you're going to think somebody cheated even when they

00:22:36.740 didn't. And so, you're going to punish them. And then what's going to happen is they're going to

00:22:40.840 punish you for punishing them, and then you're going to punish them for punishing you for punishing

00:22:44.500 them. And you're going to get yourself into one of these spirals, perhaps a little bit like what

00:22:50.540 we see in the Mideast, where it's hard to even figure out who started it. But now, we're just

00:22:56.980 in this endless cycle of retaliation. And how do we ever get out of it?

00:23:02.340 Right. This is interesting. With the airline thing, I mean, there's laws in place where companies

00:23:08.200 can't explicitly collude, right? They can't get together in a sort of a cabal and say, all right,

00:23:13.740 here's the price we're going to set the tickets at, so all of us can benefit from it. So, because

00:23:18.960 they can't do that, they have to do these sort of implicit collusion. Okay, well, if you're going

00:23:23.280 to raise the price, I'll raise the price, and it kind of evens out. Well, it's a little bit of,

00:23:28.520 I see my rival raise price. Now, I can do two things. I can take advantage of that and get some

00:23:35.180 extra share, or I can match the price. And while I don't want to match the price, I want to give my

00:23:39.760 rival incentive to have taken this action and encourage them to keep the price high. And so, even

00:23:46.760 without talking to the other side, I can figure out that this might be in my long run interests.

00:23:55.120 People have been talking about the effects of greater concentration in industry, and that

00:24:02.540 leading to higher profits and perhaps higher prices. But what often they've missed is something

00:24:09.900 called common ownership. And two of my colleagues here, Florian Etter and Fiona Scott Morton,

00:24:17.120 have been working on this. And one of the things they've discovered is that most companies,

00:24:23.800 most competitors have the same owner. So, Vanguard or Fidelity own huge fractions of all the different

00:24:32.420 airlines, or all the different pharmaceutical companies. And when you own A and its rival, B,

00:24:39.800 you know, you say, well, wait a second. Guys, I don't think this is such a good idea for you to go

00:24:45.340 and keep on cutting prices or try and steal share from each other or adding capacity. You know, just

00:24:50.740 lay off a little bit here. And so, essentially, now we have to worry not just about firms colluding with

00:24:57.780 each other, but the person who owns both of the firms, encouraging them to not really compete

00:25:03.680 vigorously with each other.

00:25:05.520 So, another type of game that you mentioned in the book that's sort of a bit different from

00:25:08.920 the Prisoner's Dilemma is what you call a confidence game. What is a confidence game,

00:25:15.540 and how does it differ from a Prisoner's Dilemma?

00:25:17.480 You know, I think Maria Konnikova has written a great book about this, and she talks about how it

00:25:26.120 is that con artists end up fooling people. And this is some wonderful applications of game theory.

00:25:34.140 In particular, if you're ever wondering why it is that spam that's trying to get phishing exercises,

00:25:43.140 trying to go and get you to send lots of money to Nigeria or someplace else,

00:25:48.120 are full of spelling errors. You can say, well, okay, guys, you know, come on, run through a spell

00:25:54.540 checker. I mean, how bad, how stupid you have to be? And the answer is, they don't want to waste 1.00

00:26:03.960 their time with people who aren't gullible. And so, they do things that are particularly bad.

00:26:10.720 Because if, in fact, you can't spot the super obvious nature of the spam, then that's saying, 0.99

00:26:21.860 okay, I've got a real stupid fish here. And I've hooked a great one, and I can go after this person. 0.99

00:26:28.940 Whereas, if they find people who are particularly sophisticated, later on, those folks will catch on,

00:26:35.320 and they will have wasted a lot of their time. So, it's an interesting point that they make the letters

00:26:42.740 intentionally simplistic, unrealistic, riddled with spelling errors, because they're trying to find the 1.00

00:26:52.600 stupidest fish in the sea. 1.00

00:26:54.660 Right. So, it's sort of like they're signaling. They're putting out a signal to find out the signals 1.00

00:27:00.280 of their potential victims.

00:27:02.600 Exactly. It's the latter point that's the key, is that they're looking for their victims to signal

00:27:07.480 that they're not paying attention, that they're gullible. And if they don't have spelling errors,

00:27:14.820 then the other side can't really signal their gullibility.

00:27:19.820 All right. So, these spam guys from Nigeria, they're pretty smart. 1.00

00:27:22.420 Eric, they're smart to act stupid. 1.00

00:27:27.380 Right. Right. So, let's talk about, I think, something that people might have heard before 1.00

00:27:33.400 because of popular culture. I think A Beautiful Mind might have helped. But like, this idea of

00:27:37.480 the Nash equilibrium. I've heard it before, over and over, and I never quite understood until I read

00:27:43.220 your book. But for those who aren't familiar, what is a Nash equilibrium in game theory? Does it

00:27:49.280 happen in sequential games or does it happen in simultaneous games or both?

00:27:54.400 The concept of a Nash equilibrium was developed to help us understand what will happen or a resting

00:28:02.380 point in a simultaneous move game. And so, the challenge is, what do we do in a world where

00:28:11.700 I think, that you think, that I think, and ad infinitum, will happen? I don't get to see what

00:28:19.940 you're doing. You don't get to see what I'm doing. And so, what move is it that I want to make

00:28:24.700 in a world where I have to anticipate what you're doing when you're anticipating what I'm going to do?

00:28:31.680 And that seems like it's an infinitely recursive logic. And it's not clear how you ever cut through

00:28:36.400 that not. And so, the brilliant insight of John Nash is, well, are there a set of strategies or moves

00:28:44.360 such that if I'm doing A and you're doing B, and I think you're doing B, and I think you think I'm

00:28:52.440 doing A, then I still actually want to do A. So, that is, if you've correctly anticipated what I'm

00:28:57.940 going to do, and I've correctly anticipated what you're going to do, neither of us wants to change

00:29:04.220 what we're doing. And that is an attractive candidate for how a game will be played when

00:29:13.660 we can't actually see what the other person has done. So, it sounds like the goal is to get to a

00:29:19.580 Nash equilibrium when you're strategizing. No. No? Okay. Right. It is not a goal. In particular,

00:29:29.300 in the Prisoner's Dilemma, the Nash equilibrium is that both confess. So, that's not a good outcome.

00:29:34.220 So, if we want to predict how a game might be played, then a Nash equilibrium is a good starting

00:29:41.180 place for what players might end up doing. But it is not necessarily desirable as an outcome.

00:29:50.660 Okay. So, as you work through the Nash equilibrium or trying to figure out what the Nash equilibrium

00:29:57.220 is, you're going to find, I guess, what you call dominant strategies in the mix. And then,

00:30:03.780 is that the thing you should take? Is the dominant strategy for you?

00:30:06.440 Well, if there's a dominant strategy, then life is easy. Because it says, whatever I think the other

00:30:13.120 person is doing doesn't matter. It's always the case that I want to do A. A is better than any other

00:30:19.960 strategy. And so, I don't have to consider what the other person is doing. And so, that allows me a real

00:30:24.520 cheat out of this Gordian Knot. The challenge, of course, is that there aren't that many games

00:30:34.760 where there really is a dominant strategy. And so, we have to, more often than not,

00:30:45.160 refer back to a Nash equilibrium to get a better sense of how we should play the game.

00:30:49.300 Okay. So, this idea, when you're strategizing, doing a simultaneous strategy, like you said,

00:30:58.080 you're doing this recursive thing in your head. I'm thinking A, and I think my opponent or

00:31:03.740 competitor is thinking that I'm thinking A. And if he's thinking that, then I'm going to do this.

00:31:09.920 It sounds like it would be good to inject randomness, right? So, you can throw people

00:31:15.300 off. Well, again, it depends. Is my goal to coordinate with you or to get an advantage over

00:31:23.000 you? So, here's, I'll give you two versions of a simultaneous move game. Here's one. You and I

00:31:32.600 both have to pick a number. And if we pick the same number, then we both get that amount of money

00:31:39.040 paid for by a third party. And that number, let's say, has to be between one and ten. It's an integer.

00:31:47.460 So, if we both pick four, we both get four. If we both pick five, we both get five. If you pick four

00:31:55.140 and I pick six, we both get zero. So, yeah, we both pick ten, if we're cooperating.

00:32:00.580 Okay. Well, now you've ruined it because you gave me a sense of what it is you're going to do before

00:32:05.720 we played. Oh, okay. Darn it. But that's okay. So, one of the things this game illustrates is that

00:32:12.920 there's a lot of Nash equilibrium. If I'm going to pick six, what is it that you're going to do in

00:32:19.000 this game? What do you want to do? Well, I'd pick six, too, if I knew that. Exactly. Now, you might say,

00:32:24.740 okay, well, six, six is not such a great outcome. We could both pick ten. I got it. But you have to

00:32:35.020 be sufficiently confident that I'm going to pick ten in order for you to pick ten. And in fact,

00:32:43.360 this is a game where there's multiple Nash equilibria. You might decide, well, it's not that

00:32:48.560 hard to pick between them. Because isn't it obvious that everyone should pick ten? Okay. But

00:32:54.760 actually, this game helps explain a lot of why we see some countries developing faster than others.

00:33:02.220 So, in much of the world, there's corruption. And corruption creates problems with police,

00:33:08.500 with doing business. And you can say, you know, I think a world in which there's no corruption

00:33:14.660 is a better world. But if I think you're going to be corrupt, then I have to be corrupt. And if you

00:33:20.320 think I'm going to be corrupt, then you're going to be corrupt. And so, in such a case, we end up both

00:33:26.840 picking two, if you'd like, and we each get two rather than ten and ten. And so, if you're scared

00:33:33.100 that I'm going to pick two, even if you want to pick ten and you know I want to pick ten, if I'm scared

00:33:40.720 that you think I'm scared, then you might pick two because you think I'm going to pick two.

00:33:45.400 And we both know there's a better answer. But neither of us

00:33:48.500 has the confidence that we're willing to go there.

00:33:51.820 Okay. Well, and so that's one example of a game. What's another

00:33:54.660 example? You said there was another example of a game?

00:33:58.800 Well, so the other version is, if we

00:34:00.700 both pick different numbers,

00:34:03.680 now

00:34:05.000 we get a reward.

00:34:06.600 Well, now it's a little harder.

00:34:10.960 What number do you pick between one and ten?

00:34:13.660 So, how does it determine who gets the

00:34:15.840 money? Is it the person who picks the highest?

00:34:18.240 Well, we both get a third party who's going to pay

00:34:20.740 us money unless we hit a tie.

00:34:23.240 Okay. Yeah.

00:34:26.240 And

00:34:26.600 now you can think about this a little bit as

00:34:28.500 commuting.

00:34:31.240 If we both

00:34:32.620 leave at the same time, there's traffic.

00:34:34.060 And is it, do I leave early

00:34:37.180 and you leave late? Do you leave late

00:34:38.700 and I leave early?

00:34:41.260 How is it that we

00:34:42.440 end up uncoordinating our behavior?

00:34:45.820 And we both agree

00:34:46.640 that we want to be uncoordinated, but it's not quite

00:34:48.460 so clear how it is we go about doing

00:34:50.420 that.

00:34:52.380 Interesting.

00:34:53.220 So, I mean, I guess

00:34:54.420 you would have to, there would have to

00:34:56.580 again be communication

00:34:57.560 if you want to over... Well, if there was

00:35:00.120 communication, then it'd be easy. Just like

00:35:02.200 when you said, hey, I'm going to pick ten.

00:35:03.480 Right.

00:35:05.760 But here,

00:35:07.240 you know,

00:35:09.020 in other cases,

00:35:11.540 if you

00:35:13.700 don't allow

00:35:15.620 communication,

00:35:17.300 then the idea of coordination

00:35:19.560 or discoordination without

00:35:21.500 communication is what

00:35:23.440 becomes the challenge.

00:35:25.720 So, you might say, look,

00:35:27.600 the best thing to do in that case is just

00:35:29.520 pick any number at random, between one and

00:35:31.520 ten.

00:35:31.680 And that actually

00:35:35.320 would be a Nash equilibrium in this

00:35:37.280 particular game.

00:35:39.220 Interesting.

00:35:40.240 And I guess

00:35:41.340 you talk, highlight other

00:35:43.140 examples where

00:35:44.020 randomness would be the best

00:35:45.500 approach.

00:35:45.960 You talk about

00:35:46.840 in soccer,

00:35:48.760 in the penalty

00:35:49.480 kick situation,

00:35:51.020 where,

00:35:51.580 you know,

00:35:52.420 this kicker can either kick

00:35:53.880 right or left,

00:35:54.600 and the goalkeeper has to decide

00:35:56.820 whether he's going to go right.

00:35:58.140 Because he doesn't have enough time

00:35:59.120 to see where the ball is going.

00:36:00.240 He has to, like,

00:36:00.720 make that decision as soon as the guy

00:36:02.120 kicks the ball.

00:36:04.340 So,

00:36:04.720 you are, I guess,

00:36:05.700 in the book,

00:36:06.020 you say that it's in the interest of

00:36:07.660 both the kicker and the goalkeeper

00:36:09.300 just to randomize which way they're

00:36:10.680 going to go.

00:36:12.040 Yeah, well,

00:36:12.580 if, in fact,

00:36:13.560 either side could predict

00:36:14.820 what the other side is going to do,

00:36:16.880 then they'd have a big strategic

00:36:18.060 advantage.

00:36:18.520 If I know

00:36:19.260 that you're always going to kick

00:36:20.840 to the right side,

00:36:22.040 then I'm going to want to

00:36:23.100 jump to the right side

00:36:24.220 to try and prevent the shot.

00:36:26.140 And, of course,

00:36:26.660 if you know that I'm jumping to the

00:36:27.760 right side,

00:36:28.080 then you're going to want to

00:36:28.780 kick to the left. 0.97

00:36:30.400 So,

00:36:31.660 each side is trying to

00:36:33.480 get a sense of what the other

00:36:35.600 one is doing,

00:36:36.280 and this is this notion

00:36:37.800 of being unpredictable.

00:36:40.420 Now,

00:36:40.880 what I find interesting

00:36:42.140 in the current presidential

00:36:44.560 election

00:36:45.020 is that

00:36:46.320 that discussion

00:36:47.480 of whether or not

00:36:48.300 you always want to

00:36:48.920 keep people guessing

00:36:50.320 is a strategy

00:36:52.000 that Donald Trump

00:36:52.740 talks about a lot.

00:36:54.420 And sometimes

00:36:55.400 it's the right strategy

00:36:56.420 and sometimes not.

00:36:58.340 So,

00:36:58.560 if it's the case

00:37:00.560 that I'm thinking about

00:37:01.420 doing a surprise

00:37:02.340 military attack,

00:37:03.840 yeah,

00:37:04.140 then I don't want people

00:37:05.040 to know

00:37:05.580 which day I'm going,

00:37:07.640 where,

00:37:08.000 am I going to land

00:37:08.760 at Dunkirk?

00:37:09.840 Am I going to land

00:37:10.620 in Normandy?

00:37:11.980 I don't want the enemy

00:37:13.560 to have a heads up

00:37:15.500 in terms of where

00:37:16.180 my troops are landing.

00:37:17.800 On the other hand,

00:37:19.600 if it's something like,

00:37:21.560 what will my response be

00:37:23.180 if Russia attacks

00:37:25.360 a NATO country

00:37:26.300 or if China

00:37:27.480 attacks Taiwan, 0.54

00:37:28.560 I want the other side

00:37:30.320 to know

00:37:30.820 without any randomness

00:37:32.320 that NATO

00:37:34.500 will respond.

00:37:36.200 And we don't want

00:37:37.520 people to be guessing

00:37:38.300 in that case.

00:37:39.320 We want to turn this

00:37:40.300 into a sequential move game

00:37:41.540 where they can imagine

00:37:43.240 and know

00:37:44.740 with great certainty

00:37:45.660 rather than have to guess

00:37:46.760 what the response is

00:37:48.180 because if they think

00:37:48.940 NATO is going to respond

00:37:49.940 or U.S. will respond

00:37:51.220 to attack of Taiwan,

00:37:52.700 then they won't go

00:37:53.700 and initiate the conflict.

00:37:54.880 So you have to strategize

00:37:57.140 about your strategy.

00:38:00.160 It's an English expression,

00:38:01.640 different horses

00:38:02.260 for different courses.

00:38:03.700 And that it's not the case

00:38:05.200 that playing a random strategy

00:38:06.560 is always a good idea.

00:38:08.340 Sometimes you want to keep

00:38:09.400 the other side guessing

00:38:10.140 what you're going to do.

00:38:11.260 And other times,

00:38:12.320 exactly the reverse.

00:38:13.980 You want to make sure

00:38:14.660 they don't guess,

00:38:15.920 that they know

00:38:16.660 and can anticipate

00:38:17.480 with precision

00:38:18.420 how you will respond

00:38:20.040 to any action.

00:38:20.800 Another example you gave

00:38:22.620 I thought was interesting

00:38:23.220 about randomness

00:38:24.080 being effective

00:38:24.940 is with parking tickets.

00:38:30.040 So you just kind of,

00:38:30.980 you randomly enforce

00:38:32.080 who gets a parking ticket

00:38:33.460 and then that kind of

00:38:34.580 keeps people on the lookout.

00:38:36.240 Like, I better not do that

00:38:37.160 because there's a chance

00:38:38.120 that I could get a ticket.

00:38:40.740 But if people knew

00:38:41.640 in advance,

00:38:42.160 like, okay,

00:38:42.600 if they broke,

00:38:43.240 if they were parking

00:38:44.080 when they shouldn't be parking,

00:38:45.240 they knew they'd get a ticket

00:38:46.100 then they,

00:38:47.460 or they knew there's times

00:38:48.660 when they wouldn't get a ticket,

00:38:49.540 they would just

00:38:50.000 break the law all the time.

00:38:52.900 Well, here's the thing.

00:38:54.620 If we said we're only,

00:38:56.320 if, think about

00:38:56.900 enforcing parking tickets

00:38:58.460 a lot like the IRS

00:38:59.440 enforcing tax returns.

00:39:01.660 And if we said

00:39:02.380 we're only going to audit

00:39:03.200 people this year

00:39:04.180 whose name begins with D,

00:39:07.420 then 25 out of the 26 letters

00:39:09.720 would say,

00:39:10.040 okay, this is not the,

00:39:10.900 this is the year

00:39:11.420 I can get away with cheating.

00:39:13.940 And so,

00:39:15.160 instead you want to say,

00:39:16.960 look,

00:39:17.340 we don't have the resources

00:39:18.820 to audit every parked car

00:39:21.480 or every tax exam.

00:39:23.440 But what we're going to do

00:39:24.600 is keep you guessing

00:39:26.340 as to which ones

00:39:27.660 we're going to look at.

00:39:28.940 And if we find

00:39:30.060 that you have made a mistake,

00:39:32.040 then we're not just going to ask you

00:39:33.300 to pay the cost

00:39:34.260 of the parking meter,

00:39:35.300 the 50 cents

00:39:36.440 that you would have put in.

00:39:37.600 We're actually going to stick you

00:39:38.600 with a $25 fine.

00:39:39.800 And if we find

00:39:42.080 that you cheated

00:39:42.560 on your tax returns,

00:39:43.480 we're not just going to ask you

00:39:44.680 for the amount of money

00:39:45.800 that you should have paid.

00:39:47.100 We're going to impose

00:39:47.740 severe penalties on you.

00:39:49.440 And so,

00:39:49.920 we reduce the probability

00:39:51.260 of getting caught,

00:39:53.080 but we increase the penalties

00:39:54.340 and we keep people guessing

00:39:56.920 by picking a random audit

00:39:59.340 or random enforcement strategy.

00:40:01.760 So, I mean,

00:40:01.960 how do you determine

00:40:02.640 when a random strategy is best

00:40:05.300 or when it's not best?

00:40:06.380 I mean,

00:40:06.540 how do you sit down and think?

00:40:08.160 You look at the situation,

00:40:10.140 you have to decide,

00:40:11.100 okay,

00:40:11.320 should I inject some randomness here

00:40:12.980 or maybe I should go

00:40:13.880 make it a sequential game?

00:40:15.060 How do you make that decision?

00:40:17.200 Well,

00:40:17.720 it is actually,

00:40:18.700 in the case of taxes,

00:40:19.860 a little bit of sequential game.

00:40:22.740 The issue is,

00:40:24.180 in terms of randomness,

00:40:25.080 do I care

00:40:26.180 if the other side

00:40:27.180 knows what I'm doing?

00:40:29.540 Okay?

00:40:30.060 So,

00:40:30.880 if I'm playing

00:40:31.740 to shoot to the right

00:40:32.760 and I announce

00:40:35.280 that ahead of time,

00:40:36.140 would that be a good

00:40:38.200 or a bad thing?

00:40:39.620 And in the case of soccer,

00:40:40.520 it would be a bad thing.

00:40:41.200 If I said it ahead of time,

00:40:42.900 who it is

00:40:43.440 that I was going to audit,

00:40:44.660 would that be a good

00:40:45.780 or a bad thing?

00:40:47.320 And the answer is,

00:40:49.060 it's a bad thing

00:40:49.940 because then I would be auditing

00:40:51.520 exactly the wrong people.

00:40:54.220 And so,

00:40:54.880 if I move

00:40:56.280 in a way

00:40:57.960 that I don't want

00:40:59.060 other people

00:40:59.800 to anticipate

00:41:00.980 what it is

00:41:01.780 that I'm doing,

00:41:02.720 to know what I'm doing,

00:41:03.740 that's typically the case

00:41:05.620 where a random strategy

00:41:06.920 is a good idea.

00:41:08.640 Okay.

00:41:09.620 That makes sense.

00:41:10.920 All right,

00:41:11.060 so we've been talking

00:41:11.720 about game theory

00:41:13.500 whenever other people

00:41:15.020 are involved.

00:41:15.980 But you have this

00:41:16.400 interesting section

00:41:17.160 in your book

00:41:17.620 about using game theory

00:41:18.920 against yourself

00:41:20.040 for self-improvement,

00:41:22.220 personal improvement.

00:41:23.660 So,

00:41:24.160 how can we play,

00:41:25.680 apply game theory

00:41:26.480 towards ourself

00:41:27.880 when there's just

00:41:28.420 one of us?

00:41:29.920 Well,

00:41:30.280 the thing is,

00:41:30.740 there isn't just one of us.

00:41:31.740 So,

00:41:32.560 the game we're playing

00:41:33.480 is against this person

00:41:34.700 who we might call

00:41:35.440 our future self.

00:41:37.360 And we have all sorts

00:41:38.140 of aspirations

00:41:38.740 for that future person.

00:41:40.560 That person's going

00:41:41.060 to exercise more,

00:41:42.040 eat less,

00:41:43.720 not smoke,

00:41:45.200 be nicer.

00:41:47.460 And,

00:41:48.340 while we would like

00:41:49.280 this other person

00:41:50.080 to do all those things,

00:41:51.960 when we become

00:41:52.780 that person in the future,

00:41:54.100 we may decide,

00:41:55.000 you know,

00:41:55.380 I'm going to have

00:41:56.020 another cookie.

00:41:57.480 No,

00:41:58.020 I'm a little tired today.

00:41:59.300 No room to exercise.

00:42:00.940 I can delay

00:42:02.060 my quitting smoking

00:42:03.840 for another week.

00:42:06.800 And so,

00:42:07.300 what we want to do

00:42:08.520 is create a game

00:42:09.660 where we change

00:42:10.520 the payoffs

00:42:11.180 for this future person

00:42:13.480 while today

00:42:14.960 we have some ability

00:42:16.080 to do that.

00:42:17.760 And,

00:42:18.060 that's anything,

00:42:19.380 there's a,

00:42:19.840 there's a gentleman

00:42:21.400 who I think

00:42:21.940 put signs up

00:42:22.820 all over town

00:42:23.500 which said,

00:42:24.660 if you find me

00:42:25.720 eating any pies

00:42:26.960 or desserts,

00:42:28.200 you can collect

00:42:29.260 a thousand dollars.

00:42:30.940 And so,

00:42:32.600 the idea is

00:42:33.720 that

00:42:34.100 now he's turned

00:42:36.400 all of his neighbors

00:42:37.640 into enforcers

00:42:39.740 for him

00:42:40.040 and while he might

00:42:40.660 like to have that pie,

00:42:42.440 now he knows

00:42:43.660 that it'll cost him

00:42:44.320 a thousand dollars

00:42:45.060 and that's not worth it.

00:42:47.500 And so,

00:42:48.140 two colleagues

00:42:48.920 of mine here

00:42:49.600 at Yale,

00:42:51.460 Dean Carlin

00:42:52.040 and Ian Ayers,

00:42:53.240 started a website

00:42:54.160 called

00:42:54.660 stick,

00:42:55.160 S-T-I-C-K-K 1.00

00:42:57.160 dot com

00:42:58.560 that's also run

00:43:00.040 by one of my

00:43:00.600 former students,

00:43:01.420 Jordan Goldberg

00:43:01.980 and

00:43:03.280 in this website

00:43:05.940 it allows you

00:43:07.260 to make commitments

00:43:08.100 against yourself

00:43:09.440 or contracts

00:43:10.320 against yourself

00:43:11.040 where you say,

00:43:12.620 if I do X

00:43:13.800 then I will have

00:43:15.240 to pay something

00:43:16.500 to other people

00:43:17.540 as a consequence

00:43:18.880 and therefore

00:43:20.200 I'm not going to want

00:43:21.420 to go ahead

00:43:22.120 and do it.

00:43:23.100 I've used stick

00:43:25.460 in the past

00:43:26.320 for myself

00:43:26.920 when I had

00:43:28.060 writing deadlines

00:43:28.860 and I needed

00:43:30.280 to get it done.

00:43:31.340 What I think

00:43:31.560 is interesting

00:43:31.920 about stick

00:43:32.320 is that you can

00:43:32.880 set it up

00:43:33.360 to where

00:43:33.800 you can have

00:43:34.640 the money

00:43:35.000 go to

00:43:35.520 what they call

00:43:36.080 an anti-charity.

00:43:37.780 Exactly.

00:43:38.320 For an organization

00:43:38.960 because I mean

00:43:39.360 you could say,

00:43:39.840 okay,

00:43:40.160 donate the money

00:43:40.860 to the American

00:43:41.360 Heart Association

00:43:42.180 like you won't

00:43:43.240 feel that bad

00:43:44.160 if you're 500-

00:43:45.540 I was going to do it

00:43:46.120 anyway so that's not

00:43:46.960 so I have to give it

00:43:47.680 to the John Birch Society.

00:43:48.780 Right, exactly.

00:43:49.800 It's some organization

00:43:50.600 you absolutely despise.

00:43:53.240 Detest.

00:43:54.100 Yeah.

00:43:54.580 Yeah, so that's

00:43:55.380 Game Theory in Action.

00:43:56.540 That was a result

00:43:57.500 of Game Theory,

00:43:58.120 that website.

00:43:58.940 Yeah.

00:44:00.240 Absolutely.

00:44:01.420 You can either

00:44:02.520 give a small amount

00:44:04.180 of money

00:44:04.520 to a charity

00:44:05.600 you despise

00:44:06.340 or a large amount

00:44:07.660 of money

00:44:08.060 much more

00:44:09.100 than you would have liked

00:44:10.020 to somebody

00:44:11.120 who you feel neutral about

00:44:12.680 or even like.

00:44:13.420 So yeah,

00:44:13.900 I may like

00:44:14.420 the American Cancer Society

00:44:15.420 but not enough

00:44:16.280 to give them

00:44:16.620 $100,000.

00:44:17.160 Right.

00:44:19.520 And so

00:44:20.080 you may say

00:44:21.020 giving $1,000

00:44:22.360 to the John Birch Society

00:44:23.580 and $100,000

00:44:24.640 to the American Cancer Society

00:44:26.080 sort of are both

00:44:27.160 equally painful to me

00:44:28.280 if you'd like.

00:44:29.260 Right.

00:44:30.440 That's interesting.

00:44:30.980 So yeah,

00:44:31.300 I've used it before

00:44:32.680 and I think we've talked

00:44:33.260 about it before

00:44:33.640 on the podcast before

00:44:34.580 and if any of you

00:44:35.700 have had trouble

00:44:37.320 with the goal

00:44:38.100 it is extremely effective.

00:44:41.340 I've had home runs

00:44:42.540 with it.

00:44:42.760 I've never had a problem

00:44:43.600 having to pay up

00:44:45.380 my money

00:44:45.800 because I always get

00:44:46.760 the thing done.

00:44:47.060 In my own life

00:44:47.860 before STIC existed

00:44:50.180 I was teaching

00:44:51.900 a large class

00:44:52.820 and I showed up

00:44:53.920 the first day

00:44:54.380 with a scale

00:44:55.000 and I told my students

00:44:57.120 that if I didn't lose

00:44:58.360 15 pounds

00:44:59.060 during the semester

00:44:59.740 I would teach

00:45:00.240 my last class

00:45:00.940 in a Speedo.

00:45:03.940 And I

00:45:04.820 offered my students

00:45:08.400 the same ability

00:45:09.220 if they wanted

00:45:09.840 to weigh themselves

00:45:10.580 and they would have

00:45:12.160 to come to the last class

00:45:13.260 in a Speedo.

00:45:14.260 And I think

00:45:16.700 about 15

00:45:17.240 took me up

00:45:17.740 on this

00:45:18.120 and when my dean

00:45:20.200 heard about it

00:45:20.880 he was none too pleased.

00:45:21.980 He said,

00:45:22.240 you know,

00:45:22.500 Barry,

00:45:23.040 you don't understand

00:45:24.120 being a professor

00:45:24.740 here at Yale

00:45:25.420 it's just not appropriate

00:45:27.320 it's just not done

00:45:28.500 I would be

00:45:30.580 very upset

00:45:31.400 if you taught

00:45:32.520 your last class

00:45:33.260 in a Speedo.

00:45:34.900 And my response

00:45:35.960 was,

00:45:36.620 yeah,

00:45:37.180 me too

00:45:37.640 and that's why

00:45:38.680 it's not going

00:45:39.160 to happen.

00:45:40.860 And of course

00:45:41.620 I lost the weight.

00:45:42.340 so

00:45:44.220 that

00:45:45.840 the idea

00:45:47.280 of committing yourself

00:45:48.280 to do something

00:45:48.780 you really wouldn't like

00:45:49.660 and so I

00:45:50.260 worked with

00:45:51.580 ABC Primetime

00:45:52.560 and did a TV show

00:45:54.900 where

00:45:55.180 we took photographs

00:45:56.860 of people

00:45:57.540 wearing Speedos

00:45:58.700 before they lost weight

00:46:00.860 and these were people

00:46:02.100 who really needed

00:46:02.980 to lose weight

00:46:03.520 and these photographs

00:46:04.300 of them at a Speedo

00:46:05.200 were none too attractive

00:46:06.880 and the deal was

00:46:08.580 if they didn't lose

00:46:09.460 15 pounds

00:46:10.300 over the next

00:46:10.920 six weeks

00:46:11.520 those photographs

00:46:13.740 would be posted

00:46:14.340 online

00:46:15.060 on TV

00:46:15.760 and

00:46:17.120 as one woman

00:46:18.260 said

00:46:18.820 you know

00:46:19.940 I know that

00:46:20.540 being obese

00:46:21.340 will lead to

00:46:22.480 heart attacks

00:46:23.380 diabetes

00:46:24.040 stroke

00:46:24.640 and death

00:46:25.200 but

00:46:26.360 that hasn't been

00:46:27.100 enough to get me

00:46:27.740 to lose weight

00:46:28.320 having my ex-boyfriend

00:46:30.520 see me hanging out

00:46:31.340 of a bikini

00:46:31.840 that's the motivation

00:46:33.480 I need

00:46:33.960 and let's be clear

00:46:35.760 we didn't trick people

00:46:36.720 into doing this

00:46:37.460 they voluntarily

00:46:38.760 signed up

00:46:39.540 and they were

00:46:40.020 happy to do it

00:46:40.920 because they knew

00:46:42.120 that doing this

00:46:42.940 would actually

00:46:43.800 provide them

00:46:44.660 the deadline

00:46:46.240 and the incentive

00:46:46.820 they needed

00:46:47.380 to get started

00:46:48.440 and to lose weight

00:46:49.300 but you talk about

00:46:51.420 in the book though

00:46:52.000 it lost its effectiveness

00:46:54.380 that game

00:46:55.160 because

00:46:56.000 someone didn't

00:46:57.460 lose the weight

00:46:58.080 and there was

00:46:58.880 a lawsuit

00:46:59.320 involved

00:46:59.700 you can't let

00:47:00.740 that image

00:47:01.420 be shown

00:47:02.600 and they didn't

00:47:03.560 not quite

00:47:04.340 one person

00:47:06.520 didn't lose

00:47:08.440 the weight

00:47:08.800 she actually

00:47:09.920 went down

00:47:10.300 several dress sizes

00:47:11.460 and I think

00:47:12.060 it gained some muscle

00:47:12.800 because she was

00:47:13.440 really working out

00:47:14.240 and so

00:47:14.580 really looked better

00:47:15.660 and the wimps 0.53

00:47:18.180 at ABC

00:47:20.160 decided

00:47:21.680 they didn't

00:47:22.360 want to show

00:47:23.220 the photographs

00:47:24.140 because they were

00:47:25.500 afraid of a lawsuit

00:47:26.380 and so

00:47:28.860 as a result

00:47:29.580 now when they

00:47:31.560 tried to redo

00:47:32.360 the series

00:47:32.960 people

00:47:34.980 would say

00:47:35.800 well

00:47:36.100 you know

00:47:36.480 okay

00:47:36.740 if I don't

00:47:37.120 lose the weight

00:47:37.640 all I have to do

00:47:38.800 is threaten

00:47:39.180 a lawsuit

00:47:39.620 and

00:47:41.340 I'll get off

00:47:43.260 the hook

00:47:43.580 and so

00:47:44.720 it's just not

00:47:45.280 the threat

00:47:46.060 no longer

00:47:46.540 really exists

00:47:47.220 right

00:47:47.800 so what makes

00:47:48.420 that work

00:47:48.800 is the threat

00:47:49.440 that's part

00:47:49.900 that's one

00:47:50.320 aspect of

00:47:51.260 strategizing

00:47:52.040 is using

00:47:52.480 threats

00:47:53.020 well it's

00:47:54.900 or a promise

00:47:56.000 in this particular

00:47:56.460 case

00:47:56.820 I mean

00:47:57.060 it's a sense

00:47:57.620 of

00:47:57.860 we reach

00:47:58.880 this agreement

00:47:59.400 and if you

00:48:01.080 lose the weight

00:48:01.660 we don't show it

00:48:02.340 and if you do

00:48:02.820 lose the weight

00:48:03.280 we will show it

00:48:04.080 and while

00:48:05.380 if you're going to

00:48:06.460 do this only once

00:48:07.380 it's nice to let

00:48:08.400 somebody off the hook

00:48:09.160 because it doesn't

00:48:09.680 really matter

00:48:10.260 if you ever thought

00:48:12.540 about doing it again

00:48:13.420 then once you let

00:48:14.420 them off the hook

00:48:15.080 you have no

00:48:15.740 credibility in this

00:48:16.700 well that

00:48:18.380 that leads me to

00:48:19.060 I think

00:48:19.420 a nice segue

00:48:20.360 to my next

00:48:20.820 question

00:48:21.120 about using

00:48:21.620 game theory

00:48:22.480 as a parent

00:48:24.260 with your children

00:48:25.520 to influence

00:48:26.960 good behavior

00:48:27.780 because as you

00:48:29.680 said

00:48:29.880 you can

00:48:30.440 there's that

00:48:31.280 tendency

00:48:31.660 if you're

00:48:32.400 talking to your

00:48:33.060 child about

00:48:33.500 something

00:48:33.820 and you let

00:48:34.180 them off the

00:48:34.560 hook once

00:48:35.200 they might get

00:48:36.240 in their head

00:48:36.540 well

00:48:36.840 if mom and dad

00:48:38.100 did it this

00:48:38.500 one time

00:48:39.140 well maybe

00:48:39.680 if I do

00:48:39.920 the same

00:48:40.300 thing again

00:48:40.740 they'll do

00:48:41.120 it again

00:48:41.640 so there's a

00:48:45.020 great book on

00:48:45.700 this called

00:48:46.160 Parentonomics

00:48:47.400 Parentonomics

00:48:49.040 by Joshua Gans

00:48:50.480 which applies

00:48:51.460 game theory

00:48:52.120 to child

00:48:52.820 rearing

00:48:53.140 and you

00:48:55.740 might decide

00:48:56.220 the following

00:48:56.720 is a

00:48:57.340 evil

00:48:58.460 sinister

00:49:00.200 version of

00:49:01.140 parenting

00:49:01.680 but let's

00:49:02.960 say that

00:49:03.420 you've got

00:49:04.420 two kids

00:49:05.020 and you

00:49:07.220 know as a

00:49:07.580 parent you

00:49:08.280 really believe

00:49:08.940 that you

00:49:09.480 can't

00:49:11.020 hit a

00:49:11.680 kid 0.95

00:49:12.060 or

00:49:12.440 corporal

00:49:13.080 punishment

00:49:13.380 that just

00:49:14.300 doesn't

00:49:15.060 go anymore

00:49:15.760 and the

00:49:16.720 kid knows

00:49:17.140 it

00:49:17.480 and so

00:49:18.000 is willing

00:49:18.260 to take

00:49:18.460 advantage

00:49:18.820 of you

00:49:19.160 well

00:49:21.320 so the

00:49:22.100 parent says

00:49:22.900 to the

00:49:23.200 older kid

00:49:23.800 look

00:49:24.440 if you

00:49:24.960 misbehave

00:49:25.700 I'm going 0.91

00:49:27.720 to punish 0.99

00:49:28.180 your sibling

00:49:28.720 and

00:49:32.260 the punishment

00:49:33.900 might be

00:49:34.720 whether it be

00:49:35.200 going to bed

00:49:35.600 early or

00:49:36.360 you can't go

00:49:37.980 see a movie

00:49:38.420 or something

00:49:38.880 well I'll

00:49:40.800 tell you

00:49:41.120 one sibling

00:49:41.640 has no

00:49:42.240 compulsion

00:49:42.960 against

00:49:44.320 hitting or

00:49:45.740 doing things

00:49:46.600 to annoy

00:49:47.000 the other

00:49:47.320 sibling

00:49:47.580 much more

00:49:48.120 so than

00:49:48.520 any parent

00:49:48.980 can do

00:49:49.380 and so

00:49:50.500 if you

00:49:50.680 want to

00:49:50.840 make a

00:49:51.100 credible

00:49:51.440 threat

00:49:51.920 to one

00:49:53.000 kid

00:49:53.300 that if

00:49:55.100 they really

00:49:55.480 misbehave

00:49:56.220 there's going

00:49:57.060 to be

00:49:57.500 a serious

00:49:58.040 consequence

00:49:58.480 to it

00:49:59.020 the idea

00:50:00.220 of punishing

00:50:00.700 the other

00:50:01.100 one in

00:50:01.460 response

00:50:01.940 might be

00:50:03.640 a much

00:50:03.900 more

00:50:04.080 effective

00:50:04.340 threat

00:50:04.660 okay

00:50:06.220 that's

00:50:07.300 interesting

00:50:07.680 I'm going

00:50:07.980 to I might

00:50:08.740 try that

00:50:09.240 on my

00:50:09.600 five and

00:50:09.960 three year

00:50:10.260 old

00:50:10.800 we'll see

00:50:11.140 it's wildly

00:50:12.920 unfair

00:50:13.380 and that's

00:50:14.300 actually part

00:50:14.780 of the whole

00:50:15.060 point

00:50:15.400 is that

00:50:16.740 it's unfair

00:50:17.220 all right

00:50:19.040 well any

00:50:19.400 other ways

00:50:20.580 that parents

00:50:21.080 can use

00:50:21.420 game theory

00:50:21.940 to you know

00:50:22.560 influence

00:50:23.180 good behavior

00:50:23.620 like get

00:50:23.940 your kid

00:50:24.260 to read

00:50:24.840 more or

00:50:25.980 say please

00:50:27.180 or thank you

00:50:27.600 I mean just

00:50:27.960 anything

00:50:28.500 well the one

00:50:30.500 that you

00:50:31.820 I don't know

00:50:32.260 how much

00:50:32.580 game theory

00:50:32.900 you'll think

00:50:33.280 and this

00:50:33.540 is my

00:50:34.640 strategy

00:50:35.960 with our

00:50:36.900 kids

00:50:37.200 was to

00:50:38.860 give them

00:50:39.540 an opportunity

00:50:40.440 to have a

00:50:41.160 list of

00:50:41.560 three foods

00:50:42.360 that they

00:50:43.040 didn't have

00:50:43.380 to eat

00:50:43.680 and they

00:50:46.400 could change

00:50:46.940 that list

00:50:47.480 after any

00:50:48.160 meal but

00:50:48.720 not before

00:50:49.240 a meal

00:50:49.520 and so

00:50:51.840 this

00:50:52.820 led them

00:50:54.180 to think

00:50:55.260 about strategies

00:50:56.020 in the sense

00:50:56.800 of well dad

00:50:57.540 doesn't like

00:50:58.000 brussel sprouts

00:50:58.620 so even if I

00:50:59.800 don't like

00:51:00.100 brussel sprouts

00:51:00.600 I probably

00:51:01.060 don't have to

00:51:01.460 put it on the

00:51:01.860 list because

00:51:02.560 it's not going

00:51:03.060 to be served

00:51:03.640 very often

00:51:04.300 and then

00:51:06.940 it's

00:51:07.740 how

00:51:08.380 intensely

00:51:09.320 do I

00:51:09.740 dislike

00:51:10.140 this

00:51:10.500 how often

00:51:11.880 is something

00:51:12.260 going to be

00:51:12.620 served

00:51:12.980 and so

00:51:14.820 they have

00:51:15.120 control

00:51:15.640 in the sense

00:51:16.460 that they

00:51:16.720 really don't

00:51:17.060 like something

00:51:17.520 they can

00:51:17.820 put it

00:51:18.060 on a

00:51:18.260 list

00:51:18.540 but

00:51:19.940 they have

00:51:20.800 to choose

00:51:21.480 which items

00:51:22.720 they can't

00:51:23.180 have an

00:51:23.440 infinite list

00:51:24.040 and that

00:51:26.660 seemed to

00:51:27.260 eliminate

00:51:27.680 most fights

00:51:28.460 that we

00:51:28.680 had over

00:51:29.080 food

00:51:29.400 okay

00:51:30.220 that's

00:51:30.600 interesting

00:51:30.920 too

00:51:31.120 I'm going

00:51:31.560 to try

00:51:31.780 that one

00:51:32.120 out too

00:51:32.500 all my

00:51:33.560 kiddos

00:51:33.900 well

00:51:35.000 Barry

00:51:35.260 this has

00:51:35.540 been a

00:51:35.920 really

00:51:36.200 interesting

00:51:36.500 conversation

00:51:37.040 where can

00:51:37.420 people learn

00:51:37.820 more about

00:51:38.180 your book

00:51:38.760 and your

00:51:39.060 work

00:51:39.440 if they

00:51:41.760 go to

00:51:42.300 barrynailbuff.com

00:51:43.980 there's a

00:51:45.940 whole list

00:51:46.560 of books

00:51:47.740 that

00:51:48.140 I've

00:51:49.800 co-authored

00:51:50.660 on everything

00:51:51.680 from

00:51:52.400 innovation

00:51:53.120 to

00:51:53.820 competing

00:51:55.720 and cooperating

00:51:56.480 to

00:51:57.080 problem

00:51:58.560 solving

00:51:58.940 to

00:51:59.440 business

00:52:00.080 strategy

00:52:00.620 to

00:52:01.200 startups

00:52:02.240 there's

00:52:03.660 my

00:52:03.960 most

00:52:04.200 recent

00:52:04.420 book

00:52:04.700 is

00:52:05.040 done

00:52:05.640 in

00:52:05.740 graphic

00:52:06.020 form

00:52:06.440 telling

00:52:07.340 the

00:52:07.500 startup

00:52:07.880 of

00:52:08.260 honesty

00:52:08.720 and

00:52:09.920 then

00:52:10.260 I've

00:52:10.860 just

00:52:11.100 done

00:52:11.360 a

00:52:11.540 free

00:52:12.020 online

00:52:15.300 course

00:52:16.000 on

00:52:16.380 negotiation

00:52:17.000 which

00:52:18.000 takes

00:52:18.380 game

00:52:18.660 theory

00:52:18.900 and

00:52:19.040 applies

00:52:19.420 it

00:52:19.640 to

00:52:19.920 how

00:52:20.180 you

00:52:20.320 can

00:52:20.440 become

00:52:20.720 a

00:52:20.900 better

00:52:21.080 negotiator

00:52:21.680 and

00:52:22.300 that's

00:52:22.600 at

00:52:22.800 Coursera

00:52:23.560 C-O-U-R-S-E-R-A 1.00

00:52:26.120 dot org

00:52:27.080 and

00:52:27.800 if

00:52:27.900 you

00:52:28.000 want

00:52:28.220 the

00:52:28.360 whole

00:52:28.640 link

00:52:28.980 it's

00:52:29.220 Coursera

00:52:29.600 dot org

00:52:30.240 slash

00:52:30.760 learn

00:52:31.260 slash

00:52:31.920 negotiation

00:52:32.760 perfect

00:52:33.980 well

00:52:34.560 Barry

00:52:34.780 Nailbuff 1.00

00:52:35.080 thank you

00:52:35.420 so much

00:52:35.620 your time

00:52:35.880 it's

00:52:36.080 been

00:52:36.220 a

00:52:36.360 pleasure

00:52:36.640 thank

00:52:37.700 you

00:52:37.840 for

00:52:38.020 having

00:52:38.260 me

00:52:38.880 my

00:52:40.340 guest

00:52:40.500 today

00:52:40.600 was

00:52:40.720 Barry

00:52:40.940 Nailbuff 1.00

00:52:41.300 he's

00:52:41.500 the

00:52:41.620 author

00:52:41.840 of

00:52:41.960 the

00:52:42.020 book

00:52:42.160 the

00:52:42.320 art

00:52:42.540 of

00:52:42.680 strategy

00:52:43.140 it's

00:52:43.400 available

00:52:43.660 on

00:52:43.820 amazon.com

00:52:44.620 and

00:52:44.760 bookstores

00:52:45.160 everywhere

00:52:45.620 also

00:52:45.940 check

00:52:46.180 out

00:52:46.320 his

00:52:46.440 website

00:52:46.760 barry

00:52:47.120 nailbuff 1.00

00:52:47.580 dot com

00:52:48.080 for

00:52:48.220 more

00:52:48.380 information

00:52:48.720 about

00:52:48.960 his

00:52:57.080 well

00:53:06.940 that

00:53:07.140 wraps

00:53:07.360 up

00:53:07.540 another

00:53:07.840 edition

00:53:08.160 of

00:53:08.360 the

00:53:08.500 art

00:53:08.700 of

00:53:08.880 manliness

00:53:09.260 podcast

00:53:09.640 for

00:53:09.900 more

00:53:10.100 manly

00:53:10.340 tips

00:53:10.540 and

00:53:10.620 advice

00:53:10.880 make

00:53:11.120 sure

00:53:11.260 to

00:53:11.360 check

00:53:11.500 out

00:53:11.620 the

00:53:11.740 art

00:53:11.900 of

00:53:12.020 manliness

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00:53:12.740 at

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00:53:13.140 manliness

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00:53:14.540 show

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00:53:14.860 edited

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00:53:15.260 creative

00:53:15.500 audio

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00:53:16.280 Tulsa

00:53:16.560 Oklahoma

00:53:16.940 if

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00:53:17.260 any

00:53:17.400 audio

00:53:17.720 editing

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00:53:18.460 any

00:53:18.620 audio

00:53:19.100 production

00:53:19.540 needs

00:53:19.800 check

00:53:20.000 them

00:53:20.120 out

00:53:20.220 at

00:53:20.360 creative

00:53:20.580 audio

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00:53:21.680 and

00:53:22.380 we

00:53:22.520 appreciate

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00:53:23.300 reviews

00:53:23.820 on

00:53:27.080 your

00:53:27.200 support

00:53:27.480 and

00:53:27.620 until

00:53:27.860 next

00:53:28.060 time

00:53:28.220 this

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00:53:28.420 Brett

00:53:28.620 McKay

00:53:28.940 telling

00:53:29.200 you

00:53:29.320 to

00:53:29.460 stay

00:53:29.860 manly

The Art of Manliness - November 09, 2016

#250： The Art of Strategy

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