Transcript GamesTalk2012 (KateRevised)

Google, gaming & getting ahead
Games & Observational Learning
Patrick A. McNutt, FRSA
Web: www.patrickmcnutt.com
McNutt: Game Embedded Strategy (2010) McGraw Hill
Q: What is Game Theory about?
A: Observational learning in a time continuum

Finding & extracting a pattern from a sequence of
moves (historic v real-time)

Understanding the pattern as wave movements

Information embedded in observed behaviour

Information filtering and ‘transactive’ memory?
Q: So what? Why?

Information has a value

Individual memory is ‘outsourced’ to Google,
Facebook, LinkedIn…

Behaviour can be ‘tracked’

Predicting likely future actions and reactions
Tracking decisions: Observe but do not judge
Decisions, action are not isolated events
 They can reveal a pattern
 Observe, and filter the information embedded in the
signal
 Information used to monitor and report on individual
behaviour
 Cloud computing
 FBI Strategic Information & Operations Centre
 FBI Behavioural Analysis Unit

Hegazy-McNutt ‘Non-linear thinking’ image…
time continuum
Time continuum.. observing patterns in time, dT/dt = -1
Last Month…
 Last Week…
 Yesterday…
 Today…
 Tomorrow…
 Next Week…
 Next Month…

1 hour ago
10 minutes ago
1 minute ago
Now
1 minute later
10 minutes later
1 hour later
Host (updating your belief system) or…
Guest (observing signals & type)

WHERE TO HOST THE BBQ?

Preference

Regrets

Disappointment

Disaster

Note: Host [incumbent] v Guest [entrant]
SUN
RAIN
HOUSE
Regrets
Disappointment
GARDEN
Preference
Disaster
Thinking strategically in a time continuum
1st Objective
 Cascade effect
 Understanding the
pattern (eg a
restaurant queue,
CTL) in what you
observe
2nd Objective

Observing in context

What is the information
in the pattern
observed?
Observation
Signal
Type
MOVE
Our interest is in the
sequence of moves as a pattern
1st Objective: Cascade Effect

Observe individual type

Private information & truthful revelation: memory
cost of deception

Action and reaction: Yes

Action and diffusion: ‘Black Swan’ effect

What market should a firm be in?
Jul ‘05
Google buys Android Inc
Nov ‘07
Google opens Android
Apple invite app developers
Oct ‘07
Nokia operates Windows
i5
Apple sues Samsung
2010
Nokia sues Apple
Oct Nov Jul Aug Nov Jun Jul
Samsung sues Apple
i4 launched
2009
Samsung Galaxy
Motorola CLIQ, Google Nexus
i3GS launched
2008
HTC Magic
G2
BB Tour
Mar Jun Jul Aug
BB Storm
i3G launched
i3G announced
2007
HTC Dream
Aug Jan Mar Jun
BB Bold
G1
Corporate intentions
2006
i2G launched
i2G announced
2005
BB Curve
BB Pearl
CTL: 2005 Google & Android
2011
Apple
share
price
Apr Jun
?
G3
2nd Objective: In Context
Signals: observe but do not judge
 Signals contain information?
 Type & Signals
 Keeping to type: trust and truth
 Signalling cycle… the critical time line: CTL

Architecture of a Game

Playing a game without information

Playing a game with ‘good’ signals

What is the optimal move, given X?

How does the value of the signal vary with X under
different actions?

Playing to win

Playing not to lose
• 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
CTL – observe and filter the information
Example (abstract) Google Android signalling
Critical Time Line Nokia/ Apple/ Google - Western Europe – Mobile Handset
Announce Open Handset alliance;
Android SDK preview; contest kick
off. Google recognizes the need for
an ecosystem
Jul
2007
Aug
2007
Android market
announced
App inventor
available
Sep
Oct
Nov
Mar
Aug
Jul
Sep
Mar
Apr
Jul
Feb
2007
2007
2007
2008
2008
2009
2009
2010
2010
2010
2011
Acquired Loudeye to
target iTunes
acquired Twango for
media sharing
HTC Hero launches
in Europe
Acquired navteq:
digital mapping data
Announced intent to
buy Enpocket
(mobile advertising)
Unveil 7705 Twist
Announce shift to
internet business @
annual stock holder
meeting
Acquired Metacarta local search
Acquired novarra mobile browser
Acquired Metacarta local search
Game Embedded Strategy [GEMS] & Tn=3
The sequence of moves is observed

1. by rivals as a pattern, revealing your ‘type’ as a
player…reveals insight into company strategy

2. Can I trust you? Private information is not
observable, only actions are.
What is strategy? CTL: Today’s decision depends
on the one we shall make tomorrow

Time periods t [action] and t+1[reaction]

About extracting information from time period t to time
period t+1

Predicting competitor reaction in t+1

Analyse what market your company should be in in t+1

Decisions are not isolated events
Trust & Signalling Mismatch (Non-Binding Chat)

Example Signal at (March 12 2007) = New Century
Financial Shares suspended in the US. Did you observe?

Example: Early 2007 Singal b = ‘moonshot’ of reported
launch of a gPhone and Apple launch the iPhone earlier
than planned in 2007?

Example: Leo the Liar is the only person who can save you
from a cliff edge where you are hanging on with one hand.
Leo asks for your hand so that he can pull you up..do you
give Leo your hand?

Belief system: Barcelona v Man Utd……I know that he
knows that I know…..Player type: Arjen Robben - Man Utd v
Bayern Munich [2010] and England v Netherlands [2012]
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
Thomas Schelling-John Nash (signalling) premise….

Observe the signals & identify the type

Understand your strategy as simple actionreaction…where reaction = action of other player

Likely reaction from a competitor: Who?

Binary Reaction: D or E will react?

Non-Binary Reaction: what is probability that D will
react?

Being ‘ahead of the game’ v ‘we didn’t win by a lot, but
we won by enough’ Romney on Michigan Primary Feb
28 2012
Critical Analysis: Signals
Do not ‘be surprised’ by unseen events
 Recognise the best that you can do given the
reaction of a competitor: the Nash reply
 Make better informed decisions (on how to
respond)

TIMELINE – Pre 2006
PS2
launched
at $299
PS2 at
$199.99
PS2 at
$179.99
14 May 02 13 May 03
26 Oct 00
PS2 at
$149.99
11 May 04
100 million
PS2
shipped
Announcement
PS3 production
schedule to ship 6
million units by 31
Mar 07 at $499
PS2 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 Nov 05
22 million
Xbox
shipped
Microsoft Xbox
launched at $299
Xbox at
$199
30 Oct 05
Xbox at
$179
Xbox at
$149
Xbox 360
launched
at $399
6 Feb 06
27 April 06
Xbox at
$179
Revised production
schedule for Xbox
360 to 5- 5.5 million
units by 30th June
2006
Sequence of Moves as a Wave Movement

The wavelength is the timing of reactions

Behaviour is a ‘vibrational pattern’ in time and space

Observe the price signals as amplitudes in the wave
pattern

CTL allows us to observe what sequence would look
like in t+1
And .……t+1 is here

The future is not what it used to be !!

Feel the force, Luke: let go of your conscious self
and act on instinct !!

Do you agree?
Q: Why GEMS?
A: Opportunities identified that can be seized

The biggest risk to a
company is ignorance
of potential risks, not
having a Nash reply,
requiring team-driven
critical imagination
based on SLT…
Strategic Lateral Thinking (SLT):
filtering information in a time continuum
Relevance and importance of Player type: vision of
t+1 informs action in t
 Footprints in the game as patterns
 ‘Near-rival’: Player A reacts first to Player B…why
not Player C? Nash reply minimises surprises
 Market-as-a-game evolving in time
 ‘Spherical’ competitors from anywhere at anytime in
a game..Google & Moto, HP & Palm

Thank you for listening………
Sapere aude
‘That which one can know,
one should dare to know’
Thank you for listening………
Mark Twain
‘If you tell the truth you
don’t have to remember
anything’
Google, gaming & getting ahead
Games & Observational Learning
Patrick A. McNutt, FRSA
Web: www.patrickmcnutt.com
McNutt: Game Embedded Strategy (2010) McGraw Hill