Game Theory involves a mathematical study of solving the problem of achieving most beneficial outcomes for parties to a transaction. That’s a bit dry for a casual read so get it into practical terms.
Game Theory, approached intelligently, is a strategy to maximize results. We seek to maximize the results for all parties to a transaction. A transaction can be a purchase or sale. It can be a negotiation over salary or budget. A transaction can be a political wrangling as well.
We measure the desired results in terms of payoff. When two parties enter a transaction, each is looking for maximum payoff for themselves. However, changing that focus to sincerely seeking maximum payoff for all parties, will, in most cases, raise the payoff for all. Simply stated, if I look for payoff for you, I will come out better than if I simply win and get more out of a transaction than you.
The reason we don’t see Game Theory employed more often as a strategy is because ego satisfaction becomes a big part of the payoff. People are willing to get less in order to defeat the other party in negotiation.
So there’s a basic thesis you can play with. To explain this in depth would take a lot more time.
Let’s look at an example.
This fiasco going on in Washington right now has led to shutdown of the government. Both sides insist on getting what they want. Both sides seek to win every aspect of this struggle. Each side not only wants 100% of their budget demands, they also seek to cause harm to the other party in elections of 2014.
This is just about an exact opposite definition of good strategy. And, the results to date show that. The government is shuttered. The debt ceiling looms. The country’s enemies laugh. The public has scorn for their representatives. Even the lowly Tea Party, trying to make a mark as bold ‘patriots’ is losing credibility and support by the day.
Is anyone winning? No.
The winning will start when the two sides begin to allow payoff to the opposing side. This is painfully obvious but we will still be forced through the painful exercise of futility.
Here’s the take-away. When you want to get what you want, consider payoff for the other side. If they cannot come away with their own payoff, a stalemate will always result. Also, we are inherently wired for fairness. If the other side even ‘feels’ unfair treatment, they will accept losing payoff to hurt you. Again, this is usually manifests as stalemate.
If we start all negotiations with a careful analysis of what the OTHER SIDE wants and what they consider payoff, we will gain more by the end of the process. Instead, the usual method is to list everything WE want and then check what we MIGHT be willing to give up.
If you see the difference in those two approaches, you will become an expert negotiator.
Chris Reich, CEO, TeachU