Game Theory; The Devil You Know

I devote a lot of my time helping people and companies get from their present reality to some new reality.  It is rarely easy and – although almost always considered a success – the success is not quite as complete as it could be.  This is the norm; the expectation.  And this is not because of a lack of skill on the part of the consultant (me) or the will of the client.  Rather, it is because the forces that are resisting change are often more powerful than the change agents.

All change involves a conflict between the introduction of new paradigms intended to supplant the old (sometimes, the new paradigm is a reinstatement of an older paradigm) with the intensity of the conflict increasing with the magnitude of the change being of being introduced.

We can better understand the dynamics involved in introducing change by studying the relatively new field of Game Theory; which is the study of how people behave when certain stimulations (inputs) are introduced and the decisions they will make considering the consequences (outputs) – given their nostalgia, traditions and values (collectively, culture).

One of the earliest works on Game Theory is the book “Theory of Games and Economic Behavior” by John von Neumann and Oskar Morgenstern originally published in 1944 and considered the origin of the field of Game Theory.  Their work was the first time mathematical models were applied to economics and the effects of human behavior.

Another significant body of work in Game Theory and building upon the prior work of von Neumann and Morgenstern is that of John Forbes Nash Jr.  His first work on non-cooperative games entitled “Equilibrium Points in N-Person Games” (1950) and subsequent works through 1953 became formalized and known as the “Nash Equilibrium”; for which he was eventually awarded the Nobel Prize in Economics in 1994.

The notion of an equilibrium existing plays a significant role in there being change, or, more specifically, there not being change.  If the strategy of each player in the game is stable unto itself, and no player can gain by changing only their strategy, an equilibrium exists – and the status quo perpetuates.  The only way for everyone to win is to do what is best for themselves and for the group as a whole.

Probably the most definitive and comprehensive work to-date on Game Theory is “The Strategy of Conflict” by Thomas Schelling which was originally written in 1960 and updated in 1980 (you can download the pdf for free here).  Schelling was awarded the Nobel Prize in Economics in 2005 for his life’s work in the field of game-theory analysis.

“The Strategy of Conflict” looks at people, nations, and predictability from a macro perspective including bargaining and the importance of communication (not just what is communicated, but also the manner in which it is communicated or positioned), how decisions are derived and what motivates decision making, the relative effective use of threats and the perils contained therein, the effects of fear and reciprocity in considering surprise attacks, and a deep dive into the various types of games including; cooperative games versus non-cooperative games, zero-sum and non-zero-sum games, symmetric and non-symmetric games, simultaneous and sequential games, and combinations thereof.

It is the deep dive into the playing of games, and the use of models to simulate the variables that might be injected and their potential outcomes – and its many real-life examples – that is the books particular strength.  The emphasis is placed on winning – even if, by winning, you are not particularly proud of the means employed.  A truly Machiavellian perspective is the bedrock on which the book is based.

I realize emotions are running hot and high on some of the following subjects and that some of what I am about to share might touch on people’s sensibilities.  But try to look beyond the personalities involved and focus on the application of Game Theory


To understand these games and how they play out, we need not look any further than at the present goings-on around the world to see these phenomena in action.

The following are a couple of examples of how the principals involved in game theory are manifesting themselves, and how difficult true transformational change is to effect.

United States Congress and Election:

The approval rating of the United States Congress (those in the House of Representatives and the Senate) is consistently reported as poor.  A Gallup Poll published on March 9th, 2016 showed the public’s approval of Congress was at 13 percent (13%), an approval rate that has been more or less consistent from 2010 (see graphic below).


Some would have you believe that only “the other party” is suffering such poor approvals and that “their party” is faring much better.  However, a further breakdown of approval ratings along party lines shows those who identify as Democrats view the work done by Congress only slightly more favorably than those who identify as Republicans – with those who identify as Independents hold steady throughout in the mid-teens.  That is, until a precipitous drop from in the approval ratings given by Independents from February 2016 to March 2016 when their approval rating of Congress drops from eighteen percent (18%) to ten percent (10%).


Logic would hold that, if someone was poorly performing at their job in such a chronic manner that they would be replaced – especially if their holding that position was the sole result of others voting for them to remain.  But a simple analysis entitled Reelection Rates Over the Years and performed by shows that this simply is not true – that ninety percent (90%) or more of those in the House of Representatives seeking re-election are re-elected and eighty percent (80%) or more of those in the Senate get re-elected.



How can this be, other than their existing a Nash Equilibrium?

Each player (voter) – or in this case, the aggregate of the voters in a (community) district – are in relatively stable circumstances themselves within their community and as compared with other Districts or States.  They might not be as satisfied as they can be, but there is no obvious advantage for them to change their circumstances and introducing an unknown.  So those in office are re-elected.

Disruptors:  Disruptors are forces that are introduced into the community and challenge its harmony and continuity.  The community, having shared values and traditions, rally to repel the disruptor and preserve the status-quo.  The larger the threat to the community, the greater the efforts by the community to repel the threats.

  • Non-Credible Disruptor: A non-credible disruptor is an introduced force that challenges the community, but is inadequate to overcome the community.  Its ability to cause change to the community is limited to the periphery and details, and then only to the extent the community permits.
  • Credible Disruptor: A credible disruptor is an introduced force that possesses truly destructive power (not that it is actually used).  Faced with such, the community will either fight to the death or succumb.  In either case, the community will change from its previous state to a new state as designed by the disruptor.

Election Prediction: 

We can easily see Game Theory playing out in the Presidential Election just by reading the feeds on our social media pages (especially Facebook).  There are people who are for one candidate and against another, which is natural enough.  But the intensity with which a person holds such positions is rather remarkable.  Assuming there is an ability to separate the truth from the propaganda (not easy, perhaps not possible), there is nothing that can be written about a candidate – no matter how eloquent the argument – and nothing that a candidate can say or do that will change the way a person feels about the candidate.

Even the candidates know this.  We need look no further than Donald Trump stating that “He could shoot a person in Times Square and not lose a single vote.”  He might not be wrong.  And Hillary Clinton could probably make the same claim with the same result.

In the end, the choices are between;

  • Hillary Clinton: A self-serving Machiavellian whose greatest strength is her experience as an insider and the predictability that comes with it.  This is comforting to many.
  • Donald Trump: A bombastic contrarian whose greatest strength is that he is a disruptor who holds all those who are associated with, or those who wish to maintain, the status-quo in contempt.  This attracts many who feel they are ignored and are disenfranchised.


Corporate Culture:

The application of Game Theory is exactly the same in the business world as it is in the political world and it’s critically important to realize that before you embark on an initiative that involves change – especially if the magnitude of the change is transformational in its nature.

In an organization, as with a citizenry, there are three factions.  Those that are;

  • Apathetic Regarding Change: These are the people in the organization that consider their job as just that – a job.  They do their work for the paycheck.  Certainly, they might be very capable at their job, always on time, respectful and diligent; but they don’t care about change one way or another.  They will just come in and do it however they are told to do it.
  • Resistant to Change: These are the people who have been with the organization for a considerable amount of time – enough time for the cement to have hardened.  They remember “the good ole days” and have a loyalty to the past and their long-time colleagues, mentors, and leadership.  They feel threatened – that the value of their experience and longevity with the company will discounted, or that the size and power of their fiefdom (as measured by the budget they command) will be diminished.
  • Embracing Change: These are probably the newer hires in your organization.  They don’t know the nostalgia and traditions of the company and the cement of the “way we do things here” has not quite hardened.  If you are going to start a change initiative, seek these people out to gain traction.

Given these factions and their pre-existing disposition for change, we have to consider the type of disruptor (credible versus non-credible) and the magnitude of change we can expect.

A non-credible disruptor will normally be pre-existing and found within the organization.  They will be charged with creating a level of change that is beyond their capability to deliver.  That is not to say they will not be able to effect change.  But, being insiders or having the disruption come from within the organization, the impact they are able to make will be limited by the desire to maintain a balance between change and maintaining the equilibrium.  As such, the change will be incremental and not transformational.

A credible disruptor, which will set the precursor conditions for transformational change to occur, will almost certainly be introduced from the outside – from a source external to the organization.  In fact, in my over 30 years in business and being exposed to goings-on in countless organizations, I have never seen it – or read of it happening – otherwise.

Credible disruptors include (but are not limited to); a competitor (or new entrant into the marketplace) introducing a leap-change in their offering which puts the organization on their back-foot; or a sudden change in economic climate such as one that was experienced during the financial meltdown of 2007-2008; a merger with another company; or the organization gaining new executive leadership.

A credible disruptor will challenge a company to its core.  All of the old rules will no longer apply if the company is to remain viable.  It has no concern for maintaining the equilibrium because it/they were never a party to its existence.

But, the members of the organization (community) will not willingly accept the introduction of the credible disruptor and its/their attempt in install a new order – this is especially true of those who have the characteristics of those who are resistant to change as noted above.  In fact, a mighty and overt effort to defer, deflect, delay, or even sabotage the change should be the expectation from these people in the organization.  Prepare accordingly.

“Dans la Légion étrangère, c’est marche ou crève”

“In the Legion, you march or you die.”

—Unofficial motto of the French Foreign Legion

Change is inevitable.  As is the resistance to change.

The magnitude and velocity of change – and whether that change is under our terms and conditions or we have those terms and conditions thrust upon us – are the only real variables.

Always keep in mind that those who embrace the idea of change are the minority within your organization and you will not easily find allies.  You will be surrounded by those who wish to see you fail so they can continue on as they always have – even if their actions are passive.  This is not intended to discourage you, but to prepare you for the challenge you are about to face.

If you are the credible disruptor from the outside; assess the situation quickly, set the direction, communicate the intent, and press forward with velocity and momentum – never giving the cement a chance to set.

If you are a non-credible disruptor, you need to expect to set a slower pace so that incremental changes can occur without overtly challenging the equilibrium.  And find solace in being the water on the rock – the rock will succumb to the water, but it will take time and constant pressure.

By Joseph F Paris Jr


Paris is the Founder and Chairman of the XONITEK Group of Companies; an international management consultancy firm specializing in all disciplines related to Operational Excellence, the continuous and deliberate improvement of company performance AND the circumstances of those who work there – to pursue “Operational Excellence by Design” and not by coincidence. 

He is also the Founder of the Operational Excellence Society, with hundreds of members and several Chapters located around the world, as well as the Owner of the Operational Excellence Group on Linked-In, with over 40,000 members.

Connect with him on LinkedIn

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