Oct 18, 2022
Today’s episode is all about the
fascinating world of game theory. This episode originally aired on
August 23, 2019, and was episode 62 of the podcast. There are a
couple of reasons I’ve selected this to be our refreshed episode
this week. For one, with last Friday’s episode featuring Annie Duke
talking about her new book Quit…you can’t think about Annie without thinking
about poker, and game theory is so related to
One of my favorite insights from
game theory, which you’ll hear me talk about more during the
episode, is the difference between playing to
win and playing not to lose. As you will hear today, these two things may
seem similar, but they are actually very different. And as you
reflect upon the episode today (whether it is your first time or
something you’re revisiting) consider your own life and work and
let’s build upon the lessons from Friday’s episode with Annie about
quitting, and how winners need to quit in order to win. Tip:
understanding the rules and what it will take to win (so your
emotions don’t get the better of you) will help you to win any game
you are playing.
- [00:37] Today’s episode is all
about the fascinating world of game theory.
- [01:46] You need to know when
to be gritty and when to quit.
- [03:31] Humans aren’t rational.
Humans don’t always make choices that are fully rational. We try to
game the system or play the odds and choose routes that are not in
our best interest – especially when we think someone may be
treating us unfairly.
- [05:19] In behavioral game
theory we need to consider how revenge, fairness, and personal gain
all play to the outcomes. The 3 main games in game theory are the
ultimatum game, the prisoner's dilemma, and the dictator
- [06:37] In purely rational
economic terms it is best to keep the full $10 for yourself. There
is no consequence for keeping it and no one will know. In reality,
people would give away an average of $3.
- [08:19] You are playing the
odds of being seen, feeling guilty, or whether or not that person
will resent you. Whether or not you see each other or will see them
again play a big part in your behavior.
- [10:18] History has a lot to
play in the actions people take. Existing relationships help
- [12:39] It is important to
understand who has what power in each situation when you determine
what to offer and think about how they might
- [14:0312] You can make an extra
gesture (surprise & delight) to make a big impact. That first
interaction lays a foundation for what people expect and how they
feel about you in all your future interactions.
- [15:58 It is important to
understand all the options and variables before taking an action or
making an offer.
- [17:02] In the prisoner’s
dilemma, as a group they are better to both not say anything and
take the one-year's sentence. If they look at their individual
personal gain or personal loss they are of course better off with
no prison time motivating them to say something.
- [19:50] As it turns out, a
tit-for-tat strategy consistently did best overall. In this way,
you cooperate until someone deflects.
- [20:31] A quick response and a
short memory was the best strategy.
- [21:19] In most real-life
scenarios most of us are likely to choose to play fair until given
a reason not to.
- [22:40] As much as we wish it
would be, dealing with people is never black and white. There is so
much gray impacting every situation and
- [23:54] Always have written
contracts and agreements. Document to ensure
- [26:23] Game theory is truly
around us all of the time. Pretty much any time you interact
with another person, business, or entity game theory comes into
play. We play the odds whether we realize it or
- [29:23] Companies used to be
able to take advantage of customers much more if they wanted to.
There wasn’t an easy mechanism for them to be punished. Often the
punishment hurts much more than if you did the right thing in the
- [29:52] Melina shares a story
about United playing the odds and losing big
- [32:17] When emotions take hold
it can cause people to make bad decisions that they may regret in
the long run so try and get some distance and perspective before
acting especially if you feel really betrayed and
- [33:19] When it comes to games
many people are playing not to lose instead of playing to win.
Winning is a long game.
- [36:02] Winners quit a lot of
stuff because they know what winning looks like. They know the
rules, they know the game, and they can see what is helping them
reach their goals and what is a hindrance.
Thanks for listening. Don’t
forget to subscribe on
Android. If you like
what you heard, please leave a
review on iTunes
and share what you liked about the
I hope you love
everything recommended via The Brainy Business! Everything was
independently reviewed and selected by me, Melina Palmer. So you
know, as an Amazon Associate I earn from qualifying purchases. That
means if you decide to shop from the links on this page (via Amazon
or others), The Brainy Business may collect a share of sales or
Learn and support The Brainy Business:
Get the Books Mentioned on (or related to) this
Top Recommended Next Episode:
Quit: The Power of Knowing When to
Walk Away, with Annie Duke (episode 227)
Already Heard That One? Try These:
Other Important Links: