10 Takeaways from “The Art of Strategy”

Overall, I (Brendan) give this book a C. It was not very consumable and wasn’t packed with enough interesting anecdotes to break up the theory that is discussed. I needed a long-haul flight to force myself through the back half of this book after enjoying the intro. Below are my 10 favorite takeaways after reviewing my highlights of the book:

  1. The Millennium Development Goals and Jeff Sachs’s book The End of Poverty emphasize that contributing 1 percent of gross domestic product to development will end poverty by 2025 (the book’s copyright is 2008).
  2. Most people’s intuition assumes each game must have a winner and loser but games of pure conflict are rare. Games in economics, where the players engage in voluntary trade for mutual benefit, can have outcomes where everyone wins. Prisoner’s dilemmas illustrate situations where everyone can lose. Always leave your opponent an outlet free, not that he/she might take it, but so he/she knows it exists so he/she does not fight with courage of desperation.
  3. “The size of the U.S. college textbook market is $7 billion (including course packets). To put that in perspective, the revenue from the movie industry is about $10 billion and all of professional sports is $16 billion.” Wow, I hear about movies and sports constantly but rarely hear about textbooks.
  4. “Offer significant financial rewards or none at all. Paying just a little might lead to the worst of all outcomes.”
  5. Enter any negotiation with a clear understanding of your Best Alternative to a Negotiated (No) Agreement.
  6. Look forward and reason backward. Determine what outcome you want and how you expect the game to be played, then reason backward to what steps you should take now. Anticipate what your moves will lead to and what your opponent wants and will do. Decision trees work to map out simple games, and then you can reason backward beginning with the final branch.
  7. A Nash equilibrium is when each player in the game chooses their best response to what he/she believes the other players will choose & each player’s belief’s are correct so all the players are doing just what everyone else thinks they are doing. (This is depicted in the scene in the bar with the blonde in “A Beautiful Mind”.) The Nash equilibrium instructs you to: when formulating your best response, do not formulate your best response to the game, formulate your response to the other players’ best response.
  8. Committing to a decision and communicating your decision to the opposition may be a valuable tactic. E.g. in the game of “chicken” played with cars, throw your steering wheel out of the car and if the other driver sees it, he/she will swerve.
  9. When other people’s perception of your ability matters, it might be better for you to tackle a more difficult problem, which will increase your chance of failing in order to reduce the consequence of the failure itself. Go big if you think there is a good chance you will fail.
  10. In technology races, trailing organizations tend to employ more innovative solutions and the leaders imitate the followers. If you’re contemplating an investment in an innovative solution by a trailing organization, think about what the leaders will do to imitate the solution.

 

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