Business is a Game

“Business is a game, played for fantastic stakes, and you're in competition with
experts. If you want to win, you have to learn to be a master of the game.”
― Sidney Sheldon, Master of the Game

Why is business a game? What kind of game is it? Who are the stakeholders in this
game? What is the main prize?
What kind of players are involved? Which strategies and tactics do they follow? What
interests do they pursue?
Who wins this game? Who are the losers? Are there any laws of success and failures in
business?
What are the main principles, rules and laws of playing game in business?
Why is business an intellectual game?

What do you know about Game Theory? How can Game Theory be applied in business?
What insights does it bring into the nature of business?

Game Theory1

Game theory is the study of strategic decision-making and the process of modeling the
strategic interaction between two or more players in a situation containing set rules and
outcomes. Game theory is applied in a number of fields including business, finance, economics,

                                                                                                               
1 E. Picardo. Advanced Game Theory Strategies for Decision-Making. // Investopedia.com.
A.  Pinkasovitch.  Why  is  game  theory  useful  in  business?  //  Investopedia.com.
management, military affairs, philosophy, political science and psychology. It can be used very
effectively as a tool for decision-making whether in an economical, business or personal setting.
Any time we have a situation with two or more players that involves known payouts or
quantifiable consequences, we can use game theory to help determine the most likely outcomes.

Game Theory: Main Definitions

Game: Any set of circumstances that has a result dependent on the actions of two or more
decision makers ("players").
Players: A strategic decision maker within the context of the game.
Strategy: A complete plan of action a player will take given the set of circumstances that
might arise within the game.
Payoff: The payout a player receives from arriving at a particular outcome. The payout can
be in any quantifiable form, from dollars to utility.
Equilibrium: The point in a game where both players have made their decisions and an
outcome is reached.

Prisoner’s Dilemma – In a Nutshell

One of the most popular and basic game theory strategies is Prisoner's Dilemma. This
concept explores the decision-making strategy taken by two individuals who, by acting in their
own individual best interest, end up with worse outcomes than if they had cooperated with each
other in the first place.
In the Prisoner’s Dilemma, two suspects who have been apprehended for a crime are held
in separate rooms and cannot communicate with each other. The prosecutor informs each of
them individually that if he (call him Suspect 1) confesses and testifies against the other, he can
go free, but if he does not cooperate and Suspect 2 does, Suspect 1 will be sentenced to three
years in prison. If both confess, they will get a two-year sentence, and if neither confesses, they
will be sentenced to one year in prison.
While cooperation is the best strategy for the two suspects, when confronted with such a
dilemma, research shows that most rational people prefer to confess and testify against the
other person rather than stay silent and take the chance that the other party confesses.
Thus, the dilemma suggests that there is a conflict between individual interest and group
interests, and that in such circumstances, the most likely scenario is for individuals to defect
from the group strategy. The empirical evidence on the prisoner's dilemma is mixed, but it
revealed a more profound overall trend: cooperative outcomes are unlikely to last if they are not
in self-interested equilibrium.

Finite and infinite games and players2

Are you playing to win, or playing to play?
Life can be seen as a game. Business can be seen as a game. The difference, however, is
these life games can be played in two very different ways. These two games can be finite or
infinite — as explored by philosopher James Carse.
Finite games have specific boundaries. They have a clear beginning, a playing field and a
certain number of players. In addition to these restrictions, they are dictated by a set of rules —

                                                                                                               
2  J. Andrew. Are you playing to win, or playing to play? // Medium.com
 rules that are pre-established and mutually agreed upon by the players. Once the rules are
established, the objective is to win. When there’s a winner, the game is over. It is zero sum.
If this doesn’t sound like the real world to you, consider an election. The election rules are
set by a constitution, the winner is decided by a vote, and there are practices that are or not
permitted (eg. rigging/fraudulent votes).
Infinite games, on the other hand, are the polar opposite to finite games.
Where a finite game is played for the purpose of winning, an infinite game is played for
the purpose of continuing the play. Infinite games are not bound by any external or internal
restrictions. Anyone can participate in this game, anytime, anywhere.
Consider music composition. There will never be ‘the world’s best artist’, because there
will always be new composers writing new and inspiring music. No artist makes art to win or be
the best. Rather, the compositions are open invitations for more people to join the game.
Finite players strive for domination, infinite players strive to coexist through playing.
The desire to dominate accompanies finite players everywhere. Finite players aim to win in
order to gain control over others. They flaunt their titles and exhibit their power and superiority.
They are in the business to conquer, disrupt and crush their competitors.
The infinite player, on the other hand, is not concerned with beating others, because to
them, only the game matters. As a result, infinite players aren’t fixated on a particular outcome
or result. They seek to coexist and offer their partners their perspective. They are accepting the
new knowledge and are open to have their minds changed. Their objective is to continue play,
and are therefore malleable to new approaches.

How has business changed for the last decades?

What are the main differences between 20th and 21st century management?
What is business of the future?
What are the main values in business in the 20th and 21st centuries?
How has the role of a leader changed?
How has the role of an employee changed?

The Game Of Business Has Changed3

Business has always been a game. Just like top athletes train and practice to come out
victorious, companies train and prepare so they can beat the competition. Instead of scoring
home runs or goals, however, companies compete on things like revenue, profit, and quarterly
metrics. It's all designed to take market share away from the competition and for organizations to
become more powerful. For decades, the focus of nearly every organization has been how it can
beat the competition and become victorious.
However, in recent years the game of business has fundamentally changed. How do
companies stay victorious in the new business game? It all comes down to a changed mentality
and mindset. Now it's not about scoring more points or bringing in a bigger profit than the
competition, it's about outlasting them. Instead of the old way of thinking of business as a
sprint to the end of the quarter to see who could have the biggest profits, today's game is a
marathon that is more about endurance than speed. The winners of the new game are the
                                                                                                               
3   J. Morgan. The Game of Business has changed. // Inc.com.
companies that can stay in the race while others have fallen behind and can't keep going. To be
successful, companies must focus on long-term growth and endurance instead of just what will
take them over the top next quarter.

You are invited to read the article “Business is a social game”.

What do you think is meant by this? Why is business a social game?

Business Is a Social Game4

If you want to be an effective entrepreneur, I’d say you should have at least 10 good
friends who are already successful entrepreneurs. If that sounds like a lot to you, I’d say that
something is very wrong with your mindset.
Few entrepreneurs succeed in isolation. Business is a social game.
I’d estimate that about half of the money I’ve made in business (and in my life overall)
actually came from other businesses. The other half would be directly from consumers.
Am I saying you can’t go it alone? No. You could do that. But the odds of success as a
strict solopreneur who only deals with individuals are stacked against you.
Doing Business With Friends
Where do you find good business deals? Through networking. I hate that word though
since it sounds too cold. A better term is friendship.
Business deals happen through friendship. At least that’s how it plays out with me. I meet
another entrepreneur. We get to talking and realize we have compatible business models,
attitudes, and values. We realize that in some particular area, our businesses could mutually
support each other. We discuss possibilities. We settle on a deal that seems win-win-win: They
win. I win. The customers win. We do the deal. Value flows. Money flows.
If the deal works and everyone does their part honestly and honorably, and if the deal adds
value and generates positive results, it strengthens the friendship, too. Try doing a million
dollars’ worth of business with someone, and see how friendly you become.
Doing Business Sideways
Do you have people regularly calling and emailing you with proposals that could generate
extra income for you? If not, then why not? Maybe it’s time to stop hiding behind your laptop,
and start making some actual friends in your field.
I hit a major turning point in my computer games business when I finally realized that
being socially isolated was hurting me. At first, I couldn’t bring myself to accept that this was a
problem, but I decided to take another entrepreneur’s advice and put myself out there anyway. I

                                                                                                               
4   S. Pavlina. Business is a social game. // Stevepavlina.com.
got involved in a trade association in my field, including serving as an officer for two years. It
was a lot of work for no direct pay, but I made dozens of new friends in the industry. That made
my life so much easier.
Within a matter of months, my income increased by a factor of ten. The friends I made
turned out to be extremely helpful resources for me. For instance, they taught me how to do
some pretty decent marketing from home and at very low cost.
Eventually, I decided to suggest some direct business deals with my industry friends. My
proposals were well-received, and shortly thereafter and for the rest of the time, I ran that
business, I earned thousands of dollars per month in extra income from those deals. Basically, I
began publishing other developers’ games through my games website. I offered their games to
my customers and paid the developers a royalty for every sale.
Work Together
Don’t mistakenly assume that you have to figure out every piece of your business puzzle
on your own. That’s a newbie mistake. You’re not going to be great at everything. But where
you’re weak, someone else is strong. Work together. This benefits everyone.
The best deals have a limited downside (low risk) and a very high potential upside. If they
don’t work out, it’s not a huge loss for anyone. If there are few sales, well… at least you tried.
Maybe you didn’t make money, but at least you didn’t lose much money to test your idea.
However, when a deal really works, it could be a home run for all involved — the perfect match.
And it could lead to many more similar deals.
Personally, I love going into new deals not knowing what will happen. Some of them are
disappointing duds. Some are delightful hits. Some are in between. I enjoy the discovery process
of finding out. I never know if a new deal will only earn enough to pay for groceries… or if it
will earn enough to buy a house. It’s a fun game to play when the downside is minimal, but the
upside is potentially huge.
Make friends in your field. Propose some win-win-win deals. Do business with other
entrepreneurs. This can spell the difference between dismal scarcity and delightful prosperity.
And it can make business a lot more fun.

Watching Video

Game Theory. The Science of Decision-Making:

https://www.youtube.com/watch?v=MHS-htjGgSY
the tactician
to flee from the scene of a crime
based on evidence
to collect evidence
to confess to the crime
to grant immunity for
to serve …years in jail
to dish up loads of dirt about each other
hardened criminals
to rat each other out
to keep the mouth shut
the pinky promise
an unstable state
to stab
interchangeable
the snitch – to snitch
to decompose
to divvy up payment
divide up the loot
to subtract
to make adjustment

What Game Theory Teaches us about War:

https://www.youtube.com/watch?v=0bFs6ZiynSU
to create chaos and uncertainty
finite games
infinite games
agreed-upon objective
to perpetuate a game
to keep the game in play
to run out of resources
to drop out
the will to play
quagmire
to eject
to drain the enemy of will and resources
blunder
to impose one's will on
coincidentally
the persuit of happiness
to bear any burden
to pay any price
turmoil
an opposing force
fight like cats and dogs
the intelligence services
to combine forces
enduring
allies

Nash Equilibrium: the Scene from the Movie “Beautiful Mind”:

https://www.youtube.com/watch?v=2d_dtTZQyUM

How Nash Equilibrium Changed Economics:

https://www.youtube.com/watch?v=q7JEsaC4ADs
universally hailed
the thinker
He was portrayed in the Oscar-winning movie.
hefty profits

 
 
 
 
 
 
 
 Extra  Vocabulary  
 
to  weigh  up  potential  dangers  
to  run  the  risk  of  
to  expose  smb/smth  to  risks  /  the  risk  exposure  
to  take  a  step  backwards  
to  put  yourself  in  a  better  position  
a  bold  solution  
to  be  cautious  
to  lose  momentum  
to  figure  out  ways  to…  
to  lose  ground  
to  get  back  on  track  
to  think  outside  the  box  
the  driving  force  
to  look  beyond…to  find  innovative  solutions  
to  run  into  problems  
to  come  to  fruition  
to  get  off  the  ground  
to  nurture  new  and  expansive  patterns  of  thinking  
to  see  the  whole  /  to  take  a  holistic  view  of  
a  paradigm  shift  
to  cause  upheaval  
in  the  long  run  
to  seize  the  day  
to  mitigate  the  risks  
to  be  risk-­‐inclined  
to  be  risk-­‐averse  
to  face  a  challenge  
competitive  advantage  
competitive  edge  
competitive  field  
competitive  position  
competitive  price  
competitive  strategy  
competitive  market  
to  get  ahead  of  the  game  
to  be  highly  competitive  
stiff  competition  
to  fight  a  losing  battle:  to  try  hard  to  do  smth  when  there  is  no  chance  of  success