Monday, July 30, 2007

Basic Game theory in Corporate Combat

Do not take the first step without considering the last.

Karl von Clauswitz, “On War

Anyone can be taught this doctrine for decision-making in the combat of business; but when it comes down to it, everyone makes decisions of risk using their heart: Whether this be from the rational logic of a veteran and hardened combat commander, or based on the feeling leader's passions and prejudices. In a system where multiple intelligent agents come together and the numbers of the interacting agents are small enough as that each has a perceptible influence on the others, a model can be created to describe, predict, and control these interactions. All this is done to maximize returns from these interactions, and in the case of combat: To win.





Games studied by game theory are well-defined, finite, discrete objects. Inasmuch, it consists of a set of players, a set of strategies available, and a return for each combination of strategies. Normally, each player has some information about the choices of the other players, but there are still variables involved. Again, we are trying to eliminate the risk of those remaining variables and uncover the values of all variables possible.

No matter how many variables you uncover, you may not know exactly what the enemy commander will do, for his or her "split moment" decisions are often driven by their instincts: The inherent dispositions towards particular actions; generally inherited as patterns of responses or reactions to specific kinds of situations. They are most easily observed in responses to emotions and actions, generally serving to set in motion mechanisms that evoke an individual to action and are influenced by learning, environments, and natural principles.

Moreover, the better a player's education level, it seems, the more rational their reactions and decisions tend to be.

A symmetric game is one where the returns for utilizing a particular strategy give the same returns regardless of who is playing them. Asymmetric games are often (but not always) such that there are not identical strategy sets for both players. When all strategy combinations add to zero (or, when one player benefits equally to the amount of the others' loss). This is called a zero sum game.

In our battlespaces, all games should be considered sequential games such that later players have some knowledge (but not necessarily perfect knowledge--when all players know the moves previously made by all other players) of the actions of earlier players. This allows for using the "economics of experience" to help in the decision-making process.

Determining the outcome of the geometries of the battlespace can be complex, but remember: Intelligence drives the process of good decision making. Often, the intelligence cycle often uncovers updated or new information. Bayes Theorem shows us an understanding how the probability that a theory is true is affected by a new piece of evidence. One thing that Bayes Theorem shows us is that too much information can adversely affect the decision making process. Too much information can cloud judgment and hinder the combat solution from being a process with a simple result.

This being said: Competent, trained, experienced intelligence staff analysts should be able to turn the incoherence of much information into a coherent stream of highly useful intelligence for its customers. Regardless of how complex the process as a senior combat decision-maker with your staff is, keep the input and the output of the system as simple as possible: Clear, precise, simple orders and maneuvers help to eliminate confusion in the chain of command. Competent and experienced staff advising the commander and the subsequent echelons of leadership helps ensure that the intelligence process runs smoothly, and thus, the decision-making process.

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