Economic

Game Theory Math versus Good Choice of Strategy

In this article about the Traveler's Dilemma, the mathematics of game theory dictates one solution while most people typically choose another solution. Interestingly, real world tests prove that the "regular person solution" consistently garnishes better rewards than those who use the game theory approach. Sun Tzu's strategy not only tells us why most people pick the better solution, but why game theory doesn't recognize it.

Intentional Misinformation

To continue on the topic of misdiagnosing positions, Sun Tzu makes a central issue of never factoring out the purposeful deception of others. You always have to ask yourself about people's motives for offering the information they do. For example, an very interesting financial blog, carfutia.com, uses the MSM news as a contra-indicator of market direction. When the media's business coverage is primarily negative, the market is going up but when it turns positive, it is time to sell.

Driving Forces in Darfur

Sun Tzu list the elements important to a strategic position in their order of priority: 1) philosophy, 2) climate, 3) ground, 4) leadership, and 5) methods. When it comes to conflict, philosophical battles trump climate/ground battles and climate/ground battles trump leadership/methods battles.

Response Time in the Virtual War

While it is often the overreaction to an attack the creates more problems than the initial attack, responding correctly and instantly to an attack will usually defuse the attack. The Art of War lists five targets of attack, five types of attack, and five appropriate responses, but the best action is to strike while your opponent is still laying plans.

The Cost of Competition

People reading Sun Tzu for the first time are surprised by how important managing costs are to his system of competition, but before anything else, he teaches that we must manage our resources well. It is easy to spend money in competition and get little for it. the words of John McCain summarizing his campaign troubles can be applied to almost any losing campaign:
"We didn't use the money in the most effective way," he said.

Complementary Opposites: The Law of Unintended Consequences

One of the least intuitive aspects of Sun Tzu's system of Sun Tzu's strategy is what we call "complementary opposites." According to bing-fa, all of nature exists, not as a steady state, but as a tension between opposing conditions. The climate and the ground, strength and weakness, offense and defense, male and female, emptiness and fullness, standards and innovation, group action and individual decision, knowledge and ignorance are all complementary opposites. Each condition not only creates its opposite but is a necessary condition of its opposite.

Levels of Strategy

Does an organization have one strategy or many? One of our new trainers, Allan Elder, asks:
While searching for blogs on strategy I discovered many specialty sites focusing on topics such as "Internet," "branding," and "supply chain," strategy sites and the list goes on. Does a company have "A" strategy or does it have many strategies? Should marketing, purchasing, HR, and all the other functions have a separate strategy or should the business have a strategy?

Timing in Strategy

Today the stock market reached new highs, but I choose to sell out my stocks, going into cash, last Wednesday, when the stock market was up in the morning. It was down that day and fell dramatically the next. I felt pretty good about my timing at the time, but today, the stock market is up strongly again. It will probably be up again tomorrow. Does this mean I made a bad decision on strategic timing?

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