Google, gaming getting ahead Games Observational Learning

Google, gaming & getting ahead Games & Observational Learning

Patrick A. McNutt, FRSA Web: www.patrickmcnutt.com McNutt: Game Embedded Strategy (2010) McGraw Hill

Q: What is Game Theory about

A: Observational learning in a time continuum

Finding & extracting a pattern from a sequence of moves (historic v real-time) Understanding the pattern as wave movements Information embedded in observed behaviour Information filtering and ‘transactive’ memory?

Q: So what

Why?

Information has a value Individual memory is ‘outsourced’ to Google, Facebook, LinkedIn… Behaviour can be ‘tracked’ Predicting likely future actions and reactions

Tracking decisions: Observe but do not judge

Decisions, action are not isolated events They can reveal a pattern Observe, and filter the information embedded in the signal Information used to monitor and report on individual behaviour Cloud computing FBI Strategic Information & Operations Centre FBI Behavioural Analysis Unit

Hegazy-McNutt ‘Non-linear thinking’ image… time continuum

Time continuum

. observing patterns in time, dT/dt = -1

Last Month… 1 hour ago Last Week… 10 minutes ago Yesterday… 1 minute ago Today… Now Tomorrow… 1 minute later Next Week… 10 minutes later Next Month… 1 hour later

Host (updating your belief system) or… Guest (observing signals &

type)

WHERE TO HOST THE BBQ? Preference Regrets Disappointment Disaster Note: Host [incumbent] v Guest [entrant]

SUN

RAIN

HOUSE

Regrets

Disappointment

GARDEN

Preference

Disaster

Thinking strategically in a time continuum

2nd Objective Observing in context What is the information in the pattern observed?

1st Objective Cascade effect Understanding the pattern (eg a restaurant queue, CTL) in what you observe

1st Objective: Cascade Effect

Observe individual type Private information & truthful revelation: memory cost of deception Action and reaction: Yes Action and diffusion: ‘Black Swan’ effect What market should a firm be in?

CTL: 2005 Google & Android

2005 2006 2007 2008 2009 2010 2011

Apple share price

Apple sues Samsung

Corporate intentions

i2G announced

i2G launched

i3G announced

i3GS launched

i3G launched

i4 launched

i5

BB Pearl

BB Tour

BB Curve

BB Storm

BB Bold

HTC Dream

HTC Magic

Samsung Galaxy

Nokia sues Apple

Samsung sues Apple

Nokia operates Windows

Motorola CLIQ, Google Nexus

G1 Aug Jan Mar Jun Mar Jun Jul Aug G2 Oct Nov Jul Aug Nov Jun Jul Apr Jun ? G3

Jul ‘05

Nov ‘07

Google buys Android Inc

Google opens Android

Apple invite app developers

Oct ‘07

2nd Objective: In Context

Signals: observe but do not judge Signals contain information? Type & Signals Keeping to type: trust and truth Signalling cycle… the critical time line: CTL

Architecture of a Game

Playing a game without information Playing a game with ‘good’ signals What is the optimal move, given X? How does the value of the signal vary with X under different actions? Playing to win Playing not to lose

CTL – observe and filter the information Example (abstract) Google

Android signalling

Critical Time Line Nokia/ Apple/ Google - Western Europe – Mobile Handset

Jul Aug Sep Oct Nov Mar Aug Jul Sep Mar Apr Jul Feb

2007 2007 2007 2007 2007 2008 2008 2009 2009 2010 2010 2010 2011

Acquired navteq: digital mapping data

Acquired Loudeye to target iTunes

Unveil 7705 Twist

Acquired Metacarta - local search

Announce shift to internet business @ annual stock holder meeting

acquired Twango for media sharing

Announced intent to buy Enpocket (mobile advertising)

Acquired novarra - mobile browser

Acquired Metacarta - local search

Game Embedded Strategy [GEMS] & Tn=3

The sequence of moves is observed 1. by rivals as a pattern, revealing your ‘type’ as a player…reveals insight into company strategy 2. Can I trust you? Private information is not observable, only actions are.

What is strategy

CTL: Today’s decision depends on the one we shall make tomorrow

Time periods t [action] and t+1[reaction] About extracting information from time period t to time period t+1 Predicting competitor reaction in t+1 Analyse what market your company should be in in t+1 Decisions are not isolated events

Trust & Signalling Mismatch (Non-Binding Chat)

Example Signal at (March 12 2007) = New Century Financial Shares suspended in the US. Did you observe? Example: Early 2007 Singal b = ‘moonshot’ of reported launch of a gPhone and Apple launch the iPhone earlier than planned in 2007? Example: Leo the Liar is the only person who can save you from a cliff edge where you are hanging on with one hand. Leo asks for your hand so that he can pull you up..do you give Leo your hand? Belief system: Barcelona v Man Utd……I know that he knows that I know…..Player type: Arjen Robben - Man Utd v Bayern Munich [2010] and England v Netherlands [2012]

High Price Player A

Low Price Player A

High Price Player B

Cartel, cooperation

B’s loss

Low Price Player B

A’s loss

Competition

Observe the signals & identify the type Understand your strategy as

simple action-reaction…where reaction = action of other player Likely reaction from a competitor: Who? Binary Reaction: D or E will react? Non-Binary Reaction: what is probability that D will react? Being ‘ahead of the game’ v ‘we didn’t win by a lot, but we won by enough’ Romney on Michigan Primary Feb 28 2012

Thomas Schelling-John Nash (signalling) premise….

Critical Analysis: Signals

Do not ‘be surprised’ by unseen events Recognise the best that you can do given the reaction of a competitor: the Nash reply Make better informed decisions (on how to respond)

TIMELINE – Pre 2006

Announcement PS3 production schedule to ship 6 million units by 31 Mar 07 at $499

PS2 launched at $299

PS2 at $199.99

PS2 at $179.99

PS2 at $149.99

100 million PS2 shipped

PS2 at $129.99

Xbox at $179

22 million Xbox shipped

Microsoft Xbox launched at $299

Revised production schedule for Xbox 360 to 5- 5.5 million units by 30th June 2006

Xbox 360 launched at $399

Xbox at $199

Xbox at $179

Xbox at $149

11 May 04

20 April 06

8 May 06

26 Oct 00

15 Nov 01

14 May 02 15 May 02

13 May 03 14 May 03

29 Mar 04

1 Nov 05 30 Oct 05

22 Nov 05

6 Feb 06

27 April 06

Sequence of Moves as a Wave Movement

The wavelength is the timing of reactions Behaviour is a ‘vibrational pattern’ in time and space Observe the price signals as amplitudes in the wave pattern CTL allows us to observe what sequence would look like in t+1

And

……t+1 is here

The future is not what it used to be !! Feel the force, Luke: let go of your conscious self and act on instinct !! Do you agree?

Q: Why GEMS

A: Opportunities identified that can be seized

The biggest risk to a company is ignorance of potential risks, not having a Nash reply, requiring team-driven critical imagination based on SLT…

Strategic Lateral Thinking (SLT): filtering information in a time

continuum

Relevance and importance of Player type: vision of t+1 informs action in t Footprints in the game as patterns ‘Near-rival’: Player A reacts first to Player B…why not Player C? Nash reply minimises surprises Market-as-a-game evolving in time ‘Spherical’ competitors from anywhere at anytime in a game..Google & Moto, HP & Palm

Thank you for listening………

Sapere aude ‘That which one can know, one should dare to know’

Thank you for listening………

Mark Twain ‘If you tell the truth you don’t have to remember anything’

Google, gaming & getting ahead Games & Observational Learning

Patrick A. McNutt, FRSA Web: www.patrickmcnutt.com McNutt: Game Embedded Strategy (2010) McGraw Hill