The Right Game
The Right Game: Use Game Theory to Shape Strategy by Adam M. Brandenburger and Barry J. Nalebuff
Harvard Business Review
Reprint 95402
HBR
J U LY- A U G U S T 1 9 9 5
The Right Game: Use Game Theory to Shape Strategy by Adam M. Brandenburger and Barry J. Nalebuff
Business is a high-stakes game. The way we approach this game is reflected in the language we use to describe it. Business language is full of expressions borrowed from the military and from sports. Some of them are dangerously misleading. Unlike war and sports, business is not about winning and losing. Nor is it about how well you play the game. Companies can succeed spectacularly without requiring others to fail. And they can fail miserably no matter how well they play if they make the mistake of playing the wrong game. The essence of business success lies in making sure you’re playing the right game. How do you know if it’s the right game? What can you do about it if it’s the wrong game? To help managers answer those questions, we’ve developed a framework that draws on the insights of game theory. After 50 years as a mathematical construct, game theory is about to change the game of business. Game theory came of age in 1994, when three pioneers in the field were awarded the Nobel Prize. It all began in 1944, when mathematics genius John von Neumann and economist Oskar Morgenstern
PHOTOS BY CHRISTOPHER MAKOS
published their book Theory of Games and Economic Behavior. Immediately heralded as one of the greatest scientific achievements of the century, their work provided a systematic way to understand the behavior of players in situations where their fortunes are interdependent. Von Neumann and Morgenstern distinguished two types of games. In the first type, rule-based games, players interact according to specified “rules of engagement.” These rules might come from contracts, loan covenants, or trade agreements, for example. In the second type, freewheeling games, players interact
Harvard Business Review
Reprint 95402
HBR
J U LY- A U G U S T 1 9 9 5
The Right Game: Use Game Theory to Shape Strategy by Adam M. Brandenburger and Barry J. Nalebuff
Business is a high-stakes game. The way we approach this game is reflected in the language we use to describe it. Business language is full of expressions borrowed from the military and from sports. Some of them are dangerously misleading. Unlike war and sports, business is not about winning and losing. Nor is it about how well you play the game. Companies can succeed spectacularly without requiring others to fail. And they can fail miserably no matter how well they play if they make the mistake of playing the wrong game. The essence of business success lies in making sure you’re playing the right game. How do you know if it’s the right game? What can you do about it if it’s the wrong game? To help managers answer those questions, we’ve developed a framework that draws on the insights of game theory. After 50 years as a mathematical construct, game theory is about to change the game of business. Game theory came of age in 1994, when three pioneers in the field were awarded the Nobel Prize. It all began in 1944, when mathematics genius John von Neumann and economist Oskar Morgenstern
PHOTOS BY CHRISTOPHER MAKOS
published their book Theory of Games and Economic Behavior. Immediately heralded as one of the greatest scientific achievements of the century, their work provided a systematic way to understand the behavior of players in situations where their fortunes are interdependent. Von Neumann and Morgenstern distinguished two types of games. In the first type, rule-based games, players interact according to specified “rules of engagement.” These rules might come from contracts, loan covenants, or trade agreements, for example. In the second type, freewheeling games, players interact