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Game theory for a better worldGendry Morales

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Gendry likes…

* Percentages are indicative only and based on about 5mins of analysis

human sciences

nerdy stuff

peace, love and harmony

technology

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Game theory

Gamification

Changemaking

Metrics & KPIs

A first principles style mathematical analysis of people’s strategies

Game mechanics in non-game environments

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John Von Neumann & Oskar MorgensternIn 1940s the book Theory of Games and Economic Behavior established game theory as a field of study.

John NashExpanded the application of

game theory, introducing mutual consistency of players

strategies

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Game: Any set of circumstances that has a result dependent on the actions of two of 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

Rules: the information and instructions given

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 players have made their decisions and an outcome is reached.

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Let’s play a game

Choose a number between 0 and 100. The winner is the one who guesses 2/3 of the average of all the other numbers chosen.

I’ll give you a moment to think about it the number you’ll choose.

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LET’S ANALYSE

YOUR STRATEGIC THINKING

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how about I guess

50while my brain catches up to this question - that philosoraptor is

so funny - it’s half of 100 and it’s a nice round number

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hang on, if everyone does that then I need to guess 2/3 of that

average. 2/3 x 50 =

33

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but if everyone does that too then i’ve got to guess 2/3 of

that. 2/3 x 33 =

22this is starting to get a bit tricky

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…let’s wait while some people do a few more of these 2/3s

sums…

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wait a minute if I keep doing this i’ll end up at 1 or even 0. that’s

it, i’ve got it! the answer is

0

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or is it? how smart are these people, are they thinking like me

(hmmm, let’s look around the room). Gee I don’t know, how

about

5

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Hilarious blog kinda thing with stick figure cartoons

They ran this same game with their readers. There were a total of 5,101 reader guesses.

Let’s look at their data

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Start hereEnd here

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illogicalslightly strategic

almost there

using iterative elimination of weakly dominated strategies

1s & 0spure

strategy nash

equilibrium

hot pink is a winner!

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A bit of theory and jargon

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The Nash equilibrium is a solution concept of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy.

A pure strategy provides a complete definition of how a player will play a game. It determines the move a player will make for any situation he or she could face.A mixed strategy is an assignment of a probability to each pure strategy.

DominanceA strategy is strictly dominant if it strictly dominates every other possible strategy.A strategy is weakly dominant if it dominates all other strategies, but some (or all) strategies are only weakly dominated by it.A strategy is strictly dominated if some other strategy exists that strictly dominates it.A strategy is weakly dominated if some other strategy exists that weakly dominates it

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People aren’t always logical

Put yourself in other people’s shoes, think about their strategy then develop your own and iterate a lot until you get to the equilibrium

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Game theory

Gamification

Changemaking

Metrics & KPIs

The design of Metrics and KPIs and their impact

on behavior change in

Software Delivery

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Metric – Story Points Velocity

Rules: Create a burn up chart showing your actual team velocity vs estimated so that you can track and improve progress and estimation.

Strategies:Reaches a Nash Equillibrium nicely Dominance Pretty

Good?

Review and retro ✔ ️ ✔ ️

Collaborate more ✔ ️ ✔ ️

Improve and try harder ✔ ️ ✔ ️

Players: Just the team, no other players allowed

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Metric – Story Points Velocity

Rules: Track team velocity, but some new players assume meeting or exceeding points is winning and want to make it a metric

Strategies: Dominance Pretty

Good?

Some players ask for velocity targets to be met

✔ ️ Nup

In response team meet targets by bloating their estimations

✔ ️ Nup

Players: The team, plus managers and people a bit further removed from the team and agile.

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Payoffs: represent the motivations of players. Payoffs may represent profit, quantity, "utility," or other continuous measures (cardinal payoffs), or may simply rank the desirability of outcomes (ordinal payoffs).

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bonus & incentives

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Metric – Chasing Value

Rules: Show your benefits velocity, estimating and forecasting ROI, customer growth etc, then showing the actuals.

Strategies:Iteratively adding better strategies Dominance Pretty

Good?

Reducing cycle times ✔ ️ ✔ ️

Learning how to deliver more value ✔ ️ ✔ ️

Test benefits earlier ✔ ️ ✔ ️

Players: Team members and people outside the team. To be sure, include the people who monitor the actuals already.

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Metric – Chasing Value

Rules: Show your benefits velocity, estimating and forecasting ROI, customer growth etc, then showing the actuals.

Strategies: Payoff: competitive funding

Iteratively adding better strategies Dominance Pretty Good?

Reducing cycle times ✔ ️ ✔ ️

Learning how to deliver more value ✔ ️ ✔ ️

Test benefits earlier ✔ ️ ✔ ️

Players: Team members and people outside the team. To be sure, include the people who monitor the actuals already.

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Not everything that counts can be counted and not everything that can be counted counts

- Albert Einstein

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Metrics that can create good games

• Reduce Cycle time• Increase Throughput• Predictability in meeting Sprint goals• Stakeholder/PO/Customer Satisfaction• Benefits velocity

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Metrics that create dodgy games

• Get the status green (red on the inside)• Meet the go live date (leave out the quality

and scope)• Decrease the number of defects found (lack

of transparency)• Emphasising actuals, money spent (sunk cost

fallacy… Vinh Pham)

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Notice the games being played

See other people’s strategies & think a few more steps ahead

Nerd it up with game theory & design better games, for a better world

Gendry Morales,Principal Consultant

Thank you