Game Theory in Business

game theory in business is a very complicated one which is always hard to discribe here

It was one of those beautiful June mornings when all of New York City seems solar-powered: bright, fast, and teeming with energy. I was walking down Sixth Avenue to the hotel where Ivan Seidenberg and I would hold the first official meeting of the management teams of Nynex and Bell Atlantic - the initial step in creating what we believed would be the world's next great communications company. As I walked, I reviewed the complicated policy questions we'd be facing as we put this new company together. Surely, I thought as I jostled along the busy sidewalk, I've been presented with a unique business challenge.

I relate this story because it illustrates a basic, even a defining truth about modern management: Leadership in the late 20th century is all about making decisions in the midst of complexity - something that traditional management systems fail woefully to prepare executives to do. To succeed in this sometimes baffling environment, managers have to devise dynamic new systems to assist them. These systems must do the following:

If you make all your investment and marketing decisions based on a single view of the future, you put your company at risk if your assumptions turn out to be invalid. On the other hand, if you make a decision that is correct across a wide range of outcomes, you reduce your risk while maximizing your exposure to growth opportunities.

This is the principle we've used at Bell Atlantic in making decisions about modernizing our telephone plant. We know that, like every telephone company, we have to upgrade our old copper plant with fiber optics and other broadband technologies. We also know that interactive applications are driving the market and that the costs of high-speed lines and other digital technologies are dropping dramatically. However, we don't know precisely how digital content will be delivered. We don't know exactly what the product mix will be - PCs? digital TVs? the new Internet appliances? - or what people will pay for them. And we don't know how digital technologies will become an affordable, mass-market phenomenon.

So rather than commit our capital dollars to a limited technology platform that will be correct based on only one reading of the tea leaves,