The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future

did not happen and see the anticipated consequences of what didn’t happen as an important part of the cause of what did happen. The central characteristic of any game’s solution is that each and every player expects to be worse off by choosing differently from the way they did. They’ve pondered the counterfactual—what would my world look like if I did this or I did that?—and did whatever they believed would lead to the best result for them personally.

Remember the very beginning of this book, when we pondered why Leopold was such a good king in Belgium and such a monster in the Congo? This is part of the answer. The real Leopold would have loved to do whatever he wanted in Belgium, but he couldn’t. It was not in his interest to act like an absolute monarch when he wasn’t one. Doing some counterfactual reasoning, he surely could see that if he tried to act like an absolute ruler in Belgium, the people probably would put someone else on the throne or get rid of the monarchy altogether, and that would be worse for him than being a constitutional monarch. Seeing that prospect, he did good works at home, kept his job, and freed himself to pursue his deepest interests elsewhere. Not facing such limitations in the Congo, there he did whatever he wanted.

This counterfactual thinking becomes especially clear if we look at a problem or game as a sequence of moves. In the prisoner’s dilemma table I showed what happens when the two players choose without knowing what the other will do. Another way to see how games are played is to draw a tree that shows the order in which players make their moves. Who gets to move first matters a lot in many situations, but it does not matter in the prisoner’s dilemma because each player’s best choice of action is the same—confess—whatever the other crook does. Let’s have a look at a prospective corporate acquisition I worked on (with the details masked to maintain confidentiality). In this game, anticipating what the other player will do is crucial to getting a good outcome.

The buyer, a Paris-based bank, wanted to acquire a German bank. The buyer was prepared to pay a big premium for the German firm but was insistent on moving all of the German executives to the corporate headquarters in Paris. As we analyzed the prospect of the acquisition, it became apparent that the price paid was not the decisive element for the Heidelberg-based bank. Sure, everyone wanted the best price they could get, but the Germans loved living in Heidelberg and were not willing to move to Paris just for money. Paris was not for them. Had the French bankers pushed ahead with the offer they had in mind, the deal would have been rejected, as can be seen in the game tree below. But because their attention was drawn to the importance the Germans attached to where they lived, the offer was changed from big money to a more modest amount—fine enough for the French— but with assurances that the German executives could remain in Heidelberg for at least five years, which wasn’t ideal for the French, but necessary for their ends to be realized.

FIG. 3.1. Pay Less to Buy a Bank

The very thick, dark lines in the figure show what the plans of action were for the French buyer and the German seller. There is a plan of action for every contingency in this game. One aspect of the plan of action on the part of the executives in Heidelberg was to say nein to a big-money offer that required them to move to Paris. This never happened, exactly because the French bankers asked the right “what if” question. They asked, What happens if we make a big offer that is tied to a move to Paris, and what happens if we make a more modest money offer that allows the German bank’s management to stay in Heidelberg? Big money in Paris, as we see with the thick, dark lines, gets nein and less money in Heidelberg encourages the seller to say jawohl. Rather than not make the deal at all, the French chose the second- best outcome from their point of view. They made the deal that allowed the German management to stay put for five years. The French wisely put themselves in their German counterparts’ shoes and acted accordingly.

By thinking about the strategic interplay between themselves and the German executives, the French figured out how to make a deal they wanted. They concentrated on the all-important question, “What will the Germans do if we insist they move to Paris?” No one actually moved to Paris. Historians don’t usually ask questions about things that did not happen, so they would probably overlook the consequences of an offer that insisted the German management relocate to France. They might even wonder why the Germans sold so cheaply. In the end, the Germans stayed in Heidelberg.

Why should we care about their moving to Paris when in fact they didn’t? The reason they stayed in Heidelberg while agreeing to the merger is precisely because of what would have happened had the French insisted on moving them to France: no deal would have been struck, and so there would have been no acquisition for anyone to study.

The two games I have illustrated in the preceding pages are very simple. They involve only two players, and each game has only one possible rational pair of strategies leading to an equilibrium result. Even a simple two- player game, however, can involve more than one set of sensible plans of action that lead to different possible ends of the game. We’ll solve an example of such a game in the last chapter. Of course, with more players and more choices of actions, many complicated games involve the possibility of many different strategies and many different outcomes. Part of my task as a consultant is to work out how to get players to select strategies that are more beneficial for my client than some other way of playing the game. That’s where trying to shape information, beliefs, and even the game itself become crucial, and in this next section I’d like to show you just what I mean.

WANT TO BE A CEO?

As we all know, great jobs are getting harder to come by, and reaching the top is as competitive as ever. Merit may be necessary, but, as many of us can attest, it’s unlikely to be sufficient. There are, after all, many more well- qualified people than there are high-level jobs to fill.

That being said, even if you’ve managed to mask or overcome your personal limitations and have been blessed with great timing and good luck such that you now find yourself in the rarefied air of the boardroom, there’s something worth knowing that might have escaped you, something that might still prevent you from grabbing that cherished top spot: the selection process.

That’s right, understanding and shaping the process by which a CEO or other leaders are chosen can tip the competition in your favor. It’s funny that few of us pay much attention, in a strategic sense, to something as prosaic as how votes are counted, whether in the boardroom or national elections. And yet the method used to translate what people want into what they get can turn a losing candidacy into a winning one.³

When I talk about shaping outcomes based on voting, I don’t mean anything like miscounting or cheating. I don’t mean relying on hanging chads or anything like that. I’m just thinking about the many regular, commonly used ways of arriving at a choice based on what voters or shareholders or board members want.

Few board members or shareholders pause to think about how the votes are going to be counted when they select a new CEO. Hardly anyone asks whether it really matters if we require a candidate to get a majority or a plurality; if we count just votes for people’s first choice or we allow them to express their first and second (or even more) preferences; if in decisions with many candidates we vote on all of them at once or we pair them up in head-to-head contests. And yet you can bet your bottom dollar that these decisions really can change the results.

Just think back to the hotly contested 2008 Democratic Party primaries. The Democrats allocated delegates from each state roughly proportionally to the candidates based on their share of the popular vote in each primary. Barack Obama won a majority of delegates that way, and was ultimately elected president. If the Democrats had