Choosing in conditions of uncertainty
Clearing up a paradox
This chapter has been about dealing with the uncertainty involved in choice. In the complex environment of e-business it isn't possible to make decisions based on rationalities because there are too many unknowns in the equations. The only viable strategy therefore is to allow a range of options to take their course and wait for unfolding events point to a clear leader.
There seems to be an anomaly here though, because even though the final decision of choosing between the options is determined by the unfolding of events, the options have to be chosen beforehand. Surely these initial options have to be arrived at through rational choice?
Here we come to the crux of Game Theory. The range of options is arrived at in the same way as the game of twenty questions arrives at a conclusion: it's a process of elimination. Rules are applied to all possibilities so as to eliminate all but a few remaining possibilities.
There is one difference though. In twenty questions there is only one correct solution. In Games there can be many. Game Theory isn't about choosing the perfect solution, but, choosing a solution that satisfies certain criteria. Solutions can therefore be easier or harder to come by depending upon how particular you are with the criteria. The trick then, in being able to get solutions most efficiently, is to choose sensible criteria and place pragmatic values on them.
This is more easily explained by the process of mate selection. For everyone, somewhere in the world there is somebody who would be the best possible match for them But, there are over six billion people in the world, nobody would ever settle down with a mate if they had to interview three billion people to find the ideal one for them. So, they are forced to adopt a strategy that is a compromise. They will apply a set of rules or standards to help narrow down their search. They will confine their search to a practical geographic search area. They'll probably arrive at a range of possibilities and make cautious exploratory investigations by dating them.
Out of the process, a most suitable choice is likely to emerge. It is unlikely to be the best in the world, but, it is a solution. that is acceptable. How near this might be to a perfect choice is a combination of chance (luck), standards set and length of time available for the search. As is readily observed, this process may start out with high standards when there is plenty of time available for the search, but, standards quickly drop if no results are forthcoming and time is running out.
This easily translates into business scenarios: a choice of business; a niche speciality; an employee, an employer; a partner; a client; a contractor or a sub contractor; even an area of study. All of these have to be chosen in the same way as people choose their mates. A compromise - where the optimum results are determined by the time available, the efficiency of the search process and the selection criteria imposed. This is what Game Theory is about: devising an optimum strategy to reach the best compromise in conditions of uncertainty and competition.
It is only in light of such a strategy that the importance of the Internet can be appreciated. A person seeking a mate is severely restricted in choice through the limitations imposed by geographic location. Imagine now being connected to millions of others through the Internet. Certainly, a person couldn't make a final choice through the Internet, but, an efficient search strategy to arrive at a number of alternative starting options could use a far more rigorous set of criteria than if the search was restricted to a local social scene. This is what e-business is about, taking advantage of the fact that everyone can use the Internet to set higher standards for their explorative search strategies. This is where we are going to go now.