When I was a kid, my parents and teachers didn’t want me to play too much. They felt that the only thing I ever wanted to do was fool around which, to a large extent, was true and still is.
They found this immensely disturbing. Life, after all, is about hard work. You need to learn things in school, apply yourself and get a good job. Fooling around shows a lack of the kind of maturity and seriousness which is required to have a successful life.
I never did lose my love for horsing around and probably never will. Today, I urge my 3 year-old to play games because I’ve come to realise their power. We find them irresistible because they are, in a very real sense, simulations of real life. They allow us to practice with training wheels and, when we fail, we don’t get hurt, but learn lessons just the same.
A Crappy Poker Player (but a genius nonetheless)
No one ever doubted that John von Neumann was a genius. When he was still a child, his parents would have him memorize entire pages of the phone book to impress friends and neighbours at their lavish parties. He could do it with little more than a glance. Later in life, he could a novel and then recite entire chapters from it – in another language!
It has been said that the Nobel prizewinning physicist Eugene Wigner chose his profession because, with little Johnny in his class at the Fasori Gimnázium in Budapest, he came to consider his mathematical skills woefully inadequate.
As an adult, the game von Neuman really liked to play was poker. The problem was that he never got any good at it. He could calculate the odds like nobody on earth, but still couldn’t predict the actions of the other players. Most people would just find a new hobby that was easier on their wallets, but von Neumann took a vastly different approach.
His failure at poker led him to create the new field of game theory, which mathematically accounts for the strategies of other players. It has since been deployed in fields ranging from negotiations to marketing to warfare.
From Pong to Primacy
When my brothers and I first met our prospective stepfather, we called him “Pong.” It wasn’t because he was of Asian descent (he wasn’t), but because he was in the toy business and sold a popular game of the same name. It was amazingly simple, just two electronic paddles on a screen with a small dot simulating a ball going back and forth between them.
Of course, video games have come a long way since then. Now we have massive multiplayer online games, like World of Warcraft where millions of people seek to gain dominance. You form clans, acquire wealth and artifacts and go on quests to enhance your power and prestige.
You never actually win. The idea is to constantly grow in power through increasing the skills and attributes of your character, forming alliances with other players who have similar objectives and discovering new areas of opportunity. You constantly pursue quests. Some you attain, some you don’t, but to be successful, you must always move forward.
In other words, today’s games are pretty good simulations for today’s business world.
The New Game of Strategy
The old game of strategy was very much like Pong. It was fairly static, you just tried to get better and better at doing the same thing. A product refinement here, a cost efficiency there and, with some strong personal relationships, you could become enormously successful.
By now it should be obvious that the game of strategy has changed. We live in an unstable age, where increasingly frequent and sweeping technological and cultural shifts ensure that whatever we are doing now will become obsolete in a matter of just a few years. Stasis is not an option because business models no longer last.
At the same time, the stakes have never been higher. Digital technology has broken down barriers between industries, making just about everyone a potential competitor. While options expand and permutations multiply, the consequences of getting a major initiative wrong are dire and can threaten the continued solvency of even the healthiest enterprise.
Much like the transition from Pong to World of Warcraft, when the game of business strategy is transformed, you need to change the way you play it.
Games aren’t real life. When you die in World of Warcraft, you get reincarnated and play on. When you kill your adversary, you don’t leave a mourning family behind or face prosecution. That’s what makes games so much fun, you can experience the excitement of real danger without having to worry about real consequences.
We’re learning to do the same in the business world. We can try on business models in Excel and see if they fit. If not, we discard them. Computer aided design (CAD) software lets us do very much the same with virtual product designs and we’re beginning to get the hang of simulating more complicated interactions with agent based models.
In other words, the reason that games are so powerful is precisely the same as why my parents didn’t want me playing them. They allow us to experiment with behaviour without consequences. While that doesn’t provide character building experiences, it permits us to test strategies before they can do real harm.
And that’s the strategic power of games. It’s no longer enough to simply fail “fast and cheap.” By simulating failure, we can test multitudes of options in the virtual world while minimising costs in the real one.
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