Co-Opetition - Adam M. Brandenburger [33]
People are very quick to deem others irrational when they see them doing “crazy” things. In a case we encountered, senior management was ready to fire an “irrational” salesman. He was so single-minded in going after volume that he cut prices to the point of destroying profits. He was a one-man price war.
But the salesman wasn’t irrational. He understood all too well what determined his bonus. While, in theory, he was compensated on both sales volume and profit margins, he knew that when push came to shove, keeping the factory at capacity was what really mattered. In practice, his bonus depended on hitting and exceeding sales targets more than on maintaining profit margins. Instead of firing him, management came to see his perspective. The bonus compensation system was changed, and the salesman became a whole new person.
Simply dismissing someone as irrational closes the mind. Much better is to work harder at seeing the world as the other person sees it. This is a mind-expanding exercise. Trying to understand what motivates the other person, what drives him, can help you anticipate what he’s going to do in the future or how he’s going to respond to something you do.
In sum: the fact that other people view the world differently does not make them irrational. In fact, if you try to impose your rationality on others, who’s the one who is really being irrational?
To us, the issue of whether people are rational or irrational is largely beside the point. More important is remembering to look at a game from multiple perspectives—your own and that of every other player. This simple-sounding idea is possibly the most profound insight of game theory.
Allocentrism
When I am getting ready to reason with a man I spend one-third of my time thinking about myself and what I am going to say, and two-thirds thinking about him and what he is going to say.
—Abraham Lincoln6
Many people view games egocentrically; they focus on their own position. The insight of game theory is the importance of focusing on others—namely, allocentrism.7 This principle underlies everything we’ve said about added values, rules, and perceptions. To assess your added value, you have to put yourself in the other players’ shoes and ask what you bring to them. To understand how a rule affects the play of a game, you have to put yourself in the other players’ shoes to anticipate how they’ll react to your move. To take account of differing perceptions, you have to put yourself in the other players’ shoes and see how they look at the game.
The underlying principle is the same: you have to put yourself in the other players’ shoes. You have to be allocentric. This doesn’t mean you can ignore your own position. The skill lies in putting the two vantage points together: in understanding both the egocentric and the allocentric perspectives.
Putting yourself in other players’ shoes does not mean: how would you analyze the game from their perspectives? It means: how would they analyze the game from their perspectives? It means putting yourself in their heads as much as in their shoes. It means adopting their views of the world. As part of that exercise, you also need to imagine how they perceive your view of the world. How will they put themselves in your head? Or rather, how do you think they will? And that’s not the end. You even need to imagine how other players imagine you perceive their view of the world. How do they think you will put yourself in their heads? Or rather, how do you think they think you will? And so on. None of this is easy.
Allocentrism
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