Game Theory and the Advancement of Management Science, Part 1

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In the April 8, 2013, edition of American Thinker , Theodore Dawes penned an article entitled “The Fall of Journalism.” In it, Dawes describes the responses he receives when he poses a question to journalism students, “Why are newspapers published?” He writes that he hears a variety of answers, but never the correct one: to make money for the publisher. He goes on to quote an associate, who said “If you want to see heads explode, try explaining to people that they are not the customer and the newspaper is not the product... advertisers are the customer and reader attention is the product."

In the April 8, 2013, edition of American Thinker, Theodore Dawes penned an article entitled “The Fall of Journalism.” In it, Dawes describes the responses he receives when he poses a question to journalism students, “Why are newspapers published?” He writes that he hears a variety of answers, but never the correct one: to make money for the publisher. He goes on to quote an associate, who said “If you want to see heads explode, try explaining to people that they are not the customer and the newspaper is not the product... advertisers are the customer and reader attention is the product."

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In a similar vein, what do you suppose a majority of professional trainers believe to be the reason professional training organizations exist? I would imagine that—like the journalism students’ (and even professors’) responses indicated—answers to that question would center on the need to impart knowledge or skills. But it’s undeniable: the purpose of training is to help their organizations make money.

In a similar vein, what do you suppose a majority of professional trainers believe to be the reason professional training organizations exist? I would imagine that—like the journalism students’ (and even professors’) responses indicated—answers to that question would center on the need to impart knowledge or skills. But it’s undeniable: the purpose of training is to help their organizations make money.

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In 1962 the University of Chicago Press published a book by Thomas Kuhn, The Structure of Scientific Revolutions . In it, Kuhn provides an analysis on what happens when scientific theories are proposed, tested, analyzed, and ultimately accepted or rejected, and uses the field of astronomy as a key example. In the Ptolemy theoretical structure, the movement of the planets and stars were explained as a series of cycles and epicycles, with Earth at the Universe’s center. When Copernicus introduced his theories that the Earth was not the center of the Universe, his work was widely criticized and condemned, and yet, as we now know, the Copernican model was far more accurate than the Ptolemy structure.

In 1962 the University of Chicago Press published a book by Thomas Kuhn, The Structure of Scientific Revolutions. In it, Kuhn provides an analysis on what happens when scientific theories are proposed, tested, analyzed, and ultimately accepted or rejected, and uses the field of astronomy as a key example. In the Ptolemy theoretical structure, the movement of the planets and stars were explained as a series of cycles and epicycles, with Earth at the Universe’s center. When Copernicus introduced his theories that the Earth was not the center of the Universe, his work was widely criticized and condemned, and yet, as we now know, the Copernican model was far more accurate than the Ptolemy structure.

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With the invention of the telescope, there was simply more data being collected that could not be adequately explained by the Ptolemy model, but could be explained by the Copernican. Once the majority of the available observations were shown to be consistent with Copernicus’ theory, the astronomers of the day gradually rejected their previous understanding of the cosmos, and embraced Copernicus’ ideas. Kuhn described this shift in thinking as a “paradigm shift,” a phrase that became very widely used (and mis-used) ever since, particularly in the realm of management.

With the invention of the telescope, there was simply more data being collected that could not be adequately explained by the Ptolemy model, but could be explained by the Copernican. Once the majority of the available observations were shown to be consistent with Copernicus’ theory, the astronomers of the day gradually rejected their previous understanding of the cosmos, and embraced Copernicus’ ideas. Kuhn described this shift in thinking as a “paradigm shift,” a phrase that became very widely used (and mis-used) ever since, particularly in the realm of management.

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Keep in mind Kuhn was discussing the advancement of theories in the hard sciences. Does something similar happen in the management sciences?

Keep in mind Kuhn was discussing the advancement of theories in the hard sciences. Does something similar happen in the management sciences?

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As I discuss in my recently released book, Game Theory in Management , I tend to wince when I hear the very term “management science.” In order for a theory to be considered scientific, it must have two characteristics:

As I discuss in my recently released book, Game Theory in Management, I tend to wince when I hear the very term “management science.” In order for a theory to be considered scientific, it must have two characteristics:

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  be observable

  be observable

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  be repeatable in an experimental setting.

  be repeatable in an experimental setting.

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However, since the macro (or even micro, if we are to be completely honest) economic environment is far too complex to allow for the testing of a given business theory that has a confined and specific set of parameters, it’s impossible to speak of a set of hypotheses or ideas that have universal applications. Every single time I introduce pure water into an environment where the temperature is below freezing that water will eventually turn to ice. But every single time I train my employees to, say, improve the quality of their service or product, I will not necessarily realize an improvement in my organization’s profitability.

However, since the macro (or even micro, if we are to be completely honest) economic environment is far too complex to allow for the testing of a given business theory that has a confined and specific set of parameters, it’s impossible to speak of a set of hypotheses or ideas that have universal applications. Every single time I introduce pure water into an environment where the temperature is below freezing that water will eventually turn to ice. But every single time I train my employees to, say, improve the quality of their service or product, I will not necessarily realize an improvement in my organization’s profitability.

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In such a quasi-scientific environment, it goes without saying that there is going to be some bit of quackery—invalid, over-extended, or just plain dopey ideas being presented as useful business approaches and strategies. In his best-selling book The Black Swan – The Impact of the Highly Improbable, , Nassim Taleb asserts that it is not an idea’s validity that leads to its acceptance; is is its contagion.

In such a quasi-scientific environment, it goes without saying that there is going to be some bit of quackery—invalid, over-extended, or just plain dopey ideas being presented as useful business approaches and strategies. In his best-selling book The Black Swan – The Impact of the Highly Improbable,, Nassim Taleb asserts that it is not an idea’s validity that leads to its acceptance; is is its contagion.

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This leads us back to the purpose of organizations that teach management science techniques or strategies. Consider that prior to 1453, any organization attempting to teach cosmology that furthered an idea that did not place the Earth at the center of the Universe would not have attracted any paying students or scholars. Because of the level of understanding at the time, the only way to make a living teaching cosmology would have been to perpetrate, well, a myth. Indeed, our imaginary Ptolemy Model-teaching company would have had a vested interest in slowing (or even preventing) the Copernican model from advancing, because their student base would erode and eventually disappear.

This leads us back to the purpose of organizations that teach management science techniques or strategies. Consider that prior to 1453, any organization attempting to teach cosmology that furthered an idea that did not place the Earth at the center of the Universe would not have attracted any paying students or scholars. Because of the level of understanding at the time, the only way to make a living teaching cosmology would have been to perpetrate, well, a myth. Indeed, our imaginary Ptolemy Model-teaching company would have had a vested interest in slowing (or even preventing) the Copernican model from advancing, because their student base would erode and eventually disappear.

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In a rather strange twist, then, training organizations will often find themselves in the peculiar position of being rewarded monetarily for actively retarding the advancement of valid management science in those instances where the superior theory overturns a widely-held (and taught) paradigm. Organizations that believe they are advancing knowledge and expertise can and do end up doing the exact opposite, particularly if they are advocates of a particular management technique or strategy.

In a rather strange twist, then, training organizations will often find themselves in the peculiar position of being rewarded monetarily for actively retarding the advancement of valid management science in those instances where the superior theory overturns a widely-held (and taught) paradigm. Organizations that believe they are advancing knowledge and expertise can and do end up doing the exact opposite, particularly if they are advocates of a particular management technique or strategy.

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Is there a way to undo the factors that lead to this kind of a tail-spin within the training and development world? I believe there may be, and it has its basis in game theory. In part 2 of this series, I will examine some examples of management science advocacy, and how its advancement is both degrading management science in general, but also can also detected, evaluated, and successfully opposed.

Is there a way to undo the factors that lead to this kind of a tail-spin within the training and development world? I believe there may be, and it has its basis in game theory. In part 2 of this series, I will examine some examples of management science advocacy, and how its advancement is both degrading management science in general, but also can also detected, evaluated, and successfully opposed.