Games let leaders practice making risky decisions
This column is written by our Riskgaming consultant, Ian Curtiss. His first Riskgaming scenario, “Powering Up: China’s Global Quest for Electric Vehicle Dominance” will be published by us in the next few weeks.
At the Resilience Conference in London last month, an investor told me about how another early-stage investor with a “no-war” policy restricted one of their companies from using its drone technologies for warfare. This seemed like a reasonable, moral line to draw in isolation. But what really happened is the company formed a new entity. Now the company sends drones to deliver supplies to the front and conduct reconnaissance, and the new entity licenses the company’s tech to support striking capabilities.
Other than the lawyers negotiating these technicalities, did anyone get what they wanted?
We live in a world of mixed-interests, limited resources, and differing moral views. Even the most obvious and universally agreed upon rules and decisions have tradeoffs and consequences. Leading an organization today is less like running an assembly line and more like trying to direct a focused conversation over Thanksgiving dinner with both partners’ families seated randomly around the table. Trying to steamroll your decisions without considering the tradeoffs or externalities can lead to significant blowback — and mashed potatoes thrown across the room.
If you’ve been following The Orthogonal Bet, our scientist-in-residence Sam Arbesman has been diving into complexity theory: how interwoven relationships between the many facets of a problem or industry create dynamic, unpredictable futures depending on how, when and where they interact.
Take, for example, the separation of commerce and government. These two seemingly divergent fields have, in fact, only recently been so strictly separated in the post-Cold War era. The reality is, commercial entities are political. They can be military targets. And they’re often the recipients of extensive state support. Business executives, though they may try, cannot ignore government anymore.
Regardless of the way we have inevitably been told to classify our world — professions, sectors, academic disciplines — they have always had gray zones that don’t fit (even animals), and each group is increasingly overlapping and impacting with the others and crossing imposed boundaries. The result: powerful actors are making decisions in response to fields they barely understand, decisions that often backfire.
One way to get better at handling that discomfort and psychological stress: practice.
Wargaming: A model for the human mind
Pijus Krūminas, an academic researching political economy in Lithuania, described wargaming to me at the Connections Wargaming Conference as the place where Game Theory (hat is the optimal choice given all actors’ options?), Agency (how does it feel to make the decision?) and Relationships (Y is a function of X) meet. In other words, wargaming allows us to practice what it feels like to try to make optimal choices in a complex, interconnected world.
It turns out that, without practice, making these kinds of complex agency-driven decisions is very hard. You have to engage in both of Daniel Kahneman’s Type 1 and Type 2 thinking, and we’re often unaware of when our Type 1 thinking steps into the calculus. Despite this well-discussed phenomenon, our education, training and decision models most frequently assume that we are “homo-economicus,” making purely rational decisions based on socially valued outcomes.
But when you’re in a wargame or one of our riskgames, you’re forced to make decisions in unfamiliar circumstances, and experience a direct form of reward and pain for the outcomes of your decisions. In one of our 2-3 hour Riskgaming scenarios, attendees confront their “gut” and the assumptions they apply during uncertainty: a common stressful experience, even when it's a simulation.
In fact, training through games and play is perhaps the most fundamental human experience; if you listened to Danny’s recent interview with Kelly Clancy or read her book Playing With Reality: How Games Have Shaped Our World, she describes games as a human evolutionary superpower, which leverages dopamine to reward us for learning. It’s no wonder that militaries have been formally practicing the methodology for over 200 years since the Prussian military practiced kriegsspiel and decisively won the Franco-Prussian war.
Gaming should test a lot more than war
At many of the wargaming conferences I’ve attended, wargame designers bemoan the inability to include political factors into games. The excuses are predictable: no one wants to risk stepping on political egos, they say, or “it's out of our wheelhouse.” To me, these were shocking statements coming from simulators catering to a country, the United States, that hasn’t had a military engagement in the past 30 years without intense political involvement.
Meanwhile, long before kinetic warfare begins, cutting-edge technologies have high-probability, high-impact outcomes for national power, and can create disruptions that expose society to security risks and deep social fissures. And yet, I’ve seen almost no games about technology adoption in the wargaming conferences I’ve been to.
What's more, from the games I’ve led at the intersection of technology and defense, it’s also clear the policy community and the tech community don’t understand each other and behave quite differently. Tech executives are frequently mystified by the non-financial inputs required by governments to make a decision, while policy makers have frequently misunderstood the underpinnings of a successful business operation. The best scenario games highlight these gaps so both groups can see their own biases and deficiencies with clear eyes.
Understand risks, but don’t organize them
Analysis of risks are often siloed by type, and managed accordingly. Take, for example, the Enterprise Risk Management COSO cube, which is used worldwide for risk assessments. While it implies their interrelation, the cube methodology is, by design, a passive accounting of existing features: “Lets see where these risks fit, and then build a report around it.” It’s a compliance and due diligence report structure, not a driver of decision-making to build the future.
Meanwhile, chief risk officers are a more frequent role in organizations, but they are frequently grouped together with the General Counsel’s portfolio, or even with accounting, limiting their ability to think about future risks, instead focused on reporting and compliance.
As many have said: compliance kills innovation.
Instead, future-oriented leaders will see risks less as passive stochastic numbers to integrate into a formula, and more as decisions that individuals make around us. “Buying the market” is only a luxury for retirement accounts; every other investment in life requires an analysis of the tradeoffs involved.
On the government side, we’ve seen a rapid growth in the call for “statecraft” — the need for and use of cross-departmental coordination, awareness and tools. Mario Draghi’s report on European Union competitiveness, for one, openly calls for improved statecraft to compete with the U.S. and China. And yet, the bureaucratic focus on avoiding any negative repercussions of their decisions leads to a long list of unaccounted for risks as well.
Proper simulations can and should reveal the silos we operate in and how they force players to break through. For example, startup players frequently forget to calculate political implications of their actions in games, while policy makers often disregard economic rules of supply and demand to chase a goal.
This is easier said than done. But if done right, despite the myriad differences in player background, approach, and level of expertise, the game outcomes are often the same: beautiful “A-ha!” moments, deep integrative conversations between the players on these gaps, and faces full of curiosity and self-reflection as they walk out the door.
We accept that practice makes perfect when it comes to sports, entertainment, and even literal war. Leaders need to see that the same is true for high-stakes events and complex decision making too.
Podcast: The dangers of our rapidly narrowing understanding of China
China’s pivot from open to closed over the past decade has been striking. It wasn’t so long ago that tens of thousands of students and thousands of journalists and researchers were living and studying in the country, with multitudes of ambitious business executives spread across the nation’s financial capitals. Now, the number of Americans traveling and living in China has hit another low. With less grounded information, what are Americans missing about its most important trade partner and its growing adversary?
Randal Phillips knows the crisis better than anyone. The former chief CIA representative in China and a 28-year veteran of the agency’s Directorate of Operations, he retired for the world of business consulting, focusing on answering key geopolitical and business landscape questions for global clients. He was also vice chairman of the American Chamber of Commerce in China. Now, he’s increasingly concerned about the closing of the country’s borders and information systems, making it increasingly challenging for executives and political leaders to understand what they don’t know.
Randal and I talk about the recent Department of Justice indictment against the Sinaloa drug cartel and underground Chinese money launderers, and then we cover the fentanyl crisis, the shrinking space for information and due diligence firms on China’s economy, the challenges of operating on the mainland and the CIA’s operations, and finally, what the prognosis is for China’s economy in the years ahead.
🔊 Listen to “The dangers of our rapidly narrowing understanding of China”
The Orthogonal Bet: The Wonders of Graph Paper and Algorithmic Art
In this episode, Sam speaks with Alex Miller, a software developer and artist known for his work on a project called Spacefiller. This project exemplifies generative art, where computer code is used to create art and imagery. Spacefiller itself is a pixelated form of artwork that feels organic and biological, but is entirely crafted through algorithms.
Sam invited Alex to discuss not only Spacefiller, but also the broader world of generative art, and the concept of coding as a fun and playful activity. Together, they explore topics such as the distinction between computation as art and computation as software engineering, the nature of algorithmic botany, and even the wonders of graph paper.
🔊 Listen to “The Wonders of Graph Paper and Algorithmic Art”
Lux Recommends
- Shaq Vayda enjoyed Dario Amodei’s recent longform essay on “Machines of Loving Grace: How AI Could Transform the World for the Better,” and particularly its section on biology. “But I think that pessimistic perspective is thinking about AI in the wrong way. If our core hypothesis about AI progress is correct, then the right way to think of AI is not as a method of data analysis, but as a virtual biologist who performs all the tasks biologists do, including designing and running experiments in the real world (by controlling lab robots or simply telling humans which experiments to run – as a Principal Investigator would to their graduate students), inventing new biological methods or measurement techniques, and so on. It is by speeding up the whole research process that AI can truly accelerate biology.”
- Sam was intrigued by Claire L. Evans’s piece on “The Hidden Bird Algorithm” on how Craig Reynolds developed models for simulating and animating bird flocks for Hollywood. “Nobody in the visual effects business was crying out for a flocking algorithm. Nor was flocking some grand challenge in computer science. Reynolds just thought it might work, and it did. ‘My career path has been finding research questions that nobody cares about, and following them to where they led,’ he says, and laughs. But even Reynolds was surprised to discover where this question ultimately led. Because not long after his presentation at SIGGRAPH, he started getting calls—from biologists.”
- Tess van Stekelenburg is excited about a new research paper titled “Intelligence at the Edge of Chaos,” which she described as “interesting early work looking at intelligence arising from the ability to predict complexity and whether creating intelligence may require only exposure to complexity.” From the abstract: “Our findings reveal that rules with higher complexity lead to models exhibiting greater intelligence, as demonstrated by their performance on reasoning and chess move prediction tasks. Both uniform and periodic systems, and often also highly chaotic systems, resulted in poorer downstream performance, highlighting a sweet spot of complexity conducive to intelligence. We conjecture that intelligence arises from the ability to predict complexity and that creating intelligence may require only exposure to complexity.”
- Sam liked Gisela Salim-Peyer’s comment in The Atlantic on “Why Does Anyone Care About the Nobel Prize?.” “Establishing a prize is easy. The hard part is getting anyone to care. Alfred Nobel, a businessman who made his fortune selling dynamite and explosives in the 19th century, was not an obvious candidate to become the namesake of the most prestigious distinction in the world. Nor were Swedish scientists, as opposed to French or British, clearly the ones who should award it. Some biographers link Nobel’s idea to establish a prize for sciences, culture, and peace to the moment he learned that a newspaper had prepared an obituary for him with the phrase ‘merchant of death’ in the headline. That’s not how he wanted history to remember him.”
- Finally, Laurence Pevsner highlights a recent piece in The New York Times on “The Secretive Dynasty That Controls the Boar’s Head Brand.” “By the 1990s, Mr. Brunckhorst started taking on bigger roles, too. Trained as a computer scientist at Carnegie Mellon, he took charge of the company’s financials — digitizing them and creating spreadsheets for cost projections. As the Boar’s Head name became better known, Mr. Martin’s sales push became more aggressive. If stores wanted to offer high-end cold cuts from competitors like Thumann’s or Dietz & Watson behind the deli counter, they could no longer carry Boar’s Head.”
That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.
