Game Theory, Grexit and Chicken

 “The simplest way of thinking about it ( Grexit) is a game of chicken…the two sides ( Germany and Greece) resemble drivers heading for a single lane bridge from opposite directions.”

– George Tsebelis, Professor, University of Michigan

In game theory there is a game called Chicken. The game is designed to test the nerve of the players involved. In this game two people each get into the driver’s seat of a car and drive straight towards each other at top speed in single lane, the first to swerve out of the impending head-on collision is the “chicken”. Nobody wants to be called as “chicken”, but if no one swerves out then there head-on collision.

chicken 2

After becoming member of Eurozone, Greece kept borrowing money from European Banks, and spent it on paying salaries and pensions and on public welfare. Had this money been used in initiatives to boost economy it would have benefited Greece, instead it spend it welfare, which did not help economy. Soon Greece was in debt; at present debt is 200% of its GDP. The lenders are European Banks, members of Eurozone (mainly Germany) and IMF.

greek dilemma

Since Greece was unable to manage its expenditure i.e. control debt, it asked for bailout. But bailout came with condition that Greece will observe austerity i.e. control its spending. But this did not improve situation as austerity measures were partly implemented and money was spent on interest payment. Result was debt burden increased, GDP went down and unemployment rose. Now Greece is due to make a €1.6bn payment to the International Monetary Fund (IMF) tomorrow i.e. 30th June 2015, but Greece does not have money to make payment so is going to default.

greek drama

Now the game of chicken starts, banks are in no moods to offer another bailout or give any concessions, as doing so will send wrong message to countries like Spain and Portugal whose financial situation is not very different from that of Greece. They too will seek bailout. But rigid stand by banks will result in Greece opting out of Eurozone (called as Grexit- Greece Exit) and shifting to their earlier currency Drachma. This means banks will be unable to recover billions of Euros they have lent to Greece, leading to global financial crisis.

chicken

“I don’t believe in this game-of-chicken rubbish…We don’t know what the risks are.”

– Jeroen Dijsselbloem,Dutch Finance Minister

Greece on the other hand by exiting Eurozone will get into financial crisis; it will not be able to get loans from banks anymore, and Drachma will lose its value. This will further increase crisis as government will have little money to pay salaries, pensions and spend on public welfare, which in turn will increase unemployment which today is at 25%. But accepting terms of Eurozone would mean political crisis as it will be seen as humiliation by Greeks. Most of the Greeks are blaming their current problems to austerity measures.

greek economy

If both take rigid stand, head-on collision is unavoidable, this is turn will hit global economy and will again result in another cycle of recession.

So who will blink first?

pay bill

“The Greek government cannot announce a policy of leaving the euro — and I’m sure it has no intention of doing that…And if Greece is in effect forced out of the euro, what happens to other shaky members? I think I’ll go hide under the table now.”

-Paul Krugman Nobel prize-winning economist

Wicked Problems, Innovation and Project Masiluleke

“Most problems in organizations are ‘wicked problems,’…but most problem solving methods are suitable for simple, well-structured problems. The usual approaches do not, therefore, help organizations or people deal with their most important problems.”

– Robert Louis Flood, Creative Problem Solving

 

In corporate world some problems are well defined i.e. start, end and in between steps are known, these are also called as tamed problems. While some problems are not only difficult to define but are also resistant to solution, such problems are called as wicked problems.

14_T_Tamed-Wicked

A wicked problem is a social or cultural problem that is difficult or impossible to solve for as many as four reasons: incomplete or contradictory knowledge, the number of people and opinions involved, the large economic burden, and the interconnected nature of these problems with other problems ex. Poverty which is difficult to define, and is in turn related to number of macro factors like education, nutrition, economy, employment etc.

Wicked_Diagram

Most of the wicked problems are in social field ex. poverty, unemployment, corruption, public health, education etc. But people who are supposed to resolve it are bureaucrats who are trained to solve well defined problems, hence are unable to resolve wicked problems. Their efforts either end up in failure or they simply give up and just ignore the problem.

Wicked problems need innovative solutions, something bureaucrats just cannot come up with. Instead of bureaucrats, the responsibility should be given to social entrepreneurs, who can come up with innovative ideas using their network.

South Africa is battling with problem of AIDS, which has assumed form of epidemics in that country. Problem of AIDS is not just of diagnosis and treatment. It has lot of social and cultural dimensions ex. complex issues of privacy, sexual identity, fear and behaviour. These issues have to be handled along with the biological spread of the disease.

Traditional approach of government opening diagnostic centres, waiting for people to turn up for diagnosis and then giving medicines was not working. An innovative approach was needed.

Data showed that around 90% of South Africans have access to mobile phone. A project was designed around it. It was called Project Masilueke or Project M, which was a joint effort of  Pop Tech (community of innovators from many fields), frog( a global design and innovation firm) and MTN ( mobile service provider in South Africa.

project M

KwaZulu- Natal area of South Africa was chosen for this project. Initially MTN started sending SMS to people in that areas informing them about AIDS and giving them helpline number.

“Frequently sick, tired, losing weight and scared that you might be HIV positive? Please call AIDS Helpline 0800012322.”

-SMS by MTN

When contacted, people were sent Home HIV Test Kit, designed by frog which helped a person to do diagnostics at home. Instead of blood test, it consisted of saliva based diagnostics. The test, with copy written in both English and Zulu, was available free of charge.

projectm kits

The person could get in touch with mobile based helpline and app to discuss his/her test results and start counselling and treatment.

PROJECT-MASILULEKE

This combination of mobile support and saliva-based diagnostics resulted in significant increase of awareness of AIDS in KwaZulu- Natal region, which would not have been possible with traditional methods.

 

Parallel Learning Structure, Hot Spots and Innovation

“Organizations are designed more to perform day-to-day activities and to produce well-defined products and services—not to solve complex and changing problems…what is needed is a different approach to organizational problem solving—and one that  is specifically designed for problem solving…like a parallel design which resolves ill-defined, long-term, system-wide type problems.”

-Ralph Kilmann, Human Systems Management

An organisation today faces problems which are either well defined or are ill defined. In fact current dynamic and changing environment poses more complex and ill-defined problems than before.

While formal organisational structure (also called operational design) can solve well defined problems, for ill-defined problems one need what is called as collateral design, it coexists with the formal, operational design but is structured as a flexible, open, loose system of problem-solving group. Collateral Design is also called as Parallel Learning Structure.

creativity

Parallel Learning Structure is an informal structure, where members of organisation come together to solve a problem. The group is informal and doesn’t have hierarchy. The group comes up with innovative solution to a problem. Parallel Learning Structure consists of group of people that cut across the formal departments in the operational design so that a wide array of expertise and information is available to collateral group i.e C group.  There is also a steering committee above it which removes bottlenecks that this group might face i.e. S group.

Parallel structure

“ Parallel Structure should be microcosm of larger organisation, that is, it should have representatives from all in the organisation”

-Cecil Bell – Organisational Development

Parallel Learning Structure encourages innovation, learning and change which are not possible in formal bureaucratic organisation. It encourages members and line managers from the operational design to develop creative yet feasible solutions in a more relaxed, fluid, informal collateral design—and then enables them to return to the operational design and implement their solution from a formal position of authority in the organization.

'Gentlemen, I want you each to come up with an idea whose time has come.'

Working on similar lines, management expert Lynda Gratton came with concept Hot Spots.

Hot Spot is a stage when members of group feel energized, vibrantly alive with brains buzzing with ideas. Ideas and insights of members miraculously combine in a process of synthesis from which spring novelty, new ideas, and innovation.

 

 When we took a lot at organizations, what we found was that quite often you just see business-as-usual – you can almost imagine that as being green; and then sometimes the place really freezes up – you can almost imagine it as blue icicles.  Then, as you watch, you see these incredible places of energy and innovation – you can imagine them as orange or red – and we call those hot spots.”

-Lynda Gratton, Hot Spots

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Gratton has identified three factors that promote the development of Hot Spots.

The first is cooperative mindset. If there’s no trust or willingness to share ideas, you’ll never generate a creative atmosphere.

The second factor is boundary spanning. New ideas are often the product of two previously unassociated thoughts, so crossing boundaries within and beyond organisations can be very fruitful.

The third is igniting purpose. While getting a diverse bunch of cooperative people together creates the potential for a Hot Spot, it takes a fresh idea or challenge to really ignite their creativity.

One such challenge was thrown by Ratan Tata to Tata motors- How do we make Rs. 1 lakh car.

'We have to be more innovative but not in an out-of-the-box way.'

Complexity Theory, Cynefin Framework, Decision Making

“Using the Cynefin framework can help executives sense which context they are in so that they can not only make better decisions but also avoid the problems that arise when their preferred management style causes them to make mistakes.”

-David Snowden in HBR

Dave Snowden is an expert in area of knowledge management. One of his biggest contributions has been application of complexity theory to management. Snowden explained this with help of model called as Cynefin.

Rapid changes in business environment makes it difficult to predict future i.e. future is no longer linear- you cannot foresee future steps. To explain this non-linear change, experts have come up with Chaos Theory and Complexity Theory.

The Chaos Theory explores effects of small occurrences in dramatically affecting the outcomes of seemingly unrelated events.

Complexity Theory is based on assumption that whole is greater than sum of its parts. Any system has large number of elements that are interacting with each other ex. various departments of organisation. These interactions can produce impact which is sometimes disproportionately bigger than sum of individual efforts.

In both chaos theory and complexity theory your past experience may not be of any use i.e. hindsight does not lead to foresight.

“In the complex environment of the current business world, leaders often will be called upon to act against their instincts. They will need to know when to share power and when to wield it alone, when to look to the wisdom of the group and when to take their own counsel.”

-David Snowden in HBR

Snowden used these theories to design a model of change and decision making called Cynefin Framework. The model has 5 domains and your problem lies in one of the domains, the domain tells you what decision to take. The five domains are obvious/simple, complicated, complex and chaotic and disorder.

Cynefin-600x632

In simple (later renamed obvious) domain, your options are clear and cause and effect relationships are apparent to everyone involved ex. problems faced by call centre executives, there are well defined processes to handle them, and you can come up with best practices to handle such situations. It is also called domain of best practices.

'Don't spend money I don't  have, eh!  Always, a simple solution to a complex problem!'

In complicated domain a problem is complicated and may have several solutions. Due to complication you may not be able to decide which solution to apply. In other words there is clear relationship between cause and effect but solution is not visible to everyone. So you need expert to solve your problems. Since there is dependence on experts it is called domain of experts.

expert

In case of complex domain it is very difficult to identify one correct solution or find cause and effect relationship. Today many organisations are facing problems that fall in this category. In such situations instead of coming with plan of action, it is better to be patient, look for patterns and wait for a solution to emerge. In such situations the leader instead of giving solution should gather diverse group of people and encourage them discuss possibilities and come up with innovative solution. This is also called domain of emergence.

complicated

In case of chaotic solution, there is no relationship between cause and effect, so first step is to establish order. Since crisis or emergency situations fall in this domain what is required it to act decisively. Since this domain requires quick action and decisiveness, it is called domain of rapid response.

chaos

Last domain is domain of disorder, here you are not clear on which of the above four domains you fall in. So primary goal here is to gather more information and move to any one of the four domains and take appropriate action.

simple

“During the Palatine murders of 1993, Deputy Chief Gasior faced four contexts at once. He had to take immediate action via the media to stem the tide of initial panic by keeping the community informed (chaotic); he had to help keep the department running routinely and according to established procedure (simple); he had to call in experts (complicated); and he had to continue to calm the community in the days and weeks following the crime (complex).”

-David Snowden in HBR

 

Multiple Personality Disorder, Chris Sizemore, Kenneth Bianchi and Billy Milligan

“Despite authorities’ claims to the contrary, my former alters were not fragments of my birth personality. They were entities, whole in their own rights, who coexisted with my birth personality before I was born. They were not me, but they remain intrinsically related to what it means to be me.”

-Chris Costner Sizemore, author I am Eve & A Mind of My Own

Chris Sizemore is a woman who was diagnosed with multiple personality disorder (now called as dissociative identity disorder (DID). DID is a mental disorder  characterized by at least two distinct and relatively enduring identities or dissociated personality states that alternately control a person’s behaviour.

Later a film was made on Chris called Three Faces of Eve. Film is about lady called Eve White who is having troubled marriage, after meeting psychiatrist a new personality emerges called Eve Black who is carefree and flirt. Later during therapy one more personality emerged- a mature person called Jane. Finally the psychiatrist managed to fade out Eve White and Black and only Jane remained.

3 faces

Chris wrote books like I am Eve and A Mind of My Own. Chris later claimed that she didn’t have just three but twenty different personalities.

Many psychologist feel that DID does not exist, the person suffering from disorder is just doing role play based on suggestions of psychologist, and he keeps doing role play till he starts believing that role is real.

multiple 1

This theory was tested in case of serial killer Kenneth Bianchi. Bianchi has murdered 12 women. When he was arrested he claimed that murders were committed by his other self called Steve Walker. He managed to convince psychologists that he indeed suffered from DID. But investigators brought their own psychiatrist Matrin Orne. Orne told Bianchi that in case of DID there are atleast three personalities. The trick worked, Bianchi promptly created a third personality called Billy. Later Bianchi admitted that he was trying to trick investigators and DID story was fake and an attempt to save himself.

'I'm trying to get to know my boss better. So far I'm on a first-name basis with three of her 12 personalities.'

“I couldn’t tell you what was going on, but it was like I was talking to different people at different times”        

-Elliot Boxerbaum, Police Investigator, on Milligan

But in case of another criminal Billy Milligan this theory worked, Billy pleaded multiple personality disorder to save himself from imprisonment. He was sent to mental asylum, where psychiatrists diagnosed that Billy has 24 personalities within him!

The Last Thing a Psychiatrist Wants to Hear When Treating a Patient with a Multi-Personality Disorder: ' Thanks, Doc! I feel like a whole new person!'

Kenneth Benne, Robert Chin and Change Management Strategy

“Change is hard because people overestimate the value of what they have—and underestimate the value of what they may gain by giving that up.”

— James Belasco and Ralph Stayer, Authors of Flight of Buffalos

change management 2

Organisational Development Specialists Kenneth Benne and Robert Chin came up with four strategies to bring about change in organisation. Which strategy to use depends on organisational culture, employees, level of urgency etc. One thing you cannot ignore is resistance to change; a section of employees will always resist change.

'I thought people were quite receptive to the change seminar.'

Four strategies recommended by Benne and Chin are…

Empirical-Rational Strategy – Here assumption is employee are rational i.e. they always keep their self-interest in mind, and will support change once they understand how change will benefit them. Change is based on the how the information related to change is communicated to them and what incentives are offered.

change communication

Normative-Reeducative Strategy – Here assumption is employees are social beings and will adhere to cultural norms and values. Anyone going against norms and values may face boycott. Change is based on redefining and reinterpreting existing norms and values, and developing commitments to new ones.

'Implementing these changes won't be easy. We're pretty set in doing things the wrong way.'

Power-Coercive Strategy – Here assumption is employees are basically compliant and will generally do what they are told or can be made to do. Change is based on the exercise of authority and the imposition of sanctions.

Environmental-Adaptive Strategy – Here assumption is employees will oppose any loss and disruption due to change, but they are also adaptive i.e. will adapt to new situation since they don’t have any other option. Change is based on building a new organization and gradually transferring people from the old one to the new one.

“Unless you are prepared to give up something valuable you will never be able to truly change at all, because you’ll be forever in the control of things you can’t give up.”

— Andy Law

change mg

Each strategy has its own advantages and disadvantages ex. Power Coercive Strategy will give quick results and is useful when level of urgency is high, but changes don’t last for long, on the other hand Normative Reeducative Strategy takes long time, since changing culture of organisation and making people accept new culture takes lot of time and efforts, but once implemented the change is permanent. In change management Normative Reeducative Strategy is used by most of organisational development specialists.

Secondly, selection of strategy may also depend on culture of nation ex. In Asian countries Power Coercive strategy works well while in case of North America and Western Europe Empirical Rational/Normative Reeducative works well.

china canada

Butterfly Effect, Maggi Noodles and Madhuri Dixit

“The tests we have done found no lead. So we are trying to engage with the authorities regarding the test methods they have used…we do not add MSG in Maggi noodles our safety measures and standards are same all over the world.”

-Paul Bulcke, Nestle CEO

In Chaos Theory there is an interesting phenomenon called Butterfly effect.  Butterfly effect is a phenomenon in which a small change in the initial condition of a system results in large changes in later conditions ex. if a butterfly flaps its wings in one part of globe, it can result in storm in other part of globe.

butterfly effect

Few months back, India witnessed butterfly effect. It started with a food inspector in small town of Uttar Pradesh who tested Maggi noodles for MSG and lead content. The butterfly had started flapping its wing, but a multinational food giant and superstar of yesteryears were completely unaware of the fact that this flapping of wings will result in storm all over India and how it will affect them.

maggie angry

During testing it was found that Maggi noodles had high level of MSG and lead, soon more samples of Maggie noodles were tested for MSG and lead. Maggi noodles failed in most of the tests. This resulted in one state after another banning Maggi noodles. Soon one of the most well-known brand in India disappeared from shelf.

“Nestle has reassured me that they adhere to stringent testing for quality and safety and are working with the authorities closely.”

-Madhuri Dixit, the current brand ambassador of Maggi

maggi-madhuri

Madhuri Dixit is superstar of yesteryears. She was also brand ambassador for Maggi noodles when this controversy took place. Madhuri had been promoting Maggi noodles as health food. Post controversy people wanted Madhuri arrested for misleading them and for promoting harmful product. Meanwhile CEO of Nestle has assured that their inhouse tests have shown that Maggi is safe. But food authorities have proof of high MSG and lead content, so as of today government has not lifted ban on Maggi noodles. Nestle has to wait till storm created by food inspector subsides.

maggie graphic