Archive for the ‘Video’ Category

What is Game Theory?

Game theory is about choices and trade-offs and how we interact with each other in different situations. In business, for example, companies do compete and more often they collaborate on joint ventures. As players in a game, how well a player does depends on what each player believes the other player is likely to do.

Book: Decoding Strategy

Deceiving Strategy: Deceiving Strategy PDF

In this document we ask: is it rational for an entrant to retreat from the game? The answer depends on the belief formation process of both players, the timing of entry and commitment from the incumbent. In order to assess the value proposition for a client-entrant we describe the main battlefield, open a pre-entry playbook, assess the risk-on of the strategy sets and provide an Aide Memoire to management.

Patrick Mcnutt - Decoding Strategy


Link to book on publisher’s website

In his new book, Decoding Strategy, Patrick introduces the T/3 framework as a template for discovering patterns in company data and intelligence. With an emphasis on player type, game technology and time, the T/3 framework supports a narrative on rival interaction and observation. He argues that patterns do exist in the data but the challenge is to discover the patterns. Game dimensions are identified and companies are defined as players in a game. The book offers management and individuals a possible template for understanding patterns with a view to predicting the next move in a game.

Patterns & Critical Analysis

Behaviour & Observations

New Module: Ethics in Business

Patrick launches a new module ‘Ethics and Responsibility in Business’ on the Manchester MBA programme in January 2015.

Combining Kantian ethics with game theory reasoning and analysis, using case studies and examples, the module offers a new and refreshing approach to
business ethics, governance and anti-trust regulations. It builds and extends on the range of issues discussed in the International Journal of Social Economics.

Memo to Ms Ahrendts


Re: Apple Inc: Play not to lose: Minimax strategy

Dear Ms Ahrendts

Congratulations on your recent appointment. We have been commenting on Apple for a number of years in this Blog, and from the perspective of game theory. You should challenge everything about the data – market share figures, consumer loyalty and the source of the competitive threat. Apple does need to refocus, to reshape its strategy in order to compete in an evolving game that exhibits both convergent technologies and rapidly changing set of consumer preferences. Are you a brand? Are you a design company or an innovator? Analysts look at Apple in terms of profit margins and a company trading on earnings estimates and revision of the estimates. With new product launches across the i-suite of products, coupled with an underlying iOS ecosystem, they look forward to new product launches, and endless queues by early adopters and loyal fans at different cities across the world. But from our perspective, observing Apple as a player in a game, we would adjudge that you are not winning the game.

Confused consumers

First of all, your product offerings are in danger of becoming nodoids: in other words, they come to represent nothing more than a roll-out across a common platform of a suite of not dissimilar products absent any innovation. Consumers are either underwhelmed or disappointed. Once they ask the nodoid question: ‘is an iPhone an iPad or is the iPad an iPhone?’ the game dynamic switches from a game of playing to win to a game of playing not to lose. This is happening. Secondly, the analysts expect the i-Watch – so what? Analysts continue to debate the next big thing. So what? Could it be IPTV or cloud solutions?  So what? You know that you are not in search, you know that you are not in digital mobile advertising, you are a late entrant into cloud services, you failed to acquire Twitter, SIRI failed, Newton failed in the 1990s and in 2013 you allow us to believe that you are not a player in IPTV.

We have argued this before #tuncnunc discussing a range of game solutions to consider: launch a nano iPhone or engage in a telecom alliance with 4G LTE providers such as China Mobile. The 5C launch is about maximising profit margins; a nano offensive play, however, would ignite a $99 ‘sweet price’ competition for full functionality smartphone devices. Forward guidance on the stock estimate above $500 may adjust for these events in 2014-15 but these events may now be too late from a game perspective to play to win the long game. In other words, no longer is it about how Apple is performing in 2013, it should be about Apple’s likely performance in 2023.



Second mover advantage: SMA & Minimax

So an alternative for you to consider in your new role is to secure the second mover advantage [SMA] by playing not to lose. First, recognise that your market shares are increasing at a decreasing rate. Correct that trend. The iPhone 5 delay, for example, created a zero-sum switch to rivals, notably Samsung, in the UK and possibly across the EU. Your smartphone market share is under threat in Asia as the convergent smartphone and tablet game evolves to become Apple’s game to lose. Start thinking like your competitors – reason like this: ‘I think-you think-I-think’: Apple thinks that Samsung expects it to defend the iPhone, so Samsung will attack the iPad. But Samsung believes that Apple will reason this way, and so assuming that Apple will defend the iPad, Samsung will attack the iPhone. But Samsung also knows that Apple will reason this way.

This line of reasoning suggests that some kind of a decision tree ‘what-if’ analysis will reveal which strategy is Apple’s optimal choice. But it is more complex than that – we argue in our new book Decoding Strategy that how either player does in the game depends on what each believes the other is likely to do. Apple has to choose to play a minimax strategy, that is, a strategy that minimizes the maximum amount Samsung can expect to get in the evolving smartphone and tablet game, and thus maximize the amount Apple can expect to win. It is for you to patch a minimax strategy into your strategic vision for 2014 and beyond. To quote T.S.Eliot: ‘What we call the beginning is often the end, and to make an end is to make a beginning, the end is what we start from’. With best wishes in t+1…..

i-Lag or Byte of the Apple

The smartphone has evolved from new gadget to just another gadget – it has become commoditized.  The Razr i will indeed allow you to switch quickly between the web, play games, send texts and take photos. Will iOS 6 disappoint as consumers realize that it begins to slow down your iPad2 and is backward incompatible with the new generation iPod touch?  A case of i-lag will emerge as random consumers begin to ask: why upgrade to iPhone5? Why queue? Why buy Apple product? The convergence of technology will trump the key players as spherical competitors from anywhere at any time enter the game. Google’s Motorola has now unveiled its first smartphone with Razr i, a social media and mobile advertising market game began without Apple, SmartTV technology resides with LG and Samsung, and the new spherical competitors in smartphones are likely to be the Chinese players, Huawei and ZTE. Forget the device; the game has evolved from a game of competing ecosystems, OS v Android and 4G technologies to one of consumer expectations. Rational consumers have no idea what they want, but whatever it is, they want it now.  So expectations are dangerously high, matching them with low prices may be an optimal response. Judicious pricing policies will facilitate a winning strategy. We have argued before in this Blog for a nano-iPhone – a strategy to compete on price against the impending challenge from Huawei in the US. Launching a nano is a dominant strategy for Apple Inc because its payoff in the smartphone game will be (i) always at least as much as that of iPhone5 [whatever Samsung or Huawei do] and, (ii) at least some of the time actually better in the evolving game of commoditized smartphones.

Refer back to Blog entry: Simon en-cycling to SMIN!

Refer back to early Blog entries: The  Brontosaurus paradox

Euro Debt Crisis:Signalling Game

Interview on 25th May on Russia Today with Katrina Ross and on Bloomberg 26th May with Linzie Janis and addressing the ICAEW Conference in London, July 14th Patrick McNutt argued that the Euro debt crisis could spillover into the Euro currency, and ECB signals to de-list insolvent banks and promote Europe as off-shore hub for RMB as template solutions to avoid a permanent debt-deflation cycle in the EU.

Russia Today:


Word Document: Banks-and-Financial-SignalsJuly2011v4.doc

Powerpoint Slides: LondonpaperFinal2011.pptx

Signalling Game: China and US

I continue to address audiences in Dubai, Singapore and Shanghai on applying gametheory concepts to the international crisis…

Continuing the argument provided in the Financial Times letter, the signalling game between China and the US on the role of the US dollar in international markets is considered as a template for analysis.


If it is unlikely that China moves first on its exchange rate to revalue to allow more imports and help in the fight to control domestic inflation then will the US move on a real depreciation of the US dollar to realise a long-term economic growth through a reliance on export growth. Who will prevail as the US needs to export more and China needs to fight inflation? It may require a G20 initiative on managing exchange rates as global imbalances continue to hamper a world economic recovery.

McNutt on, EU Debt Crisis, G-8 Summit

May 26 (Bloomberg) — Patrick McNutt, visiting fellow at Manchester Business School, talks about the European debt crisis and the G-8 summit in Deauville, France. He speaks from Moscow with Linzie Janis on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

Euro debt woes could be solved by delisting banks

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With Russian economic growth threatened by Eurozone debt concerns Business RT spoke with Professor Patrick McNutt from Manchester Business School about the possible outcomes.

RT: Will the debt crisis in the euro zone hurt financial markets the way Lehman Brothers did following its collapse?

PN:”Indeed there is every possibility that it could, and we have to be very careful that this Euro crisis is structured carefully.However having said that if you look at the value of the Euro in the foreign exchange markets, it is sitting around 40 to the rouble, $1.42 to the US dollar, and around 87 pence sterling. So, at the moment the crisis has not filtered into the foreign exchange market.Having said that, however, we do need to see some resolution of the situation sooner rather than later.”

RT: Europe is suffering from the economics of insolvency – both public and private. What should the done?

PN:“One approach is to delist the insolvent banks completely, and remove what is the bank debt off the sovereign debt.In many countries, including my own country of Ireland, and Portugal and Greece, part of the issue is that the bank debt, the insolvency of the banks, has been wrapped inside what is effectively public sector debt.If we can separate that, one clear solution would be to delist the banks completely and stop trading in their shares on the European stock market.

It is very dramatic, but we can do it.We can do it with private sector companies all the time.There are debt obligations we can put in place.I cannot see why we cannot do the same for what is sovereign debt.But Europe is afraid of what effectively would be a default.But the solution to wait until 2013 is too long in my view.”

RT: Greece pays roughly 10 percent of its GDP in interest costs alone and is staring at a likely third straight year of GDP contraction. Can Athens avoid a default without more bailout funds?

PN:“Probably not, and this is a serious concern for the Greeks.The bigger concern for Europe is should we allow Greece to depart from the euro.That would destabilize the Euro, so Greece has to commit to very serious reform.There is some political move towards that but the sooner they do it the better.When you think about it even if Greece were to restructure their debt by 50% of GDP, it would take them quite a long time to recover natural growth rates as an economy.”

Patrick McNutt’s Thomson Reuters videos

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