Squid Game, Game Theory and the Illusion of Business Competition
Squid Game is a Netflix film series that tells the story of a group of people who have acute financial problems. They played in a series of children's games with their lives at stake. The winner will be able to take home 45.6 billion Korean Won equivalent to 38 million US Dollars.
Admit it or not, the squid game represents the dynamics of today's business competition world. So in this paper, we will use Game Theory to dissect the strategy and behavioral psychology of the characters in the squid game series. The goal is to understand the subconscious logic of competitive business behavior as well as to draw learning and help you determine the best steps to come out as a winner in the business you run.
Chapter 1: Learning from the Squid Game
Saying that the squid game represents a business game in the real world sounds like an exaggeration, but it really isn't. Children's games played in squid games such as red light, green light, tug of war and marbles demand complex strategic considerations. Moreover, talking about the psychological process that occurs in every game that risks its life. These are the things that are explored in the squid game series and that's how it really is in the business world.
As an illustration, for example, if you trade meatballs, it should be simple, but it's not. You have to decide; What is the right selling price with a decent margin but quite competitive? Where to sell it? In a crowded place but there are many competitors or in a quieter place but there are no competitors. How much raw material to buy and then produce it. For example, if you produce a lot but the market is empty, you will lose, but if you produce a little but the market is crowded, you will also lose because you have lost the opportunity to make more profits.
Now, let's look at the psychological aspect of all squid game players to play voluntarily. Indeed, at first they tried it and then regretted it and finally decided not to play anymore and went home but in the end they came back to play again.
Well, there are also so many entrepreneurs who try at the beginning then give up and finally say they want to stop. But many of them then decide to return to being entrepreneurs even though they know the risks. The lure of becoming rich makes them willing to take the risk of fatal failure. In the game squad, the risk is death, while in the business world the analogy is more or less the same. The business world is always full of surprises and uncertainties. we never know what will happen even friends can become enemies.
Now, let's use game theory to dissect the situation. Game theory is a branch of mathematics that examines the interaction of economic actors in which the interaction results obtained depend on the interests of each actor. Game theory was originally developed by Hungarian-born American mathematician John Von Newmann and his colleague Oscar Morgan Stone to solve problems in economics. In their book the Theory of Games and Economic Behavior published in 1944. They assert that mathematics developed for physics is a poor model for economics. Physics according to them observes inanimate objects that have no interest even though human economic behavior is full of interests.
They observe that the economy is very similar to a game where players anticipate each other's moves. Therefore, it requires a new kind of mathematics which they call Game Theory.
Chapter 2: Game Theory in Business Game
Game theory has many concepts in it, one of the most basic and well known is the Zero Sum Game concept which represents a situation where the value obtained by one party is equal to the value of the loss experienced by the other party. In other words, the net change in wealth or benefits earned is Zero. In the game of poker the players bet the same money, so that a certain amount of money is collected. The money that the winner gets is the money that other players lose.
In the squid game, every time a player loses, the winning players have the opportunity to get more money. The more players who fail, the more money the potential winner will get. The basic premise of a zero sum game is that the total potential income that can be obtained from the game is fixed. The more players, the less each player will get. Therefore, the players must compete to bring down the opponent, so that he can get a larger portion of the income.
Therefore, in business the first decision we need to make is to decide which arena to enter into. The playing field is industry. Each industry has a different amount of money. According to Yahoo Finance, the telecommunications industry has a market value of US$1.7 trillion, the food industry is valued at US$5 trillion, the e-commerce industry is valued at US$9 trillion, and the financial industry is valued at US$22.5 trillion.
In addition to the value of money, business people also need to estimate the number of players already in the game. Who are they? And how easily can other players enter?. Choosing the right playing field will determine the chances of your business success. But of course the business is not just choosing the arena of the game. You also have to be good at playing it. This is where things get more complex and game theory can help you understand them.
In a business game, the decisions of one player and the actions that follow will have an impact on the other players. In other words, the fate of the players depends on the decisions they make in the game. So, before you decide to do something. You must consider the response of other players to your action and the extent to which this response will benefit or even potentially harm you.
In a chess game, before you move a chess piece, you must anticipate the next move of your opponent. The hope is that the next steps will put you in a favorable position. A world chess Grand Master is able to predict up to 30 moves ahead of his opponent. Unfortunately, the business world is not like a game of chess, where every player can see the perfect condition of the game all the time. The business world is a blur because much is unclear. One of the concepts in game theory that is appropriate to represent the business game is called the Prisoner's Dilemma which was formulated by a mathematician named Albert W. Tucker. As the name implies, this game is played by two prisoners and this is how the game looks like;
There are two prisoners, A and B suspected of committing the robbery together. They were then isolated and pressured to confess. Each prisoner only cares about himself. They want to get the prison sentence as short as possible. Each must decide whether to confess or not, without knowing the decision of the other prisoner. Before deciding they are informed of the consequences of their decision.
First, if they both confess, they both go to prison for five years. Second, if neither confesses, they both go to prison for one year. Third, if one confesses and the other does not, then those who confess will be released but those who do not confess will be imprisoned for 20 years.
Logically, the second option (both not confessing) would provide optimal results for both detainees because they were only imprisoned for one year. This is what is called the Nash Equilibrium in game theory. However, every prisoner thinks for himself. They want to be free, so the choice is the third. Moreover, there is no guarantee that the other prisoner will not confess. If it turns out that he did not confess, while the other prisoners confessed, then he would be stupefied. The other prisoner is free, while he is in prison for 20 years. Because of this, the two detainees had the opportunity to choose to confess, the result of which was not optimal, each being imprisoned for five years.
Another example, there are two shop owners who sell the same product. Each wants to increase his profit. Every shop owner knows that if he sells at a lower price than his competitors, he will attract customers from his competitors. In this way the profits will increase. Because of that, each decided to lower the price until both were caught in a price war. As a result, the two shop owners actually made less profit.
Chapter 3: The Complexity of Business Games
Hopefully by now, you have started to understand about game theory related to the squid game and are able to explain the economic behavior of business people. But wait, the prisoner's dilemma is only two players, even though there can be many players in a business game. Besides that, if we talk about the reality, actually the business players can communicate with each other and it's not like the prisoners who were isolated separately.
Okay, let's take a look at another game in game theory that has a lot of players and is done more openly. Now you imagine that there are three players A, B and C. Actually there can be more than three players. Using three players to make it easier to explain later and also understand. But regardless of the number of players, the complexity of the choice remains the same and the results will usually be the same too.
The three players are located in the corners of an equilateral triangle. They engage in the Three-Way Duel (Truel). Truel is a duel that involves three people. Each player has a weapon with one bullet. Assume that each player is able to shoot perfectly and can kill one other player at any time. There is no sequence of players but shooting can only occur sequentially. After one shot, another player can shoot. They cannot fire at the same time so if a bullet is fired the result is known to all players before the second bullet is fired. The order of priority of the final results of the game expected by each player is as follows:
(1). Survive alone, (2). Survive with one opponent, (3). Survive with all opponents, (4). Do not survive without a living opponent, (5). Not survive with one versus live and (6). Not surviving with both of his opponents alive.
Surviving alone was the most ideal outcome for the player, while dying alone was the worst outcome. Do you think anyone shot? If there is who and he guesses who?. In the third point option, where no one shoots is the choice with optimal results for all players. Although not the first point result as every player expected. Why is that? because any other choice will always have a worse effect. Suppose A decides to shoot B expecting a result on the second point where he and C hold on. See in such a situation, C will have the opportunity to shoot A who has run out of bullets. So he finally left himself as the only survivor. C will get the result on the first point, the ideal result. If this is what will happen then A will actually get an undesirable result, namely the result on the fifth point.
Logically, A should not shoot first. The same logic applies to all other players, so the result on the third point is that all of them survive. However, do other players think the same as you? What if they were willing to take that risk? What if he decides to shoot you? What if the other two players form a coalition to shoot you? and if you had to guess who would you shoot? Which of the two are you sure you won't shoot after you run out of bullets?.
You can of course try to form a coalition with other players to shoot a third player and agree not to shoot each other. But, who will shoot the third player? If you do! What guarantees the second player won't shoot you when you run out of bullets?. The same is true of your coalition partners. Therefore, to ensure that no one shoots, all players need to make a mutual agreement. This is what explains that currently formed Industrial Associations such as; American Automobile Association (AAA), American Library Association (ALA), or American Public Health Association (APHA).
If the number of players is small, making such an agreement and enforcing the agreement is relatively easy. For example, oil-producing countries that are members of OPEC (Organization of the Petroleum Exporting Countries) agree to determine the amount of production and maintain the selling price. However, if the players are very large and difficult to control, for example in the consumer product industry; food or fashion industries, then such an ideal coalition is very difficult to realize. Finally, competition is inevitable. Every sea of competition will end up being a red sea full of blood like the ones we see in the squid game series. That is the reality of today's business competition.
Chapter 4: The Illusion of Business Competition
Then, what should we do so as not to get caught up in the bloody competition. There are three ways we can do this:
First, stay away from the competition and create your blue ocean. This is the advice that has been campaigned by Professor W. Chan Kim and Renee Mauborgne since 2004 in their book Blue Ocean Strategy. How to do it? Identify the key factors against which players in your industry compete. Then, create a product or service that is completely different from them in order to form a New Market where there are no competitors. That's your blue ocean.
Second, change the game to infinite games. Squid games like many other games are infinite games where the goal is to beat your opponent within a set time and rules. Simon Sinex in his book invites us to play infinite games. The game is timeless and the only opponent to beat is ourselves. Infinite games are advancement or self-growth to be better than before.
The two ways above can help you avoid bloody competition in business. But of course, each has its limitations. Finding the blue ocean is not easy, even a strategist still has to try and error. Even if we have found a blue ocean it won't take long because other players enter and turn our blue ocean into a blood red sea. The business idea as Infinite games is a beautiful concept. By definition that's great, but in a world where shareholders continue to demand short-term gains, that idea seems a long way off.
Third, ignore competition entirely. Just focus on the customer. You don't have to try to beat anyone. Simply win the hearts of your customers. After all, why bother spending energy on competitors. Doesn't your company's income come from customers? Competitors are only distractions, deceivers, don't give money, only make thoughts. So put all your resources and efforts to deliver the highest value jump for your customers. Just ignore competitors and don't want to be invited to compete in their bloody game.
The challenge of this third method is that customers are moving targets or not, their desires are static, their needs are changing, they are evolving and often they don't even know what they want. So, we too must be very good at understanding them. Able to anticipate their movements, then quickly respond to any of their needs. all of that is definitely not easy, but it's better than having to play a bloody squid game.
Whichever way you choose! Now, you know that you don't have to play the competitive game that exists in your industry. The competition is just a deceptive illusion that keeps you from your real job, which is to win the hearts of your customers. So, refuse if one day someone invites you to participate in the game. Let other players play it while you enjoy your time with your customers.
Reference: https://youtu.be/fXBzxAKDIi0
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