conversations.from: human
conversations.value: What could be a title for a book about Irish, Astronomical, Journal with the genre: Crafts, Hobbies & Home, Home Improvement & Design?
conversations.from: assistant
conversations.value: A title for this book could be 'Thinking Strategically'
conversations.from: human
conversations.value: Do you know the first four paragraphs for this book?
conversations.from: assistant
conversations.value: Thinking Strategically
  The adoption of QWERTY, gasoline engines, and light-water reactors are but three demonstrations of how history matters in determining today's technology choices. But the historical reasons may be irrelevant considerations in the present. Typewriter-key jamming, hoof-and-mouth disease, and submarine space constraints are not relevant to today's trade-offs between the competing technologies. The important insight from game theory is to recognize early on the potential for future lock-in—once one option has enough of a head start, superior technological alternatives may never get the chance to develop. Thus there is a potentially great payoff in the early stages from spending more time figuring out not only what technology meets today's constraints, but also what options will be the best for the future.
  Just how fast should you drive? In particular, should you abide by the speed limit? Again the answer is found by looking at the game where your decision interacts with those of all the other drivers.
  If nobody is abiding by the law, then you have two reasons to break it too. First, some experts argue that it is actually safer to drive at the same speed as the flow of traffic. On most highways, anyone who tries to drive at fifty-five miles per hour creates a dangerous obstacle that everyone else must go around. Second, when you tag along with the other speeders, your chances of getting caught are almost zero. The police simply cannot pull over more than a small percentage of the speeding cars. As long as you go with the flow of traffic, there is safety in numbers.
  As more people become law-abiding, both reasons to speed vanish. It becomes more dangerous to speed, since this will require weaving in and out of traffic. And your chances of getting caught increase dramatically.
conversations.from: human
conversations.value: Do you know five more paragraphs?
conversations.from: assistant
conversations.value: In fact both these conditions exist to some degree in many actual instances. We will highlight them by constructing an example that is modeled on a real case, but isolates some features of it for emphasis.
  When IBM chose Microsoft's operating system (MS-DOS) for its first generation of personal computers, this was a big factor in Microsoft's growth and profits. In turn, the future development of IBM's family of computers was constrained by their dependence on features of MS-DOS. Let us stylize this example.
  Suppose the development of a computer system involves separate development of a compatible pair of hardware and software components. Two firms, each specializing in one area, are contemplating this project. The initial exploration will require $2.2 million of investment in the hardware part, and $1.1 million in the software. This initial investment will reveal the additional costs of completing the development. For the moment, the prospective partners know only the low, middle, and high values of the likely costs. Suppose these are $18, $24, and $30 million for the hardware and $9, $12, and $15 million for the software. The finished computer system is expected to generate operating profits of $39 million.
  Before we ask what kind of contract these two firms can agree to, and abide by, let us pose a simpler question. Suppose instead of two separate firms specializing in hardware and software, there is just one integrated firm. Its management is appraising a project with two components, hardware and software, whose costs and revenues are exactly as above. How will the management proceed?
  The decision involves two stages. The first is whether to go ahead with the exploration; the second, depending on what the exploration has shown, is whether to proceed with the further development. As usual, the management must look ahead and reason back, that is, start thinking about the second stage first.
conversations.from: human
conversations.value: Do you know the last three paragraphs?
conversations.from: assistant
conversations.value: In contrast, the least favorable machines could be set to pay back a large fraction of the money with a very high chance, and basically eliminate the hope of the big jackpot. Look at a machine set with a payback of 80 percent. If it provided a $1 prize on roughly every fifth draw, then this machine would make a lot of noise, attracting attention and possibly more gamblers' money.
  Perhaps the experienced slot players have figured all this out. But if so, you can bet that the casinos are just doing the reverse. Whatever happens, the casinos can find out at the end of the day which machines were played the most. They can make sure that the payoff patterns that attract the most play are actually the ones with the lower payoff ratio. For while the difference between a payoff ratio of 1.20 and 0.80 may seem large—and determines the difference between making money and losing money—it can be extremely hard to distinguish based on the number of experiments any one slot player has to make. The casinos can design the payoffs to make these inferences harder and even go the wrong way most of the time.
  The strategic insight is to recognize that unlike the United Way, the Las Vegas casinos are not in the business to give out money. In their search for the favorable machines, the majority of the players can't be right. For if the majority of the people were able to figure it out, the casino would discontinue their offer rather than lose money. Hence, don't wait in line. You can bet that the most heavily played machines are not the ones with the highest payback.
conversations.from: human
conversations.value: Delete the last sentence.
conversations.from: assistant
conversations.value: In contrast, the least favorable machines could be set to pay back a large fraction of the money with a very high chance, and basically eliminate the hope of the big jackpot. Look at a machine set with a payback of 80 percent. If it provided a $1 prize on roughly every fifth draw, then this machine would make a lot of noise, attracting attention and possibly more gamblers' money.
  Perhaps the experienced slot players have figured all this out. But if so, you can bet that the casinos are just doing the reverse. Whatever happens, the casinos can find out at the end of the day which machines were played the most. They can make sure that the payoff patterns that attract the most play are actually the ones with the lower payoff ratio. For while the difference between a payoff ratio of 1.20 and 0.80 may seem large—and determines the difference between making money and losing money—it can be extremely hard to distinguish based on the number of experiments any one slot player has to make. The casinos can design the payoffs to make these inferences harder and even go the wrong way most of the time.
  The strategic insight is to recognize that unlike the United Way, the Las Vegas casinos are not in the business to give out money. In their search for the favorable machines, the majority of the players can't be right. For if the majority of the people were able to figure it out, the casino would discontinue their offer rather than lose money. Hence, don't wait in line.