Book SummaryThe Art of Strategy, by Avinash K. Dixit and Barry J. Nalebuff

1-Page Summary1-Page Book Summary of The Art of Strategy

In The Art of Strategy (2010), Avinash Dixit and Barry Nalebuff explore how you can apply strategic principles of game theory to your business and everyday life. They argue that success in any competitive situation depends on understanding your choices as well as your opponent’s: anticipating moves, reasoning backward from your ultimate goal, and recognizing when to...

The Art of Strategy Summary Overview of Games

Dixit and Nalebuff define a game as a set of interactions between people or organizations in which each player’s options, decisions, and outcomes depend on the decisions of the other players. They call this “strategic interdependence.”

(Shortform note: Dixit and Nalebuff’s definition of games aligns with that of classic game theorists, one of whom, Eric Rasmusen, expands on that definition in his book Games and Information. Rasmusen writes that games are composed of four elements: players, actions, payoffs, and information—PAPI. Collectively, these form the rules of a game.)

As Dixit and Nalebuff explain it, your overall strategy when playing a game is to try to predict what the other players will do so you can make choices that counter, nullify, or otherwise work off their moves so that your interests are served no matter what they do. To make these predictions, you’ll consider the goals, motives, and points of view of the other players. You’ll also assume they’re trying to predict your next...

The Art of Strategy Summary Sequential Games

To successfully navigate sequential games, Dixit and Nalebuff recommend using a game tree to look forward to your ultimate goal and then reason backward. A game tree is a type of decision tree, which is a common analysis tool where you write down a starting choice, then draw a line from it to each possible next choice. From those choices, you draw lines to subsequent choices, and so on. The resulting chart will resemble a tree branching out from a central trunk.

For example, if your end goal is to become a lawyer, your decision tree’s trunk—your starting option—might be “go to college.” From there, your branches could point to different colleges that offer law programs. From there, your branches might point to the specialties each college program offers, as well as potential internships each college might lead to, and so on. You could then judge which path is most likely to lead you to your desired job.

A game tree differs from a simple decision tree because it also accounts for the decisions of others. For example, if you’re playing checkers, your choices at any point could be to move one piece here or another piece there. In either case, your opponent would then...

The Art of Strategy Summary Simultaneous Games

Dixit and Nalebuff devote the majority of their book to exploring simultaneous games, where players make their moves at the same time. Because players don’t have the advantage of seeing other players’ choices before they get their turn to choose a move, everyone has to predict what the other player will do at the same time they’re planning their own moves.

Dixit and Nalebuff write that most games of everyday life are simultaneous games. For example, two companies bringing similar products to market will plan their marketing campaign without knowing how the other company plans to market their product.

(Shortform note: Because everyday simultaneous games are set in the real world, they have a level of unpredictability that can’t be overcome no matter how much any one player analyses a situation. It’s often not possible for any player to know the entire breadth of options available to others, and, as the number of players and possible strategies increases, it becomes cognitively challenging for individuals or firms to consider every possible scenario, making oversights and surprises more likely. This can result in...

The Art of Strategy Summary Miscellaneous Game Strategies

After explaining the basics of sequential and simultaneous games and exploring the difficulty of getting players to coordinate, Dixit and Nalebuff discuss techniques that can help you get ahead in various types of games. These include introducing randomness to the game, detecting lies, and limiting your options.

Be Random

Dixit and Nalebuff write that because other players are trying to predict your moves just as you’re trying to predict theirs, you can make their job harder by acting randomly. If you can keep them from detecting patterns in your behavior, they’ll be less likely to guess your next move.

The authors illustrate this principle with an example of a soccer player shooting a penalty kick. This is a zero-sum game with no Nash equilibrium—there’s no choice that benefits both kicker and goalie.

A ball takes only a fraction of a second to travel from the kicker’s foot to the goal, so a goalie doesn’t have the luxury of waiting to see which way it’s headed before they have to choose which side to jump to. (Because a kicker rarely kicks to the center of the goal, Dixit and Nalebuff ignore this option and focus only on the option to kick either left or right.)

If...

Shortform Exercise: Gaining Leverage With Miscellaneous Techniques

Dixit and Nalebuff suggest that you can increase your chances of success at games by incorporating randomness, watching for lies, and limiting your options. In this exercise, try out some of their suggestions.

Think back to the last time you either played a game (for example, a board game, video game, or sport), or negotiated. This negotiation could have been a professional negotiation, such as with a business partner, or a personal one, like with your kids. Describe a point in the process when you were faced with multiple options and had to make a choice that would affect the other person’s next move.