Monday, August 30, 2010

game theory - any book recommendation?

I'm almost done reading the book Against the Gods. The book started really strong, but now I'm really forcing myself to finish reading it. Not sure if the problem is the book or just me. The topic and the explanation seems less meaningful and harder to understand. Any ways, the books is now touching on game theory and its impact on economic theories. The simplified explanation in the book on game theory sounds very interesting.

I'm especially interested in the topic of game theory and SW product strategy / development and personal finance.

Here is the fundamental questions that I use intuition and experience to figure out.

1) I have a fixed time and engineering resources. I have a product development road map 15x compares to my resources. How do I optimize my product outcome to increase the odds of market success?
a) add features x
b) add feature y
c) improve performance
d) fix bugs

2) I have a set of long and short term financial goals, in no particular order.
a) build up cash reserve
b) retirement
c) pay down debt
d) build up capital for my future start-up business
e) children college fund
f) acquire the various insurances.
g) vacation fund

Since my budget is well under control. I have money left to over into one or more of these goals. Which one's are the priority now and why? What is the allocation of funds of each and why?

On the surface the core of these two questions are identical. This an optimization of resource question. However, the deeper view is much more interesting and I hoping game theory will help me break down these steps into patterns that I can use and solve. What's interesting here, is that, this really is a multiple person game. In product management, my counter-party are my engineers, my boss, customers, sales, marketing, and various direct and indirect product competition. Every move that I make, these people are making simultaneous counter moves intended to optimize their own position. I'm in the same team with some but not necessarily with the same value. For example, with sales, I'm on the same team, but we don't have the same value. What I deliver might be highly valued by sales but not valued by engineers (bug fixes.) Or valued by sales but not by existing customers. (new features.) New features give sales new option to go after new customer base while existing customer wants bug fixes and better performance.

Obviously a mix strategy is the way to go. Some new features, some performance enhancements, some bug fixes, etc. But can game theory help me determine which mix would be optimal in under which set of conditions? How I do optimize over the life of the product release (not just the current release?) I would be happy if game theory can help me to clearly articulate and measure the utility of each their winning scenario?

In the case of personal finance, I think the game is actually much easier. My counter-parties are stock market, IRS, and family members. I want to maximize my potential gain, minimal my potential loss, minimize my tax payment, and maximize my utility with my family. I have to optimize based my current employment and expenses situation. Stock market, no one has any control over so it's only a matter of fund allocation and diversification. The tactical details of the allocation, I left to my advisor. However, I'm still the super allocator between all these competing priorities.

this is a rather disorganized post because my mind is so busy trying to apply a new concept to an long term existing problem. So if you know of any good books send more recommendations my way.