Game Theory, Myopia and Gandhigiri

I have been reading a remarkable book by my friend Prof. V Raghunathan. The book is lucidly written and tries to put a complex concept as game theory within the reach of a non-technical person by using everyday examples. It is a book that is introspective about being 'Indian' and our essential behavioural patterns analysed with the backdrop of Game Theory. Ultimately the essence of behavioural patterns is all tempered by the outcomes of a certain action. This book not only tries to understand the behavioural patterns under an expected reward scheme but also exhibits an anguish about the general civic behaviour. While these two appear unrelated the art of Raghu's writing is a brave attempt to link these two.

Raghu constantly asks the questions as to why we are the way we are. Why do we constantly jump queues, why do we constantly cut corners, and why is there an apparent chaotic or non-disciplined behaviour in our approach to things. This chalta-hai attitude is what he tries to examine in the book. The book - typifying an Indian trait - asks more questions than it answers. Obviously the answers to these questions are not simple. If they were, they would have been found by brave and intelligent Indians long before. The answers to an extent are systemic and we have learned to live in chaos. Therefore we can see that this is more a book of anguish than anything else. The book is about here-and-now behaviour than behaviour about the longer term.

For instance, Raghu's example of exporting sub-standard goods that fetch a high return on a given consignment at the cost of future orders is something which most small time businessmen would be happy with. Obviously if we treated each transaction as a terminating transaction and not a point in the continuum then it is evident that we would try to maximise the return on that particular deal rather than look at maximising long term returns. The concept of game theory is all about the outcomes and how these expected outcomes temper behaviour. Is this rational behaviour? Well, it is if we look at the transaction as a single transaction, but it would be suicidal not to look at it from a long term perspective.

Obviously the antidote to this is that all of us behave in a ethically and morally acceptable manner. We unfortunately do not live in such an Utopian world. If that were the case, the world would have been such a boring place to live, with everybody quite clear on what the outcome would be. It is not without reason that a noted writer in Kannada said that there is no fun in heaven - only solitude, while you meet a whole lot of interesting people in hell.

While the book raises several issues at the transactional level - more to do with general norms of behaviour its reference to strategic issues like stockpiling of nuclear weapons is only in the passing. Obviously this is a clear instance of taking preventive measures in case the counter party shows deviant behaviour - essentially stemming out of mistrust and from being unsure of the action/reaction that the counterparty would take. The admiration Raghu has for the western world is more focussed on transactional issues. These pertain to jumping queues, maintaining orderly behaviour, better traffic sense and so on. Clearly on those, we Indians as Raghu rightly points out are very weak on regulation.

But that does not explain the differential behaviour within India between say Mumbai and Delhi. In general I have found that the traffic rules are obeyed more in Mumbai, lane discipline is maintained and people stop at red lights. Part of it might have to do with regulation. But I guess a larger part of it has to do with the transactional price Mumbaikars have to pay if there is a traffic jam. Mumbai is a city that cannot pause and thus traffic has to be orderly. In Delhi there is not only general level of aggression in all walks with a "Jugaad" attitude, the price for a delay can be easily explained away because most of the time one is not involved in the level of commerce as in Mumbai. Possibly a part of the explanation for tempering of behaviour is to do with pay offs - are we in a monetised commercial world where pay offs are tangible or are we in a world of fixers where pay offs are not really tangible. Thus as in the western world, even in places like Mumbai the cost one pays for deviation in the west is so high that transactionally it makes great sense to follow the rules than cut corners.

Remarkable about Raghu's style of writing is that he brings in everyday issues into understanding the complex concepts pertaining to game theory. It could be about airport queues, highways projects, train compartments or even paying speed money. Indeed he laments somewhere that we possibly are the only nation that pays a bribe to pay money to the government [referring to transfer of titles and stamp duties to be paid]. But is this all about game theory? I wonder sometime whether the linkages between the concepts that Raghu is elucidating and the examples are somewhat weak. However, it really does not matter as Raghu puts in a disclaimer that this book is not a serious research book, but a potpurri of ideas. And of course these ideas are presented very well. For an academic, Raghu has a very simple style of writing which makes these concepts applied to everyday happenings. While the language he uses is generally formal he constantly uses the term 'squealers' which does not jell well with the language used elsewhere. He certainly does not use the word 'sucker' and in general uses a formal language. So the squealers stand out as a sore thumb in the narrative.

As I was reading this book I was reminded of two unrelated things. I remember that another friend of mine Sanjiv Phansalkar had written a remarkable book on how small industrialists manage their business and why they remain small. The arguments extended by Sanjiv are also remarkably similar to the ones used by Raghu. Sanjiv, however does not use the game theory framework. Both these gentlemen put forth the essential argument that in being short sighted and in looking at each transaction as a terminating transaction, one is being myopic and loses a chance to look at the bigger picture.

For instance a typical attitude of a small industrialist is to try and maximise returns on any 'investment' they make. I have taught in training programmes designed for small industries and we constantly see that they are fishing for 'value for money'. Thus these are the only category of trainess who get bothered about the quality of the biscuits that are served, they are the only ones who come to faculty who are considered experts for 'tips' and photocopy enormous amounts of literature from the library. What they do not realise is that the 'tips' given by experts are generic in nature and may not be appropriate for a specific instance. It might be better to look at a consulting assignment where the 'tipper' is held accountable. This leads the firms to look at ways of avoiding payment of taxes, payment to creditors, creating an aura about themselves by driving fancy cars and hiring people because they are "trustworthy" and 'inexpensive'.. Obviously the output will then reflect the defects in the inputs. Sanjiv argues that if they ever reach a stage of being big and hitting the capital market, they actually do not have much to show by way of a balance sheet, because firms have got spawned a large part of the transactions are done in cash and a credibility trail is not established. Obviously the payoffs using Raghu's framework come in over the longer run, but one survives on a day to day basis as if there was no tomorrow. Thus, I personally think that these two books go hand in hand as they argue that one needs to expand time horizons and certainly show non-strategic behaviour at least at the level of transactions, so that long term relationships and trust could be built.

The other unrelated thing that came to my mind as I was reading the book was Munnabhai's Gandhigiri. When we look at the methods used by Gandhi, it is very clear that he never betrayed anybody about his expected response. Gandhi's response was non-violent, non-compromising and persuasive. In Munnabhai at places we see a deviation from the basic tenet that Rajkumar Hirani is trying to propogate. For instance, the movie has an instance where Munna wants to keep an old man happy by ensuring that the old man's son comes in with a birthday cake to the old-age home. The son is not interested and Munna does not use his Gandhigiri to convince the son. He uses brute force [though he talks about using Gandhigiri to his girlfriend!!]. Obviously if we look at it from Munna's point of view, Gandhigiri would have taken long and there was a deadline to meet. Therefore deviating from the expected behaviour to here-and-now behaviour might become necessary.

The problem with our society as Raghu identifies is that we seem to resort to this here-and-now behaviour a bit too often, and that is what makes our society chaotic in general and interesting at times. However, Raghu's book compels us to think and interrospect. It certainly makes us wonder "why we are the way we are". It awakens our guilt. Does it compel us to action in embracing non-strategic transactional behaviour? Does it lead us towards Gandhigiri? Well.. The last comment I would like to make is that it would have been nice if Raghu had picked up one or two instances of long term strategic behaviour and examined it in this frame. Why is it that the traffic rules are observed in general in the US, but as a nation US actually behaves like a "well connected rich politician's son" in world affairs. Why does it jump the line without recourse to United Nations in instance after instance? Possibly thoughts for Raghu's next book.