1. Predicting Behaviour Introducing ‘Game Ontology’ Presentation at Hong Kong General Chamber of Commerce March Patrick A. McNutt FRSA Visiting Fellow, Manchester Business School, UK & Smurfit Business School, Dublin, Ireland.

2. Premise: prediction depends on finding a pattern Step 1
Premise: prediction depends on finding a pattern Step 1. sequence 2,3,5,8,13,21,34… finite order [string] Step 2. digital self [repeat behaviour] step 3 coding binary 7 = 111 alpha-numeric: word = 9673

3. Premise: Apoptosis [defined for a data pattern in a game] a programmed sequence of choice events leading to the elimination of individual choice Patterns as a finite order [string] created by digital self [repeat behaviour] and behaviour is coded b

4. when your behaviour adapts & adopts you are enveloped by a game A game unfolds when There is both mutual interdependence and rival interaction a rational individual (.) plays the game (winning strategy ) or (.) obeys a rule (does not think) => abandon unilateral decision making & an inherited or acquired game dna

5. Prediction Vs forecasting
Patterns
Repeat Patterns….due to:
Avoid errors & Habit
Disbelief in fate
Possibility of ‘nudge-averse’
Signals & Semi-structured Data [tweets, newsfeeds]
=>
Patterns and Rules
Find the Rule.
FORECASTING
An ‘odds ratio’
What is the probability of an event?
Republican in the White House?
€ = 1US$?
Noise & Structured Data [sales reports]
=>
Patterns and Beliefs
Influence the Belief

6. At the level of individual: Find the rule + Influence the belief = decoding the pattern ‘a behavioural process, a sequence of actions and reactions at time period t with consequences at time period t+1’ Lets take an example: The Daily Routine

7. probability: Obey the rule. Is it inertia or habit
probability: Obey the rule. Is it inertia or habit? Example: Driving on left or right side of road? Example: your daily routine

8. Smartphone Wake Up 7am NFC at coffee shop 825 At office Log in PC 845
Leave the house 725am
Transit Smartcard at 745am
Check text messages
Social media
NFC at coffee shop 825
Coffee stop 8.25
Texting, FB and ‘Googling’ the weekend plans.
‘Latte to go’ NFC payment at 832am walk to office
At office Log in PC 845
At desk: 845am Log On PC, search web. & texting
925 Receive text message confirm lunch
1230 for lunch, CC payment 13.45
1730 Log off PC; Returning home, smart card 1814; send text; at home by surf the net, final texts, web browsing.
Texting, surfing ‘lights out’ by 23.55

9. probability: Obey the rule => don’t think => daily routine What if? poisson sequence of events with external nudge [example: a preferred coffee-house] chain of events follow a pattern as a rule ooooo

10. 7am
825
832
925
1230
1345

11. Δ IS THE NUDGE PARAMETER
Patterns have a ‘game’ dimension - to make someone do something they would not otherwise do
Δ is the nudge parameter ..it is an individual’s change parameter
The future is t+1 and if the change from t to t+1 can be framed as a loss/gain it creates a change (loss) aversion effect.
Individuals learn from observing the behaviour of others.
Individuals also learn from private information …I think- you think-I think loop

12. Daily Routine Algorithm

13. Probability: Obey the rule => don’t think => daily routine what if? poisson sequence of events with bespoke nudges [specific coffee-house] chain of events: influence or nudge the pattern

14. 7am
725
745
NUDGE
825
832
845
925
1230
1345

15. Poisson sequence 1.You and your friend’s daily routine are independent events. 2.you are [externally] ‘nudged’ towards costa. 3. your friend phones you for lunch tomorrow, you persuade her to go to costa. she goes to costa. 4.You and your friend’s daily routine are now co-dependent events.

16. 7am
725
745
NUDGE
825
832
845
925
1230
1345

17. Self as a player in a game
Information is embedded in observed behaviour Bt during the time continuum from t to t+1. .may be due to inertia or habit.
Bt+1 = Bt + Δ
Δ is the nudge parameter that policy makers, management, algorithms and strategists can influence.
RANDOMNESS-(NUDGE)-PATTERN-(CODE)- SEQUENCE-PREDICTION

18. Probability: Obey the rule (don’t think) = behaviour coded with a nudge 1 = Costa, 0 = No Costa (sbux) (14 days): ,5,2,4,3 becomes (14 days): ,7,0,6,0

19. ,6,5,4,3,2,1,0

20. PREDICTABLE BEHAVIOUR
NUDGE
NUDGE………….
NUDGE……….

21. Daily Routine Algorithm

22. A Pattern evolves from MONDAY, TUESDAY, WEDNESDAY, THURSDAY… then funnel into FRIDAY? CAN WE PREDICT FRIDAY? Pattern evolves WEEK 1, WEEK 2, WEEK 3.. then funnel into WEEK 4? CAN WE PREDICT WEEK 4?

23. PREDICTABLE BEHAVIOUR
NUDGE
NUDGE………….
NUDGE……….

24. FIND THE PATTERN: WHY? IT IS THE COGNITIVE KEY THAT DECODES BEHAVIOUR BT+1 = BT + Δ IN THE DAILY ROUTINE WE HAVE PRE-8.25a.m IN BUSINESS ALSO FIND THE PATTERN IN SONY VS MICROSOFT WE HAVE PRE-2004

25. PATTERN –
Announcement PS3 production schedule to ship 6 million units by 31 Mar 07 at $499
PS2 launched at $299
PS2 at $199.99
PS2 at $179.99
PS2 at $149.99
100 million PS2 shipped
PS2 at $129.99
26 Oct 00
15 Nov 01
14 May 02
15 May 02
13 May 03
14 May 03
29 Mar 04
11 May 04
1 Nov 05
30 Oct 05
20 April 06
8 May 06
22 Nov 05
6 Feb 06
27 April 06
22 million Xbox shipped
Xbox at $179
Microsoft Xbox launched at $299
Revised production schedule for Xbox 360 to million units by 30th June 2006
Xbox 360 launched at $399
Xbox at $199
Xbox at $179
Xbox at $149

26. October 2000 – may 2004 observable pattern ex-post 299. 299. 199. 99
October 2000 – may 2004 observable pattern ex-post opening symmetric move……. ………….. 50% price decrease repeated in 2010 and 2015

27. Cognitive Business Strategy
Cognitive dissonance:
Why strategy does not work?
Who is to blame?
More leaps than steps
LG Prada smartphone 2006
Yoghurt shampoo

28. Decoding strategy Decode Bt behaviour
Untangle the type tapestry in The Daily Routine as consumers outsource memory and leave smart ‘breadcrumbs’ or smart ‘footprints’.
Audience/Group or Consumer Inertia
Audience/Group or Consumer Habit

29. Business strategy EXAMPLES If Δ is inertia: =>
Sunk-cost investment
Nudge-averse
Strategy ‘what-if?’ is to move before a competitor
Δ = price promotion [income response].

30. Cognitive Business Strategy
Cognitive association:
Why doesn’t it work?
What should I change to make it work?
Less leaps more steps
Apple iPhone 2007
Faber-Castell Smart Pencil

31. Business strategy EXAMPLES If Δ is habit: =>
Network or group effects
Situation-specific
Strategy ‘if-then’ is to facilitate consumer’s choice
Δ = stripy toothpaste [asset response]

32. Signal/noise ratio signal/noise > 1 [find the rule] consumers are nudge-averse (do not launch a new product) nudge strategy [you can influence belief] signal/noise < 1 consumers are not nudge-averse (launch a new product)

33. Signal/noise < 1 in a Time continuum
Engage with consumers: don’t underestimate future gains in t+1:
When individuals are asked to choose between a piece of fruit and an unhealthy snack for a meal tomorrow, the choice is influenced by (i) the preference today; (ii) observing others as a norm.

34. with signaling everything is changing
What should I do?
With all the chaotic information available ‘what you are’ and ‘who you are’ defines your Daily Routine and converts it into information = a valuable tradable asset, so
Stop and Think.
Know Your Pattern
Observe but do not judge.

35. Problem: How to bring a 5 feet long fishing rod onto A london bus regulation height = 4 feet solution: find a wooden box of dimensions 3x4 insert rod across the diagonal bring box on board the bus with rod inside the box

36. Game Ontology
At 7am the choice is between: sunglasses or an umbrella? Game theory is observational. People filter signals and would act or behave accordingly. But what if an external influence could be introduced into the filtering process? The purpose is to nudge behaviour. In 1950s there was subliminal advertising and in 2016 there are smart nudges – cognitive business strategy.
The pattern is a repeated action but what is the action? Is it voluntary or habit? What is the metaphysics behind an action or the philosophy of conduct? An answer requires the receipt of intelligence, the appreciation of the situation, the invocation of principles, the planning, the execution of the action and the excuse provided for not doing an action at a moment in time.

37. Poisson sequence: Let µ = 1 and x = 2: P(2) =e-1/2!=0.3679÷2 = 0.1839
Suppose the coffee house already knows by decoding patterns that on average 60 customers walk by each day => one customer arrives per minute. In order to find the probability that exactly two customers arrive in a given one-minute time interval between :
Let µ = 1 and x = 2: 
P(2) =e-1/2!=0.3679÷2 =
The number of times a smart card is used at has an average rate of 10 times per hour then the coffee house would like to know (i) the probability no more than 10 times occur at the 1 hour lunchtime break and (ii) more importantly, the probability that the number of times will exceed 10 during the 1 hour lunch break:
P(x≤10) = Σ10i · e-10 ÷ i! = 0.58
(i = 0….10)

39. Thank you for listening………
‘Habit is a great deadner’
Samuel Beckett
Waiting for Godot Act II