A kid who understood game theory at an early age

[update 12-20-10] This is my last post of the year…articles will return in the first or second week of January

image via flickr with c.c. by 2.0

What separates game theory from other decision frameworks is the explicit modeling of interaction. In game theory, the key principle is to act not just on what you believe is best, but rather to act on how others will react to you based on their beliefs.

I came across an anecdote in a very old Readers Digest that illustrates this kind of game theoretic thinking.

Here is the story:

When I was a teen-ager, my father caught me reading one of my older sister’s magazines. “Son, why are you reading that sissy magazine?” he asked.

“There’s an article that tells women where to meet men,” I responded, pointing to the magazine’s cover. “I need to know where I’m supposed to be.”

Years ago, I simply thought the story was cute. At this age, I can see the truth in the lesson, as we sometimes end up in a lounge on a Friday night rather than a bar that serves good beer.

We also applied some of this game theoretic thinking in a couple early articles for Bundle. One of the coolest things on Bundle is the Everybody’s Money tool which allows you to look at actual spending data summarized from credit card transactions.

Early on we thought it would be fun to data mine some interesting demographics. Debra investigated some spending of the rich and single. I took it a step further by looking at restaurant data where single women actually spend money to create a list of where men could meet women–and yes, you’re welcome.