Bruce Bueno de Mesquita is a master of game theory, which is a fancy label for a simple idea: People compete, and they always do what they think is in their own best interest. Bueno de Mesquita uses game theory and its insights into human behavior to predict and even engineer political, financial, and personal events. His forecasts, which have been employed by everyone from the CIA to major business firms, have an amazing 90 percent accuracy rate, and in this dazzling and revelatory book he shares his startling methods and lets you play along in a range of high-stakes negotiations and conflicts. Revealing the origins of game theory and the advances made by John Nash, the Nobel Prize-winning scientist perhaps best known from A Beautiful Mind, Bueno de Mesquita details the controversial and cold-eyed system of calculation that he has since created, one that allows individuals to think strategically about what their opponents want, how much they want it, and how they might react to every move. From there, Bueno de Mesquita games such events as the North Korean disarmament talks and the Middle East peace process and recalls, among other cases, how he correctly predicted which corporate clients of the Arthur Andersen accounting firm were most likely engaged in fraudulent activity (hint: one of them started with an E). And looking as ever to the future, Bueno de Mesquita also demonstrates how game theory can provide successful strategies to combat both global warming (instead of relying on empty regulations, make nations compete in technology) and terror (figure out exactly how much U.S. aid will make Pakistan fight the Taliban). But as Bueno de Mesquita shows, game theory isn't just for saving the world. It can help you in your own life, whether you want to succeed in a lawsuit (lawyers argue too much the merits of the case and question too little the motives of their opponents), elect the CEO of your company (change the system of voting on your board to be more advantageous to your candidate), or even buy a car (start by knowing exactly what you want, call every dealer in a fifty-mile radius, and negotiate only over the phone). Savvy, provocative, and shockingly effective,The Predictioneer's Game will change how you understand the world and manage your future. Life's a game, and how you play is whether you win or lose.

Bruce Bueno de Mesquita is the Julius Silver Professor of Politics at New York University and a senior fellow at the Hoover Institution at Stanford University. A specialist in policy forecasting, political economy, and international security policy, he received his doctorate in political science from the University of Michigan. Bueno de Mesquita is the author of fifteen books and more than one hundred articles as well as numerous pieces in major newspapers and magazines. He has appeared on all the major networks as well as television broadcasts in Brazil, China, Korea, the Netherlands, and elsewhere. His previous book, The Strategy of Campaigning, was co-authored with Kiron Skinner, Serhiy Kudelia, and Condoleeza Rice. He lives in San Francisco and New York City.


From the Hardcover edition.

Chapter One


WHAT WILL IT TAKE TO PUT YOU IN THIS CAR TODAY?  

GAME THEORY" IS a fancy label for a pretty simple idea: that people do what they believe is in their best interest. That means they pay attention to how others might react if they choose to do one thing or another. Those "others" are anyone believed to be a prospective supporter or opponent. Looking at how their interests intersect or collide is basic to assessing potential outcomes of decision making. To get a good grip on what people are likely to do requires first approximating what they believe about the situation and what they want to get out of it. By estimating carefully people's wants and beliefs, anyone can make a reliable forecast of what each and every one of them will do. And if you can predict what will happen, then you can also predict what will happen if you alter what people believe about a situation. This is, in short, how we can use the same logic both for prediction and for engineering the future.  

I'll provide a more detailed examination of game theory in the next two chapters, but first, as promised, let me illustrate what I'm talking about with the example of how best to buy a new car.   A new car purchase is a costly bargaining experience for most of us because most of us are bad at it. A little strategic reasoning can go a long way to improve the experience. If you follow the ideas here, you will not only have a happier time buying a car, you'll also pay a lot less money.  

New cars are mostly bought in one of two ways. Most of us go to a dealership, test-drive a vehicle, maybe fall in love with it, and engage in a most unpleasant negotiation over the price. A smaller number of us hate that experience enough that we buy cars through the Internet. This usually means getting price bids from a few local dealers and then going to one of them to get the car. That's slightly better, but there's yet a better way to buy cars that I urge you to try.  

What's wrong with the most popular means of car shopping? Pretty much everything. To start with, you, the buyer, invest your time, and probably the time of some family members as well, at a car dealership. The salesperson knows that few people enjoy dealing with them. They know that they rate near the bottom of anybody's scale of occupational trustworthiness. (The Jobs Rated Almanac weights occupations by numerous factors and reports that auto sales ranks 220th out of 250 occupations.1 Apparently it's worse to be a taxi driver, cowboy, or roustabout, but not by much.) But there you are subjecting yourself to the salesperson's pitch, standing before a car dealer in his or her place of business, feeling compelled to haggle over the price, probably to your embarrassment and certainly to your disadvantage. The whole time you're talking to the dealer you're revealing information that sets you up to pay too much.  

Being there is what game theorists call a "costly signal." It's a costly signal because your expenditure of time and energy announces that you want to buy, that there's a good chance you'll buy from the dealership you're visiting rather than go elsewhere, and, especially if you have kids with you, that you want to get out of there as quickly as possible. That first step, then, your simply being there, translates into strengthening the salesperson's hand in getting a good price. They believe you're ready to buy, and you've done precious little to dissuade them. Score one for the dealer, none for you.  

Now as it happens, costly signals are usually good things for you. They show you're serious about what you are saying and doing. That can give you credibility, as we will see in later chapters. Unfortunately, costly signals can have just the opposite effect when you're a shopper. They announce your eagerness to buy, and that makes it tough to get a good deal.  

The situat

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Excerpted from The Predictioneer's Game: Using the Logic of Brazen Self-Interest to See and Shape the Future by Bruce Bueno De Mesquita
All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.