Zacharias 🐝 Voulgaris

1 year ago · 4 min. reading time · ~100 ·

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Strategy and Heuristics’ Role in It

Strategy and Heuristics’ Role in It

Strategy is a broad concept involving planning and acting on a plan to tackle an often complex situation, usually involving other people too (aka players). Strategy stems from antiquity and is bound to linger for the foreseeable future. Although its origins are in the military strategy finds applications in various domains (Fig. 1). Nowadays, it even plays a crucial role in data-related endeavors as we often talk about Data Strategy whenever we integrate the use of data in business decisions.

Figure 1. Different manifestations of strategy. - Strategy

Figure 1. Different manifestations of strategy.

 

Using a different taxonomy, we can talk about the science of strategy or the art of strategy. The science of strategy involves mathematical and visual tools for analyzing an adversarial situation and selecting the optimal option. This adversity aspect may stem from the fact that other players have conflicting actions or the options we have are conflicting with each other (i.e., it's an either/or situation). As for the optimal option, we often define it through a specific function that is usually maximized (or minimized in some cases) through strategy. The science of strategy involves tools like Game Theory and Decision/Game Trees (Fig. 2).

Figure 2. An example of a simple game tree          for a poker game. - / \
call / drop
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Figure 2. An example of a simple game tree for a poker game.

 

The art of strategy concerns the softer aspects of the field and involves things like understanding others and their wants in the "game" in which you all partake. It’s also about the subtle art of negotiating, striking deals, and gauging the situation beyond what's measurable. Intuition plays a crucial role in the art of strategy, and it's something that usually comes about with experience. Although more geared towards game theory and its application, the book "The Art of Strategy" by Avinash Dixit and Barry Nalebuff provides a solid introduction to these topics.

Strategy can get complicated fast, especially when real-world scenarios come into play. It's not nearly as simple as it's depicted in textbooks, while the consequences of a move in these "games" can be long-term and far-reaching, with many people's livelihoods at stake. So, it's by no means as playful or innocent as the term "game" makes it sound. Perhaps that's why strategic decisions are undertaken by those few individuals with a high-level understanding of the organization and its objectives. Nevertheless, everyone can cultivate and apply strategy to some extent since we all need to make tough decisions and live with their outcomes.

Chess is often a metaphor for strategy, while it's a game that most people are somewhat familiar with across different cultures. Since its popularization with the phenomenon of Bobby Fisher and the rivalry between the US and Russia during the Cold War, chess became a pop-culture element of sorts. The advent of computer programs in the 80s popularized chess more and made it appealing to everyone. The plethora of chess puzzles that came about since then made it even more accessible. Chess hasn't always been a game, though, as it was an educational tool for the royalty and their courts during ancient times. The idea of the game was simple, but its complexity was admirable, necessitating patience, imagination, foresight, and other qualities that came to be known as strategic thinking (Fig. 3).

Figure 3. Although deceptively simple, the game of chess is estimated to have about 10E120 possible branches in its game tree (more than the number of electrons in the universe!), making it virtually impossible to analyze thoroughly, even with powerful computers.

Figure 3. Although deceptively simple, the game of chess is estimated to have about 10E120 possible branches in its game tree (more than the number of electrons in the universe!), making it virtually impossible to analyze thoroughly, even with powerful computers.

 

It's not all fun and games, though, when you have to analyze a particular position and strategize around it. Whether in chess or a real-life problem, strategic reasoning is a tough challenge involving a lot of computations and uncertainty. This latter part makes things challenging since we need to factor in the unknown to the extent this is possible. Perhaps that's why people are obsessing about data these days to mitigate this unknown element and the uncertainty that stems from it. In strategy, this is also under the umbrella of risk.

Heuristics play a significant role in these matters as a way to handle uncertainty efficiently and save us some time. Additionally, they can help us retain our birds-eye view and avoid getting carried away with the low-level calculations of the various possibilities. Some would argue that developing a good chess aptitude is all about learning the proper heuristics and using them in the positions you encounter. Business acumen on that high level where strategy comes into play isn't much different. Where does one draw the line between intuition and a set of good heuristics?

It’s important to note here that heuristics aren’t always simple rules-of-thumb as a psychology book would instruct us. They can be like this too, but if they are to stand the test of time and be taken seriously, they need to be more. In analytics, we see heuristics as a whole array of different methods and techniques that facilitate the solution of a problem. Taking very concrete forms such as scripts that a computer can run, heuristics are promising tools that embody notions that would otherwise solely reside in the realm of intuition.

The evolution of heuristics isn't something we'll learn about in a strategy book, however, as they are often frowned upon, partly because they are ad-hoc and without much or any theory behind them. When enough heuristics come about though, something magical happens: new theory starts to come about gradually. This phenomenon is easily observable in chess when a bunch of heuristics developed by chess masters like Philidor (e.g., "pawns are the soul of the chess game") are part of the core theory of chess today. Lasker's intriguing heuristics for defensive strategy also found their way to the chess lore as they dictate that deliberate defense can also win a game. In computer chess programs, heuristics commonly leveraged take the form of the codification of expert knowledge or simplification rules that help the computer prioritize which branches of the game tree to focus on first.

Maybe we need people like John Nash (the creator of Game Theory) to put all these modern heuristics together into a new theory. This theory can facilitate data-driven decision-making just like Game Theory but for non-data-driven scenarios. After all, most real-world strategies today rely on data analytics to some extent, much like modern computer chess programs.

In the world of heuristics at large, new ideas come into manifestation through heuristics opening up new paths we didn't know even existed. Perhaps that's the reason heuristics are so fascinating and appealing to beginners and learners. Some could argue that heuristics can be a vehicle of creativity and intuitive thinking. Isn't that what the winning strategy is often all about? Without a doubt, strategy can benefit significantly from all this since the elusive optimal move is often just a heuristic away.

 

To learn more about the intriguing world of heuristics and how they help us tackle data creatively to solve challenging problems, check out my latest book, "The Data Path Less Traveled," by Technics Publications.

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