The Right Level of Reasoning

We can spend a surprising amount of time trying to understand why other people do things.

A customer does not reply. A vendor changes its pricing. Someone on a team suddenly disagrees with a decision. A competitor launches a product similar to ours.

Sometimes the obvious explanation is enough. Sometimes it isn't.

The difficulty is that other people are not static parts of the environment. They have goals, information, constraints, and beliefs. They react to what happens. Sometimes they are also trying to understand us at the same time.

Game theory has a long history of studying these strategic interactions.

Years ago, I reviewed research on a related problem: how machine-learning agents behave in environments with other agents. One question was how to classify increasingly sophisticated ways of accounting for what the other agents were doing.

Translated from machines to people, the progression looks something like this:

1. The world happens to me.
Treat other people's behavior as part of the environment.

2. The world has changed.
Notice that patterns have shifted and adapt.

3. People have types.
Recognize recurring behaviors and respond accordingly.

4. People have reasons.
Infer goals, incentives, information, and constraints.

5. People have models of me.
Understand that your actions change their beliefs, and therefore their future actions.

Read from top to bottom, this looks like a ladder, or a progression in reasoning sophistication.

And often, but not always, it is useful to move up that ladder.

More sophisticated reasoning is not necessarily better reasoning.

The Prestige and Succession

Movies and series have many examples of this problem. Characters are constantly trying to understand what other people want, what they know, and what they might do next.

The Prestige and Succession show two different sides of it.

The Prestige (It’s Not That Simple)

The Prestige is a movie about two rival magicians, Borden and Angier, obsessed with understanding and surpassing each other's illusions.

Borden develops a trick called The Transported Man. He enters one side of the stage and appears almost immediately at the other.

Angier becomes obsessed with discovering how it works.

Cutter, the engineer who designs Angier's illusions, gives him an explanation almost immediately:

Cutter: “He uses a double.”

Angier: “It's not that simple. This is a complex illusion.”

We have a very simple explanation. But Angier, amazed by what he has seen, searches for something more sophisticated.

Cutter's basic explanation was right.

Angier rejects the correct model because it seems too simple.

Maybe the lesson is: uncertainty makes complexity attractive.

When we don't understand why something is happening, a more sophisticated explanation can feel like progress.

The ordinary version is much less dramatic.

A customer does not reply.

Maybe they are busy. Maybe they are evaluating another vendor. Maybe they are deliberately slowing the process because they know we want to close.

All are possible.

But the fact that we can construct the more sophisticated explanation does not make it correct.

Succession (But Sometimes It Really Isn’t That Simple)

Succession follows the Roy family, owners of a large media company. A big part of the story is about who will eventually replace Logan Roy, the company's founder and CEO.

It is also a series where almost everyone is trying to understand what everyone else really wants.

At one point, Logan tells his daughter Shiv that he wants her to succeed him as CEO.

The simple explanation is:

Logan wants Shiv to become CEO.

But there are other possibilities.

Maybe Logan wants to bring Shiv back into the company. Maybe he wants to pull her away from politics. Maybe he wants to keep her close enough to control her. Maybe several of these things are true at once.

In the world of Succession, taking what someone says literally can be a serious mistake.

The ordinary version happens too.

A customer says they are interested.

Maybe they are. But there can be a big difference between being interested and being willing to schedule the next meeting, run a pilot, or pay.

So simple explanations are not always better either.

The Right Level

Experience helps.

After enough negotiations or customer conversations, we start recognizing incentives, constraints, anchoring, signalling, and things we would have missed before.

But experience also means we can come up with more explanations.

And more explanations do not necessarily get us closer to the right one.

Sometimes another level of reasoning helps. Sometimes another observation helps more.

The difficult part is knowing when the simple explanation is enough and when it isn't.

The skill is not always moving up the ladder. It is being able to move up and down.

Strategic sophistication is not thinking the maximum number of steps ahead.

It is knowing how many steps ahead the situation requires.

Sometimes, as Angier says, it's not that simple.

And sometimes it is.