The Person You're Trying to Become

Dean Dudley: Our dopamine system in our brain fires as we're moving towards a goal, not so much as achieving it. So it's more important to be moving towards a goal than it is to achieve a goal as far as neuroscience and brain chemistry is concerned.

Spencer Clouatre: We are blessed to have Dr. Dean Dudley back with us. one of my heroes, one of the guys that I truly, seek wisdom from, and he's always there to provide. A PhD in economics from Indiana University. retiring from West Point at the end of this month with, 33 years of teaching. from my calculations, Dean has taught about 33,000 cadets, second lieutenants that have defended this nation over three decades. some of them are still out there doing it. By my calculations, he's about 2,400 econ majors over those 33 years, which is tremendously important, teaching them how to allocate the scarce resources in their lives. he's a very important person in my life, we're gonna learn a lot today. With that, I'll turn it over to Dean for some opening comments.

Dean Dudley: I don't know what to say other than the fact that, that I've Always had great colleagues, always had great people to work with, and we always had a mission to shoot towards, which is very important. having a goal to, to strive towards. I don't think you ever achieve goals. Oftentimes you just end up striving towards them, and the movement in that direction is what builds you and makes you stronger and makes you the person you can be

Aaron: my time with Dean, spans a lot of different experiences. my first experience was actually when I was researching the faculty at West Point when I was considering coming here. Dean was also a really big part of the conversations we had about this class, Leadership Economics. We've talked about the production function and how, leaders have different inputs, and then they have different outputs. But what actually is going on in that production function, we've distilled down to allocation, information, motivation, and execution. But I wanted to get your sense of the ways that you see economics being a useful lens for leadership? you taught game theory for a long time, but you also have your book, which is largely about game theory. and so I wanted to first draw you into this conversation about the allocation, information, motivation, and execution. And if you feel like that captures the main functions or the main avenues through which economics can inform people, and then if it's missing something, I'd love to talk about that.

Dean Dudley: when you talk to other economists, allocation is one of those very, very important things that, that we pay attention to. And a matter of fact, micro theory is fundamentally based on that, on those allocation questions. The first real discussions of information camewhen, Friedrich Hayek and, others got into debates about whether or not, centrally plannedgovernments were able to make the allocation of resources possible. And that allocation process, if you talk to Hayek, was not doable 'cause the human mind wasn't able to conceptualize all of the issues involved. And so the decentralized mechanism was better at distributing the information so that the person knew the things that they needed to know for a particular process they were involved in. And so yes, absolutely, as far as leadership is concerned, information dissemination and allocation of resources, very, very important. that's not the only thing that is necessary for leadership, although those are two very, very important pieces. how do I process information? That's truly important. how do people process information? If I'm a leader, I have to understand that information that I'm distributing is being processed by s- a human brain. The human brain is going to- is going to uptake, understand, and organize that information But neuroscience and thought processes, th- those advances that have come recently are critical for leadership. if you don't understand how people that you are talking to understand what you're trying to distribute to them, then you've done nothing, and you've got to be very aware when I think about, the lemons market, George Akerlof and that piece of information that he brought forward essentially he won a Nobel Prize for his understanding of game theory. But he went on after that into something called identity economics, which I think is very critical for the understanding and moving forward in leadership, right? BecauseOur dopamine system in our brain fires as we're moving towards a goal, not so much as achieving it. So it's more important to be moving towards a goal than it is to achieve a goal as far as neuroscience and brain chemistry is concerned. And so identity economics puts that goalpost out there that we will continually wander towards. a leader that sets a good goalpost that the followers can, strive towards, is... a critical piece of leadership and probably leadership economics, knowing where your goalposts are and which ones to set and how to get people to achieve towards them.

Aaron: that's one of the key elements of motivation that I think people misunderstand, especially coming from an economist, and rightfully so, economists have spent a lot of time talking about motivation in terms of incentives and financial motivation because that's, very, external. It's easy to see and measure. But as neuroscience continues to grow and we understand a bit more about how people are motivated, the bigger ideas here are about how do you influence that goal that people are looking towards, How do you actually shape what it is that they see as the goal, not just for the mission or for the project that they're working on, but also for who they are? and so Akerlof's idea of, identity is much more than just we're trying to achieve this thing. It's about who is it that you're trying to become or who is it that, that you want to be? And what's interesting about this is how culture shapes that. So, in theory you can think about this too, but the primary idea I push is that your culture in an organization is going to influence and set how people see the good and how they see the qualities and the life that they plan to live. that's the motivation part. the information, like you said before, is tricky because even though we may be looking at the same thing, and, colloquially, we understand this sort of, but it's really an important aspect of how even your eyes when you're looking at things, your brain is literally filtering things out because there's too much information coming in at once, and so your brain is identifying the elements that are most relevant. and they're other parts of how you're interpreting communication from people that it's naturally set up and wired to filter. that's the information part that's really important to recognize that you need to be cognizant of how people are going to be interpreting it, the motivations coming from this culture that you're setting, and other forms of motivation. But it's really fundamentally about understanding who people want to become, the life they want to live, and really trying to bring all of that together into a culture.

Spencer Clouatre: This really feels like the hallways of SOSH again, Dean knows I'm a good C student. not very bright and talented. But what I want you to do, Aaron, real quick, is just we jumped from George Akerlof, Nobel Prize winner, the lemons problem, which you two know very well, for the average Joes out there, could you explain to us what Akerlof, what was the problem? I think it's asymmetric information that ends up in the market for lemons. then I'll just frame one more time, we're talking allocation, information, motivation, execution, and in the middle, the anchors of this, the information and the motivation, is where the asymmetries lie. and that's where markets seem to fail if it's a market for lemons. And I'm gonna turn it over to you, to Aaron, to properly identify why it is the case that we get asymmetric information, and I think you were on that pathway already, just for the C students in the audience, which we probably don't have many, but I'm one of them.

Aaron: Well, I guess the, the simplest way to put this is that people use the information that's available to them, and they're using the information of prices. So the whole market for lemons is that There is asymmetric information that the person selling the car, a used car, has information about its actual quality. And so as a purchaser, you're going to use the price as information as opposed to being able to see exactly what, the car's capable of. the connection here for me is about you have asymmetric information about what someone on your team is pursuing. so what would you think as a sort of a solution there? Or how do you connect these ideas to the problems that leaders on a daily basis?

Dean Dudley: the fundamental problem is What is the target that your team, individuals in your team are aiming at, a good team leader would be having them all aiming in a similar direction. you can't guarantee that everybody's going for exactly the same thing, but you would like them to be all moving towards a sim- in a similar direction, or at least be able to weed out those that are gonna pull in the opposite direction, And So there's asymmetric information in the team itself as to who's, quote-unquote, "really on the team" and who's just there. When Akerlof started talking about it, he actually used, West Point's, model as an idea that in economics, we think of our bliss points as being set genetically and not changing. And Akerlof says, "Well, no, we can adjust that. We can change what that point looks like, and then you will measure your distance from that bliss point, and you will gain satisfaction by being closer to your bliss point than further away from it." And that's kind of the fundamental of his, identity economics. he says, "Well, West Point models a bliss point for the cadets to accept and to internalize so that it will move things forward. our churches do exactly the same thing, right? and at some level our culture does that because we don't want to be setting explicit incentives to move people in the directions that are good for society. For example, I don't want to police everybody so that they don't, you know, steal candy bars from the local grocery store. What I want them to do is I want them to have internalized that their satisfaction is higher if they're not stealing. there's a dichotomy there because, at the one hand, if I steal, I end up with the candy bar, and it tastes good and it feels good, and I've got that utility from it. On the other hand, I need to have this external goal that I want to achieve that makes me a, quote-unquote, "good person." That overrides that desire, that hedonistic desire to grab the candy bar. If we were to talk about Sigmund Freud, which we ought not ever talk about, Sigmund Freud would talk about, my id, which is my animal instincts, and my superego, which is this societal ideal that, comes from God or wherever it comes from. And that my ego, my being, my self, is generated by coming into compromise between these two things. So the ego is the compromise between my id and my superego. And if I play that game, and I think about it in terms of Akerlof, what's going on is that I'm setting this external goalpost, this superego, and I'm using that superego to m- to mold the ego or the self to be moving in a direction that the leader would consider valuable.

Spencer Clouatre: This, equilibrium between the superego, what my bliss point is, what I expect to be, right? The right thing. Versus this hedonic id, tell me again, in that trade-off between those two, we're all fighting it individually, like inside my own mind. and the leader, I think you're telling me, can help set the bliss point as to what I think my own identity is. Is that what we're saying?

Dean Dudley: Yeah.

Aaron: What's interesting though for me as you go through this though, Freud would've called it the id and the ego, but there are multiple simultaneous models in our mind about what the good life is. And it's not possible for us to be perfectly consistent across this because the world and our perception of the information we see is insufficient to be able to create this perfectly consistent model of how everything works, how we work, so what's fascinating about the human mind is that its special capability when we went from homo neanderthal to Homo sapien, as far as we can tell, the biggest shift was we gained this ability to tell stories, to think a bit more about someone else's perspective, to think a bit more abstractly, right? to think about things that aren't front of us. And even today, it's the defining difference between us and all other animals, that we do tell stories andwe have,this ability to imagine all sorts of different futures. But this comes with a cost where we have to deal with the fact that we can't see all the future, and so we can tell ourselves all these different stories and create these different versions of ourselves and these different identities. And I think when we talk about identity economics, obviously it's, it's simplified to a single bliss point, but it seems like there's... as always, there's a little bit more to it where when I'm in, father mode, the bliss or the identity is different than when I'm in professor mode. those multiple models and views of myself are okay to maintain, but just recognizing that, there are multiple versions of this. as part of that, when you talk about, say, like West Point or a church, those types of cultures or sort of identities are fairly, immersive. They construct a lot of how we view everything around us. But when you are in a workplace, you don't get to have the luxury of really tapping into that much immersion. And so I wanted to know what you think about how do you influence, people's identity in not just their iden-- I mean, we keep using the word identity, but it's sort of- vision of what will bring fulfillment in their life, right? It's a vision of what is the good life. And so I'm wondering in the workplace or in these other environments that aren't quite as immersive, what would you, would you scale that in terms of what they can do, how they can influence it?

Dean Dudley: that's actually a very hard question to answer. the easiest answer is sorting. You let them self-sort. that's the easiest answer. You just bring a bunch of people into a room and slowly throw out the ones that don't meet or don't have, identity that you like. Yeah, they aren't ali- yeah, exactly, they aren't aligned. that would be the easiest way to do it. but I- as, as you were talking about, there are multiple mes, and so there's therefore multiple truths, right? there isn't an absolute truth if there's multiple mes, a different me is going to see exactly the same data, the same information, the same whatever it is. And because truth is data wrapped in some kind of story, like you were talking about, there's gonna be different stories depending upon whether I'm a father or a professor or a w- whatever it is so my concept of truth is unfixed, even to myself. Even though I'll tell myself there's only one truth, right? it's not, it's not gonna be fixed. Inside of me it won't be fixed because it'll depend upon which me I'm bringing forward. there's this whole discussion on, parts or personalities or whatever you wanna talk about that, that come up. I personally like to think of them as subconscious programs that automate certain types of behaviors. they view a set of data and, depending upon where I am, a truth emerges and a preset subroutine in my brain gets turned on. either I'm livid or I'm happy or I'm,sad or what- whatever it is. I, I become violent, I become loving, the truth is determined by what story comes up with the data that I see. And so the question is: How do I generate identity in the workplace? Well, one, there's an ethos in the workplace, there's a culture in the workplace that generates a certain structure in which information is interpreted and because you have that structure through which information's interpreted, you're going to have a truth that comes through that interpretation. as an economist, we think about the, the market economy. And when I look at an economy and I think about the trades, the things that are going on, and how much of it's in the market and how much of it is not in the market, I would say the vast majority of trades and agreements and things that we do are not market-oriented. a contract cannot be well-written. and things like trust and shared understanding and that kind of stuff are critical to making those transactions take place. It's not like going to Walmart and dropping your credit card on the machine and taking your product out of the store. When my wife and I agree to something or d- or exchange stuff,There is no absolute market that's making that take place. There's a set of trust, there's an understanding of reciprocity, but there isn't a specific set of bills that are being ledgered in a very clean way. And so leadership has to deal in that arena where you don't have a pure market, interaction taking place, an absolutely well-defined contingent contract. It's where an undefined contingent contract is being played out. And in a very real sense, I'm not keeping a ledger of, whether I folded my underwear yesterday or not.

Aaron: I guess the, the part of this that really resonates is that, we've talked about in the past that if you have to constantly enforce the rules, it's gonna be a rough go, right? like you said, when you go to Walmart to purchase something, it is quite, simplified or clean, right? The contract is simply you pay for what you're getting. but in, in partnerships, you're going to end up having to use trust, and when that trust breaks down, suddenly the contracts that you have become quite malleable and debatable. when I think about setting the culture in your environment with your team, part of what I'm hearing here is that it's less about establishing a set of rules that you're going to be constantly pushing down on people. it's about establishing almost, the narrative for what your work is about and doing. If you can create this story or even, heroes and legends, sort of like a mythology for your work, I mean, like think about West Point. The place is covered in, in statues and monuments. Buildings are named after people. Everywhere you go, you're reminded of, someone to look up to or someone to aspire to be, and that's a big part of this. it's about establishing that story and those legends and that hero and keeping you in contact with that objective. I wanna let Spencer comment on this a little bit, but, one of the other parts of this that I, I would like to push, not push, but get your take on, is that as people are coming into your team, sometimes you don't get to pick who's on your team. if that sorting is the mechanism by which you are setting the culture, how much influence do you really have afterwards, I think the answer is what you said, but I want to get a little bit more clarity on how it's both making sure people are aligned but then also coalescing that alignment, right?

Dean Dudley: that's absolutely critical, and that's where Spencer's strength is, oh, by the way, right? So I'm a fat, old civilian, and if he told me to fix bayonets and charge a machine gun nest, I'd be right with him 'cause he coalesces that endpoint. he's very good at coalescing. I want to follow Spencer

Spencer Clouatre: well, first of all, I am definitely not, the most, inspirational leader, and I don't know what I'm doing, but I do try to be a good friend, and I do try to show genuine care for the other person, and I don't think you can fake genuine, but I do genuinely care. that comes at a cost. There's commitments and, trade-offs you're gonna face when you do that. ultimately, at the end of the day, when you look backwards, for me,you know, Dean, we've talked about this, in the Army or in the military, we've talked about, the mission versus the men, or women now. the mission versus the soldiers, and I, I've always felt like if you do right for the team, then you don't have to push them up that hill towards that gun nest. they'll do it for you. that's, I think, the difference when you look at the disciplined initiative that's set in the mission command philosophy in the Army, that people will act on your best behalf or the mission's best behalf or the commander's intent or a shared outcome, if they believe you are also operating toward that. And in some bits of subordination to the overall mission, that none of us are more important than the mission. And then using that logic to prioritize the scarce resources we have, can kind of elicit truth as to who you are and what you're after, Whether it's an end state that is purely yours or an end state that is an outcome that we all believe in. So to me, two words, loyalty and pride, are both very dangerous words. I wanna say I'm loyal to those monuments, Aaron, that are West Point. I'm loyal to the ideals, the ideas and ideals that are the other people that self-selected to West Point and those who stayed there for 33 years. We started with, Akerlof, who I really love, and just so everybody knows, there's a book called Identity Economics out there that he wrote. Just buy the book. Don't go find the paper. The paper's hard to read. It's got a lot of crazy math in it, but it makes sense. Go read the book. It talks about spelling bee kids, it talks about, West Point's used as an example. But this idea of identity is tremendously important and, I think Dean's really on it. every time I taught the core course, you taught me how to teach it. So how we individually make decisions, how we interact once we make those decisions, and then what's the outcome look like at the end of it? 'Cause Adam Smith taught us the invisible hand, and prices could give us better information than what we could gain on our own. And if you wanted to decentralize the principal-agent problem, you know, the soldiers at the bottom, when you get to be a brigade commander, they won't recognize your voice in the dark, you know? But hopefully they know your commander's intent. So how do you gap the principal-agent problem and get your intent out forward? So Aaron and I both really, Dean, and I think you do too, believe that, that free markets have a say in this. But in the competitive versus cooperative nature of how we allocate at scale, this becomes hard. It does become hard. We've talked about sorting and the rest, but I wanna go back to the asymmetric information, I wanna ask, I love asking you broad questions 'cause you have good answers. And I don't know where you'll take it, but I've asked Aaron this. Do you think every decision we make is an allocation decision? And I'm, when I say that, I'm thinking about scarcity forces choice, choice forces decisions, decisions force you to prioritize. So is every decision an allocation decision? And I'll follow that up with, if so, what are we allocating?

Dean Dudley: Uh, that's actually a hard question. fundamental to my core, I say every decision is an allocation choice. Every time I decide something, I'm choosing to allocate some of my scarce resources in a direction or another. that goes from, deciding to, to marry my sweetheart all the way to, buying socks at Walmart, right? All of those are scarce allocation choices and decisions that are being made. the question always comes, as to whether I understand what the... This is a terrible way for economists to speak. do I understand how the utility that I'm going to gain from making this decision, is the marginal benefit going to exceed the marginal cost of allocating those scarce resources? And that's always going to be the decision that I make. I'm always gonna be weighing that. And then now the question comes: how well do I understand what the marginal benefit is, and how well do I understand what the marginal cost is? And when I go to Walmart, the marginal benefit and marginal cost are pretty straightforward. You know, I, I buy a, a package of socks means that I can't buy, a package of Oreos or... Right? So the, the marginal benefit, marginal cost is fairly straightforward and Easier for me to understand. When I'm making that decision in realms where the contractual agreement of what I'm giving up and what I'm gaining is ill-defined, contingent, and not writable even, then it's very difficult, right? So what is my marginal benefit of marrying my sweetheart? that's a hard marginal benefit to, to lay out. I mean, I can maybe talk about five or six things that I go, "Okay, this is better." I get to spend more time with her. we get to discuss things. We g- right? So you can list these five or six things that are primary. But at best, what you're doing is you're making I would say an incomplete assessment of the marginal benefit and what are the marginal costs. And I'm making an incomplete assessment of the marginal costs as well, because I just, I don't know what those resources actually cost. And so that's a huge problem, right? and the leader faces exactly that marriage problem, right? What are the marginal benefits and what are the marginal costs? And the team is making the same thing. What are the marginal benefits of aligning with the commander's intent? and what are the marginal costs? Those are, those are not clean answers. It's not like socks and Oreo cookies. it's a much more messy set of decisions that have to be made. I think that a leader disseminates enough information that it's clearer to me what the benefits are, and it may also be clearer to me what my costs are. So good leaders reduce the... i-in Aaron's term, good leaders reduce the ambiguity

Spencer Clouatre: Yeah D- do you agree with that, Aaron?

Aaron: Absolutely. I mean, Dean and I, I think are very well aligned on some of this. but yeah, so this whole example Dean's given illustrates that while even if you're not really, like, mapping out exactly what the costs and benefits are, the marginal benefit, the marginal cost The way your brain is gonna weigh this is still involving these ideas, and it gets to be tricky for your brain when that marginal benefit is uncertain. So in fact, this is why I think what, what we talk about in, these deeper levels is it turns out it's not clear what the dis- the difference is between uncertainty and ambiguity. Most people don't really have a good definition for this, but it turns out that your brain does. Your brain does care very much about the difference between the two. And in fact, this is what I love about some of the more recent science research is that It is clear that your brain processes them slightly differently, and also that even your physiology and your brain respond differently to them. And so ambiguity causes a reduction in dopamine, and it causes, a reduction in that prefrontal cortex behavior. In, in other words, it, it almost creates something similar to this fight or flight, sort of this, this instinctual scared response.

Spencer Clouatre: Yeah.

Aaron: Whereas uncertainty doesn't do that.

Spencer Clouatre: Yeah

Aaron: And so when Dean's talking about what's the marginal benefit of marrying his sweetheart, that decision is absolutely fraught with ambiguity. It's not just uncertainty. Like the future you're gonna have together, where you're gonna end up living, what your jobs are gonna be, that's uncertainty. But when you're trying to make this calculation of what's the benefit, what the marginal benefit vs the marginal cost, that's, that's crazy, there's just so much going on there that there's no way know for sure what those values are. and so making those decisions, creates a lot of distress in some people, and it also results in distortions in your behavior, where you're no longer pursuing what's actually most beneficial to you, but you're actually hedging too much. And this is why, as Dean said, the leader's job to reduce that, at the heart of it, that has to be what they're doing. Because they have to be able to make clear why we're doing this, and that's about, reducing this marginal benefit uncertainty. and by doing that, you can ensure that instead of defaulting to sort of the paths or the decisions that they're used to making, that they don't default to the, "Well, I just don't want to feel uncomfortable," instead you're able to get them to be motivated to achieve that outcome because you have coalesced that culture, as I said before, but you've also removed all this noise that's going on about, the value of what you're doing.

Dean Dudley: Yeah,

Spencer Clouatre: If,

Dean Dudley: I agree with that

Spencer Clouatre: If I were to put that into the production function, we are somewhat reducing asymmetries of information. The second question I'd ask Dean, the follow-on, was what are we allocating? Dean, I'd like to test this with you. what I have come to believe is that, yes, I agree with you fundamentally, every decision, because of the scarcity, is, some kind of allocation. I think in a free market, prices, are signals and incentives, like it capture both. I think it's Tabarrok and Cohen or the George Mason guys that do that Marginal Revolution University. Prices are a signal wrapped up in an incentive or something like that, but I do like that term. and I was telling Aaron, I'm like, "You know, I think we're allocating something," whether it be with all of our wonderful wives, or at work or whatever, and I called it the currency of commitment. And I think commitment can capture a bunch, commitment can. what I'm really trying to figure out is can you show commitment first, right? Can you be dedicated to it? and then how much of that can you be dedicated to in a changing and ambiguous world? The special operations units I have worked with, they are great teammates to face ambiguity, and I think that's why those teams are very good, because we exchange this currency of commitment to each other, to a, an outcome, and we all have scarce commitment. But what do you think about that? If you, if we do believe that every decision is an allocation decision, is the currency of commitment at play? Is, is it a good idea? I don't know. You can

Dean Dudley: Is

Spencer Clouatre: me it's wrong. Please tell

Dean Dudley: it?

Spencer Clouatre: it's wrong

Dean Dudley: so I don't know that it's wrong. I don't know that it's, I don't know that it's the basis of the measurement. I think it's what we understand, right? We understand that we've committed, but I-if I'm committing to somebody, what am I actually spending? Right? is there a reservoir of commitment inside me of which I can only allocate a certain amount? And I, I don't know that that's necessarily the case. But commitment re- does require time, and it requires, intent or intention. And, if you believe the social psychologists, intention is a scarce resource that gets used up, or cognitive ability or whatever you wanna call it. But time is also a scarce resource that gets used up. so commitment may be a bundle of those kinds of things. I, I'd have to think a long time about what commitment means, 'cause I don't have, a basis for it in me, right? I mean, it's not that I don't commit to things, it's that I haven't thought of it that way,

Spencer Clouatre: Have you ever felt overcommitted? Have you ever felt overcommitted?

Dean Dudley: yes, I've of- I've often felt overcommitted, but oftentimes it's a time constraint issue, right? And that overcommitment releases itself if I'm able to, extend deadlines, which would imply that time is at least a piece of it, right? So time is a piece of that commitment. I'd, I'd h- I'd have to think a long time about... I mean, I, I love that you gave it to me to think about, right? But, but it's not something that I can tell you right now.

Aaron: Yeah

Spencer Clouatre: I'm, I'm just search- searching for something that we allocate, because I believe we are allocating to each other, and we're showing our commitment to ideals by our actions, Like, multiple layers of commitment result in trust. layers of commitment reduce asymmetries. The more adverse the condition is, the more available it is for me to show you my commitment. I mean, you know our creed at the Night Stalker world. "I'd rather die than quit. I serve with the memory and pride of those gone before me," 'cause they loved to fight, fought to win, would rather die than quit. Well, that's a hell of a trade-off, to commit my life to your mission. You know what I mean? But you can count on me. And that confidence, and the names on the walls of our monuments have proven, this culture that still people are fighting to get in, be a part of. Why? Why are people fighting to get into this culture? Well, the deepest of relationships share the greatest commitment, and that's a kind of a crazy look at it, that I would rather die than quit. But the names on the wall say that we've done it, and that makes the currency credible: commitment. That's my... I'm selling it, man. I'm proselytizing it.

Aaron: I, I would say in, you know, in this conversation, we've talked a lot about bliss points and identity And one way I can think of commitment is that it's a way of aligning or demonstrating really that my Happiness, my objectives

Spencer Clouatre: Your bliss point. Yeah, your bliss point

Aaron: yeah, align with, yours, right? That you have become or our objective has become part of my own bliss point.and the currency is in demonstrating my allocation of resources towards that objective. And we can think about...the widow's mite, how the value of that mite was not its monetary value, but in the opportunity cost of it for her. And as you demonstrate your willingness to give up a lot, and by a lot I don't mean you've dedicated a ton of time. What I mean is you've been willing to incur a high opportunity cost for this investment. That, to me, I think is what would describe as the currency.

Dean Dudley: That

Aaron: it's as though I am putting in investments what we're trying to build together,

Spencer Clouatre: Yeah

Aaron: and that comes at a cost, and it has value in it, and it frees up a lot of these, fuzzier, softer ideas to be able for us all to almost like in a market to coordinate the information

Spencer Clouatre: Yeah

Aaron: of, what is important to you, how well do I believe that what you're recommending or, what you want to do, how well do I believe that that is aligned with what we're trying to achieve. That's informed by your investment in what we've been doing.

Dean Dudley: That's

Aaron: roughly how I, I would think of it

Dean Dudley: That makes, that makes a lot of sense. but it gets down to, the question, what is the actual resource that's being used?

Aaron: And it's, it's what you're giving up.

Dean Dudley: Yeah

Aaron: it's not so much that you're willing to give up time, even though you are. It's more about you're willing to sacrifice, maybe how people view you in terms of their priorities or maybe how, even career progression by standing up for your commitment to the honor code. So again, Dean, I'm in the same boat here where it's like, okay, well so now we've got, it's not just time, it's not just attention, it's also, like, I'm throwing in, my reputation, my career. it's sort of all of these fuzzy things

Dean Dudley: it drills us right back to Akerlof, and that there's a bliss point that we have, and how far away from that bliss point are we willing to trade ourselves, right?

Spencer Clouatre: Mm-hmm.

Dean Dudley: So in a sense, the distance from my bliss point, however I'm measuring distance, whether it's in time or whether it's in reputation or whether it's in, you know, whatever kinds of things that I would measure it, th- the opportunity cost is the utility that I give up from becoming more distant from my bliss point. And that's a fine way to talk about it from the Akerlof perspective, but then the question is: how do you operationalize that into something that's knowable, doable, talk-about-able, put into a spreadsheet and bullet point so that you can advise people on how to build teams? And there, I don't know that Akerlof's identity model is that useful because it doesn't really give you measurements or things that you can say. it gives you a way to conceptualize it as an economist, but what it doesn't do is it doesn't give you a way to discuss it with a human

Spencer Clouatre: Organizations have bliss points, I would say, like a person has a bliss point. me and my wife we have a bliss point. West Point has a bliss point. It has a, an idea or perspective of what, who it is. And in that perspective of who it is, it's built on the conscience of every individual out there, and then the outward display of their character. We started a whole new world to create this character system at West Point, which I'm like, "It's already baked in. You don't need it," but, all right. Conscience, character, and then the culture evolves from that. What is the bliss point, and what trade-offs are we making? What are the relative pricing mechanisms that are going to maintain this bliss point that we think we are? When we make trade-offs, Dean first showed up in '93, and maybe I'm wrong about this, but in '93 when Dean showed up and when I was there as a cadet, if you f-found on the honor committee, you were kicked out. That's how it was. And, when I came back in '04, I think we started talking about a second chance, and depending on your time, how young you were in the program, you could maybe get a second chance. We redefined what the bliss point was through relative pricing, you know? And now we have a senior leader development program, and I've done it numerous times. It makes sense to me that we wouldn't hold this young person, who we don't know where they came from, what kind of trust they have, it made sense that we'd do that. So are we compromising our bliss point? Who, what we stand for? Or are we actually making a change that reinforces the monument? that's the idea, and I believe in free markets, you know? I believe in free markets. I've had Dean's benevolent dictator talk a bunch, and the sorting, or how are we gonna solve the coordination problem, right? They're

Dean Dudley: just

Spencer Clouatre: not out there. There are not many benevolent dictators out there. So how do we do it? I do believe in free markets, and I'm, I'm proselytizing this currency of commitment, even though it has problems. I just wanna mention utils have problems, too,

Dean Dudley: Oh yeah, they got big problems. No, it, and, I agree with you. there was a move, if you're gonna take the honor system as an example, there was a move from we are a sorting mechanism, right? So West Point under the old, older honor system was purely a sorting mechanism. If you showed yourself not aligned with the honor system, we didn't need you, and we would sort you out. So it was purely a sorting system. And then it became, like you said, a leader development system. That is, that, okay, we brought these people in. We don't know where they came from. can we take them from where their bliss point is to where we want it to be, right? So can we do the Akerlof thing? and so the transition is to a developmental model. And the question is, how successful are we at developing leaders of character, or how successful are we of just weeding out leaders of not character, right? those are two endpoints, and we have to do both, right? Because some people aren't gonna move their bliss point. And if they're not gonna move their bliss point, we can't use them 'cause we have an end goal that we're looking for, or that we think we're looking for anyway. if they can't move in the direction, then we can't develop them. if they're malleable, if they can be developed, then the system should look at them. But if you're four years in, and so you're a second semester firstie and you're copying other people's papers, you've had three and a half years of development. If you're still that far away, I don't know what we can do.

Spencer Clouatre: Yeah.

Dean Dudley: Yeah.

Spencer Clouatre: So those are the real long-term trade-offs that you may wanna look at.

Dean Dudley: Yeah, and that may be commitment. How committed are we to our bliss point?

Spencer Clouatre: Commitment, yes. What am I committed to? What am I committed to? a dollar is a dollar because a dollar is a fiat currency. I mean, it's a medium of exchange, a unit of account, a store of value. I think commitment fits all three of those. you know when you're over-committed and inflated, and the credibility of your currency stinks because you can't meet your commitments. I'm just saying it's pretty close.

Dean Dudley: It's

Spencer Clouatre: pretty close. it's looking at the back of YouTools, I can tell you that much. I know we wanna also talk about Dean's book.but what, do, is there anything else we need to capture and close on what we were just talking about?

Aaron: I think sort of the wrap-up on this is that As a leader, one of the core functions is to reduce that ambiguity that people have in their decision-making, and much of that comes from, you know, people think clear communication, it's more about that story and that vision of what it means to be part of this team

Spencer Clouatre: Mm-hmm.

Aaron: and moving people towards that. The currency of commitment is a way of conceptualizing how that trade is occurring. So all of this is about shepherding people into this culture and ways of trying to

Dean Dudley: reinforce

Aaron: it, make sure that they're aligned,

Dean Dudley: and

Aaron: also being willing to remove people who aren't aligned with it. Now, shifting gears towards Dean's book is much more about strategy and understanding how you're going to deal with, maybe complex problems. And so I, would like to just get, at the very least, Dean's take on how the concepts he talks about in his book

Dean Dudley: are

Aaron: informative for everyday leaders,

Dean Dudley: I guess that for me personally, game theory is a way to organize and understand the world in which we live. it's a tool for organizing your thoughts and understanding about costs and benefits that you're facing. So I think of game theory specifically as that kind of tool. the most important thing that the everyday person gets out of game theory is that it moves us past the ideas of decision science, and in a lot of decision science, The decision-maker is the only person in the game, and the rest of the world just is, is fixed and constant. Game theory says I'm going to be in an environment where somebody else gets to make a decision as well, and I have no control over the-- that person's decision, choice, or the outcome that is tied between my choice and, another cognitive person's choice. That is, I no longer can just, "If I do this, this will happen." So if then goes away. So if I do something, somebody else will respond and the outcome is determined by both of us, not just a single individual. And so now game theory allows me to hang that kind of decision process and think it through clearly, carefully, and systematically. And so that's what game theory is and what its strength is. it doesn't have to be sequential, it can be simultaneous thought processes as well. But the underlying idea is that there are two strategic players in the game, or two players that are able to make their own decisions and their own choices, and that both of our, or more than two, all of our decisions jointly determine the outcome. And one of the games that I like to talk about a lot, as just a human is rock, paper, scissors, 'cause it gets played a lot. And, one of the really cool things is that, when men are playing women, without thinking about it, they will tend to lose more often in a game where you shouldn't lose more often Right?

Aaron: Could you explain that to me?

Spencer Clouatre: Yeah.

Dean Dudley: it's a game where, where you're choosing to display a rock, a paper, a sheet of paper or scissors, and one will beat the other, and, or

Aaron: like it's effectively random,

Dean Dudley: effectively random and

Aaron: so I, this is why I wanna know. I need you to explain this now. I'm dying

Dean Dudley: Okay, so it turns out that, women aren't stupid and they know what men are. And so when men select something, they're gonna s- select something manly. And so we tend to overplay rock

Spencer Clouatre: That's what I... Yes. That makes sense. And every woman out there knows us better than we know ourselves. Yes.

Dean Dudley: So men tend to overplay rock, and women understand that, so they overplay paper and win

Spencer Clouatre: Mm-hmm.

Dean Dudley: And so win disproportionately, right? So it should be essentially random, and we should essentially, one should not win more than the other in that game. how do you hang the fact that a game that should be essentially completely random, and there should be no person who wins it more often than another when playing the game, how do I explain this issue? And game theory allows me to explain why, if I overplay a particular strategy, I'm going to have either a good outcome or a bad outcome. And the trick is, is that for the most part, when we talk about game theory, if I send somebody to read a game theory book, one of the people that reviewed my book was Roger Myerson, who's a game theorist and got a Nobel Prize and he asked me, "Why are you writing this book?" And I said, "Well, because your book is hard to read, 'cause it's a math book."

Spencer Clouatre: Yeah

Dean Dudley: so there are people out there that are in the environment where they're playing a game, so to speak. There's multiple decision makers, and the outcomes are determined by the decisions of multiple decision makers. So how do I think my way clearly through that particular thing without saying, given a game gamma that has these properties and, uh, outcome and strategy set S and O, uh, you know, so the, the goal of the book was to use narrative and examples to explain the fundamental process of, of analyzing a game so that you could, if I happen to be an insightful leader, I can explain to those that I lead why the things that I'm thinking of make sense. So how do I explain that to them? Or if I happen to be an insightful teammate, how do I move back up the chain to the leader that my idea is worth considering? And so game theory gives us the structure on which we can, we can discuss those kinds of things, and if we do it at a colloquial level as opposed to a mathematical level, then more people can engage in it, and that's the point of the book, allowing people to engage in the thought process

Spencer Clouatre: I start with it ultimately because it's all about reducing asymmetries again. I, you know, it's information, Aaron, and motivations. I'm back to right there in my head a little bit. If I know that you're gonna throw rock every time, I'm gonna throw paper. But if I know that you know that I'm gonna throw rock and you're gonna throw paper, then I'm gonna throw scissors. And if you know that I'm... Like, this infinite loop, I can't always get out. It messes me up a little bit. But, the point I wanna kind of bring out, is that, um, some games are zero sum, but I think most leadership things, are not zero sum, that you're looking for the win-win. Like, where does the bid-ask spread overlap? Now, we can get to the question of, okay, your W in the win is bigger than my W in the win. Like, that's probably the next question. How much did you win, and then what is fair? that's a problem. But Dean, talk to a little about zero-sum They're out there, but I think there's some win-wins, and I think in the invisible hand and the reduction of asymmetries of information, the butcher, the baker, and the brewer,

Dean Dudley: what

Spencer Clouatre: Adam Smith was saying, and in the terms of game theory, that there's some win-wins out there and multiple players. And as a leader, you kind of got to try to find the win-win. So zero sum versus win win games, Take us down that path

Dean Dudley: so zero-sum games are just a small subset of games in general. And thinking of a game as zero-sum, even if it is zero-sum, puts you in a position where you're not thinking correctly about games. And I got it, you know, Morgan Stern and Von Neumann were great and wonderful people, and they solved the zero-sum game. But, one of their students, this guy by the name of John Nash, said, "Well, not all games are zero-sum. And oh, by the way, my solution solves your game too, so neener." And so , I think that, just learning, of the thought process, so I guess the best way to think of it is best response process. if I anticipate what you're going to do, what's my best response to that? and play that thought process out across all of the possible choices of things that we can do, I can figure out which of my strategies is best to engage in, given that I know that you're going to respond in the best way you can. And so once we have that thought process down, we move away from the zero-sum minimax, solution process into the mutual win. I'm gonna choose what's best for me, you're gonna choose what's best for you, and we're gonna have this mutual win. By mutual win may be this, may be just a smaller loss, but that's still a win, right? So generating that thought process and pushing it through, that's what the first, essentially the first three or four chapters of the book do.

Aaron: I just wanted to also say, kind of like the rock, paper, scissor example, that as you know people, you can anticipate better how they're going to respond.

Dean Dudley: Yes

Aaron: in, in a team, or a relationship, I mean, this sounds somewhat manipulative, I guess. But, if you understand more how someone else is going to play the game, then it, it opens up opportunities as well to create those win-wins where I know that we're both sort of on the general page of achieving this goal, but if I pitch it this way or if I give them this task, I know how they're going to respond to that. And, it is worthwhile for me to understand what it is they're seeking to achieve as well in order to influence what I anticipate the response being. And so ev- even just in these simple interactions, I think we do it somewhat naturally, but having some clarity there about each time I'm trying to interact with somebody and trying to maybe influence them towards an outcome, that's game theoretic as well. I'd like to hear the rest of the blocks of the chapters, but eventually what I really want is to know which example or game in the book you just love to tell. But why don't we finish this, the summary here?

Dean Dudley: we start off with that kind of perfect information. I can know my opponent, perfect information, which is unlikely.

Spencer Clouatre: But

Dean Dudley: There's-

Spencer Clouatre: explain the theory. It's

Dean Dudley: Yes

Spencer Clouatre: to start in a vacuum

Dean Dudley: start, start there is a great place to start. so then we go on to what happens if a strategic player is not perfectly knowable, but I understand the probability distribution across which that particular player will engage. And so then we can add uncertainty, not ambiguity, because I do know a lot about... I may not know what choice they will actually make, but I know everything that I can know about their choice. I know the distribution, I know the mean of the distribution and the variance of it or the spread-outness of it. So I know what their center tendency is, and I know how wide their willingness to deviate from their central tendency is. So I have that piece, that amount of in- information, so now I can Bayesian update things. Or I can find Bayesian eq- Bayesian-Nash equilibrium, that kind of stuff. But then we just explain how that's happening, right? so, you know, what happens when one of the players is uncertain about the other player's outcomes, but understands some fundamental distributional ideation about it. I never get to the place w- 'cause game theory is incapable of solving ambiguous outcomes that's where you get to that cognitive dissonance thing. going back to Aaron's distinction between uncertainty and ambiguity, I like to think of a uncertainty as, my mind has a structure that it measures the world against. That is, that my brain is a thing in a black box sealed off from the rest of the world. What I do is I see whatever the construct is inside my mind, and I cl- claim that's the world. As long as things that I see don't disagree too heavily with that construct that I have in my mind, my brain's pretty satisfied, and it will do Bayesian updating. It will slowly update. It will, it'll go, "Oh, you know, re- re- really? the floor is wet. I need to adjust for that." But if what I see is so far in discord with it that it tears the whole structure down, I have no way of conceptualizing or contemplating it, right? That's ambiguity. There's nothing that I can hold onto. Jordan Peterson would call it chaos. I've moved into chaos.

Aaron: I would add that, Pema Chodron, I recently read one of her books, but she calls it, ungroundedness, and that when you create this vision in your mind and you hold onto it so tightly, it's inevitably going to be incomplete, and there are cases where that model in your mind isn't capable of predicting, right? it's incomplete. and so for me, that's the ambiguity, too, right? Is that when I'm trying to forecast or create this structure of the world, there are some parts of it that I just don't know where they fit, right? And that's similar to what you're saying here is I experienced something, and it doesn't fit anywhere in this model I had, or at least it's very, unexpected based on that model. And so that's this ambiguity. going back to the game theory, the uncertainty in a Bayesian game, that is sort of the regular version of uncertainty where I have a model, but that model incorporates, the variety of outcomes in some predictability, right? I have a model that anticipates a lot of the different possible outcomes and is able to account for that

Dean Dudley: Exactly. Exactly. That's right.so the randomness is just uncertain, and to the level that randomness can be predicted, it can be predicted.so in a sense, it's not outside of my ability to conceptualize. So that would be just uncertainty. Unlike, as you said, if something comes in, that is not fittable and not recognizable, that's not random. that's from outside of the universe, and it,

Aaron: That's the earthquake.

Dean Dudley: Th-

Aaron: just shook from underneath you

Dean Dudley: yeah, it-- that-- exactly. so I move up through uncertainty, and I move up through If I don't know you, but I know enough about you and your outcomes, what are the rational distributions that I can understand your, behavior to fit into? Roger Myerson would call it scenarios, 'cause that's what he calls that kind of thing, what scenarios are rational and which ones are irrational? And so what scenarios can I throw out? That's as far as the book really goes, up through that decision process, up to where I can conceptualize and, codify scenarios that make sense, given, the structure of the game as I perceive it. So that's really as far as the book goes

Aaron: That's it. That's all, that's all it covers, huh?

Dean Dudley: That's all it covers.

Aaron: That's ri- geez. I mean, tell me now, I need your favorite story and your favorite example from here, and I wanna know what it teaches you

Dean Dudley: So there are two case studies that I drag through the book. and they're old battles, so one of them is D-Day, and the other one is, Gettysburg. those are my two favorite because when you look at how the structure of the game is, if you were to set up the structure of the game, both times the losing side picks suboptimal paths through the game. So

Aaron: you to walk me through D-Day on this. This is very interesting.

Dean Dudley: we could talk about D-Day in a very simple format. the Germans knew we were going to land somewhere along the coast of the Channel. they knew that the two best places, or the two really only places, were Normandy and Pas-de-Calais, right? So they knew that. the only thing they didn't know was when we were going to do it, but they knew that when we started, they would recognize it.

Aaron: Yeah.

Dean Dudley: You know, there's something about ships crossing the Channel, once they start crossing, you can see them. And so it's not a surprise attack. The exact date may not be known, so they set up their strategy. How do I defend Europe? You know, how do I make Fortress Europe? Which was what their plan was called. And so in a sense, they had two types of military structures. They could set up fixed coastal defenses, which they did.And they had mobile panzers, or tank units. And the question is, Where do I build heaviest, right? Do I build heavier towards Calais or towards, Normandy, or evenly across the two? So how do I build my coastal defenses, and where do I station my mobile reserves? do I hold them back in reserve, or do I hold them forward, essentially that set of things generates, in the easiest form, six potential choices they could make, given the choices that they choose, the Allies then can decide where to attack. attack at Calais or attack at Normandy. then the battle will pursue, and according to,army doctrine, if you're attacking a fortified position, You need three times the strength in order to have a 50/50 chance at winning. And if you use that, then you can calculate the probabilities of winning any specific battle, depending upon how the forces are distributed. So, so then you've got uncertainty, because you don't know how the battle's actually gonna turn out, but you understand it well enough, it's just uncertainty, because you can have a probability distribution across how the battle will turn out. And we'll just say that there's only two possibilities, win or lose, right? And there are actually more possibilities, but just making it simple that way. Well, so it turns out that, the equilibrium path said that the Germans should build equally across Calais and Normandy and have their, mobile forces at the coast, ready to repel. they chose to build heavier at Calais and keep their mobile forces in reserve. That's the choice they made. given that choice, the Allies were brilliant. They attacked at Normandy and, ended up, winning something that they should not have. the probability of a victory if the mobile forces would've been forward was much, much smaller, right? and if you talk about it historically, you go, "Well, why did that happen?" Well, Field Marshal Rommel wanted his panzers forward. and Field Marshal... Von somebody, kept the forces, in reserve. And the difference was that Rommel fought the British in Africa and had to face superior air fire. And it turns out airplanes are really quite effective against tanks,

Spencer Clouatre: Mm-hmm.

Dean Dudley: and they can keep them from moving. And Von Runstedt, he was on the Russian front, and the Russians didn't have much as far as an air corps goes, so his tanks were quite mobile, So his assumptions about the ability of his tanks to move were fallacious

Spencer Clouatre: Yeah

Aaron: in a way, he misunderstood the game a little bit, right? Because he, he,

Spencer Clouatre: Yeah

Aaron: know, he expected to be able to deploy those forces to wherever the Allies attacked.

Dean Dudley: Right

Aaron: But the other part of this is why did they build up Calais instead of building up both equally

Dean Dudley: so they built Calais because Calais was a straighter shot to Berlin And a shorter distance across the channel and an easier landing site. And Germany actually put its, V2 rocket production facility in the neighborhood of Calais just specifically to encourage an attack there

Spencer Clouatre: What's interesting, Aaron, is that If you think about the whole story of what Dean just talked to you about and the four buckets, the allocation decisions that were made have basically shaped your pathway in the future, whether, you like it or not. And then the information and the motivation was shaped by an environment that didn't apply to this production function. just a different one in that you got better air support, at Normandy and the rest on D-Day than you had, but you were making decisions on the Russian front. So, then in the execution of it, Dean, correct me if I'm wrong, and my mil art instructors are gonna be terrified if I say this wrong, but I think Hitler at that point was trying to take greater control of tactical things. He moved from a higher level down to a lower level and wanted more control of what was happening. So even in the fourth bucket, Aaron, the fourth bucket of our AIME, in the execution of it, the commanders that used to have more responsibility and authority had less responsibility and authority, and then that slowed up. so all those things put together make a very low percentage attack, which it's hard to attack a beachhead, in this fashion, especially against this kind of enemy. we won crazy. I feel like the game theory, as a portion of, I think, of economics, And how it fits into our framework and understanding the perse- perspective of others, I mean, this is where the graduate level work is at. I feel like what we teach in our playbook, the principles, th- they are the economic leader principles, Dean. We came up with a long time ago, me and Major General Cogbill back in the day, these six things, and then Ben Sommers and a whole group, and then the four buckets that Aaron has talked about on top. next step, I think, Aaron, the graduate level of what we're developing incorporates game theory, uncertainty, and ambiguity, and I think it talks about it. we've beat around a little bit. It's your acronym of discord, inconsequence, complexity, absence, and overconfidence. That DACOW that me and you have talked about is alive and well in understanding a production function that is changing with a thinking enemy, a thinking partner, a thinking player, right? So

Aaron: Well,

Spencer Clouatre: the gra- we are at the graduate level now, is all I'm saying. Yeah.

Aaron: so I, I'm trying to pull this back to how does game theory help inform these choices? the Germans were making their decisions, based off of their knowledge of war at the time. but the game theory allows us to pinpoint What the optimal choice would have been. But obviously they, if they had known what the optimal choice was, they would have made it.

Spencer Clouatre: Mm-hmm.

Aaron: so this is where this execution thing comes in, where who's making the decisions and what information do they have, Like Ro- Rommel understood the mobility problem, but he wasn't, in charge of that decision. And so when we talk about execution, the execution bucket, that's the main component is who's making the decisions and who has the authority to do what. And that's really about how are you going to manage the ambiguity that's arising. what I love about this is that the game theory is providing the structure to understand this, went wrong, and now we can go into, okay, so why did it go wrong? Why did they make that choice?

Dean Dudley: so that's exactly right, but I like to think of it in contemporaneously with the actual battle. So the deal is, is that in charge Von Rundstedt, next level down in charge Rommel. So in the military, oftentimes rank has more knowledge by definition, whether it's true or not. Right? So, so Von Rundstedt's interpretation of the universe was correct because of his position in the hierarchy. Now, if Rommel had game theory where he could structure his argument back up and not just say, "Well, I'm a general, too," but he actually had a argumentative structure to push the information back up to Von Rundstedt, would have R- Von Rundstedt been more acquiescing towards Rommel's position? Right? So I talk about in the book there are two things. One, how does the leader bring his information down to his team? But the other question is, how does the team bring information back up to the leader? And game theory gives a very structured argument that could have brought information back up to Rundstedt, and Von Rundstedt may have been convinced by Rommel's argument if there had been not just, "Well, I think, and I think, and I think, and I..." I mean, we've all been in those discussions and arguments. "Well, I think that they're gonna do this. Well, I think they're gonna do this." Well, now I've got this structure on which it's no longer what I think, it's if they're rational, this is what they'll do. Right? I don't care what you think they're gonna do. If they're reasonable, this is what they're going to do, and that ch- that changes it. So the question is, could have Rommel been more convincing to Von Rundstedt if he had this process to bring the information back up the chain?

Aaron: Would you say that process should be? from a theoretical standpoint, part of the problem is that Rommel's gonna be thinking about, pr- potentially the conflict it could create or the fact that von Rundstedt's not gonna listen, right? so what is, is your proposed solution then to guarantee that information's also coming up that chain?

Dean Dudley: I can't argue to making von Rundstedt more, a good Prussian with a von in front of his name. I, I can't make him more, acquiescing to a Rommel who doesn't have a von in front of his name and started out as an enlisted soldier, right?

Spencer Clouatre: Mm-hmm.

Dean Dudley: So, so I can't, I can't make that-

Aaron: Like, this is what I love though,when we, when we talk about leadership,what is leadership? Well, part of it is then taking, you know, whatever that problem is, right? whatever's causing that disconnect between the information coming up, then the point of, say, leadership economics and the game theory here is to say that's going to create real problems, and it's on the leader to understand what those solutions should be. And there's all sorts of solutions out there about making sure honesty and truthfulness gets, elevated correctly. the whole point, though, is that whatever it is, there must be a, an incentive structure, whether that's culture or whether that's actual rules. Whatever it is, there needs to be a structure in place that makes telling the truth the best choice, right? that's one of our core, principles here, is that the information that needs to be transmitted up and down, it has to be the case that whatever the structure is, that's your best move. Your best move is to tell the truth. Whether you screwed up and now you have a new problem that's gotta be resolved, that information, it has to be the case that conveying it is the best move.

Dean Dudley: Yeah. so we revisit the game later on in the book where we go, okay, what is the scenario under which Von Rundstedt is correct? Right? What are the probabilities that his mobile panzer units can move forward in a timely manner? what are the probabilities that, that have to be true for that to work? And so we go and we build that out. And what we have now is that given these two structures, Rommel's structure, Von Rundstedt's structure, we can now see what the argument is about. The argument isn't about, I'm a tank leader from Russia, or I'm a tank leader from Africa. I understand airplanes, you don't understand airplanes. There's no-- That's no longer the argument. The argument's no longer at the level where it may be personal competence or whatever it is. it comes down to the level of what's the probability you're gonna be able to move these people forward at a winning speed. And now you've got an argument that you can talk about. Now it's not, it's no longer personal, and it's no longer my experience against your experience. It's, what are the probabilities that I can move my people the way that I think I should be able to move my people? it allows it to move away from this personality argument into, what is really happening and what are we really believing

Spencer Clouatre: When I say subordinate to the mission, Aaron, like getting to that spot is the spot we need to be in. Like, what's the real truth, eliciting truth to accomplish a shared outcome? Yeah

Aaron: what I'd like to do as we, as we close this out is I always like to ask what is the one thing that you would want a leader to take from this? 'Cause we've covered a lot of different stuff here we've gone from really couched it within the AIME framework, but covered it in a lot of different depth. But it all comes back to, your concern with, the existing literature was that it's inaccessible, so that's why you wanted to create this layer of accessibility. it's difficult often to convey these concepts, to people who, are in a better position to actually use them. like Spencer, he's already there. He's straddling both worlds here, and he wants to be able to help,connect them together. And probably the best way I know of is to at least get down to the one thing in all of this work you've done and this whole discussion. know, what is the thing that you would tell a leader to just start with? The one thing that they could do tomorrow that would move them on this path. And if that's gonna be, you gotta go out and read Dean's book, fine. Or if that's, you gotta go out there and learn game theory, fine. But I wanna know your opinion, what would your advice actually be to start with tomorr ow?

Dean Dudley: So I've actually had the opportunity to work with an incredible leader, and incredible colleagues. And so the one thing that I truly appreciate about the leadership that we had in our department, in particular in the econ program, the econ program worked best when the leader was willing to recognize that there was useful information inside the team, and was humble enough to accept that there was useful information inside the team and hear it out. They may or may not have decided to move forward on it, right? They have their vision of the goal and the outcome. And perhaps the one who was the best at it was Spencer, right? He could see, what the junior captain who was just brand new teaching SS201, Introductory to Econ, he could see that person had information about the struggles of teaching econ at West Point. But he also was more than willing to listen to, starry-eyed academicslike Aaron Phipps the ability to listen down, whether you accept it or not's a whole different thing, but as long as the team knows they're listened to, I guess it's commitment