How to Develop Strategic Thinking

Strategic thinking helps us anticipate the outcomes of our decisions. Of course, it’s impossible to predict everything with 100% accuracy because of the element of chance in life. However, the more experienced a strategist you are, the less often things happen to you “suddenly” or “unexpectedly.” So, how can you learn this skill?

Think About Interpretation

Misinterpretation is often at the root of our problems. Strategic thinking automatically identifies situations where our actions might be misunderstood.

Here’s an example from a relationship scenario. A woman suggests to her boyfriend that they move in together (both are renting, but her apartment is larger). The man agrees but doesn’t want to break his own lease. As an economist, he’s calculated that he won’t find such a good deal if they break up. How did the woman react? Most female readers can probably guess: she broke up with him, seeing his reluctance as a sign that he wasn’t serious about their relationship. Male readers might think she overreacted, since he didn’t mean anything by it—just economics, nothing personal!

Unfortunately, we often find ourselves in similar situations where our actions are perceived differently by others. How can we avoid this? How do we not fall into the trap of stereotypical thinking?

There’s a simple strategy to minimize these situations: frequently ask yourself, “Will my action be interpreted correctly?” Even more importantly, explain your actions. Men often don’t see the need to go into details, while women tend to fill in the gaps themselves. Strategic thinking helps you anticipate these situations and avoid the trap of misinterpretation.

Build a Decision Tree

Imagine you’re facing a problem and considering your options. Try drawing a tree: the trunk is the problem, the branches are possible solutions, and the ends of the branches are your outcomes. If your decision depends on the actions of others, the tree will have more branches. Here’s an example:

“Street Garden” Game Example

In the “Street Garden” game, three players (Emily, Nina, and Talia) decide whether to contribute to building a local park. They make their decisions in turn, so each choice depends on the previous one. Let’s walk through the tree from left to right. For example, Emily decides not to spend money (we follow the bold arrow—no contribution). Nina realizes the garden is at risk, so she decides to invest (continue along the bold arrow). Talia decides to support her friend and also contributes.

This leads us to a result of 4, 3, 3. What do these numbers mean? They represent the payoff (the first number is for the first player, the last for the third). Each option is assigned points. The best outcome is to get the garden without spending money (4 points, which Emily chose). It’s less ideal if everyone or several people contribute (3 points—you spend money and get the garden, but so does someone else). If only one person contributes, the park will be rather poor. If a girl doesn’t spend money but still gets the park, it’s still better for her (2 points) than spending money and ending up with a mediocre park (1 point).

Why go through all this? If you understand this tree, you can build similar reasoning for your own situations. Imagine knowing exactly how much each decision “costs” and how to act depending on others’ choices.

To summarize: to build a decision tree, identify all participants (who else influences the outcome?), list possible moves, and assign a value to each result (from best to worst for you). This will help you see which decision is most beneficial in the long run!

Don’t Limit the Playing Field

Strategic thinking applies to almost any situation. That’s why the authors of game theory books use everyday examples and encourage you not to box yourself in:

“You play strategic games all the time: with parents, siblings, friends, enemies, and even teachers. These games happen in business, politics, diplomacy, and war—in fact, in any situation where people interact to make a mutually beneficial deal or resolve a conflict.”

Even so-called impersonal markets can be part of the game. Take a bank, for example. It might seem like a soulless mechanism with no room for games. But that’s not true! What does a bank fear? That a client will become insolvent. This risk is personalized, so banks consider each borrower’s situation individually. In this case, a bank employee enters the game, and you can develop a strategy with them.

Strategic thinking doesn’t guarantee victory. After all, any game is not just theory, but also experience. Game theory teaches you to analyze the actions of others and choose the strategy that’s best for your specific situation.