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  • 30Sep

    If you’re following this blog, then you have probably noticed that fact that the CEO Game is a serious game that will be a good tool for improving business-related skills. If it’s your first time please read our introduction post.  You might ask yourself if a computer game, or as we call it, a serious game, can really be a platform for passing on educational values? Can it really help? Well we believe it can.

    Serious games can be a way to enrich our lives. They can educate us through lessons embedded in the game play, they can provide training that otherwise might be expansive or dangerous like surgery simulation or military training, they can aid in raising the awareness especially of global issues such as global warming, they can improve our creativity, and thanks to the new technology they can even make you move, such as through the Nintendo WII. Serious games can really help us change the world because of all of these strengths – and you can enjoy yourself in the process.

    Ailon.

    The CEO Game.

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  • 29Sep

    People have a hard time accepting changes. They hate change and usually they ignore and repress it until it surprises them.

    Managing people in times of change is not easy. Here are some tips for making good organizational changes:

    Time Management

    Change Management

    1. The change is here to stay! As I stated, people don’t like changes, and because of that they are usually ignore it and deny its existence. Our employees treat organizational change as management caprice, which will vanish as soon as the big boss will come down. That is why the message must be clear, simple (no double meaning) and assertive. The earlier your people absorb the message the better the change will be accepted and managed. Let everyone (include yourself) understand that the change is here to stay.
    2. Resistance to change is not true resistance Change is something that is forced onto the organization as a strategic management decision. The employees feel they have no real choice, which destabilize them and arouse emotional reactions such as anger, helplessness etc. The more one fears the upcoming change, the more one feels helpless, which makes one less likely to see the benefit of it and cooperate. It is easy to interpret those behaviors as resistance against the change and against the management. They are not. Those behaviors are emotional reactions and you should deal with them with the proper tools: empathy, patience and tolerance, understanding and open-mindedness.
    3. Describe the future Saying goodbye to the past is very important in change processes. Suddenly, everyone remembers how good things were before the change. In retrospect everything was just perfect, and the management cannot understand it. Your employees are too busy to reconstruct the past. It is hard to give up on the present for a vague future. But a good, tangible, and realistic description of the future, emphasizing all the new opportunities and the motives for the change, will ease your people to accept the new situation and increase their commitment to the goals of change in the upcoming future.
    4. Manage the adaptation period Organizational change does not happen once, especially when dealing with massive and complex changes, which effects firmly established habits or long-running, cross-method processes. Change requires adaptation, and adaptation takes time. Legitimate the adaptation process and don’t demand your people to achieve the most right from the start. Gradient achievement more likely guarantees that everyone accepts, understands and is willing to act toward the new order. Good organizational change plans set measured targets spread over some time (usually 3-6 months).
    5. Don’t flounder- decide! Don’t be afraid to make hard decisions, even if the uncertainty that arises from them out is high. Since your people expect you to lead them to the journey of change, you rather have good decision now than Great decision later. If you’ll find out that your choice wasn’t as you’ve expected- don’t change it. Consistency is one of the principles in order to achieve stability in the process of change.

    In conclusion, changes are blessed in every learning and growing organization. CEO must always be aware of the fact that it is also not that easy to assimilate changes.

    Business simulations, such as The CEO Game, examine your ability to produce changes in your company. Of course, there is no simulation that 100% matches reality, but the more experienced you are the better you’ll manage the change.

    Nimrod.

    The CEO Game.

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  • 28Sep

    In the past few years, simulation games have become so popular that, no matter where you look, you are likely to stumble upon a business game or some kind of management simulation, many of them alike but each unique in its own way, with popular titles ranging from “Roller Coaster Tycoon”, to “Hotel Giant” to “Sim City”. One of the titles that really caught my attention is the widely renowned Tropico“. Now it’s more relevant than ever, with the upcoming release of the third game in the series, you guessed right, “Tropico 3″, which is already tipped to be one of the strategy game highlights of 2009.

    Tropico. Management Simulation Game.

    Tropico. Management Simulation Game.

    Tropico is strategy simulation game with a philosophical approach, developed by PopTop Software and published by Gathering of Developers. The game was first released in 2001 and is considered one of the finest construction and management simulations ever made and is influenced by other business game masterpieces, such as the aforementioned “Sim City” and “Railroad Tycoon”. Tropico packs up addictive construction-oriented game play combined with Latin American politics and economics, which together make an easy to learn, hard to master habit-forming package.
    In Tropico, the Cold war is in full throttle, as the player takes on the position of the all mighty one “El-Presidente”, the newly-installed ruler of the obscure Caribbean paradise island country of Tropico, whose rise to power is doubted to be, how can one say, oh yes, democratic.

    Once the game begins, the player must design the characteristics of the island’s leader: how he inherited the mantle of power, if he is allied with the Soviet or Western bloc,what are his strong points and on the contrary, his flaws. You may select a predefined character from a list of real life personas including America’s sworn enemy Fidel Castro, his comrade Che, Argentina and Hollywood’s sweetheart Eva Perón and many more. This phase of the game is a tradeoff, where each decision that the player makes influences the entire course of the game and the leader’s relations with the different factions of the island, so one should carefully plan his strategy if he wants to last in power. This is similar to a small business or entrepreneurship, where much relies on the CEO’s characteristics.

    Enough messing around, leading an island is not a child’s play, as the governor you will have to take on all fronts, both domestic and international. Altogether, you have very few resources when you start (like most ambitious startups have in the beginning) and choosing priorities is the name of the game. You must decide whether to play out as an unscrupulous dictator and use brute force to secure your regime, or turn your island into an economic powerhouse bringing in tourists from all around the world, or perhaps become a modern industrial nation marketing yourself as an export giant. No matter which path you take, you must remember that as a leader, you are on constant trial and the jury is the people.

    In order to last long, you must please that jury, or find ways to eliminate it if there is no other way. Your style of rule is entirely up to you. Running the island, is much like dealing with HR, finance and management issues that every CEO must take into account. The developers of the game did a fine job of creating balanced political, religious, economic and social factors in the island who spark up tensions all the time, that delicate balance (allowing victory when playing right) is a very complicated accomplishment, that each business game much deal with.

    Furthermore, you must struggle to shape your vision, fight off and outlast your political rivalries either by “re-education” or by honest means and secure the people’s happiness by providing food via farms and fishing, housing, jobs and careers, human services like hospitals and schools, building island infrastructure, entertainment and even churches and cathedrals. Tropico provides over 100 of these structures, and many edicts and policies you can choose from and as the population grows and gets scattered around the island you must issue more and fast.

    Don’t let your lust for Yankee dollars or a fat Swiss-bank-retirement account, fool you. You shouldn’t let your guard down; you must keep a sharp eye out because danger is always seeking you out, whether it is a coup d’etat led by militant guerilla forces or the private ambitions of the Uncle Sam or the Soviet Union for the island. It’s important to point out that game is not a real time strategy (RTS), at least not in the classic way, but the game is influenced by real historical events such as the Cuban missle crisis, earthquakes, visits from the Pope and more.

    In short, the name of the game is cleverly plan ahead to stay in power. Ultimately, the CEO will be held responsible for the success of the company, because he is the one who dictates the way. The question for each CEO is whether he can play that role in history. Can he make the right decisions and invest heavily when needed in the right place and on the right time or cut short bad investments, before it’s too late? In a sense running a business resembles running a Banana Republic, just like the Caribbean island simulation shows; plan your growth well and lead a thriving stabile enterprise to gain your people’s favor, or plan your growth badly and watch as your resources decrease and your opponents get richer while they fantasize about teaching you a lesson in mob justice. Remember, if all fails there is always martial law.

    Omer Shachnai

    The CEO Game.

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  • 26Sep

    A field that is closely related to behavioral economics and aiding its development is Neuroeconomics. Neuroeconomics uses the insights and methodologies of neuroscience, the study of the brain, in order to deepen our understanding of economics. Neuroscience has both been able to augment some of the traditional assumptions of classical economics (termed the “incremental approach”) and to force economics to completely rethink classical economic constructs (termed the “radical approach”). Classical economics evolved based on a system of revealed preferences — the idea that people’s preferences can indicated correctly through their actions, such as through their purchases. Now that a neuroscience technique allows measurement of actual thoughts and feelings, the link between feelings and actions is being broken down.

    Understanding The Brain.

    Understanding The Brain.

    What neuroscience doing, perhaps most importantly, is illuminating the difference between controlled and automatic responses and between the affective and cognitive systems. Classical economics mostly deals with controlled responses and the cognitive system. It presumes that people always can and do fully take the time to weigh all of their options, think of all of the ramifications, and pick the option that maximizes their utility. Some responses, however, are automatic. People have little control over these processes and even very little introspective access. Therefore, the usual utility-maximizing behavior cannot apply. Furthermore, some responses, whether or not there are automatic, are drive by the affective system. This includes not only emotions, but also drives, such as arousal, pain, and craving.

    What tools does Neuroeconomics employ? Firstly, Neuroeconomics employs neural imaging techniques, such as MRIs, PET scans, and EEGs. But the field has a number of other tools at its disposal, including single-neuron imaging (used only on animals, thus far), electrical brain stimulation (EBS), the examination of brain damage and its effect on humans, Transcranial magnetic stimulation (TMS), diffusion tensor imaging (DTI) and the monitoring of physiological indicators.

    The use of neuroscience techniques to inform economics is Neuroeconomics. So what have these techniques told economists? Firstly, it challenges many of the basic constructs we now use, such as risk aversion and time preferences. For instance, classical economics assumes that people have consistent discount rates across different activities. However, neuroscience shows us that different parts of the brain are used when contemplating or doing different activities. Thus, the discounting involved overeating may be completely different than the discounting involved in properly storing your shoes. Secondly, brain scans suggest that people react similarly to the gain or loss of money as do the gain or loss of food. This implies that money itself has utility, as opposed to being an indirect measure of utility as something than can be used to obtain other things. Thirdly, the distinction in the brain between pleasure and motivation system shows that people do not always pursue the most that is that they want the most, which is a basic assumption of classical economic theory. This is just a sampling of the findings of neuroeconomics.

    The implications of neuroeconomics are staggering. With the brain more accessible than ever before, assumptions that were made before economics could know how people thought have to be rethought. Though it is too early to tell exactly how and if economics will integrate this field, it is certainly promising to change the way many of us think.

    Tamar.

    The CEO Game.

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  • 25Sep

    The stage at the United Nations General Assembly on Thursday night resembled nothing short of a fighting ring, as Israeli Prime Minister Benyamin Netanyahu shot accusations at Iranian President Mahmoud Ahmadinejad. After prior speeches given by Mahmoud Ahmadinejad and Libya’s four-decades-long leader Muammar Gaddafi came the Israeli Prime Minister’s turn to respond; Netanyahu began by taking Ahmadinejad to task for his ongoing Holocaust denial, he pointed out that “Yesterday the President of Iran stood at this very podium, spewing his latest anti-Semitic rants”. He then turned to blame and criticize those diplomatic counterparts who stayed and listened on the previous night to Ahmadinejad asking them, if they “have no shame, no decency”.

    Banyaim Netanyahu - Israeli Prime Minister

    Banyaim Netanyahu - Israeli Prime Minister

    The Israeli Prime Minister, who won a name for himself during his time in office as Israel’s Minister of Finance, continued on to discuss the symbiotic bond between Iran and the worldwide terrorism network. He claimed that Iran is behaving barbarically while aspiring to drag the world back to the Middle Ages. Furthermore, the Prime Minister proclaimed that if Iran places its hands on nuclear weaponry, history could repeat itself. He went on to question the audience if they think that the Iranian regime threatens only Israel, which he answered himself by saying that what might be Iran’s plans for Israel could “end up engulfing many others”. These words and what Netanyahu presents later on in his speech are clearly equivalent to a call forth to the United Nations to take more firm steps regarding Iran, by hardening the sanctions, meaning an onslaught on Iranian financial resources.

    Iran’s regime is a one “fueled by an extreme fundamentalism”, in his words and is fighting for more than a decade to develop their own nuclear energy. He asks how “can the most primitive fanaticism acquire the most deadly weapons”. He goes on to discuss the possible consequences of this “marriage between religious fanaticism and the weapons of mass destruction“. His answer: another (unwelcomed of course) world war with plenty of bloodshed. While there was a time when it wasn’t clear to the global community and media, now it is quite clear that Iranian plans include efforts to harness the nuclear power for military purposes. The main issue is what would it be used for? Is it meant for the sake of the Islamic Republic’s power, that in time of the revolution they could use it or threaten some intimidating enemy? Or perhaps there is another purpose aside from the obvious one mentioned above: could this nuclear pursuit also lead to a new economic era for the once almighty historical Persian Empire?

    Mahmoud Ahmadinejad

    Mahmoud Ahmadinejad

    It is clear that certain achievements have already been accomplished by Iran’s quest for nuclear power, such as wisely placing Iran on the worldwide media’s agenda and establishing Iran as a leading major force in the Islamic world. Iran will completes the bomb, its power will increase a significantly. This amount of power can lead to diplomatic and financial extortion, as was demonstrated by Iraqi tyrant Saddam Hussein, who threatened the entire region, making pretentious demands and finally invading some surrounding provinces and countries. It can also lead to an arms race, as it inflames the entire area. While some say that peace is profitable and more beneficial than war, that isn’t exactly the case with countries with militaristic ambitions and ideology. For them, the constant fiddling in war and war readiness is a financial blessing, bolstering their economy which reliant on military and defenses industries. When most fear from hearing an explosion, some welcome the familiar sound of “Ka-ching”.

    Furthermore, once you have this knowledge of nuclear power and weaponry, you immediately enter a limited circle of specific knowledge and technology trading. When you have this power, the flow of scientists, engineers, weapons specialists in and out of your country becomes rapid. There is another increase as well, as your science and technological industries, researches and products become more influential than ever. Take the United States and Israel for instance, both have strong militaries (proportionally to their sizes) and invest heavily in military development and innovation and as a result are considered among the most technologically and economically influential and advanced countries in the world. It’s no wonder that Netanyahu pointed this out “my country is at the forefront of these advances – by leading innovations in science and technology, medicine and biology, agriculture and water, energy and the environment”.

    Last but not least, through his entire speech Netanyahu kept on blaming Iran for being patrons of terror in the world, claiming the Republic to be “the world’s most pernicious sponsors and practitioners of terrorism”. He addressed the assembly and said that not enough is being done against this link of Iran, Money and terror. Attacking this link is a smart move on his behalf, because ever since the 9/11 attacks on the World’s Trade Center; terror funding became a sensitive issue as Americans found out it was Wahhabi oil money that financed the attack. He then claimed that Iran is also the patron of Gaza which is an “Iranian backed terror base fifty miles from Tel Aviv, the financial capital of Israel. Terror is also a profitable power, because marketing terror is easy: terror is easy to spread around, can have light costs and mega influences and one photograph can raise a lot of public and media support. The more support and the more hearts supporting the cause, the more money raised.

    In conclusion, these days, modern warfare isn’t what it used to be. No one goes to war just to conquer the next hill; the modern war is first and foremost a financial one. It is a tradeoff actually; no nation begins a major offensive campaign without knowing what’s at stake and what’s to gain and the question always is whether it is cost-effective to fight? Only a fool will go ahead with no strong financial support. All we can hope is that the solution to this Middle East crisis will come as soon as possible and may it be a non-violent one backed up and led by the United Nations, instead of one-sided actions that can lead to regional instability and chaos.

    Nimrod Ellias & Omer Shachnai

    The CEO Game.

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  • 24Sep
    G20 - Pittsburg Summit 2009

    G20 - Pittsburg Summit 2009

    Now it is happening, all eyes are on Pittsburgh, Pennsylvania the host of the two-day long, tens of millions of dollars staging costs ,G-20 Summit; With President Obama chairing the event and welcoming the guests, nothing less is expected than a mega media fiasco. Leaders and important personal will come a-knocking from countries all around the world that constitute together eighty five percent of the world’s economy. At the summit, all aspects of the progress made since the Washington and London Summits will be reviewed and the leaders will discuss more actions regarding sustaining the ongoing recovery from the global economic and financial crisis. This article looks at what should we expect.

    The central debate is going to revolve around reforming the way the world economy is governed and the obvious follow-up question: who should run the global economy. Furthermore, another main issue to be discussed by the G-20 members is placing limits on bankers’ bonuses worldwide. But what is the G-20 actually? The G-20, The Group of Twenty, to give it its full title, was formally set up in 1999 as a result of the Asian financial crisis, in order to bring together major finance ministers and bankers from industrialized and developing economies to discuss the hot issues in the world economy. Among the desirable members you can find: Australia, China, France, Germany, India, Saudi Arabia ,Russia, the United Kingdom, the USA as well as the European Union itself and more, and they are usually joined by representatives from widely renowned institutions such as the World Bank, World Trade Organization and the International Monetary Fund.

    Last year, the frightening ongoing recession pushed G-20 officials to hold the first summit that had primary heads of state as guests in the Washington summit, when the leaders agreed on an action plan that included issues such as promoting integrity in the markets, strengthening worldwide cooperation, reforming international economic institutions and more. The theme in the April 2009 summit in London was similar: dealing with the crisis. In London the leaders continued to work on the previously made resolutions and agreed upon six pledges centering on restoring confidence, repairing the financial system, restoring financial regulation, preventing future crises by building up international institutions, promoting global trade and building a stable, green recovery. Altogether, the counterparts pledged they would spend an astronomical five trillion dollars on efforts to salvage their economies and another trillion dollars to help out struggling nations. In London the leaders also requested another convention to be held before the end of the year; Obama enthusiastically agreed to entertain and chose Pittsburgh for the setting.

    Thus, why Pittsburgh? Officials like to say the city of bridges was chosen because of the remarkable transformation it made from a grimy old steel industry to high-tech innovation including green and clean development over the years, a positive change that Obama surely wants to showcase. “Pittsburgh stands as a bold example of how to create new jobs and industries while transitioning to a 21st century economy” he has said. Pittsburgh is a perfect spot to show off local green achievements made this year such as the revival of “East Penn Manufacturing”, the city’s medical laboratories, and transformed industrial plants that went hybrid. Yet the proximity to New York is kind of comfy since many of the attendees must attend the UN General Assembly as well and the fact that, well let’s face it, Pittsburgh is important for the second cadence also must be taken into account. A great deal of thought was also made in selecting the convention center itself, the David L. Lawrence center, the world’s first green convention center.

    Another question to be asked is did they do what they promised? At this time, the picture isn’t clear enough to say, but much of the dough promised to struggling countries has been transferred to them. However, there still remains a lot of work ahead with complex issues like who is going to be running the global economy and regulation of banks and hedge funds as mentioned before.

    More importantly, what should we expect from the Pittsburgh Summit? Since many prime economies are slowly recovering from the recession, there is no need (nor could it be fulfilled) for another round of big spending pledges, instead the summit will concentrate on the ones its members already committed to. The center stage will focus on regulation and reform, with the topic of the day being dealing with banker’s bonuses; there is a good chance to see an agreement on that.  Another hot item, is making sure that all countries are on the same page and don’t mess around with staggering companies. Will India and China be presented better in the International Monetary Fund? The IMF, The UN’s agency that facilitates international commerce and aids developing countries, will also be under discussion. Obama also claimed that we must stay clear of the asset bubbles by setting up a path for “sustainable growth while steering clear of the imbalances of the past”. Hence that’s going to be a key part of the agenda as well. Although the recovery is in progress, the fact that many people are still unemployed, should and probably will be a noticeable subject.

    In conclusion, as financial crises fear no international boundaries, these meetings offer an opportunity to discuss economic problems and maybe even agree on the appropriate actions that need to be taken in response. As the conductors of the world’s largest economies, these leaders have a responsibility to work together in order to insure this kind of crisis won’t happen again. “The Pittsburgh Summit is an important opportunity to continue the hard work that we have done in confronting the global economic crisis, and renewing prosperity for our people”, said Obama on the eve of the summit’s jumpstart. Prior to Obama’s election, critics said that after the campaign ends, Obama will be tested by major-hard-to-cope-with events and by his reactions to them. Now it’s up to him and his administration to deal with the crisis in order to prove themselves. Now is the time to see whether the Pittsburgh Summit will be remembered as an important milestone or a complete disaster in terms of financial pace making and use of the tax payer’s cash. Will it be a prestigious achievement, one that may prove that Obama’s administration is better than his predecessor’s Or will the summit be just another brick in the wall of history?

    Omer Shachnai

    The CEO Game.

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  • 23Sep

    How can industry analysis and business strategy influence your decision-making process as a CEO?
    This article discusses industry analysis and business strategy and the use of Six Forces Model (by Michael E. Porter of Harvard Business School) in the business world.

    What is the Six Forces Model? And what is it good for?
    The Six Forces Model developed by Porter is a tool that determines the competition level in any industry and the attractiveness of the industry.

    The six Forces are:

    Competition – this parameter is determined by the number of the competitors and their aggressiveness. If in your industry you have many competitors, and your competitors might be drawn into price wars, this will cause the profit rate to drop towards a competitive level (perfect competition)

    New Entrants – if your industry is highly profitable and doesn’t have any barriers to entry, many companies will enter your industry. This may cause the profit rate to drop towards a low, competitive level (perfect competition). If your industry has many entrance barriers such as high fixed costs, patent laws etc. your profit will soar. For example, if your company has a patent on any product, you can sell this product at almost any price you want without fearing any competition (but if you know the demand curve you’ll set the product price in such way that will lead to highest rate of profit).

    Porter's Old 5 Forces Model

    Porter's Old 5 Forces Model

    End users/Buyers/costumers – this parameter is the bargaining power of the customer. If the product, like luxury products, is not necessary to the customer he might buy it at a lower price. If on the other hand the customer depends on this product, he might pay much more. This is the case for essential goods such as gas and water. In other words the parameter describes the ability of customers to put the firm under pressure and also the reaction of the customers to price changes.

    Suppliers – every company needs a supply of materials in order to make new products. These materials can be components, labor, and services, etc. Suppliers may refuse to work with a firm, such as many Arab countries that sell trade oil to Israel. Or suppliers may charge excessively high prices for unique resources like highly trained workers.

    Substitutes (Product or service) – the existence of similar products or services raise the barging power of the customers over the products. The customer has the most power when two products are practically identical. In that case, the customers don’t have any incentive to pay more for any one product and so the customers will buy the cheapest product available in the market. This case may lead to high elasticity of demand.

    Complementary products/ the government/ the public – this is a relatively new parameter and it is determined by how the government, complementary products or the public perception can change the profit rate of your company. For example, sometimes corporations can grow too much and the government tries to limit the company control over the market through the use of competition law (aka antitrust law in the US).

    Omri.

    The CEO Game.

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  • 22Sep

    Traditional microeconomics teaches us that we should make decisions on the margin. That is, we should ignore sunk costs. Sunk costs are costs we have already been incurred and cannot be recovered regardless of your next time. In order to optimize revenue, theory of the firm states that, in perfect competition, marginal revenue should be equal to marginal cost. That is, how much you earn for selling the last unit of a product should be how much it costs you to produce that product (in this perfect world, that would also be the price on every unit). This also applies for people and their utility. You should assess both costs and benefits on the margin, in the next time period, on the next purchase, without thinking of everything that came before.

    Logic In, Emotions Out.

    Logic In, Emotions Out.

    Most of us, of course, don’t do this. How many times have you sat through a movie you hated because you paid for the ticket already? How many times have you waited for the subway an extra 20 minutes instead of just walking because you have already waited for 20 minutes? And how many times you have eaten that last slice of pie even though you were really incredibly full because you already heated up the whole thing and you didn’t want to throw it away? Enough times, I am sure, that you are aware of the phenomenon of, at the end of the movie, wait, or pie, being incredibly bored, late, or nauseous, and wondering why you just did that.

    The reason you just did whatever irrational behavior it was that I just described (or a host of others) is that, unfortunately, you’re human. And that, as always, is the lesson from behavioral economics. Humans aren’t irrational! So why treat them that way? Now we come back to our good friend prospect theory, which was mentioned in the first article I wrote about behavioral economics. In addition to valuable insights on reference points, prospect theory states that people are inherently loss averse. Not only that, but they did to weigh losses twice as heavily as gains — that is, a loss of $1 is twice as painful as a gain of $1. The combination of a non-neutral reference point and loss aversion is what leads to irrational behavior.

    Once you have decided to see the movie, wait for the subway, or eat that piece of pie, your reference point account for your doing those things. That is your neutral position. Not achieving these goals is a loss. This sort of mental accounting, as it is called, commits you to decisions that are less than ideal.

    A good businessman, either online in a serious game such as The CEO Game or in real life, doesn’t let a misplaced sense of regret and loss stop him from making proper economic decisions. Recognize when you’re including sunk costs in your decision-making and put an end to it. Live life on the edge, or margin. You’ll be happier, and wealthier, for it.

    Tamar.

    The CEO Game.

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