• Matthew Kaufman

Game Theory: A Five-Minute Guide

Updated: Dec 23, 2020

You are locked in a room full of strangers and know next to nothing about one another.

You are all being held against your will and all are presented with a real world incarnation of the Prisoner’s Dilemma. Except instead of someone serving a longer sentence, it's your lives on the line. You can choose to trust or betray your companion.

The more I thought about this dilemma the more I realized that there are many times where the concepts of game theory are gated by one big thing: The fear of the great unknown. If you knew for sure that your partner in The Prisoner’s Dilemma was going to choose trust, then that makes it easy for you to choose trust. But because of our fear of the unknown, we would sooner choose betray because it’s relatively safer.

Now take, for example, the St. Petersburg paradox. You enter a lottery where you flip a coin. If you win, you double all your earnings to date and if you lose, you lose everything. In Game Theory and Statistics, this is a very common paradox to bring up because in theory, you should never stop playing. This is because the potential earnings of the game are infinite. Meanwhile, most people would stop playing pretty early on because they’d be afraid of losing whatever they would have won to that point. Once again, our fear of what we don’t know is dictating our actions and causing us to miss out on the best possible outcome.

Here's the recurring theme: There are many times when we are playing these thought experiments or facing these paradoxes, that we are limited by our human knowledge and bravery. However, these thought experiments are meant to produce exactly what their names suggest, thought. These things are supposed to make you think about how you are living your life in an attempt to get you to live more efficiently or to maximize your winnings.

While I, like most other people, do enjoy winning, there's a critical flaw with this. Back to our prisoner’s dilemma, the best possible ending for all involved will never be achieved if everyone follows game theory. If we let our lives be ruled by fear of the great unknown and blindly follow game theory into the dark, then it is highly likely we’ll never get to see the light of the best possible outcome for all entities involved.

This applies pretty broadly as well. Recently, I witnessed a discussion between Bill Gates and Mark Zuckerberg concerning whether it is possible that the earning income of Harvard dropouts is actually higher than that of Harvard graduates. Obviously, this is because we have outliers and anomalies like Mr. Gates and Mr. Zuckerberg, but this also tell us something about the topic at hand. Had those two and those like them just followed game theory and stayed in school to finish their degrees, there is no guarantee that they would be as successful as they have been and continue to be. By shirking game theory and charging bravely into the great unknown, these two have both found their best possible outcomes.

I’m not saying that everyone out there should go dropout out of college or that they should start randomly mixing together chemicals in the hope of finding a cure for cancer, but what I am pointing out is that strict adherence to game theory isn’t necessarily a good thing either. Sometimes, to truly win, you have to be willing to lose and part of that means charging into the Great Unknown without any safety net and without any reassurance that things will be okay. I have the great fortune of being friends with more than a few artistic career individuals. They’re involved in various creative industries like music, movie and television, traditional art, game design, and so on. These people are all, in my opinion, immensely brave as they’re staking their livelihoods on their own abilities and attempting to defy the odds of their industries being hard to get involved with. They’re venturing into the Great Unknown with minimal safety backing and all for the sake of passion and loving what they do.

Again, this may not be the best course for everyone. Not everyone can be a Bill Gates and more often than not, they’ll end up just being a Joe Schmoe. But if no one is willing to take those big risks then there may not be a single more great artist or great person. As you go throughout your life, evaluate how often you’re just taking the safe option and shying away from what could be your greatness. As I mentioned before, you can’t win without being willing to lose, and many times, you can’t achieve greatness without being willing to shirk game theory and to go charging into the Great Unknown.

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