Thread by @martinmasrna

GAME THEORY is the most powerful decision-making framework in history.

From Sun Tzu & Genghis Khan to John F. Kennedy, it was used to win wars, forge empires and conquer the world.

Here’s what it is, how it works and how to master it:

(thread)

In 1962, world was ONE decision away from nuclear war:

Attack or Retreat?

If you think about it, our entire history is made of individual choices made by individual people.

But this goes far beyond war and politics…

Your entire life is made of choices:

• Your health
• Your career
• Your relationships

All this depends on the decisions you and other people make.

And this is where “Game Theory” comes in…

Game Theory is a mathematical model with:

• Rules
• Players
• Choices
• Strategies
• Outcomes

The goal is to describe and predict rational decision-making.

Game Theory in practice:

In 1962, US & USSR had two choices:

a) Dismantle the nukes (cooperate)
b) Continue building them (cheat)

Since neither side wanted to appear weak, they wasted TRILLIONS in their arms race. And this gives us a crucial insight:

Trust is everything.

If US & USSR had trusted each other, they wouldn’t have built 1000s of nukes (which they couldn’t use anyway).

So … why is trust so difficult?

Again, Game Theory can explain it:

This is “The Game of Trust”

• You and your opponent
• Both can cooperate or cheat
• If both cooperate, you get $2
• If both cheat, you get nothing
• If one cooperates and other cheats, cooperator loses $1 and cheater gets $3

So, what do you do?

Rationally, you should ALWAYS cheat - regardless of what your opponent does. Here’s why:

• If they cooperate, it's better to cheat (make $3 instead of $2)
• If they cheat, it's better to cheat (make $0 instead of losing $1)

The implication is shocking:

Being rational means war.

If both sides are rationally selfish, they will both end up “cheating” - which is exactly what happened in the US vs. USSR arms race.

But this has a simple solution...

Imagine you play “The Game of Trust” with the same opponent 100 times in a row.

If you’re both smart, you should build long-term trust and cooperate to make it a win-win.

And the science proves this:

In 1977, a tournament was held.

• 14 scientists submitted computer programs
• They played against each other for 200-rounds

The result?

ALL the best strategies shared the same 4 qualities.

Here are 4 rules to win The Game of Trust: 👇

[1/4] BE NICE

Cooperate as long as your opponent does.

Top players were NEVER the first ones to cheat.

This allowed them to get “perfect games” with each others, while the “nasty” players tore each other to pieces.

But what if you’re nice and the opponent cheats?

[2/4] BE STRONG

Be nice, but don’t be weak.

The cheaters took advantage of the pushovers that were “too nice” and kept cooperating.

The best response was to retaliate immediately.

But this is where it gets fascinating…

[3/4] BE FORGIVING

It doesn’t pay to hold grudges.

Some nice players started cooperating, but once they got cheated on, they kept cheating for the rest of the game.

But all the best players - while striking back - were willing to go back to cooperation.

And finally…

[4/4] BE CLEAR

The worst strategy was - unsurprisingly - a random one.

Cheaters took advantage of it, and the nice players thought it was trying to cheat them.

On the other hand, the winning strategy was the simplest of all:

The winner was clear, and it had only two lines of code:

1) In the first round, cooperate.
2) In every other round, copy what the opponent did last turn

Or simply:

“An eye for an eye, and a tooth for a tooth”

What does this tell us about the world?

You’re playing the Game of Life every day - whether you like it or not.

While rules and players are complicated, winning strategy seems simple:

1) Be nice
2) Be strong
3) Be forgiving
4) Be clear

And the world religions seem to agree:

Thanks for reading!

I'm Martin and I've been obsessed with learning my whole life.

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And that’s a wrap!

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