Plato, in two of his texts,
the Laches and the Symposium,
explains how Socrates
recalls an episode
from the famous battle
of Delium in 424 BC
between the Athenians
and the Boeotians.
The synopsis of his
passage goes as follows:
Consider a soldier at the
front of the Boeotian line
having the following realization:
If our defense is successful, I
still risk the chance of dying.
If our defense is unsuccessful,
I will almost certainly die.
Based on this reasoning, it seems that
the best alternative for the soldier
is to run away regardless of who
is going to win the battle.
Now imagine if all soldiers
were to exhibit this very
reasoning at the same time.
If such an event would occur,
they would all probably realize
that they would be
better off running away.
This seemingly simple yet
incredibly reasonable hypothesis
is one of the first historical
instances of game theory.
Flash forward 2368 years in 1944
Hungarian-American
mathematician John von Neuman
published a book titled “Theory
of Games and Economic Behavior.”
This foundational work
contains the method for finding
mutually consistent solutions
for two-person zero-sum games.
This great book introduced
game theory as a concept,
thus extending its application to
fields like economics, politics,
and sports and leading to the
expansion of the array of scientists
that showed interest in it.
One of those scientists was
the legendary John Nash
who won the Nobel Memorial Prize
in Economic Sciences in 1994
and popularized the idea of
Game Theory as we now it today.
Something very
fundamental about game theory
is that it doesn’t get its name from
the preconceived notion of a game
as we understand it:
A game in game theory is any
interaction between multiple people
in which each person’s payoff is
affected by the decisions of others.
Namely, any single
interaction you are part of
can be analyzed with game theory
in order to produce the
most beneficial outcome.
But before we get into the mechanics,
let’s lay out the main principles:
1. A game needs to include
multiple players (>2).
2. The players need to
interact with each other.
3. There needs to be a reward.
4. We assume that
players act rationally.
5. We assume that players act according
to their personal self-interest.
Prisoner’s Dilemma is the most
widely mentioned game in game theory
The basic premise is how to establish
a mutually beneficial strategy
between two members of a
gang that got arrested
and face potential imprisonment.
The rules are as follows:
1. The players of the game are
Prisoner A and Prisoner B.
2. The players can’t
communicate with each other.
3. If A and B each betray the other,
each of them serves 2 years in prison.
4. If A betrays B but
B remains silent,
A will be set free and B will serve
3 years in prison (and vice versa).
5. If A and B both remain silent,
both of them will only serve 1 year
in prison (on the lesser charge).
This matrix depicts
the different choices of each membember
and each number signifies the number
of years to serve according to each.
Prisoner’s Dilemma exemplifies to a great
degree the substrate of human nature.
The irrational self-interest
driven gang member
will most probably choose
to betray his counterpart,
thinking that he will
get a better deal.
This idiosyncratic choice
will most certainly lead to
a disaster for both parties
since they will get the
worst deal possible.
The obvious, mutually beneficial
choice here is to keep silent.
The main idea behind this game is
to expose the inherent tendency
of humans to display a lack of
cooperation in this and similar games.
Game theorists usually coin the terms
dominant strategy and Nash equilibrium
to distinguish the kind of
strategies followed by the players.
Those two terms are
used usually together
and form the basis upon which
game theory is founded.
Dominant strategy refers to strategies
that are better than other strategies
for one player, no matter
how the opponent may play.
Those strategies might be great
in the case of non-alternatives
but if you are part of a game
with more dominant strategies
(each player has a dominant
strategy) than they aren’t optimal.
In the prisoner’s dilemma case,
the dominant strategy for
each player is to betray.
And here is where the term Nash
equilibrium comes into play.
The term is used since John Nash
explained the essentiality of
equilibrium in his landmark work –
Equilibrium points in
N-Person Games.
In essence, what he proposed is that
even in high-level competitive games
like Google vs Apple,
or USA vs Russia
there exists an “equilibrium”
where no side would benefit
by changing its course.
At this equilibrium, each side
knows its adversary very well
and sticks to its strategy.
For instance, in the prisoner’s
dilemma, the Nash Equilibrium
is the upper left square of the matrix, 
which means both prisoners need to stay silent.
What makes Nash’s theory
of equilibrium so special,
is that it presupposes
that in each game
there is at least one point of equilibrium
and all players will be better off
trying to find it and form
their strategy around it.
This momentous revelation helped people
in disciplines like politics, war,
economics, business and social
theory understand the world better
and form better strategies.
The inception of Nash equilibrium
was portrayed exceptionally
in the wonderful movie
“A beautiful mind.”
Even if people or companies rationally
follow their own self-interest,
the best outcome is hard to reach
when they can’t or don’t cooperate.
Therefore, the best strategy
is to continually scan the
“market” for potential alliances.
People who can forge strong alliances
will eventually become part of
oligopolies and thus
dominate their market.
The rest will consequently
be ostracized.
That’s what I love about game theory.
It approaches the “game of life”
from its most axiomatic
principle, that of evolution.
Evolution equals adaptation
and, therefore, life is an
omnipresent game of adaptation.
Humans thrive in cooperation
because it is the main strategy
that helped us survive and thrive
after years of adversity
and struggle to compete against
different forces in nature.
The sad thing is that after
establishing our sovereignty,
we overpowered other species and,
in most occasions, nature itself,
but eventually we turned
ourselves against each other.
There are a variety of
factors that affect
the descent to the
point we have reached,
but a game theory mindset
can work to our advantage.
I always believed that change and
equilibrium start at the micro level.
And that is something
we fail to grasp
because we are usually consumed
by events at the macro.
It is interesting to be in the
know and discuss and argue
about politics and
national strategies,
but, at the end of the day, the trigger
is pulled by the respective strategists.
What each of us could do
instead is to use game theory
in our most challenging decisions
and in our closest relationships.
Regardless of what
decision you have made
and how this will impact your
future, think like a game theorist.
Ponder questions like:
Are the actors in the
situation rational?
Are we able to reach
Nash equilibrium?
Do they act according
to their self-interest?
Do they understand
the rules of the game?
Is their dominant strategy
really that dominant?
If you see that most game
theory parameters aren’t met,
you know that you have
to change your approach.
You either need to also act irrationally,
which is something I wouldn’t suggest,
or you need to step away and
find better players or games.
The choice is always yours.
Life oftentimes feels like a game.
And, usually, the winners are
the ones who know how to play.
Hi everyone, today is a great 
day.
It is a great day because
this is my first attempt
to head towards a new trajectory
in my creative endeavors.
Most of you probably know me from
my blog “The Quintessential Mind”
where I have been focusing on creating
essays on personal development,
psychology, philosophy, culture
and sometimes even business.
From now on, I will also try to immerse
myself in the art of video making
by transforming some of my
essays into video essays
and, thus, adding a more visual
aspect to my words and ideas.
I started with game theory because it
is a topic that always fascinated me.
It is quite a complex topic, but even by
understanding its fundamental principles
one can experience tremendous benefits
in the way one makes decisions.
I hope you enjoyed this video as
much as I enjoyed creating it
and that it worked as a great primer to
warm you up for what is about to follow.
If this is the case, please
make sure to like it,
share it with people that you
think will benefit from it
and also subscribe and hit
the notification button
so you can be notified when I
will release my next video
which will happen pretty soon.
Thanks again for watching.
Take care.
