10 life lessons from Game theory

Game theory teaches strategic thinking. By studying credible models of cooperation and conflict, we gain useful perspectives for navigating life's complex dynamics. Consider these key lessons I’ve grokked from studying game theory and navigating somewhat situations in career and relationships to optimise for best possible outcome from current hand.

  1. Embrace Positive-Sum Games

Seek opportunities where multiple parties can benefit. Negotiations, trade, and business deals done right can create win-win scenarios that incentivize cooperation. Even in competitive situations, look for ways to expand the pie before dividing it.

  1. Sidestep Zero-Sum Games

Avoid scenarios where gains for one party mean direct losses for others. While sometimes unavoidable, these situations often breed hostility and bad faith. When possible, reframe interactions to align incentives rather than oppose them.

  1. Understand Your Equilibrium

Know your best option given others' likely choices. In repeat games, equilibrium strategies balance rewards, risks, and sustainability. Disrupting unhealthy equilibriums can pay off, but ensure a superior alternative exists.

  1. Beware of Hidden Games

People often have undisclosed interests and indirect ways of pursuing them. Pay attention to potential ulterior motives and agendas, even in cooperative contexts. Maintain empathy while protecting against unknowns.

  1. Cooperate and Compete Judiciously

Alternating cooperation and competition elicits optimal system-wide results. Collaboration unlocks shared gains, while competition incentivizes effort and excellence. Balance is key—excessive competition breeds distrust, while excessive collaboration allows free-riding.

  1. Master Commitment Strategies

Commitments restrict options in the present but can pay dividends long-term. Making credible commitments—like contracts—can build trust and align efforts over time. But retain flexibility where needed.

  1. Uncover and Leverage Market Inefficiencies

Seek win-win opportunities by identifying mismatches between supply and demand. Connect underutilized assets to unmet needs and solidify gains via trade. Inefficiencies persist due to information gaps—bridging those gaps pays off.

  1. Embrace Randomness and Adapt

Chance events inevitably arise. Don't treat life like a fixed game; recognize uncertainty and be ready to respond. Maintain margin for error and consider hedges. Iteratively adjust strategy as new information emerges.

  1. Resist the Sunk Cost Fallacy

Don't blindly persist based on past efforts. The costs already incurred are irrelevant to present and future choices. Dispassionately decide what now leads to the best outcome regardless of prior time and resources spent.

  1. Guard Against the Endowment Effect and Status Quo Bias

People overvalue what they already have. Recognize this bias when assessing trades, deals, or changes. The fact that you own something now doesn't intrinsically make it more valuable. Similarly, change has inherent upside, despite short-term discomfort.

The games of life are infinite, yet the rules are simple - seek positive sums, build trust, know your BATNA. Leverage asymmetry by coordinating the uncoordinated and bridging inefficiencies. Master optionality through agility and open-mindedness. Let randomness and black swans guide you to antifragility. Play iterated games through consistent credibility. Never get attached to sunken costs or current endowments. In the end, it's all made up and the points don't matter, so enjoy the ride.