Game Theory Optimal Living
Playing games that make you Rich (Part One)
There is the man who wishes to be rich, but never thinks of discovering what means, actions and conditions are required to achieve wealth. Who is he to judge? He never made the world—and “nobody gave him a break.”
There is the girl who wishes to be loved, but never thinks of discovering what love is, what values it requires, and whether she possesses any virtues to be loved for. Who is she to judge? Love, she feels, is an inexplicable favor—so she merely longs for it, feeling that somebody has deprived her of her share in the distribution of favors.
There are the parents who suffer deeply and genuinely, because their son (or daughter) does not love them, and who, simultaneously, ignore, oppose or attempt to destroy everything they know of their son’s convictions, values and goals, never thinking of the connection between these two facts, never making an attempt to understand their son. The world they never made and dare not challenge, has told them that children love parents automatically.1
I have undoubtedly met an above average number of unusually happy, satisfied, and wealthy people, some of whom I am lucky enough to call friends. Perhaps it’s purely incidental, but without exception they all have three traits in common. The first is a value, the second is a mindset, and the third is a strategy. Today I will talk about the first of these, which I call the the Value of Wealth.
1. The Value of Wealth
Zero Sum games
It’s difficult to overstate how much the game of Texas hold ‘em has changed in the past two decades. These days if you are at all interested in playing poker for money and you haven’t studied Game Theory Optimal (GTO) poker strategy, especially for heads-up poker, you will leave a lot of money on the table—literally. If you don’t understand the optimal strategy and use it to your advantage by exploiting the play of the other plays someone else will, and they will take your money. It’s the equivalent to playing Monopoly and not buying the railroads, or failing to put three houses on New York Avenue, Illinois Avenue, and Tennessee Avenue. You may get lucky, you could still win, but the longer you play, and the less optimally you play (while playing with others who are aware of how to play more optimally than you) the more likely you are to lose.
The principles behind Game Theory Optimal play (known in mathematics and economics as Nash Equilibrium) haven’t been limited to poker and Monopoly, they’ve also been applied to other games like football (soccer) and baseball. What do all of these games have in common that allows the same mathematical principles to be useful for crafting a mathematically optimal strategy, no matter how complex the game, or how much of the game’s information is opaque? They’re all zero sum games. You can only win by creating conditions which ensure someone else’s loss. The most insidious variety of these zero sum games are known as status games.
Status games
Status games are the zero sum games we play in social contexts. The way to ‘win’ at them is relatively straight forward:
I can only win by ensuring you lose (or at the very least, ensuring you win less than me).
This can only be accomplished by lowering someone else’s social status relative to my own. By decreasing someone else’s status I am increasing my status relative to theirs. By increasing my own status I am decreasing everyone else’s status relative to my own.
All of politics is a status game. Politicians cannot create anything new, they can only redistribute what already exists from one person in a place and time to another. All taxes and penalties are a form of wealth redistribution from one class of people to another. All subsidies are distributions of wealth already stolen from someone else. Subsidies funded through inflation are no exception. Creating new notes does not increase wealth (that is to say: it does not increase standards of living, it does not innovate new products, it does not create novel solutions to existing problems, it does not increase people’s available leisure time) it only redistributes money from certain classes of people to others—while tricking people who can’t do math into spending more of it (the wealth effect). Most famously, inflation redistributes wealth from creditors to debtors by decreasing the real amount owed by debtors.
But political actors in power aren’t the only ones playing status games. Political activists are also playing status games. They’re vying for attention, praise, and social status at the expense of those who disagree with them. Political activism is necessarily destructive rather than constructive. Building new institutions takes work, moving up a social hierarchy by criticizing or shaming someone else as being wrong or evil is easy. Journalism, philosophy, and academia are all places where playing status games is normal, expected, and rewarded. But you don’t have to play.
Micro-Status games
Once you start to notice people playing status games, it becomes difficult to unsee. Most status games are not played at scale, they take place in everyday interactions with friends and family. I’ve taken to calling these micro-status games. In micro-status games the goal of ‘winning’ is less about climbing a social ladder by pushing someone else down it and more about control through emotional manipulation. The ‘win condition’ of these games is to change your behaviour in some significant way that benefits the person engaging in this kind of status game, usually through appeals to morality, reason, or liberal uses of guilt and shame. This is not even usually a conscious effort on the part of the person engaging in it, and more a product of the way they were raised that they feel the need to engage in status games in order to get their own needs met. They’re done by people who are trapped in the zero sum mindset and simply don’t know how to communicate any other way. One of the more common examples of this kind of micro-status game is demands to justify preferences or questioning of personal boundaries. These can even take place in a one-on-one social setting. The conversation goes something like this:
Person 1: Do you want to _____ ?
Person 2: Not really.
Person 1: Why not?
But the ‘why not?’ is rarely so mild. It’s usually accompanied by emotional coldness, pouty faces, or “please, please, please, just this once!” And occasionally the true intention behind the game isn’t masked at all: “If you don’t _____, you must not love me.” Whatever form it takes, the goal is the same. Person 1 is attempting to circumvent a boundary set by Person 2 using guilt and emotional manipulation. The strategic particulars vary depending on the subculture, occasionally this game also involves appeals to Morality or Reason (*cough* Objectivists *cough*), but the goal of changing your behaviour for the benefit of the other person (and at the expense of your own preferences and boundaries) remains the same.
Vivek Patel recently wrote about this on Twitter, and I find his method (and Nonviolent-Communication more generally) for disarming the people who play this particular game incredibly effective. It’s worth reading the whole thread.
Positive Sum games
When the author of Ecclesiastes wrote that there was ‘nothing new under the sun,’ it was very literally true. What could be expected then, as for most of human history, was a general sense of ‘sameness.’ You would live the same quality of life as your parents and would do what they did to survive, which for almost everyone was subsistence farming. Even as recently as 1790, when the first Census of U.S. states took place, 90 percent of respondents listed their occupation as ‘farmer.’ And that actually understates the number who had to engage in food production to live. Sailors kept chickens for eggs while at sea. Most doctors, merchants, and ministers in the new country kept cows for milk or raised chickens in addition to the occasional hog or pig for special occasions. Only the absolute elite were not directly involved in their own food production. It wasn’t until the 1880 Census that fewer than 50% of those in the U.S. identified themselves as farmers. Thanks to a hundred years of advances in food production efficiency some people finally had time to do literally anything other than worry about how to get enough food.
By the 1920s the majority of U.S. citizens were living in cities and fewer than 25% were directly involved in food production. Later still, thanks to the incredible abundance of a newly discovered non-human energy resource, oil refined by the Standard Oil Company, the internal combustion engine lifted tens of millions out of poverty. And then two world wars abruptly set back advances in standards of living by almost an entire generation. Many had to relearn the only life their ancestors had known, and the U.S. government engaged in a decade of farming propaganda efforts to nobelize subsistence farming to a generation who had previously been wealthy enough to focus their time and attention on other things. The War Food Administration’s ‘Victory farm’ during WWII is one of the more famous examples of this as most Americans were forced out of necessity to convert their yards into farms and learned how to feed themselves. By 1950 further technological advances had resumed the trend towards progress and out of subsistence poverty for most U.S. citizens. In the 1950 Census fewer than 13% of respondents identified as farmers. By 1980 that number was down to 3.4%.
In 1968, Alan Kay came up with the idea for what he later called the Dynabook, a portable tablet with a screen that children could use to learn about the world and share their ideas and creations with each other. He then spent decades of his life creating foundational technologies that we all rely on today in an effort to realize his original vision. A couple weeks ago I spent time at my aunt and uncle’s house with their two kids, who spent a not-insignificant amount of time using their iPads to play games like Duo Lingo and watch YouTube tutorials on how to speedrun Minecraft. They have never had to worry about having enough food to eat. They don’t spend most of their time helping their parents raise animals or growing food, hoping that there isn’t a particularly long drought or flood and that they will have enough to last through the winter months.
Today, thanks to the vision and dedication of people like Alan Kay playing positive sum games, we are among the first humans in history to live in a state of relative abundance. Progress and technological advancement are now the rule rather than the exception. That doesn’t mean that all problems have been solved, only that we have the opportunity to focus our time and attention on things other than our own food for the first time in human history.
Positive Sum games are games where by merely playing the game you increase the total amount of resources. At the end of the game, if you add up everyone’s resources the number is higher than total amount all players initially put in. They are games where it’s possible for everyone playing the game to win when anyone else does.
Building new tools that solve problems is an example of exactly this kind of positive sum game. As Bret Victor says, a new tool “addresses human needs by amplifying human capabilities. That is, a tool converts what we can do into what we want to do. A great tool is designed to fit both sides.”
By creating new tools that address human needs and amplify human capabilities, everyone is better off. Even if they aren’t the ones directly using the tool, because someone else is able to better solve a problem, we all have more time to do other things that we want to do. Fewer people have to worry about producing their own food because farming has become so much more efficient. By reducing the labor time needed to complete a task, we unlock more time for human creativity to solve new problems, like how to produce a portable touchscreen for children to learn about and explore the world that’s also cheap enough that every household can afford one (Alan Kay is still working on that part). This virtuous cycle is the reason that you’re even reading this right now!
There are lots of other positive sum games we can play at a micro scale too, my personal favourite is raising other’s aspirations. It costs me almost nothing to encourage friends to seek out greater ambitions and then chase them, but there is a huge payoff for both themselves and everyone else with whom they share the earth. Marriage is another example of a positive sum game (with compounding returns!), the longer it lasts and the more you put into the relationship the more you and your partner get out of it. Give away your best ideas and advice for free. Teach everything you know. Have children. All of these are positive sum games.
The important point here that I want you to remember is this: every person I know who radiates joy, whose cup runneth over with life, wealth, and life satisfaction is singularly obsessed with playing positive sum games. They don’t care about status games. Many of them don’t even respond to their critics. They care about building things and giving to others—repeatedly, relentlessly, and unconditionally. And I don’t think that’s an accident.
In short, if you want to build emotional and financial wealth, play more positive sum games. And when it comes to zero sum games, the unbeatable strategy is not to play.
Rand, A. (2016). The “Conflicts” of Men’s interests. In Virtue of selfishness: A new concept of egoism (pp. 449). essay, Paw Prints.
Astrid, I really enjoyed this post! I started learning about Game Theory, the other week, and your post gave me some good tidbits to chew on :-)
Astrid, your writing is a revelation. Brilliant. Enlightening. Refreshing. You write from your heart, soul, mind and personal values. Not necessarily in that order. :)