In a scene of the movie A Beautiful Mind, John Nash is sitting with friends in a bar when a beguiling blonde enters with her girlfriends. One of Nash’s friends recalls Adam Smith’s lessons that every man should pursue his own self-interest, since, after all, individual ambition serves the common good. In short, every man should offer the blonde a drink.
Nash has an epiphany and dismisses his friend’s idea saying, “Adam Smith needs revision.” Nash explains that if all boys pursue the blonde, they will block each other, and not a single one will get her. Then when she rejects them all, the boys won’t be able to pursue any of her girlfriends either, because no girl wants to be second choice. Nash goes on, “But what if no one goes for the blonde? We don't get in each other’s way, and we don't insult the other girls. That's the only way we win.”
Regardless of Crowe’s faulty explanation of Nash equilibrium, the concept that collective decision-making yields a better outcome for everyone has lived on. The scene continued to inspire me for years to come, just not in the context of picking up girls at bars.
We live in a noisy world where everyone has a philosophy and an ideology. The self-help industry is booming, yet people are more clueless than ever. There are books on every subject, yet real insights escape most of us.
Like everyone, I thought I was different. I wanted my worldview to make sense, and I wanted my life to matter. I wanted to find my purpose and make better decisions. But how? I was as clueless as everyone else.
After graduating from school, I watched movies like Moneyball and read books like Freakonomics and The Art of Strategy. These books and films repeatedly claimed that the world is mismanaged and that common wisdom is often wrong. They asserted that data prevails and that there’s always room for experimentations and improvement.
These books resonated with me as I’ve always wondered about mismanagement in my own life and everywhere else. One night, I was reading about making better decisions when I came across the Wikipedia page on decision theory. This theory studies optimal decisions, ones that maximize prospects and minimize regret. It seemed intriguing. I wanted to learn more, so I did!
A few years after my undergrad, I decided to go back to school to learn more about the world. I chose to study financial mathematics, a niche interdisciplinary field of study that draws knowledge from financial economics, decision theory, game theory, and optimal control.
The standard of living for most people has stagnated for two thousand years from the height of Rome to Victorian England. Yet today, we live more prosperous lives than our ancestors dreamt possible. We enjoy assorted sushi, countless ice cream flavors, and on-demand tv series all day long. This prosperity attributed to Macroeconomics had me interested in the subject and economists’ tools: fiscal and monetary policy.
In my financial economics class, I learned about the market and risk. I read up on the efficient-market hypothesis, which states that no profit can be made from the market because all the information about stocks is already reflected in their prices. This is why economists often claim that blind-folded monkeys beat hedge funds.
In my optimal control class, I learned how finance rocket scientists develop trading strategies on Wall Street to make money and beat the market. I developed a few trading strategies of my own but never really executed any of them. I found that these models bring me closer to making these so-called optimal decisions.
In my game theory class, I studied how to analyze strategic situations like conflicts and cooperation. I worked on compelling problems ranging from analyzing nuclear warfare models like mutually assured destruction, which paradoxically asserts that having more nuclear weapons can lead to a more peaceful world. Another problem that I studied was fair division, i.e., cutting a cake to satisfy every person with their piece, even if the cake is nonuniform. Now, that could come in handy at a party!
This class reminded me of the premise from the movie A Beautiful Mind: Social interactions are nothing if not strategic games. I tried to encompass this premise in my life as I modeled my interactions with my friends as games. I sought win-win solutions for such games where no party has an incentive to change their course of action in the long-run. In other words, I pursued Nash Equilibria and Pareto-optimal solutions.
Throughout my studies and personal experiences, I learned that the world is messier than I ever expected. Although I studied many theories that provide profound philosophical meanings and insights, they’ve all proved quite theoretical when applying them in real life. I found that optimal decision-making is only confined to academics’ hypothetical problems and their research papers.
I, finally, gave up on making optimal decisions because every situation is different, and every person is unique. I concluded that any rational theory of decision-making is bound to fail because of how biased humans are and how random life is. In short, I moved on.
Since I love writing and I’m always fascinated by what I learn, I decided to start Project Nash. Project Nash is my attempt to understand how the world works and explain it in a simple way by deconstructing layers of complexity and presenting different theories concisely.
Mainly, I’m more concerned with developing the reader’s intuition and establishing their interest than focusing on implementation details, to borrow a term from my dear engineering jargon. The reader can then research the topic as far as they’re interested and have these ideas change their lives as much as they allow them.
Hollywood’s romanticization aside, it seems that many captivating stories have inspired mind-blowing theories about our existence. I’m ready to search, delve, and ponder these stories until they reveal their secrets to us. Are you?