3 game theory tactics, explained
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- Опубликовано: 14 май 2024
- How to maximize wins and minimize losses, explained by four experts on game theory.
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Game theory is a useful tool for decision-making in situations where the outcome depends on multiple parties. It provides a systematic way to analyze the interdependence of individuals or organizations and their potential strategies.
Not only does game theory help you identify the optimal strategy for achieving your goals, it can also help you avoid the sunk-cost fallacy - the tendency to persist in an endeavor because of the resources you've already invested.
By taking into account the potential actions and responses of other players, game theory allows you to minimize your losses and make informed choices that lead to better outcomes. Whether you're negotiating a business deal or making investment decisions, game theory can be a valuable asset in helping you make smarter choices and achieve your objectives.
0:00 What is game theory?
1:08 War: Learn from Reagan and Gorbachev
2:58 Poker: The sunk cost fallacy
5:56 Zero-sum games: The minimax strategy
Read the video transcript ► bigthink.com/series/the-big-t...
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About Kevin Zollman:
Kevin Zollman is an associate professor in the Department of Philosophy at Carnegie Mellon University. He is also an associate fellow at the Center for Philosophy of Science at the University of Pittsburgh, visiting professor at the Munich Center for Mathematical Philosophy (part of Ludwig-Maximilians Universität), and an associate editor of the journal Philosophy of Science. His research focuses on game theory, agent based modeling, and the philosophy of science. Zollman is the co-author of The Game Theorist's Guide to Parenting: How the Science of Strategic Thinking Can Help You Deal with the Toughest Negotiators You Know--Your Kids, with Paul Raeburn.
About Annie Duke:
Annie Duke has leveraged her expertise in the science of smart decision making to excel at pursuits as varied as championship poker to public speaking. For two decades, Annie was one of the top poker players in the world. In 2004, she bested a field of 234 players to win her first World Series of Poker (WSOP) bracelet. The same year, she triumphed in the $2 million winner-take-all, invitation-only WSOP Tournament of Champions. In 2010, she won the prestigious NBC National Heads-Up Poker Championship. Prior to becoming a professional poker player, Annie was awarded the National Science Foundation Fellowship. Thanks to this fellowship, she studied Cognitive Psychology at the University of Pennsylvania.
About Liv Boeree:
Olivia "Liv" Boeree is a poker player, TV presenter and model from England who won the 2010 European Poker Tour in Sanremo. Born in Kent, Boeree studied at Ashford School before going on to earn a First Class Honours degree in Physics with Astrophysics at the University of Manchester. She was the #1 ranked female player on the Global Poker Index as of November 2015, and #6 on the female all-time live poker winnings list.
About Julia Galef:
Julia Galef is a New York-based writer and public speaker specializing in science, rationality, and design. She serves on the board of directors of the New York City Skeptics, co-hosts their official podcast, Rationally Speaking, and co-writes the blog Rationally Speaking along with philosopher of science Massimo Pigliucci. She has moderated panel discussions at The Amazing Meeting and the Northeast Conference on Science and Skepticism, and gives frequent public lectures to organizations including the Center for Inquiry and the Secular Student Alliance. Julia received her B.A. in statistics from Columbia in 2005.
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"Minimizing your maximum loss" As a trader, these are the most important words when dealing with risk management.
cut losses!!!! tough tough decision..
Yes, and isn't "maximum drawdown" or drawdown the finance term for biggest single loss?
Since you are an options trader i presume that you know all about brownian motion?
i thought the exact same thing - risk management and psychology makes up 95% of trading
The sunk cost fallacy also applies to relationships.
I was thinking about the same thing. I was also thinking, about the drive to not give up and fail vs cash in your sunk cost. How do you balance that dilemma? Can you turn things around, and confidently push on to see it through...
The whole risk-taking ability comes into question. I wish this video evaluated this argument.
knowing when to quit, knowing when to concede "defeat" and ask for help, knowing when to say I was wrong - no one likes to lose and it's almost harder to lose than to concede victory
oh I guess I'll be ditching your mum then.
Gut feeling has been proven as a way to communicate with the vast unconscious mind which is like a supercomputer. My father went from extreme poverty to multi-millionaire and one of the reasons I couldn't replicate was he made his decisions without even knowing why. He just found himself unable to do something sometimes like he just knew it was wrong and couldn't do it. He seemed to be incredibly lucky but you don't get lucky almost everytime without some unexplained reason. There were a lot of factors of course. Number one without a doubt was actually the number 1 rule poker. BRM BANKROLL MANAGEMENT. He aimed to save his entire weeks wages and work overtime for "pocket money" . Can't emphasize this enough to young people who hate the idea. In poker a good rule was if you had €100 you can play a €1 game. The odds of going bust are impossible if you stick to this. Obviously in real life you invest most of your bank roll and aim for 20¢% or above if you saved your weeks wages and got a low return like 20 percent you'd have over 100k bankroll in 3 years. With that much to play with you would be a millionaire from just an average wage in between 5to 10 years. Easier said than done of cours. I had a Brazilian working for me in expensive Ireland who earned 480 a week on minimum wage 6 days a week and lived off 20€ . He earned the price of a fine home in Brazil in 2 years. Around 50k. If he rented it in Brazil where interest rates for mortgages were 17% it would have paid for itself in 7 years but property trebled as we predicted so those are just some fascinating ways of seeing how we can build for the future but it always perplexed me as people who lived this way never got to enjoy their money. They became like Warren buffet. Living frugal life as a billionaire!? I don't get it
definitely, 'I've been with her so long might as well just stick it out' - it's human nature I think
I think a more detailed video would be marvelous. Because what was just here assumes that at least one of the opponents is minimizing the maximum loss. However, what if the opponent's intention is not to win or not to minimize the losses. I know the theory is more detailed than that. This is why I am recommending a detailed video. Thanks for the ideas you bring to the table.
I thought they would talk about the paper,rock, scissors.
I'm pretty much a failure in life due to my circumstances of course lol. I just want to brag that I won the first three poker tournaments I played. I'm a treble champ in the casino . I found out after the 2nd game I beat the best guy in the country at that variant (Omaha) after the game. The sunk cost fallacy is very strange as in poker the option to put in the remainder of your chips is decided by pot odds ie you have a 90% chance of losing aka 9to1 of winning and the pot is 9000 and you have 3000 chips left then you need 9to3aka 3to1 to break even. Which is easily converted to 25%(3 + 1)=4 and 1 is 25% of 4. Putting all your chips in equals a fishy 15% loss of 3000 as you will only win 10% putting in 25%of the pot. So whatever fallacy she called it is a losing strategy. She must be lucky or maybe her looks and accent put the players on tilt . Don't send her to Russia as Putin will not fall for her bluffs
I dont think BigThink produces detailed video, not for free atleast. There are few course on game theory on Coursera which is more comprehensive. Ive started with basic one there, its good
Aki Elokl: It is clear to me you have a much better grasp of Game Theory than I ever will... so I have to ask: what opponent has the intention not to win or not to minimize loss. Can you give me an example to understand what you mean? Thank you for your time.
@@macforme for instance, a trivial example your opponent maybe playing to lose. i didn't say this is a sane strategy. However, if you're playing poker for instance and your opponent is playing to lose that would ruin your calculation that he wanted to win. the jest of my comment is you don't have the same constraints all the time.
@@thegreatloll Well there's my answer.... I am so clueless about this theory I didn't even pick up on the sarcasm.🤣
That sunk cost fallacy hits hard...
Why exactly? This belief is exactly what she describes as destructive/ flawed...😉
@@xyzv8640 Try being married for 20 years to the wrong person and you’ll see what the original post means
To summarize :
1. What can we do that would result in more benefits and less drawbacks of the both parties?
2. If you are sure that putting your money from now on in the current hand (poker example) will result in more loss, you should stop playing. This is Sunk Cost Fallacy.
3. Third one works when you are competing against a strong opponent. What can you do which can minimize your maximum loss. This is called Minimax.
Very nicely narrated and scripted. Amazing and Quite Informative video ❤
But that’s just a theory, a GAME THEORY!
Thanks for watching
Thanks for making me laugh.
Thanks for being dumb
Great vid. It’s also interesting how it works with multiple parties involved since the higher number involved the chances of lower cooperation. For example with OPEC (13 oil country exporters) where they have guidelines annually to produce a certain amount of oil in order to maintain a certain price. Though most of the countries, if not all, produce a slightly higher amount than agreed upon to minimize damages in case the other members decide to produce over the agreed upon amount. Game theory in general is complex and can be probably be discussed about in depth for hours.
don't they just get punished if they over produce? so its just a mafia situtiation
Can we just take a moment to acknowledge how Big Thinks always brings us high quality videos?
Sometimes
you talk like a bot
That’s a joke. Their channel is entirely clickbait and how to get experts to say words without saying anything.
@@olafcreed4726 That's your opinion.
npc comment
The tic-tac-toe example of the Minimax strategy would be better suited if the end game was a tie, I think. Because right now it doesn't look like minimizing losses, but maximizing winning lol.
My thoughts exactly.
Ok pumpkin! Your NO John Nash girlfriend
"Shall we play a game?" - War Games
You are too generous. The tic-tac-toe example is just plain stupid. It is not an example of minimaxing at all. As any fool can see there is one way of winning right away and all other moves lose with the next O in the middle.
To be charitable, maybe the guy was tired.
More likely he was overwhelmed by the brain rot that has already destroyed the mind anyone who thinks that being a genius on RUclips is a worthwhile ambition.
Short, detailed to the point and incredibly beneficial
Good stuff
I would add on to the looking for a win/win between 2 parties to include a 3rd party. There is always a 3rd party, or more that will be effected by this decision. This certainly adds more complexity to a negotiation, but if done so, you could come out with a better agreement that benefits even more parties. This might mean you might be taking home 'less' out of a deal. But this is best for everyone and you should see that as being part of the reward as well.
This is a really interesting point. Could you please share a scenario example?
A situation similar to that is in OPEC (a list of 13 countries that produce oil) where they have an agreed upon amount of oil they must produce in an annual basis. Though since it’s impossible for all 13 countries to cooperate they produce more than the agreed upon amount, minimizing damages while maximizing profit since if they underproduce their fellow OPEC members it minimizes profit and actually helps gain profit for the other countries.
Missed this episode. Thanks for uploading!
I used to think that I am ultra defensive,but now I know I have been following minimax strategy, unknowingly though.
game theory is the most interesting concept in microeconomics in my opinion
I love this channel! You all are the best.
I’m an attorney. The minny-max strategy is something litigators always do.
3 game theory
1. In zero-sum game. You should lose nothing but maybe you can achieve something. Minize losses.
2. You should think it is okay to get out something that you been working so long. Because when you keep working on in, maybe you will be loss more than before.
3. In such moment, think what the best way is to get out from the problem and win.
thanks.. how does this apply to stock market trading? trading is a game involves multiple players all wanted to win at any point in time within a day on a particular stock/few stocks. means what is the strategic moves to win? cut losses sure, but still losses. to win, how to win using game theory mindset?
Perfect short video, thanks!
This could be a much shorter video. It comes down to one concept: in zero sum games, seek to minimize your maximum loss. Since they don't expand on that ultimate point, that is really it for this video.
Agree. Sunk cost fallacy was off topic, and they didn't really explain non-zero-sum games. I think one of the biggest problems with game theory, is that many will watch a video like this, then focus on defeating their opponent, not realizing that they're actually in a non-zero-sum game, and should be working together.
Great video guys. Does anyone know any good books to read about game theory.
Appear strong when your weak,appear weak when your strong ~Poker zu
Now this is high-quality stuff yea!
I thought this would be about the RUclips channel game theory but great video anywyas
Look up 'carrot in a box Sean Lock'. Make sure it is the first game.
It is very entertaining and I think it is an example of Game Theory.
Which one in background music
Can u give a name of 0:15 & 0:54
No better gift then giving people the experience they are determined to have.
very important explaination
You're actually saving my life hahah, Thanks.
But that’s just a theory
A GAME THEORY!
Imagine two friends read the same book, use the same tactic. It would be a tragedy.
Minimax strategy: apply this to your real life! That’s how my brain works. I always think “what’s the worst thing that can possibly happen in this scenario” and work out problems in my head before they potentially happen.
Do you guys have a podcast?
Elegant theory. This was a turning point in my rehabilitation.
I suffered a very bad Traumatic Brain Injury and I have sunk to the lowest of low. I started to appreciate every day a lot more after I died.
For the last 8 years of my life, I saw some deep shit. That mmmade me appreciate each breath I take.
TRY.
Special force?
What the best text book to learn Game Theory? I’m a data scientist interested in the topic.
Theory of Games and Economic Behavior
2:30 What outcome can be good for both parties?
5:55 Zero sum game
No mention of John nash?
Should I give up my research in Reinforcement learning, or should I keep up sunking cost but do prevail some day? It not it about dedication and perseverance?
That depends. Do you have objective reason to believe that it will succeed, or is there a strong chance of failure? If there's a good chance (evidence backed) of success, then yes its about perseverance. If the opposite is true, then its sunk cost. Keep in mind that you define success.
@@ChristopherRoss. Defining success is nonsense. If I am big dreamer and I want to be top most famous specialist or influencer or businessman thinking of RL as a futur of mankind, why cannot I think of this as success and why should I lower my bar. To be honest, I did not do any result during my 3 year unfinished PhD. Is that backed failure? But I do not have miterally anytjing else in my life to think as something valuable. It feels destroying my world to think I cannot achieve that highly ambitious goal.
@@user-lv8rf9tm1f Sounds to me like you have already defined success. Great, now you can determine if its sunk cost or not.
All I was saying is that if your goal was to finish the research (I don't know anything about it, so forgive me if I'm misspeaking), but level of recognition or fame and fortune mean nothing to you, then that changes the parameters of whether or not its sunk cost. Transversely If you want as many citations as possible, then that also changes the parameters of sunk cost. That's two different definitions of success. In the end, its up to you what you want the outcome of your endeavors to be, and then measure your likelihood of achieving those outcomes.
@@ChristopherRoss. Thank you, I appreciate your thoughts n this!
what's the song name at 1:28
In game theory add in the element of perspective of AQAL and you have true open minded and open ended thinking. So build on self, outside, societal, religious, etc... perspectives when putting together a game.
The video explains the basics of game theory, which is a mathematical theory that studies decision-making under conditions of uncertainty over time. It was originally developed in economics to understand economic behavior but was later applied to various fields like biology and international relations. Game theory has shown that interactions that we often think of as zero-sum, or competitive, are not as competitive as they seem, and that mutual cooperation is possible. The video also touches on John von Neumann's development of game theory based on a simplified version of poker and the sunk cost fallacy in decision-making.
I always love watching these video but please use something higher then 1080p for these videos
sun cost fallecy is really similar to being patient with your losses in trading, it really costed me a lot of losses due to this and also its the opposite when the price is going up, because i go very impatient thinking that the price is going to crash anytime soon.
Thanks for spending the time to create and share this content
The minmax reminds me of how Rome defeated Hannibal by minimizing their losses and waiting until he ran out of resources.
Kinda like Ukraine and Russia right now. But which side is depleting which side here?
Russia depleting Ukraine’s weapons or Ukrainian depleting Russia’s soldiers?
@@chowsquid Ukraine will keep getting weapons from allied countries, so I'm inclined to say Russia will deplete first. You can mass produce weapons, but you can't mass produce soldiers.
Grit vs Sunk Cost makes life interesting, and also pits us with crossroads, so what is left is not game theory, but gut feeling.
Surely if ur four to six years or whatever into ur PHD (the person at 5:45), is it not worth sticking it out for the extra year for the benefits of a PHD? Like obviously depends how long is left but if it’s less than a year stick it out
I'll play poker, or do business with you all day.
I seriously thought he was going to say “the only winning move is not to play.” Lol
Tenet style background music vibes.
I rather apply sunk cost fallacy on a relationship rather than the on a bad investment I've made.
you have the choice to not commit on either
Any books on this u recommend?
Theory of Games and Economic Behavior
Using 'Minimizing your maximum loss' perspective, so you can feel win regardless of how great your opponent
Game theory results in rule utilitarianism of the selfish without need for morality.
Simplified Game Theory Steps;
1. Betray/ Coop (one side takes advantage of the other, "fool me once")
2. Betray/ Betray (both sides fight, better than being abused, "fool me twice")
3. Coop/ Coop (both sides coop, even if they hate each other, because better than fighting)
What about Nash?
Anyone have any recommended reading on Game Theory?
Theory of Games and Economic Behavior
The Sunk Cost Fallacy really hit home.
The Minimax Strategy is an effective strategy is dealing with the wife. It never about winning, its about losing small.
Allow me to ask you a question. How many of you have actually used information given by such informational videos?
I have. Multiple times. I worked in the trades for years, and game theory helped me many times.
It's helped me with relationships as well.
Probably not in ways that would satisfy you, but it's helped me a lot.
what is the background song playing during sunk cost fallacy section? Sounds very familiar but cannot place it.
So, while you're thinking about the outcomes that will be good for both parties, the other party unfortunately is thinking about the outcomes that will be good for themselves, now how you deal with that?
See, from your angle, the best outcome will be the both of you getting what you all want, and the worst outcome will be the other party getting what they want and you get nothing.
But, from the other party's angle however, the best outcome will be them getting exactly what they want and the worst outcome will be both of you getting what you all want.
Now which position between these two is better?
Lol, why cant the outcome they want be good for them and you?
THey getting what they want, doesnt necessary mean nothing for yourself...
.
The secret is you both have to agree at the beginning to look for mutual gain. You listen their side and try to understand them and in turn they listen to you and try to understand you. Then you focus on some objective goals that you both can agree on and try to create as many solutions as possible. If a win-win scenario is not possible you default to a no-deal situation until you both can find an agreement that benefits everybody.
Obviously, some people will try to take advantage of you even if you're trying to create a solution that benefits everyone but you just have to accept that as a cost of doing business. In the long run you'll have better business and interpersonal relationships if you look for mutual gain.
the way she pronounces john van-neumann like a chinese name 0:28 2:58
That's.......how it's pronounced? "Neumann", although it may look like "Newman" to the untrained, naive eye, John's last name is actually pronounced "Noyman", so she's correct.
3:42 You can be certain in poker if you have the strongest hand possible that round.
yeah I get the point, but you do not know what the opponent expects you to have nor their cards, so you are not sure how to play the game to get the maximum possible. Also, if you win this particular game, you might not notice that the opponents have learned some of your card-strenght revealing patterns, which they may use against you later. So if spoken theoretically, you can never be 100% sure, cause you always assume something about the other players.
As a noob trader, this is helpful
Whenever I am working on a phd I feel free to switch to a different phd.
"You never going to be 100% certain where you are, whether you are beating them or have a worse hand"
Royal Flush: Enters the chat. . . . .
Or the nuts
In classic poker you can't be certain, because lowest royal flush beats highest, so you can never be 100% sure.
@@francescocarelli6090 you don't have to be. If you get 1000 to 1 odds of Ukraine kicking Russia out of Europe you need to get investers who don't care about losing a few hundred K. Even tho a stalemate is possibly more likely. It's roughly 50/50 but too touchy a subject so let's talk about red and black in roulette. 50Percent of time you get the money invested minus the big chunk they take.
Best poker players in the world still do this for sanity sake. They have backers
Every thing that says game theory makes me cry because it reminds me that mat pat retired
It's a double edge sword; A dumb person thinking that they don't want to finish what they started versus an intelligent person thinking that they are wasting time if they continue.
Funny 😂
Like persevering in a bad relationship for all your life versus accepting the fact and negotiating how to quit with a win-win potential for each to develop new relationships.
Music sounds like it comes from the movie Tenet
This is interesting
@2:57: Everybody benefits" ... cut to to faygs hugging. LOLZ
Is the first one like a positive escalation
But thats just a theory,a GAAAAme THEorYY
Is that talk about the sunk-cost fallacy true, by the way? If the estimated odds of losing are not 100%, it's probably worth risking a few more chips than giving up entirely and lose your investment no matter what.
yep. u understand EV and pot odds
I'm sure there are edge cases in poker where you could stay in and perhaps stay on top if you're opponents believe you have a good hand, but that is likely an edge case and I would argue that most professional poker players know that's a losing strategy on the long term. I would imagine that if you ALWAYS folded when you had a bad hand and your opponents knew that, you could probably get away with not folding with a bad hand and get away with it once in a while. Also, from what I understand computers have already beaten pro poker players at certain types of games of poker and that's without them taking into account for bluffing or reading their opponents, etc. Though research that on your own because I know very little of that.
Anyhow, I'm sure there are always interesting edge cases with all of this stuff but those are likely exceptions that prove the rule. In other words I'm sure you can find poker players who won a ton of money with a terrible hand but I would imagine those are way less common than someone who wins little battles over time and playing the statistics.
There are limits to the sunk cost fallacy. For instance, what if she was 1 day away from getting her phd? She thinks she is not going to like it or use it, but if she just holds out 1 more day she obtains it and maybe it benefits her in some way she couldn't conceive.
@@michaelanthony4750 I see what you’re saying but based on the definition here: “the phenomenon whereby a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial.” in your scenario 1 day away from completion wouldn’t be clear that abandonment is more beneficial. Now, if she was years away and had put a year in, and hated it, etc…then that would be a more realistic scenario I think.
@@michaelanthony4750 you say 1 day away. I assume you mean graduation. But is it one day? Because if you hate that career, after graduation, you are likely going to apply for a job and then get a career that you’ve established that you hate. So it’s not one more day but could be a decade or two. 1 day + 20yrs.
Life is not a zero sum game. Much like in the prisoners dilemna and denuclearization all parties benefit from strategies which reduce the likelihood of incurring damages while increasing communication, transparency, and learning opportunities.
Reaching back to pick coals out of a fire is a waste of effort compared to cutting the cord once you know its a loss situation.
Leaving this video in between after realising not enjoying the video
3:07 holy shit ana de armas
I apply the sunk cost fallacy to watching new shows/movies. If you can't hook me within the first or 2nd episode, or within the first 15 mins of a movie, I'm out and onto the next one.
Remember guys this Is a GAME theory
Wow what an amazing revelation. An epiphany……
Nice !
No mention of Nash’s Equilibrium. SMH.
I am obsessed with game theory
i lost a hand really hard to lost, i was all in, i knew i was correct, the oponet won me with a full house, then i make the math and the probability was 1 of 1050, 0.095%, that was bananas xD
What is street fighter or even super smash bros ult ? Is it a more advanced chess game?
Lol, Street fighter or super smash bros isnt more advanced than chess. Specially considering the number of tactics, long time strategies, openings, technics in the endgame,etc.
@@majormononoke8958 Careful not to be dismissive. Chess has a finite number of permutations, and only a fraction of those are actually useful in terms of strategy, and only a fraction of those are maximally efficient for strategy. Its why winning chess games comes down to who can correctly think more moves ahead (why computers will beat grandmasters 10 out of 10 times with today's technology).
Fighting games on the other hand (though they rely perhaps too heavily on reaction time over strategy) have exponentially more permutations just from fighter selection alone, let alone all the other variables. The strategy (and skill) for these games is very sophisticated, especially when you consider their lifespan compared to that of chess.
The sunk cost isn't entirely a fallacy. In the poker example, if you fold, it's a definite loss
And that's a theory, a game theory!
where are the game theory comments
Great tips for trading crypto as well 😄
So this isn’t about poker?
The problem with minimax is that people are often not fully logical
life is not a zero sum game. But some people treat it like it is.
Its only a theory a GAME THEORY
Just wow!
What if they say “you seen that Big Think video too?”
"they are trying to do the best they can."
So, some people's 'the best they can' have a meaning of following stupid TikTok challenge, especially a lethal challenge one. Hopefully they can get their Darwin Award as a reward.
Did you really do the best you could with those sentences?
This is top-tier material. I read a book with similar content, and it was an extraordinary journey. "Game Theory and the Pursuit of Algorithmic Fairness" by Jack Frostwell
Haha, what was that tictactoe example supposed to be showing?
That the worst movement is not placing circle in the middle and letting your opponent win, thats why you go there a place the circle, to don’t lose.
pot odds tho? dont they contradict sunk cost fallacy?
Nah, with pot odds, you stay in if you are uncertain of the other person's hand. The sunken cost fallacy happens when you are becoming fairly certain you lost. Let's say you know for certain that you lost. In this imaginary scenario, you glimpse their hand and know you've lost. No matter what the pot odds are, you don't throw more money in. So, with pot odds, let's say you have 4:1. You need to win 20% of the time to break even. But what if you're also 90% sure you are beat? That's a fold, for if you're 90% sure, you will only win 10% of the time. So, pot odds work here, with your certainty level.
No mention of Jonh Forbes Nash Jr.? - How sad...