John Nash and his wife died in an accident in a taxi in New York (23 May 2015). This news stings me, given his genius helps us to understand the complexity in deciding anything.
Who is John Nash? In the Oscar-winning film A Beautiful Mind, Russell Crowe managed to bring the young John -- mathematician at Princeton University -- with plainly and straightforward. In the 60s, he sought mathematical formula to predict the decisions of any problems, ranging from about dating, shopping until works problems.
The theory is known as Game Theory. Previously, John von Neumann made a mathematical model for a zero-sum game, i.e. in the ecosystem, if there are those who lose, then there must be those who are lucky. In the game, there are always winners and losers. But John was always looking for more answers. He made more complicated mathematical model to prove the complicated situation: if the parties want to work together, the results obtained are much better than just to maximize their respective interests.
The most famous illustration is the prisoner dilemma. There are two people in separate interrogation because of their crimes. If one confesses and the other is silent, then he/she who confesses will be free, and he/she who is only silence will be sentenced to 10 years. If both confess, then they are sentenced to 5 years. Meanwhile, if both are silent, then they are sentenced for 1 year. They both know these rules, but they can not communicate between them. What are they going to decide?
If they think fast, then both will confess their crimes, because they want to be free. But if they think deeply, they will guess that the others will do the same so that they will be imprisoned for 5 years. Now they both begin to recall how the behavior of others in the act. If they are compact, then better they both remain silent, although there is a risk that one of them will be betrayed by one another.
Well, Nash made a mathematical formula that showing convergence of the parties in making decisions, as long as both are still rational. The mathematical formula that can predict the uncertainty is directly useful for many things. Game Theory quickly spreads into various fields such complicated decisions in financial markets, corporate strategies, labor negotiations, up to conflicts between states. So many benefits of his genius so that he was awarded the Nobel prize for economics in 1994.
In the autumn of 2002 my brother was lucky because he was attending Industrial Organization (IO) at the School of Economics Massachusetts Institute of Technology (MIT) of Prof. Jean Tirole, a French economist. IO is the branch of Game Theory about the interaction of companies and markets. Enthusiastically, he could simplify a complicated mathematical formula. My brother told me that since then he fell in love to this theory. Tirole using IO for market regulation and monopoly. He could formulate optimal pricing models for financial markets in the U.S. and Europe. To his outstanding contributions, he was given the Nobel Economics in 2014, 20 years after his teacher -- John Nash -- accepted it.
Many world catastrophe could have been avoided because the parties intuitively using Game Theory, such as the Cuban Crisis between Kennedy - Krushev and star wars between Reagan - Andropov. In the end, war is not the best solution. To protect our interests, we have to think about other people. This is contrary to the classical theory of Adam Smith in the 18th century that says human life would be better if each person pursuing his/her interests respectively, because the natural equilibrium will be reached from all selfish human interaction.
My brother always uses the mind set of Game Theory for his career in the corporate world, including being the number one in various companies for more than 5 years. He was greatly helped when facing the issue of barriers-to-entry, determining the selling price, unfair competition, investment decisions, until the relationship with employees. No single action of employees to interfere with the company. They are more cooperative if assymetric information is reduced.
Hopefully, the Game Theory application can be used and understood by the entire government team, so that the expected behavior is achieved. Good intentions are not enough. Man is rational.
God has so generously gave Nash for all of us.
Thank you, Mr.John Nash! Rest in peace.
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