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Game Theory

Looking at life as a game can be beneficial in avoiding feelings of depression or emotional distress. Game theory, a widely used concept in economics, can assist in making informed decisions when it comes to selecting the right people, places, and investments in one's life.

There are four types of games that can be played with the government, competitors, emotions, or anyone else:

NO.

Player 1

Player 2

1

Win

Win

2

Win

Lose

3

Lose

Win

4

Lose

Lose

 As Charlie Munger has said, what not to do is more important than what to do in life. Warren Buffett also says that "successful people say no to almost everything", especially when it comes to lose-lose situations. Wasting time on these types of games can be detrimental to one's materialistic life, such as investing in a business where the market is declining.

The most popular game is the win-win situation, where both parties work together to achieve a common goal that benefits them both. They are willing to compromise and find a mutually beneficial outcome rather than trying to maximize individual gains at the expense of the other. This type of cooperation is based on trust and mutual respect, which can lead to positive outcomes and long-term relationships. An example of a win-win situation is collaborating on a podcast with another YouTuber or famous person. 

The other two games, win-lose and lose-win, have a very thin line between them. When it comes to risk management in life, figuring out whether a game is dominant for you or not is crucial. It's essential to analyze a situation, understand the downside risk of the game, and determine whether to participate or not. Knowing your risk is vital.

For instance, trading in futures and options can be a win-lose or lose-win game. It cannot be a win-win situation because when someone loses money in derivatives, another person earns. Taking advice or tips from outside can be dangerous for your financial health.

Another example is spending too much time watching television, movies, and social media. It's a win-lose situation for marketing companies. Therefore, the most valuable companies in the world have advertising revenue models, such as Google, Meta, and LVMH.

Moreover, emotions like envy, anger, and greed are completely lose-win situations. Whenever someone is making you greedy, angry, or envious, you are losing the game, and they are winning.

 

 

 

 

 

 

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