Game Theory

Chaos: Behavior so unpredictable as to appear random, owing to great sensitivity to small changes in conditions.

Chaos Theory: Chaos Theory describes the qualities of the point at which stability moves to instability or order moves to disorder.?

Game Theory: The branch of mathematics concerned with the analysis of strategies for dealing with competitive situations where the outcome of a participant's choice of action depends critically on the actions of other participants. Game Theory has been applied to contexts in war, business, and biology.

Entropy: A lack of order or predictability; gradual decline into disorder.

Here is what has been “revealed/announced” through most media platforms, heightened by last week’s news regarding Silicon Valley Bank and First Republic Bank. Big banks are beginning to fail, which will impact businesses in their ability to access capital, which will impact employees, which will impact other businesses, which will impact their employees, and the cycle continues.?

If you follow what is being said on the “news” regarding the banking world, it feels like chaos. Uncertainty is brewing at the core of the financial markets impacting every citizen, every business, across the country. This year will be one of chaos, uncertainty, and change, by their “reporting.”

Yes it may seem scary, however there are documented, long-ranging statistics, that reveal there is more good than is conveyed by the purveyors of news.

This may seem counterintuitive. Please bear with me. For your consideration, Game Theory (John Nash - Nobel Laureate and Developer of Game Theory, 1950, originally coined by Antoine Augustin Cournot circa 1838 when he applied it to competing firms choosing outputs) reveals an expanded and more accurate (predictable) dimension of perception in economics, business, societal behavior, and cyclical stability.?

Below are three examples debunking the negative folklore of chaos:?

Fluctuations: All change, large or small, presents in the form of chaos. What preceded the founding of our great country? Chaos. The industrial revolution, scientific revolution, and technological revolution, all were born of chaos. Chaos is part of a cycle of advancement. It is the uncomfortable hatching into a better tomorrow. It is the yin and yang.?

Predictability: Chaos carries the stigma of being random, paradoxically it is part of the process. The incongruity is that there is a level of predictability within the chaos that does not exist in a stable environment. When one big bank fails, it brings with it a level of predictability that others will soon follow. This is a degree of certainty that did not exist prior to the chaos of the first bank failing. While there’s comfort in times of strong consumer confidence, that comfort can be counterfeit because the certainty is often artificial. It is merely a perception of certainty. The real certainty exists within chaos, the predictability of unpredictableness. Decisions and actions made within this cycle create long term outcomes. Decisions and actions within the chaos determine future stability.

Order to Entropy, and then Order: Entropy is the gradual decline of order. It is one of the fundamental natural laws of the universe that order gradually declines into disorder. From disorder, a new order may be created. It is a cycle, and cycle’s by their very nature are formulaic, foreseeable, and inevitable. In times of chaos, a future of stability is probable. In times of stability, a future of chaos is likely. Neither turn of the wheel is good or bad. They are positional locations within the cycle. Game Theory recognizes that the outcome will depend on one’s ability to navigate the challenges and opportunities, both of which exist at any point in the cycle. One of the opportunities presented by chaos is that the “if” and “when” disappear so that all energy may be spent on the “how.”

"We adore chaos because we love to producer order." - M.C. Escher