You’ve definitely noticed this in your city

A long long time ago, as I walked past the road leading to my grandparents home, I noticed something very ordinary - two chemist shops operating side by side - but still made me ‘Michael Scott’ level inquisitive. Why were they operating next to each other? Back in the day, I would usually confront my elder cousin with some of my questions - whether we could print money at home to get rich, how could we buy an F1 car, and the sorts. I don’t really remember what my cousin responded to this question, maybe he made something up, but it didn’t calm my inquisitiveness. The question remained unanswered… however, through the years, I still remembered this one point… why couldn’t the two shops be on two ends of the road?

Wouldn’t that just be better? Don’t you think you would be better off at one end of the road, away from your competitor (selling the same products at exactly the same price), than being right beside him?

In 2013, I chanced onto the Ed-Tech platform Coursera. Back then it was still at its nascent stage and I was curious to explore this new dimension of learning. So I did a few courses in Finance (that made it crystal clear why printing money indiscriminately will actually make me poor) and chanced to learn a bit on Game Theory. Voila.

That’s when I learned the answer to my age-old question: It is actually most profitable (in equilibrium) when both shops are side by side as against when both are on two sides of the same road. Why? Because of a Noble winning concept called Nash Equilibrium, named after Mathematics genius John Forbes Nash Jr. This is how marketplaces (online and offline) are eventually created, as more and more competitors come and set up shops side by side to eventually build a vibrant market!

I’d like to leave you with one final thought - next time don’t always learn or approach something with one or two pre-defined goals. Keep an open mind. You cannot fathom or compute the independent variables that can influence and affect our lives.

To those who are curious, one definition of Nash Equilibrium: “The Nash equilibrium is a decision-making theorem within game theory that states a player can achieve the desired outcome by not deviating from their initial strategy. In the Nash equilibrium, each player's strategy is optimal when considering the decisions of other players.”

Confusing? Try this: https://www.gametheory.net/Mike/applets/PDilemma/Pdilemma.html

Still not convinced? Learn some: https://www.coursera.org/learn/game-theory-1

Are you reading this on a weekend? Watch: A Beautiful Mind