Game Theory #5: The World Game

Today we examine the question: why is it that states, countries, and nations rise and fall?

Let's start with an example you know pretty well: the Warring States period. At this point in history, around 250 BCE, there are many powerful states, for example, the Chu, the Zhao, and the Wei. If I asked you to use game theory to figure out which state would unite China and become its first great empire, there are certain metrics you would use.

Obviously, you would look at population—the question of mass. Second, you might look at resources, which in this context is basically farmland. You would look at which areas had the most rivers and seem most strategic. Then you might also look at technology: which state has the most scientists, the most advanced literature, and arts. From these metrics, you could do some analysis and figure out that maybe Chu would conquer all of China at some point.

But at no point, using any of these metrics, would you assume that Qin would conquer China. There are certain reasons why. First of all, it's in the mountains, so it's pretty poor. Second, it's far away from the rivers and trade routes. And third, it's pretty isolated. You could not possibly imagine that the Qin dynasty would conquer China.

But in fact, it is the Qin that would come and conquer all of China. Not only that, but if you look at most of human history, this pattern repeats itself.

If you look at a region, the strongest nation does not come out on top. It's usually the weakest, most marginalized area that will eventually come and conquer the entire territory and create an empire.

Clearly, the way that we understand history is problematic; it's wrong. I want to propose to you a new way to understand how empires come into being. This was actually first proposed by a Muslim scholar and historian named Ibn Khaldun. He proposed the idea of Asabiyyah. All this word means is basically cohesion or group solidarity.

His theory is that yes, the people in the margins are poorer, but because they're poorer, they're more unified. They focus more on solidarity, on working together. Whereas in the rich areas, people become too individualistic, too decadent, and too corrupt. Ultimately, that's why it's always these tribes from the margins that conquer the wealthy, civilized areas. This is a pattern that repeats itself throughout human history all the time. It's almost like an iron law of history.

The Three Metrics of a Dynamic Society

I want to show you that there are actually three metrics you can use to measure how dynamic a society is and how likely it is to triumph in the end. These three metrics are:

• Energy: This just means that you're willing to work hard, you're focused, you have a clear goal, and you're motivated to achieve this goal.
• Openness: This is a very important concept. It just means how willing you are to adapt, accept your limitations, and be resilient. You can think of openness as humility and resilience.
• Cohesion: This follows the idea of Asabiyyah. It asks: how likely is it that these people are willing to work together? Do they see themselves as a team? Are they willing to sacrifice themselves for each other? Are they a family?

These three metrics tell us how dynamic a society is going to be. Using these three metrics, we can now better understand why the Qin dynasty was able to conquer all of China.

The idea is that if you're rich, what often happens is that you have low energy. The elite don't want to work anymore; they'd rather just exploit the people. And because the people are being enslaved and are too much in debt, they have low energy as well. For them, it's not really about building a great nation or doing a great job; it's just about getting by.

In terms of openness, the elite become extremely corrupt, insulated, and arrogant. They refuse to admit that they're wrong. As a result, society becomes stagnant and doesn't improve.

And for cohesion, because of wealth inequality and corruption, people become much more individualized and atomized. This allows for a new group to come in and conquer everyone.

Historical Patterns of Conquest

Let's use another example: the Greek city-states. This was really the height of human civilization. They gave us Homer, Plato, Thucydides, and Sophocles—basically the basis for all of Western civilization.

For most of their history, the Greek city-states—and these are small cities, thousands of them, with an average of about a thousand people each—were always in competition with each other, very much like the Chinese Warring States. Some were larger, like Athens, which at its height had about 50,000 people. The major ones were Athens, Thebes, and Sparta, along with others like Corinth and Argos.

Again, if we look at the year 500 BCE, you would think that maybe Athens or Sparta would emerge as the grand unifier of the Greek city-states. In fact, Athens did become an empire, but then the other Greek city-states started to attack Athens, and it declined over time. The advantage that Athens had over everyone else was tremendous. It had the greatest navy, which allowed it to control the trade routes in the Aegean. Therefore, it was the wealthiest city-state, with the greatest population, the most innovation, the most strategic location, and the most wealth. You would just assume that Athens would come to conquer all the Greek city-states.

But in fact, it was the Macedonians who came in and conquered all of them. At this time in history, you couldn't possibly imagine that, because the Macedonians were poor, isolated, uncultured, and uncivilized. But again, they had energy, openness, and cohesion, and that allowed them to conquer the city-states.

What's most amazing is that even after this area was unified, the Macedonians would then do the impossible and go over and conquer the great Persian Empire—the first great empire in human history. It was huge, encompassing Egypt, Anatolia, Mesopotamia, the Zagros Mountains, and Persia. In a very short amount of time, the Macedonians under Alexander the Great sailed across the Aegean, landed a small force, and in about 10 years conquered the entire Persian Empire.

You would think that this new Macedonian empire would be invincible. But then, a few decades later, came the rise of the Romans. Who were the Romans? At this time in history, we don't know who they are. The entire Italian peninsula was being colonized by the Greeks. But the Romans, these poor, backward, tribal people, would eventually conquer the entire Italian peninsula. Then they would go on to conquer the Greek mainland and go south to conquer Carthage as well, creating the Roman Empire.

This is a pattern that repeats itself throughout human history. The empire becomes corrupt, lazy, and arrogant. This gives an opportunity for a troubled people—whether it's the Macedonians, the Qin, or the Romans—to come and conquer all of them.

The Aztecs and the Sumerians

Let's look at the Aztecs, which is an even more stark example. Around the 15th and 16th centuries, the Mexican peninsula was divided into different warring city-states, a very similar situation to the Greek and Chinese city-states.

Then, the Aztecs came in from the north. The Aztecs were a poor, starving tribe from North America, looking for food. As warrior people, they were hired by other city-states to fight for them. Eventually, they became too powerful and were isolated on a marsh. This marsh was poor, and everyone assumed they would starve to death. What's amazing is that as a people, they became very creative and turned this marsh into farmland. Over time, they would slowly come to conquer everyone, establishing the Aztec Empire, which ruled over millions.

Then, in one of the greatest mysteries in human history, another group of people called the conquistadors arrived from Spain around the year 1519. There were only about 500 of them. Led by Hernán Cortés, they came in and, in a very short amount of time, conquered the entire Aztec Empire. Spain came to rule basically all of South and Latin America.

Even though we have a formula in place—whichever group has the most energy, is the most open, and the most cohesive will conquer the other groups—it still doesn't explain how this happened. How was Cortés with 500 conquistadors able to conquer a land of millions?

There are historical explanations, including disease. People from Spain had diseases, and the Aztecs did not have the immune system to counter them. Another explanation is that the Aztecs believed these conquistadors were gods, which is why they surrendered very quickly. A third explanation is that the conquistadors had local allies who were angry at the Aztecs. But again, these explanations sound okay, but they don't give us the full picture of what really happened. In game theory, what we're really trying to figure out is what happened exactly. It's a game. How are the players playing the game? What are their motivations? What are their incentives?

Let's look at one more example: the Sumerians, one of the earliest civilizations and considered the first great civilization of human history.

Mesopotamia is the center of the world; to access the rest of the world, you have to go through it. The center of Mesopotamia is a place called Uruk. Uruk is the meeting place of the Euphrates and the Tigris rivers. It allows you to access the Persian Gulf, which gives you access to India (the Indus Valley Civilization). From there, traders were able to take goods and cross to Egypt or go north to Anatolia.

Uruk became the first great world city because it was the center of all global trade. Different people came together in the city to establish a trading post, and over time it grew and grew because it was very wealthy. It set up colonies elsewhere, and eventually, these different city-states came into conflict with each other—the same process as with the Chinese and Greek city-states. You would assume that one of these city-states would conquer the rest. But in fact, again, it was these tribal mercenaries from an isolated region, the Akkadians, who would come and conquer everyone else.

After they built the first empire, other people came over and conquered them. Then you had people from the Zagros Mountains, the Persians, come in and unify the entire area, creating the Persian Empire.

This is a pretty consistent pattern that emerges throughout human history. We have theories as to why this is happening. We know that groups that are energetic, open, and cohesive will triumph over other groups. But the idea of game theory is to figure out exactly what happened.

The Game Theory of Empire: How the Game Changes

As nations rise and fall, the games they play change. Their motivations, incentives, and strategies change over time.

Phase 1: The Rise through Cooperation

In the beginning, you as a people need to come together and build a land in which you can all prosper, or at least have food to eat. Therefore, the game is cooperation, and the mechanism for cooperation is actually religion.

In this first game, you're trying to create a dynamic religion that motivates people to be energetic and gives them a reason to work really hard. The people who are best able to articulate this religion—poets and priests—become the elite. At this point, it's basically a startup. Everyone's enthusiastic, working hard, and feels as though they're making a positive contribution to the world.

Phase 2: Hereditary Elites and Bureaucracy

Over time, the elite becomes hereditary. The game becomes: how do I, the elite, pass on my privileges to my children? The way they do that is by changing the religion. The religion now becomes almost like a bureaucracy.

In the first game, the religion is about energy, creativity, and working together. But in the second iteration, the religion becomes like a bureaucracy where you must follow the rules of the game. The rules are set, there's a hierarchy, and you must obey this hierarchy.

Phase 3: Elite Overproduction and Factionalism

Then, a process called elite overproduction happens. Yes, these privileges are being passed on to the children, but now, over time, there are too many children. Society breaks up into different factions, usually divided according to the princes who are about to inherit the throne. The prince is not the leader of the faction, just its symbol.

At this time, the way they reduce conflict is that the losing factions move away. They're exiled and have to set up a new colony. This process continues, where the losers of the game are forced into exile until there's no more place to colonize.

Phase 4: The Warring States Period and Maximum Creativity

Now you have the Warring States period. What's interesting is that the Warring States period is a time of maximum creativity for a civilization. Why? Because of the idea of open, cooperative competition.

Back to the Qin, the Greeks, and the Sumerians, there are different colonies competing against each other. You need to be open and innovative if you're going to triumph. At the same time, they're trading with each other, so they're sharing best practices and innovations. This leads to open competition, which marks the height of the civilization. China's been around for 5,000 years, but most of the innovations happened during the Warring States period—a hundred years when we had Confucius, Mencius, and Laozi. It's the same for other civilizations as well. If you look at the Greeks during the classical period, they basically created everything that became the foundation for Western civilization.

Phase 5: Equilibrium and Organized Warfare

Eventually, these city-states figure out that while the game is to compete, they can also choose to work together through intermarriage. The idea of intermarriage creates an equilibrium.

At this point, warfare becomes organized warfare. Before, warfare was about innovation. But now, when these elites from different city-states intermarry, they have a new equilibrium. They are above the state. So now when they fight, it's not really about fighting each other; it's about reducing their population to maintain control. It's a way to resolve the elite overproduction issue. Warfare becomes a mechanism of population control.

Even though these city-states are still in theory competing, they have essentially reached an equilibrium. Another word for equilibrium is basically an empire.

Phase 6: Court Politics and Secret Societies

Now the game changes. During the Warring States period, it was a game to see which state would be the most innovative, which is why you invited people who could contribute the most. It was a meritocracy. Once you reach an equilibrium, you don't have to do that. All you have to do is maintain the status quo. So, you create this rigid hierarchy, and what matters is who reaches the top. As a result, you create court politics or factional struggle.

If you look at any court politics, the faction that triumphs is the one that's able to solve three problems:

1. Secrecy
2. Trust
3. Coordination

In theory, everyone has to obey the bureaucracy. But if you just play by the rules, you're going to lose. So, you want to cheat. But if you want to cheat, you have to do so secretly. This creates a problem of trust. And if you're doing it all in secret, how do you coordinate? You can't have meetings where you take notes because if you're discovered, you'll all be executed by the other factions.

Historically, the way we resolve this issue is through secret societies. This is true for China, the Greeks, the Aztecs—for everyone. Let's figure out how secret societies work.

• Secrecy: You achieve this through a hierarchy or compartmentalization. Within secret societies, there's a hierarchy where only people at the very top know what's going on. If you want to join, you are initiated at the bottom and slowly climb the ladder.
• Trust: How do you get people to trust each other? Through transgression. If we cheat on a test together, we are much more likely to trust each other because if we're caught, we all get punished. By breaking the law together, we can trust each other. The most basic type of transgression is ritual sacrifice, where you decide to go kill someone together.
• Coordination: To solve the problem of coordination, you have the idea of eschatology, which is just mythology. Why are you guys doing what you're doing? The answer is often because we're trying to serve a higher god that wants to conquer the world, and we are his servants in this quest to end the world and make it a paradise. Different secret societies have different eschatologies, but the system is the same.

What happens is that every faction has to form its own secret society. The game of empire becomes a struggle between different secret societies. This means you don't care what happens to the empire. You don't care about the enemies of the empire. All you care about is that your team emerges on top.

And so what does that mean? It means that you become:

• Insular (the opposite of open)
• Corrupt (the opposite of energetic)
• Divided (the opposite of cohesive)

You become corrupt because you need resources to play this game, so you steal from the people. It's all about trying to steal as much as you can to feed your faction. This is why the factions ultimately lose to the tribes in the borderlands.

The Final Phase: The Mercenaries Take Over

There's more to this. You have different factions and secret societies fighting against each other. From their perspective, all they care about is winning against the other factions. So what do they do? They invite foreigners to come help them. These are what are called mercenaries.

These mercenaries come in, and their leadership is absorbed into the secret societies through eschatology, transgression, and hierarchy. There's always contact with the borderland peoples through:

• Trade
• Banditry
• Mercenary work

Because the people in these regions are so poor, they'll do anything to survive. They'll trade with you, but they'll also steal from you and come fight for you. What's important is that through trade and banditry, they're becoming wealthier. And by working as your mercenaries, they are learning your best technology, fighting skills, and weapons.

Then, what happens is that the mercenaries eventually take over. At first, they merge, but then the mercenaries just kill everyone and take over.

That's what happened. That's why the Qin were able to conquer the Warring States. They don't teach you this in history class, but according to game theory, different factions of these different states actually invited the Qin in, and they were conquered one by one. Same thing with the Macedonians. The Macedonians came in and helped one city-state, then they conquered that city-state and moved on to the next. But it was always a certain faction of that city-state which invited the Macedonians in the first place.

This is a pattern that repeats itself throughout human history. If you want to know what's going to happen today or tomorrow, just figure out which areas of the world are the most energetic, open, and cohesive, and then figure out which empires are the most corrupt, insular, and divided. Then you'll figure out who will conquer whom.

Modern Analogies and Future Predictions

Let me give you two more examples to better illustrate how this works.

The World Game

When I was in high school in Canada, we played a game called the World Game. It's very simple. You're put into a team of four or five players, and each team is assigned a country, like the USA, Britain, India, Pakistan, and Japan. Each team is given an envelope with certain resources: paper, scissors, a ruler. There's an organization called the World Bank, and you're trying to become the wealthiest country in the world by taking your resources and turning them into commodities that the World Bank buys from you, like triangles, circles, and squares.

Different countries have different resources. The United States has everything. Pakistan usually gets nothing—no resources. But you're allowed to trade with each other. Even though you have nothing, you can go to the United States and beg, "Can I please borrow your ruler for today?" Or you can go to Britain and say, "Hey, can I borrow your paper?" Or, "I'll come work for you for free."

You play this for one day, and it's really interesting what happens. At the end of the day, you look at who the wealthiest countries are. The United States becomes number one. Why? Because it has everything. But number two is interesting. You would think it would be Japan or Britain, but it's actually Pakistan—the country that starts out with nothing at all.

Why? Because they're forced to be the most energetic, the most open, and the most cohesive. Team members have to go and beg to work for free. Other team members go and lie and cheat and steal. They're forced to be resourceful and creative. That's how the world works. Just because you have the most resources or the most people does not mean you'll win the game. What matters is how energetic, open, and resourceful your people are. And often, they are that way because they're poor. Pakistan has nothing, so they're forced to be creative. Poverty leads to creativity.

The Teacher Workshop

Before teaching in high school, I was teaching teachers how to teach STEM. I would run two-day workshops where I would divide the faculty into teams of four or five. I would give them an assignment and resources, and it would be a competition—for example, which team can build the fastest toy car, the best airplane, or a catapult.

At the end of the first day, I would rank the teams. On day two, we would start the competition again with a new assignment. Which team would finish first on day two? According to game theory, Team 10—the team that finished last on day one—wins. This is exactly what happens. The results are reversed. Number 10 shoots up to number one, and number one falls all the way down.

It's common sense if you think about it. If you're the best student in the school, you never have to reflect or think about how to improve because you're always number one. You become arrogant and complacent. After you graduate, you can't find any work because people find you too arrogant. You refuse to learn; you want to be the boss. But if you're the worst student, you're used to being laughed at and constantly adapting. When you go into the workplace, you are much more likely to learn and focus on relationships.

In China, there's a joke: in school, there are two people everyone hates—the best student and the worst student. Why do you hate the best student? Because they're going to graduate and come back as your principal one day. Why do you hate the worst student? Because he's going to graduate and come back and give you a lecture on how to become rich. These are the two students who will probably be the most successful, especially the worst student. Regardless of all his problems, he's open-minded, willing to work hard, and willing to build teams and make sacrifices so that others become his friend.

What happens on Day 3?

A great question is what happens if we keep going? What happens on day three and day four? In my experience, Team 1, which finished first on day one, really screws up on day two. On day three and day four, they continue to screw up. Why? Because they don't know what they did wrong and they refuse to reflect.

We see this in history where an empire, once it rises, it falls. It never comes back. It's possible that new people come in and use the name of the empire, but it's not the same people anymore. It's a different team. That's the danger of being number one. Once you're number one, you become so arrogant that it's impossible for you to be humble again. When societies fall, they just die off.

Applying the Theory to the Future

If we apply this theory, there should be three countries that will emerge as great empires in our history.

1. Germany. Why? Because they lost World War I and World War II. They were never a world empire. So, Germany, according to this theory, will one day come to rule the world, or at least Europe and Asia.
2. Japan. Japan lost World War II. They were never a great empire. So Japan should come to dominate East Asia according to this theory. The Americans dropped two nukes on Japan and destroyed it with firebombing. Japan was humiliated. Now you go to Japan, and you can see how energetic, open, and cohesive the people are because they were forced to reflect as a people.
3. Israel. The people in Israel believe that for thousands of years they were persecuted by other people.

These are three great empires that we will move towards in our history: the Germans, the Japanese, and the Israelis.

This is all just a theory, a way to understand the world. But look around you and ask yourself: Are the people here open-minded? Are they willing to learn from their mistakes? Do they ever say, "I'm wrong"? Are people energetic? Do they take their work seriously? Do people feel as though they're all part of one big group, willing to make sacrifices for each other? Japan is. Maybe even the North Koreans are.

But Aren't Japan and Germany Wealthy Now?

This is a great point. After World War II, Japan and Germany became very wealthy. So if they became very wealthy, then in theory, shouldn't they also become corrupt, insular, and arrogant?

The answer is no, and there's a good reason why. Ultimately, power means you're able to impose your game on other people and extract rent from them. The problem with Japan and Germany is that yes, they became very wealthy, but the game master was America.

An example of this is the Plaza Accord. Japan was becoming too wealthy, and America got very annoyed. So America said to Japan, "I want you to destroy your economy." Japan was forced to spend too much money, to stop saving and start spending. In theory, it seemed as though Japan got rich, but it never had any power. It could not be a sovereign nation.

Same with Germany. Yes, Germany became very wealthy, but all that money went to America because they were forced to buy U.S. Treasury bonds. America could also destroy Germany's pipeline, Nord Stream, and there's nothing Germany could do about it. The German economy has been destroyed right now because Germany is a vassal state to America. When Russia invaded Ukraine, America basically said to Germany, "You can no longer do business deals with Russia," even though Germany required Russian oil to fuel its economy. America also said, "You can no longer trade with China," even though most of German car exports were going to China.

So it seems as though Germany and Japan became very wealthy, but they were not. They were just vassal states to America.

What Makes a Poor Society Energetic?

Just because you're poor does not mean you're open, energetic, and cohesive. But if you want to go from being poor to becoming rich, you have to be. So what decides if a poor society becomes energetic and cohesive or not?

The obvious answer is a leader. Look at the Mongols. Before the emergence of Genghis Khan, the Mongols were almost like a vassal state—divided, poor, and willing to do whatever it took to survive. They became mercenaries for the Song and other groups. But then a leader emerged to unify everyone. And once he did, the Mongols were very quickly able to destroy everyone else.

It's usually a great leader. But a leader doesn't necessarily mean a general. It could also be a poet, like Homer, or a great thinker to give you a new religion, like Zoroaster or even Jesus. It's someone who comes in to say, "We are a people." It could be a poet, a general, a prophet, or a priest. That one person then unifies the imagination of everyone into one cohesive group.

And that's why some groups are able to cohere together and others are not. It's why the world is the way it is. Why do we have organizations like the United Nations or international development aid? The goal is to identify the possibility of a leader emerging and make sure he does not emerge. If you left Africa alone, it would be a lot better. But because you have all these schools, NGOs, and organizations in Africa, what they're really doing is ensuring that Africa is in a continuous state of development. If you just left them alone, they might starve, but at the same time, a great leader might emerge to unite all of them.