The Nash Equilibrium explains why so many things are the way they are.
OK, let's get to electronics. The Beta vs. VHS VCR war was a two-equilibrium game theory model, much like the stag and hare conundrum. VHS could have won. Beta could have won. But there was only room for one winner. Though equally balanced at one time, once the rental stores started leaning towards VHS, the transport vendors did also, and eventually the entire market flipped to a VHS-centric world. The same thing happened later with Blu-Ray and HD-DVD. Either could have won, but only one did. Once the players sense a winner, more investment is made in that direction, and the market flips heavily.
This is why Nash won a Nobel prize in economics. The game theory explains so much of how industries are structured. In my own specialty, electronic test automation, I see Nash game theory playing out in a complex way. In this case, traditional instrument architectures of boxes with serial interfaces have about 85 percent market share, with 15 percent taken by the disrupting modular architectures, such as PXI or AXIe. Using the above example, one would think the traditional architectures would win, because they have the critical mass. The modular standards are, however, gaining.
Here's why. Besides some advantages, which are crucial for a change, it is the nature of the industry. The industry isn't homogeneous. Some segments have already shifted to the new architecture. Critical mass exists in those segments, and almost exists in adjacent segments, which are those that require nearly the some set of products. Game theory suggests that vendors pursue those adjacent segments, since a marginal investment brings them great returns. Sure enough, that is how modular instrumentation has advanced -- segment by adjacent segment.
Game theory isn't limited to games and economics. It also explains much of politics in democracies. Public choice theory uses these same game theory and economic constructs to explain the structure of politics itself. James Buchanan, also a winner of the Nobel prize in economics, applied these same concepts to politics, where individuals are all maximizing their gains, whether voters or politicians, and discovered that political structures can also have Nash equilibriums. Like those in industry, these equilibriums are not necessarily optimal for the participants. Did you ever wonder why the US has a "two party system," though that isn't legislated anywhere? Another Nash equilibrium!
Thanks to Nash, I can now recognize Nash equilibriums in unusual places, not just my own industry. Have you ever watched competitive cyclists as they break into cooperative groups in a road race, even though they are from competing teams? More Nash equilibriums.
This was my epiphany, when I saw the game theory being played out in so many domains. It explains so much, including many aspects of the innovator's dilemma.
The movie title was spot on -- Nash had a beautiful mind. Any other Nash equilibriums that come to mind?