Game Theory #9: The US-Iran War

I hope everyone had a nice break and welcome back to the end of the world.

So as you know, World War 3 has started, the United States and Israel have started to attack Iran, and we are now in the fourth day of this war, and we can expect this war to last for many weeks, possibly also for many years.

But I promise you that after this war is done, the world will never be the same again.

So what we will do these next few weeks is use game theory and understand and analyze the geopolitical situation.

And so I'm going to teach you the ideas, the theories, the techniques to understand the world around you and make predictions.

And we can know if our analysis is correct because all this is happening in real time and so we can test it against reality.

All right, so let's go over some basic facts about what's happened so far.

So in the early morning of Saturday, in Tehran, the Israelis and Americans launched a decapitation strike against the Ayatollah Khamenei, who is the supreme leader of Iran.

Now, there are arguments and disputes about as to what happened. The Americans and Israelis said that they had real intelligence about where the leader was, and so they sent airplanes to just bomb the crap out of the place.

They also had a spy who was able to record the body of the dead Ayatollah, and then this was announced.

At first, the Iranians denied this, and the Iranians insisted he was still alive, but eventually state media admitted that he did die in the airstrike.

But then what they also said is that the Ayatollah, he's 86 years old, and he chose to die. He could have gone to Moscow, but instead he chose to stay in Tehran and die for his people.

But not only that, but he died along many of his relatives. He died along with his daughter, his son-in-law, his grandchildren.

So the entire, so many of the family died in this assault.

Also, there's been reporting that he had prostate cancer.

Okay?

So he was going to die fairly soon as well.

So what you need to understand first about the war is that even though the Americans and Israelis claim great success in decapitating the leadership of the Iranians, from the Iranian perspective, this is a martyrdom.

Martyrdom, okay?

And so the religion of the Iranians is called Shia Muslim.

And this is different from Sunni Muslim.

So Sunnis are the majority, they're about 90% of all Muslims in the world.

The Shia have always been the minority.

And as such, they've always been persecuted.

So in the Shia faith, the core value, the force that binds everyone together and gives them purpose and meaning in life, that galvanizes them into action, is the idea of martyrdom, which forces jihad.

To sacrifice yourself for your religion, sacrifice yourself for the common good.

So think of the death of Khamenei as a sacrifice, a self-sacrifice in order to motivate the Iranians in this war.

Okay?

So that's the first thing you need to understand.

That for the Iranians, this is not a geopolitical war.

This is not an economic war.

This is not a war of resistance.

This is a jihad.

Okay, it's a war against the Great Satan to avenge their leader.

They will fight to the death.

All right?

That's number one.

Number two is this.

Also that morning, when the Ayatollah was killed, the Israelis struck a school in the south of Tehran, killing about 150 school children.

These are girls in primary school.

And again,

there's a debate and argument as to what happened.

The Israelis said that, first of all, the school was next to a military base, we are targeting the military base, and second of all, it wasn't us which struck the school.

It was an air defense missile that went off course.

Okay?

And the Iranians insisted, no, the Israelis purposefully attacked the school to kill the school children.

And then you're like,

why would the Israelis do that?

But then these few years, what we've seen what they've done in Gaza, in Palestine to the Palestinians.

And it's pretty consistent.

What the Israelis have been doing.

All right?

So this action against the Israelis, it's meant to show to themselves and the world that we are now all in.

Okay?

We've made the sacrifice.

We are now committed to this war, to winning this war at all costs.

And this action has also provoked the Iranian people to resist with their full might.

Okay?

So I want you to keep this in mind.

And again, we don't have complete evidence that it's the Israelis who did this.

But given past actions from the Israelis, this is fairly consistent with what they've done.

Okay?

So we can assume that this is something the Israelis do.

Why they did this, what the purpose is, is something we will discuss as we move on.

Okay?

It's very complicated.

Next, I want to show you this.

This is Dubai.

And Dubai is considered one of the wealthiest, safest cities in the world.

There are thousands, tens of thousands of Westerners who moved to Dubai because it's clean, you don't pay any taxes, you make a lot of money.

And you there are great restaurants.

And this is really the economic model of Dubai.

It's one of the Gulf, the GCC countries.

Okay?

The Gulf.

And for the longest time, Dubai had a really good deal.

Because they were under the protection of the American military.

So they didn't have to pay for defense.

They and then they were in the Middle East, which is the oil producing center of the world.

And so they focus on aviation, they focus on logistics, they focus on finance, on tourism.

They make extremely wealthy, right?

I'm not sure if you've taken Emirates.

One of the best airlines in the world.

So their airport, Dubai Airport is the busiest in the world.

And Dubai for the longest time was flourishing under American protection.

And Dubai said to the world, listen.

We're like Switzerland, we're neutral, we don't want any involvement in any wars.

We're here just to take our citizens, to make sure everyone has a good time, to make money.

And then right after the war started, the Iranians attacked the GCC.

Okay?

Dubai, Abu Dhabi, Bahrain, Qatar, Kuwait.

They attacked these places.

And these places are like, what's going on?

We're neutral, man.

We're not involved in this war.

And the airport was shut down in Dubai.

At at one point, rich, the rich people in Dubai were willing to pay about 25,000 US dollars just to get on a plane and get out of there.

Okay?

So the reality is this, for the longest time, Dubai had a reputation for being safe.

And that's why people moved their money there.

Guess what, guys?

After the Iranians did, it's dead.

Dubai is a city in the long term, it is dead.

Because you're a wealthy Westerner, you're not going to move to a place where it could be attacked anytime by the Iranians.

You might move to Singapore, you might move to Hong Kong, Japan, South America, but you're not moving to Dubai.

Okay?

So the big question for us is, why do the Iranians do this?

It was the Israelis and Americans who attacked you.

Why go after the GCC?

All right?

And not only that, but they're escalating their attacks against the GCC.

So that's something that we will look at very closely today.

All right.

Let's continue.

So we will know how this war develops just based on geography.

Okay?

So this is a map.

And this map, even even if you don't really know the war, even if you don't know the participants, even if you don't know the weaponry,

this map will tell you exactly how this war will progress.

All right, so some certain things to keep in mind about this map.

This is what we call this area, okay, really small, about it's actually 33 kilometers wide.

Okay?

People can swim across it.

It's really, really narrow.

Okay?

This small area, guys.

It's called the Strait of Hormuz.

All right.

And it's important because it's really the center of the world.

This one area is the nexus, the pivot of the world.

Let me explain why.

First of all, from the GCC, you have 20% of all the world's oil flowing through this narrow strait.

Where does it go, guys?

It goes to Asia, India, Pakistan, South Korea, China, Japan.

India depends on 60% of its oil from this area.

China depends on 40%.

Japan, 75%.

Prime Minister Takeichi of Japan has said that, listen, if the Strait of Hormuz closes, we're going to have oil in about eight, nine months.

The entire Japanese economy will collapse in eight, nine months.

If the Strait of Hormuz were to close.

And guess what?

The Iranians have closed the Strait of Hormuz.

Okay, so we can expect that the entire global economy will suffer greatly over the next few months.

All right.

So that's point number one.

Point number two is,

okay, so the GCC sends oil across the Strait of Hormuz.

And what do they get back in return?

Food, guys.

All right.

People don't appreciate the GCC.

But it is really the linchpin of the American Empire.

Because what is the American Empire?

The American Empire is the petrodollar.

All right.

The idea of the petrodollar is this.

The US dollar is worth nothing.

It's only valuable if people want it.

But the GCC says that if you want oil from us, you have to pay us in US dollars.

Then that is the basis of the value of the US dollar.

So if the GCC collapses, the American economy and the American Empire both collapse at the same time.

The problem, though, is the GCC is an artificial construct of empire.

It does not exist naturally.

Why?

Because there's no food.

There's no oil, no water.

Okay, guys?

No food, no water.

So these cities are able to grow up in the millions because of all this petrodollars flowing in.

If you close off the Strait of Hormuz, there's no food coming in.

Right?

They're all going to starve.

How much food does the GCC get from overseas?

80%.

80% of all the food consumed comes from overseas.

That it imports.

It does not grow by itself.

It imports.

All right.

So the Strait of Hormuz is really key.

And again, the Iranians will close it in order to strangle the global economy.

And therefore, bankrupt the American Empire.

All right.

Second thing you will notice is these mountains.

These mountains is what we call Iran.

All right.

This is Iran.

This is GCC.

Okay, this is not a fair matchup.

Right?

Because these are mountains.

And what can you do in mountains?

You can hide rocket bases, you can hide drone bases, you can hide missiles.

And that's the entire Iranian offensive strategy.

All right, from here, they can hide missiles and drones from which to attack the GCC.

And what are they attacking?

They're attacking three things.

Right?

They're attacking American military bases.

That's number one.

Is it possible for the Americans to fend against these attacks?

The answer is, no.

They're not.

It's a silly thing, you don't really have all these bases in the Middle East.

But you cannot defend them against the Iranians.

That's kind of strange.

Okay, but that's number one.

Number two is oil and energy.

How hard is it to blow up an oil field with a drone?

Not hard at all.

Can you defend these oil fields?

No, you cannot.

All right.

Number three.

And this is most important.

Is water.

Okay, you guys don't know this, but.

the GCC has little access to fresh water.

So the only way that it can produce water is what is what we call desalination plants.

Okay, these factories that take salt water and then through an electrical chemical process,

turn it into fresh water for the population to use.

60% of the water supply in the GCC comes from these desalination plants.

Okay?

Is it hard to blow up these desalination plants using a drone?

The answer is, it's very easy.

You understand?

So you have this absurd situation where Iran is a mountain fortress where it can hide its offensive capacity.

And the GCC, it's just this desert, this flat desert, and it is exposed to attack.

And there's nothing it can do about it.

Okay?

So at any point in this war, the Iranians can choose to just destroy the entire GCC.

And there's nothing that anyone can do about it.

Okay?

But Iran also has a weakness.

Okay?

And this is fundamental.

So Iran also has a water problem.

Okay?

So for the longest time, they suffered a drought issue.

Okay?

Just climate change.

And so what the plan of the Israelis and Americans is, is to destroy the water supply of the Iranians.

Because the fortress, it's it is a mountain fortress, but it can also be a mountain prison as well.

Or people are trapped inside with no access to water.

Okay, so what we're going to see right now, we're we're already seeing attacks on civilian infrastructure.

Hospitals.

In the future, you will see attacks on water supply, on dams, on reservoirs, on power plants.

The point, the idea is to make Iran so inhabitable that the people will will have to rebel against the people.

Or there'll be a refugee crisis in Iran.

Okay?

So as you can see from this map, this war, it is the end of the world.

Okay?

Both sides have the potential to destroy each other.

It's really a question of how far do they want to go.

All right, we can also say this is almost like a game of chicken.

Okay?

We can blow, we can blow each other up.

How far do you want to go?

And the problem is this, the problem is that the Iranians are Shia.

Which believes in martyrdom.

And you've killed the religious leader.

The Ayatollah Khamenei.

So they're willing to go very, very far.

The GCC countries are Muslim, but they're materialistic, they love money.

And also, most of the population are expatriates, foreigners.

90% of Dubai are foreigners.

Guess what's going to happen if they suffer?

They're all going to run away.

Okay?

So this is not a fair matchup.

The big question that people have is,

first of all, are the Americans going to use ground troops?

Because the only way that you can defeat Iran is by using ground troops.

Okay?

That's the big question we'll look at over the next few weeks.

Will they, will America send its army?

Half a million, two million soldiers to topple the government.

Okay?

That's question number one.

Question number two, nuclear weapons.

If you lose the war, would you choose to use nuclear weapons?

Okay?

That's another big question that we have.

Okay?

Another big question that we have is, who gets involved?

Because this situation is so dire that Europe, okay?

Specifically, Germany, France, and Britain are talking about entering this war.

And guess what?

If that happens, it is possible that Russia and China will also enter this war on the side of the Iranians.

This is World War 3.

Okay?

Because of the importance of the Strait of Hormuz, because of the importance of the Middle East, everyone has to get involved at some point.

And we're going to use game theory to really try to understand what what's happening on the ground and where this could lead us.

Okay?

All right.

You guys understand?

All right.

So another idea that I want you guys to understand is the idea of asymmetry.

Asymmetry.

All right.

So what is asymmetry?

Asymmetry means that the two sides are choosing to fight different wars, using different techniques.

Because one is much stronger than the other.

Okay?

America is the great empire.

It has unlimited resources.

It has the USD.

It has, it controls the world.

Right, Iran is a country that has been under economic sanctions for the past 45 years.

It's poor.

It's technology is very limited.

Okay?

But as we learn in this class, actually, those nations that are poor actually have more energy.

They're more open.

And they're more cohesive.

All right.

So let me give an example.

This is what we call the Shahed drones.

Each of these drones cost $50,000 at most.

Okay?

At most.

It can go as cheap as $35,000 US dollars.

But one of them is 50,000.

As you can see, you can fit a lot of these drones to a truck that can go anywhere in Iran.

And they can hide anywhere.

All right.

So the thing to understand is, first of all, these drones are cheap.

They're easy and they're easy to make.

They make about 500 a day.

Okay, and estimates are about there's 80,000 right now that the Iranians have.

So they can go on for a long, long time.

Okay, and one of these drones again can knock out a desalination plant, it can knock out an oil field, it can knock out a hotel.

It can do a lot of damage.

Okay, and it's easily transportable.

You can hide it anywhere.

You can you can use it from anywhere.

Okay?

And that's what the Iranians are using as an offensive weapon.

And how do the Americans defend against this?

They use something called the THAAD.

Right?

Okay, guys, this is what they use.

THAAD stands for thermal high altitude air defense.

And they also have the Patriot systems.

There's a lot.

Okay?

The thing that you will that you need to know about the system is, it's really expensive.

This missile, guys, costs $1 million.

So there's this $50,000 drone coming your way.

And you throw a million dollar missile at it.

Okay, and often these missiles miss.

So you have to throw two or three missiles at it.

Okay, so you you're spending two to three million dollars on each $50,000 that the Iranians spend.

That's kind of silly.

Second thing you'll notice is that this thing is really big and really slow.

And therefore, you can't really move it around.

Therefore, it's pretty easy for the Iranians to spot where this is and attack it.

And when these things blow up, that's a lot of money, guys.

Okay?

Then you're like,

but this makes no sense.

You know the Iranians have drones, they've had drones for like 10 years.

You've also seen drones used in the Russia-Ukraine war to devastating effect.

Why don't the Americans know this?

Why didn't they prepare?

Okay, and again, it has to do with military doctrine.

Because military doctrine determines how you fight a war.

It determines on your bureaucracy and it determines how you spend your resources.

Okay, and unfortunately, the Americans are used to fighting something called the Cold War.

Right?

And the Cold War, because you can actually fight the war, you can actually use, kill each other.

Because then you people use nuclear weapons.

The Cold War was about flexing.

Flexing.

Okay?

You see how big and powerful I am?

Me.

Okay?

That's all it was.

These weapon systems are designed to scare the crap out of you.

They are designed to impress you.

And as a result, they cost a lot of money.

And they don't really do anything.

All right?

It's not resilient.

It's not innovative.

It's not open.

Also, the other thing I have to say this, okay?

Is if you look at the American military, it's corrupt.

So this is really about corruption.

So the Americans don't really care about winning a war.

What they care about is spending as much money as possible.

Because then they get a cut.

It doesn't make sense.

And that's why the Americans are in a situation as they are.

All right.

So that is the situation for today.

Today was just an overview, guys.

Okay?

I know we covered a lot.

I know there's a lot to take in.

But over the next few weeks, we will explore each issue in depth.

And really understand what's really going on.

Okay?

All right.

Any questions, guys?

Okay, great.

So, um, we'll continue this discussion on Thursday.

Okay?