The Monte Carlo Simulation of our lives

I heard it for the first time from Ricky Gervais. In the passage of time, we're more dead than alive. For all practical purposes, we don't exist until we're born. Subsequently, we're alive for a few decades, and then we're dead for eternity afterward.

There are certain milestones in every person's life when one tends to sit down and reflect upon their life, or rather, its fleetingness. We're all seeking a purpose, or a life to remember, only to realize that we won't be remembering much of it once we're old, and the steps most of us will take for our pursuits won't matter once we're gone. 

I've recently turned 30. This has led to a lot of introspection. A lot of it has been hard to put into words, or rather, into words that I'm comfortable sharing publicly. However, a pattern has definitely emerged. I think about the past, I look at the present, and then I begin to wonder about the future. 

This isn't a very productive exercise in itself, especially if it's happening often. Life is nothing but the one path in a Monte Carlo simulation that an individual chooses to actually walk on. It's inconsequential to ponder upon the paths you could've taken, or in simpler terms, it's useless to spend too much time wondering about the "what ifs" of the past.

However, it did lead me to come up with a new way of looking at the world that we live in - like a bunch of Monte Carlo simulations. 

What's a Monte Carlo Simulation?

Well, I believe nothing explains it better than Investopedia. However, in simpler terms, it's essentially a mathematical tool that is used in various industries for forecasting and simulations. For example, in Finance, it's used to forecast asset prices.

Let's say you have a stock of Google at $100 and you want to forecast its price a year from now. You can take the historical price data of the stock, and apply a Monte Carlo simulation to it to come up with a probabilistic estimate of the price of the stock a year from now. With Monte Carlo simulations, one can create infinite potential paths that the price of Google can potentially take over the next year to arrive at its final price a year from now. 

 

Using these models, financial analysts are able to make a prediction of the sort - "There's a 95% chance that the price of this Google will be between $106 and $97 a year from now" 

Monte Carlo Simulations of an Individual's lives 

One of the underlying assumptions of forecasting using the Monte Carlo simulations is that at every point in time in the future, something random can and will happen. It's something that we can't account for, and possibly something that we have no control over. In essence, it's the simplest way of assuming the omnipresence of Murphy's Law at all times. 

In a lot of ways, this is similar to the lives that most of us live. At each and every step of our lives, we make decisions that drive the future course of our lives. At each step, we can and do come across hurdles and hardships that we aren't able to account for, or have no control over, and yet, we make decisions based on our best judgment (or rather the lack of it at times) and we soldier on. 

In a way, our life is a series of random choices that we make based on random factors using our best/worst judgment. If we could simulate our lives over and over again, with different decisions made at each and every step of the way, we can come up with infinite paths that our lives could've taken to get from birth to today, and in each path, we would've been in a different situation today. The actual life we end up living is just one of the infinite paths of a Monte-Carlo simulation. It's the path that we actually end up taking and living through to arrive at the situation where we are now. Just like the path that the stock of Google actually takes and reaches the price that it does in a year.  

The motivation behind this view of life

In the long term, depending on how a company does, its stock value (not price) goes up or down. Similarly, as an individual, depending on the decisions we make and the path we choose, our life can be seen as an asset. How we value our lives is our own personal choice - in terms of wealth, health, life experiences, time spent with loved ones, or an aptly weighted index of all of these and many more variables. Depending on the decisions we make, we can choose to grow in value or be an asset that depreciated. 

In utilitarian economics, I learned to estimate asset values in Dollar terms. The tools at our disposal have often limited our abilities to measure life in clear terms, unfortunately. Our calculation of an individual's wealth is taken as a proxy for their value as an individual. Being a banker further exacerbates this flaw. We really do tend to price everything without knowing the real value of anything. 

Consequently, I often wondered why an individual would choose a path that would depreciate their wealth or their potential future wealth gains. As I begin the fourth decade of my life, I've come to realize that there are certain values that are a bit hard for the banker in me to put monetary terms on. Some things are only to be valued and not to be priced in life. That's what makes us human. That is what makes the actual path we take so unique from all the other paths that we could've taken. 

Additionally, there's a certain peace in knowing that a majority of people, if not all, do take the rational path in life, or at least they have until now. Otherwise, we wouldn't be living in a world that is much better than it was a century ago.