By Greta Petry (July 5, 2007)
Zikry Applies Game Theory to Global Economics
Emad Zikry, B.S. '72, founder of Vanderbilt Capital Advisors, recently warned the Capital Region business community that the stock market will become significantly more volatile in the future.
Zikry was the guest speaker June 1 at a breakfast at the Desmond hosted by The University at Albany Foundation's Council for Economic Outreach.
Zikry, who majored in business administration, explained his prediction using game theory, a branch of applied mathematics and economics that studies situations in which multiple players make decisions in an attempt to maximize their returns.
Later that same day, Zikry was honored with the Excellence in Entrepreneurship award from the UAlbany Alumni Association.
His company handles fixed-income portfolios for institutional clients, now with $24 billion under management. Vanderbilt is a wholly owned subsidiary of Pioneer Investment, a global investment-management group with $300 billion under management for institutional clients worldwide.
Zikry, who earned a master's degree and a doctorate in economics from the University of Kansas, learned game theory at UAlbany in the late 1960s when it was not yet popular in economic thinking.
"It (game theory) really turned me on to economics," Zikry said. In 1994 game theorists John Nash (subject of the biography and movie A Beautiful Mind), John Harsanyi, and Reinhard Selten won the Nobel Prize for economics, and understanding of its economic implications increased in popular culture.
Global stability increases with a smaller number of major players, stronger cohesive interests, and the possession of a full information set. However, with the growing power of microeconomic players (private companies), Zikry said, traditional nations and states have diminished control of the economy, and new "weak and fluid" alliances are being formed without any aligned set of goals. In this new economy, progress is coming from "businesses small and large, indifferent to national frontiers and artificial barriers," Zikry said.
In response to a question, Zikry said that the multiple players in the game today may be the U.S.; Europe, especially Eastern Europe; China; and India. China, he said, "is the 800-lb. gorilla producing all of the West's needs at a lower cost with higher quality." In fifth place is Iraq, Iran, North Korea, or other smaller nations or groups, at different points in time, whose objectives are not well known to us.
While the U.S. has lost its economic dominance, it can nevertheless remain a player on the world stage by dropping the mindset of a manufacturing economy and using its strengths, a mobile work force, creativity, and entrepreneurship.
School of Business Dean Paul Leonard said Zikry is "obviously someone who thinks broadly and long term and then is able to translate that into what we have to do now. He is a brilliant guy who really understands geopolitics. Emad explained why the basic research being conducted at UAlbany, such as in nanotechnology, is so important. This research leads to innovations that give us a competitive edge."