BOOK REVIEW: ON THE EDGE
Published in the January 25, 2025 edition.
Headline from Monday: “Tech billionaires take center stage at Trump Inauguration.”
Hardly a surprise that they’re cozying up to one another.
Question is, who’s the alpha?
With that as backdrop …
On The Edge
Nate Silver
Penguin
472 p.
I’m not gonna lie. Hanging out with Nate Silver for 472 pages is gonna make your brain hurt – especially if you read all the footnotes. And some of it will make your eyes glaze over. But if you want to understand what’s happening in the world right now, and have a peek into the mindset of the people who are actually driving change and making decisions, this is a must-read.
The first half of the book is all about … poker, with diversions into sports betting and political handicapping. Which helps Silver lay the groundwork to talk about probability and risk and mindset.
He classifies poker players and professional gamblers as belonging to a tribe he calls “Riverians.”
The river being a particular ecosystem of people and ideas – the common denominator being they’re very data and value-driven. And thrive on risk, albeit, well thought out and calculated risk.
They’re EV (expected value) maximizers – as Silver explains, “someone who is always trying to calculate the highest expected value in relation to a particular problem, be it how to play a poker hand or how to most effectively donate to charity.”
So in addition to poker players, the River is populated by hedge fund managers and Silicon Valley entrepreneurs, and other, like, contrarian, risk-tolerant souls.
“People in the River are trying to beat the market. In sports betting, the average player loses money because the house takes a cut of every bet. So if you follow the consensus, you’ll eventually go broke … so part of the job of people in the River inherently involves being critical of consensus thinking, often to the point of being contrarian.”
Silver contrasts the River with an ecosystem he dubs the “Village” – the Village is where government, media and academia and its left-of-center politics largely reside.
Riverians complain that Villagers are “too political,” worrying that “the Village’s claims to academic, scientific and journalistic expertise are becoming increasingly hard to separate from Democratic political partisanship” and that they are too conformist and “not aware of the degree to which their views are influenced by confirmation bias and political and social fads within their communities.”
Riverians tend to, as Silver says, “decouple.” Meaning, they’re able to overlook some things to appreciate other things.
“Yes, I disagree with the Chick-Fil-A CEO’s position on gay marriage, but they make a damned fine chicken sandwich.”
Whereas Villagers, says Silver, hate decoupling.
And then there’s the “trust the experts” mantra of the Left which Silver has little use for.
“Increasingly, ‘trust the experts’ or ‘trust the science’ is used as a political cudgel, such as during many controversies about the Covid-19 pandemic. But citing the experts isn’t always welcome if it doesn’t match the Village’s political objectives. Something has changed when skepticism, something I’d always though of as the province of liberals, is instead being championed by conservatives like Peter Thiel.”
From Thiel: “It seems to me that they [the liberal establishment] are fighting skepticism way harder than they’re fighting dogmatism.”
On the other side of the ledger, “The Village believes that Riverians are naive about how politics works and about what is happening in the U.S. It sees Donald Trump and the Republican Party as having characteristics of a fascist movement and argues that it is time for moral clarity and unity against these forces. Villagers see themselves as clearly right on the most important big-picture questions of the day (climate change, LGBTQ rights). So they view the Riverian inclination to poke holes in arguments and just ask questions as being a waste of time at best, and as potentially empowering a wake of bad-faith actors and bigots.
And Villagers generally don’t share the River’s interest in abstract moral philosophy. In the Village’s view, some questions can be resolved through common sense, politics is inherently transactional and not everything needs to be out up for debate or subject to cost-benefit analysis.”
Lunch Tangent
As I go back over my dog-eared pages and try to synthesize this philosophical chasm, I realize I remain a lifelong skeptic who, based upon Silver’s analysis, no longer has a political home.
I find Village dogma suffocating.
Trump is an abysmal human being and his sycophants are suffocating in their own right.
And I am under no illusion that “EV Maximizers” care about anything beyond their own maximization.
Applied on the local level, the housing dogma is what gives me the most heartburn.
A paean to bloated inefficiency.
Where government notions of what suitable housing should look like and feel like, and what such housing costs to build, are completely divorced from practicality and cost. Where the bleeding heart dogma of providing “proper” housing at all costs overwhelms reason. Leaving us stuck operating in the “other people will pay for it” government grant system because so many people feed at that trough and conformism is so powerful.
This Silver footnote describes this governmental philosophy succinctly. “Most people suffer from what’s called ‘anchoring bias,’ the tendency to be weighted down by information you learn early in your decision-making process. It’s hard to change course, especially under stress.”
By the same token, the EV Maximizers have been selling the Town of Mammoth a bill of data-driven goods (marketing!!!) ever since it skirted bankruptcy.
But channel Ronald Reagan’s 1980 campaign for president here, and ask yourself, “Is the business climate in Mammoth better than it was five years ago? Ten years ago? Are there more or less businesses? Is your quality of life better or worse? Is the customer experience better or worse?”
I suppose you could say there are more visitors and anyone visiting is by definition on vacation and prone to having a good time and overall, there is greater happiness.
But is there greater happiness per capita?
Or are there more people simply having slightly less of an awesome experience?
I suppose I could illustrate it mathematically. In terms of total EV, 100,000 people having an average 8.5 experience = more greater good (100,000 x 8.5 = 850,000 units of happiness) than 90,000 people having a 9.0 experience. (90,000 x 9 = 810,000 units of happiness).
At what point does that experience degrade enough (an average 7.8 experience? An average 8.1?) so that people look elsewhere, requiring more marketing and more visitors (and more turnover) than ever to prop it all up?
We are utter slaves to EV.
We are the frog that likes a nice, hot bath.
——-
“One of the things that con artists take advantage of is the fact that the human brain hates uncertainty and always craves some sort of a story – cause and effect, something that makes sense. And whenever the world is changing and a lot of things are happening at once, it’s hard for the average mind to deal with it. Con artists give you a nice little narrative. They take advantage of the moment to give you the certainty you crave.” -Silver
——-
The second half of the book gets into the risks and rewards posed by the Riverian mindset.
Where Silver, who has prepped us with his gambling analyses, then takes those lessons and applies them to larger, existential questions.
There’s quite a lot about Sam Bankman-Fried (SBF), the now disgraced and jailed founder of FTX, a cryptocurrency exchange platform which went spectacularly bankrupt.
Silver quotes court testimony where SBF talks about his approach to risk-taking.
If $10 million rests on a coin flip, so long as there’s a slight advantage to be gained (Say you make $10,000,001 if it comes up heads versus lose $10,000,000 if it comes up tails), SBF will take that action every time.
Similarly, “He talked about this in the context of thinking about what was good for the world, saying that he would be happy to flip a coin, if it came up tails and the world was destroyed, as long as if it came up heads the world would be, like, more than twice as good.”
While this might be a rational EV bet, this is also, well, insane.
And it’s guys like this who are shepherding the future of AI, a future which carries some risk (as nuclear weapons carry risk) of wiping out humanity as we know it.
As AI skeptic Eliezer Yudkowsky warns, “If Elon Musk is too dumb to figure out on his own that AIs will follow him to Mars, then he’s too dumb to be messing with AI.”
Jack Clark, an Open AI ex-pat, is quoted as saying, “We’re sleepwalking into handing over the future to solely market-driven enterprises that become functionally ungovernable.”
Big tech and big money just gets bigger, the power circle gets ever more exclusive, and within this power circle, people can believe all sorts of insane shit … and increasingly they have the agency to pursue it – to hell with the consequences.
Access to Musk’s Starlink has aided Russia in the Ukraine war.
Jeff Bezos has been able to stifle free speech at the Washington Post.
Mark Zuckerberg no longer bothers with fact-checking at Facebook.
From Silver: “Totalizing utopian ideologies have the potential to be dangerous. And they are potentially more dangerous in a world where instead of power being entrusted to governments – kludgy as they are with checks and balances and that experiment we call democracy – it now increasingly resides in individual people or firms who can accumulate untold amounts of wealth and power almost overnight.”
Back to the frog in the pot. I want to talk a bit about the gaming industry and Silver’s description of its evolution.
The chapter is called “The Moneyball-ization of the Casino Business” and talks about the industry’s evolution through an executive named Gary Loveman.
Moneyball, to refresh your memory, was about how analytics and data hijacked baseball.
“Loveman [who was promoted to CEO of Caesar’s Entertainment in 2003 during the same era] was shocked by the gap between how much data the casino business generated and how little of that data was used to guide decisions.”
His aha moment. “Loveman was in an elevator going up to his room at the Harrah’s in Las Vegas when he heard a group of tourists from Atlantic City complaining. ‘They’re saying, Jesus, we can’t win anything on the slots here in Las Vegas. These slots are so tight. I can’t believe it. I wish I was back in Atlantic City.’ Loveman knew better. At the time, Vegas slots were relatively generous, with a hold percentage of around 5% – that’s how much the Casino keeps as profit, on average, of every pull of the machine. By contrast, New Jersey slots were much stingier, with a hold of around 7.5%. Over the long run, a profit of 7.5% versus 5% makes a lot of difference to a casino’s bottom line. But in the short run, Loveman realized, it’s essentially impossible for the player to tell the difference.”
Loveman enlisted a band of MIT mathematicians to study the issue.
“And we determined that for the individual to recognize the difference between a slot machine that had a hold of 5%, and one that had a hold of 8%, the player would have to make 40,000 handle pulls on each machine.”
The average player only pulls a slot machine a few hundred times before trying something else.
During Loveman’s tenure, the average hold percentage increased from 5.67% to 7.77%.
And yet, explains Silver, Vegas-goers are very loyal. 80% of visitors are repeat customers. Some of that is attributed to another Loveman innovation: loyalty cards.
People love the perks. And when they see an even higher-roller cutting the line and getting more perks, “it makes them aspirational.”
“The casino business is top-heavy. A lot of revenue comes from a very small number of whales. In the airline industry, a business-class ticket might cost four or five times more than a seat in coach. In the gambling business, some customers are spending hundreds or thousands of times more than others.”
Loveman: “We would tell our folks that if you lose a Diamond customer because of poor service, you have to find twenty Gold customers to replace them.”
Obviously, it’s hard not to draw comparisons between the casino business and the ski business.
A few thoughts that come to mind …
It did immediately occur to me – an effective room tax rate of 14% versus 16%, maybe I am the only one who would notice or give a damn.
If one diamond is worth 20 golds, how many peons equal one gold?
Peons think about tax rates.
To reference the front page story on Mammoth soliciting outside help, if the top-heavy resort caters to the rare diamonds (great EV!), how do you talk the state or the feds into a $200 million fire resilience project? Why would the many of lesser means subsidize the unicorns? Oh, that’s right. We keep cramming people into this joint in an effort to become “too big to be failed.” One massive income-restricted dormitory at a time.
Why did Vail risk losing even a single diamond or gold customer over paying ski patrollers a few more bucks?
Knowing that risk/reward equation, you’d figure every essential employee at any high end resort would seek to exert pressure for better pay and benefits.
“I always laugh when people tell me that slot machine gambling is about chance. Because if it were about chance, then I should just be in the real world where you have no control. This is the one place I can go where I know exactly what is going to happen.”
-Anon Gambling Addict
