Cautionary Questions with Nate Silver and Maria Konnikova

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Hey everybody, Nate here.

I'm dropping into your feed on a Tuesday because Maria and I were recently guests on Cautionary Tales.

Normally on that show, economist Tim Harford tells us stories of real-world mistakes.

Things like the Birmingham lab leak and the Tenrife Air disaster, and what lessons we can learn from them.

When Maria and I appeared, Tim had us answer questions from cautionary tales and risky business listeners.

They're smart, they're fun, and we're excited to be sharing the full episode with you today.

Hope you enjoy and be sure to check out the rest of Cautionary Tales wherever you are listening to this.

Hello and welcome to another episode of Cautionary Questions where I team up with clever people to answer your clever questions.

And this time I'm joined by Nate Silver and Maria Konikova.

They are the hosts of the Risky Business podcast, and they are here to answer questions from both sets of listeners.

Nate is a political analyst.

He's the author of On the Edge, and Maria is the best-selling author of The Biggest Bluff, How I Learn to Pay Attention, Master Myself, and Win.

They're both fantastic books.

Both Nate and Maria are also journalists, and they are both high-stakes.

poker players.

I'm a journalist too, and an undercover economist, and I'm not much of a poker player, but between us we we should have some good answers for all of the smart questions that you've been sending in.

We will be tackling smartphones in schools, tariffs, and how to use game theory to win at sports.

Nate, Maria, welcome to Cautionary Tales.

Thank you, Tim.

Thanks so much, Tim.

Or should it be Cautionary Business or Risky Tales?

Risky Caution.

Risky Caution.

That's good.

That's good.

You've been podcasting for how long?

About a year.

About a year.

Yeah, we're coming up on the World Series of Poker begins in every May.

And so, yeah, we launched it just about a year ago and we're coming up on our second World Series season.

Excellent.

When Nate and I are both at the final table of the main event, that'll be really great for our risky business podcast audience growth.

Would you be podcasting from the World Series if you're on the final table?

Not at the final table since there are no phones allowed.

We'll find a way.

I mean, we do have these long days, right, where we both have real jobs and then maybe you'll do several hours of real work, quote unquote, and then play poker for 12 hours.

And then it's fine your 2 a.m.

Mexican food hangout or something.

But they're long days.

We do not get vacation when we're in Vegas, basically.

No, we do not.

Right, enough poker chat.

Let us get into the virtual post bag after

we listen to the theme music for cautionary tales.

I am here with Nate Silver and Maria Konikova, and here is a good question to start with from listener Alex.

Alex asks: Have any personal experiences or academic theories really shaped your decision-making?

Let me put this one to Nate first, and I'd love to hear what both of you think.

I would say my experience with risk-taking and decision-making is very hands-on.

For the most part, right?

When I was a kid, we would play fantasy baseball and have little NFL betting pools and things like that.

Obviously, poker, there's good instructional material, but you know, most people are ultimately kind of largely self-taught.

You know, in my book, On the Edge, then game theory plays a really large role, and game theory plays a very large role in poker.

There are now computer programs called Solvers that literally have solved the Nash equilibrium for poker.

If you've seen A Beautiful Mind, a lot of things in life is like what's the game theory equilibrium of like what traffic patterns look like in New York, or how often you should eat one type of cuisine versus another, or any type of competitive situation where there are lots of optionality.

I'd say game theory is kind of the most important variable there.

And game theory, we should say, is really the use of mathematical equations to model strategic interactions.

So a very simple example of game theory is the game of rock, paper, scissors.

Now, if I play rock, you're going to play paper and beat me.

If I play paper, you're going to play scissors and beat me.

And so game theory says, oh, you have to randomize.

You have to have a one-third chance of playing each strategy.

I mean, that's kind of obvious.

Game theory can be used to model much more complex situations, including famously, because it inspired one of of the creators of game theory, Poker.

Yeah, I would second Nate on game theory.

It was one of the pinnacles of my academic work.

And I'd also say the psychological theories of Danny Kahneman have been hugely influential in how I think about decision-making.

He was an absolutely brilliant man who really unearthed a lot of the ways that our brains misprocess, I don't think that's a word, but I'm going to make it one, misprocess information and the biases and heuristics that we're up against.

And it's incredibly powerful because even if you know that those biases and heuristics exist, in theory, in practice, you still exhibit them, right?

You have the game theory, kind of that mathematical side, and then the psychological side of Kahneman.

And poker, in my mind, is the life experience that has cemented these more than anything else in my brain and has made me internalize how this actually works in reality and how you can try to decide optimally and then take that from the poker table to real life.

Because poker is an environment where you can really sample thousands and thousands and thousands of decisions, sample correctly.

And as you know, Tim, that's incredibly important when it comes to learning and trying to get a sense of probabilities.

And in real life, not the poker table, we never sample correctly, right?

So that's where a lot of these biases come from.

So I think poker is a very powerful teaching tool to help cement these theories into practice.

Okay, I've got a great question from Drew.

Loyal listeners to Cautionary Tales know I'm a big fan of board games.

And Drew wants to know, Maria and Nate, do you play board games?

If you play board games, do you bring a poker lens to the table or is it a different vibe?

So I hate board games.

I do not play board games.

My sister is a little over six years older than I am.

She always loved board games.

They bored me.

Ha ha.

They're just not interesting.

And, you know, when someone brings out, you know, Settlers of Catan or anything like that, I'm like, oh God, no, no, no, no, please.

Ticket to ride is a is a favorite in my family and I just want to die.

You know, for me, if there's game night, please let it be poker.

Otherwise, please don't make me play and let me read my book on the side and cheer you on while you play.

Yeah, I mean, look, some of the games get quite advanced.

And so it's like, where do you go from a game that that takes 10 hours to learn to something that's kind of a broken, overly simple game, right?

But like, yeah, I like games because I'm very competitive, right?

If I'm playing, it's like, oh, people who are like, don't have that background in games or poker, then I'm just going to be honest,

I tend to figure out the strategy pretty quick and

win.

You crush them, Nate.

You crush their souls and their dreams.

And they wish they'd never asked you to play.

Nate, to your point about the complexity, there's a New Yorker cartoon that I absolutely love.

And it's a group of people sitting around a table.

And one of them is reading a game instruction manual.

And the rest of them are all skeletons.

He says, and so those are the rules.

Shall we start playing?

I love it.

I had the privilege of interviewing Klaus Teuber, the creator of Settlers of Catan.

And he said something that really stuck with me.

which I suspect will resonate with you poker players.

He said, you can know somebody their whole lives and play a game with them them and you will see something that you have never seen.

That's wonderful.

And I actually, that's how I feel about poker.

Your character comes out.

And by the way, I do have a very strong interest in games for my next book when it comes to cheating.

So I'm interested in like what kind of a person cheats up Monopoly at home game night.

People who want to win.

It's just totally like.

mind-boggling to me that you would that you would do that but but but there you have it yep my partner is also very competitive but his main objective is making sure that I don't win, right?

He will go out.

He'll go out of his way to lose himself if it's a murder-suicide mission, basically, which changes the strategy quite a bit.

I feel C.

That's amazing.

So here's one for you, Tim.

This question is from Kerry.

K-E-R-R-I-E.

I don't know if it's Irish or something, Carrie, but anyway.

Hi, Tim and team.

I worry that a big problem with the productivity gap in the UK is a lack of high-quality data and data-driven decision-making.

I see a lot of investment in data that is overseen by technical experts in a given domain, but very little consultation of data scientists.

Company and organizational boards also seem to lack the sort of expertise which is often rolled into a catch-all IT function.

I work in the public sector and so I have framed my question accordingly.

Should we have a government department devoted to data or is that all a bit 1984?

Best wishes, Carrie.

Well, I love the the question.

And we do kind of have a government department devoted to data.

It's called the Office for National Statistics, but it's focused on very old-school statistics rather than modern data science.

And old school statistics tends to focus on smaller data sets, very well-behaved, well-formatted data sets.

For example, you might go out and do a survey rather than just say, hey, well, we're going to just draw administrative data or we're going to look at data that's coming out of people's smartphones, which, you know, there's a lot more information in there, but it's a lot messier.

To be honest, what really concerns me at the moment is that

data is systematically underrated by governments.

I think they don't realize how powerful it can be.

They don't realize how dangerous it can be.

And it tends to be given a low political priority or misused.

So at the moment in the US, for example, we've got this sort of sudden disappearance of all these government websites.

It's unclear how much data has permanently disappeared disappeared or is it just that it's temporarily gone down is somebody archiving it will the archives work or not archives don't always work are we going to have interrupted data sets and it's very unclear what's gone and what hasn't so that's a particularly extreme example but generally i mean i'm working on a history of data at the moment it's so powerful it's so important It is the foundation of our health systems.

It's the foundation of many of our economic activities.

It's the foundation of science.

It's also the foundation of some terrible abuses of human rights in the past.

And yet it's kind of boring and it's kind of geeky.

And so it just gets overlooked.

And that's what really worries me.

Yeah, I mean, it's interesting that you have, you know, one partisan faction in the U.S.

that seems to think that less data is better instead of having better data, right?

And some types of data you can go back and recollect, but some things you can't, right?

The UK, for example, has a data set of economic statistics like GDP that goes back like almost a thousand years or something, right?

Because they were collecting records for tax purposes and estate purposes and everything in real time.

Yeah.

Well, we got the doomsday book

in 1086.

I'm old enough to remember the 900th anniversary of the doomsday book.

There's an interesting little cautionary tale there.

So for the 900th anniversary of the doomsday book, which was in 1986, the BBC organized this kind of a proto-Wikipedia.

They said, we're going to encourage this project where school kids across the country are going to act as citizen journalists.

They're going to go around, they'll interview people, they'll gather data, they'll write little essays.

We've got maps, we'll have photographs, and we'll put it all on a laser disc.

Remember, laser discs?

You can see the problem, right?

And we've got these highly sophisticated, expensive computer systems.

They're going to be accessible in every school.

And it was called Doomsday 1986, I think.

It was super cool.

I remember it really well.

And then by about 1998, it was just impossible to even read the laser discs.

So this whole project just went offline.

Meanwhile, by the way, the original doomsday books from 1086, still available.

Yeah.

Paper

has a certain appeal and has lasted for centuries for a reason.

You know, the flip side, Tim, of what you were saying about what's happening in the US and kind of to address the 1984 element of the question is so, you know, yes, a lot of data is disappearing, and then data that was never meant to be aggregated and linked and personalized is being shared.

And profiles of people, of US citizens and non-citizens, are being created that should have never been created, right?

There were rules in place to keep those data sets separate for a reason, for privacy protections.

And now the government is trying to kind of roll back those rules and collect and de-anonymize the data data that was shared by people with the assumption that that would never happen.

That's really bad.

Right.

So there's this kind of dystopian thing going on.

And there's history here.

I mean, this has happened before.

This happened in the 1940s.

It's not good.

1940s was not a good time in history, if people remember.

No, I think we can all agree on that one.

Thank you very much, Nate and Maria.

We will be answering more of your questions after this short break.

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We are back.

I'm here with Nate Silver and Maria Konikova of Risky Business, and we have an interesting question from a Risky Business listener who asks, one thing that happened during the tariffs which didn't get much attention is the 10-year treasury rate spiked from 4% to 4.5%.

I should say, by the way, I work for the Financial Times.

We were paying a lot of attention to that, but understand that outside Geekland, it was ignored.

That basically means, the listener continues, there is less belief that US debt is a safe bet.

It probably means somebody, Koff, China, Koff, issued a sell order for a large amount of U.S.

Treasury with the intent to move the interest rate as retaliation for tariffs.

To cut to the chase, the listener asks, I would be extremely interested in hearing what are your thoughts on the likelihood of the United States defaulting.

Nate, this one's you.

I used to know more about credit default swaps and things like this.

I mean, look, the U.S.

runs up very large deficits.

Neither party has any interest in

doing what it would take to cut those deficits potentially, right?

We got lucky in kind of the financial crisis and COVID era of lower interest rates where you can borrow very cheaply.

That's no longer true now.

In fact, borrowing is getting more expensive.

And so, you know, I trust the market's fairly efficient here, but I guess the U.S.

is still a bit too big to fail.

Well, normally when we say too big to fail, we're referring to things that the U.S.

is going to bail out if necessary.

Right.

Yeah.

So the U.S.

is too big to save.

That's your problem.

You know, the world has profoundly been affected by Trump's second term in a way.

It wasn't in Trump's first term.

Our neighbors to the north, Canada, had an election that was entirely upended.

The liberals wound up back in power, even though Trudeau had been very unpopular, right?

I would argue that the election of the new Pope was in part a response to Trump and the changing geopolitical world, right?

And say, okay, we want to have some influence on the United States, have to figure who's not Trump.

It can balance him out somehow.

And so, yeah,

we're a different world.

And I suppose I trust the markets and investors are intelligent about that.

And I'm not sure it's China so much as the fact that we're in a new regime.

Yeah, I mean, I certainly agree.

I don't think China needs to do anything to make the US treasury rate spike.

When the rate spikes, by the way, it means people are selling.

US government debt.

When they sell it, the price goes down, the interest rates go up.

But yeah, plenty of people willing to do that without any coordinated action from China.

I mean, there is absolutely zero need for the U.S.

government to default because the U.S.

government can always print more dollars.

I mean, it could be that U.S.

government debt gets less attractive.

It could be that inflation takes off.

It could be there are all kinds of problems, but there's never a need to default.

I think the decision to default would be just that.

It would be a decision.

The U.S.

government would have to actively decide we want to stiff our creditors.

So you just have to look at the president and say, does this look like a man who stiffs his creditors?

I don't think so.

I don't think so.

That doesn't sound like Donald J.

Trump to me.

This is President Trump we're talking about, Tim.

Yeah.

In the FT, we have a new acronym.

It's TACO.

TACO stands for Trump Always Chickens Out.

So the bet is that he will not, in fact, default, even though he's talking about various things that already look like default.

because the consequences would be so catastrophic that he would look at the consequences and he would back away.

But that doesn't mean that he couldn't do some damage.

So fingers crossed.

All right.

So listener, Jack wants us to explore the thorny issue of cell phones in school and writes, Australia has been running an experiment with New South Wales banning mobile phone use in all schools from October 2023.

This is following the implementation of a ban in Victoria in 2020, which itself cites research from England and other justifications.

So this listener has kids in school.

This is not where I thought the question was going to go.

Actively helps the 14-year-old subvert this ban.

So they have an old phone in a locked pouch and their actual phone in their bag.

This is because they must use their phone to hotspot the internet to their laptop.

Jack writes, my opinion is the whole thing is stupid as most kids have some kind of workaround and are on their laptops all day anyway.

If parents are on their phones all the time, why are we expecting kids not to be?

I still see teachers in playgrounds, face and phone, and all the injustices and hypocrisy of my own school days come flooding back.

I mean, I know I'm asking this question.

I have so many thoughts, but I'll open it up to you guys first.

I also have thoughts.

I think the hypocrisy thought is real.

I have three children myself.

My oldest child is 21.

The youngest is 13.

They see me being distracted by my phone all the time.

And of course, they're going to be influenced by that.

I think that this is an evil device, useful but evil, that we all of us need to fight together because it's capable of ruining all of our lives.

I feel like I should set a good example and I don't feel that the fact that the grown-ups are being distracted by the phones is particularly good reason to say the kids should have the phones too.

I mean, we would never say, hey, I see the grown-ups drinking vodka and smoking, so why?

Surely it's fine for the nine-year-olds to also drink vodka and smoke.

I mean, I don't think that follows.

It's hypocritical, Tim.

It's hypocritical that you do not let your child.

Yeah, it's well,

I think it suggests that maybe the grown-ups shouldn't drink so much vodka and shouldn't smoke so much rather than the other way around.

But anyway, yeah, we are setting an example whether we like it or not.

I completely agree with that.

And to add to it, the use of screens in general, it's very different depending on your age.

There's emerging research, but now we have a few decades worth of what phones do to developing brains and kind of the habits that you create from a young age.

So being on the phone as an adult who grew up without that kind of access is very different from growing up and actually constantly being connected to a screen.

By the way, there's also research that shows that taking notes by hand is much more powerful than taking notes on a laptop, right?

You retain more information, you learn better because there's a brain link.

between the hand and the brain that does not exist when you're typing.

It would be better, I totally agree with you, Tim, Tim, adults should be on their phones much less so than I write about this.

I think it's actually really great practice to not have your phone.

I've sometimes left my phone at home on purpose to kind of have a day without cell phones.

I have programs that turn the internet off on my computer because I lack willpower if I don't forcibly kind of have it turned off to try to have some deep concentration, deep writing time.

This is all kind of related to our executive function, our self-control ability, our ability to learn, our memory.

All of these things are interconnected.

And don't you want your child to actually emerge as a kind of smart adult who's capable of all of these things as opposed to someone who is constantly distracted?

Nate strikes me as a three screens at once guy.

Nate, any thoughts?

You know, I just have my laptops.

People think I have some big elaborate modder setup.

I just have my little laptop, actually.

Yeah, look, is it paternalistic to tell kids they can't use their phones?

I mean, yeah, but they're kids, right?

So

you're allowed to be paternalistic toward them.

And

I don't know.

I mean, I guess the one caveat I have is I was chronically pretty bored in school, right?

And so I'm sympathetic to the kids that are like, okay, I'm bored.

I'm learning things I already know.

But like, it is a situation where I think you have to have some type of consistent enforcement in the rules.

But when you're in school, blame your teachers for not making you interested, but don't blame them for not letting you be on Instagram while you're supposed to be learning algebra.

I think it might also be a collective action problem.

Yes.

I think it's perfectly possible that you've got teenagers who would be quite happy if nobody in the school had Instagram or nobody had Snapchat.

But if other people are using Snapchat to communicate, to arrange to meet up, well, then I need Snapchat too.

And just talking to teenagers, I think...

that viewpoint is not unusual.

Some of them are like, please, can you just ban everybody from using it and then I'll be happy.

Yeah.

Okay, let's move on because I got a, I've got a question specifically from for Maria, from a long, long time listener from Quebec.

They would like to hear Maria talk about a particular point of her book, The Biggest Bluff, where she describes the breakfast she had with her mentor.

You were trying to find somebody who would teach you to play poker so that you could write a book about learning to play poker.

He only became interested when he realized you don't know anything at all about this subject.

You don't even know how a deck of cards works.

And our listener says, I'm 65 years old and I went through a couple of career changes and I find this story very moving and so true about what it means to learn something and to teach something.

So what are your thoughts on that?

Yeah, I think so.

So this conversation took place the first time I ever met Eric Seidel, who is a legend of the poker world.

And he had never taken on a poker student before.

And what stood out about me was that I was a complete blank slate.

I didn't have any bad habits.

I didn't have any habits, right?

I didn't know anything.

And so for him, I think it was a very interesting experiment.

Just like for me, it was an interesting experiment from scratch.

You know, what can he do with me given my background in psychology in a short period of time?

These days, when, you know, we've got all these math wizards and solvers and all of these things, is kind of psychology hard work kind of my background is it enough, right?

Could I do well?

And so so if I could, that would be an amazing kind of proof of concept for the way that he thinks about the game.

And so I think to him, that's what made this interesting and that's what made it appealing.

Nate, why is Maria so good at poker?

Is it the coach?

Is it her training as a psychologist?

Is it something else?

I think it's her and not the coaching, although Maria is a wonderfully well-connected person who has access to some of the best poker minds in the world.

But yeah, look, it's the balance of the people people reading skills and the mathematical skills and the discipline, really.

You know, it's rare to see Maria tilt.

I'm sure she does it, right?

But I think she's playing more than I am, frankly.

Tilting is basically where you get emotional and it affects your decisions.

Tilt doesn't have to be anger, right?

It can be like, oh, I've had a great day, so I'm going to not fight for this pot that you're supposed to bluff for a thing.

It can be a lot of different formats of it, but like, you know, I mean, no one always plays their A game, right?

But if you're always playing your B plus game or better, and you're really smart in lots of different ways and read people well, and maybe defy stereotypes a little bit too, maybe are more aggressive than people are expecting.

So yeah,

I would say she's a well-rounded poker player.

By the way, it's part of like learning the game later is that you might wind up being a little bit more well-rounded.

When I used to play for a living back, God, 20 years ago now, I'm getting old, I played a game called Limit Holdem, which the same amount is bet on every hand.

Whereas in no limit, you can bet anywhere from one chip to the entire size of your stack, and it's a much different game.

And so I had to spend a lot of time unlearning habits from Limit Holdem, which can be bad habits in No Limit Holdem.

We've got more questions coming up, but first, let's take a quick break.

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With built-in security on the first nationwide 5G advanced network, you keep private data private for you, your team, your clients.

And with seamless coverage from the world's largest satellite-to-mobile constellation, your whole team can text and stay updated even when they're off the grid.

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Welcome back to Cautionary Questions with me, Tim Harford.

And me, Maria Konakova.

And me, Nate Silver.

So here's a question from Mark.

Mark asks, it's no secret that political donations are tied to political favors, legislation benefiting the highest owners, and so forth.

If the politicians are the machine and the machine runs on money, what if we tweaked the source of the money?

What would happen if by some stroke of magic Congress received vastly larger salaries, increasing with years of service, but with one big caveat?

Politicians cannot accept any donations, gifts, speaking fees, or favors in any form other than direct money donations from constituents up to the federal limits without forfeiting their public service salary.

So put simply, what if public service was the bigger, more valuable incentive?

Could it even out-compete the current incentives?

Would governing change for the better or for the worse, and why?

I like it.

You know, it's a good question, but it's slightly naive in the sense that we already have rules against politicians accepting all sorts of things that Mark wants them not to accept.

And there are ways around them, right?

There are PACs, which are political action committees, which you can donate to.

There's ways that you can lobby and influence people.

People would get around these incentives very easily, just like they do today.

This maybe is a naive observation, but I would have thought there was a difference between donations to a campaign for the purposes of spending money on adverts to get re-elected versus just donations to a politician's bank account.

There should be a bright line between the two of them.

I mean, Nate, you're the expert on this.

The answer is: you are supposed to report to the Federal Election Commission every dollar that you spend.

So, you definitely run a risk of expenses being scrutinized if they're not legitimate.

But of course, there are a million things.

A tranche of expenses that are ambiguous between personal and business expenses, right?

You can also shuffle money to consultants and pay them maybe more than they're worth in exchange for, who knows, favors later on and so forth.

I think it's probably a good idea to pay members of Congress more.

I think it might help recruit some people who are not already wealthy to enter Congress.

I think, in general, top-performing government employees should be paid more too and make it easier maybe to fire the poor performers.

I don't understand why anyone would want to go into politics.

It sounds like miserable to me to be a member of Congress.

My lizard brain can't grok those incentives necessarily.

It is worth directing some attention to politicians' latitude to do things that that people might want to bribe them to do.

So the more personal discretion a politician has, the more it's worth bribing them.

So one of the interesting things about tariffs is that if you put a large tariff on importers, it's then worth a great deal of money to particular importers to be exempt from that tariff.

I mean, it keeps changing, but there was this huge tariff on electronic goods coming from China.

And then it's like, oh, actually, you know, we're not going to levy that on iPhones so Apple benefits from that and I'm not saying oh Apple bribed the president I don't have any particular reason to believe they they did but the point is that when you've got that sort of personal discretion it becomes hugely valuable and those interest groups are willing to pay a lot of money and that so there's the temptation for bribery One of the big differences between first world and third world countries is how prevalent bribery is kind of in the way that governments function.

And yet, a lot of so-called first world countries and second world countries, there's a lot of bribing and corruption and cheating that goes on no matter what.

So, sure, it would be amazing if somehow we could create an incentive structure where that doesn't happen.

But I don't see

from a psychological standpoint how the same type of personality that wants to become a politician and who's successful as a politician, who kind of wheels and deals as a part of what they did to get there, how they would ever be totally above everything and rise to the heights of government needed to exert real influence.

It's a very cynical take, but that's how I see it.

Maria, you mentioned developing countries.

This was perceived as being a particular problem in Africa, both for historical reasons and because a lot of sub-Saharan African countries were very, very poor.

And so this amazing African entrepreneur called Mo Ibrahim, who made a huge amount of money in telecommunications in the the 1990s, became a billionaire.

He announced the Mo Ibrahim Prize.

He was going to give, it was millions, to any African leader who surrendered power after losing a democratic election.

This is about 20 years ago.

I was Googling around.

I think the prize has been paid at least once.

But I haven't been able to find any survey of whether it's made a difference.

But I just think it's a clever idea, whether or not it worked in practice.

It's a clever idea.

Didn't Sam Bakeman-Freed want to pay or bribe Donald Trump like a billion dollars not to run for re-election or something like that?

Just because Sam Bankman-Fried wanted to do it doesn't mean it's a bad idea.

It might color my priors a little bit, I'd say.

Fair, fair.

Sometimes, you know, a broken clock is right twice a day.

Let's take another question now from Jordan.

And this one was directed to you, Tim.

So first, Jordan loves your podcast and has listened to every episode you've put out.

Good to hear.

So keep up the great work and thank you.

Jordan is a dedicated phantom.

It's a lot of episodes.

I like it.

I like it.

I love your podcast too, but I've missed some, I have to admit.

They're all available on CatShop.

So what is Jordan's question?

Yes, it's about penalty kicks.

So if you don't move, you're more likely to save them.

I wonder about that, since if a goalie never moves, then wouldn't the kicker behave differently and make it easier to save shots that don't go down the middle?

I was just thinking about it and was wondering how that was controlled for.

Actually, you two are the perfect people to answer this question because it's about game theory optimality and trying to exploit suboptimal behavior.

In a soccer penalty, basically you've just got a striker trying to score a goal.

You've got the goalkeeper standing there and they can kind of guess.

They can dive to the left or they can dive to the right.

And that's really a 50-50 they'll guess right.

Or they could just kind of not dive at all and stand in the middle which makes them look passive and like they're not even trying however it turns out that because goalkeepers don't stand in the middle because it makes them look passive some strikers have figured out oh if i just boot the ball straight at the goalkeeper they are guaranteed to dive to the left or right and i'm going to kick where they were anyway so jordan's question is well hang on if the strikers figure that out aren't the goalkeepers also going to figure it out so it's really a question of people adapting to each other's strategy and the optimal mix of strategies.

And, you know, who better than you two to explain the details here?

I mean, that is such a fascinating element of game theory that Nate and I talk about quite often, which is kind of this recursive element of it, right?

If I know that you know, that I know that you know.

And in poker, this happens all the time, where you're trying to figure out, you know, how do I adjust to my opponent?

If we're both playing GTO, game theory optimal poker, then technically, you know, we're both executing a strategy perfectly.

But humans aren't computers and that doesn't happen, right?

So if I figure out, for instance, that Nate is calling too often, then I should start, you know, changing my strategy away from GTO.

So even if in this particular spot, game theory says that I should check because my hand is a little too weak to bet for value, I bet again because I know that Nate is going to call me again with a worse hand because he over calls, right?

So I'm kind of adapting to his behavior.

Now, Nate is a smart guy who also knows a lot about game theory.

So what if Nate then figures out that I'm doing this, right?

Because we get to showdown and he's like, Maria, how did you bet three times with, you know, bottom pair?

This is crazy.

You were right.

You won.

But Nate figures out that, oh, I'm over calling.

So now she's actually playing differently.

So now I'm going to change my strategy to adjust to that.

So next time I actually try to do that, Nate ends up having just the nuts, right?

The best hand ever.

And when I have a good hand, you know, he folds, right?

So he's now adjusted and I say, oh, wait, wait, wait.

Okay, he's changed.

So now I need to change.

And with two good players, this process can go on.

indefinitely.

And sometimes you psych yourself out, right?

And you start getting into mind games.

And sometimes you end up overthinking and just making the wrong decision.

Also, you're making assumptions about the other person, right?

And how the other person is seeing you and how how they're adjusting.

Now, I'm talking about poker because I know poker and I don't know soccer, but this is exactly kind of the problem that you have in this soccer question.

In theoretical terms, as an academic would analyze it, you get to an equilibrium and the equilibrium

is a mixed strategy where it's unpredictable.

So, for example, the striker might...

go left 45% of the time, go right 45% of the time, stick it down the middle 10% of the time, and the goalkeeper might stay in the middle 20% of the time and go left 40% and go right 40%.

But the point is, they can't be predictable.

If they were predictable, that could be exploitable.

And they can't just be unpredictable in a foolish way.

So it's like, oh, I could dive to the right 50% and to the left 50% and never stand up in the middle.

Well, that's unpredictable, but it's also not smart because actually I need to keep the striker honest and sometimes stand up.

Absolutely.

There's always an equilibrium, but that equilibrium will involve a randomized mixture of strategies.

Right.

But in practice, so this is called randomization, right?

The human brain is very bad at randomizing randomly.

Most humans will end up having a pattern and will end up actually doing one thing more than they're supposed to, right?

Doing another thing less than they're supposed to because they're not optimal game theoreticians.

There was actually a recent example where the English keeper Jordan Pickford in a high-stakes penalty shootout

had a water bottle with a list of every player on the opposing team and whether he should dive to the left or to the right or stand up for that player.

So they had previously analyzed the play.

His coaches had basically pre-randomized.

It's a little risky.

So as long as nobody finds your water bottle ahead of time, you can pre-randomize.

And I think he saved some goals and England won that particular penalty shootout, which is very un-English.

That's great.

If you don't think that athletes are thinking about this stuff, professional athletes, then you're wrong, right?

They may have their coaching staffs encouraging them to do it.

They may talk about themselves.

They may even do some of the stuff like fairly intuitively, right?

In an NBA game, you have five players and 24 seconds on the shot clock.

So it's kind of a game of like trying to maximize your expected value with the best shot you can, but the defense is trying to minimize your expected value.

And like the decisions these players make are usually pretty smart about like, it's not quite worth taking this shot, but now time's running out.

Now I need to, you know, I think a lot of them are actually quite high IQ, frankly.

There's a lot of money and competitive pride on the line in making the right decisions.

Yeah, so Nate, actually, Caleb has been thinking about underhanded free throws in the NBA.

Here's what he says: From what I understand, some, if not most, players could hit a higher free throw percentage if they practiced an underhand technique.

Honestly, I respect basketball pros less after learning that they don't use underhanded free throws because they think it looks goofy.

It's not a winning mentality.

So, Nate, should NBA players switch to underhanded free free throws?

Yeah, look, there probably are

some equilibriums where strategies that are considered emasculating, right, or embarrassing somehow might be pursued a bit less, right?

Although maybe that changes too, right?

You've now seen a thing in the NBA where there's a lot more flopping than there once was, meaning that when guys get fouled, they'll exaggerate the magnitude of what actually happened to them, right?

It used to be something people associate with soccer.

It's migrated into the NBA as well.

But But yeah, sometimes to take strategies that would be seen as embarrassing, there's expected value there if you don't care about the embarrassment.

I'm curious, guys, is there an example in poker of a strategy that is positive expected value, but everyone thinks it's just embarrassing and only an idiot would do it.

Yeah, there's one that has turned out to be much better than people thought, and it's called donk betting, which is leading into the pre-flop raiser.

And so the reason it's called donk betting is because people thought you were a donk, a donkey, if you did it, right?

Because the established wisdom is you always check to the pre-flop razor.

And once we got more advanced game theory, it turns out that no, actually, there are some spots where you should lead.

What is leading into a pre-flop razor?

Betting first, right?

Instead of checking your options to letting the other person act, you act first.

You bet first.

To this day, though, even though it's now accepted, if someone does it right away, it still feels donkey-ish even when it's not, right?

It's very hard to kind of wrap your mind around the fact that this might actually be the correct play.

One other play that can be hard to make is folding when you've already put a lot of money in the pot and there's just a little bit more to put in and see the showdown, but still sometimes you maybe do have a fold potentially.

You know, I played one unusual hand at a tournament a couple of months ago where I raised a second player called and a third player re-raise.

And if I was gonna call, I was committing about half my stack, right?

Which means ordinarily what you're supposed to do is either fold or go ahead and go all in.

However, I had a hand that I wanted to encourage the third player to enter the pot.

So I just called.

I'm like, well, I'll have a lot of good flops.

And if I don't have a good flop, then I can get away if it's a bad flop.

And anyway, so yeah, like, um, so I miss the flop, which is the first three cards in poker.

He bets, and I fold, getting

three and a half to one odds.

It's like, what are you doing, man?

you're not allowed to fold there right which indicated I think that he had a good hand and was hoping that I continued right but like you know I ran the math later and I'm like actually this is the right play by a couple of percentage points it was just an embarrassing play to to make in the moment so I have learned no donk betting for me and I've also learned from Nate that sometimes you have to quit whether or not you are ahead.

We have to quit.

We're out of time.

Nate, Maria, this has been such fun.

Thank you so much, Tim.

Thank you for having us, Tim.

I always love listening to Risky Business, and thank you so much for joining us on Cautionary Questions.

Thank you, Tim.

We'll do it again sometime.

Thank you.

I will be back next week with another Cautionary Tale.

Cautionary Tales is written by me, Tim Harford, with Andrew Wright, Alice Fiennes, and Ryan Dilley.

It's produced by Georgia Mills and Marilyn Rust.

The sound design and original music are the work of Pascal Wise.

Additional sound design is by Carlos San Juan at Brain Audio.

Ben Nadaf Hafrey edited the scripts.

The show features the voice talents of Melanie Guttridge, Stella Harford, Oliver Hembra, Sarah Jopp, Masaya Monroe, Jamal Westman and Rufus Wright.

The show also wouldn't have been possible without the work of Jacob Weisberg, Retta Cohn, Sarah Nix, Eric Sandler, Carrie Brody, Christina Sullivan, Kiera Posey and Owen Miller.

Cautionary Tales is a production of Pushkin Industries.

It's recorded at Wardore Studios in London by Tom Berry.

If you like the show, please remember to share, rate and review.

It really makes a difference to us.

And if you want to hear the show ad-free, sign up to Pushkin Plus on the show page on Apple Podcasts or at pushkin.fm slash plus.

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