Even Our Economy Is Gamified Now

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Speaker 1 Welcome back to Risky Business, a show about making better decisions. I'm Maria Konakova.

Speaker 4 And I'm Nate Silver.

Speaker 4 Earlier this week, you heard us talk about, hopefully you're listening to every episode. Yes.

Speaker 1 Right, listeners? If not, what are you doing with your life?

Speaker 4 What are you doing with your life? You heard us talk about Las Vegas and the kind of literal casino economy.

Speaker 4 We want to be a little bit more figurative about that today, the casinoification of the American economy, of frankly, everyday life in lots of ways.

Speaker 1 Yeah, so there was an op-ed in the New York Times on October 26th from Kyla Scanlon that talked about kind of this casino economy. And what does she mean by that? We have gamification of

Speaker 1 almost, I mean, gamification has been something we've talked about before, but casinoification specifically is that we are fueling speculation, we're fueling risk-taking, and we're kind of placing bets on a lot of things.

Speaker 1 And, you know, we're betting that this all works out well for the U.S., except instead of gambling with your own money, you're gambling with the United States, with U.S.

Speaker 1 currency, with the way that the U.S. is perceived abroad, with, you know, how our economy is going to do.
And

Speaker 1 we're, you know.

Speaker 1 You're seeing the government placing these big bets and we don't actually know, Nate, whether they're smart gamblers or not, right?

Speaker 1 We don't know what went into that whether they are um people who are like advantage players who are like oh you know there are some uh some edges here that we can exploit or whether they're just d-jans who are like i like to take risk and i hope it works out i'm betting it all on black come on baby let's go

Speaker 4 Sorry, Ms. Marie, I was checking my NVIDIA stock and my Bitcoin and the DraftKings bets I have for the Minneapolite game.
And yeah, yeah, yeah. I was sort of a little distracted by

Speaker 4 all the, you know, on the polymarket price. You can't see a bodega without seeing a Cauchy or polymarket billboard in the New York City area anymore.
So this is all around us.

Speaker 4 I enjoy some of it and profit from some of it. But like, I can imagine how it becomes overwhelming to

Speaker 4 a more normy American.

Speaker 1 Oh, absolutely. And I think that there are two different spheres here, right?

Speaker 1 There's the like rise of prediction markets, the fact that Trump himself is getting into the prediction market business, you know, crypto and the fact that Trump himself got into crypto, like the actual gamifications.

Speaker 1 But then there are also things like we're going to, you know, have the government invest in NVIDIA, like invest in NVIDIA and do all these different things,

Speaker 1 try to play a game of chicken with tariffs to see like who's going to blink first, right? Who's going to swerve first? Are we going to end up in a trade war?

Speaker 1 Are we going to end up with better concessions for the United States? We're seeing it at every single level of society. And I think that higher level is, people are focused on the lower level.

Speaker 1 They're like, oh, you know, you know, calcium prediction markets and they're getting into like sports betting and all this stuff. This is terrible.

Speaker 1 But maybe they should actually be looking more at that higher level, which is saying, well, okay, but we're also, you know, pouring U.S. government money into meme coins.
And

Speaker 1 we're also

Speaker 1 trying to see, like, can we levy 100% tariffs on some countries and have them still want to do business with us?

Speaker 1 Like, what can I get away with, basically?

Speaker 1 And so that, that might be, even though it's harder to pinpoint and it's harder to make like a nice headline about that, those might be some of the more worrisome elements of this.

Speaker 4 Yeah. And look, in some ways, I'd like to see the American government be

Speaker 4 a little bit more market-driven in some things. I mean, the government isn't paying a lot of people market rate salaries.
That's a big problem. And like,

Speaker 4 you you know, there were debates years ago about like, should Americans be allowed to invest their social security savings?

Speaker 4 I'm not sure that they shouldn't. It's probably not a popular position among progressives, right?

Speaker 4 But like, but you also face things like if all these risks become correlated, right, then in the United States, but also then Social Security holders would bear more geopolitical risk.

Speaker 4 I mean, look, I mean, there are a few dimensions, right? One is like exhaustion of like, um,

Speaker 4 you feel like every decision that you make, you're battling some algorithm or there's some way to optimize.

Speaker 4 And I guess if you have high agency and are experienced and have money and don't have to worry about as much of this stuff, right, then maybe it leads to opportunities, but where it feels like everything is gamified, everything is complicated, right?

Speaker 4 I mean, um,

Speaker 4 I guess we haven't had Natasha Schul on the show. She's an anthropologist who wrote Addiction by Design, which is about similarities.

Speaker 1 It's a really interesting book.

Speaker 4 Yeah, between literally slot machine design and like social media apps, continuous scroll, the complete absorption that you're in constantly, right?

Speaker 1 Yeah.

Speaker 1 Can I, can I, I want to take a step back with that because this is some of the most fundamental work in 20th century psychology. And I just want to give people a little bit of a refresher.

Speaker 1 If it's been like a little while since they're Psych 101, everyone kind of has heard about Pavlov's dogs, right?

Speaker 1 If I bring food to a dog and it gets used to kind of the food, it salivates because it knows it's about to eat, right?

Speaker 1 And if you ring a bell every time before you bring the food, now the dog learns to associate the bell with the food.

Speaker 1 Now we take away the food. and the dog hears the bell and the dog salivates.
That's called associative learning. Now, what Pavlov found was then you can extinguish it, right?

Speaker 1 If after a while you keep ringing the bell and no food comes, eventually the response will be extinguished and the dog will stop salivating. Now, fast forward to B.F.

Speaker 1 Skinner, who kind of took behaviorism to the next level and realized that

Speaker 1 basically the single best way to get rats, guinea pigs, humans to do what you want them to do is not just through reinforcement learning, which is, you know, you reinforce a behavior that you want with something positive, but through a cycle of intermittent reinforcement.

Speaker 1 So regular reinforcement learning, you press a button and you get a pellet, or you get a coin that you can use for a slot machine or whatever it is.

Speaker 1 Like I don't know if we're talking about a human or a guinea pig. But if sometimes when you press the button, you get a pellet, sometimes you don't.

Speaker 1 Sometimes you get two pellets, you know, sometimes you don't, then all of a sudden there is nothing you can do to get that rat to step away from pressing the button if that pellet is compelling enough.

Speaker 1 It will just keep pressing because that intermittent cycle of reinforcement is something that is just inherently appealing, right? It's that gamble, right?

Speaker 1 Oh, maybe I won't get anything, but maybe I'll get a lot. And maybe I'll get more than I ever got before.
Maybe I'll get like an extra sweet, amazing treat. And that is how.

Speaker 1 animals, including humans, learn the best, but also how they start engaging in compulsive behaviors. And all of a sudden, you see, you know, rats, guinea pigs, humans who are just

Speaker 1 pressing that button over and over. So now we're seeing how powerful that psychology is and what happens when you take the guardrails off of it and when you start seeing the U.S.

Speaker 1 government engaging in that sort of behavior.

Speaker 4 I mean, look at slot machines. Like there are a couple of things you can learn from slot machines in terms of reinforcing behavior that can be compulsive, right?

Speaker 4 Number one is this combination of small and big rewards, right? If you play a slot, then you spend for $5 and oh, there's a churn, ching, ching, ching, ching, jing, and you win $3 back, right?

Speaker 4 Or $10 back or $2 back or something, right?

Speaker 4 And then you have the occasional big jackpot where an attendant comes and pays you and it creates a big scene, right?

Speaker 4 That combination seems to be pretty powerful, right? But the other thing these machines do...

Speaker 4 They have complicated game modes where you feel like you almost win. Like, oh, if you get five reels all turn in the same direction, right?

Speaker 4 Then you trigger some bonus mode, a buffalo stampede or a wolf howl or whatever else. They all have like animal themes or the price is right, a wheel of fortune.

Speaker 1 Oh, I see the buffalo one everywhere, so I'm assuming that's a high margin one for casinos. I have no idea.

Speaker 1 I know that different machines have different, you know, different value for casinos, but the buffalo one's everywhere. Please continue.

Speaker 4 But yeah, you feel like, oh man, if I just got this one more reel to turn, I would trigger stampede mode and make lots of money.

Speaker 4 And so they show you your kind of like they dramatize your near misses if you're like oh i came so close last time that like how could i give up on this when i came yeah all these when you and by the way you don't know the payouts for

Speaker 1 slot machines are not posted anywhere easily viewable by anybody right by the way a really good illustration of this without getting into kind of the innards of a slot machine is if you've ever kind of seen a game show which i'm sure everyone has where they spin the wheel, right?

Speaker 1 And there's always like the huge prize is always in between like tiny prizes. Yeah, exactly.
And you all, you see kind of that drama of like the needle almost going to the huge prize and then not.

Speaker 1 And it almost never does. And I don't know, like, I assume that it's not rigged.
But if you ever do that at a carnival, don't, by the way, because then it is rigged.

Speaker 4 Yeah, I don't know what the regulations are on like

Speaker 4 on-slaught mission, like, but like in general, the reporting good for my book suggests that like the computer within milliseconds, microseconds determines what the payout is.

Speaker 4 It's according to a fixed schedule. And if you don't abide by that schedule, then you get in a great deal of trouble with the gaming board, right?

Speaker 4 I don't think they regulate it as much how they represent that outcome to you.

Speaker 4 And so, like, so you are manipulating people not only with the payout schedule, which has been optimized by MAT engineers to figure out what gets people to

Speaker 4 be most compulsive, right? But also, the way in which a given result is shown can also contribute to anxiety, excitement,

Speaker 4 the feeling of just having missed out on an amazing, life-changing jackpot.

Speaker 1 The visual is so important. The visual is so important.

Speaker 1 That's why I gave the example of the game show, right, where you spin the wheel, because when you see like cherry, cherry, cherry, and then like, it's almost a cherry, and then it just like misses by a half, right?

Speaker 1 And you're like, oh, damn.

Speaker 4 No, there's something about moving from the analog to the, so like a lot of

Speaker 4 most of the tennis tournaments now now use electronic eye judges, line judges, right? Um, so go to the U.S. Open.

Speaker 1 But that's good, right?

Speaker 4 Well, it depends on how accurate it's, but you'll go to the U.S. Open and Hawkeye, I think it's called, will determine whether the ball is in or out, right?

Speaker 4 And then they'll show the replay, and the replay is computer generated. I'm like, that's not a fucking replay, right? It's not actually a replay.

Speaker 4 You can't verify when the computer was right or wrong in this very close call by showing the computer's input.

Speaker 1 No, that's actually, it's really annoying. Yep.

Speaker 4 But like feeling like you never kind of are able to like touch grass and get something real, I think, is a feeling that's a little bit, a little bit frustrating too. For sure.

Speaker 1 Something that's

Speaker 1 verifiable.

Speaker 4 Are used to that. I mean, this kind of gets into the segment we taped earlier, or the segment we had earlier this week about like just the feeling of constantly being

Speaker 4 manipulated by the algorithm. You know, there has been, for example, a big

Speaker 4 increase in like fast food revenues per order per customer in recent years and part of this is that like part of this is that like um

Speaker 4 now people are ordering on kiosks most of the time even at physical locations so number one number one um

Speaker 4 you reduce stopping costs right number two

Speaker 4 people you have all types of upsells oh here's an extra sauce you can add for just 49 cents right i'm sure the margin is very high or whatever and like and like just that constant fatigue from being, you know, sometimes my

Speaker 4 partner would be like, we should go to like a simple restaurant

Speaker 4 tonight, one of these, it's like not corporate owned. It's like, well, that food's actually this other place.

Speaker 1 It's like, yeah, I just don't want all that fucking

Speaker 4 option. I want a B plus plaint spaghetti without any fuss and without feeling like everything is being nickeled and dimed for me.

Speaker 1 Yeah, no, absolutely.

Speaker 1 And psychologically speaking, you know, once again, we've, we're talking about kind of thin lines between a frustrating experience and one that actually works in terms of nudging the consumer to the type of behavior that you want.

Speaker 1 So yeah, when you're at a kiodosca and you're like, oh, like, do you, are you sure you don't want to like for 50 cents upgrade this to like an extra large, right?

Speaker 1 Which would normally cost this much more, but you get kind of, you get an extra deal. And it's so interesting.

Speaker 1 So I flew to Vegas this past weekend

Speaker 1 and took a lift from the airport and

Speaker 1 got my little statement, you know, the little email that they send you. And

Speaker 1 I think my lift was, I don't remember, $25, something like that. And then I see the statement and it's like, $48

Speaker 1 plus a 30% discount for this and this and this.

Speaker 1 And so $25. So they present the exact same amount in very different ways.
And all of a sudden you're like, oh, I got a deal. It was supposed to be $48,

Speaker 1 but really, I got it for $25. It wasn't supposed to be $48.
They just make that shit up so that you don't feel like you're being taken advantage of. And, but that works with fast food.

Speaker 1 That works with everything. DoorDash.
So when, you know, I order from delivery apps and you get that sort of thing all the way all the time where you're like, oh, get a credit.

Speaker 1 Like, do you want a double dash? Do you want to add this from another store?

Speaker 1 While, you know, with no delivery fee, right? Do you want some ice cream? You ordered Italiated. This will pair well from gelato.
No extra delivery fee. Your dasher can stop by and get gelato.

Speaker 1 I wasn't planning to get gelato, but, you know, it does seem like a great deal because I don't have to pay two delivery fees. Maybe I will get gelato after all, right?

Speaker 1 That kind of, so the way that you present it can actually turn it from something that's either annoying or really cool.

Speaker 1 And there are, when it comes to consumers, when it comes to advertising, there are very strict regulations on this, but that's not true across every industry.

Speaker 1 And that's certainly not true when it comes to kind of the U.S. government because it's the one that's supposed to be regulating.

Speaker 1 So there are few things other than the Constitution that regulate what what it can do when it comes to kind of gamifying different experiences.

Speaker 1 And every now and then you can like actually get an offer that's like actually pretty good.

Speaker 4 These typically happen in times and places when the environment can be a little bit recessionary, right? Like so Maria, I am going to be out with you playing the NAPT in Vegas this week.

Speaker 4 There's also various poker tournaments in December. It's a good month for poker.

Speaker 4 The World Series of Poker is offering a $25,000 bonus if you are eligible because you cashed the main event or had enough cashes in the Summer World Chairs of Poker in this Bahamas event they have, right?

Speaker 4 If you cashed their main event there.

Speaker 1 By the way, the main event in the Bahamas is $25,000.

Speaker 4 It's a serious event. However,

Speaker 4 if you cash, you basically get your buy-in back for free and like 15%, 20 times 25,000, maybe premium, you know, up a little bit for a stealth premium if I'm being generous with myself, right?

Speaker 4 Like that's actually worth real money, you know? But the reason why is because like

Speaker 4 they're trying to get people there and out compete these other tournaments. So they actually are, they are actually really spending real marketing budget.

Speaker 4 And you, if you want to participate in that, have the optimist consumer to benefit from that. Right.

Speaker 4 That's usually not true. Usually you're being squeezed on the margin and every nickel that you think you save is coming out of your pocket at some other point in time.

Speaker 4 I mean, you see it in politics too, where like for years, Democrats in particular, would send all these emails.

Speaker 4 Nancy pelosi says it's urgent nate you wish you should be today to this fund right and like and people get fed up with that and like we have this problem of myopia whenever you design algorithms where like an algorithm can often tell you what given current conditions in the short term will maximize revenues right they do not

Speaker 4 adjust enough for consumer fatigue. They do not adjust enough for like the long-term balance sheet of the consumer, right? They do not adjust enough for like with political messages.

Speaker 4 A message that was once fresh can become stale, right? Being the fourth or fifth iteration of Obama is not the same as the first version of Obama or whatever else, right?

Speaker 4 And yeah, I think I was talking to a guy just to who like makes films. Like, yeah, I don't use this algorithm shit for like making picking films at all, right?

Speaker 4 We just make films that are derivative and

Speaker 4 a lot of algorithms, they

Speaker 4 become inferior out of sample. And like, also, you know, with

Speaker 4 AI, I mean, I assume within

Speaker 4 could happen now, right? I assume that with some of these services, you'll say, okay, here's, you know, here's an ad from the gap or whatever, right?

Speaker 4 Nate, here's how you would look in this nice new t-shirt from the gap, right?

Speaker 4 Maybe it's probably a little flattering to your dimensions and whatever else, but like people are going to begin to feel correctly very manipulated.

Speaker 4 And that may just lead to like, you know, I mean, even with Trump, right?

Speaker 4 I would argue there is

Speaker 4 some degree of boy who cried wolf syndrome with Trump, where like everything is seen as an outrage, and therefore, the things that actually are outrages, which there are many outrages, in my opinion, as a American citizen, right?

Speaker 4 Um,

Speaker 4 people are just so fucking sick of the message, and they and they tune out and they lose their serotonin response and whatever else, right? And yeah, it's pretty, pretty bad.

Speaker 1 And we'll be back right after this.

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Speaker 4 Do you have any tips for helping people navigate this stuff, Maria?

Speaker 1 Oh, man.

Speaker 1 Yeah.

Speaker 1 Well, you know, know, try to

Speaker 1 get out of it a little bit. Like people need to like just take a step back and try to reclaim.

Speaker 1 We haven't talked about this at all on the episode, but like reclaim some semblance of their attention, right? Like get off social media.

Speaker 1 Stop like reacting to things all the time and try to like, just try to. I'm not sure I'm good at that.

Speaker 4 I know, I know.

Speaker 1 And just try to take a step back and get some perspective.

Speaker 1 When I try to help people through their decision making and they're about to make kind of a big purchase, a big decision or whatever it is, something I often do is I say, okay, before you look at anything, before you buy anything, before you kind of do anything like that, why don't you take a pen and paper and write down like, what are the most important things to you, right?

Speaker 1 Like, what are you looking for?

Speaker 1 What is in this particular decision? Like, what are you optimizing for? What do you care a little bit less about? How much are you willing to kind of spend? And give yourself kind of

Speaker 1 answer those questions and give yourself firm limits because then you're, I think, a little bit less susceptible to those nudges that happen to behavior in the moment.

Speaker 1 Because in the moment, it's really hard to make good decisions, if especially if you're tired, right? This, this is like poker. This is like trying to play well at the poker table.

Speaker 1 Think through all of these scenarios ahead of time because in the moment, when it comes up, if you haven't thought through, you're going to tilt and you're going to make a poor decision because you don't actually know how to react react in the moment.

Speaker 1 And so I think taking that time and taking those steps back can be really, really important for just solid decision making, especially as we acknowledge that our attention is limited and we are getting tired.

Speaker 4 The other thing I'd add is that like

Speaker 4 people make this mistake of spending the most time on the most marginal decisions instead of the most high-stakes decisions, right?

Speaker 4 Where it's like, okay, I can optimize this or that by picking the six different versions of Uber or Lyft to take me to the airport, right?

Speaker 4 And one's a little bit more expensive and one's there a little sooner.

Speaker 4 It's like, if it's like reasonably close, just pick one and don't worry about it because the mental effort of worrying about it outweighs the marginal gain that's within some margin of uncertainty, anyway, right?

Speaker 4 At equilibrium, often you're indifferent between different options. I mean, likewise, like if there is something that, like, you know,

Speaker 4 don't buy a bundle of things

Speaker 4 that aren't interesting to you personally, right?

Speaker 4 You know, if you're paying some extra fee when you check in a hotel for a bigger room and you're planning on having a crazy 24 hours in Vegas and being in your room just asleep, it probably is not a good piece of advice for you.

Speaker 4 Whereas for me, if I'm spending hours working, which I often do, then it might be worth the upgrade. It's kind of common sense stuff.
And like,

Speaker 4 you know, even things like airline frequent flyer miles, I think the average person probably have a lot of airline optimizers in the risky business audience, right?

Speaker 4 But like there's a cost to all this. Some people think it's fun to maximize this kind of thing, but like

Speaker 4 you just have to simplify some decisions.

Speaker 1 So I think that

Speaker 1 it's really interesting, but everything we've been talking about on a consumer level actually plays out on the government. level as well and on how Trump is trying to kind of play, right? And

Speaker 1 take these risks and play these games of chicken. So that actually goes both ways.
You You know, as

Speaker 1 citizens of the United States, we do have this reaction where he's trying to flood the zone and like get everyone to just not respond anymore because it is, you know, it's just one thing after another, after another, you get tired.

Speaker 1 But he's using very similar tactics, not on, I think, not on purpose, but when he's trying to kind of place all of these bets with the U.S. economy on different activities like levying tariffs.

Speaker 1 And I mean, this is the taco effect, right? The

Speaker 1 fact that Trump will always chicken out at the end where he says, oh, I'm going to put 100% tariffs on you. I'm going to do this.
I'm going to do that.

Speaker 1 And as a negotiating tactic, when you're trying to kind of take this calculated, what you think is a calculated risk, because you're like, I'm never actually going to have to follow through on this because I know that this person will back off first, right?

Speaker 1 I know that she will want to negotiate with me because they don't want to get into a trade war.

Speaker 1 I know that Canada will kind of do what I want because they don't want to get into a trade war, et cetera, et cetera, et cetera. It works until it doesn't, right?

Speaker 1 Because what happens with other countries is exactly what's happening with a consumer where like you've actually flooded the zone, right?

Speaker 1 And where you've done this so many times and you've been erratic so many times and you've made these threats so many times and then pulled them back that at some point as a leader of a foreign country might be, you know what, screw this.

Speaker 1 Like, I'm tired, right? We're not going to keep repeating this cycle and I'm actually going to, you know, stand my ground.

Speaker 1 So it has a very different effect, but it's the exact same sort of reinforcement mechanism that, that we're seeing on a domestic level, but you now see it abroad with very large economic circumstances where you kind of, you keep taking those risks.

Speaker 1 Um, and then eventually the risk calculus changes. And you have to realize that what was a calculated risk is now just a pure gamble, probably a negative EV gamble.

Speaker 1 And unless you're a very, very smart player, you often, especially when you're in it and you're so enamored and kind of in love with your own success, right?

Speaker 1 And you're almost like you're riding high because you think you've been successful at doing all of these things.

Speaker 1 It can be very difficult to have an objective reality check and realize, hey, the risk has actually changed, the risk proposition has changed. I should change the way I'm betting.

Speaker 4 And look, when people feel

Speaker 4 like they've been manipulated for a long period of time, right? And then they exit the situation,

Speaker 4 they tend to, I mean, you can probably tell me if I'm, if there are some studies here.

Speaker 4 Like, they rebel against that a lot, right? They're like, I am so fucking through with this. I mean, again, I, you know, I cover politics a lot, so I can't help but make like politics analogies.

Speaker 1 But like, I've talked about politics now, so it's good.

Speaker 4 No, but like, I feel like people might have felt with the,

Speaker 4 you know, a lot of people getting mad. I mean, the Democratic Party has, it's rebounding slightly now, right? But has like

Speaker 4 lower voter registration numbers and lower party identification numbers than it has in a couple of decades, right? It's toward, toward a low point.

Speaker 4 You know, part of it is like, this is a party that's kind of supposed to be upstanding and responsible, but like they kind of fuck up some shit and they kind of like deny that they fuck up some shit.

Speaker 4 And like, you know, if you like thought it was a bad idea, like I did, to run Joe Biden again and felt like you were gaslit by the Democratic Party, which I also did, right?

Speaker 4 then it's very easy to say, fuck these guys. They're wrong about immigration.
They're wrong about trans rights. They're wrong about economics.

Speaker 4 They're wrong about everything because like there's that reputational halo effect and then the

Speaker 4 rebellion effect. They're probably better terms for this, right? But like,

Speaker 4 you know, any relationship, an interpersonal relationship, a business between two countries, like resentment building up.

Speaker 4 You can tolerate a lot of it in the near term. It almost always comes out in the long term.
And often the

Speaker 4 rebellion afterward is worse than the marches you would have lost in a piecemeal basis in the short run.

Speaker 1 Yeah. And if you go even more globally, if we're talking about kind of some of these risks for U.S.
foreign policy, for alliances, for what the future of the world order looks like.

Speaker 1 down the line, like that's actually not very encouraging, right? Because it's one of these things where you casino-fy, you know, the U.S.

Speaker 1 government and it takes a long time for these effects to build up.

Speaker 1 But then the resentment is is such that the backlash is much harder and undoes any economic games you might have picked up in the immediate term.

Speaker 1 And your long-term economic future suddenly looks a lot bleaker. Now,

Speaker 1 if we think that that's what's happening in the U.S. government right now, we're not seeing some of these effects yet, but we will.

Speaker 1 And they're probably, the backlash is going to be a lot worse than people imagine it's going to be.

Speaker 4 Yeah, you know, the other suspicion people have is that when you're gamifying things, that things are kind of subtly rigged and

Speaker 4 to the gamifiers' advantage, right?

Speaker 1 Which they usually are, which they often are.

Speaker 4 No, they usually are, which is, you know, all these heuristics are basically correct, right?

Speaker 4 That usually if there's some complication, then although some people might be able to take advantage of that complication,

Speaker 4 even just being, you know, price discrimination being tiered into different regions, I mean, it's if you go to Europe, you notice there's less tiering of different types of services, right?

Speaker 4 You take business class in Europe and all this different areas, the middle seat is empty, basically, and you board like slightly sooner, right? There's less tiering in general.

Speaker 4 There's more kind of nominal equality.

Speaker 4 And whereas in the American economy, there are so many hyper dimensions, and you notice it in New York City, especially, or even people who are objectively really well off in New York are like, why can't I have an even nicer apartment?

Speaker 4 Or why can't I eat this?

Speaker 4 sushi place that costs $450 a head or whatever, right? Like you, you notice it a lot more. It probably works to make people like extremely competitive, right?

Speaker 4 But it is a certain equilibrium that, you know, creates cumulative fatigue and burnout and maybe worse decision making in the long run. I mean, we've both been in enough situations where like...

Speaker 4 You're playing a poker terminal all day, you have a lot of other life decisions and you're optimizing some travel shit. You're like, I'm just fucking sick and tired of this, right?

Speaker 4 I'd just like to sit down and have a nice, mildly overpriced burger and not have to make all these fucking decisions anymore.

Speaker 1 Yep. And it's one thing if you're you and it's a burger and it's poker decisions.

Speaker 1 It's another thing if you're a government leader and you've just had this stuff kind of lobbied at you over and over and over.

Speaker 4 And we'll be right back after this break.

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Speaker 1 By the way, as we talk about kind of the downstream effects, it's both on a personal resentment level, but it's also where like behavioral incentives will sometimes take a long time for the math to play out.

Speaker 1 So, for instance, with tariffs, you have kind of this situation where people are like, oh, well, you know, inflation isn't going up. It's not that bad.

Speaker 1 And it's because companies have the ability to shield consumers for some, there's some buffer, right? There's a period of time before it actually like will start hitting.

Speaker 1 And so it's incorrect to say, oh, there's no effect, no negative effect, just because you can't see it immediately.

Speaker 1 And so too, I would say it's incorrect to say that there's no kind of international order negative repercussions of some of this kind of gamifications just because we can't see all of them yet, because those are going to take a longer time to play out.

Speaker 1 And you have these institutions in place that have been in place for decades

Speaker 1 and they're designed to kind of be resilient and to be able to withstand a lot of pressure.

Speaker 1 But at some point, like if you keep, if you keep hammering on it, like those cracks are going to start to appear. And we're going to see some of those effects, not now, but in five years or whatnot.

Speaker 1 But the problem with gamification is that if you're the gambler who's making the risk now and you're getting a reward, you don't particularly care if you're going to bring the house down five years from now if you're not going to be there to get the backlash.

Speaker 4 In poker, we have like

Speaker 4 long-term equilibriums called game theory optimal solutions or GTO, where like if everybody is optimizing their strategy, what results?

Speaker 4 And GTO strategies actually are not supposed to be exploitative, quote unquote, right? They're actually kind of defensive.

Speaker 4 Like we assume that everybody else is smart and playing optimally within the constraints of the rule set. Right.
And so therefore, here's where we wind up.

Speaker 4 And it's kind of in some ways like a fair solution, right? You're bluffing, but not too much. You can be greedy, but not too greedy.
greedy. And if you deviate from that, then you can be exploited.

Speaker 4 You know, I mean, how customers feel when

Speaker 4 they're disempowered in a relationship?

Speaker 4 You know,

Speaker 4 I don't know, but like all that algorithm, price discrimination, all that stuff is like, you know, I think contributes to people feeling like they're getting the short end of the deal, right?

Speaker 4 And that, you know, there's a big debate over inflation. People have been spending down their paychecks more and more and more.
People get nervous about the economy. It could actually decrease.

Speaker 4 People might save more if they're more nervous, right? But certainly in the kind of the boom years after COVID, there were big debates about like how bad is inflation.

Speaker 4 And if you look at kind of like how much people are spending per basket of goods, how the Bureau of Labor systems define it, inflation was already pretty bad.

Speaker 4 But they're also spending more on shit they don't necessarily need because they're manipulated into purchasing it. And you remember that the second time.
I guess we're repeating ourselves, right?

Speaker 4 It's just like, you know,

Speaker 4 I probably wouldn't endorse everything in Kyla Scanlon's argument. I don't think she's guilty of this.
I think sometimes progressives can be really fucking prudish about this stuff.

Speaker 4 But I, directionally, I totally understand the complaint.

Speaker 1 So do I. So do I.
And she actually,

Speaker 1 I want to find this original quote because I don't remember what it originally says, but she reminds us,

Speaker 1 and she doesn't have the original quote either. She paraphrases what John Maynard Keynes, who is kind of one of the fathers of economic thought,

Speaker 1 you know, free market economics, et cetera, et cetera,

Speaker 1 that he warned that markets can stay irrational longer than most people can stay solvent.

Speaker 1 And I think that that's a really kind of valid concern and one of the reasons why sometimes kind of the gambler's thinking doesn't actually work in the sense that like things work until they don't.

Speaker 1 They go up until they don't. And you have to avoid risk of ruin in the meantime, right? You cannot go broke.
That's why the the martingale strategy doesn't work for people when they're gambling.

Speaker 1 And by the way, that martingale strategy, which we've talked about before, is, you know, if you place $10 on a bet and you lose, the next time you need to place 20 so that you can, you know, get back your losses.

Speaker 1 Basically, if you double all the time, you just have to lose one. You just have to win once and you'll be fine.

Speaker 1 But what happens if you're, you know, suddenly in the millions and you don't have that money? Like you're fucked. You don't know how long that's going to go.

Speaker 1 So yeah, markets can stay irrational longer than most people can stay solvent.

Speaker 1 And I think that that's something that should be worrisome to us as we look at all of these behaviors, as we look at all of this increased pushing edges, risk taking, and see that it's coming on the part of our commander in chief, of the government, of the policies that are being undertaken.

Speaker 1 And the fact that we have things that are actually kind of tied into highly speculative ventures.

Speaker 1 And if you're betting on all of them to do well, you better hope that those are all plus EV bets and that the calculus hasn't shifted on you, which, because of the way that we've seen the reinforcements changing and the behaviors changing and how kind of erratic it's been, I think that, Nate, both you and I have raised issues on why some of these bets may no longer be plus EV and why that risk calculus may have changed.

Speaker 1 And after that,

Speaker 1 Nate, whether it's resentment like you've been talking about, and like rebellion,

Speaker 1 whatever we choose to call it,

Speaker 1 that

Speaker 1 might be a bigger backlash than you bargained for.

Speaker 1 Let us know what you think of the show. Reach out to us at riskybusiness at pushkin.fm.
Risky Business is hosted by me, Maria Konakova.

Speaker 4 And by me, Nate Silver. The show is a co-production of Pushkin Industries and iHeartMedia.
This episode was produced by Isaac Carter. Our associate producer is Sonia Gerwit.

Speaker 4 Lydia Jean Kott and Daphne Chen are our editors. And our executive producer is Jacob Goldstein.
Mixing by Sarah Bruguer.

Speaker 1 If you like the show, please rate and review us so other people can find us too. But once again, only if you like us, we don't want those bad reviews out there.
Thanks for tuning in.

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