Why Extreme Risk Takers Are Winning — With Nate Silver

Nate Silver is a statistician, election prognosticator, and bestselling author. He joins Big Technology Podcast to discuss his reporting on extreme risk takers, and why the seem to be winning. Tune in to hear Silver's theory on how society bifurcates into the risk-forward, probability oriented thinkers (The River) and the safety seeking, status oriented community (The Village). In this episode, we discuss poker, sports betting, effective altruism, VC, AI research, and existential threads to humankind. Tune in for a fascinating deep dive from one of The River's foremost instigators. To buy Silver's book, On The Edge, check out his book page: https://www.penguinrandomhouse.com/books/529280/on-the-edge-by-nate-silver/ --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

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• 0:43Alex Kantrowitz?

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• 1:03Alex Kantrowitz?

  Why is a group of extreme risk takers dominating our society? And how is their mentality influencing everything, from tech startups to artificial intelligence? We'll find out in a conversation with election prognosticator and bestselling author Nate Silver, all coming up right after this. This episode is brought to you by AppPoint. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data, and most teams have no single way to see it, secure it, and prove it's under control. That's exactly what AppPoint does. For 25 years, they've been the trusted layer beneath the world's most demanding data,

• 1:46Alex Kantrowitz?

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• 2:21Alex Kantrowitz?

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• 3:06Alex Kantrowitz?

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• 3:21Alex Kantrowitz?

  Welcome to Big Technology Podcast, a show for cool-headed nuanced conversation of the tech world and beyond. Boy, do we have a show for you today. One I've been looking forward to for a long time because Nate Silver is here. He's the bestselling author of The Signal and the Noise. He's also the author of a new book called On the Edge: The Art of Risking Everything. It's out this week. It's one of the best books I've read in a long time, and I'm really stoked for this conversation. So Nate, welcome. So great to have you here.

• 3:46Speaker 01

  Thank you so much, Alex. I really appreciate it.

• 3:48Alex Kantrowitz?

  Your book goes into this group of risk takers. You call them the river. We'll get into that in a minute. But I'm just curious how you think about risk taking because risk is something that's all around us all the time. Some people have frameworks for it. Some people don't. A lot of people are risk averse. A lot of people sort of approach risk as it comes. But you've thought a lot about risk. So tell us a little bit about the way that you think about risk and is it good to take a lot of risk?

• 4:14Speaker 01

  So that's a lot of good questions. I think in general, most people are too risk averse. Although in the book, you meet lots of exceptions. In the book, you meet some of the people who are Overly into risk who are degenerate gamblers, we sometimes call them, that can be sometimes a term of affection, sometimes not. But in general, look, we have millions of years of human evolution and societal and civilizational evolution, which is premised on like barely eking out a living in a subsistence lifestyle where you might have a life expectancy of 40 years. If you catch a disease, there's a good chance that you'll that you'll die from it. And so, most people are are safety oriented and sometimes don't take enough

• 4:58Speaker 01

  opportunities where they can better their life or change their life, or or take what I would call a plus CV, meaning positive expected value gamble. And there are studies that show, for example, that when Steve Levitt, Steve Levitt, the famous Freakonomics economist, has done studies where when people flip a coin to make decisions and it comes up heads and they make a change, so meaning like changing careers, moving locations, getting out of a relationship that you feel ambivalent about, on average, they wind up happier. So that's kind of like the the short version, but people should also be better about about how they measure risk. People have a lot of sloppy heuristics when it comes to assessing potential courses of action. You know, I come from the world where my kind of lodestar

• 5:42Speaker 01

  is poker. I took kind of a low risk consulting job out of college and quit that after a couple of years to go play poker professionally during the so-called poker boom years of the mid 2000s. Now, in poker, you can calculate things quite precisely, right? There are 52 possible cards. You can run the permutations and combinations for the order in which they might come out. Real life is not that easy sometimes. But yeah, what the book is trying to do is give you like a a guide to the mentality of people that are in this world. And it's mostly about people who are taking mathematical quantitative types of risks. So, you know, poker players or venture capitalists or or hedge funders. But there are also people who take

• 6:24Speaker 01

  Physical risks, there's like an astronaut I talked to in the book and like an explorer, an NFL player. And oddly enough, actually, they have some of the same types of mentality, being cool, under pressure is obviously a huge thing. Not being results oriented is a term we use a lot in poker, where you have imperfect information, you have to make the best choice you can, given the information you have. And sometimes you have to make a choice quickly, because in business and other things, if you wait to have perfect information, well, somebody else is already taking advantage of that opportunity. And so being kind of very focused on, on process, and being focused on the long run and having a long time horizon, these are all helpful qualities.

• 7:06Alex Kantrowitz?

  Right, and we're already in it here. I mean, we're talking about expected value. Now, one of the things that I sort of, that perked up for me when I was reading the book was, you bring up expected value, you talk about it a lot. And I'm, you know, thought about, oh, this is an effective altruist term. We've talked about EAs on the podcast in the past, and we're going to definitely talk about how effective altruists think about risk, and especially the way that that approach to risk has been reflected in the business community, in the tech community in particular. But can you just define what expected value is? Because clearly, this is something that extends beyond EA, and is also like, I think, pretty foundational when you're thinking about the type of risks you want to take.

• 7:43Speaker 01

  So, expected value is what outcome you get on average in situations where there's randomness or uncertainty. So, if you invest in a portfolio, you start a fund to invest in whatever, 20 early-stage startups, then the expected value might be that you expect a third of them to never make a dollar, right? A third of them to break even, and then a third of them to, to make money. And the question is, what's the chance of like a 100X or 1,000X outcome in that, in that bunch of startups that you invest in? Poker, it's even more clear, since there are, is literally an element of randomness in, in poker. But that's all it is. It's a, it's a situation where, it's important to make the distinction, by the way,

• 8:25Speaker 01

  It's a situation where you are playing out a scenario some number of times, or at least some theoretical, multi-first version of you, right? You know, if there are 52 cards in a poker deck, then every card will be dealt once the next time. And figuring out kind of what the average result is on average in those situations. Now, look, if it's a one-off decision, should you risk your life or something when that risk of death is tangible? Maybe not the best framework, but for repeated decisions, even things like, let's say you're going to work and there's one route that's faster on average, but there's a drawbridge that's unpredictable and if you hit the drawbridge, then it'll be slower. That's a situation where you might think about like, okay, if I get in five minutes late, does it matter? Or will my boss like fire me, that kind of thing.

• 9:10Speaker 01

  But like, I think it's actually in some ways a fairly intuitive concept when we have repeated practice with uncertain situations.

• 9:20Alex Kantrowitz?

  Right, and I gotta think of another way I just thought about it is, and tell me if this is right, like if you're thinking about asking out like a romantic prospect and you think if, alright, if I do this 100 times, they're gonna say yes 60 times and no 40 times based off like my interactions with them and all the people I've asked out in the past. That would be a positive expected value thing to make you go and ask them out because the average, if you take all of it, is a yes.

• 9:45Speaker 01

  Yeah, look, and I think it gets into slightly cliched life advice, but I generally think people who are willing to take a risk and ask for things they might want, right, whether it's romantic partner or a new job or a friendship or whatever else, you know, I think they're usually rewarded by that. I mean, people are often paralyzed by uncertainty where they do nothing and that can often be the riskiest course of action. If you're taking physical risks, certainly. If you're in some type of military battle, just standing there and doing nothing when you're getting shelled is the worst course of action. Maybe you wanna retreat, maybe you wanna attack and fight back and try to disrupt the source of the, of the whatever incoming missiles.

• 10:27Speaker 01

  But the kind of, you know, the fight, flight or freeze reaction? I mean, sometimes people freeze when that's the worst possible choice.

• 10:36Alex Kantrowitz?

  So you divide society into basically two different groups, right? This is like a good foundation for it. The first is the river, people that think about life in these terms and are willing to take risks. And then the village, which is, I guess, like people who want that safety.

• 10:52Speaker 01

  Yeah.

• 10:53Alex Kantrowitz?

  Talk a little bit more about the river and the village and why was it necessary to make that distinction?

• 10:58Speaker 01

  I mean, a couple of reasons. One is that I'm a very like geographic kind of visual figure. So imagining things as like kind of a mental map. The river is kind of a term borrowed from poker. So on poker, the last card that's dealt in Texas Hold'em is called the river. But also poker kind of comes from the Mississippi Riverboats, right? That's its origin, where you have different people with lots of time on their hands who like to take risks. And that's where poker emerges from. But what I found in writing the book is that like these different communities that we've already touched on. So like poker, or VC, or crypto, or to some extent even effective altruism, although they're a little bit different because they're not kind of, they're altruistic, at least in principle. You meet the same types of people, which are people who are very analytical, so good with numbers, good with probabilities,

• 11:42Speaker 01

  cross with being very competitive, right? Sometimes in a way to make money, but also just wanting to, I mean, Elon Musk is insanely competitive, right? You're getting people who are at the extreme right tail of how much they care about proving themselves to themselves or proving themselves to others. That combination is very powerful. The counterpart to that is what I call the village. And that's like a little bit more of a familiar term. I mean, I think of the village as academia, government, especially when you have a democratic or progressive government, academia, journalism, nonprofit sector, fields like that where it's less individualistic. It's more risk averse. You're maybe more concerned about your social status, right?

• 12:27Speaker 01

  In the village, the ultimate punishment, although this might be changing a little bit, is Is ostracization or cancellation might be the more modern term for it. You know, if you look at how political parties behave, there's a lot of group think. When Joe Biden dropped out, and full context for the reader, that's happened very recently before we're recording this. When Joe Biden dropped out, all of a sudden, every single Democrat goes ahead and endorses Kamala Harris. They're all kind of playing follow the leader, which is kind of very different than the poker player mentality when you're trying to be maybe more of a lone wolf, or in Silicon Valley where they're explicitly trying to be contrarian and look for bets that other people or companies and ideas that have been overlooked by the rest of society.

• 13:10Alex Kantrowitz?

  And so your thesis is that the river is winning? Why is that?

• 13:14Speaker 01

  I mean, if you look at the profits for venture capital, I mean, the top decile firms are making rates of return of 20% per year. That's really high. I mean, if you look at finance continues to grow, meaning Wall Street as a proportion of the economy, Las Vegas continues to grow every year. I mean, part of it is that, look, it doesn't necessarily mean that like the average VC fund is doing that well. Like the non-elite firms, their returns aren't particularly extraordinary. But if you're looking at what kind of happens, I mean, how do you end up with people who wind up with that are worth $200 billion? They almost by definition have to be both really lucky and really good and keep doubling down and making more and more bets.

• 13:56Speaker 01

  I mean, Elon Musk, for example, chose a very incentive compensation heavy deal with Tesla, the other companies that he's been in, even something like investing in Twitter or buying Twitter when he kind of has his life made and, you know, I think buying out X, I suppose. That's kind of a high risk thing in a way. Not quite the same as high risk if you're like struggling to make an income and you like cross some international boundaries, refugee, like that's also an admirable, maybe more real risk in certain ways. But the people who keep doubling down and are skilled enough to win not every bet, but more bets than not are the people that by definition in a world of 8 billion people kind of wind up on top. And like, and the very richest people, the top

• 14:38Speaker 01

  Ten richest people in the world are worth about twice as much as they were 10 years ago. You keep seeing this tale get pushed outward and outward. And by the way, those people are, by most definitions, to some degree or another, all self-made. If you inherit a huge fortune, you don't have that much incentive to keep gambling with it. But if you're kind of selected for being a maverick rebellious founder, and a lot of people who are in that department had some type of trauma or challenge in their childhood, where they kind of keep having to feel over and over to people like they have to prove themselves, and they feel like they have some duty to themselves or others to continue to compete and gamble,

• 15:22Speaker 01

  then that's where you get the extreme part of the distribution curve.

• 15:27Alex Kantrowitz?

  Right, and we're going to go through some of these things, including poker, VC, effective altruism, AI. But I first want to ask you a couple of questions before we move on. First of all, okay, so you're saying, basically, capitalism rewards risk. Is this such a new idea? I mean, this seems to be something that's fairly self-evident.

• 15:43Speaker 01

  I think it is self-evident. I think, though, also, you know, it can take a long time for industries to mature and play out. Like poker is a good example, where if you took like a... I mean, now you have what are called computer solvers in poker. So a solver is literally, technically speaking, the Nash equilibrium. It's a game theory optimal solution to poker. Now, it's very complicated, the solution. It involves a lot of randomization and mixing different strategies, even with the same hand. But, you know, I think, I think, people don't realize what happens when, when you have exponential growth, right? You have exponential growth, and the world grows at 2% per year globally, or 3% per year.

• 16:25Speaker 01

  That begins to add up, but also when you have sectors like tech that grow at 10% per year, that really begins to add up. So it's like, not a new idea, but the kind of manifestations of it, and also the fact that you're now getting into technologies like AI. And if you read the book, I have complicated feelings against AI. I kind of present arguments for and against P doom, so-called, the chance of catastrophic outcomes from AI, as well as the chance of very good outcomes. But, you know, this is kind of the trajectory of... Capitalism is that people keep making more and more bets and also in some ways, government capacity in the US is getting, I believe, somewhat weaker. There is still a very large governmental sector. I mean, you know, there are a lot of taxes. The federal government's very active and state governments, but like, look at AI.

• 17:09Speaker 01

  It's not like the Manhattan Project, which was just developed by the US government. It's being developed by, by the private sector. You know, medical innovation's happening more and more in the private sector, for example. And look at things like social media even. I mean, you know, someone like the owner of Twitter or a big technology platform might have more power to affect how the world works than, than even many governments around the world do. So I think, I think it's, it's not new. It's just we're kind of like seeing the manifestations of it. And despite a lot of missteps from Silicon Valley and big tech, I mean, you can point to lots of failures of judgment and lots of personality types that are flawed.

• 17:52Speaker 01

  The fact is that they do keep growing and creep and keep winning and become like a larger and larger segment of the American economy.

• 18:00Alex Kantrowitz?

  Right. It's almost like there's so much more action happening in the river, quote unquote, now that there's a potential to even win even more. But, but, you know, we'll, we'll discuss this throughout. I have one more question for you before we, we keep going, which is that, I mean, you pointed to Democrats as like a fall online type of group, but I mean, I'm not even saying this from like a partisan standpoint. The Republicans certainly are a fall online group. If you, you know, see what they've done with Trump, for instance, like they are definitely a group that doesn't really tolerate like, you know, sort of the lone wolf type of thing and standing out, speaking out against the consensus.

• 18:33Speaker 01

  For sure. I mean, and this is kind of why I've always felt like I never really fit in, in politics in general. I mean, you know, a lot of people in the river are people who are dissatisfied with, with the two-party system. So they might over-index toward third parties, for example, or over-index toward more centrist or libertarian candidates, for instance. But yeah, politics in general is about. In-group coalition building and reinforcement, right? You don't want people to think for themselves particularly much. There's a lot of social signaling. You have to form consensus around a nominee. And so, yeah, part of it was, partly the inspiration for the book was me feeling alienated as part of a world where I was mostly known for covering politics and kind of feeling

• 19:17Speaker 01

  like I was bashing my head up against a wall where, you know, I think political partisans are happy with you if you say their candidate is winning and unhappy if you say they're losing in your forecast and there's not a whole lot of nuance and complexity beyond that. But there are, there is this group of people that are more numerous than you think, that do think in terms of probabilities and expected value. And, you know, I mean, it's a common personality type on Wall Street and in Silicon Valley, which again are like, you can have mixed feelings about them, but like, but they are industries that are kind of in some ways eating the world more and more. And I think there, I think that, again, that combination of like, the analytical part mixed with the competitiveness and the desire to prove people wrong is just some type of

• 20:00Speaker 01

  like skeleton key for unlocking high variance. I mean, by variance, I mean, you can also have like very bad outcomes. We talk a lot about SPF in the book, who not only ruined himself, but also did a lot of damage to other people. And there are people who believe that AI has some very serious tail risks as well.

• 20:20Alex Kantrowitz?

  So we're talking about this idea of the river, people that are interested in taking chance, a little bit more risk forward and how they're winning. And it does also seem like maybe society is moving in a way that indicates that it's feeling these shifts and responding to them. And I think, you know, we're going to go, again, we're going to go through all this effective altruism, AI, B C, but we're going to briefly touch on this sort of, I think you're talking, you talked about like a poker moment or the growth of poker in the US and worldwide, whereas a few years ago, the World Series of Poker was like held, not televised, not really paid a lot of attention to. And now it's become this thing that's like on ESPN, you've been in the World Series of Poker.

• 21:04Alex Kantrowitz?

  And you've done quite well in the event, but it's become almost like a the maybe tell me if I'm wrong here. I think it's the most watched like non-sport sport like no one's like, you know, running around and stuff. But like it is very captivating on ESPN and people really pay attention to poker players have become celebrities. And so what's behind the rise of poker? Is it just a reaction to the fact that people see that this type of river style thinking is going to be a winning ticket for them?

• 21:36Speaker 01

  I think that's part of it is that, you know, if you're in fields like finance or tech, I mean, all the, you know, all the guys I know who work for hedge funds or the women who work for hedge funds, like poker is like your training mechanism to practice decision making under uncertainty. And I think it's actually fairly similar in a lot of ways. It partly grew. So by the way, we just had the main event of the World Series of Poker back in July, and it set another record with over, over 10,000 participants paying $10,000 each. So you have a hundred million dollar prize pool, basically. I think ironically, the pandemic helped to boost poker. So part of what happened is that people were, were trapped, I guess, in isolation or indoors,

• 22:20Speaker 01

  began playing a lot of online poker games. And when the real world opened back up again, there were record numbers of players who felt stir crazy and, and were playing in poker tournaments. Like I think, look, I think we talk a lot in the book about the gender issues in poker. I, I, you know, my podcast partner, Maria Konikova, is a great female poker player. There are some great players that we talked to in the book. I do think also you're in a world, however, where a lot of men feel a little bit lost. And like poker provides an opportunity for like, for a bonding experience. That you can go and, and play poker and have some degree of, hang out with the guys and the girls and have some degree of socialization and competition.

• 23:04Speaker 01

  I mean, it is a game that combines a lot of things that I think are very interesting. There's math, but there's also a lot of people reading. There's risk, there's reward. It feels really, really. Really good to like make a deep run in a poker tournament where everyone else has been eliminated and you're kind of one of the survivors and your chip stack grows over and over again. I mean poker is also a classically very American game. It did kind of originate in the American, you know, Mississippi River Delta, although now you have people from all around the world. Who play the game too, but there's something about like, like part of it, I think to Alex is like, I think we're getting more bifurcated. In our risk preferences, meaning that there are some people now who are, you saw during COVID that some people are.

• 23:47Speaker 01

  Very risk averse and that it might be sensible if you're in a high risk situation or setting. And some people are more YOLO. And so instead of having this nice. Belker, because you want both, right? You want people who are cautious in society and you want people who push the envelope and probably society benefits when you have. A mix of those in the aggregate. But those.

• 24:07Alex Kantrowitz?

  You have such a great line in the book. You say people are becoming more bifurcated in the risk tolerance. You've got the Netflix guy in the country and the strip club guy in Miami.

• 24:15Speaker 01

  Yeah, you got like, I mean, people and it feels like we have. More and more options, but options can be like paralyzing and crippling. To some people, I mean, I, I think people have felt there's, there's less and less trust in almost every institution in the U S. Less trust in media, less trust in government. In COVID, people often felt like they got contradictory advice and had to make up their mind for themselves. And that can be both wonderful and terrifying. If you feel like I, I kind of rule my own roost, then that can be. Great for some people who are comfortable with uncertainty and optionality and things like that. In a more virtual world too, you can like. Have more influence with more people around the world. But if you're someone who's like.

• 25:01Speaker 01

  Paralyzed by choice and just wants safety, or not paralyzed, but just in a life situation where. Where you have things to take care of, you have kids to take care of or health problems to take care of, you know, that can be more challenging and I, I kind of worry that we're having a certain type of. New type of inequality, almost, where people who understand risk and understand new technologies like AI and understand how to be entrepreneurial and how to to kind of craft their own way in life have like never done better, but then but then it's harder for the average person, I think, to cope with this. And sometimes, I don't mean this in a conspiratorial way, but sometimes things are kind of like rigged against them, right? If you go into a casino

• 25:45Speaker 01

  and play slot machines, literally, the big casino companies, Caesars and MGM, literally hired teams of analytics nerds to figure out how to manipulate those slot machine probabilities to make you gamble more and more and more.

• 26:01Alex Kantrowitz?

  Yeah, it's amazing. It's like all marching down to zero. It's just the question of how you get there. Although I will say the best way to play slots is you go play penny slots. I know they have worse ads, but you put five bucks on a card, pay those play those penny slots and get like three drinks and your night is made.

• 26:17Speaker 01

  Yeah, there look, and there can be good. Look, the word I use a lot in the book is agency. If you're a person who has high agency and you say, you know what, I'm spending amount of money that I can afford. I'm gonna go play slots or blackjack and I have 200 bucks in my wallet. I'm not gonna go back to my room and get any more cards or chips and like I'll get free drinks out of it. And now then I'll win and have a good story. Then like, I think that's totally fine, right? I mean, I'm kind of at least a lowercase L libertarian. So I'm not in favor of like banning any of this. But but, you know, people who are prone toward different types of addiction or manipulation than than I worry about more and more. I mean, most people are not problem gamblers, but like problem gamblers gamble so much, they

• 26:58Speaker 01

  make up a lot of, you know, probably not the majority, but a decent share of casino revenues.

• 27:04Alex Kantrowitz?

  And this is where we sort of put your river versus the village thesis to the test and ask if the river is really winning, because you have this stat in your book saying that Americans, Americans alone lost 60 billion in gambling in 2022, and then an extra 40 billion in unlicensed gambling and 30 billion in state lotteries. So, I mean, is it that the river is winning? Or like a select portion of the river that actually understands what it's doing is winning?

• 27:31Speaker 01

  A select portion of the river, because like another game, for example, that In a certain way is kind of rigged against you and you have to be careful. Let me be careful about how I say this, but like, but sports betting, the problem with sports betting is that if the casino, if the sports betting site thinks you're good, then they'll probably limit you from betting more than a few dollars a game. It varies from site to site. DraftKings, for example, is more eager to limit people than Caesars, at least in my experience. But, but yeah, I mean, sometimes it's, you know, the river isn't necessarily the, the average person in a casino in Las Vegas or New Orleans or whatever. And by the way, I should say,

• 28:10Speaker 01

  both of these communities are communities of elites. Relatively small numbers of people and, and the average American is trying to navigate between these. And that's, by the way, why they have all these rivalries. You know, when you saw, it's a little bit, if you're not a politics fan, this is a little bit esoteric, but when you saw like Bill Ackman and hedge fund people going after like the presidents of Harvard and MIT and whatnot, that was a classic river versus village confrontation.

• 28:41Alex Kantrowitz?

  Yeah, our listeners are familiar.

• 28:42Speaker 01

  Okay, I'm sure, yeah. But like, yeah, Harvard is a classic village institution and, hedge funds, VC are classic river institutions. So, and that was a fight between different

• 28:56Alex Kantrowitz?

  But you could argue Harvard's a hedge fund itself, right?

• 29:00Speaker 01

  Well, I mean, that's a deep, that's a deep irony of, of all of this, right? Is I think, and you can point out lots of hypocrisies on, on both sides. That Harvard does like, print money with a huge endowment. On the other hand, you know, lots of people in the river think of themselves as being nonpartisan and above politics, but, but you see that partisanship is a very powerful drug. And I'm probably not in a mood to point toward individuals and say, oh, that person's a partisan and that person's not. But like, they often get like quite pilled, quote unquote, by politics and, and it's, you know, are not always able to remain neutral. They tend to wind up Deep Team Blue or Deep Team Red before too long, pileless can be intoxicating in that

• 29:44Speaker 01

  way. So yeah, both these groups are full of personality flaws. And although I'm kind of more in the river mindset, I have experience in both and part of what the book's trying to do, like, you know, my pitch to people in the village is like, I can help you to understand how these people on the river think. Because I'm one of them and I talk to them and I think I have very honest conversations with them. But they can be trying to take advantage of you or can be trying to run circles around you and they are very capable of lots and lots of lapses and errors and judgment, as well as just things that are that are kind of self-serving, the way that different technologies are regulated, for example.

• 30:24Alex Kantrowitz?

  And we will get into that in a moment. Also, for listeners, towards the end of this conversation, we're going to ask Nate for his like, three key poker tips. I'm excited for that. I recently joined like a once a month weekend poker game. So this will help me, but we're going to hold off on that for a moment because we do want to talk a little bit about sports betting and then get into the VC stuff. The sports betting section of your book is fascinating. The first part that I found so interesting was, or I would just say the most interesting part to me was the fact that the casinos don't really have like such a sophisticated operation, setting lines, and they're waiting for professional bettors who've like their own formulas or crunching numbers to make their bets. And then they sort of adjust the line based off of what these pro bettors are. So effectively,

• 31:09Alex Kantrowitz?

  if you get in to a bet pretty early on, like basically or immediately, once it goes up, you might have better odds than if you wait.

• 31:16Speaker 01

  For sure. No, look, you might have some like, smart kid who's 25 years old, who, you know, whatever PhD in economics or math, or not even a PhD, probably, maybe, but more likely just a BA in math and is getting paid $100,000 a year to go work for a casino somewhere. And, you know, the college basketball lines must go up and he used like a computer program to estimate Duke versus North Carolina or whatever else. And like, maybe he's talking to his colleague on the other side of the desk. But no, I mean, They are not that sophisticated in terms of setting lines. What they're good at is

• 31:57Speaker 01

  understanding how to account for information and the actual act of what is called bookmaking, right? Maybe Alex, they think that you're smart, so the line starts out with the Kansas City Chiefs favored by two points. When you bet on the Chiefs, they'll move the line to Chiefs minus three. Whereas for me, they think I have the profile of a recreational better. I bet on the Chiefs every week, so when I make that bet, they're not going to change one thing. They'll want to keep the line there to encourage me to bet, to bet more, potentially. So that act of gaining information is a traditional process of bookmaking, and it's a market discovery, almost like an auction-type format, a price-discovery format.

• 32:39Alex Kantrowitz?

  In your book, you talk a lot about sports betting, but the one thing that you sort of stay away from, or maybe it's not applicable, but I want to get your opinion on, is the fact that this is potentially dangerous for the sports. I mean, I think probably the Shohei Ohtani thing happened after your deadline, but we've already had Shohei potentially implicated in a sports betting scandal, or definitely implicated, we don't know if he was involved, but who knows? We never find out. We've had an NBA player suspended, I'm sure. There's been, a lot of these platforms won't let college games be bet on. Do you think that sports are getting a little bit too close to the gambling platforms? Because we're going to just end up seeing scandal after scandal of people being unable to resist. Gambling can be in a compulsion, and especially if you have a way of trying to swing the

• 33:23Alex Kantrowitz?

  outcome, it can really change the balance of what might be one of the last pure things

• 33:29Speaker 01

  Yeah, no, look, I think-

• 33:30Alex Kantrowitz?

  in the United States or in the world, which is like sports played by the rules.

• 33:34Speaker 01

  I think the leagues are getting a little bit greedy in some ways. So for example, in the NBA, Jontay Porter is a player who was suspended for betting on his own prop bets, right? He would bet that he wouldn't get as many rebounds as the over-under line had, and mysteriously would find ways to miss rebounds and have injuries that required him to be taken out of the game. So why is anyone betting hundreds of thousands of dollars on this obscure player? That doesn't make sense. So having like- I call it the kind of in and out menu where you only have like, like six items, but they're all done pretty well. Like, that's more rational where if you want to bet on, you know, big time sports, the point spread, the money line, which is just the odds that each team will win, or the

• 34:18Speaker 01

  over under line, like, that's probably fine. When you have things like player prop bets, when you have things that are based on news, there are many casinos that will let you bet on, like, who is taken first in the NFL draft. If you work for ESPN and you're an NFL reporter, or you work for, for an NFL team, you're going to have a lot of inside information about that. So I, I, I think it's been a little bit of a money grab in the short term, and there's not enough focus on making it more sustainable. I mean, look, I live right in New York City. I, I go to Madison Square Garden a lot. At one point, there were like, literally three different ads for three different sports books at New York Rangers games on like, the rink around the ice,

• 35:01Speaker 01

  the sideboards. Usually, people care about category exclusivity in such a narrow venue, but they so didn't care that like, that like, they were, I mean, I, you know, I think it was overbought, and you've seen some, some consolidation, where actually DraftKings and FanDuel are doing reasonably well. They have a bit more market share relative to the others. But it's always been a tough business. And the reason it's a tough business is because like, it's not that hard. I mean, it's hard, don't get me wrong. It's very hard to beat the sports books. But when they offer this gigantic menu of hundreds of different bets on every single game in thousands of leagues around the world, and by the way, and there are nine legal sports books in New York,

• 35:43Speaker 01

  and however many gray market offshore ones, so I can look for the best line out of thousands of options, it's not that hard to find a line that I can beat by 4% on average, which is what you need to beat the house. You have to beat it by, you know, they take about a 4%, 4.5% cut of every bet. So I think it's always been In Vegas, sports betting has always been seen as an amenity, A M E N I T Y. Meaning like you come in, there are certain types of customers that want to go in for the NCAA Tournament or for an NFL Weekend or, you know, big soccer match and, and bet a few hundred bucks and gamble and watch on the big screen and like, and sports books are fun kinetic environments.

• 36:26Speaker 01

  If you go to like, I was there for Copa America, I was just in Las Vegas and like, it's, it's fun to see kind of the Colombian fans and the Argentinian fans and all the people who have action on the game. Like, that's a fun piece of like eye candy for the casino, but sports betting's never been a major profit center. It's like one or 2% of overall Vegas revenues. And I think, I think it's been like a little overbought in a way that isn't fully sustainable.

• 36:50Alex Kantrowitz?

  Okay, one last thing on sports betting. I don't know if you guys started this at 538 when you were there, but this was something that's always kind of annoyed me about the analytical approach to sports. Is that like, sometimes the sites will be like, this team has a 70% chance of winning, or this player has like a 30% chance of hitting a homerun. Like, you watch Apple Baseball on Apple TV right now, and it's ridiculous. Like, they adjust the win probability with every, every percentage. And for me, as like a massive sports fan, I've always thought this is, the word chance is so wrong here. Cause it's not a chance. Like, it's not like you're like putting a ball on the roulette wheel and allowing it to come where it is. It's actually something that's determined by human outcome, human intervention here. And

• 37:34Alex Kantrowitz?

  I just think chance is the wrong word for this. What's your response to that?

• 37:37Speaker 01

  We can get into some existential questions here. I think it like literally depends on the sport to some degree. In a sport like hockey, for example, which there's a lot of luck in hockey, generally speaking, teams don't have that large an edge. Like, literally, if the Zamboni made a certain patch of the ice slick in between periods, and maybe the puck bounces and goes in the goal and like otherwise, it doesn't certainly, but I, look, this, that's actually a very deep, Alex, existential debate about the kind of nature of, of uncertainty. Look, epistemologically,

• 38:12Speaker 01

  You don't know, right? It might be true that it's not literally a matter of chance, although some things actually are kind of random. Like, this is part of what like, chaos theory said is that some systems are irreducibly complex, like weather systems, for example. Now, I don't know if like, a baseball game fall in that category. But there is probably some element of like, of like literal, of literal chaos, I suppose.

• 38:39Alex Kantrowitz?

  Okay. I feel like I could do a full show on this, but I'll accept the argument.

• 38:45Alex Kantrowitz?

  All right. One more thing about, on this line, politics. So, polymarket, you know, watching it predict like, who's going to be the nominee, who's going to win the election? You can bet on anything there. It's a betting site on sort of news outcomes. I mean, I think you're on the board of, as well.

• 39:01Speaker 01

  I'm an advisor to polymarket. That's correct. Yeah.

• 39:02Alex Kantrowitz?

  An advisor. Are they getting to, are these prediction markets getting to be better than actual polling in terms of predicting an outcome?

• 39:10Speaker 01

  Um, so I have my own polling-based model at my newsletter, so I'm a little bit partial to it. However, one thing about polling is that it takes a few days to incorporate new information. You actually have to contact people on the phone or online and have them take your poll, and you go back and do your weights and run your numbers, whereas they get to react to things in real time. So, for example, in the disastrous debate for Joe Biden, was it June 26th or 27th, or something like that, you could see, reflected in real time, prices at polymarket and other markets changing on the chance that not just Trump would win, but that Biden would drop out. You could see Bitcoin reacting in real time, because Trump

• 39:52Speaker 01

  is seen as bullish for Bitcoin. So, you know, these were not people who were waiting for information to come in. They were people who were making their best guesses in real time. And that skill's underrated, too. Look, I'm a guy who loves to be rigorous. The book is very rigorous. It involved three years of reporting and writing. The model we build is thousands of lines of code. But the skill that people on the river have to make decisions based on incomplete information is often vital, because if you wait for complete information, then someone else has already made that bet first, right? There's no more profit in that bet anymore. You have to be willing to make judgments when the data is noisy. And that's kind of what makes.

• 40:35Speaker 01

  The actual skin in the game, risk-taking communities actually have the potential to make profit and makes like academia or the village than too, too slow most of the time.

• 40:47Alex Kantrowitz?

  Okay, that's interesting. So you're a river guy, but you're also a polling guy?

• 40:50Speaker 01

  Yeah.

• 40:51Alex Kantrowitz?

  And the answer that I'm hearing you give right now is maybe the river will eventually have an edge on polling?

• 40:58Speaker 01

  I think this is-

• 40:59Alex Kantrowitz?

  In politics, or am I reading this wrong?

• 41:00Speaker 01

  This is changing too, in part because, um, you know, the markets are becoming more like, the politics markets are becoming more like, uh, more like sports betting markets, which again are, are, are at least pretty smart, once you have price discovery. Um, I think the reason why is that everything is kind of becoming eaten by politics now. And so you have more and more financial firms, hedge funds, investment banks, so forth, who think they have to like, understand political risk, because political risk can affect things like different classes of stocks, how different industries are regulated, interest rates, whether foreign countries, if you're investing in some foreign exchange, is this country going to be stable or not? Um, will the leadership be good for the economy?

• 41:45Speaker 01

  Good for equities? So you have more and more investment, I think, and this is somewhat firsthand knowledge, based on going around and talking to people about consulting opportunities and so forth. You know, I have noticed more sophisticated conversations happening in the last few years. Some of these companies will trade in different ways, but like, prediction markets are, are a part of that. I mean, the critique was always that when you just had kind of hobbyists, that it didn't get that far, because you only have like, one election every four years, building an election model is hard, people are, are very partisan. But you have kind of more institutional investment now in, in building models of things involving political risk or other types of exotic derivatives where, where there's actually

• 42:29Speaker 01

  adequate liquidity and actually adequate opportunities to trade, which I, I didn't think was as true, um, say, five years ago, 10 years ago.

• 42:39Alex Kantrowitz?

  That's crazy Nate, because I mean, we know that money has influence on politics. Are we going to end up getting to a place where like, I mean, I guess this was always the case, but like, companies or financial institutions that may end up placing big bets on candidates in one arena, just work hard behind the scenes to manifest that, that outcome that they're trying, that they're financially linked to.

• 43:03Speaker 01

  I mean, there are a couple of things here. One is that there have been accusations before in 2012, for example, there were accusations that Mitt Romney traders were deliberately buying up Romney stock at prediction markets because they thought that would create favorable buzz and therefore it's like free earned media, for example. But remember, that's at a point 12 years ago where there's less volume. So you have to spend less to influence or manipulate, if you want to use the term, that market. Yeah, look, you do get into some gray areas here where if you have like, you know, traditionally organizations like the CFTC, which regulates commodities exchanges, have not loved betting

• 43:45Speaker 01

  on real world events, in part because they were worried that it could create moral hazard, for example. You know, if you're betting on some insider trading case or something like that, then if you have access to like manipulate the markets, however, the fact is that like, you know, if I were talking to CFTC, this risk is priced into lots of commodities and so forth anyway, that when, when the, when the Donald Trump price increases, it's probably good for, for maybe defense contractors or Bitcoin or whatever else. I don't want to speculate too much. I, that's not the part of it that I do. But like, yeah, but like, you know, political risk has huge effects around the world.

• 44:26Speaker 01

  If there's some, you know, dictatorship that emerges in what had previously been a capitalist country, then that can have profound effects on the global economy. Things like, like, for example, if you're investing in Nvidia or semiconductor. Supply chains and understanding the China Taiwan conflict is going to be like very important potentially. And so these things are things people have to price anyway. And the argument for prediction markets is that is that they give you a more efficient and explicit way to do it.

• 44:55Alex Kantrowitz?

  Okay, let's talk about VC and founders.

• 44:57Speaker 01

  Yeah.

• 44:57Alex Kantrowitz?

  We're like forty something minutes in. We have to do this. It's the show mandate. But VCs and founders, they think about risk in really different ways, which is another thing that you highlight in the book that to me was surprising. So can you talk about like the different type of risk that a VC and a founder tries to take on? And how does that influence what they do?

• 45:17Speaker 01

  Yeah, I mean, the main difference is that most VCs want founders who are going all in on an idea with a very long time horizon. So for 10 years or often more, I mean, these companies can have, I mean, the J curve means you can often take 10, 12, 15 years before your fund is actually making money, even if you've made good investments.

• 45:36Alex Kantrowitz?

  Right. I love how you call these founders hedgehogs.

• 45:39Speaker 01

  This comes from

• 45:39Alex Kantrowitz?

  Basically, get in that hole and keep.

• 45:41Speaker 01

  Yeah. So this comes from the typology from Isaiah Berlin, where a hedgehog versus a fox, where a fox is crafty and kind of roots around for different things. And it's kind of like a hunter gatherer type, right? Whereas a hedgehog very much like digs in and stays berries in the hole and is very much, very much all in. So for a founder, I mean, being a founder is, I think, legitimately often a very risky thing to do. It's pretty rare for a company to become the next Google or SpaceX or whatever else. By definition, you're pursuing an idea that probably is not adequately addressed in the market. Usually the market's smart. It's for a good reason that your idea wouldn't, wouldn't work potentially. And so,

• 46:25Speaker 01

  and so you have all these VCs who are foxes, right? They'll say, yeah, actually, we don't want to have. Too much domain knowledge. You talked to like Michael Moritz, right? He used to be a journalist and then became one of the best investors on on earth. Right from Sequoia. Yeah, Sequoia. He's like, yeah, as a journalist, you kind of parachute into a place and you have to, again, use incomplete information to make decisions quickly. And you don't necessarily want to be a domain expert. Sometimes domain experts get blinded or biased by the forest for the trees a little bit. You want to be like a good generalist. Whereas for a founder, you want them to solve a problem in a different way.

• 47:10Speaker 01

  And devote all their resources to it and be a true believer in themselves, right? You know, Paul Graham, another VC I talked to, says you need founders to be optimistic. It's kind of irrational in some ways. You would think you want a founder who's a perfect assessor of risk and very well calibrated. But if you're not like a true believer in your idea, then it's very hard to sell other people on it.

• 47:37Speaker 01

  And kind of in a world where things are getting more and more quantified and analytically driven. Maybe you need, maybe there's more of an edge now from being a a true believer and saying, I don't care what the barriers are. I don't care what the conventional wisdom is. I'm just going to kind of plow through things. Now, to be clear, this often ends in disappointment or ruin. And if you're a VC, then you can collect 15 hedgehogs into a fund and then and then that turns out to be a very nice thing. I mean, somewhat contrary to the conventional wisdom. Before I started this, before I knew anything about VC, I thought, well, actually, it's like a poker tournament where you lose money most of the time. Like, that's not true. If you talk to like, talk to like Marc Andreessen and Andreessen Horowitz or funds like that, or Sequoia.

• 48:21Speaker 01

  They'll say, actually, we make money from maybe 60% of our investments return something and then 20% return a lot. And that's, it's actually a pretty nice business if you are in a, in a, in a top tier firm. But, but that's from aggregating risk and, and that's, again, that's where you realize expected value is. If you can literally kind of run the experiment 100 times, you can be almost guaranteed to make money. We run simulations in the book where it's like, if you really are returning 20% ROI per year on average, with a lot of variance, you're almost guaranteed to make money.

• 49:00Speaker 01

  And there's enough empirical evidence that like, oh, like a certain A16Z fund will have a down cycle and only make 11% per year for five years. It's still better than you can normally do in the S and P 500 or things like that. And so it's a really good, it's a really good business to be able to find these dogmatic founders who are taking huge risks and then, and then have a piece of all of them and hedge that risk.

• 49:28Alex Kantrowitz?

  Right. And you talk in the book about how Silicon Valley marries risk tolerant venture capitalists with risk ignorant founders. Basically founders go all in and it's win or lose. I mean, they'll make a salary probably, but basically they could do all this work, destroy themselves physically for nothing. And whereas a VC, that's okay, as long as they pick enough.

• 49:51Speaker 01

  The VC mindset is such that when you had FTX blow up, I guess it was Sequoia said, yeah, you want high variance bets and so we would make the same bet again.

• 50:03Alex Kantrowitz?

  They do it again, which is, they lost a lot of their, I would say sheen, Sequoia did with the FTX bet. But also I think that you made a good point, which is that some, one of the things that makes Silicon Valley unique, and it goes back to this quality of being willing to be embarrassed, is they're willing to be embarrassed. Whereas like, it's not necessarily, like in the more villagey status, you know, safety type of occupations and fields, like that actually matters a lot. But for Silicon Valley, it's just another day.

• 50:32Speaker 01

  Yeah. And look, you see lots of behaviors in Silicon Valley, some of which are maybe asocial or antisocial behaviors, but everything from like, Tolerance for psychedelic drug use to tolerance, which may not be a good thing for like difficult kind of, you know, asshole founders. And look, I think within itself, like Silicon Valley, it's kind of conformist relative to itself in certain ways, but it, it really doesn't care about what the village thinks or what the rest of society thinks, or at least it shouldn't. I mean, I think you have like, like, you know, obviously certain VCs and founders are, are more politically sensitive. Um, but you know, you talk to Mark Andreessen, he thinks the rest of the world's becoming more conformist. And that's great for me because

• 51:17Speaker 01

  it means the returns to being like different are, are, are higher now. Um, if there's more of a penalty, a social penalty for, for non-conformity, um, then I don't care about the social penalty and I'll, I'll make money and invest in cool things and, and kind of make my own universe out of this.

• 51:34Alex Kantrowitz?

  Right. But, but isn't that a little bit, isn't that bullshit? Like a little bit from, from Andreessen? Because, you know, as I'm reading the VC chapter, and I think you even put this in, like, I started having these questions, like, all right, so VCs, if you're in a position like Andreessen Horowitz, you're probably guaranteed at least a 15% return as you spread your bets. Okay. So that's safety. VCs, they're herd followers, right? So like, they are pack animals in a way that like you would typically associate with the village. And then you ask like, all right, well, are VCs disruptors or are they incumbents? And in some way, you know, they are the incumbents making money off of the disruptors.

• 52:08Speaker 01

  No.

• 52:09Alex Kantrowitz?

  So I'm curious what you think about that. Like Andreessen can talk a big game about time to build and change the world, but with this whole like raise your hand up and fight type of mentality, like, aren't they the man just as much as like Wall Street institutions are, or the traditional, uh, village institutions are?

• 52:25Speaker 01

  For sure. Or the, the comparison I'm sure they won't like, um, that I make in the book is that it's a lot like Harvard or Stanford, because a lot of these guys have become anti-big universities. But like, if you're Harvard and you're guaranteed to be able to recruit, you know, an 85% yield rate from the best students around the world, it's really hard to fuck that up, right? Um, if you're a startup, then it's such a positive signal to have Andreessen Horowitz invest in you that you'd kind of have to be... Crazy to turn them down. And so, I mean, and recently even told me that it's a self fulfilling prophecy at some point. I respect the fact that Silicon Valley understands the importance of making high upside bets and understands the importance of having a long time horizon, being willing to

• 53:10Speaker 01

  project out 10 or 15 or more years. I do think sometimes that some of them are spoiled winners. I say that slightly affectionately, but like they have a lot of things going for them. They control a greater and greater share of the world's wealth. And I understand as someone who himself often gets annoyed by by the village, I understand the, you know, the impetus to be annoyed by it, but like going back to being a little bit more apolitical, I think I think might be a better look and maybe in the long run, because there is some risk of regulation. I mean, certainly when it comes to things like AI in particular, then government's going to have an opinion about that.

• 53:55Speaker 01

  In crypto, government's going to have a lot of say over kind of over how crypto works and what the upside potential of those businesses are and that and those platforms are. So I think they, I think they are

• 54:09Speaker 01

  a little bit

• 54:11Speaker 01

  asking for fights. And again, I have this tendency too. I like, I'm competitive. I like to pick fights, but like it doesn't always, it's not always leading to decisions that I, I think were good decisions at the end of the day, when I, when you kind of wake up and look back on things later on.

• 54:26Alex Kantrowitz?

  Yeah. And I look, I mean, I appreciate VC. They find a lot of interesting things. We talk about them on the show. They're fun to speak with. But with some of the top end ones, there does feel like there's some of the same sanctimony that you would find like on a Princeton campus. And that, that kind of annoys me.

• 54:39Speaker 01

  The horseshoe theory of like, of like,

• 54:41Alex Kantrowitz?

  Exactly.

• 54:42Speaker 01

  You objectively have it really good. If you're like a tech billionaire, you get to spend all day meeting interesting people and investing in cool businesses and throwing cool parties anywhere in the world. I mean, you have, if you have infinite money, then that's a pretty nice, pretty nice life. And I, I think I understand where the competitiveness comes from, but I, you know, we are seeing more signs of a tech.

• 55:07Speaker 01

  Backlash and you know, so far they're still making lots of money, but I do think AI in particular is a sector where there is a pretty big appetite for regulation. It's actually one of the few things that both Democrats and Republicans agree upon is they actually are concerned about AI. Not as concerned as like the effective altruists or whatnot, but the notion that like, hey, it's going to take over your job. It's going to lead to discrimination. It's going to lead to whatever else. You're going to cede your agency to the machines. Like that is intuitively scary for most people. And I think they have to be careful about about. I mean, you know, sports betting is a much lower stakes industry, but like, I, you know,

• 55:48Alex Kantrowitz?

  Right.

• 55:49Speaker 01

  VCs should have a long-term outlook and that includes a kind of political environment in which they're operating. Because you could have a shift toward more, more regulation for sure.

• 56:03Alex Kantrowitz?

  Totally. Okay. So we'll take a break now and we're going to come back. We're going to, I think we'll try to talk about a handful of the following. Sam Bankman-Fried, effective altruism, AI existential risk, nuclear stuff, and Nate's tips for poker. So I'm going to try to get to at least three. We'll be back right after this.

• 57:15Alex Kantrowitz?

  And we're back here on Big Technology Podcast with Nate Silver. He is the author of On the Edge: The Art of Risking Everything. You can see it if you're watching on the video here. I've plowed through it. Really great book. Let's talk a little bit about effective altruism. So, and Sam Baikman Fried in this. We'll start with SBF, then we'll zoom out a little bit. I guess like effective altruism takes this like expected value type of thing to the extreme. And with like SBF, there's a moment in the book, you meet with him as like the whole FTX thing is going down. And he's such a compelling character. It's like the third book I've read that has like a lot of SBF. And I feel like my appetite for reading about him is just like endless. But there's an interesting

• 57:57Alex Kantrowitz?

  moment where like, basically Sam says if he can flip a coin, I'm gonna get details of this wrong, but flip a coin three times, and two times, the world is twice as good as what it is. And one time, the world is obliterated, he would do it every time.

• 58:12Speaker 01

  Or even less than that, right? If you, if you win 51 out of 100 flips, and you make the world twice as well off, then, then he literally would take that coin flip. And I think he's actually not even being tongue in cheek about that. I mean, he told Carolyn Ellison that in court testimony that I obtained, he said similar things to like Tyler Cowen, The Economist. Yeah, it's philosophy known as utilitarianism, taken to a quite logical extreme. And I think this speaks to, look, I think effective altruists tend to be, A, I think SBF is not representative of the whole group, certainly. I think they are very smart. They ask questions that other people don't ask, which I always think there's value in doing. But I do think that-

• 58:57Alex Kantrowitz?

  So, explain, explain what they are from your perspective? I mean, sorry, I know this is huge. Try to do it in like a minute, because everybody has so many different definitions of them. But you actually went through the reporting process of like, meeting and learning about EA. And then you can go back to like the weakness-

• 59:11Speaker 01

  So, effective altruism is a brand, is the way I call it, created by Will McCaskill and Toby Ord, who are professors of philosophy, I think, at Oxford. And it kind of is what it sounds like. So, the original idea was, how do you more effectively do altruistic things? For example, give more money to charity, right? If I give money to like the American Red Cross or something, you can calculate that actually X percent of it is wasted on administrative costs. And then the way they distribute it is for things that may or may not be good, right? And so, you know, the original idea was that if you give money to things, for example, like mosquito nets in Africa,

• 59:52Speaker 01

  were found to prevent loss of life and prevent severe disease at a pretty low cost. You can like save a life for for 5,000 bucks or something on average. So it began, I mean, I'm I'm deliberately simplifying the story here because the origin story gets a little bit convoluted, but it's kind of like the short version of it. It began as a way to to do more effective philanthropy. Um, but then people began to apply it to all sorts of other things like like animal welfare, for example. You know, if I decide to eat a chicken or or some chicken nuggets, right? What is the utility for the chicken's life

• 1:00:33Speaker 01

  versus my pleasure and my nutritional value in like eating those chicken nuggets? So I know some EAs, for example, who who won't eat chicken, but will eat beef because you can create a lot more portions out of a giant cow than you can out of a chicken. And cows are also kind of dumb and therefore they are valued less in some EA systems. So it gets very weird, very fast. And then kind of where the interest in things like um existential risk and AI come from is that if you think that there's a chance that something could destroy civilization, like um like unaligned AI or like nuclear weapons or like bioweapons, for example, um where climate change,

• 1:01:15Speaker 01

  although climate change is not traditionally an area of EA focus, we can talk about that. Um, that has a very high expected value gain or loss based on on what you do. Um, so yeah, it's kind of taking this um. Gamblers' expected value maximization mindset and applying it to all sorts of real world problems that it's not traditionally applied to, and I'd say with kind of very, with very mixed success.

• 1:01:42Alex Kantrowitz?

  Right. And the point is that this is sort of making its way into the business world. And if you think in, if, if, if expected value is sort of like you're a North Star, and you think about like, do I want to risk the company on this behavior, that may have like a two in one chance of working, but a one in chance, one in, one in three chance of doom, or two, sorry, two of three chance of working, one in three chance of doom. Most founders would never do that. But like SBF, for instance, seemed to be open to making these, this type of decision.

• 1:02:14Speaker 01

  Yeah, I mean, literally, he told me that if you're not willing to risk completely ruining your life, that you're a wimp, was the term he used, and not undertaking enough risk. And believe me, that is, that is atypical. But, you know, you talk to like Vitalik Buterin, who founded Ethereum, and he's like, yeah, I thought there was only a 10% chance that it would work out like this, right? But if you make 100x your money in that 10% of the time, then the expected value is positive. I mean, my issue with someone like Sam is more that I think he's miscalculating a lot of things. If you talk to people who were in his orbit, then, you know, he was a person who might make a good first estimate, but then not refine it and become very hedgehog-like and get very dug in, and also not thinking

• 1:02:56Speaker 01

  about the harm that would occur to, to other people. But, you know, look, I'd be the first to tell you that like, you know, I like to work on problems that are kind of closed-ended problems. So, we, we were talking before about sports and how, is it really random or whatnot? You can get into some philosophical discussions there about sports or elections, what's really random, what's not. But the fact is that you can represent these things reasonably well with the model. Sometimes there are little fudge factors that you might round up or round down the model based on things that it's a little bit hard to quantify, but your experience tells you are important. But these are kind of closed world problems that you can have repeated trials of. I worry that sometimes the EAs are like operating

• 1:03:38Speaker 01

  in a world where they assume everyone has like 200 IQs instead of us regular stupid human beings, and, and, and often have like a lot of short-sighted.

• 1:03:50Speaker 01

  Realizations, because when I, when I look at like work, even in sports or something like that, there are lots of bad election models out there and bad sports models. And that's with relatively good data and closed systems. So, so, you know, you can very easily make very bad models if you're not, if you're not careful.

• 1:04:09Alex Kantrowitz?

  Exactly. And that to me is like the huge hole in effect, and it's sorry, in expected value that, you know, we've been talking about through this whole conversation. And I think you explicitly like talk about this in the book that like, basically, expected value can be good for things that are quantifiable. But the problem is that people will take it and say, like, you know, this has an expected value of this, but they're fudging it. They're really, I think you called it improv. And to me, it sounds a lot like a religion. So I, this is what I, I maybe, maybe this is from the book, I just wrote this as a note. And but there are strict values up until there's something that's, that has self-interest. And then you can squeeze it in and sort of fit your expected value calculation. And this is some, some examples you gave, that some, that effective altruists, they say that, you

• 1:04:54Alex Kantrowitz?

  know, future lives are important, but they also are okay with abortion, which is an ideological inconsistency, not really, not taking a position on it. They're okay with not having kids, although they value future lives. They defend immigration restrictions because they say that like, if we're anti-immigration, then like, it means that there's a chance that like more pro-immigration politicians will come in and allow more immigration. Like, it reminds me exactly of religion where like you have this tenants and you have these self-beliefs and you make the tenants work to advance your self-beliefs. It feels like the same exact thing. And I know religion is sort of like a pejorative in these type of worlds, but it's, that's what it sounds like. And that's a huge, huge liability when it comes to expected value.

• 1:05:38Speaker 01

  There are some similarities, right? Just like in some churches, you tithe or tithe, I'm not sure how to say that word, but give 10% to the church. Some EAs believe in earning to give, where you go work for a hedge fund or something, and then you give 10% of your income away for that. Look, one of the ironies in the book is I think people who are operating in the world of like VC or poker, in some ways, The profit motive grounds you a little bit and kind of gives you maybe more of a BS detector and that whereas if you're a true believer, like the people who worked for SBF, I think were actually very nice, conscientious people, but that may have made them less skeptical

• 1:06:21Speaker 01

  than they should have been of like, of like Sam himself. So, and don't get me wrong, like, I think a lot of EAs have done a lot of smart things with respect to like poverty reduction and things like that. I think overall, having more focus on existential risk is a big win for, for EAs. I mean, there's been a paradigm shift in, in the awareness of the conversation about AI and, and what risks and opportunities that it might pose potentially. So, look, I think they've done good for the world. I, I think it's a small community. It is fairly demographically homogeneous, right? It's, you know, a lot of kind of thirty something,

• 1:07:04Speaker 01

  mostly, mostly white people, a lot of men, very concentrated in some areas like Oxford or Silicon Valley or things like that, maybe who don't have that much necessarily life experience. So I think it's a useful movement, but like, yeah, there are things that are, I mean, I, I think religion is a little bit too disparaging of it. But they proselytize, right? They, they, they want to spread the word. They tend to be pretty good at, at PR. When they have, when there's an EA book coming out, it has like big like book release parties and, and things like that. And yeah, there, I mean, I think there are, there are definitely some parallels.

• 1:07:44Alex Kantrowitz?

  Yeah. I mean, like, look, my first introduction really to AI, I was learning about it through SBF. I'm more impressed with it now than I was previously, but there are still like some flaws. So, but it is a very interesting movement and we'll be doing more about it on the show. Let me, let me ask you this then, and this is sort of what it all sort of builds up to, which is that EA is extremely influential in the AI field.

• 1:08:04Speaker 01

  Yes.

• 1:08:05Alex Kantrowitz?

  And just not even, not even just EA, just this thinking, this similar like thinking, River style thinking, thinking in expected value. And then this sort of hypothetical that you had with SBF of like flip a coin 500 times, 51 times, the world is twice as good, 49, it's destroyed. And a lot of people who think in this expected value mentality will be like, all right, I'll flip that every time. Maybe not a lot of people, maybe with Sam is the outlier. But then you think about AI and it's like, oh, is AI that exact calculation where AI, if it works out well, will make the world twice as good. And if it works out poorly, it might destroy the world. And do you want people with this type of thinking to be running AI projects?

• 1:08:47Speaker 01

  Yeah. So Sam Altman, who, believe me, I think is not in the same category as SBF. I talked to different sources like

• 1:08:54Alex Kantrowitz?

  He got, I mean, he also got ousted by EA aligned folks. So

• 1:08:58Speaker 01

  But, but Sam Altman, and I talked to him, I think in August 2022, for the first time, that was the main interview, which was a good time because it was like, when he was a little bit less guarded.

• 1:09:09Alex Kantrowitz?

  Right before

• 1:09:10Speaker 01

  Yeah. Yeah. So they kind of knew what was coming with 3.5 and four, and it wasn't quite public yet. So he was, I think, in an optimistic and unguarded mood. And he's like, yeah, I think that AI could end global poverty. Like, he meant that very literally, like, it could end global poverty. We'd have so much economic growth and plenty and automation of tasks that used to be burdensome for human beings that you could end poverty, he thought. But he also thinks that it could also destroy the world. I mean, I think the chance that he would put is not as high as some people. But he's like, literally willing to make not the 50 50 bet that Sam made, but maybe a 90 10 bet, maybe a bet where there's a 10% chance of really bad things happening because he's convinced there's a

• 1:09:52Speaker 01

  90% chance of really good things happening. I guess that kind of gets more into expected value terms. But then you get into questions of like, of like, what right does he have to, to make that bet for all of humanity? And there are parallels. I mean, when the Manhattan Project was experimenting with atomic weapons, there was one experiment they thought had some chance of like actually igniting the earth's atmosphere on fire. It was very unlikely, but they figured it might be a one in 1,000 chance of like literally incinerating the earth, right? And like,

• 1:10:31Speaker 01

  You know, who has the right to take that sort of chance? At least the Manhattan Project is kind of, at least nominally, an offshoot of the US federal government, which is an elected company. But, but yeah, and look, when you have people who are kind of taking risks on behalf of everyone else, then they often wind up being villainized by society. I mean, that's an area where, again, the potential for like, I think, political backlash is, is fairly high and, um, and, you know, it's also like, if you have these GPUs that have lots and lots and lots of compute, I mean, one good thing about AI risk is that we, there are a finite number of entities that we know

• 1:11:12Speaker 01

  have enough compute for now to, to build top, uh, top-tier models, large language models and other models. That might not be true as things get faster and faster in, in five years and 10 years, which could potentially be more dangerous, but, um, but I think they, I mean, for one, in one ways, it's reasonable to be optimistic, is that like, you know, something doesn't quite add up to me where you have these like smart, rich like nerds in San Francisco and Silicon Valley making bets for all the future of humanity, like something doesn't quite add up there. I mean, I, I would think humanity might have a tendency to want to have a, something to say about that, maybe.

• 1:11:53Alex Kantrowitz?

  Right, and the people that are closest to this are the ones that are most concerned, right? It's like, you met people who are so afraid of, I think, AI risk that they won't save for retirement. You made people whose, whose P dooms were like in the 30% and they felt they were considered moderates, uh, in their community. And yours is between 2 and 20%, which is interesting, but it, it struck me that you took this fear of existential AI risk pretty seriously.

• 1:12:19Speaker 01

  Look, the fact is that the relevant experts in the field are pretty unanimous. This is at least a risk that we want to, that we want to monitor, right? Um, so like you just said, Alex, like, the fact that the people who are closer to it are more worried is worrisome. Also the fact that like, we don't fully understand the technology. I mean, people call it like a, a giant bag of numbers. How large language models do what they do is a little bit of a mystery. Um, and considered like a little bit of a miracle. I mean, people now kind of take for granted. Um, part because maybe we're at like a, a little bit of a plateau, kind of post 3.5, four, we'll see where we are in a year or so.

• 1:13:03Speaker 01

  But like, you have this machine that's basically like a, can almost pass the Turing test, right? You can like, ask it a question about anything, and some of the answers are stupid. But some are quite ingenious and brilliant. It can draw pictures. I mean, uh, there's this like thermostatic increase where you just get used to this for now. But like, I, you know, few experts in the field would have expected anything like this to occur 10 years ago, right? Um, uh, you know, the reason why OpenAI was originally a, a, a nonprofit is because it was not clear. It was enough of a long shot bet that like, it wasn't clear if it would work. Oh, you just kind of throw a bunch of like compute through this transformer architecture.

• 1:13:46Speaker 01

  And maybe it'll keep scaling up and produce a miracle where you have like a machine that has comparable linguistic intelligence to human beings. And all of a sudden, it does, or at least it's pretty close. I mean, that's kind of a miracle. And like, and like, the fact that we don't, it's not fully legible, what it's doing exactly, I think ought to be, ought to be frightening.

• 1:14:06Alex Kantrowitz?

  All right, Nate, before we leave, love to get your three tips, uh, for poker players. What are the three things that anybody who wants to be good at poker needs to know?

• 1:14:15Speaker 01

  Um, I think the most important, basic tip for poker is, is be aggressive. Um, if you're new in activity, there's a tendency to, um, to take the middle ground. So if you, if you play like a backyard game with people who have never played poker before, they tend to call too much when they should be, be raising or folding. That mechanic of like, take more decisive action is a good decision-making framework across any type of risk-taking, I think. Um, you know, number two is, is being cool under pressure. And partly that involves not trying to be a hero, right? Um, Executing basic strategy and kind of, you know, because when you are operating in

• 1:14:57Speaker 01

  an environment where all of a sudden you're playing a $10,000 pot in the World Series of Poker or something, you're actually operating on different physical and brain chemistry. Like literally, right? You have a stress response that kicks in, an adrenal response, and like, and you're kind of in like, a flow state or a zone state, which some people will panic and, and go on tilt, and you have to be able to avoid that. That's something that can be learned a little bit with experience. And number three is be, being really observant. One of the things I learned just playing a ton of live poker over the past three years is that things like, physical tells, getting a read on someone, having an intuition for what someone's doing through their just general demeanor, like that's a real thing.

• 1:15:42Speaker 01

  I used to think this was like exaggerated kind of BS, but like, it's a real thing. I mean, human beings making decisions under stress are not very good at concealing information. So whether it's like a micro expression or something like that, or, or a betting pattern, or a speech pattern, or, or involuntary, you know, looking at someone's like, neck muscles, for example, or the way they're hunched over, what they're doing, if they look away, that can be a sign of strength. And so, just being attentive, and the importance of attentiveness is, is a big lesson, I think, for poker players.

• 1:16:17Alex Kantrowitz?

  And why don't I throw out a fourth one that I learned from your book, which is that you gotta bluff.

• 1:16:20Speaker 01

  Oh, you have to bluff, yeah. Poker is a game, the whole premise of the game is based on, on bluffing. There are lots of fun card games that don't involve bluffing per se, although they may involve deception. But the only reason in poker, in theory, to ever pay off someone when they have a good hand, is because they are capable of bluffing. And even, until you get to like, the very top 100 best poker players in the world, believe it or not, most poker players bluff, bluff too little and not, and not too much.

• 1:16:51Alex Kantrowitz?

  Yeah, I'm always like, I want to hold on to those chips, but I'm learning after reading the book. Don't do that.

• 1:16:55Speaker 01

  No, you have to, you have to take risks to win a poker tournament. It's, it's unavoidable. And so that's part of why it's an attractive metaphor for, for life, et cetera.

• 1:17:05Alex Kantrowitz?

  The book is On the Edge, The Art of Risking Everything by Nate Silver, who's with us here today. It's out this week. I encourage you to go grab it. Definitely one of the more interesting books I've read in a long time. Nate Silver. Thanks so much.

• 1:17:16Speaker 01

  Of course. Thank you, Alex.

• 1:17:18Alex Kantrowitz?

  All right, everybody. Thanks so much for listening and we'll see you next time on Big Technology Podcast.

• 1:17:23Speaker 02

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