What Nate Silver gets wrong about risk
A book review of On the Edge, in Foreign Policy
I have a new essay up at Foreign Policy this weekend, “‘On the Edge’ Puts Its Bets in the Wrong Place.” It’s a review of Nate Silver’s new book, On the Edge: The Art of Risking Everything.
The book review is the ultimate output of a review thread that I wrote on Bluesky last month. The original review thread ended up spanning 83 posts, over 3,600 words in total. It includes *two* references to the Boss Baby tweet, several long diatribes about advanced poker theory, the phrase “Reverse-Isaac-Chotiner,” and a joke about finding Brooklyn on a map.
The Foreign Policy review is much tighter writing, and gets to the real heart of the matter. What’s missing from Silver’s book is any notion of systemic risk. It’s a celebration of the gambling economy, one that lionizes the winners as “highly-effective risk takers” without ever grappling either with the social consequences for the rest of us. The book is 576 pages, and yet it turns out to be surprisingly small.
As I write in the review,
[the book’s omissions] invite us to ponder whether there’s any societal value to all this gambling. The stock market may essentially be gambling, but it is a type of gambling that produces valuable byproduct information. Through the activity of the stock market, we are able to gauge aggregate investor opinion on the state and worth of publicly traded companies. What is the social benefit of building an equivalent marketplace for establishing the betting line on NBA games? Sophisticated sports bettors may have a better read than DraftKings on whether the Washington Wizards should be 7.5- or 8-point underdogs in their season opener. But what value does that add to the quality of play, or the fan experience, or anything at all? Why incur and encourage all the systemic risk, when the societal value is effectively nil?
Thematically, this piece fits pretty closely with a substack essay I wrote back in February, “Old Gambler Yells at Clouds.” I don’t write about the gambling economy very often on this blog, but I am pretty well convinced that legalizing vice and inviting the gambling industry to remove all the friction separating the casinos and sportsbooks from their potential marks has been a mistake.
Silver is cheering on social forces that we ought to be criticizing and shutting down. That’s worth a careful look.
Australia has gone much further down the path of legalised gambling, with predictably disastrous results. I worked on casinos when they were relatively new in Australia and have hated them ever since.
We are now seeing a political backlash, partly in response to an explosion of ads for sports betting, but extending to a general reaction against the social harms of gambling.
I read and enjoyed the bluesky thread and I'd also mention this recent LRB essay arguing that much of contemporary banking/finance is just gambling (I think it's overstated to suggest that it has _no_ social value, but still . . . ) https://www.lrb.co.uk/the-paper/v46/n17/john-lanchester/for-every-winner-a-loser
"Lending money where it’s needed is what the modern form of finance, for the most part, does not do. What modern finance does, for the most part, is gamble. It speculates on the movements of prices and makes bets on their direction. ...."
"The total value of all the economic activity in the world is estimated at $105 trillion. That’s the mangoes. The value of the financial derivatives which arise from this activity – that’s the subsequent trading – is $667 trillion. That makes it the biggest business in the world. And in terms of the things it produces, that business is useless. It does nothing and adds no value. It is just one speculator betting against another and for every winner, on every single transaction, there is an exactly equivalent loser."