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.
"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."
I've long suspected that all this is substantially due to the fact that rich sociopaths have so thoroughly captured the world's political systems and thereby so thoroughly immunized themselves and their corporations against taxation and regulation that they now have far more money than they know how to spend or invest sensibly. According to theorists of capitalism, all that money should be invested in expanding the productive capacity of the economy, but who would buy the additional products? Certainly not the vast majority of us who are just scraping by. So what to do with all that money? An obvious possibility is, play casino games, or in other words, speculate.
This review gave me some insights into Silver's perspective. I used to think he was a data analysis nerd! Silly me.
I think it's fair to say that people and industries that profit on other people's addictions are parasitic to society, but capitalism being what it is, making a huge profit also means you have outsize political power, so the exploitation carries on.
You are a bit too generous to the financial system here. The big financial institutions have embraced crypto, which is mainly gambling (plus dark economy), and it is just about as big as the big five tech stocks (which have a pretty big meme element themselves)
Why is he a "problem" for analyzing gambling? I haven't read his new book (I have it next on my listen list having downloaded it last week) but I have read his first and liked it a lot.
This attitude doesn't match at all how he treats gambling and statistical analysis in his first book. Most people have no idea at all how to assess risk, and using gambling as an example for how to do it without passion and correctly mathematically is a way to use something most people are familiar with to explain sometimes difficult statistical analysis.
I am just am tired of people stupid people. I think this started lots of people who can’t stand the fact that they were wrong about the 2016 election and they can’t stand Silver was right because so many people can never admit they’re wrong about anything.
Here is a vastly more nuanced, very different about this take by Silver
I am interested in the question of how innovation today compares to innovation a 100 years ago. Back then, innovation had tremendous societal value: fertilizers, electricity, fridges, antibiotics, anesthetics, transportation. In line with the blog, I am tempted to say that innovation today largely increases systemic risks without much societal benefit. My prime examples are blockchain technology and AI. I can now add gambling to the list.
As you say, Silver is actually risk-averse in his present writing, for the same reason that a courtier hesitates to criticize his king. He has too much riding on being of ideological value to his new patrons and very little riding on doing actually-risky, bold thinking about risk. When he wrote The Signal and the Noise, he was aiming for credibility and value within the world of American public intellectuals, and looked to leverage that credibility into his own media brand. Once that bubble popped, he did what more than a few other writers and talkers and researchers have done, and that's sign up as a combination court jester and flatterer for techbros. That mostly hasn't worked out well for other people.
One other thing that I'm sure he knows--and wonder how he addresses--is that many poker players are trying to improve their EV by telling a story through their bets, their table manner, their long-term profile as a player, and that the cardinal sin is not committing to your story. That has changed poker a lot over the years--the period where hold'em poker was heavily televised helped a lot of players understand how the story told through bets and table demeanor corresponded to the information held in a hand, but the culture of story-telling changed as a result--what had been a fairly calculated, somewhat mathematically calculation of risk-reward leavened by bluffing and calculated performances gave way to a wave of players trying to make it impossible to glean information about their hand by aggressive almost-random betting. Silicon Valley's current elite have followed that pattern: concealing information, lying routinely, making huge bets and then deploying all power at their command to transfer the risk of those bets to others while claiming all the reward. Silver is all-in on being a court jester, so of course he's going to tell a story where that is the only way to win at all--that's the bluff, that's the story intended to make people think he's holding the nuts rather than having his nuts in a vise.
Thomas Kuhn once announced at a convention devoted to his work, “I am not a Kuhnian.
Silver isn’t by any means right about everything (something Silver thinks he’s right about everything though many other people I’ve met I have never met them anything they’re wrong about). But there is a huge market of people who hate Silver i guess because they started with the sin of being wrong about the 2016 election.
I cannot read the article you posted because I can’t read it because it’s behind a paywall. Based on your response you posted and what I’ve read in the paywall that really distorts Silvers original story to being completely wrong. Maybe Silver is wrong but he has a much more nuanced and different what you and this piece wrote.
Here Ezra Klein and Nate Silver on New York Times. There are other articles once about this.
One theory I have on why the public believes that we are in hard times is that the public's idea of good times is a bubble economy on the verge of bursting.
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.
This is probably wrong. The modern stock market provides no valid information on the worth of the frequently traded companies. It never did in the short one, as Ben Graham said In the short term the stock market is a voting machine. Prices are determined by popularity as in elections and fads.
The second part of Graham's quote is "in the long run the market is a weighing machine" This was true for more than 200 years but since 2014 has increasingly ceased to be the case. The reason is market manipulation on a vast scale through stock buybacks and to a lesser extend Fed QE. Because if this stock prices have become uncoupled from business fundamentals and begin to resemble objects of speculation like crypto. What sort of valuable information about *worth* is provided by bitcoin prices?
In that piece and, I gather, in the book, Silver spouts a lot of bullshit, most of which the Guardian presents without challenge. For example:
"Its mindset is highly analytical, somewhat contrarian and frequently thrill-seeking."
Clowns like Elon Musk are "highly analytical", eh? That's a good one, Nate! So Musk was "highly analytical" when he paid $44 billion for Twitter and proceeded to trash it so thoroughly that he probably couldn't get half that much for it now, or when he claimed in 2021 that he was "highly confident the car [a Tesla] will be able to drive itself with reliability in excess of human this year", or when he claimed last week that there will be a self-sustaining city on Mars in 20 years?* And Sam Bankman-Fried was "highly analytical" when he orchestrated the scams that landed him in prison for 25 years (or until he and his enablers manage to get him sprung)? Riiight.
But I want to focus for a moment on the following bullshit, which seems particularly germane to the themes of this blog/newsletter:
"But it’s more than a curious outgrowth of advanced capitalism, Silver says; in an era of breakneck technological change, it will play an outsize role in determining the shape of society, and our collective futures."
If the present actually were "an era of breakneck technological change", then our parents and grandparents wouldn't have survived to beget us - not only would their necks have been broken, their heads would have been chopped clean off - because they lived through much more and more consequential technological change than we have. Consider the world of 1960 from the perspective of a person born in 1900 - before airplanes, before all but the crudest electronics and therefore before computers or television and almost before even radio, before nuclear energy or quantum mechanics, before antibiotics or genetics to speak of**, etc. To such a person, 1960 felt like science fiction come true. In contrast, I was born in 1964, and to me, 2024 definitely does not feel like science fiction come true.
Consider, for example, "2001: A space odyssey", released in 1968. Arthur Clarke, who co-wrote it with Stanley Kubrick, was among the most scientifically literate and sober of sci-fi authors, and he thought it was reasonable to suggest that by 2001, humanity would have a massive station in low-Earth orbit - palatial in size and comfort compared to the ISS - large, permanent settlements on the moon, and the ability to send a manned mission to Jupiter bearing an artificial intelligence whose only defect in replicating human mentality was an inability to lie with equanimity. 23 years later, not only has none of that happened, but humanity isn't even close to capable of doing any of it.
Contra Silver, we live in an era less of technological change than of technological stagnation. As David Graeber remarked in his 2012 essay "On flying cars and the declining rate of profit":
"We are well informed of the wonders of computers, as if this is some sort of unanticipated compensation, but, in fact, we haven't moved even computing to the point of progress that people in the fifties expected we'd have reached by now."
Cryptocurrencies, NFTs, and LLMs are fitting avatars of this crappy, form-over-substance era.
There's more, of course, much more; the Guardian piece is an orgy of bullshitting. As for Silver's "River vs. Village" foolishness, it reminds me of nothing so much as Joseph Epstein's 1979 essay "The ephemeral verities":
"But as we [Epstein and a magazine editor] talked further, it became clear to me that what he really wanted, what every editor of a contemporary mass magazine for the college-educated middle classes wants, is not a body of useful or curious information, or the spectacle of an idiosyncratic and perhaps interesting mind at work, but a piece of writing that will spot a trend, put a new phrase into the language, erect a new truth that will endure until the next issue of the magazine appears. What is wanted, if I may say so, is a shiny new cliché."
*See https://idlewords.com/2023/1/why_not_mars.htm for an introduction to why this notion is idiotic. As the author, Maciej Cegłowski, remarks, "Once you get beyond 'rocket factory go brrrrr,' there is no plan, just a familiar fog of Musky woo."
**Gregor Mendel published in the 1860s, but his work was largely ignored until its rediscovery in the early 1900s. And even then, it took many more years to understand the mechanics of how DNA, RNA, etc. function in heredity.
I met Nate Silver a long time ago, before he was famous, when he just wrote for Baseball Prospectus. He was legitimately a groundbreaking innovator when it came to understanding how to best analyze complicated statistics. I was happy to see more attention paid to his brand of statistical analysis, after a long period of denial his (and his peers) approach to baseball stats improved our understanding of the game. I hoped that his political contributions would be equally useful. I’m so disappointed by his loss of plot.
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."
I've long suspected that all this is substantially due to the fact that rich sociopaths have so thoroughly captured the world's political systems and thereby so thoroughly immunized themselves and their corporations against taxation and regulation that they now have far more money than they know how to spend or invest sensibly. According to theorists of capitalism, all that money should be invested in expanding the productive capacity of the economy, but who would buy the additional products? Certainly not the vast majority of us who are just scraping by. So what to do with all that money? An obvious possibility is, play casino games, or in other words, speculate.
This review gave me some insights into Silver's perspective. I used to think he was a data analysis nerd! Silly me.
I think it's fair to say that people and industries that profit on other people's addictions are parasitic to society, but capitalism being what it is, making a huge profit also means you have outsize political power, so the exploitation carries on.
Or you could actually read the Silver article but it’s other just to read Silvers article which is different than Silver.
https://www.nytimes.com/2024/08/13/opinion/ezra-klein-podcast-nate-silver.html?smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb
You are a bit too generous to the financial system here. The big financial institutions have embraced crypto, which is mainly gambling (plus dark economy), and it is just about as big as the big five tech stocks (which have a pretty big meme element themselves)
Superb review and gets at the heart of why Silver is a problem these days.
Why is he a "problem" for analyzing gambling? I haven't read his new book (I have it next on my listen list having downloaded it last week) but I have read his first and liked it a lot.
This attitude doesn't match at all how he treats gambling and statistical analysis in his first book. Most people have no idea at all how to assess risk, and using gambling as an example for how to do it without passion and correctly mathematically is a way to use something most people are familiar with to explain sometimes difficult statistical analysis.
I am just am tired of people stupid people. I think this started lots of people who can’t stand the fact that they were wrong about the 2016 election and they can’t stand Silver was right because so many people can never admit they’re wrong about anything.
Here is a vastly more nuanced, very different about this take by Silver
https://www.nytimes.com/2024/08/13/opinion/ezra-klein-podcast-nate-silver.html?smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb
I am interested in the question of how innovation today compares to innovation a 100 years ago. Back then, innovation had tremendous societal value: fertilizers, electricity, fridges, antibiotics, anesthetics, transportation. In line with the blog, I am tempted to say that innovation today largely increases systemic risks without much societal benefit. My prime examples are blockchain technology and AI. I can now add gambling to the list.
Paywall. Sigh.
I am delighted to encounter the phrases "systemic risk" and "societal value" on substack. May be that is even a first. Do I read the wrong substacks?
As you say, Silver is actually risk-averse in his present writing, for the same reason that a courtier hesitates to criticize his king. He has too much riding on being of ideological value to his new patrons and very little riding on doing actually-risky, bold thinking about risk. When he wrote The Signal and the Noise, he was aiming for credibility and value within the world of American public intellectuals, and looked to leverage that credibility into his own media brand. Once that bubble popped, he did what more than a few other writers and talkers and researchers have done, and that's sign up as a combination court jester and flatterer for techbros. That mostly hasn't worked out well for other people.
One other thing that I'm sure he knows--and wonder how he addresses--is that many poker players are trying to improve their EV by telling a story through their bets, their table manner, their long-term profile as a player, and that the cardinal sin is not committing to your story. That has changed poker a lot over the years--the period where hold'em poker was heavily televised helped a lot of players understand how the story told through bets and table demeanor corresponded to the information held in a hand, but the culture of story-telling changed as a result--what had been a fairly calculated, somewhat mathematically calculation of risk-reward leavened by bluffing and calculated performances gave way to a wave of players trying to make it impossible to glean information about their hand by aggressive almost-random betting. Silicon Valley's current elite have followed that pattern: concealing information, lying routinely, making huge bets and then deploying all power at their command to transfer the risk of those bets to others while claiming all the reward. Silver is all-in on being a court jester, so of course he's going to tell a story where that is the only way to win at all--that's the bluff, that's the story intended to make people think he's holding the nuts rather than having his nuts in a vise.
Thomas Kuhn once announced at a convention devoted to his work, “I am not a Kuhnian.
Silver isn’t by any means right about everything (something Silver thinks he’s right about everything though many other people I’ve met I have never met them anything they’re wrong about). But there is a huge market of people who hate Silver i guess because they started with the sin of being wrong about the 2016 election.
I cannot read the article you posted because I can’t read it because it’s behind a paywall. Based on your response you posted and what I’ve read in the paywall that really distorts Silvers original story to being completely wrong. Maybe Silver is wrong but he has a much more nuanced and different what you and this piece wrote.
Here Ezra Klein and Nate Silver on New York Times. There are other articles once about this.
https://www.nytimes.com/2024/08/13/opinion/ezra-klein-podcast-nate-silver.html?smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb
One theory I have on why the public believes that we are in hard times is that the public's idea of good times is a bubble economy on the verge of bursting.
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.
This is probably wrong. The modern stock market provides no valid information on the worth of the frequently traded companies. It never did in the short one, as Ben Graham said In the short term the stock market is a voting machine. Prices are determined by popularity as in elections and fads.
The second part of Graham's quote is "in the long run the market is a weighing machine" This was true for more than 200 years but since 2014 has increasingly ceased to be the case. The reason is market manipulation on a vast scale through stock buybacks and to a lesser extend Fed QE. Because if this stock prices have become uncoupled from business fundamentals and begin to resemble objects of speculation like crypto. What sort of valuable information about *worth* is provided by bitcoin prices?
Indian govt body SEBI did a detailed analysis of how Individual investors fared in F&O markets. Here is detailed thread by one gentleman -
https://x.com/amitgupta0310/status/1838174010544452054
Besides Dave's well taken points about systemic risk and social corrosion ...
I've never paid much attention to Silver, but I read a Guardian piece that's sort of about his book:
https://www.theguardian.com/us-news/2024/sep/21/people-should-be-making-their-contingency-plans-like-right-away-americas-leading-forecaster-on-the-chances-of-a-trump-win
In that piece and, I gather, in the book, Silver spouts a lot of bullshit, most of which the Guardian presents without challenge. For example:
"Its mindset is highly analytical, somewhat contrarian and frequently thrill-seeking."
Clowns like Elon Musk are "highly analytical", eh? That's a good one, Nate! So Musk was "highly analytical" when he paid $44 billion for Twitter and proceeded to trash it so thoroughly that he probably couldn't get half that much for it now, or when he claimed in 2021 that he was "highly confident the car [a Tesla] will be able to drive itself with reliability in excess of human this year", or when he claimed last week that there will be a self-sustaining city on Mars in 20 years?* And Sam Bankman-Fried was "highly analytical" when he orchestrated the scams that landed him in prison for 25 years (or until he and his enablers manage to get him sprung)? Riiight.
But I want to focus for a moment on the following bullshit, which seems particularly germane to the themes of this blog/newsletter:
"But it’s more than a curious outgrowth of advanced capitalism, Silver says; in an era of breakneck technological change, it will play an outsize role in determining the shape of society, and our collective futures."
If the present actually were "an era of breakneck technological change", then our parents and grandparents wouldn't have survived to beget us - not only would their necks have been broken, their heads would have been chopped clean off - because they lived through much more and more consequential technological change than we have. Consider the world of 1960 from the perspective of a person born in 1900 - before airplanes, before all but the crudest electronics and therefore before computers or television and almost before even radio, before nuclear energy or quantum mechanics, before antibiotics or genetics to speak of**, etc. To such a person, 1960 felt like science fiction come true. In contrast, I was born in 1964, and to me, 2024 definitely does not feel like science fiction come true.
Consider, for example, "2001: A space odyssey", released in 1968. Arthur Clarke, who co-wrote it with Stanley Kubrick, was among the most scientifically literate and sober of sci-fi authors, and he thought it was reasonable to suggest that by 2001, humanity would have a massive station in low-Earth orbit - palatial in size and comfort compared to the ISS - large, permanent settlements on the moon, and the ability to send a manned mission to Jupiter bearing an artificial intelligence whose only defect in replicating human mentality was an inability to lie with equanimity. 23 years later, not only has none of that happened, but humanity isn't even close to capable of doing any of it.
Contra Silver, we live in an era less of technological change than of technological stagnation. As David Graeber remarked in his 2012 essay "On flying cars and the declining rate of profit":
"We are well informed of the wonders of computers, as if this is some sort of unanticipated compensation, but, in fact, we haven't moved even computing to the point of progress that people in the fifties expected we'd have reached by now."
(https://thebaffler.com/salvos/of-flying-cars-and-the-declining-rate-of-profit)
Cryptocurrencies, NFTs, and LLMs are fitting avatars of this crappy, form-over-substance era.
There's more, of course, much more; the Guardian piece is an orgy of bullshitting. As for Silver's "River vs. Village" foolishness, it reminds me of nothing so much as Joseph Epstein's 1979 essay "The ephemeral verities":
"But as we [Epstein and a magazine editor] talked further, it became clear to me that what he really wanted, what every editor of a contemporary mass magazine for the college-educated middle classes wants, is not a body of useful or curious information, or the spectacle of an idiosyncratic and perhaps interesting mind at work, but a piece of writing that will spot a trend, put a new phrase into the language, erect a new truth that will endure until the next issue of the magazine appears. What is wanted, if I may say so, is a shiny new cliché."
*See https://idlewords.com/2023/1/why_not_mars.htm for an introduction to why this notion is idiotic. As the author, Maciej Cegłowski, remarks, "Once you get beyond 'rocket factory go brrrrr,' there is no plan, just a familiar fog of Musky woo."
**Gregor Mendel published in the 1860s, but his work was largely ignored until its rediscovery in the early 1900s. And even then, it took many more years to understand the mechanics of how DNA, RNA, etc. function in heredity.
I met Nate Silver a long time ago, before he was famous, when he just wrote for Baseball Prospectus. He was legitimately a groundbreaking innovator when it came to understanding how to best analyze complicated statistics. I was happy to see more attention paid to his brand of statistical analysis, after a long period of denial his (and his peers) approach to baseball stats improved our understanding of the game. I hoped that his political contributions would be equally useful. I’m so disappointed by his loss of plot.
If you did a partisan affiliation analysis of who is pissed at silver you would learn a lot.
The capsize and sinking of the Bayesian was a human tragedy, but also a darkly funny B-roll for Silver's descent into a16z cryptobro bullshit.