Speaker 1: Pushkin. Over the years, Cautionary Tales has warned you about
Speaker 1: Ponzi schemes, dodgy Christmas savings clubs, and promotions that are
Speaker 1: too good to be true. So it may come as
Speaker 1: a surprise when I urge you to get into Risky Business.
Speaker 2: Don't worry.
Speaker 1: I'm not trying to pull a fast one. I just
Speaker 1: want you to try out a podcast I think you'll enjoy.
Speaker 1: Risky Business is a weekly show about making better decisions.
Speaker 1: The hosts, Maria Konakova and Nate Silver, are both writers
Speaker 1: and high stakes poker players. Maria and Nate cover everything
Speaker 1: from politics to poker to personal decisions, so when they
Speaker 1: asked me to join them for an episode, I was
Speaker 1: eager to try. I even got the chance to talk
Speaker 1: to Maria about one of the fraudsters featured in Cautionary Tales.
Speaker 1: She has met him and he assured her yes, he
Speaker 1: was a liar. You can listen to Risky Business wherever
Speaker 1: you get your podcasts, But for now, here's the episode
Speaker 1: featuring me. I hope you like it. There are duels,
Speaker 1: prison breaks, banking bubbles, poetry, and Nate reveals he has
Speaker 1: a relative who faked his own death.
Speaker 2: Hi, everyone, Welcome back to Risky Business, our show about
Speaker 2: making better decisions. I'm Maria Kanikova.
Speaker 3: And I'm Nate Silver.
Speaker 2: So today we have a slightly different and fun show
Speaker 2: for you. We're going to be bringing on a very
Speaker 2: special guest, Tim Harford, who hosts another Pushkin podcast, Cautionary Tales,
Speaker 2: and we'll be talking about the intersection of risk and
Speaker 2: cautionary tales from history. Tim, welcome to the show to
Speaker 2: be on the show. Thank you so for listeners of Pushkin,
Speaker 2: you're probably familiar with Tim as the host of Cautionary Tales.
Speaker 2: I've been lucky enough to be on the show and
Speaker 2: to have been a listener of the show. I think
Speaker 2: it's wonderful. My episodes are obviously the best, but it's
Speaker 2: all pretty good. Tim is an economist, a journalist. He
Speaker 2: has a column in the Financial Times, He's written multiple
Speaker 2: amazing books. You know, longtime friend of the two of us. Nate,
Speaker 2: I don't know if you want to add anything else,
Speaker 2: but we're so happy to be here and to do
Speaker 2: kind of an episode where Cautionary Tales and Risky Business intersect,
Speaker 2: where we talk about cautionary tales that are about risky business.
Speaker 2: That are about risk, about taking risks, about how risk
Speaker 2: taking can go wrong, and how sometimes you know, the
Speaker 2: lines between legitimate risks and cons and deceptions might get
Speaker 2: blurred a little bit and cross over into territory that
Speaker 2: goes from legitimate to illegitimate very quickly.
Speaker 3: Do you mean to say that campbling doesn't always work out, Maria?
Speaker 2: It's weird, it's so weird.
Speaker 1: The chance of loss is in fact one hundred percent,
Speaker 1: which I guess we'll get we'll get to that, but yes, that.
Speaker 2: Is absolutely true. So when we were kind of thinking
Speaker 2: about ways to make this episode work, Tim, you thought
Speaker 2: about one particular story where you and I have actually
Speaker 2: intersected on this because we've both thought about this person
Speaker 2: and he's someone who I actually had on my previous podcast,
Speaker 2: The Grift, and he is a well, let's let's have
Speaker 2: you lay him out. Let us meet Sam Israel, the
Speaker 2: first kind of our first subject for today.
Speaker 1: Sam Israel, the third I think is his full name. Third,
Speaker 1: absolutely remarkable gentleman if gentlemen is the right term, and
Speaker 1: it probably isn't. So we did a Cautionary Tales episode
Speaker 1: live on stage about pyramid schemes and Ponzi schemes and
Speaker 1: white people fall for them, but also white people set
Speaker 1: them up. And this kind of strange snowball of disaster
Speaker 1: where the Ponzi scheme becomes increasingly difficult to cover. And
Speaker 1: the most amazing example I've ever come across is by
Speaker 1: You Capital, which was set up by Sam Israel. I
Speaker 1: saw one writer described Sam Israel and by You Capital.
Speaker 1: It's like somebody took the Bernie Madoff story but was
Speaker 1: told to write a Hollywood script and to punch it
Speaker 1: up a bit, make it sing a bit more. And
Speaker 1: everything that made made Off's Ponzi scheme notorious applies to
Speaker 1: Sam Israel, but it just all gets crazier. So Sam
Speaker 1: came from a wealthy family, I think of commodity traders
Speaker 1: in Louisiana, but he wanted to show he could make
Speaker 1: it himself, and he got into Wall Street at an
Speaker 1: early age, absorbed that Wall Street culture, you know, all
Speaker 1: that kind of broish culture of Wall Street in the
Speaker 1: nineteen eighties. And so he takes all this in, he
Speaker 1: keeps his mouth shut. He watches various dubious activities, and
Speaker 1: not just the kind of the sex work and the excess,
Speaker 1: but also illegality, financial illegality, observes people kind of insider trading,
Speaker 1: for example, and then he sets up his own firm,
Speaker 1: by You Capital, which is a hedge fund, and very quickly,
Speaker 1: by You Capital turns from being a hedge fund into
Speaker 1: being a ponzi scheme. And just to remind people what
Speaker 1: a ponzi scheme is, it's very simple. Investors give you money,
Speaker 1: and then you announce you've made massive profits, and then
Speaker 1: more investors give you money, and you announce you made
Speaker 1: even more massive profits, and then more investors give you money,
Speaker 1: and you keep saying you've made massive profits. And if
Speaker 1: anybody ever says, that's great, I'd like my money back, well,
Speaker 1: that's easy. You can give them the money back with
Speaker 1: the profits because more people keep giving you, keep giving
Speaker 1: you their money. And the insight that Sam Israel had
Speaker 1: was with a hedge fund, it's kind of open ended.
Speaker 1: The money keeps growing, and why would anybody ever want
Speaker 1: their money back if you keep telling them they made
Speaker 1: another twenty percent this year, they made another twenty five
Speaker 1: percent this year, Like no one ever asks for their
Speaker 1: money back. They just leave the money with you. And
Speaker 1: so the fraud went on for a very long time,
Speaker 1: and then things started to unravel. But Maria, you met
Speaker 1: Sam so so, and you met Sam in prison, so
Speaker 1: a spoiler. So tell us what did you make for
Speaker 1: him as a person? How did he get into this?
Speaker 1: Why did he get into this?
Speaker 2: Well, it's funny because my interview with him was from
Speaker 2: a while back, you know, twenty seventeen something like that.
Speaker 2: I honestly don't remember.
Speaker 1: We should say he was arrested, I think in about
Speaker 1: two thousand and seven, two thousand and eight something like that.
Speaker 2: Wasn't yeah, exactly exactly, but so I was trying to
Speaker 2: refresh my memory, and you know, just looked at some
Speaker 2: of the transcripts and then also looked at an interview
Speaker 2: that he did with Andrew Ross Sorkin, and he told
Speaker 2: us the exact same thing at the beginning, which is like,
Speaker 2: don't believe me, I'm a liar. And it's so funny
Speaker 2: because I think that he thinks that that absolves him, right,
Speaker 2: if he puts that disclaimer up top, then he can
Speaker 2: sort of charm his way out and say, but actually,
Speaker 2: I'm a good guy, right, I'm not like that bad
Speaker 2: guy made off.
Speaker 1: So I should say there's one amazing scene. Gee Lawson
Speaker 1: wrote this book The Octopus, which is like the quintessential
Speaker 1: account of Sammy's wail. But there's a scene in that
Speaker 1: book where his wife walks in and catches him bent
Speaker 1: over his desk snorting cocaine through a fifty dollar bill
Speaker 1: and says, why are you taking cocaine? And he goes,
Speaker 1: how dare you accuse me of taking drugs? So yeah, sorry,
Speaker 1: I interrupted, but.
Speaker 2: No, he is. It is the kind of guy he is.
Speaker 2: And you know, he was incredibly charismatic, and he said,
Speaker 2: I was doing really really well on Wall Street. Right,
Speaker 2: he kind of got in. He didn't want to compete
Speaker 2: with his siblings, wanted to do it on his own,
Speaker 2: so he didn't want to go into the family business. Instead,
Speaker 2: he had this opportunity to go into Wall Street, worked
Speaker 2: at a very successful hedge fund, and was actually making money.
Speaker 2: By the way, this is all according to sam Israel, Right.
Speaker 2: I haven't actually looked at his returns. I did not
Speaker 2: look at his balance sheets. I don't know how he
Speaker 2: did as a trader. He assures me that he was
Speaker 2: making millions for people and for himself in his prior
Speaker 2: Wall Street days. So let's just we'll take that on faith.
Speaker 2: But what I've learned working with con artists is you
Speaker 2: can't take anything on faith, so asterisk. But he was
Speaker 2: very successful on Wall Street, and I assume he must
Speaker 2: have been to a certain degree because he started his
Speaker 2: own hedge fund right and he was able to raise
Speaker 2: I think about three hundred million to begin with of
Speaker 2: outside money, which back then this was nineteen ninety six,
Speaker 2: I want to say something around somewhere around there in
Speaker 2: ninety so that was a lot of money. And he
Speaker 2: went in with a partner who was a close friend
Speaker 2: of his, who was a disgraced fund manager whose fund
Speaker 2: had just gone under. But Sam believed in him and
Speaker 2: thought that, you know, that he was a good guy
Speaker 2: and that this would work. So the way Sam told
Speaker 2: it to me was that when they started by you
Speaker 2: in nineteen ninety six, he kind of relied on this guy,
Speaker 2: you know, to be an equal partner, and that this
Speaker 2: guy was started losing a lot of money, and Sam said, well,
Speaker 2: I'm a good trader, I'm good at this. I'll be
Speaker 2: able to kind of work my way out of the hole.
Speaker 2: But he couldn't, and the hole kept getting bigger, and
Speaker 2: so at some point he realized, you know, shit, we've
Speaker 2: lost twelve percent in our first year. You know, it's
Speaker 2: even worse in our second year. This is looking bad
Speaker 2: and our ability to raise money is going down because
Speaker 2: our returns are shit. They're absolutely horrible. And so that's
Speaker 2: when it became a Ponzi scheme.
Speaker 1: And his accountant, who was a guy called Dan Marino. Hell,
Speaker 1: there is footnote for body. Well if anybody so think
Speaker 1: about it, this is nineteen ninety six. If anybody googles
Speaker 1: as pre google, right, if anybody who tries to search
Speaker 1: on the Internet for Dan Marino, they get the football player.
Speaker 1: So he's working with this accountant who is completely invisible
Speaker 1: to Internet searches. And the accountants are smart. Yeah, it's
Speaker 1: really smart. The accountant's completely crooked and basically sets up
Speaker 1: his own fake Uh.
Speaker 4: Sounds like a cricket I've read a stereotype based on
Speaker 4: last but Deno sounds like a cricket account accountant or
Speaker 4: an NFL quarterback.
Speaker 1: So he sets up his own fake auditing firm. So
Speaker 1: he's basically auditing his own accounts. And if anybody sort
Speaker 1: of were to really go and check the go the
Speaker 1: guy who says that Dan Marino's accounts are genuine is
Speaker 1: an uditor called Dan Marino, and they're the same guy,
Speaker 1: so that that was kind of an important part of
Speaker 1: this fraud. But yeah, Dan Marinos told the author Gey
Speaker 1: Lawson that one of the problems was, there's this idea, Oh,
Speaker 1: we're going to have a really good year, We're going
Speaker 1: to make a lot of money for real. And when
Speaker 1: we make a lot of money for real, then it
Speaker 1: will no longer be a palmzy scheme. You know, we'll
Speaker 1: have you know, it's all genuine, it all come out
Speaker 1: good in the end. Dan Marino said. The problem is
Speaker 1: sometimes they did have good years, but whenever they had
Speaker 1: a good year, they would claim it was an even
Speaker 1: better year, and whenever they had a bad year, they
Speaker 1: would never admit that they had a bad year. So
Speaker 1: there was a you know, whatever it was, vanity, fear
Speaker 1: of the consequences, whatever it was. He just made it
Speaker 1: completely impossible for him ever to catch up with his
Speaker 1: own life.
Speaker 2: And I think that that's very typical of con artists,
Speaker 2: right where they say I'll fix it, I'll make it better.
Speaker 2: This isn't this is just temporary, but it never is.
Speaker 2: But the most incredible thing about Sam Israel is that
Speaker 2: once the scheme kind of comes undone, right, which happens
Speaker 2: at some point, just like with SBF. Note right, at
Speaker 2: some point people are going to ask for their money
Speaker 2: and people are going to get spooked. And when they
Speaker 2: get spooked, like there's going to be a day of reckoning.
Speaker 2: And he had a moment where he said, oh shit,
Speaker 2: you know I'm going to jail. And he thought he
Speaker 2: would get seven or eight years, which was pretty typical
Speaker 2: for white collar criminals. And then they switched judges and
Speaker 2: the judge gave him two hundred and forty months, so
Speaker 2: twenty years right instead. And he was like, oh shit,
Speaker 2: you know I can't do twenty years. I'm going to
Speaker 2: be an old man. This is this is not cool.
Speaker 2: I was ready for seven I can't do twenty. And
Speaker 2: so instead of you know, figuring out how do I
Speaker 2: deal with this, he decides to fake his own death.
Speaker 1: Yeah, which he's obviously going to work out really well.
Speaker 2: Oh it's going to work out great, We'll be back
Speaker 2: in a minute. He only has a few months to plan, right,
Speaker 2: It's not like he has been thinking, oh, I'm going
Speaker 2: to fake my own death. This is my exit strategy.
Speaker 2: Because a lot of connor is they don't think that
Speaker 2: far ahead, right, They don't think of the exit strategy.
Speaker 2: They think it's always going to work out. So he says,
Speaker 2: I'm gonna I'm gonna fake my own death. I've watched
Speaker 2: this really cool movie it's called r V, and I'm
Speaker 2: going to buy an RV and I'm going to, you know,
Speaker 2: just go around the country and maybe make my way
Speaker 2: to go by the way. One of the things he
Speaker 2: told me was that as after his sentencing, as he
Speaker 2: was walking out, an FBI agent, one of the ones
Speaker 2: he'd gotten friendly with, looked at him and said, I
Speaker 2: have two words for you, Costa Rica. I find it
Speaker 2: very difficult to believe that that actually has.
Speaker 1: Yes, I also doubt.
Speaker 3: Marino Dan Marino two woods to you, Costa Rica. I
Speaker 3: don't know what.
Speaker 2: I think.
Speaker 1: You've got a career this so but I'm curious. So, Marie,
Speaker 1: you said that this is very this is short term thinking.
Speaker 1: He didn't. He wasn't really thinking to the consequences of
Speaker 1: his actions, and that that's true. Any Ponzi scheme inevitably
Speaker 1: become completely unsustainable. You cannot possibly keep it going. It
Speaker 1: will come to an end. So what is the way out?
Speaker 1: And then the faking the suicide again like of course
Speaker 1: he's gonna get caught. Of course that's not going to work.
Speaker 2: So yeah, he decided he was going to jump off
Speaker 2: a bridge.
Speaker 1: Well not just he decided he was going to pretend
Speaker 1: that he had jumped off.
Speaker 3: A bridge, right, he actually jumped off a.
Speaker 1: Bridge because he because he then he did actually actually claim.
Speaker 2: Actually he actually jumped off a bridge. He did. So
Speaker 2: this is the research he was doing. When you're trying
Speaker 2: to fake your own death, and I interviewed this woman,
Speaker 2: Elizabeth Greenwood, who wrote about faking your own death, you
Speaker 2: have to think very far ahead. You have to figure
Speaker 2: out money. You know, how am I going to be
Speaker 2: off the grid right these days? Like how am I
Speaker 2: going to survive? How am I going to get out
Speaker 2: of the country, and you know where where's my cash
Speaker 2: going to come from? All of these things. Instead, what
Speaker 2: he spends his time thinking is researching all of the
Speaker 2: bridges in New York to try to figure out which
Speaker 2: one he could conceivably jump off of an die. So
Speaker 2: he finds a bridge that's under construction, so there are
Speaker 2: nets underneath, and he's like, oh, perfect, Like I'm gonna
Speaker 2: jump and I'm going to land in the net and
Speaker 2: then I'll use the net to scramble up and get out.
Speaker 2: So he does this, not realizing that those nets are
Speaker 2: pretty damn hard to climb out of, so he manages
Speaker 2: to make the net. By the way, thinking about risk, right,
Speaker 2: risk reward if you miss the net, the you know
Speaker 2: the risk reward equation there is not great.
Speaker 1: The designed to catch people or just like a span
Speaker 1: of that somebody drops.
Speaker 2: I mean that's the right, No, it's I think it
Speaker 2: was gonna I think it was designed to catch bricks
Speaker 2: and you know, falling debris from construction. So when a
Speaker 2: person goes into it, it just like you know, it
Speaker 2: goes all the way down. So then he's stuck in it.
Speaker 2: And at this point he's like, I think I'm going
Speaker 2: to die anyway, except it's going to be much worse
Speaker 2: because I'm going to have spent my last minute trying
Speaker 2: to scramble up this net. But he actually does manage
Speaker 2: to get out, and he has a driver waiting for
Speaker 2: him to take him to his RV and he thinks
Speaker 2: he's going to drive off into the sunset. Oh, by
Speaker 2: the way, another really really important thing, if you're trying
Speaker 2: to fake your own death, do not tell your mother,
Speaker 2: your girlfriend, your son, and the driver that you're going
Speaker 2: to be faking your own death. Don't worry, mom, I'm
Speaker 2: not actually going calling uber.
Speaker 3: Do it in style.
Speaker 2: But that's this is what happened. So you know, he's
Speaker 2: fucked from the beginning because he has not thought any
Speaker 2: of this through. But he does manage to make it
Speaker 2: out of the net. He's met by a driver, makes
Speaker 2: it to his RV, and for the first few weeks
Speaker 2: it actually seems like everything is kind of okay because
Speaker 2: even though he's living in an RV, living in RV parks,
Speaker 2: you know, he's kind of getting away with it. And
Speaker 2: then he walks into a bar one day and he
Speaker 2: sees himself on TV on America's Most Wanted, and he
Speaker 2: goes and reads about himself on the Internet, which is
Speaker 2: a big, big no no if you're faking your own
Speaker 2: death to start googling yourself, but he does that, and
Speaker 2: he sees that his girlfriend has been arrested as an
Speaker 2: accomplice and that they're looking to arrest his mother. He
Speaker 2: doesn't realize that this is a trap, that the police
Speaker 2: do this kind of thing to try to get people
Speaker 2: kind of out of hiding. He thinks this is real,
Speaker 2: and so he gets on a motorcycle, goes to the
Speaker 2: police department to turn himself in, walks in. He says,
Speaker 2: you know, hey, I'm here to turn myself in, and
Speaker 2: the police officers like what you know? In for what?
Speaker 2: You need to use the bathroom, like it's over there anyway,
Speaker 2: there's all of this miscommunication. He says, no, you know,
Speaker 2: I turning myself in. I'm wanted and I just don't
Speaker 2: want any press here. And at this point the police
Speaker 2: officer actually looks at him, realizes who he is, and
Speaker 2: that is when he gets caught and gets an additional
Speaker 2: two years added on to his sentence for faking his
Speaker 2: own death and running away.
Speaker 1: It's astonishing. I'm not one thing you said, Maria. You
Speaker 1: said that the craziest thing about him, or the most
Speaker 1: amazing thing about him. I'm not even sure that is
Speaker 1: the craziest thing about him. But you know, we haven't
Speaker 1: got all day, so that there are other stories you
Speaker 1: could tell about Sam. But I wanted to ask Nate.
Speaker 1: Given that, Nate, you've been thinking about the habits of
Speaker 1: risk taking individuals, these people you call Riverians. Is short
Speaker 1: termism part of the or kind of a side effect
Speaker 1: or a glitch in the Riverian thinking system. So on
Speaker 1: the one hand, you need that ability to think probabilistically,
Speaker 1: you need that ability to take calculated risks. But I mean,
Speaker 1: Sam as Weel just seems to have never been able
Speaker 1: to see past the It had no problem taking risks,
Speaker 1: but just couldn't see past the end of his nose.
Speaker 4: Yeah. No, look, I think the better investors and gamblers
Speaker 4: have a longer time horizon. That's kind of one of
Speaker 4: one of Silicon Valley's secrets, despite their mini flaws, that
Speaker 4: they do kind of think ten years ahead. But yeah,
Speaker 4: some of this sounds very familiar, Marie, I know if
Speaker 4: I'm talking to you, the notion of like a good
Speaker 4: business gone bad. I mean, even FTX was a pretty
Speaker 4: good business, right, It was like the leading brand for
Speaker 4: crypto trading. They made legitimate profits, et cetera. But like
Speaker 4: you know, it turns sour or I think you know,
Speaker 4: Sam bacon Free couldn't resist the temptation to take all
Speaker 4: this money staying on the sideline. He couldn't like resist
Speaker 4: the temptation to go and gamble with it. But yeah,
Speaker 4: the lack of advanced planning coupled with the kind of
Speaker 4: miscalculating consequences. You know, if you're very charming, which I
Speaker 4: think Sam Israel is more so than SBF, it's a
Speaker 4: different story. You can kind of weasele your way out of.
Speaker 3: Things, right.
Speaker 4: You can think you can like dance your way out
Speaker 4: of anything, and you can up the con a level
Speaker 4: or two or three, and then you may on some level, no,
Speaker 4: it's not going to work.
Speaker 3: But I don't know. I mean, at some point there's
Speaker 3: a point of no return, right.
Speaker 2: There is a point of no return. Yeah, I think
Speaker 2: I think that's absolutely right, Nate. I think one of
Speaker 2: the this is a characteristic that you have both uh,
Speaker 2: both with raverians and non reveriance and and Tim. I'm
Speaker 2: sure you've come across this in other cautionary tales, but
Speaker 2: I think a lot of it is this over confidence
Speaker 2: in hubris, right, that comes with a certain level of
Speaker 2: success and people. And I think to be an entrepreneur
Speaker 2: and to be a risk taker, you need to be
Speaker 2: over confident to a certain extent. You know, as as
Speaker 2: we all know, if you actually know your odds of success,
Speaker 2: you're not gonna You're not gonna start the damn company
Speaker 2: you're not gonna You're not gonna try it because it's
Speaker 2: the risk of failure and the chances of failure are
Speaker 2: so high, So it's a it's this fine balance, and
Speaker 2: I think over confidence so turns into delusion and turns
Speaker 2: into this thinking that actually, you know, I can keep
Speaker 2: doing this forever. And because you've gotten away with it
Speaker 2: for so long, it seems like probabilistically speaking, you know,
Speaker 2: your base rates change, I've gotten you know, okay, you
Speaker 2: know one year, two years, three years, four years, everything's good,
Speaker 2: This is all going good.
Speaker 4: Yeah, if the coin comes up heads five times in
Speaker 4: a row, I mean you see it.
Speaker 3: In poker all the time, right, Yeah.
Speaker 4: You know, winner's tilt is something which is maybe underdiscussed
Speaker 4: loser tilt we all have experienced, maybe Maria, but Winter's
Speaker 4: tilt where you're on a hot streak and you're like a,
Speaker 4: maybe I have some gift from God to play poker
Speaker 4: really well or something is also a big deal.
Speaker 2: It absolutely is. One of My favorite psych studies is
Speaker 2: from Ellen Langer, and I think the name of the
Speaker 2: paper is something like heads, I win tails, It's chance
Speaker 2: something like that. Yeah, And she had people bet not bet,
Speaker 2: but guess the results of a coin toss, and it
Speaker 2: was actually not a fair coin. It was rigged, and
Speaker 2: there were different Basically, it came up heads and tails
Speaker 2: the exact same number of times in all of the
Speaker 2: different conditions, but in some of them it was pretty random.
Speaker 2: In others it was clustered near the end, and in
Speaker 2: the most important condition, the correct guesses were clustered near
Speaker 2: the beginning, right, So basically you would say, you know, heads,
Speaker 2: you'd guess, and then they'd make sure it landed on heads.
Speaker 2: It was a rigged toss, so that you were right
Speaker 2: it was yeah, And the people who were correct clustered
Speaker 2: at the beginning would then and these were Harvard students,
Speaker 2: by the way. Then they got all sorts of questions
Speaker 2: like I'm good at predicting the outcomes of coin tosses,
Speaker 2: and they would rate themselves as actually quite good at it.
Speaker 2: They would say, if I had more time to practice
Speaker 2: and to guess, I'd get even better. So things that
Speaker 2: made it very clear that they thought that this was
Speaker 2: a skill and not actually completely random. And it was
Speaker 2: so easy to get people to believe that they were
Speaker 2: skilled at something where it was just complete randomness when
Speaker 2: they had those those things happened at the beginning. So Tim,
Speaker 2: I think this goes back to the beginning of your question.
Speaker 2: This is how you get into Ponzi schemes. Think about
Speaker 2: Bernie Madeoff right. He was successful for far longer than
Speaker 2: Sam Israel, and Sam Israel, by the way, was the
Speaker 2: single biggest Ponzi scheme before Bernie made Off.
Speaker 1: Now I am I'm curious. We've been talking about people
Speaker 1: who were have an appetite for risk and who it
Speaker 1: all came apart for Maria, I know you've been doing
Speaker 1: a little bit of research into one of the most
Speaker 1: important gamblers in economic history.
Speaker 2: Yeah, John Law. He was someone who I wrote about
Speaker 2: for The Confidence Game and I've come back to so
Speaker 2: my next book is about cheating. So I've kind of
Speaker 2: been thinking about him. But one of the reasons I
Speaker 2: am interested in John Law. So when we're talking about
Speaker 2: someone like Sam Israel, right, it's pretty clear con artist,
Speaker 2: right Ponzi scheme. When you're talking about someone like John Law,
Speaker 2: it becomes much less clear because he's someone who was
Speaker 2: a huge gambler and we know that sometimes he was successful,
Speaker 2: but he also ran his father's business into the ground.
Speaker 2: If I remember correctly through gambling. But I guess he
Speaker 2: got better with time and killed.
Speaker 4: Man and likely killed a man literal gambling or like
Speaker 4: literal gambling.
Speaker 2: So yeah, so he was someone who came from money.
Speaker 2: Who's you know whose parents had a financial business.
Speaker 1: We should say it was seventeen hundreds, just just a situation, right, Yes,
Speaker 1: for those small number of listeners who don't know who
Speaker 1: John Law is or everybody should.
Speaker 2: We're in the seventeen hundreds and he's going to be
Speaker 2: making friends with the Duke of Orleans or the Duke
Speaker 2: of Orleans who was then Regent of France, and he's
Speaker 2: going to be basically setting up France's banking system. So
Speaker 2: the reason why I was fascinated by him is that
Speaker 2: it's actually unclear if he was a con artist or not,
Speaker 2: like did he believe that? Because it was the kind
Speaker 2: of the end of his time at the height of
Speaker 2: finance was with the establishment of this thing called the
Speaker 2: Mississippi Company, which was a huge bubble and basically bankrupted
Speaker 2: a ton of people. And the question is, you know,
Speaker 2: did he know what he was doing and get unlucky
Speaker 2: or did he like basically did he do this as
Speaker 2: a kind of Ponzi scheme as a kind of con
Speaker 2: or not.
Speaker 1: And the fact that we still don't really agree on that,
Speaker 1: I think is fascinating. I mean, we should say so.
Speaker 1: He he was originally Scott, a Scott. He he killed
Speaker 1: a guy and a duel, was sentenced to death for murder.
Speaker 1: Escape from prison, traveled Europe, wound up in Paris, made
Speaker 1: a few friends with some influential nobles, made a huge
Speaker 1: amount of money gambling because he would set himself up
Speaker 1: as the house and he understood the probability enough that
Speaker 1: he knew he had an edge. So he's gambling with
Speaker 1: all these nobles. He's making a huge amount of money.
Speaker 1: And then he sets up his own bank and he
Speaker 1: starts issuing paper money. This is not the first paper
Speaker 1: money in the history of the world, it's not even
Speaker 1: the first paper money in the history of France, but
Speaker 1: it is. It's pretty new and people are still trying
Speaker 1: to figure out kind of how it works. And of
Speaker 1: course this is revolutionary. He's ahead of his time, like
Speaker 1: paper money is how we do things right. It's kind
Speaker 1: of amazing. And then the whole thing just gets wrapped
Speaker 1: up with French government debt and gets wrapped up with
Speaker 1: the Mississippi bubble, and the Mississippi bubble was it was
Speaker 1: a stock market bubble. One stock was involved, the stock
Speaker 1: of the Mississippi Company, and John Law controlled the Mississippi Company.
Speaker 1: But it was clear that nobody really understood what was
Speaker 1: going on except that go up, and if numb, but
Speaker 1: go up, everyone everyone gets very excited.
Speaker 4: Yeah, it's very intoxicating when the number goes up. Right,
Speaker 4: I did wonder too, there is some survivorship bias in
Speaker 4: which kind of scams and schemes we discover, you know,
Speaker 4: the best frauds in history. Probably nobody knows about it. Yeah,
Speaker 4: good point. Sbl was convinced that he could somehow navigate
Speaker 4: his way through bankruptcy, or not through bankruptcy, now, his
Speaker 4: way through this downfall and bitcoin and come out on
Speaker 4: either side of it.
Speaker 3: And maybe people wouldn't really notice.
Speaker 4: Right, Maybe it's like a page a sixteen story, not
Speaker 4: in a one story. If he like, if there's a
Speaker 4: spontaneous rise in bitcoin prices and they recover these losses
Speaker 4: that they have, although they were ten million and ten
Speaker 4: billion in a hole, which is pretty hard to overcome.
Speaker 2: It's funny, Nate. I think it's that's a really important
Speaker 2: point that the best con artists are never caught. When
Speaker 2: people when we talk about connartists and people ask me,
Speaker 2: you know, why aren't there as many female con artists,
Speaker 2: I say a few things, but one of the it's
Speaker 2: kind of a joke but kind of not, which is
Speaker 2: that they're just better at it. So we don't know
Speaker 2: them because they haven't been caught. They don't have as
Speaker 2: much ego, and they know when to disappear and how
Speaker 2: to disappear much better than the sam Israel's of the world.
Speaker 4: Or like cheating in poker, a lot of these famous
Speaker 4: cheating scandals, like online cheating scandals, people are are very
Speaker 4: greedy where they win at like, you know, thirteen centered
Speaker 4: deviations above some random rate, whereas if we won at
Speaker 4: two center deviations above random, it would be almost impossible
Speaker 4: to detect and you'd have a great life. Although we
Speaker 4: don't find those people though, right, we don't find the
Speaker 4: people that are that are actually good at cheating a.
Speaker 3: Lot of time.
Speaker 2: Yeah, but so so as we you know, wrap up
Speaker 2: the story of John law I do think that it's
Speaker 2: interesting that, I mean, economists don't agree, historians don't agree
Speaker 2: whether whether or not he was, you know, greedy cheat.
Speaker 2: He was obviously greedy. I think everyone agrees on that,
Speaker 2: but whether he thought that this could actually all worked out.
Speaker 2: I found a rhyme that I would love to share
Speaker 2: if you guys are in poetry mode, that come from
Speaker 2: the time about what happened with the Mississippi bubble. And
Speaker 2: it goes like this. My shares, which on Monday I bought,
Speaker 2: were worth millions. On Tuesday, I thought so. On Wednesday,
Speaker 2: I chose my abode in my carriage. On Thursday I
Speaker 2: rode to the ballroom. On Friday I went to the workhouse.
Speaker 2: Next day I was sent.
Speaker 3: First poetry reading on the Risky Business podcast.
Speaker 2: I believe it is.
Speaker 1: It is I think that should stop tradition. That's very good.
Speaker 2: And one nobleman of the time said, thus sends the
Speaker 2: system of paper money, which has enriched a thousand beggars
Speaker 2: and impoverished one hundred thousand men. And obviously that's not true,
Speaker 2: which is why we You know, that was not the
Speaker 2: end of the system of paper money. It was just
Speaker 2: it just happened to be the end of John Law.
Speaker 2: He had to escape France, by the way, because he
Speaker 2: was convicted and was going to be sent to prison there.
Speaker 2: So he dressed up as a beggar, ran away to
Speaker 2: Italy and died in Venice, totally impoverished. And I guess
Speaker 2: the cautionary tales.
Speaker 1: It is a cautionary tale. And I guess the lesson,
Speaker 1: or maybe the lesson is that the economics lesson is,
Speaker 1: if you're going to have paper money, if you're going
Speaker 1: to have somebody who has the right to just create
Speaker 1: money with the printing press, you've got to make sure
Speaker 1: you have the right controls over that person or over
Speaker 1: that institution. It can't just be some guy who killed
Speaker 1: a guy in a duel and came over one a
Speaker 1: lot of money and gambling and then he's the guy
Speaker 1: who can do it.
Speaker 3: It's you.
Speaker 1: You need this institutional scaffolding, which you know, when we
Speaker 1: have it, it seems to work just fine.
Speaker 3: We'll be back right after this.
Speaker 4: I mean, are there like two or three on big takeaways,
Speaker 4: like common patterns and when you know something is becoming
Speaker 4: a cautionary tale or a can.
Speaker 1: At the risk of quoting that classic opening line of
Speaker 1: Ana Karenina that all happy families are alike and every
Speaker 1: unhappy family is unhappy in its own way, I think
Speaker 1: one of the striking things about cautionary tales is that
Speaker 1: there are a lot of different ways for things to
Speaker 1: go wrong. The organizational problems, informational problems, engineering problems, hubris
Speaker 1: and arrogance, short sightedness, lots and lots of self delusion,
Speaker 1: lots of wishful thinking. I mean, it's a miracle that
Speaker 1: human civilization survives, actually, given how many different ways there
Speaker 1: are to go wrong. But I mean that is part
Speaker 1: of the slightly perverse joy of researching and writing these
Speaker 1: cautionary tales. There is always a new disaster, and always
Speaker 1: a new way for disaster to happen.
Speaker 2: You make that sound almost gleeful.
Speaker 1: Yeah, I mean sometimes I have to remind myself that, like,
Speaker 1: I'm not supposed to be enjoying this, because some of
Speaker 1: them are very, very sad. Some of them are straightforwardly
Speaker 1: hilarious and no great harm is done, but a lot
Speaker 1: of them are pretty painful.
Speaker 4: Yeah, Maria, I remember you telling me that, like, cons
Speaker 4: are most likely to occur when you're in an upcycle
Speaker 4: or a down cycle, right, not in the steady state,
Speaker 4: but when there's something new and novel and people are panicking.
Speaker 2: Yeah, moments of transition. So whether those are societal transitions
Speaker 2: or whether they're personal transitions, is when you're most vulnerable
Speaker 2: to get cons So it's not a personality trait. It's
Speaker 2: not intelligence, it's not it's not anything like that. It
Speaker 2: is this kind of moment of either up or down
Speaker 2: euphoria or you know, despondency. But when things are uncertain
Speaker 2: and your worldview gets challenged, gets shattered, gets displaced, you
Speaker 2: look for certainty and that's when con artists swoop in
Speaker 2: and give that certainty to you.
Speaker 1: So as long as nothing ever changes, we will say
Speaker 1: from Collins, we're good.
Speaker 4: You know my uh my great grandfather faked his death
Speaker 4: and got a.
Speaker 2: Wait what okay, Nate, can we just can we we
Speaker 2: need this story. I'm sorry we're pausing everything, Nate, please.
Speaker 3: I mean his name was Ferdinand Thrunn, which is a
Speaker 3: great name.
Speaker 2: It's an amazing name.
Speaker 4: He was written up in the Chicago Tribune and the
Speaker 4: New York Times and places like that. Yeah, he was
Speaker 4: like an insurance frauds ster. We should do this as
Speaker 4: a separate segment sometime, yeah, But basically his technique was
Speaker 4: to commit crimes so devious that there was no law
Speaker 4: to charge them with. Because I hadn't figured out like
Speaker 4: this particular type of fraud. But we should do proper
Speaker 4: research and do an episode on this.
Speaker 1: Maria, Yeah, absolutely so, so Maria Knight. I now we've
Speaker 1: discussed some as well. We discussed John Law. I actually
Speaker 1: had a couple of questions, given that you guys are
Speaker 1: absolutely experts on this sort of thing. I had a
Speaker 1: couple of questions for you that I hope you won't
Speaker 1: mind me asking, and that The first one is, I
Speaker 1: have you your two most recent books in front of me.
Speaker 1: I have Nates on the Edge, I have Maria's The
Speaker 1: Biggest Bluff Stone Cold Classic Amazing. I looked in the index.
Speaker 1: The word experiments does not appear in the index of
Speaker 1: either of your books. Expected value, of course does appear,
Speaker 1: but experiments does not. And I just wondered whether you
Speaker 1: to brilliant risk takers, analysts, poker players. But I thought
Speaker 1: a poker player can't really experiment, Like if you want to,
Speaker 1: if you want to find out, you need to, you
Speaker 1: need to make the bet. You know, you need to
Speaker 1: put down the money. There's no cheap way to find
Speaker 1: out what the other person's cards are. And maybe that
Speaker 1: is a blind spot in poker playing relative to decision
Speaker 1: making advice in everyday life, because what I've what I've
Speaker 1: always been saying to people is Okay, if you're facing
Speaker 1: an uncertain situation, you know, you don't know what the
Speaker 1: right thing to do is. Maybe there's an experiment, maybe
Speaker 1: that you can run a little pilot, Maybe you can
Speaker 1: run a little you know, a b test. Maybe there's
Speaker 1: a cheap way to find out without betting all your
Speaker 1: chips metaphorically speaking. So I just wanted to ask why
Speaker 1: why did neither of you talk about experiments? And is
Speaker 1: this in fact a blind spot in the poker player's
Speaker 1: view of the world.
Speaker 4: It's a great point to I have a home game
Speaker 4: I play maybe every third week. That's a one dollar
Speaker 4: two dollar game, which for me is you know, on
Speaker 4: the lower side of the stakes I play, and I
Speaker 4: probably am doing some experimenting in that game, right.
Speaker 3: You know?
Speaker 4: Last night I made I had a nut flushtra which
Speaker 4: some of our artists will know what that means. I
Speaker 4: had the Asi flustra on a boarder that was King
Speaker 4: Queen x X. I made like a three x overbent
Speaker 4: shove on the turn. I'm just getting an experiment. I
Speaker 4: bet probably there's some frequency which you're supposed to do
Speaker 4: this in game theory. But like, but if I lose
Speaker 4: this pot, then you know, I'll win sometimes to catch
Speaker 4: my flush and like it'll be a fun hand to
Speaker 4: show down and whatever. But I did feel I think
Speaker 4: we do probably experiment a little bit, and that kind
Speaker 4: of like naughty feeling you have of like having an
Speaker 4: experiment and getting away with it, like you're kind of
Speaker 4: taking the piss to use. Is that the British term. Yeah,
Speaker 4: you're taking the piss. You kind of get away with it.
Speaker 4: Like that's a very satisfying feeling, and I think encourages
Speaker 4: kind artistry sometimes.
Speaker 2: Yeah, yeah, I think that there are so two things. One, yes,
Speaker 2: I think that you can experiment this way, and to me,
Speaker 2: I do it when I move down in stakes as well,
Speaker 2: right when the money is not not as meaningful and
Speaker 2: you get to test certain theories out Right, So if
Speaker 2: I'm studying and I'm kind of figuring out different possibilities
Speaker 2: for playing similar spots, I might test those out and
Speaker 2: feel comfortable testing them out when I don't care as
Speaker 2: much about the stakes, when it's not kind of as important.
Speaker 2: Now that said, we can't experiment as in the traditional
Speaker 2: So I'm you know, I'm a trained psychologist, right, So
Speaker 2: when I was doing studies for my PhD, you have
Speaker 2: to have a very strict experimental design where you have
Speaker 2: your control group, and you have your test groups, and
Speaker 2: you know, you have all of these things where you're
Speaker 2: trying to subtly change the conditions and see if the
Speaker 2: outcome changes. That obviously you can't do because in some ways,
Speaker 2: you know, my whole book was an experiment. So experiments
Speaker 2: not in the index, but the biggest bluff, all of
Speaker 2: it was was experiment. And I saw poker as kind
Speaker 2: of a psychology laboratory of testing out a lot of
Speaker 2: the psychological theories that I had kind of known in
Speaker 2: theory and putting them into practice at the table and
Speaker 2: being able to see, oh, you know, this is how
Speaker 2: this plays out, this is how that plays out. And
Speaker 2: I do think that poker is great for that. But
Speaker 2: of course you can't when you're playing in a tournament,
Speaker 2: when you're playing in a game, you can't have the
Speaker 2: exact same conditions where you say, Okay, on this exact
Speaker 2: same board, I'm going to do this, let's see what happens.
Speaker 1: All right.
Speaker 2: Pretend I didn't do that. Let's go back. Now, I'm
Speaker 2: going to do something else and we'll see what happens there.
Speaker 2: Because even if Nate and I were thinking, oh, okay,
Speaker 2: let's see what it feels like to overbt three times
Speaker 2: the pot in this particular spot, and Nay says, okay,
Speaker 2: I'm going to do this, and then Maria you do
Speaker 2: why people that's not in poker, that experiment is actually
Speaker 2: not a valid control group because Nate and I are
Speaker 2: so different. People respond to us differently, and all of
Speaker 2: a sudden, you can't control the environment because it's a
Speaker 2: different environment. The moment you switch out the players, right,
Speaker 2: all of a sudden, the experimental conditions change, even if
Speaker 2: you've changed literally nothing except who's sitting in that chair.
Speaker 2: And I think that's actually fascinating and a really that's
Speaker 2: how life works. That's why sometimes psych studies from the
Speaker 2: laboratory don't generalize well to the real world, because the
Speaker 2: real world does get messier and it's much more difficult
Speaker 2: to control. No. Look, I think of your variables.
Speaker 4: As someone who's self reflectively kind of seen his social
Speaker 4: status rise and fall different times. If you're charming and
Speaker 4: privileged and are seen as being on a winning streak,
Speaker 4: you can get away.
Speaker 3: With a lot. Yeah. People really are afraid to call
Speaker 3: you on your bullshit.
Speaker 1: Yeah, okay, yes, second quick question. Second quick question, because
Speaker 1: I have to take advantage of the opportunity to tap
Speaker 1: into your wisdom. Okay, So you I think I think
Speaker 1: it's fair to say that both of you would advocate
Speaker 1: you're putting a probability on something. If you're going to
Speaker 1: make a risky decision, you have to have an idea.
Speaker 1: Is this like a five to one? Is is it
Speaker 1: a three to one? Is there twenty percent chances is
Speaker 1: going to happen? Is there are seventy percent chances is
Speaker 1: going to happen? And you know, and there's a difference
Speaker 1: between say a fifty three percent chance and a forty
Speaker 1: eight percent chance, even though they're both close to fifty
Speaker 1: to fifty. So it's important to quantify as much as
Speaker 1: you can, even though you don't always have the data. Okay,
Speaker 1: So two very little stories to get you to reflect
Speaker 1: on the case in favor of quantification. Apparently, when the
Speaker 1: US government was pondering the Bay of Pigs invasion, the
Speaker 1: Joint chiefs of Staff thought that the chance of success
Speaker 1: was thirty percent, and a report was prepared for President
Speaker 1: Kennedy and Kennedy and thirty percent was presumably they thought,
Speaker 1: are the president working to understand percentages? So he was
Speaker 1: told there is a fair chance of success, and by
Speaker 1: fair chance of success they meant well, thirty percent. Now
Speaker 1: we don't know what Kennedy understood by a fair chance
Speaker 1: of success, but he seems to have thought it was
Speaker 1: a good chance of success, so and he approved this
Speaker 1: total fiasco. So it might seem more user friendly to
Speaker 1: express things as well, this is common or uncommon, or
Speaker 1: likely or un likely, But actually none of those words
Speaker 1: really mean the same thing to the person who's uttering
Speaker 1: the word as to the person who's receiving it. So
Speaker 1: you should always put probabilities on things. Here's the counterexample. Counterexample.
Speaker 1: Think back to the financial crisis two thousand and seven,
Speaker 1: two thousand and eight. You had quants putting probabilities on things.
Speaker 1: This is the probability that such and such a thing
Speaker 1: will default based on what we know about history, based
Speaker 1: on what we know about other things that are correlated
Speaker 1: with it. But actually all of those probabilities were spuriously precise.
Speaker 1: People had too much confidence in the probabilities, and it's
Speaker 1: fine to say, oh, we think there's like a zero
Speaker 1: point five percent chance that this will default. That's fine.
Speaker 1: Then the problem is you feed the zero point five
Speaker 1: percent into a model, which gets fed into another model,
Speaker 1: which gets fed into another model, and in the end
Speaker 1: you'd be like, oh, well, we've repackaged this thing, and
Speaker 1: now there's like only a one in a trillion chance
Speaker 1: that this will default. And it turns out that that's
Speaker 1: all dependent on the quality of your original sumption, and
Speaker 1: you shouldn't be betting the existence of Western civilization on
Speaker 1: that calculation. And people got it wrong. So the case
Speaker 1: against quantification is once you have a number, then you
Speaker 1: are tempted to rely on that number too much and
Speaker 1: to analyze or to manipulate or to remodel or to
Speaker 1: reanalyze that number too much, and to forget that actually
Speaker 1: the number was always basically just an educated guess.
Speaker 2: Well, I think that when you're talking about quantification and
Speaker 2: when you're talking about probabilities, it's the exact same logic
Speaker 2: that you have to apply to algorithms and to kind
Speaker 2: of building algorithms, which is something that Nate and I
Speaker 2: have talked about on the pod with AI, which is
Speaker 2: garbage in garbage out right. If your assumptions are garbage,
Speaker 2: then your probabilistic assessment is going to be garbage. So
Speaker 2: I actually think that both of these things they're not
Speaker 2: counter examples. The thirty percent chance of the Bay of pigs.
Speaker 2: I just think that these were people who had a
Speaker 2: lot of qualifications, had done the research, had done regulus
Speaker 2: rigorous analysis, and that was not garbage. And right there
Speaker 2: they had assumptions that were there for a good reason.
Speaker 2: They had good historical data. I have no idea how
Speaker 2: they came upon the thirty percent. I'm just making yeah,
Speaker 2: hindsight by us exactly, And so you get thirty percent
Speaker 2: and by the way, you should absolutely have told Kennedy
Speaker 2: thirty percent and not fair chance. There are so many
Speaker 2: psych studies about this that trying to put words with
Speaker 2: percentages backfires because people do not understand. It's like if
Speaker 2: you have a weather man and says a fair chance
Speaker 2: of rain, Right, let's talk about not a fair chance
Speaker 2: that the Bay of pigs is a success fair chance
Speaker 2: of rain? Do you bring an umbrella? You want to
Speaker 2: know what the percentage chances. You want to know that
Speaker 2: actual number because otherwise a quantification gets all out of whack.
Speaker 2: Financial cis when you have those numbers in the models.
Speaker 2: Those were people whose incentives were not aligned with giving
Speaker 2: you a correct probabilistic assessment. Their incentives were to make money.
Speaker 2: That's also a question that you have to make. You
Speaker 2: always have to ask, and this is something that Nate
Speaker 2: and I talk about as well. When you're making these assumptions,
Speaker 2: do the incentives align, Where are the assumptions coming from,
Speaker 2: and do you have an incentive to be correct? Right?
Speaker 2: And in this particular case, their incentive was to make
Speaker 2: money for them today and to make their company think
Speaker 2: that this was going to be a great bet and okay,
Speaker 2: that it was going to work out. And so those
Speaker 2: percentages are not something that you want to rely on. Now,
Speaker 2: if my incentive is if my percentage is wrong, I'm
Speaker 2: getting fired. Right. If my percentage is wrong, then I'm
Speaker 2: making zero dollars. Then all of a sudden, I come
Speaker 2: up with different percentages, I use different inputs. My model
Speaker 2: looks very very different. But Wall Street didn't work that way,
Speaker 2: still doesn't work that way. That's not how you're incentivized.
Speaker 4: Yeah, look, I think there's a risk of laundering subjective
Speaker 4: opinions through probabilities and forgetting their subjective right. If I'm
Speaker 4: running link the airport, there's traffic on the van Wick
Speaker 4: or whatever, right, I might say to myself it's a
Speaker 4: five percent chance is going to miss my flight. Right,
Speaker 4: It's not coming out of any regression analysis or anything.
Speaker 4: You know, I've probably used the phrase in this show,
Speaker 4: like quoting Vice President Harris. A model does not fall
Speaker 4: out of a coconut tree. It exists in the context
Speaker 4: of that which became before it, or whatever else you're
Speaker 4: trying to get at the truth with the model. And
Speaker 4: I think mediocre modelers in particular will publish a number
Speaker 4: and then forget how many assumptions are driven into that.
Speaker 3: Right. Look, I still think it's worth quantifying things.
Speaker 4: I mean, at the end of the day, probability is
Speaker 4: defined as a number between point zero and one, and.
Speaker 3: You have to make decisions even in conditions of uncertainty.
Speaker 4: But to Tim's point, yeah, I think there are cases
Speaker 4: where people don't forget how provisional a guess is when
Speaker 4: you put a number on it.
Speaker 2: Yeah, And I think it is always important to not
Speaker 2: have a false sense of certainty. And there's also a
Speaker 2: lot of data that shows that when you have numbers,
Speaker 2: and when you have a lot of these things, it
Speaker 2: does give you a false sense of certainty, right that
Speaker 2: you often do become a little bit over confident when
Speaker 2: you're like, well, I have this model in this model,
Speaker 2: so it must be and there you have the bias
Speaker 2: that we've talked about a lot, where it goes from
Speaker 2: being probabilistic to seeming much more certain like this will
Speaker 2: not default, This will not happen because you forget that
Speaker 2: it ain't zero.
Speaker 1: Thank you so much, guys, fantastic Tim.
Speaker 2: Thank you so much for coming on the pod today.
Speaker 2: It's been such a pleasure having you.
Speaker 1: Oh it's been really really fun. Thank you for sharing
Speaker 1: your wisdom. And if people want to hear more about
Speaker 1: Sound Israel or any other stories of things going disastrously
Speaker 1: wrong and me trying to investigate the social science behind
Speaker 1: why they went wrong cause New Tales with Tim Harford
Speaker 1: is one of Risky Business's sister podcasts on pushkin.
Speaker 2: It is and there are lots of tales of risk
Speaker 2: taking assessments that do not turn out quite the way
Speaker 2: the risk taker thought they would. Risky Business is hosted
Speaker 2: by me Maria Kunakova and me Mate Silver. The show
Speaker 2: is a co production of Pushkin Industries and iHeartMedia. This
Speaker 2: episode was produced by Isabel Carter. Our associate producer is
Speaker 2: Gabriel Hunter Chang. Our executive producer is Jacob Goldstein.
Speaker 3: And if you want to listen to and add free version,
Speaker 3: sign up for Pushkin Plus. For six seventy nine a
Speaker 3: month you can access to ad free listening. Thanks for
Speaker 3: tuning in
Speaker 1: H