WEBVTT - Best Of Risky Business: Lessons From The River 0:00:15.604 --> 0:00:16.044 Pushkin. 0:00:28.804 --> 0:00:31.964 Hey everyone, we are off for the holidays, so we 0:00:32.004 --> 0:00:36.244 wanted to reshare one of our favorite episodes last year, 0:00:36.364 --> 0:00:39.964 when Nate's book On the Edge came out, I had 0:00:39.964 --> 0:00:42.724 a chance to interview him about it on the podcast, 0:00:43.044 --> 0:00:44.684 and I thought it would be really fun to take 0:00:44.724 --> 0:00:47.644 a look back at that interview where Nate was in 0:00:47.724 --> 0:00:52.444 the interviewee seat. Then I wrote a little review recap 0:00:52.484 --> 0:00:55.324 of the book on my sub stock. If somehow you 0:00:55.364 --> 0:00:57.644 are listening to Risky Business and you have not read 0:00:57.644 --> 0:01:00.044 the book, please read the book. It's wonderful, Nate. You 0:01:00.084 --> 0:01:03.684 did such a great job and I really enjoyed that conversation. 0:01:04.964 --> 0:01:08.724 Yeah, no, look, maybe I should go back and read 0:01:08.764 --> 0:01:11.164 that book is pression. I think it's talking about all 0:01:11.244 --> 0:01:15.804 the kind of topics from you know, prediction markets to 0:01:15.844 --> 0:01:18.804 AI to crypto that are our only you know, to 0:01:19.044 --> 0:01:22.284 gambling scandals right that are only becoming more pertinent today. 0:01:22.324 --> 0:01:24.564 But thank you for that interview, Maria, And yeah, maybe 0:01:24.564 --> 0:01:25.684 I'll take a listen to myself. 0:01:26.324 --> 0:01:28.604 Yeah, so enjoy everyone. 0:01:32.724 --> 0:01:35.684 So, first of all, Nate, congratulations. I know that this 0:01:35.924 --> 0:01:39.724 was a long time coming labor of many many years. 0:01:40.124 --> 0:01:42.844 Yeah no, I spent basically three years of my life 0:01:42.884 --> 0:01:46.844 where I'd say this is my main professional focus, talk 0:01:46.884 --> 0:01:48.884 to two hundred people, and I know, I just I 0:01:48.884 --> 0:01:52.404 would recommend email really smart people and ask to have 0:01:52.444 --> 0:01:54.404 a conversation with them and pretend it's for a book, 0:01:54.404 --> 0:01:56.764 and then don't write the book. That's probably still worth 0:01:56.764 --> 0:01:59.844 it in some sense. But no, I actually went ahead 0:01:59.884 --> 0:02:00.764 and wrote the book. 0:02:00.964 --> 0:02:02.884 And we're very glad you did. So I'm going to 0:02:03.004 --> 0:02:08.124 start with Nate. In the book, you make this distinction 0:02:08.284 --> 0:02:11.924 between two community. You have the village and you have 0:02:12.284 --> 0:02:15.884 the river. Talk me through what exactly those mean. 0:02:17.364 --> 0:02:19.324 Let's start with the village, even though it's not the 0:02:19.324 --> 0:02:20.884 focus of the book, just because it's a little bit 0:02:20.884 --> 0:02:23.764 easier to define in a term that's more conventional. The 0:02:23.844 --> 0:02:28.604 village is basically the kind of liberal, progressive East Coast establishment. 0:02:28.804 --> 0:02:32.444 So it's the New York Times, it's Harvard University, it's 0:02:32.484 --> 0:02:36.324 think tanks and nonprofits, it's you know, government when you 0:02:36.364 --> 0:02:38.484 have a Democrat in office at least, it's kind of 0:02:38.524 --> 0:02:42.124 the expert class, the professional managerial class, that whole cluster 0:02:42.204 --> 0:02:46.524 of attributes. By contrast, the river is kind of the 0:02:46.524 --> 0:02:49.604 world that I suppose I inhabit, or I imagine myself inhabiting. 0:02:49.924 --> 0:02:53.084 It's the world of calculator risk taking, where people are 0:02:53.204 --> 0:02:58.404 some combination of being very analytical and extremely wildly competitive. 0:02:58.484 --> 0:03:02.284 So like poker is an archetypal maybe the archetypal river activity. 0:03:02.404 --> 0:03:05.804 But as I discovered this world in the book, you know, 0:03:05.884 --> 0:03:09.204 I found that the venture capitalist and the effective at 0:03:09.764 --> 0:03:13.924 and the hedge fund people, and the sports betters, even 0:03:13.964 --> 0:03:17.724 the crypto people, they all have a common vocabulary. They 0:03:17.764 --> 0:03:20.084 all talk about things in roughly the same ways, and 0:03:21.924 --> 0:03:24.124 so it's like it's not a place, it's a discrete community. 0:03:24.444 --> 0:03:26.764 I mean, in Las Vegas and Silicon Valley you might 0:03:26.764 --> 0:03:29.924 get closer to an actual network, but like they're just 0:03:30.284 --> 0:03:32.804 these people that I think are often poorly understood by 0:03:32.804 --> 0:03:38.244 the mainstream media and yet are incredibly wealthy and powerful. 0:03:39.484 --> 0:03:41.244 Many of the richest people in the world have some 0:03:41.284 --> 0:03:45.204 of these river tendencies, and like, surprisingly to me, would 0:03:45.724 --> 0:03:48.204 take my emails and my phone calls because they kind 0:03:48.204 --> 0:03:51.364 of recognize like a fellow traveler a little bit. And 0:03:51.364 --> 0:03:53.604 then what I discovered is that the kind of conceit 0:03:53.644 --> 0:03:56.564 of the proposal that actually there's a commonalities in how 0:03:56.564 --> 0:04:00.484 people think more was more literally true than I had thought, 0:04:00.524 --> 0:04:03.524 and that there's more literal crossover poker players who become 0:04:03.564 --> 0:04:07.124 effective altruists, or hedge funders who host poker games, or 0:04:07.204 --> 0:04:11.164 venture capitalists who do sports betting is a metaphor for 0:04:11.244 --> 0:04:13.524 some of these things. So it's a real place of 0:04:13.564 --> 0:04:15.924 a real group of people that I think, Maria are 0:04:15.964 --> 0:04:18.844 in our circles, maybe not the only circle to run in, 0:04:18.884 --> 0:04:21.964 but certainly one common type. And I felt like I 0:04:21.964 --> 0:04:25.404 had the opportunity to tell a really good story about 0:04:25.444 --> 0:04:28.084 these people. I did not. I think I got lucky. 0:04:28.124 --> 0:04:30.684 I think I'm running in my like ninety eighth percentile 0:04:31.244 --> 0:04:33.764 run good for how some of these topics really blew up. 0:04:33.804 --> 0:04:36.364 I mean Ai in particular, although that was a fairly 0:04:36.764 --> 0:04:40.924 incidental thing in the book Effective Altruism and its particularly 0:04:40.964 --> 0:04:44.324 Sam Bakman Free who had talked to first before the 0:04:44.364 --> 0:04:48.444 collapse and then got to talk to you afterwards as well. 0:04:48.644 --> 0:04:54.804 Yeah, so you draw some really interesting parallels between worlds 0:04:54.844 --> 0:04:58.884 that I didn't necessarily connect, like obviously poker sports bedding, 0:04:59.124 --> 0:05:04.884 Like yes, you know, I get why those things are related. 0:05:05.124 --> 0:05:08.004 Then you go into finance, you go into venture capital 0:05:08.844 --> 0:05:12.484 and the hedge world in Silicon Valley you go into 0:05:13.364 --> 0:05:16.044 AI and people who are kind of the AI researchers, 0:05:16.084 --> 0:05:19.124 and I actually love your little side where you have 0:05:19.164 --> 0:05:21.844 the physical risk taker. Yes, where you have the astronauts, 0:05:21.884 --> 0:05:23.804 and I love that you have a female astronaut. By 0:05:23.844 --> 0:05:26.164 the way, did you on purpose, like, did you try 0:05:26.284 --> 0:05:28.884 to have two women or did that just so happen? 0:05:29.524 --> 0:05:31.644 You know, because as you know, like it's something that 0:05:32.924 --> 0:05:36.204 is interesting to me, And when you're talking about risk takers, 0:05:36.244 --> 0:05:40.364 people often assume men, and so I was very curious 0:05:40.364 --> 0:05:42.124 if that was a deliberate choice or if it just 0:05:42.124 --> 0:05:45.444 so happens that these most interesting stories happen to be female. 0:05:45.564 --> 0:05:49.924 No, there there was a deliberate choice made to I mean, look, 0:05:49.964 --> 0:05:52.164 it's a careful balance to strike because it is a 0:05:52.164 --> 0:05:57.004 world that's very male. Also world that is pokers a 0:05:57.004 --> 0:05:58.884 little bit more diverse, but the rest of the river 0:05:59.084 --> 0:06:03.124 is quite white and or Asian and or Asian sometimes. 0:06:04.324 --> 0:06:07.964 So there was a deliberate choice to like not sugarcoat 0:06:08.004 --> 0:06:10.684 this and pretend it's all a fifty fifty like. But 0:06:10.804 --> 0:06:13.604 also the I call them characters. The people I talked to, 0:06:14.084 --> 0:06:17.604 like Katharine Sullivan, this astronaut's amazing, and she has an 0:06:17.644 --> 0:06:21.324 amazing stories and she was studying like oceanography in Nova 0:06:21.364 --> 0:06:23.804 Scotia and beat out like ten thousand other people to 0:06:23.844 --> 0:06:28.684 become an astronaut. I mean, it's an amazing story. Cataline Kaiko, 0:06:29.004 --> 0:06:31.484 I had to learn all the names pronounced correctly for 0:06:31.524 --> 0:06:33.644 the audiobook and no I'd forgotten them. Who was this 0:06:33.724 --> 0:06:36.604 woman who like smuggled money in a Teddy Bear to 0:06:36.724 --> 0:06:40.484 move out of Hungary and then was just shot upon 0:06:40.644 --> 0:06:43.004 in the establishment while she was working on MR and 0:06:43.044 --> 0:06:48.244 A vaccines and eventually joined biointech and won the Nobel Prize. 0:06:48.244 --> 0:06:50.244 Co won the Nobel Prize for her work on MR 0:06:50.284 --> 0:06:52.324 and A vaccines. I mean, they have amazing stories. Or 0:06:52.364 --> 0:06:55.364 someone like our mutual friend but one of the best 0:06:55.404 --> 0:06:57.484 poker players in the world. I think Maria Ho who 0:06:57.564 --> 0:07:00.324 has great stories to tell too so so or Vanessa 0:07:00.324 --> 0:07:02.644 Selps is another person that we know but like it's 0:07:02.684 --> 0:07:05.364 just an amazing person. So yeah, I mean, when you 0:07:05.444 --> 0:07:08.004 find people like that and you want to tell their stories. 0:07:08.004 --> 0:07:12.004 And there was, but there's also sections that directly tackle 0:07:12.044 --> 0:07:13.724 There's one section the poker chapter about why an't there 0:07:13.804 --> 0:07:15.724 more women in poker? And then one section in the 0:07:15.804 --> 0:07:18.564 VC chapter about why are there so few black and 0:07:18.644 --> 0:07:21.404 Hispanic and women founders, and so you have to take 0:07:21.444 --> 0:07:24.404 it on directly without it being a woke book because 0:07:24.404 --> 0:07:26.364 I'm not super woke, but you can't. But there are 0:07:26.364 --> 0:07:28.924 real shortcomings here. I mean the VCS in particular, I think, 0:07:28.964 --> 0:07:33.244 are they claim to want people who have overcome, who 0:07:33.284 --> 0:07:36.164 have grit, who have overcome odds, and who are high variants, 0:07:36.164 --> 0:07:38.644 who are different than the consensus, and yet they have 0:07:38.724 --> 0:07:41.244 this prototype of like the on the spectrum, you know, 0:07:41.364 --> 0:07:44.444 white or Asian twenty something nerd who dropped out of 0:07:44.564 --> 0:07:47.924 Harvard or MIT as a sophomore and Sam mcminfreed played 0:07:47.924 --> 0:07:51.084 into that stereotype, and they're not actually, I think, trying 0:07:51.084 --> 0:07:53.284 to diversify their portfolio, and it just in a purely 0:07:53.724 --> 0:07:56.164 not moral but even like financial sense of wanting like 0:07:56.244 --> 0:07:58.084 high variance founders. 0:07:59.444 --> 0:08:02.604 Yeah. No, I think one of the things that I 0:08:02.684 --> 0:08:04.924 enjoyed about the book is that it's about how to 0:08:04.964 --> 0:08:06.924 take risk well. But you also talk about some of 0:08:06.924 --> 0:08:10.484 the shortcomings of the of the people on the River 0:08:10.924 --> 0:08:13.524 and how they think about risk. But first, let's talk 0:08:13.604 --> 0:08:16.564 about kind of the good elements. So what does the 0:08:16.684 --> 0:08:20.404 river have in common when it comes to evaluating risk. 0:08:20.564 --> 0:08:23.684 What can we take away from them when we're thinking 0:08:23.684 --> 0:08:29.444 about Okay, I am, you know, Maria, everyday person. How 0:08:29.444 --> 0:08:32.084 do I kind of think about risk in my life? 0:08:32.284 --> 0:08:35.324 What do I take from these people who take risks 0:08:35.404 --> 0:08:39.964 professionally so that I can just make better decisions and 0:08:40.204 --> 0:08:41.764 better risk assessments myself. 0:08:42.044 --> 0:08:44.204 So let me take the two axioms that you hear 0:08:44.244 --> 0:08:46.204 over and over and over again in Silicon Valley and 0:08:46.244 --> 0:08:50.484 make it very successful financially despite having all these flaws. 0:08:50.564 --> 0:08:53.244 I mean, some of these guys are difficult people. It 0:08:53.324 --> 0:08:55.324 is mostly guys. It's not very diverse. There are some 0:08:55.364 --> 0:08:58.404 big flaws, right, I think their political instincts are often poor. 0:08:59.484 --> 0:09:01.524 But they do two things, one of which is they 0:09:01.604 --> 0:09:04.084 understand expected value, which is kind of the theme of 0:09:04.124 --> 0:09:06.684 this show. They understand that if you can make a 0:09:06.764 --> 0:09:09.084 bet that has a ten percent chance of one hundred 0:09:09.164 --> 0:09:12.604 act payout, that's an extraordinarily good bet. And then you 0:09:12.644 --> 0:09:14.684 can make a lot of those bits by aggregating different 0:09:14.724 --> 0:09:18.524 companies into a fund, then you're kind of guaranteed to 0:09:18.604 --> 0:09:21.444 make money and maybe make a lot of money. And 0:09:21.484 --> 0:09:24.204 it also applies to things like evaluating nuclear war risk 0:09:24.324 --> 0:09:26.484 or AI risk. Things that might be you know, a 0:09:26.524 --> 0:09:29.724 two percent chance in over some timeframe, or five percent 0:09:29.764 --> 0:09:32.764 chance whatever else, but have like very bad to infinitely 0:09:32.804 --> 0:09:37.964 bad negative payouts. The second thing that Silicon Valley knows 0:09:38.244 --> 0:09:42.684 is that having a longer time horizon is really worth it. 0:09:42.724 --> 0:09:45.084 We're a country that likes to make money, but we're 0:09:45.844 --> 0:09:47.924 a get rich quick country and not to get rich 0:09:47.924 --> 0:09:51.364 slowly country. When you're investing in startups, early stage startups, 0:09:51.364 --> 0:09:53.844 they often have a time horizon. You know, SpaceX took 0:09:53.884 --> 0:09:56.524 thirteen years I think to make a first profit nine 0:09:56.604 --> 0:09:59.244 year would actually even launched a rocket successfully or something 0:09:59.324 --> 0:10:02.844 like that. So I think you almost always benefit from 0:10:02.884 --> 0:10:05.644 having like a longer time horizon than other people. People 0:10:05.804 --> 0:10:10.084 just discount the long term future wait much even in 0:10:10.124 --> 0:10:13.284 their personal lives, I think. And so therefore those I 0:10:13.284 --> 0:10:15.124 think are kind of the two foremost lessons and why 0:10:15.164 --> 0:10:18.524 the book is you know, kind of ambivalently to positive 0:10:18.524 --> 0:10:20.884 on that Silicon Valley ethos, even though the individual characters 0:10:20.884 --> 0:10:22.484 there are are complex. 0:10:24.164 --> 0:10:28.164 So one of the things that you stress over and 0:10:28.204 --> 0:10:33.084 over is that people who evaluate risk correctly and make 0:10:33.724 --> 0:10:36.164 risks that tend to pay out over the long term, 0:10:36.564 --> 0:10:41.124 they not only can understand the upside, but they can 0:10:41.244 --> 0:10:44.324 also protect against the risk of ruin, right, the risk 0:10:44.484 --> 0:10:48.324 of not being able to take these risks going forward. 0:10:48.644 --> 0:10:50.924 So first, I'd love for you to talk a little 0:10:50.924 --> 0:10:53.404 bit about this idea of risk of ruin because you 0:10:53.444 --> 0:10:55.604 talk about people who do it correctly and then people 0:10:55.604 --> 0:10:59.324 who might not, and and also like how do you 0:10:59.484 --> 0:11:01.324 how do you balance that, and how might that be 0:11:01.404 --> 0:11:02.844 different from person to person. 0:11:03.764 --> 0:11:06.764 Yeah, I mean, we have this abstract concept in poker 0:11:07.044 --> 0:11:10.644 of a bank roll, which is and that is, how 0:11:10.764 --> 0:11:13.684 much money can you spend on poker before your kind 0:11:13.684 --> 0:11:16.604 of poker broke or at least you're severely limited in 0:11:16.724 --> 0:11:18.284 the size of the games you might play, and you 0:11:18.364 --> 0:11:21.964 might have to pass up positive evy opportunities. So to 0:11:21.964 --> 0:11:24.524 some extent, this is related to the idea of opportunity cost. 0:11:25.564 --> 0:11:29.124 There's a famous formula from sports betting called the Kelly criterion, 0:11:29.164 --> 0:11:31.004 which tells you how much can you bet to maximize 0:11:31.004 --> 0:11:36.684 your expected value without enduring a very high risk of ruin. 0:11:37.204 --> 0:11:39.444 Now I can get into the technicalities of why that 0:11:39.484 --> 0:11:41.884 formula might make you a little bit more aggressive than 0:11:41.924 --> 0:11:45.804 you should be. In general, though like ninety percent of 0:11:45.804 --> 0:11:48.924 people in the world are I think too risk averse 0:11:48.964 --> 0:11:51.964 about this kind of thing. This goes back to, as 0:11:52.004 --> 0:11:54.564 you'll know, like some of the condoment and diversity work 0:11:54.564 --> 0:11:57.684 on prospect theory, it may have also an evolutionary base 0:11:57.764 --> 0:11:59.764 where we weren't living in the time of abundance that 0:11:59.764 --> 0:12:03.644 we are now and so and so. You know, you 0:12:03.724 --> 0:12:06.404 only got one shot before it made sense to protect 0:12:06.484 --> 0:12:09.004 your household. It made sense to be very cautious about 0:12:09.404 --> 0:12:11.564 if you get an infection, you might die. And I 0:12:11.564 --> 0:12:15.564 think people have not adapted to this world of abundant 0:12:15.684 --> 0:12:19.324 but confusing opportunity that we have very much. Annie Duke 0:12:19.444 --> 0:12:21.484 wrote a book called Quit, and she's in the book too, 0:12:21.524 --> 0:12:24.804 also a former hooker player. Of course, she cites studies 0:12:24.844 --> 0:12:26.684 like by Steve Levitt of fre Economics that when they 0:12:26.684 --> 0:12:29.204 have people flip a coin to make a decision, and 0:12:29.244 --> 0:12:31.604 a major decision, not like am I getting Thai food 0:12:31.644 --> 0:12:33.164 or Indian for dinner tonight, which I do flip a 0:12:33.164 --> 0:12:35.764 coin about sometimes, by the way, but things like should 0:12:35.804 --> 0:12:38.004 I leave my partner, or should I quit my job, 0:12:38.204 --> 0:12:40.164 or should I move across the country to a different 0:12:40.404 --> 0:12:43.044 part of the world. People are happier on average when 0:12:43.084 --> 0:12:46.084 they make a change and so you know, the ninety 0:12:46.084 --> 0:12:48.684 percent of people who are risk averse maybe could take 0:12:48.684 --> 0:12:50.684 some messages from that book. Then, but you also meet 0:12:50.724 --> 0:12:52.564 the sbfs and the Elon Musks of the world. 0:12:54.484 --> 0:12:58.724 And let's actually unwrap that last bit a little bit. 0:12:58.764 --> 0:13:03.124 The sbfs and the Elon Musks because you write about 0:13:03.844 --> 0:13:08.124 the fact that you know, obviously they are people. Wouldn't 0:13:08.884 --> 0:13:12.084 people don't necessarily lump them together, right, because Elon Musk 0:13:12.164 --> 0:13:15.204 is someone who is the richest man in the world, 0:13:15.284 --> 0:13:18.124 and then SBF is going to jail. However, they do 0:13:18.364 --> 0:13:21.924 have this one characteristic in common. So would I would 0:13:21.964 --> 0:13:23.284 love for you to expand on that alone. 0:13:23.364 --> 0:13:25.164 Yeah, and I should be clear, I mean I don't 0:13:25.164 --> 0:13:28.244 mean to I am very and the book is very 0:13:28.324 --> 0:13:32.724 unsympathetic to SBF. I'm not saying I'm sympathetic to Elon. 0:13:32.764 --> 0:13:34.604 But Elon has accomplished a lot of things, and I 0:13:34.604 --> 0:13:38.284 think Elon's a real person whose career wasn't based on 0:13:38.964 --> 0:13:40.644 I mean, I don't think Sam's ull career was based 0:13:40.684 --> 0:13:42.204 on fraud, but he didn't. You know, Elon has not 0:13:42.204 --> 0:13:48.124 committed ten billion dollars worth of stealing people's crypto deposits. Basically, Yeah, 0:13:48.164 --> 0:13:51.524 they are the two people that really, really really go 0:13:52.404 --> 0:13:53.884 Baalse to the wall. I think we can use that 0:13:53.924 --> 0:13:54.884 phrase in terms of risk. 0:13:54.964 --> 0:13:55.444 Absolutely. 0:13:56.364 --> 0:13:58.804 If you read the Walter Isaacson book on Elon Musk, 0:13:59.044 --> 0:14:02.364 his poker strategy is literally going all in every hand 0:14:02.444 --> 0:14:04.404 until he runs out of money or wins it all. 0:14:04.444 --> 0:14:06.404 I didn't know that that was crazy to me. 0:14:07.284 --> 0:14:10.764 It makes sense, so I've I've played in the all 0:14:10.804 --> 0:14:13.324 in podcast poker game a couple of times with some 0:14:13.364 --> 0:14:17.284 of Elon's buddies, and that's a very aggressive game. Shall 0:14:17.324 --> 0:14:20.004 we say. I'm forbidden to reveal details, but there's a 0:14:20.004 --> 0:14:24.724 lot of blind naked aggression there. You know. SBF is 0:14:24.844 --> 0:14:30.004 even more unambiguously, I think irrational in taking a very 0:14:30.084 --> 0:14:33.844 literal approach of utilitarianism, where you know, he has said 0:14:33.884 --> 0:14:37.804 repeatedly he told his co founder Carolyn Ellison this. He 0:14:37.884 --> 0:14:40.924 told the economist Tyler Cowan this that if he could 0:14:41.204 --> 0:14:43.724 flip a coin to determine the fate of the world, 0:14:43.844 --> 0:14:49.084 and either half the time the world is destroyed, but 0:14:49.404 --> 0:14:50.924 the other half the time the world is like two 0:14:51.004 --> 0:14:54.324 point oh one x as good, then he's calculating the 0:14:54.364 --> 0:14:57.124 expected value. He's so committed to that that hey you 0:14:57.164 --> 0:15:01.124 know one point five is greater than one. Therefore you 0:15:01.364 --> 0:15:03.764 take the coin flip, even though you might destroy the world, 0:15:03.804 --> 0:15:06.164 And in fact, you take that coin flip repeatedly, over 0:15:06.204 --> 0:15:08.444 and over again. This is called the Saint Petersburg paradox, 0:15:08.484 --> 0:15:11.524 where it's a bet that has infinite expected value, but 0:15:11.564 --> 0:15:14.124 its infinitely likely to leave you ruins. So what should 0:15:14.124 --> 0:15:15.604 you do? Probably not take the bet. It's not that 0:15:15.644 --> 0:15:19.164 hard a dilemma, actually, but to SBF it was. And 0:15:19.204 --> 0:15:22.764 in my interviews with him, you kind of find a 0:15:22.804 --> 0:15:24.604 pattern of him saying, I mean the first thing who 0:15:24.604 --> 0:15:26.964 I did with him when he's riding high January twenty 0:15:26.964 --> 0:15:29.924 twenty two, Bitcoin still near its all time peaks. He's like, 0:15:29.964 --> 0:15:34.124 if you're not really literally willing to ruin yourself, not 0:15:34.164 --> 0:15:36.324 the fake ruined, Like if Elon Musk has to sell 0:15:36.324 --> 0:15:39.044 Twitter and he's only worth one hundred and seventy billion 0:15:39.124 --> 0:15:42.444 dollars instead of two hundred and twenty billion dollars, that's 0:15:42.604 --> 0:15:46.204 not what it would describe as being ruined. And Sam 0:15:46.324 --> 0:15:48.284 was very clear that I don't think you should protect 0:15:48.284 --> 0:15:51.124 your downside. You have to be so risk loving that 0:15:51.204 --> 0:15:53.644 you should literally be willing to destroy your life and 0:15:53.684 --> 0:15:57.324 your reputation if it's positive expected value, which I think 0:15:57.364 --> 0:16:01.484 is insane. I think reflects I mean, not a clinical diagnosis, 0:16:01.484 --> 0:16:05.244 but I think literally some I think he's a somewhat 0:16:06.084 --> 0:16:11.644 defective person emotionally in another way. And you know, the 0:16:11.724 --> 0:16:14.444 fact that he was enabled by so many supposedly smart 0:16:14.484 --> 0:16:17.324 actors is a core question that's asked by the book. 0:16:17.324 --> 0:16:20.564 I mean, I you know, the New York Times review 0:16:20.964 --> 0:16:23.484 understood this, which is that it's like the book is 0:16:23.524 --> 0:16:28.244 actually pretty unsparing to some of these characters in the River, 0:16:28.324 --> 0:16:30.204 even though like it's not a book where I'm gonna 0:16:30.204 --> 0:16:32.444 be like Peter Teal is evil and Elon Musk is 0:16:32.444 --> 0:16:35.004 evil and a fascist, Like that's not my style of writing. 0:16:35.044 --> 0:16:37.204 And I think I think they're interesting people who deserve 0:16:37.244 --> 0:16:39.444 to have their stories told by someone who kind of 0:16:39.484 --> 0:16:43.404 understands the personality type. But SBF was a really dangerous 0:16:43.404 --> 0:16:46.164 figure and on top of everything else, like also a 0:16:46.164 --> 0:16:50.204 fairly bad calculator of risk. His decision to go take 0:16:50.204 --> 0:16:53.044 the witness stand at his trial after the government's testimony 0:16:53.204 --> 0:16:57.604 was just incredibly devastating, and they had him dead to 0:16:57.684 --> 0:17:01.004 rights and contradicting everything he told people publicly, everything he 0:17:01.044 --> 0:17:03.524 told me in interviews that were on the record, although 0:17:03.524 --> 0:17:05.204 with an embario, I mean they couldn't be used until 0:17:05.204 --> 0:17:08.564 the book was released. You know, the willingness to lie, 0:17:08.724 --> 0:17:12.084 plus the constant miscalculations he made where he probably could 0:17:12.124 --> 0:17:15.044 have avoided jail time by conceding defeat and not taking 0:17:15.044 --> 0:17:17.124 the witness stand. Not at all the jail time, but 0:17:17.684 --> 0:17:21.484 ten years or five years and not twenty You know, 0:17:22.244 --> 0:17:25.004 why did so many people vouch for him? As a 0:17:25.084 --> 0:17:27.204 question that I think has to be has to be pondered. 0:17:29.044 --> 0:17:40.964 We'll be back after a quick break. You actually touched 0:17:41.604 --> 0:17:44.844 on something there which I think is important to unwrap 0:17:44.884 --> 0:17:47.764 a little bit more, which is that if you're taking 0:17:47.764 --> 0:17:51.004 these huge gambles, you better be pretty damn sure your 0:17:51.044 --> 0:17:54.804 calculations are accurate, that your percentages are accurate. But we're 0:17:54.804 --> 0:17:56.484 living in a world where you can't do that, and 0:17:56.764 --> 0:18:00.084 so I'm curious. You know, you build models, right that 0:18:01.524 --> 0:18:04.524 try to kind of model things that are uncertain, that 0:18:04.604 --> 0:18:07.924 are unknowable, that have this margin of error, And so 0:18:08.444 --> 0:18:11.404 I think you understand and more than most people that 0:18:11.844 --> 0:18:14.524 you know, if you say sixty percent certain or like 0:18:14.604 --> 0:18:17.524 sixty percent chance of this, like you're not actually like 0:18:18.044 --> 0:18:20.044 that there is a margin of error there, right, Like, 0:18:20.404 --> 0:18:23.964 if you fifty one percent likely that you're going to 0:18:24.004 --> 0:18:27.324 have a plus EV and forty nine, what if you're wrong? Right, Like, 0:18:27.404 --> 0:18:31.004 what if it's forty nine that you're that you're actually 0:18:31.044 --> 0:18:34.484 negative TV and fifty one that you're going to destroy civilization? 0:18:34.884 --> 0:18:37.404 So I'm I'd love you to walk us through that 0:18:37.444 --> 0:18:40.604 thinking and through kind of the hubris that you both 0:18:40.724 --> 0:18:42.964 need to succeed in some ways in this area. But 0:18:43.004 --> 0:18:45.804 also that might make you over confident of these sorts 0:18:45.804 --> 0:18:48.204 of percentages where you really really can't afford to be. 0:18:49.004 --> 0:18:53.444 Yeah, look, we've seen bad election models. We saw models 0:18:53.484 --> 0:18:56.684 I gave. Yeah, saw models that gave Trump a one 0:18:56.724 --> 0:18:59.084 percent chance or zero point one percent chance of winning 0:18:59.084 --> 0:19:01.844 in twenty sixteen. We saw models earlier this year that 0:19:01.924 --> 0:19:04.284 gave Biden, even after he had tanked in the debate, 0:19:04.724 --> 0:19:06.564 a fifty to fifty chance of winning, which didn't make 0:19:06.604 --> 0:19:10.004 any sense. Even building models for these kinds of close 0:19:10.164 --> 0:19:15.884 problems like elections or sports forecasting is pretty tough. You 0:19:15.964 --> 0:19:17.684 have a lot of choices to make as a modeler, 0:19:18.044 --> 0:19:23.404 your biases might creep in and other things. So to 0:19:23.524 --> 0:19:26.564 then kind of take these very back of the envelope 0:19:27.004 --> 0:19:30.804 informal models and try to apply them to every problem 0:19:30.884 --> 0:19:33.964 in the world. Is, you know, obviously prone to going 0:19:34.004 --> 0:19:37.204 wrong to some extent, and like in effective altruism, they're 0:19:37.284 --> 0:19:41.844 very literal about this. I talked to Will mccaskell, who 0:19:41.884 --> 0:19:43.324 was kind of one of the founders or at least 0:19:43.364 --> 0:19:45.564 the brand name of EA and wrote a book called 0:19:45.764 --> 0:19:48.364 What We Owe the Future. He calls himself a long 0:19:48.444 --> 0:19:51.084 term'speaning he's concerned about the very very very far future. 0:19:52.004 --> 0:19:53.844 The first time to talk to him, he was like, okay, 0:19:53.924 --> 0:19:57.124 so how do we weigh like a human's life against 0:19:57.124 --> 0:19:58.764 an animal's life? And he's like, well, it should be 0:19:58.804 --> 0:20:02.324 based on the number of neurons in the animal's brain, 0:20:02.484 --> 0:20:04.964 or maybe the number of neurons to the one third 0:20:05.004 --> 0:20:08.244 power or something like that. It's a good approximation, but 0:20:08.324 --> 0:20:11.844 that leads to weird things like an elephant elephants. Elephants 0:20:11.844 --> 0:20:14.244 are actually with more than human beings by that calculation, 0:20:14.764 --> 0:20:17.964 it turns out, but you also face some comfortable decisions. 0:20:18.044 --> 0:20:20.124 The book uses a story of a time when a 0:20:20.164 --> 0:20:22.724 dog named I didn't know. 0:20:23.284 --> 0:20:25.884 Yeah, I didn't realize that the poodle like I didn't 0:20:25.924 --> 0:20:27.324 know this story, so please, yeah, please. 0:20:27.764 --> 0:20:31.084 There's a poodle that name named Dakota that gets loose 0:20:31.124 --> 0:20:34.124 in Prospect Park or some park in North Brooklyn from 0:20:34.164 --> 0:20:37.004 its owner and dashes into the subways at the first 0:20:37.044 --> 0:20:41.924 stop inbound on the F train from Manhattan to Brooklyn. So, 0:20:41.924 --> 0:20:44.244 and this is happening at like three point thirty on 0:20:44.324 --> 0:20:46.964 a weekday, so you're starting to get the rush hour commute. 0:20:47.004 --> 0:20:49.564 And the question is should we shut down the entire 0:20:49.764 --> 0:20:54.284 F line in order to search for and rescue Dakota, 0:20:54.324 --> 0:20:56.764 which they did, and Dakota popped up at some other 0:20:56.804 --> 0:21:00.164 subway station an hour or so later. But that's a 0:21:00.244 --> 0:21:02.004 case where I'll put it this. This is how I 0:21:02.004 --> 0:21:04.444 put it in the book. If you had, like a 0:21:04.524 --> 0:21:08.004 human baby who had fallen onto the tracks, like, no 0:21:08.044 --> 0:21:12.084 one would dispute that we should halt every train until 0:21:12.124 --> 0:21:15.404 that baby is found. If it was a squirrel, then 0:21:15.484 --> 0:21:18.164 we would just run under the squirrel, right, no questions. 0:21:17.764 --> 0:21:19.204 Asked, We would we would. 0:21:19.284 --> 0:21:23.204 I mean, I hate squirrels, and the dog is intuitively 0:21:23.284 --> 0:21:25.964 kind of a close decision, and so and so and 0:21:26.164 --> 0:21:28.644 but the fact is that you have to make a decision, 0:21:28.844 --> 0:21:31.324 and we had to make these decisions in COVID, where 0:21:31.644 --> 0:21:35.324 you know, what's the cost of the shutting down schools 0:21:35.404 --> 0:21:39.244 versus the cost of preventing some degree of sickness and death? Right, 0:21:39.284 --> 0:21:41.284