Speaker 1: Pushkin. Welcome back to Risky Business, a show about making
Speaker 1: better decisions. I'm Maria Kanikova.
Speaker 2: And I'm Nate Silver. Today on the show, we'll talk
Speaker 2: about the markets and how they're reacting to recent actions
Speaker 2: by President Trump. I you know, I'll just say this much.
Speaker 2: You know, I think that Cayman Islands bungalow I was
Speaker 2: hoping to buy has been undermined by the recent performance
Speaker 2: my Furrow and.
Speaker 1: K On a brighter side, Nate, you might have a
Speaker 1: chance to go to an island off the coast of
Speaker 1: Mexico because after that we'll be talking about the return
Speaker 1: of Billy McFarland and Fire Festival Take two.
Speaker 2: Can we pause the show so I can book my
Speaker 2: ticket right now?
Speaker 1: Let's do it.
Speaker 2: We're back. I have a I have a one way
Speaker 2: I I just want to stay there. I don't even
Speaker 2: want took a return flight. It's yeah, So we're now.
Speaker 2: I'm were now all a good gun prepared for Fire
Speaker 2: Festival too, And let's talk on a little bit of
Speaker 2: markets first.
Speaker 1: So right now, as we are recording this, it is Tuesday,
Speaker 1: March fourth, and I'm saying that because Nate, you and
Speaker 1: I have both seen I mean the world has seen
Speaker 1: that economic news in this administration changes very quickly, so
Speaker 1: it's very important to put this in context. So today, Tuesday,
Speaker 1: Trump has announced tariffs twenty five percent across the board
Speaker 1: against Canada and Mexico, ten percent against China. Canada and
Speaker 1: China have announced their own retaliatory tariffs. The markets are
Speaker 1: not happy. Let's talk about what is going on in
Speaker 1: people's heads kind of what is the decision calculus behind this?
Speaker 2: Yeah, I mean it seems like markets are reacting negatively,
Speaker 2: which is perhaps pretty reasonable. I mean, there are various
Speaker 2: things going on, right, markets like we don't have a
Speaker 2: lot of that. I mean, you know, the stock market
Speaker 2: is not the economy, right. I think the stock market
Speaker 2: sometimes is a better measure of economic vibes, and it's
Speaker 2: a bit mixed. And if you survey, look at surveys
Speaker 2: of hiring managers and CEOs, I mean they're generally pretty
Speaker 2: bullish on Trump. That's one of his bigger constituencies. But yeah, Look,
Speaker 2: according to Polymarket, which I'm an advisor, there is now
Speaker 2: a thirty eight percent chance of a United States recession
Speaker 2: this year in twenty twenty five. That's way up in
Speaker 2: recent days. It had been twenty two percent, which is
Speaker 2: kind of a base rate about one in five years.
Speaker 2: You go into a recesion. The economy can't be forecasted
Speaker 2: very well more than about six months in advance, but
Speaker 2: roughly double to almost forty percent as a result of
Speaker 2: the terriffs, as a result of some consumer sentiment data,
Speaker 2: consumers who do not like the Joe Biden economy. According
Speaker 2: to the University of Michigan's Consumer Sentiment Index, it's now
Speaker 2: worse than it was last year, which was bad enough
Speaker 2: to get Biden out in Democrats. I guess Kamala Harris
Speaker 2: eventually ousted from office. So people are reacting to this
Speaker 2: on different loves of the economy, right, and the goodwill
Speaker 2: that Trump has built up with Wall Street types. I think,
Speaker 2: you know, look, maybe there's some naive tea about people
Speaker 2: thinking they have a tear navi ta. I don't know
Speaker 2: about people, but it's a fancy word. But like people
Speaker 2: were on Wall Street where I think naive about the
Speaker 2: fact that like a, I mean, Trump is a guy
Speaker 2: who I'm not sure you'd always say that he does
Speaker 2: what he says he's gonna do, but like he's pretty
Speaker 2: literal about things. There's some decoding and he said, yeah,
Speaker 2: I'm going to have tariffs and kinda a Mexaco beat
Speaker 2: up the kids and if if they'll give me their
Speaker 2: lunch money. And so the other countries are not happy
Speaker 2: about all of this. By the way, we mentioned this
Speaker 2: last week. Friedrich Mertz, the new German chancellor elect, was like,
Speaker 2: I don't want have anything to do with the US anymore. Right,
Speaker 2: that seemed bad to me too. So other countries are
Speaker 2: noticing the domestic politics of you know, giving the bowl
Speaker 2: of your lunch money, so the different levels of this.
Speaker 2: But nobody likes this phenomenon.
Speaker 1: No nobody likes this phenomenon. And I think the markets
Speaker 1: have you know, it's very funny because the markets, I
Speaker 1: think are yo yoing much more than usual because of
Speaker 1: the uncertainty and no one knows, you know, what the
Speaker 1: hell's going to happen, what Trump is actually going to do,
Speaker 1: because they really after the initial right, you remember they
Speaker 1: went down when back in February when Trump was saying, oh,
Speaker 1: We're going to have tariffs, and then they like rallied
Speaker 1: and they more than rallied. They went crazy right when
Speaker 1: it was like, oh right, we always knew that they
Speaker 1: were going to not you know, not have the tariffs.
Speaker 1: They want to believe, right, Like I think that there's
Speaker 1: this market they want to believe in Trump. It's kind
Speaker 1: of what you were saying that Wall Street has been
Speaker 1: on his side and they want the markets to rally,
Speaker 1: and so they've taken every excuse to try to rally.
Speaker 1: And now it was like, oh shit, right the tariffs
Speaker 1: are actually being implemented, and he said they're like done. Right,
Speaker 1: we've implemented the tariffs. That trade war has started. And
Speaker 1: part of me is like, guys, like you should have
Speaker 1: foreseen this, right, this should have been built in. You
Speaker 1: should have you should have known this was coming. So
Speaker 1: now we're seeing this huge correction. Actually NATTEK isn't a
Speaker 1: correction by the technical sense, so we've officially entered a correction.
Speaker 1: And the you know, the reason this is happening, I
Speaker 1: think is because of this disconnect. Right, you want to
Speaker 1: believe in Trump and then he does something like this
Speaker 1: and you're like oops, shit, Like he said he was
Speaker 1: going to do it and then he actually did it.
Speaker 1: He didn't listen to reason because I think that people
Speaker 1: misunderstand that he's actually going to kind of listened to advisors.
Speaker 1: Listen to this and realize this is not the good
Speaker 1: thing that you think it is for the economy. Right.
Speaker 1: Inflation is going to go up, Prices are going to
Speaker 1: go up. Uh, Tariffs on China not a good thing
Speaker 1: because prices are going to go up, you know, are
Speaker 1: our exports are going to suffer? There's there are so
Speaker 1: many downstream effects and people and saying, oh, he'll understand,
Speaker 1: and he won't actually do it, but he did it.
Speaker 1: I think a broader point, though, is that I actually, like,
Speaker 1: I think that Trump is misunderstanding kind of the game
Speaker 1: theory of what he's doing. So fundamentally, you know, we
Speaker 1: talk about game theory a lot on this show. Fundamentally,
Speaker 1: what you want is, you know, you need in order
Speaker 1: to figure out the game and the strategy, you need
Speaker 1: to figure out what the payoff matrix is, right, Like
Speaker 1: that's number one, right, Like to know what game we're playing,
Speaker 1: you need to figure out, Okay, what are the payoffs? Right?
Speaker 1: What's the structure of the game, to figure out what
Speaker 1: quadrant do I want to land and what do I
Speaker 1: want to do? What do I want my policy to
Speaker 1: actually accomplish? And in everything, So I think the economy
Speaker 1: is part of this. But we're seeing this with just
Speaker 1: Trump's America First policy in general, with him kind of
Speaker 1: burning alliances, with the you know, outrageous way that he
Speaker 1: behaved towards Zelonsky, like going back on US promises basically
Speaker 1: just bridges left and right and saying we don't need allies.
Speaker 1: He's behaving as if, oh, we don't need we don't
Speaker 1: need Europe, we don't need China, we don't need Canada,
Speaker 1: we don't need Mexico, like America can do this alone.
Speaker 1: And I think that it's a misunderstanding of the payoff matrix.
Speaker 1: I think that he actually doesn't understand that something that
Speaker 1: all Republican presidents have understood up until this point, which
Speaker 1: is that America First, you need the alliances in order
Speaker 1: for you know, security and American prosperity, that you actually
Speaker 1: can't go it alone and that you have you know
Speaker 1: that that's a fundamental miscalculation of the game that you're playing.
Speaker 1: And he thinks that, you know, if I, if I
Speaker 1: try to bully everyone, then all of a sudden, you know,
Speaker 1: I'm going to be kind of king of the world.
Speaker 1: And that's not the way that it works. That's not
Speaker 1: the way that people respond, and I think that he's
Speaker 1: going to end up in the wrong quadrant, and unfortunately,
Speaker 1: you know, America with him. While while these policies are
Speaker 1: in place, and you'll see that in economic blowback, you'll
Speaker 1: see that, in political blowback, you'll see that probably in
Speaker 1: a recent session. You'll see all sorts of downstream effects
Speaker 1: of these policies that I don't think. I certainly can't
Speaker 1: even begin to imagine what that's going to look like.
Speaker 1: But it does come from this misunderstanding of what truly
Speaker 1: America first would mean. Right, What do you need in
Speaker 1: order for in order to get into the quadrant where
Speaker 1: America is doing well? And thinking that you can do
Speaker 1: it by yourself by burning out bridges is wrong.
Speaker 2: We're not asking Trump to put anyone other than America first, right,
Speaker 2: We're saying that, like Trump's first, of all, a lot
Speaker 2: of people is misunderstanding. Right. They assume that game theory
Speaker 2: only applies to zero some games, And I guess it's
Speaker 2: narrowly to the first problems in game theory concern primarily
Speaker 2: zero some games. But most games are cooperative games or
Speaker 2: they're mixed games, right where they're positive. Some we have
Speaker 2: if you and I are like negotiating together a contract.
Speaker 2: Let's say a sponsor wanted to sponsor the show, but
Speaker 2: they want to negotiate with us like individually, and they
Speaker 2: had like a fixed pool of money. Right, so we
Speaker 2: both have cooperative and adversarial incentives. You know. On the
Speaker 2: one hand, we both lose if we do you know,
Speaker 2: let's do some ad really in the show, right, we
Speaker 2: both lose if the deal breaks up because we can't
Speaker 2: come to an agreement. The other hand, we might have
Speaker 2: some trade off between what you want and what I want.
Speaker 2: You know. Most games are kind of more like that, right,
Speaker 2: And like the game of like international trade. If my
Speaker 2: country manufactures autos really well and your country has really
Speaker 2: nice coffee beans, just based on the factors of production
Speaker 2: in our respective markets. Like you know, if I'm shitty
Speaker 2: at making coffee, what country is bad at making coffee?
Speaker 2: Who's bad at making coffe? I mean, let's put Germany.
Speaker 1: There's I don't think there's a second that Germany does
Speaker 1: not grow coffee, And I don't think that's ny.
Speaker 2: Good at cars, bad at coffee. There you go, Yeah,
Speaker 2: the German. You don't want the Germans to make their
Speaker 2: own coffee of their own have you ever fucking like
Speaker 2: tacos in Germany? It's a disaster, right, we want Germany
Speaker 2: to import coffee and tacos and Zell pharmaceutical shit, and
Speaker 2: like cars and watches and all the things that Germans
Speaker 2: are you know, pillsner We want trade, right. That actually
Speaker 2: is not zero sum, even in the prisoner's lembit. The
Speaker 2: most famous problem in game theory is actually about what
Speaker 2: happens when people cannot cooperate and they behave zero some
Speaker 2: because I think they're gonna be cheated.
Speaker 1: Yep, exactly exactly. I think that's also a misunderstanding of
Speaker 1: the prisoner's dilemma. And by the way, game theory and
Speaker 1: we talk about the game the Prisoner's Dilemma a lot
Speaker 1: because that's kind of the most famous game, but game
Speaker 1: theory is not just the prisoner's dilemma. Right, So many
Speaker 1: people just think that, oh, game theory, prisoner's dilemma. No,
Speaker 1: there's so many coordination games. There's so many you know,
Speaker 1: there's so many different games at play here. And you
Speaker 1: know what what Thomas Schulling could have got the Nobel
Speaker 1: Prize for was describing that, you know, all of these
Speaker 1: strategies are incredibly nuanced, and that you're like the madman's
Speaker 1: strategy is you know what happens when you act like
Speaker 1: a madman? Literally that you know you could You're capable
Speaker 1: of doing anything like sure, I'll rip out my steering
Speaker 1: wheel so that I can't actually have my car veer
Speaker 1: off course and I have to go straight. Sure I'm
Speaker 1: going to drop the nukes. I could do anything. You know,
Speaker 1: it might work in a very very limited scenario, but
Speaker 1: it can also lead to the end of the world.
Speaker 1: And it's not a good strategy, right, Like, at the
Speaker 1: end of the day, that's not how you're going to
Speaker 1: accomplish your goals. That's not how you're going to put
Speaker 1: yourself in the winning position. And so I would even argue, like,
Speaker 1: like you said, we're not saying put anyone but America first, Like,
Speaker 1: in order for America to prosper, you need to coordinate,
Speaker 1: you need to cooperate, you need to forge alliances, like
Speaker 1: that is the backbone of the global order. And that's
Speaker 1: why America has been doing so well because it has
Speaker 1: had this sort of kind of benign influence and people
Speaker 1: have built up goodwill and that evaporates in a second,
Speaker 1: and then what happens, right, what happens when you try
Speaker 1: to be kind of the bully and the person who says,
Speaker 1: you know, do what I say or else, and people realize, oh,
Speaker 1: we can't trust you. Right now, you're actually forcing people
Speaker 1: into exactly what you said with the prisoner's dilemma, where
Speaker 1: it's in both people's interests to try to coordinate, but
Speaker 1: you can't because you think that you're going to be cheated.
Speaker 1: You think that you cannot Actually you're not talking with
Speaker 1: a reliable partner. I mean, that's everything. We're also in
Speaker 1: a repeated game, right, this is not a one shot game.
Speaker 1: This is the global order. It's like repeated game. Reputation matters.
Speaker 1: Reputation is crucial when you're playing a repeated game.
Speaker 2: Yeah, and if you look at like empirical deviations from
Speaker 2: game theory, or maybe they're kind of like rational like
Speaker 2: on a deeper level, Right, there are two primary characteristics,
Speaker 2: which is that at first, people are actually more cooperative
Speaker 2: in the prisoner's dilemma than game theory might predict. Right,
Speaker 2: they kind of assume, hey, without an explicit coordination, that
Speaker 2: we're all shared humanity and these people are probably gonna
Speaker 2: help a stranger out as a default maybe, right, But
Speaker 2: then when they feel betrayed, people really seek revenge, And
Speaker 2: you could argue it's rational over to some very long
Speaker 2: run period because that like if you seek revenge, even
Speaker 2: to your own destruction, then people will be much more
Speaker 2: reluctant to fuck with you. But revenge seeking seems to
Speaker 2: be like very ingrained. And also like I've been trying
Speaker 2: to think about like the analogy of Canada and Mexico
Speaker 2: and what position they're in, and like, yeah, you can
Speaker 2: use anology of like they are are the bullies, but
Speaker 2: it's like more like, uh, they get it both ways though, right.
Speaker 2: They now just more like maybe you have like a boss.
Speaker 2: There's a little bit of sexual harassing here and there, right,
Speaker 2: and you're like, well, do I want to like blow
Speaker 2: up my employment or cause a whole controversy by pointing
Speaker 2: out that this is inappropriate conduct? Right? But also like
Speaker 2: maybe they're like coworkers are like super concerned about this
Speaker 2: kind of thing, right, And the coworkers say, if you
Speaker 2: all sent er to the boss, we're going to disown
Speaker 2: you and ostracize you. So like you have like they're
Speaker 2: really kind of not in a good position either way.
Speaker 2: It's talking about kind of tacklating with the least worst outcomes.
Speaker 2: This is not a good thing for Canada in Mexico.
Speaker 2: It makes all their options worse. By the way, some
Speaker 2: of the reason why the bullying, well he is bullying
Speaker 2: them is because like Canadian and Mexican imports are like
Speaker 2: two percent of US GDP each, like one and a
Speaker 2: half percent or something. We make a lot of our
Speaker 2: own stuff, where a big country of other trading partners,
Speaker 2: although that many of them are also under terrorists or
Speaker 2: threat of teriffs. But you know, if we had to
Speaker 2: go it alone, it might be enough to put economy
Speaker 2: into a recession. But like for mexicoor Canada, if you
Speaker 2: shut off the borders, it would send them to a
Speaker 2: profound crisis. There might be spill over effects. But we
Speaker 2: are the more powerful entity in this scenario. But still yeah,
Speaker 2: even in poke, the big stack doesn't want to know.
Speaker 2: The big scessarily antagonize the short stack, and even the
Speaker 2: big stack would rather not get into unnecessary confrontations.
Speaker 1: Absolutely, and if the big stack misplays that, so a
Speaker 1: lot of people once they get a big stack, they
Speaker 1: just they think that you're supposed to bully everyone right,
Speaker 1: you're supposed to raise every hand, especially if you're getting
Speaker 1: if you're on the bubble, which is the money point
Speaker 1: of the poker tournament or the final table, you know,
Speaker 1: they just go crazy and that's how they bust and
Speaker 1: lose their big stack, right, because people start seeing what
Speaker 1: they're doing, they start fighting back, And small stacks have
Speaker 1: a ton of power, right because if you are a
Speaker 1: big stack who's constantly opening, and I have, say ten
Speaker 1: big blinds, I can shove on you. And if you're
Speaker 1: you know, once that happens a few times, you either
Speaker 1: have to fold right and there goes two big blinds
Speaker 1: or however much you raised, or you call me and
Speaker 1: I actually have a hand, and you lose ten big blinds, right,
Speaker 1: and now I'm suddenly a twenty big blind stack. And
Speaker 1: this can happen over and over. And I've actually seen
Speaker 1: really big stacks just dwindle instead of becoming big when
Speaker 1: people realize that, oh, hey, I can push back here, right,
Speaker 1: I have a perfectly sized amount of chips to actually
Speaker 1: really be in a position to fight back because I
Speaker 1: can hurt you. And instead of a chip leader, you're
Speaker 1: going to go to medium sized stack.
Speaker 3: Ye.
Speaker 1: But yeah, no's that's a very big misconception. And just
Speaker 1: to go back to what you were saying a little bit,
Speaker 1: you were talking about the evolutionary sec of game theory,
Speaker 1: but there's actually also just some you know, straight up
Speaker 1: history of game theory when computers and different strategies were
Speaker 1: set up against each other to try to figure out,
Speaker 1: you know, what does the best. And first the first
Speaker 1: strategy that ended up doing well. So this goes back
Speaker 1: to your kind of retaliatory thing is tit for tat? Right,
Speaker 1: So you start off cooperating and if you know, if
Speaker 1: the other person cooperates, you're in a cooperative loop, right,
Speaker 1: So you end up in this cooperative loop. Everyone's great.
Speaker 1: If they stop, then tit for tat, right, So if
Speaker 1: they defect, then you start to affecting, and all of
Speaker 1: a sudden, you know you're in a tit for tat strategy.
Speaker 1: You're you're no longer in a cooperative roof. So that
Speaker 1: strategy one and then another strategy beat it, and that
Speaker 1: strategy was instead of tit for tat, tit for two tats.
Speaker 1: So basically, you you let that harassment go on a
Speaker 1: little bit, right, you give them a shot, So you
Speaker 1: don't affect immediately. You actually kind of wait because what
Speaker 1: if that defection was a mistake, right, what if there
Speaker 1: was what if there was something else going on? What
Speaker 1: if you know, the person got distracted. Let's give people
Speaker 1: a better shot and tit for two tats ended up
Speaker 1: being the winning strategy, so that that was kind of
Speaker 1: the the thing that beat everyone, and you know, but
Speaker 1: clearly like at this point, we're not in that anymore
Speaker 1: because at some point you do have to retaliate and
Speaker 1: you're out of the cooperative spiral, and those strategies, by
Speaker 1: the way, do a lot worse, right, So those those
Speaker 1: are not winning strategies. So it's I think that's kind.
Speaker 2: Of where we are. And we'll be right back after
Speaker 2: this break.
Speaker 1: When you're talking about human nature. The other games that
Speaker 1: we should just talk about a little bit. There's a
Speaker 1: lot of work that's been done on things like the
Speaker 1: Dictator game.
Speaker 2: Right.
Speaker 1: The Dictator games say I have ten points, Nate, and
Speaker 1: I get to award them between you and me, and
Speaker 1: I can take all ten for myself, right, And people
Speaker 1: don't do that. People are actually and I can take
Speaker 1: eight for myself and give you two, or I can
Speaker 1: be like, oh, o get right, I'll take seven for myself.
Speaker 1: Final I'll give you three. But people end up being
Speaker 1: much more fair than you know, game theory would would predict,
Speaker 1: just in a pure self interested way. People end up,
Speaker 1: you know, giving pretty equitable divisions. It's actually very close
Speaker 1: to like, Okay, i'll give you half and I'll keep half,
Speaker 1: because you know we're we're not monsters, and people are
Speaker 1: actually pretty generous in those types of situations, and especially
Speaker 1: if this is a repeat game, reputation repeat interactions are
Speaker 1: our first impulses, and to be like, I'm going to
Speaker 1: take it all for myself, even if I don't know
Speaker 1: that I'm going to be playing with you, because I
Speaker 1: also think that it's reputation in your own head, right,
Speaker 1: you don't want to be you don't want to think
Speaker 1: of yourself as the type of person who's going to
Speaker 1: take all ten points for themselves and you know, just
Speaker 1: screw the other, the other person in this interaction. So
Speaker 1: I think we have there are some really interesting findings
Speaker 1: from those kinds of games where you see that, you know,
Speaker 1: people's tendencies tend to be much nicer. But I think
Speaker 1: Trump would take ten and give you zero and say
Speaker 1: that that serves his long term interest, not realizing that
Speaker 1: that's going to piss you off. Right, You're not going
Speaker 1: to be happy when you get zero. You're not going
Speaker 1: to be happy when you get when he's like, okay, fine,
Speaker 1: you can have one, right, Like, you are also now
Speaker 1: going to be happy in that scenario, and that's going
Speaker 1: to have very real long term consequences.
Speaker 2: Yeah, And the line between altruism and revenge, I think
Speaker 2: is actually often kind of thin, right. Yeah, you know
Speaker 2: you say, I am going to seek revenge to defend
Speaker 2: my people in my way of life, right, sacrificing yourself
Speaker 2: and maybe guying a hero or whatever. Right, Like, that's
Speaker 2: I think actually kind of part of the same instinct.
Speaker 2: And people don't like to be put in a place
Speaker 2: where they have fewer options. And this ship builds up
Speaker 2: over time too. You know, maybe one reason why two
Speaker 2: tits for a tat this sounds like X rated.
Speaker 3: I'm not the one who named it. I'm not the
Speaker 3: one who named these strategies. You don't want triple tits.
Speaker 3: I don't know what's going on there, but like, but
Speaker 3: like it's much harder to rebuild trust than to undo.
Speaker 1: Yes, right, Yes, that's a fundamental point.
Speaker 2: You know, if you're in a close relationship and you
Speaker 2: catch a partner cheating on you, then takes a lot
Speaker 2: of convincing that that won't happen again. Right, You might
Speaker 2: overlook the first one for whatever reasons, but like the
Speaker 2: second time, there's a fucking hope to like rebuild trust
Speaker 2: unless there's many years of you know, cooperative behavior potentially. So, like,
Speaker 2: I think Canada Mexico have like not been a rational say,
Speaker 2: and Trump is like erratic. Some might say he's a madman, right,
Speaker 2: That has a sching different connotation in game theory. It
Speaker 2: can mean that, like because you're a predictable that can
Speaker 2: serve as an effective deterrent sometimes, right, But I think
Speaker 2: not in like this more kind of pedestrian territory of like,
Speaker 2: because Trump is not threatening mutually assured destruction. Right if
Speaker 2: we completely cut off permanently imports of Canada and Mexico,
Speaker 2: that would hurt the economy a lot in the short run,
Speaker 2: but like America could survive that and eventually replaced the production,
Speaker 2: et cetera. So it's not like mutually assured destruction. But like,
Speaker 2: but he is erratic, maybe in the stupid now Jays before,
Speaker 2: like the the boss was having a bad day or
Speaker 2: was ambiguous, right, I mean Trump and JD. Vans, et
Speaker 2: cetera sometimes try to maintain some degree of ambiguity. It's
Speaker 2: a I think one of the things they're better about,
Speaker 2: like say something outrageous but like not quite you know,
Speaker 2: but it said jokingly, right, And and the Libs always
Speaker 2: take it super literally when maybe they shouldn't, And so
Speaker 2: like they play with the ambiguity in the way. It's like,
Speaker 2: I think, a bit effective sometimes. But now you know,
Speaker 2: can of Mexico, Like, I mean, what are they supposed
Speaker 2: to do? Right? Like you can't Like I just thought
Speaker 2: this was like there wasn't really even like a pretext
Speaker 2: or why we're re establishing the terrorist I think the
Speaker 2: market and I wrote this at the time, so this
Speaker 2: is not me in hindsight bias, right, I think the
Speaker 2: market at the time was naive to assume that like
Speaker 2: postponing these things for a month was a good sign, right,
Speaker 2: and that and that you know, the Trump of like
Speaker 2: the second term, seems much more determined to blow the
Speaker 2: world order up. Right. Yeah, he's not bluffing as much.
Speaker 2: He's being advised by people who are maybe more deranged
Speaker 2: in some ways, I think, right, No, I mean I
Speaker 2: think it is.
Speaker 1: It is kind of exactly what you're saying, blowing up
Speaker 1: the world order from the inside and you know, from
Speaker 1: the outside, because he's doing it both within the country
Speaker 1: and outside of its borders. Canada, Mexico not being irrational,
Speaker 1: China not being irrational at all, Ukraine not being irrational,
Speaker 1: because you know, the only way to kind of stop
Speaker 1: bullies is to is to grow a spine and to
Speaker 1: actually try to stand up and try to get them
Speaker 1: to honor their guarantees and to be like, hey, you know.
Speaker 2: I Zolensky meeting was interesting.
Speaker 1: I think it was probably one of the lowest points
Speaker 1: in American foreign policy and history. And it was tough televis.
Speaker 2: It was a spect I mean, Zelensky did have this,
Speaker 2: you know, I put it like this, right, there was
Speaker 2: some element of pride. I'm not sure i'd say it's revenged,
Speaker 2: but he thinks that, like so first of all, he
Speaker 2: thinks that like deals involving Russia without security guarantees are
Speaker 2: and he was saying, like, look, Russia has violated these
Speaker 2: agreements so many times. They're not trustworthy at all. And
Speaker 2: I'm kind of like, aren't sitting here smiling and nodding
Speaker 2: to sign this agreement that I want? Right, I'm listening
Speaker 2: to all this naive bullshit about Russia and Trump and
Speaker 2: JD Vance don't seem to don't seem to understand her.
Speaker 2: If they do understand it, I mean, Jady Vance is
Speaker 2: a they're all different, interrupt you.
Speaker 1: For a second. Like Trump, I get okay, like he's
Speaker 1: just being an idiot, But like JD Vance went to
Speaker 1: ye law, like doesn't he know history? Like I thought
Speaker 1: that he would be a little bit smarter in terms
Speaker 1: of understanding that sucking up to Putin ain't it right?
Speaker 1: I just I thought that, naively, perhaps that jd Bands
Speaker 1: would have a better grasp of the history and the
Speaker 1: game theoretical dynamics here and realize that to get where
Speaker 1: he wants to go, appeasing Putin is not I mean
Speaker 1: maybe in the immediate immediate term, so that he stays
Speaker 1: as VP. But I just, like, you know, seeing this
Speaker 1: makes him seem a lot dumber than I thought he was.
Speaker 2: One thing Trump is very consistent about is that if
Speaker 2: you get in his bad side, unless there's some very
Speaker 2: naked pigic incentive to recooperate, right, Like you know, he
Speaker 2: doesn't give people a lot of room for discriminate. It
Speaker 2: was fasting, By the way, I would recommend watching the
Speaker 2: whole Trump Zelensky meeting and partet is of like the
Speaker 2: body language, and you see kind of like Zelensky is
Speaker 2: increasingly gently but less and less gently try suggests that
Speaker 2: like Russia is not a reliable partner. And then you
Speaker 2: see Trump kind of who starts out like hit anyone
Speaker 2: on the back literally, right, do you see Trump's body
Speaker 2: language kind of change and he's like, I'm gonna give
Speaker 2: you your one time, right, tit? But if it's a
Speaker 2: double a tit tit right. But it's an example of
Speaker 2: how like like I'm not sure if he was acting
Speaker 2: narrowly rationally, right, you probably just have to suck it up.
Speaker 2: If you're being narrowly rational and suck it up, and
Speaker 2: then later on you can yell at Trump on the
Speaker 2: phone or probably go through an intermediary or have Makarrubio
Speaker 2: and the Ukrainian counterpart duke it out or whatever it else. Right,
Speaker 2: But like you know, I think he had like some
Speaker 2: trouble sucking up his pride and cowtowing to this bully
Speaker 2: who was who is you know, naive about like Russia's
Speaker 2: willingness to go along with these with these guarantees, right,
Speaker 2: And like I'd be like that, man, this is why,
Speaker 2: like this is I'd be a fair trouble fucking I'd
Speaker 2: be like, fuck, you know what, I've listened to this
Speaker 2: bullshit Donald for half an hour now, and like, give
Speaker 2: me a fucking break, right, I'd do it in front
Speaker 2: of all the cameras, and like I would you know,
Speaker 2: my coundery probably get like nuked as a result. But like,
Speaker 2: but you can, you can respect Zelensky as a human
Speaker 2: being and also understands in a terrible position, and he's
Speaker 2: probably right on the merits, right, But like but like,
Speaker 2: at the same time, like.
Speaker 1: I actually no, I disagree that he should have just
Speaker 1: sucked it up, because that's that's also that he's he's
Speaker 1: between a rock and a hard place, right he he
Speaker 1: needs he needs it, he needs help, right, But sucking
Speaker 1: it up with no security guarantees from the United States
Speaker 1: would have been I think also an absolute disaster and
Speaker 1: a disaster for kind of the world order. So I
Speaker 1: think in a way what he did was more altruistic
Speaker 1: because he's kind of he's still trying to kind of
Speaker 1: stand up like put himself because Ukraine has been kind
Speaker 1: of the one thing that has been stopping World War
Speaker 1: three and Putin's takeover of Europe.
Speaker 2: It's hard for people when they experience a worse thaning
Speaker 2: of their situation, their expected value to prefer right, It's
Speaker 2: hard people to distinguish between relatively more bad and relatively
Speaker 2: less bad options.
Speaker 3: Right.
Speaker 2: You know, you sometimes see like a poker player kind
Speaker 2: of like put money in at the end where they
Speaker 2: don't think their opponent is bluffing. They're really disappointed by
Speaker 2: how the hands played out, right, and they kind of
Speaker 2: can't quite admit that their situation that they're worse than that,
Speaker 2: and they almost punish themselves and saying, Okay, I'll call
Speaker 2: against someone that if they kind of detach themselves from
Speaker 2: the situation, would say, yeah, that guy's never bluffing or
Speaker 2: bluffing half as often as he would need to be
Speaker 2: to make that call correct. Right, Like that situation is
Speaker 2: is tough, Right, I mean, you're experiencing a loss of esteem.
Speaker 2: People are yelling at you and your country for things
Speaker 2: going badly. There are worse two I mean, I think
Speaker 2: people sometimes to estimate when you have an increase in
Speaker 2: your welfare, your EV and you have multiple good options.
Speaker 2: People I think are also sometimes like not opportunistic enough
Speaker 2: about saying, Okay, really good option A is actually a
Speaker 2: lot better than merely pretty good option B, and you
Speaker 2: don't have a situation happened all that often, So like
Speaker 2: take time and think about that and maximize when you can,
Speaker 2: you know. But like, apart from you know, people are
Speaker 2: going to comparing good versus bad. Degrees of goodness versus
Speaker 2: degrees of badness are harder for people to deal with.
Speaker 1: Yeah, for sure, for sure, And this is but I
Speaker 1: think that we're in a I think we can both
Speaker 1: agree that we're in a very bad situation right now
Speaker 1: and the game theory is not looking good and we're
Speaker 1: not in a very good cooperative spiral when it comes
Speaker 1: to anything, you know, economy, foreign policy. So let's let's
Speaker 1: see what happens. And yeah, let's see where we are
Speaker 1: next week on that note, day too, want to take
Speaker 1: a little break and talk about the fire festival rebirth.
Speaker 2: Let's do it. Maria, So Nate, I was, you know.
Speaker 1: I should not be shocked. I wrote a book about
Speaker 1: con artists and about how they operate and about you know,
Speaker 1: how the whole world works. But I was actually a
Speaker 1: little bit shocked to find out last week that Billy McFarland,
Speaker 1: who went to prison after he had tried to organize
Speaker 1: this music festival, the Fire Festival, sparked not one but
Speaker 1: two documentaries about it where he promised this luxurious getaway,
Speaker 1: you know, luxurious island, all this amazing stuff, and you
Speaker 1: know it was a complete fraud and fiasco. No music,
Speaker 1: no food, no transportation, no housing, no no nothing. Anyway,
Speaker 1: dude went to jail partly for wire fraud. While he
Speaker 1: was in jail, by the way, he ended up starting
Speaker 1: a ticket selling business, which ended up getting him an
Speaker 1: even longer sentence because that was also fraudulent. So he
Speaker 1: just doesn't give up. He's now out. I think he
Speaker 1: served a little bit less than four years, and he
Speaker 1: has announced fire festival too.
Speaker 2: Are you going this time a risky biz pop up there?
Speaker 1: Exactly? It's going to be at play a fire on
Speaker 1: a Mexican island called Isla Muheres, the Island of Women.
Speaker 2: I mean, it's not surprising why I think you'd say that,
Speaker 2: Like Billy for an in the podcast. I'm just kidding.
Speaker 2: It's not surprising that like the current artists would want
Speaker 2: to like try desperately to like run back the con right,
Speaker 2: I mean that seems like typical.
Speaker 1: Absolutely, absolutely, And so he owes a lot of money, right,
Speaker 1: he owes millions of dollars for restitution for kind of
Speaker 1: the money lost in the Fire festival. And he is now, so, Nate,
Speaker 1: do you want to guess what the ticket prices? So
Speaker 1: there are two thousand tickets available to Fire Festival too,
Speaker 1: and there's a range of ticket prices. We're at a
Speaker 1: floor of one four hundred dollars and a ceiling of
Speaker 1: one point one million dollars. And he is promising the
Speaker 1: exact same shit that he promised last time, that you're
Speaker 1: going to have an artist's palace, all this amazing stuff,
Speaker 1: VIP experiences. None of this has been built. And by
Speaker 1: the way, Mexican officials have said, hey, no one has
Speaker 1: applied for any permits, like, we don't know about this.
Speaker 1: I think we have zero applications for permits to do
Speaker 1: this on isladness. And apparently even if you go to
Speaker 1: the GPS like little pin that he put on the website,
Speaker 1: it drops you into the ocean, which probably is much
Speaker 1: more par for the course than being dropped on the
Speaker 1: island itself. So that's actually probably the most truth telling
Speaker 1: part of all of this. It tells you exactly where
Speaker 1: you're going to go, and I will not be surprised.
Speaker 1: So normally I'm firmly, firmly on the side of victims.
Speaker 1: I was firmly on the side of the victims of
Speaker 1: the fire fraud because you know, they didn't know it
Speaker 1: was going to be a fraud. At that point. It seemed,
Speaker 1: you know, there was John Rule, all of these people
Speaker 1: endorsing it, you know, who the hell knew who. Billy
Speaker 1: McFarland was like, if they want to spend money to
Speaker 1: go to this amazing experience on the island in the Bahamas, amazing, right, Like,
Speaker 1: that's good for them, Like these are not don't judge
Speaker 1: people because they want to go to a fancy music concert,
Speaker 1: Like that's their prerogative. And some of these people had
Speaker 1: no money, right, Like, they saved up for a year
Speaker 1: to be able to go to be able to go there,
Speaker 1: So I was firmly on their side. However, if you
Speaker 1: buy tickets to Fire Festival too, I'm sorry, this is
Speaker 1: I'm going to go from I'm no longer going to
Speaker 1: be a victim advocate here. This is one of those
Speaker 1: you know, fool me once situations and fool me twice,
Speaker 1: like are you fucking kidding me? Like what are you thinking?
Speaker 1: Like con artists, I think I've told you this before.
Speaker 1: They have suckers lists, so and you sell these for
Speaker 1: a lot of money, which is people who've fallen for
Speaker 1: phone scams, email scams, et cetera in the past, and
Speaker 1: these this is a very very valuable list because they're
Speaker 1: much more likely to fall forward again if they've already
Speaker 1: fallen for it once. So the Fire Festival should have
Speaker 1: a sucker's list if anyone actually ends up doing this again,
Speaker 1: because if someone believes that, oh well, the first time,
Speaker 1: you know, he messed up, But this time it's really
Speaker 1: going to be great. Man, I've got I've got so
Speaker 1: many bridges to sell you. It's not even funny.
Speaker 2: We want it be like all like New York magazine
Speaker 2: writers writing ironically detached profile pieces of this, but there's
Speaker 2: an audience for it. If I got a ticket for free,
Speaker 2: I would go. I would absolutely because there's a performance
Speaker 2: art element to this. Oh absolutely, I would if someone
Speaker 2: wants to sponsor me to go to the Fire Festival
Speaker 2: and write about it, maybe I'm not valuing my time
Speaker 2: and I'll do it.
Speaker 1: I'll do it as you know. It's part of it's
Speaker 1: part of my uh, it's part of my background.
Speaker 3: You know.
Speaker 1: I wrote a book on con artists.
Speaker 2: Book.
Speaker 1: My next book is about cheating. I will happily go
Speaker 1: and cover the Fire Festival. So if anyone wants to
Speaker 1: sponsor me, please, I will not think you're a sucker
Speaker 1: for buying that ticket. But something tells me that I
Speaker 1: might not even get to go right, Like is this
Speaker 1: even going to happen right? Like there have been zero permits,
Speaker 1: Like he clearly wants to raise money so that you know,
Speaker 1: he can have money, and he just can't help himself.
Speaker 1: What I know about con artists is that they do
Speaker 1: not go straight right like, they do not magically reform,
Speaker 1: especially like the ones on the level of Billy McFarland
Speaker 1: who have been doing this. There are people, you know
Speaker 1: who talked about his childhood. I was one of the
Speaker 1: talking heads on the documentaries, so so I kind of
Speaker 1: went into what went in deep with that this is
Speaker 1: a guy who's been doing this his whole life and
Speaker 1: has been misrepresenting himself his whole life. He's not looking
Speaker 1: to become a successful entrepreneur, businessman, event planner. Like he's
Speaker 1: going to keep taking his money, and I just want
Speaker 1: to know, like who is willing to back him?
Speaker 2: Right, Okay, they play advocate Sometimes people like psyche themselves
Speaker 2: out of that, like they do. Okay, it would be
Speaker 2: such an obvious con that like that exactly. Yeah, poper
Speaker 2: is sometimes true and sometimes like sometimes being caught bluffing
Speaker 2: and poker can deter people from bluffing again, right, I
Speaker 2: can't think of most other real world snaries, but that's it.
Speaker 1: But that's very different because in poker, like bluffing is
Speaker 1: part of the game, right, and some people, so it's
Speaker 1: it's like you're still playing by the rules and when
Speaker 1: you call someone you're not, so it's it's it's a
Speaker 1: little bit different. So I think that think about it. Actually,
Speaker 1: I think this is more like angle shooting and poker
Speaker 1: instead of bluffing, right, which if you're not a poker player,
Speaker 1: angle shooting is basically going right up until the edge,
Speaker 1: bending the rules, doing things that are like frankly kind
Speaker 1: of sleazy and scummy. But you're not technically cheating, and
Speaker 1: you're doing it to try to get information, to try
Speaker 1: to get a reaction out of your opponent, to try
Speaker 1: to gain an edge in a scummy way. You're going
Speaker 1: right up until that point where you can actually be
Speaker 1: disqualified for it. People who are known angle shooters, they
Speaker 1: are known angle shooters. If you call them out on it,
Speaker 1: that is not going to make them less likely to
Speaker 1: angle shoot next time. They are going to try it
Speaker 1: again and see like, okay, well you know, nothing really happened,
Speaker 1: like let me see if I can do this again, right, like,
Speaker 1: let me see if I can angle shoot again. And
Speaker 1: they keep doing it, even if they have known reputations
Speaker 1: for doing it. I think that that's the better analogy here,
Speaker 1: that we're dealing with someone who just doesn't give a
Speaker 1: fuck and and gets off on it and wants to
Speaker 1: be able to have this sort of image reputation because
Speaker 1: he's not doing this for the money, right like he
Speaker 1: owes a lot of money. He was already in jail,
Speaker 1: And I think that I think the motivations here are
Speaker 1: are quite different, and and he's will he will keep
Speaker 1: trying it again. But as you say, you know, people
Speaker 1: do have this mentality of oh, well, it can't happen again,
Speaker 1: so this time I'm definitely okay, and you fall forward again,
Speaker 1: and yeah, our minds and our powers of rationalization are
Speaker 1: truly epic. I want to revisit this, Nate in you know,
Speaker 1: in a few months to see if Fire Festival two
Speaker 1: is moving forward. And I will be very, very curious
Speaker 1: to know if we're going to have a second documentary
Speaker 1: made about fire to and the great fraud and how
Speaker 1: in the world did someone pay one point one million
Speaker 1: for the IP experience. On that note, dear listeners, Nate
Speaker 1: and I are going to go and try to find
Speaker 1: sponsorships to go and fly out to Fire Festival too,
Speaker 1: so that we can take a Risky Business podcast from
Speaker 1: the island of Les Mohetas. Let us know what you
Speaker 1: think of the show. Reach out to us at Risky
Speaker 1: Business at Pushkin dot fm. And by the way, if
Speaker 1: you're a Pushkin Plus subscriber, we have some bonus content
Speaker 1: for you. We'll be answering a listener question each week
Speaker 1: that's coming up right after the credits.
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Speaker 2: for listening across Pushkin's entire network of shows.
Speaker 1: Risky Business is hosted by me Maria Kannakova.
Speaker 2: And by me Nate Silver. The show is a co
Speaker 2: production of Pushkin Industries and iHeartMedia. This episode was produced
Speaker 2: by Isabelle Carter. Our associate producer is Gabriel Hunter Chang.
Speaker 2: Sally Helm is our editor, and our executive producer is
Speaker 2: Jacob Goldstein. Mixing by Sarah Bruguer.
Speaker 1: If you like the show, please rate and review us
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