Speaker 1: Pushkin. Hi, Michael lewis here and this is Against the Rules.
Speaker 1: A big part of sports betting is understanding risk, and
Speaker 1: recently I spoke to an expert on that topic, Nate Silver.
Speaker 1: Nate's been on Against the Rules before, talking about probability
Speaker 1: as an election forecast. He's now the author of a
Speaker 1: new book called On the Edge, and he's also the
Speaker 1: co host of a Pushkin podcast called Risky Business, along
Speaker 1: with writers, psychologists, and professional poker player Maria Kanakova. She's
Speaker 1: been on our show too. Each week, Maria and Nate
Speaker 1: get into how to think about risk and decision making,
Speaker 1: and this month they're also talking about the US elections.
Speaker 1: Nate and I had a fascinating conversation about why people
Speaker 1: bet on elections, why there's so many stupid sports camps
Speaker 1: in the United States, and how we each think about
Speaker 1: risk ourselves. To start, I asked Nate about a key
Speaker 1: framework he uses in his book. It's called the River
Speaker 1: and the Village. The stinction you make between the river
Speaker 1: and the village, is that right? Yeah? I got it right. Yeah,
Speaker 1: describe river and village.
Speaker 2: So the village is easier to describe. The village is
Speaker 2: kind of the east Coast establishment, d C. New York,
Speaker 2: it's the New York Times, Harvard University, the government when
Speaker 2: the Democrats in charge. So it's very collective oriented. It
Speaker 2: tends to be risk averse. It got really into like
Speaker 2: COVID caution and cancelation and things like that. But it's
Speaker 2: also the expert class. It's generally pretty pretty competent and
Speaker 2: so forth. The village or the river rather is degenerate. Well,
Speaker 2: le's gonna say degenerate gamblers, but people who take calculator
Speaker 2: risks for a living and are really competitive about it.
Speaker 2: So canonically you know, Wall Street, Silicon Valley Lost, it's
Speaker 2: really both the house and the players, especially in the
Speaker 2: skill games like poker and sports betting. I think it's
Speaker 2: a pretty unusual personality type. There's something called anagram or
Speaker 2: an aagram where like typologize people in nine ways. Right,
Speaker 2: one personality type is being really analytical, and one type
Speaker 2: is being really extremely competitive, right, wanting to dominate conquer.
Speaker 2: Because are actually the two least common personality types in
Speaker 2: the general population, but when you phase them together, they
Speaker 2: can become very powerful and very high variants. I think,
Speaker 2: and so you know that I think is the distinguishing feature.
Speaker 2: It's not just that they're like the the actuaries are
Speaker 2: the accountants who are good and calculating, right, It's that
Speaker 2: they really want to win, and they have a chip
Speaker 2: on their shoulder.
Speaker 1: So is the distinction between river and village? Also a
Speaker 1: distinction between is sort of the distincts that runs through
Speaker 1: the moneyball story, between scouts and people who are offering
Speaker 1: kind of from their gut and people who are actually
Speaker 1: able to do higher analysis and think statistically and probabilistically.
Speaker 1: Is it is? That?
Speaker 3: Is it?
Speaker 1: I think one distinction that I make in the general
Speaker 1: population is between people who actually think in terms of
Speaker 1: expected value and who think probably probabilistically, and people who don't.
Speaker 1: And that these two groups collide in lots of different places,
Speaker 1: and one of the newest places they collide is sports gambling. Uh,
Speaker 1: which is why we're doing a whole podcast about sports
Speaker 1: gambling and interests me this collision. But do you do
Speaker 1: you think of village as one and river as the other?
Speaker 2: I think, I mean the village certainly leans heavily toward
Speaker 2: the people who they are. The people who got mad
Speaker 2: at me about the election forecasts and said.
Speaker 1: You were wrong. So I still don't. You and I
Speaker 1: have talked about this. It is it's bewildering to me
Speaker 1: that intelligent people could look at your election forecasts and
Speaker 1: say that was wrong. They were they were better forecasts
Speaker 1: than what the market was saying.
Speaker 2: So that that's a very very entire toistic though, is
Speaker 2: to say that my forecast said thirteen, the market said fifteen.
Speaker 2: Therefore my forecast was good, and you want the thirty
Speaker 2: percent to happen like that's a very very are people
Speaker 2: who understand markets and have had skin in the game
Speaker 2: in markets under understand that, and people in the in
Speaker 2: the in the village just don't, because in the village
Speaker 2: it's all about looking good to your peers and not
Speaker 2: trying to beat the system and not trying to outsmart people.
Speaker 2: It's trying to fit in in some ways.
Speaker 1: So well, his question I've been dying to ask you
Speaker 1: after I read the book, do you think that like
Speaker 1: the different characters you dwell on who are inhabitants of
Speaker 1: the river, do you think how different are they from
Speaker 1: one another? And I'll I'll put the question this way.
Speaker 1: So if I gave you a choice between a successful
Speaker 1: poker player and a successful sports gambler, who would you
Speaker 1: rather have managed your money?
Speaker 3: The poker player.
Speaker 2: The sports betters tend to be higher on the degeneracy.
Speaker 2: I don't know why exactly, but these are sill.
Speaker 1: I'm talking about the successful ones, the ones who are
Speaker 1: who you know, who have a long and successful track
Speaker 1: record so that they are you would never do. They're
Speaker 1: they're operating with positive expected value, uh and and so
Speaker 1: not the degenerates.
Speaker 3: The poker play.
Speaker 2: I mean, the sports betters need a bit more street
Speaker 2: smarts because there's this whole second side to sports betting
Speaker 2: of how do you actually how do you get your
Speaker 2: money bad or money down good? If people think that
Speaker 2: you're a winning better so as a result, they are
Speaker 2: kind of wise guys are sharps a little bit more.
Speaker 2: And I associate that persona I mean, you know, Billy
Speaker 2: Walters in his day before he sobered up, was like
Speaker 2: a crazy partier, you know, out party, Doyle Brunson and
Speaker 2: all these people. It's just my anecdotal experience is like,
Speaker 2: you definitely have that type among poker players too, but like,
Speaker 2: but there are people who can be like a little
Speaker 2: bit more rules following and play poker. I think, yep,
Speaker 2: you know ninety percent of them are kind of less
Speaker 2: rule of following than the population.
Speaker 3: As a whole.
Speaker 2: But you can be you have some kids who will
Speaker 2: like study computer solvers all day, just get a lot
Speaker 2: of reps in have very good personal habits and ecount
Speaker 2: of living playing poker. Whereas sports betters, your edge could
Speaker 2: go away at any time, right if you were cut
Speaker 2: off or or the market adjusts at any time, you
Speaker 2: could go from winning to losing. And that mentality, I
Speaker 2: think is is rarer and harder in some ways.
Speaker 1: How do you feel about the sports gambling markets? Just generally?
Speaker 1: You are you? Are you a sports gambler?
Speaker 3: Not at the moment.
Speaker 1: This is so funny to me, because how you start
Speaker 1: is with baseball. Yeah right. I mean that if you
Speaker 1: had had the markets that are now available available to
Speaker 1: you in in two the year two thousand, you could
Speaker 1: have been a killing.
Speaker 2: I think at that point the markets were were yeah,
Speaker 2: not very efficient, you know, Spanky kiro Loos. One of
Speaker 2: the people I talked to is likeyeh, I used use
Speaker 2: Pakoda and that's when we had like actual real five
Speaker 2: or six percent edges. So I bet the NBA for
Speaker 2: a year in the course of running the book made
Speaker 2: a total of twenty or excuse me, two million dollars
Speaker 2: in bets roughly to betting, basically ten thousand dollars a day,
Speaker 2: probably five two thousand dollars bets a day every day
Speaker 2: of the NBA season for two hundred days. And of
Speaker 2: that two million, I made a profit of five thousand, right,
Speaker 2: so like zero point zero three percent or whatever. ROI
Speaker 2: if you break it down, it's like the same as
Speaker 2: like working a job at taco bell or something.
Speaker 3: In those hours.
Speaker 2: Now most players lose money, so you're already in the
Speaker 2: like ninety seven percentile or something. But like, but yeah,
Speaker 2: but I'm aware that like to win at sports betting,
Speaker 2: you need to really be.
Speaker 3: Devoted to it.
Speaker 2: And also I got like limited by by all but
Speaker 2: three sites in New York State. I went from like
Speaker 2: nine places I could place bets to like two and
Speaker 2: a half.
Speaker 1: Basically, do you remember how do you remember how that happened?
Speaker 1: Like who was quick as to find out that you
Speaker 1: didn't belie on their site?
Speaker 2: It was MGM where And I was out at a
Speaker 2: bar with a friend watching the NBA playoffs, And there's
Speaker 2: like a message on the bottom line screing to bet
Speaker 2: ESPN that Chris Middleton, the bucks second best player, is
Speaker 2: out for the next round against Boston, right, and so
Speaker 2: so they were smart enough to like take the line
Speaker 2: off for the upcoming series, but they weren't smart enough
Speaker 2: to think about the derivative bets.
Speaker 3: Right now, all of a sudden, the Celtics.
Speaker 2: Are much more likely would in the Eastern Conference finals
Speaker 2: because they had this much easier path and their odds
Speaker 2: hadn't change. And I and I went to place a
Speaker 2: bet right and it was like for two thousand bucks
Speaker 2: or something. It's like you're limited to one thousand dollars
Speaker 2: in ninety nine cents some weird number or something like that.
Speaker 2: And then I'm like, this must be a mistake, right,
Speaker 2: And I try doing it again and doing it again,
Speaker 2: and so yeah, every time it's like a little bit
Speaker 2: it's a little bit heartbreaking because it's like they never
Speaker 2: like reverse it, right, They never You can never like
Speaker 2: appeal to them and say and say, oh please let
Speaker 2: me go. But if if you're if you're not trying
Speaker 2: to recover your tracks, then like MGM and DraftKings in
Speaker 2: particular seem to have a pretty heavy hand. I can
Speaker 2: still bet at Caesar, So congrats to them, Fan Duel,
Speaker 2: I have some limitations but commit reasonable amounts. But but yeah,
Speaker 2: I mean DraftKings explicitly is like we do not want
Speaker 2: winning betters, right, and that's their their operating model.
Speaker 1: Have you ever bet politics?
Speaker 2: The short version is not really by the way, I
Speaker 2: am a paid advisor to Polymarket, so I'm not placing
Speaker 2: bits directly. We'll talk about the election, and they may
Speaker 2: place bets on on partly based on the information that
Speaker 2: I make, but I haven't. I don't have any problem
Speaker 2: with it in principle. I mean you get into like
Speaker 2: weird things where you know whether our numbers can move
Speaker 2: the markets or thinks.
Speaker 1: You can you can move that you could prop there
Speaker 1: was certainly times when you could move the line.
Speaker 2: Yeah I I yeah, I if y'ell slightly uncomfortable. But
Speaker 2: then again, like I am consulting, and so I don't
Speaker 2: think I have any problem with it. But in a
Speaker 2: narrow sense, I have not been on politics. But also
Speaker 2: because like this selection doesn't apply because it's like fifty
Speaker 2: to fifties, so my reputational risks are probably get blamed
Speaker 2: by half the country either way, but their heads at least.
Speaker 1: Is do you have a sense of how efficient the
Speaker 1: political prediction markets are. Like, do you think you certainly
Speaker 1: would have had an edge ten years ago? But do
Speaker 1: you think you would you could actually have have systematic
Speaker 1: edge in those markets.
Speaker 2: I do, but less than before. So I'll give you
Speaker 2: a slightly long winded answer. I mean, you know, so
Speaker 2: as recently as twenty twenty, there were lots of people
Speaker 2: willing to bet on Trump at you know, eight to
Speaker 2: one or ten to one after Trump had already lost, right,
Speaker 2: based on extremely implausible theories about the Supreme Court with
Speaker 2: no real basis, like overturning the results before January twentieth.
Speaker 3: So you know.
Speaker 2: Bill Bill Perkins, who I don't know if you know
Speaker 2: Bill Perkins is a consummate raverian. He runs a hedge fund,
Speaker 2: he plays huge poker games, involved in everything, wrote a
Speaker 2: book called Die with Zero, and he consulted like a
Speaker 2: Supreme Court expert. He's like, what's the chance that the
Speaker 2: Supremeport would actually take up this case? I think I
Speaker 2: was like zero, or if you want to be very cautious,
Speaker 2: one in five hundred and one in five thousand, and
Speaker 2: it's selling for one in ten, right, and so yeah,
Speaker 2: and so the markets aren't that efficient for elections. In fact,
Speaker 2: I think like for elections they're less efficient than for
Speaker 2: almost anything else because you have a lot of dumb
Speaker 2: money in the pool.
Speaker 3: You have a lot of.
Speaker 2: Rich guys and or degenerate whales that have strong convictions
Speaker 2: about politics and are willing to get lots of money
Speaker 2: about a field that they don't necessarily know all that well.
Speaker 2: Bill an election model is a fairly hard problem because
Speaker 2: of the way that all these results are correlated and
Speaker 2: so forth to the long term capital management problems. Now,
Speaker 2: I do think that like polymarket has much more liquidity
Speaker 2: and the other ones too. You know, Calshee is now
Speaker 2: legal in the US, so you're seeing much more attention
Speaker 2: and much more interest, and you're developing maybe more of
Speaker 2: a professional class of betters. You're also, i know firsthand,
Speaker 2: having more interest from Wall Street in trying to calculate
Speaker 2: political risk, because you know, everything is politics nowadays. What
Speaker 2: happens with the politics of the US election will affect
Speaker 2: interest rates and will affect policy towards China, will affect
Speaker 2: lots of sectors of the economy. So you know, some
Speaker 2: of these firms are betting directly in markets, some are
Speaker 2: betting through proxies, whether through cryptocurrency or just trying to say, Okay,
Speaker 2: we think that healthcare stocks would be well with Harris Winds,
Speaker 2: so we'll create a bundle of those. So I think
Speaker 2: the market's getting quite a bit sharper. But there's a
Speaker 2: lot of a lot of people with strong opinions in politics.
Speaker 1: I mean, I want to ask you a couple of
Speaker 1: questions that are relevant to how you teach people to
Speaker 1: think more like Riverians. I mean, some people do do
Speaker 1: it kind of naturally. They think probabilistically. They're kind of
Speaker 1: they move through the world probabilistically. But a lot of
Speaker 1: people just don't, and it's a problem for them, and
Speaker 1: it's a bigger problem the more opportunities they have to
Speaker 1: squander their money on in probabilistic circumstances like sports betting.
Speaker 1: So so, if you are going to design a course,
Speaker 1: a short course to teach people to be Riverian, at
Speaker 1: what age would you give it and what would be
Speaker 1: in it?
Speaker 2: I mean, I mean poker is the like er archetypal
Speaker 2: activity of the River in particular, and like the Riverian mindset,
Speaker 2: and so there'd be a lot of poker. Although there
Speaker 2: are other games, Like a lot of poker players started
Speaker 2: playing out Matt the Gathering, which is a game that
Speaker 2: involves elements of strategy and randomness. The deck changes from
Speaker 2: game to game a lot. Yeah, look, you have to
Speaker 2: have I know it's a cliche and I'm sealing another
Speaker 2: author's term, but like, you have to have skin in
Speaker 2: the game at some point because a lot of times,
Speaker 2: like so, one of the criticus of the village is
Speaker 2: that they don't actually have incentives to be accurate.
Speaker 3: So much as having incentives to please people. You know,
Speaker 3: in academic.
Speaker 2: Paper, it's rigorousness or its truthfulness is only kind of
Speaker 2: loosely correlated with its chance of being published, versus like,
Speaker 2: is it in the hot area of the literature? Does
Speaker 2: it come to a conclusion that's seen as the right
Speaker 2: political conclusion in certain fields?
Speaker 3: And there are.
Speaker 2: People in journalism who are like just really like fixating
Speaker 2: on I want to have the right answer, I care
Speaker 2: a lot about the truth who aren't. But like, but
Speaker 2: in poker and sports beenning and trading, then you're punished
Speaker 2: for your sense of bullshit and you and you you
Speaker 2: learn that in a very fine tune way, Like what's
Speaker 2: the long run really looked like. I mean, a big
Speaker 2: part of this is actually estimation. Where can you come
Speaker 2: to like a pretty good approximation quickly before the market
Speaker 2: catches up. That's the other thing too about the rooms.
Speaker 2: It's a fast moving place, even sports butting. I didn't realize,
Speaker 2: like you have to make decisions fast, right Yep. You
Speaker 2: see some line that looks wrong and you're like, well,
Speaker 2: is that because you know fan duel was slow to update,
Speaker 2: or is because to the new sealing?
Speaker 3: I don't.
Speaker 2: Is Patrick Mahomes out for this game or something all
Speaker 2: of a sudden like and they know that and I don't.
Speaker 2: And so you have to make the decisions very fast.
Speaker 2: In trading, you have to make these decisions fast. And
Speaker 2: I think that can only be learned through experience and
Speaker 2: not a pure academic curriculum.
Speaker 1: So it's it isn't it isn't you put them in
Speaker 1: the classroom when they're fourteen years old and teach them statistics.
Speaker 1: It's you force them to be a sports better or
Speaker 1: a poker player with their own money on the line,
Speaker 1: and they or and and and they and they start
Speaker 1: to associate their bullshit with the price uh and and
Speaker 1: and the market tells them when they're wrong.
Speaker 3: Yeah. One of the one of the sports fans I
Speaker 3: talked to.
Speaker 2: His name Kelly Stewart, and her her parents were kind
Speaker 2: of part of yours, I guess a little bit, and
Speaker 2: so they let her play in their poker game one time.
Speaker 2: They're like, we're not going easy on you at all,
Speaker 2: you know what I mean, We're gonna We're gonna teach
Speaker 2: you at this early age. I don't know she was
Speaker 2: eleven or whatever, what it's like to play poker against
Speaker 2: people who are better than you and there's real risk
Speaker 2: involved here. I mean, do you play poker, Michael, Do
Speaker 2: you do any of this gambling stuff?
Speaker 1: So I in high school, I had a poker game
Speaker 1: and it was almost weekly. Uh. It was with the
Speaker 1: same guys, kind of six or seven guys, each of
Speaker 1: whom had a very particular personality, one of whom ended
Speaker 1: up being an iron Randian and a gazillionaire hedge hedge
Speaker 1: fund manager who was actually short uh subprime mortgages going
Speaker 1: into the into the financial crisis. Who So I got
Speaker 1: to watch different personalities express their risk preferences and thought
Speaker 1: processes at a poker table, and I was interested, maybe
Speaker 1: more interested in watching how the other people behaved as
Speaker 1: I was in my own poker hand. But I really
Speaker 1: like playing it, and I tended to win. I adjust
Speaker 1: like the iin Randian won all the time, or won
Speaker 1: most of the time, And there was someone on the
Speaker 1: other end of the spectrum who just was full of
Speaker 1: all the cognitive vices that Connoman Diversky cataloged, plus overconfidence,
Speaker 1: plus a lot of other stuff, and he would lose
Speaker 1: all the time. So I played enough to see to
Speaker 1: kind of So yes, I have, but I haven't played
Speaker 1: as a grown up. No, I haven't played, and I'm
Speaker 1: not that attracted to gambling. It just doesn't do it
Speaker 1: for me. I don't know why, and I can't. I can't.
Speaker 1: It just doesn't. Whatever whatever trigger it triggers in your brain,
Speaker 1: it doesn't in mind, whatever pleasure you're getting from it,
Speaker 1: it doesn't. I don't really get the same pleasure. Partly,
Speaker 1: I think part of it is when I won in poker,
Speaker 1: I always felt a little badly for the person whose
Speaker 1: money I took, so I didn't. I didn't. I didn't
Speaker 1: get the full pleasure of victory. When I was walking
Speaker 1: out of the house with so everybody else's money. I
Speaker 1: always felt like I had to give some of it back.
Speaker 3: Are you?
Speaker 2: I mean, I think there are slightly separate things here.
Speaker 2: It's I mean, are you like a thrill seeker in general?
Speaker 2: Like there's the idea of like.
Speaker 3: Sky like the idea.
Speaker 2: I don't think i'd skydive because I would calculate that
Speaker 2: like the risks outweigh the reward rightly.
Speaker 1: So I did that. I did that once. Uh, I
Speaker 1: jumped out of an airplane just because I thought I had.
Speaker 1: I went through a phase of life in college and
Speaker 1: just after where I thought I'm going to have every
Speaker 1: possible experience. Well, I thought I might write about it
Speaker 1: one day, and I thought, I just want to be
Speaker 1: able to. I want to have all these experiences that
Speaker 1: I know I won't have later, So i'd, you know,
Speaker 1: scuba diving and skydiving. And it's just like I had
Speaker 1: a long list of shit like that idea. I didn't.
Speaker 1: Jumping out of a plane was one of the most
Speaker 1: terrifying things I've ever done. It's the first I suppose
Speaker 1: it gets comfortable. It's not a natural thing to do.
Speaker 1: It's really an unnatural act. But so am I a
Speaker 1: thrill seeker? A bit that I it's but it's more
Speaker 1: social thrill seeking. Now I like it. I like getting
Speaker 1: up on stage.
Speaker 2: Okay, that seems correlated in some way. I mean, so
Speaker 2: if you look at the Big five personality trades, the
Speaker 2: two things that are kind of and there's no like
Speaker 2: risk taking personality trait per se, but high openness to
Speaker 2: experience and and low neuroticism.
Speaker 1: So I got that. I think those two I basically have.
Speaker 1: I mean, here's a form of thrill seeking. I loved
Speaker 1: publishing a book about Sam Bankman Freed that I knew
Speaker 1: was going to create a war.
Speaker 3: Okay, okay, So I.
Speaker 1: Love sort of like this feeling of this confederacy of
Speaker 1: Dunce's feeling where I love. It's harder to do it
Speaker 1: now in journalism because you get yourself in way too
Speaker 1: it just way too much trouble. But I love I
Speaker 1: used to love in the New Republic taking a hugely
Speaker 1: unpopular line and pushing it as far as you could,
Speaker 1: knowing it's unpopular, but because you thought it was right.
Speaker 1: But like like that kind of I gotta I get it.
Speaker 1: I get a charge out of that feeling, not not gratuitously.
Speaker 1: It's not just do it to show you can do it.
Speaker 1: But when I find some material that said I think
Speaker 1: means one thing, and I know the world thinks it
Speaker 1: means another thing. I love pushing, pushing up against the world.
Speaker 2: That's very Riverian, that contrarian, not quite confrontational streak, but
Speaker 2: in difference toward in difference word mild amusement with creating
Speaker 2: a stir is very Riverian.
Speaker 1: We'll be right back after a quick break. I'm back
Speaker 1: with Risky Business co host Nate Silver. So this is
Speaker 1: a strange question. But if you were to send me
Speaker 1: off to get myself into the worst expected value, the
Speaker 1: most negative expected value situation available in gambling markets, where
Speaker 1: would you send it?
Speaker 2: I mean, the state lottery is the lowest player payout
Speaker 2: percentage in West Virginia. It's something like the government keeps
Speaker 2: eighty percent of the money. And of course, like a
Speaker 2: very it's a very poor play the lottery.
Speaker 1: It would be for lottery, what comes then? What comes
Speaker 1: after that? Horse racing is generally horse racing is horse
Speaker 1: racing worse than betting parlays and with DraftKings. So the
Speaker 1: parlays aren't I mean, the parlors are weird because like
Speaker 1: the way they do the accounting gets slightly strange. But yeah,
Speaker 1: horse racing they take like was it like fifteen or
Speaker 1: twenty percent depending on the state. And then and by
Speaker 1: the way, we're going in inverse order of like the
Speaker 1: average net income of the people who do these types
Speaker 1: of gambling. Right, So then you get to slot machines,
Speaker 1: which is ten or eleven percent. You know, roulette is
Speaker 1: five percent, Baccarat craps, blackjack is one ish percent depending
Speaker 1: on the rules. Video poker is if you're playing right,
Speaker 1: is very low, like zero point five percent. But video
Speaker 1: poker strategy is not always very intuitive, right, and then
Speaker 1: sports betting and poker poker where you can actually make money.
Speaker 3: Uh, if you're a skilled better.
Speaker 1: Right, if you're if you're an unskilled better, I mean
Speaker 1: the shorthand version of it. If you're skilled better, you're
Speaker 1: not allowed to bet at DraftKings. Yeah.
Speaker 2: One of the things the sports betting houses I talk
Speaker 2: to you would tell you is that, like, actually most betters.
Speaker 3: Are worse than average.
Speaker 2: Right, If you just threw darts and a dartboard at
Speaker 2: NFL pointsprints are something you'd lose four and a half percent,
Speaker 2: but most players lose like five percent instead, right, show
Speaker 2: he so tanies, degenerate gambling interpreter friend like have these
Speaker 2: horribly large losses partly because, uh, partly because he had
Speaker 2: these parlays and the way they're accounted for, but also
Speaker 2: because like, what.
Speaker 1: So, why do you think it's interesting about sports betting?
Speaker 1: You're making a point that's that to me is interesting
Speaker 1: is that here you've got this activity where you could
Speaker 1: have an edge, like blackjack, but unlike blackjack, you have
Speaker 1: people who are especially it tends to attract a lot
Speaker 1: of especially dumb bets. So what is it about sports
Speaker 1: that does this?
Speaker 2: I think it's partly because sports betting like a lot
Speaker 2: of fields in the river, but like, it's partly about
Speaker 2: men and men's egos, especially men's egos around sports and
Speaker 2: the advantalin and the and the buddy stuff that causes
Speaker 2: a little bit. So one problem with like draft kings,
Speaker 2: like not allowing sharp players. As part of the allure
Speaker 2: of sports betting should be that hey, look, hey, buddy,
Speaker 2: you're pretty smart about sports. Why don't you try to
Speaker 2: outsmart the system?
Speaker 1: Right?
Speaker 2: And now they're very careful about not quite implying that.
Speaker 2: They say, well, we all have hunches. Sometimes it's fun
Speaker 2: to better hunches. I heard ad recently on some podcasts
Speaker 2: I was listening to, But it's not the same as
Speaker 2: like the Daily Fantasy Days where they're like, hey, man,
Speaker 2: you're sitting in your office.
Speaker 3: Cubicle, but you really know sports really well, so.
Speaker 2: Why don't you boot up some draft kings lineups and
Speaker 2: then you'll be hanging out with like bikini models or
Speaker 2: like literally what the ads were saying.
Speaker 3: It wasn't even the subtext.
Speaker 2: It was like text, and now they've lost that because
Speaker 2: they're afraid of like, for every person who can beat
Speaker 2: the system, there have to be ten egotistical guys who
Speaker 2: think they can beat it and can't.
Speaker 1: Right, and when they sift the population and have the
Speaker 1: ability to sift the population so that and are able
Speaker 1: to kick out anybody who can beat the system and
Speaker 1: just keep in the system the people who were the
Speaker 1: ten guys. What I think is bound to happen is
Speaker 1: this activity is going to be stigmatized as stupid. If
Speaker 1: you're there, you're dumb. And I was thinking, like, on
Speaker 1: a list of questions that I would ask anybody who
Speaker 1: was holding himself out as a financial advisor, like wanted
Speaker 1: to manage my money, one would be do you have
Speaker 1: an account of DraftKings and do they let you bet
Speaker 1: as much as you want? Are you a VIP? And
Speaker 1: that if you are, you have no business doing this.
Speaker 2: Well, it's like what so like credit rating agencies will
Speaker 2: look for people who whose phone batteries go out a lot,
Speaker 2: because this is seen as a sign of poor planning, right,
Speaker 2: that you're not a long term planner if you routinely
Speaker 2: more than once or twice a month, right, can't make
Speaker 2: it through the day.
Speaker 3: With your cell phone on the whole day? Yeah?
Speaker 2: Absolutely, I mean, yep, people need to understand. And this
Speaker 2: is where like having spent time in on Wall Street,
Speaker 2: you probably understand adverse selection a little bit more. If
Speaker 2: if Sound's offering you a tree, why are they offering
Speaker 2: you this trade? And if you know that if they
Speaker 2: think you're sharp, you won't get this trade, then then
Speaker 2: that should be a big red flag. However, you you do,
Speaker 2: I guess kind of get this reverse adverse selection problem
Speaker 2: where you know, why is someone betting with you if
Speaker 2: they know that you know they think you're dumb. And
Speaker 2: so what happens is that you have proxies or beards
Speaker 2: they're called, where you befriend the degenerate gambler in your
Speaker 2: pokeber game with very high limits on DraftKings. You say,
Speaker 2: I'm gonna give you sharp picks, no strings attached, right,
Speaker 2: and you give me half your action. Like it's very
Speaker 2: hard to prevent that. It's against their terms of service,
Speaker 2: of course, but like it's probably not illegal, although the
Speaker 2: courts are unsympathetic toward gamblers and gambling related stuff.
Speaker 3: But like, but it's it's not a it's not a
Speaker 3: very robust industry.
Speaker 2: They have good product and good marketing and good customer acquisition,
Speaker 2: and they do certain fundamental things pretty right. But the
Speaker 2: old school approach to book making is that, look, we
Speaker 2: let a few sharp people bet because most people aren't sharp,
Speaker 2: and the sharp betters help us set better lines and
Speaker 2: and create a sense of like fairness and kind of
Speaker 2: old school Veggas camaraderie is well, I don't know, there's
Speaker 2: are a lot of cheating back in old school Vegas, so
Speaker 2: I think one should be careful about calling it the
Speaker 2: good old days too much.
Speaker 3: But but it is, but but it is.
Speaker 1: It is about letting information into a market and using
Speaker 1: the information rather than just trying to keep the information out.
Speaker 2: Yeah, and they take their four and a half percent
Speaker 2: tax and get like a lot of dumb betters and
Speaker 2: and you know, I don't know, maybe they should have
Speaker 2: a higher vague and but say we'll take everybody's bet
Speaker 2: and have a higher vegue and said what happens is
Speaker 2: like you know, some of these sites like Circa actually
Speaker 2: let everyone bet and have better odds instead, and there
Speaker 2: and there have been these sites said it are very
Speaker 2: committed to a a fair experience for the gambler where
Speaker 2: they set like rational limits for every player. The limits
Speaker 2: are the same for every player. But they're smart about things, right.
Speaker 2: They don't let you bet on some of the derivative
Speaker 2: bets that like are easy to beat. They don't offer
Speaker 2: the in game betting in the middle of the game
Speaker 2: where if you're I mean, you know, there's issues like
Speaker 2: if you are at a tennis tournament and you're watching
Speaker 2: us up a match, then sometimes you can make bets
Speaker 2: called court siding before before the lines change. They've gotten
Speaker 2: pretty fast. But like, but there's all types of edges
Speaker 2: like that that people can have that that say you
Speaker 2: have to beat us fair and square. We're gonna set
Speaker 2: good informed lines, a limited selection of good lines, but
Speaker 2: We're not gonna limit anybody from betting, and people have
Speaker 2: moved away from that, from that model.
Speaker 1: Unfortunately, hold that thought. We'll be right back. Nate Silver
Speaker 1: and I are back to discuss all things risky. I
Speaker 1: have a couple of other questions for you. One is,
Speaker 1: I'm going to Vegas this weekend give a talk. If
Speaker 1: I wanted to see Nate Silver's Vegas? Where would I go?
Speaker 1: Where your What are the places that make your socks
Speaker 1: go up and down?
Speaker 2: I mean, the wind uh and the Aria are probably
Speaker 2: my favorite properties in Las Vegas.
Speaker 1: And you walk it, you walk it, you walk in,
Speaker 1: and you go right to the poker tables in Vegas.
Speaker 2: I basically, uh, play poker and eat nice food. Yeah,
Speaker 2: and that's really what I do, right. I mean, maybe
Speaker 2: I'll maybe I'll hit hopefully you hit the gym in
Speaker 2: the morning some of the time. Maybe you hit the
Speaker 2: pool once. You know, once a year, I'll get dragged
Speaker 2: out to the club. It's about the It's about the
Speaker 2: tolerance I have for that experience.
Speaker 3: Once a year, it's fine. More than that, it gets old.
Speaker 2: On top of that, I will almost ever be able
Speaker 2: to completely put away my real life work. Right, So
Speaker 2: I'll like get up at eight, take a call with
Speaker 2: some consulting client, write a new layer post at ten,
Speaker 2: and then play poker for twelve hours. And they're like
Speaker 2: very and they're very long days. You come home just exhausted.
Speaker 3: Some of the time.
Speaker 1: When you go into these tournaments. Are you nervous?
Speaker 3: It comes and goes. I mean one of the things
Speaker 3: where it's interesting.
Speaker 2: It's also true with like doing like live public appearances
Speaker 2: where you're in front of a bunch of people, like
Speaker 2: you were talking about earlier, you know, trying to figure
Speaker 2: out kind of where those butterflies come from and why
Speaker 2: sometimes you have them and why sometimes you don't. I'm
Speaker 2: trying to, you know, you gratually learn a few things,
Speaker 2: like doing things on an empty stomach is probably a
Speaker 2: bad idea because your heart rate is going up and
Speaker 2: if you're having a little blood sugar and so forth. Basically, No,
Speaker 2: I actually kind of almost had opposite problem where you're
Speaker 2: really excited, like I haven't played a poker tournament in
Speaker 2: three months, and I flew to the wind and I
Speaker 2: checked in and finally I'm played my first tournament of
Speaker 2: this series, and I have this whole week to play poker.
Speaker 3: And then you play and there's no.
Speaker 2: Interesting hands for for three hours, and it becomes like
Speaker 2: a little bit of a letdown because the big moments
Speaker 2: in poker come unexpectedly. They come toward the end of tournaments,
Speaker 2: not toward the beginning, and so it can be kind
Speaker 2: of kind of quite a grind. Now a big high
Speaker 2: sticks cash game, then immediately you're feeling the adrenaline. But
Speaker 2: I try to like enjoy that feeling.
Speaker 1: What's the most you've ever won and lost in.
Speaker 3: A cash game?
Speaker 2: The most I've won is probably seventy seventy five K,
Speaker 2: and the most I've lost is probably forty five K
Speaker 2: or something. In a turn of the top cars I've
Speaker 2: had is like one fifty or one seventy or something. Okay,
Speaker 2: So yeah, I yeah, yeah, that feels fun, man, the
Speaker 2: feeling where you have a big winning cash session, because
Speaker 2: I like, I'm started to like cash poker better than
Speaker 2: tournaments where you have, like where you have a fixed
Speaker 2: player pool, because that's what you were talking about before
Speaker 2: in your game in high school or college. For what
Speaker 2: it was to play against the same people repeatedly is
Speaker 2: what I think pokers is really about more than the
Speaker 2: computer solvers, more than the game theory. It's about like
Speaker 2: the cat and mouse games of who's gonna win up
Speaker 2: one another today? Like that I find to be like
Speaker 2: really fun to have this same playerpool people who come
Speaker 2: friends with and people that might be might be very rational,
Speaker 2: and some walks their life and are just like artly
Speaker 2: terrible poker players or vice versa.
Speaker 3: Sometimes is enjoyable.
Speaker 1: It's a it's a it's a really useful window into
Speaker 1: character watching someone gamble. Uh that that that was the
Speaker 1: fun to me was seeing that you could It was
Speaker 1: just like they become characters in a novel when they're
Speaker 1: sitting around a poker table. There's something very distinctive about
Speaker 1: the way people it's like a fingerprint or the way
Speaker 1: they approach risk.
Speaker 2: Yeah, I know you're still in the process of writing this,
Speaker 2: but how has your approach to what's changed? And making
Speaker 2: the new season and learning more about about the sports
Speaker 2: betting world.
Speaker 1: So I'm not sure my own approach to risk is
Speaker 1: changing it all. However, one of the shocking things to
Speaker 1: me as I dive into the world sports betting is
Speaker 1: how these companies have sprung up and become multi billion
Speaker 1: dollar companies on the back of just dumb sports betting,
Speaker 1: Like like, we have a machine in place that's out
Speaker 1: there to maximize the number of stupid sports bets that
Speaker 1: people that Americans will make, and Americans are just shockingly
Speaker 1: good at making dumb sports bets. And so it's made
Speaker 1: me and especially young male Americans, And what the light
Speaker 1: bulb that went off in my head is I need
Speaker 1: to educate my seventeen year old son that he's walking
Speaker 1: into a world. It's not just sports betting, but he's
Speaker 1: not walking into a world that's going to ask him
Speaker 1: to make lots of calculations or whether he's aware of
Speaker 1: it or not, it's taking advantage of his ability to
Speaker 1: make certain calculations and if he can't make them, he's
Speaker 1: in trouble. And so he got me thinking like, like
Speaker 1: not so much about my own risk profile, but about
Speaker 1: about about sort of like the population's risk taking behavior,
Speaker 1: which which is just you know, I didn't expect the
Speaker 1: average American to be a really smart sports gambler. I
Speaker 1: was just surprised by how bad they.
Speaker 2: No just a notion that like they are explicitly saying
Speaker 2: that you can't have winning players and that we're expecting
Speaker 2: you to lose money. I mean even the casino industry
Speaker 2: offers some pretense of, oh, we're an entertainment product and
Speaker 2: you'll come and get a nice take dinner and see
Speaker 2: a show and hang out with your buddies, right whereas
Speaker 2: is this is just more cynical and.
Speaker 1: It's an explicit It's just it's an explicitly dumb transaction
Speaker 1: without a whole lot of side benefits. There are some,
Speaker 1: I get it. It makes you it's more exciting to
Speaker 1: watch the games if you have money on it, et cetera,
Speaker 1: et cetera, But it is it is really just targeting
Speaker 1: bad decision making. And and it hasn't the fine point
Speaker 1: has not been put on that. Uh, and it's it's
Speaker 1: and once the fine point is put on it, it'll
Speaker 1: be interesting to see how people think about these these
Speaker 1: companies that are the sort of the new sports bookies.
Speaker 1: It's like, is it a bad is it saying something
Speaker 1: bad about you that they want you? There?
Speaker 2: I see some perceptual shifts. I mean, you see kind
Speaker 2: of in the political circles I follow. You see people
Speaker 2: who are growing more concerned as there are more studies
Speaker 2: that come out about the effect on young men. Look,
Speaker 2: it's a lot like the guy who goes and bets
Speaker 2: fifty dollars in the Yankees at the Yankees game and
Speaker 2: is giving away if he's making just like a moneyline
Speaker 2: bet expected value of two and a half bucks. Like,
Speaker 2: I'm not worried about him. He probably gets his two
Speaker 2: and a half bucks worth of entertainment. But the five
Speaker 2: percent of people or whatever else who are who fall
Speaker 2: into the trap here and the lack of friction where
Speaker 2: it's just like you want ten thousand dollars in your
Speaker 2: draft account their draftings account, Like it's that's not that hard.
Speaker 2: That's not that hard to do. If you're in a
Speaker 2: physical casino and you didn't bring money or tips with you,
Speaker 2: then like, actually there's friction there. You got I've had
Speaker 2: at Popwerk, at the World Chairs Poker, drive out to
Speaker 2: the Chase Bank on Trafficana Avenue or whatever, right I
Speaker 2: would like to make a bank withdraw because I ran
Speaker 2: out of money, and like, at least creates like a
Speaker 2: little bit of a deterrent.
Speaker 1: Yet one of the things that runs through our whole
Speaker 1: season is how people's behavior changes and the decision making
Speaker 1: changes when you remove the friction. It's not a trivial thing.
Speaker 1: It's not that you make it a little bit harder
Speaker 1: for people to do things that are self destructive, and
Speaker 1: they're a lot less likely to do them. All right, Nate,
Speaker 1: thanks for doing this absolutely.
Speaker 3: I'll talk to you soon, Michael, all right, bye bye.
Speaker 1: Nate Silver is the author of the book On the
Speaker 1: Edge and co host of the Pushkin podcast Risky Business.
Speaker 1: Against the Rules is written and hosted by me Michael
Speaker 1: Lewis and produced by Lydia gene Kott, Catherine Gerardeau, and
Speaker 1: Ariella Markowitz. Our editor is Julia Barton. Our engineer is
Speaker 1: Sarah Bruguier. Against the Rules is a production of Pushkin Industries.
Speaker 1: To find more Pushkin podcasts, listen on the iHeartRadio app,
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