Cowen: Now, if we simulated the world a thousand times, in how many of those scenarios would you end up more or less where you are today?
Silver: It’s, of course, a question I asked Peter Thiel and other people in the book (On the Edge: The Art of Risking Everything).
Cowen: Your father was a political scientist, presumably very smart. Got you connected to politics.
Silver: This is a hard question. I feel it’s unfair that you’re asking me this question that I asked other people, but I think I would have wound up somewhere in this vicinity 20 percent of the time, or maybe less than that. I don’t know, because I had this big breakthrough in the 2008 election, which really did involve a lot of happenstance in certain ways.
I had been an online poker player, and basically, the US government shut down online poker. Technically, they shut down payment processing for online poker. That got me very interested in the 2006 midterms because I wanted the people who had passed that law to lose their seats in Congress.
Meanwhile, I lost my source of livelihood. I couldn’t play poker and press buttons [laughs] for 24 hours — not 24 hours — for 40 hours a week. So, I founded FiveThirtyEight just on a lark, and that changed everything. Yes, there’s a lot of circumstance and luck, and there are probably many ways that life could have unfolded where I was unhappy at some consulting job, or something tragic happened, or whatever else.
Cowen: Poker players — they’re ornery. They’re individualistic. You don’t always want to hire them, and you’re one of them. Isn’t it, if not inevitable, likely you would have ended up as some kind of independent? Everyone knows about sports.
Silver: Yes, because now I’m doing three or four different things, which in some ways makes it feel like I’m living out multiple versions of the simulation anyway. [laughs]
Cowen: All at once.
Silver: Yes, because I’m diversified in different ways. There might be worlds where I had won a big poker tournament early on, or something like that, but yes, I get pretty unhappy when I’m bored. I also can focus and work pretty hard, so I think I would have wound up in interesting places a lot, but I feel very blessed and lucky to have wound up in this particular place.
Cowen: What do you maximize?
Silver: I don’t know. In the short run, some combination of . . . Look, this year, it’s easier to answer that because you have a short or more medium-term . . .
Cowen: Right, everything’s thrown at you. You’ve got to get through the day, simply.
Silver: Yes. Look, I’m 46. There’s some extent to which I feel like this year is important as far as earning a fair amount of income — because it is very cyclical, with election cycles and other things like that — of having good options for the second half of my life, basically.
I found a lot of energy recently, this year. I probably work fewer hours than I once did but probably work much more efficiently, have a little bit more balance. But yes, I am trying to get as much productive work done as I can over the next four or five months until the election happens. I’m trying to build the newsletter Silver Bulletin in the long term.
I’ve matured a little bit. I tend not to work most evenings, for example. We were talking about travel before, right?
Cowen: Yes.
Silver: I do my share of travel. I have poker tournaments, which are fun and stressful but also a lot of hard work and are an escape in different ways. I want to get to a point where, for the rest of my life, I can do intellectually challenging and stimulating work and experience different things. But this year, there’s a little bit of hustle required to help ensure that in the long term.
Avoiding Status Quo Bias in One’s Life
Cowen: So, you don’t think you have that much status quo bias?
Silver: I’m sure I do, but look, I’ve done a lot of different things, and I’ve bounced around quite a bit. I’m inherently restless. Some of the common personality flaws that . . . “Flaws” is a jaded, loaded word. Some of the common personality traits a lot of people have, I think maybe poker players over-index a little bit toward the other way.
Poker players are pretty good at going with the flow. When you’re playing a poker tournament, everything is contingent because the tournament could last five more days or five more minutes. So, you’re like, “Yes, I’ll go to dinner with you, conditional on being knocked out of the tournament, and not entering this other tournament,” and x and y, and z. You’re very used to dealing with different stressors and contingencies and things like that. I think that’s somewhat unusual.
Cowen: If you’re very restless, does that seem to you like a bias in your decisions that you want to counteract with nudges, or something you should double down on? I would say you should double down on it, but what’s your view?
Silver: I think closer to double down.
Cowen: Double down.
Silver: Yes.
Cowen: So, what’s your main bias when you make decisions?
Silver: I think I’m probably more emotional than people might think [laughs] I am on the surface —
Cowen: I would think you’re pretty emotional.
Silver: Yes, that can come out on Twitter and things like that a little bit. People who are very competitive — and I put myself in that category, I think — can sometimes be a little bit irrational about continuing to fight even after they’ve already won. In some ways, I think that can be a bias potentially in certain ways.
Cowen: Who was the first human to think probabilistically with a reasonable degree of consistency? Or have we seen one yet?
Silver: I think people are actually more intuitive, probabilistic reasoners than maybe the conventional wisdom holds. If you’re thinking about some hunter-gatherer — they’re reading context clues about where might be the particular wild beasts they want to kill and want to avoid being killed by. Gambling goes back very early in many cultures. Apparently not quite universal, but probably very common in most cultures.
Cowen: But that’s a sign they don’t think probabilistically because most gambling is negative sum, right? At best, zero sum, so we should see very little of it.
Silver: It’s originally from divination, literally. Then it becomes gamified and commodified. It plays almost a spiritual role, I think, in ancient . . . I don’t know its anthropology super well. I’ve read a couple of books on it, but it has almost a spiritual divination role.
The notion of gambling halls or casinos, I think, dates back to maybe 16th- or 17th-century Europe, roughly. That’s potentially newer, but the notion of tempting one’s fate, which is still a romantic notion some gamblers have, like Erving Goffman, who I cite in the book. This is someone who has ennui or whatever. Maybe I’m using that term wrong, but they need to prove that they’re capable of taking a chance. It can be a little bit gendered. I think he thinks of it more as a post-World War II American male who feels like he has fewer chances to demonstrate his bravery. That’s always been one conception of gambling — a simulation of actual risk.
On The Psychology of Betting
Cowen: Why shouldn’t people gamble only in the positive sum game? Take the US stock market — that certainly seems to be one of them — and manufacture all the suspense you want. Learn about the companies, the CEO. Get your thrill that way and don’t do any other gambling. Why isn’t that just better for everyone?
Silver: Look, I’m not necessarily a fan of gambling for gambling’s sake. Twice a year, I’ll be in casinos and in Las Vegas a lot. Twice a year, I’ll have a friend who is like, “Let’s just go play blackjack for an hour and have a couple of free drinks,” and things like that. But I like to make bets where I think, at least in principle, I have an edge, or at least can fool myself into thinking I have an edge.
Sometimes, with the sports stuff, you probably know deep down you’re roughly break-even or something like that. You’re doing some smart things, like looking at five different sites and finding a line that’s best, which wipes out some but not all of the house edge. But no, I’m not a huge fan of slot machines, certainly. I think they are very gnarly and addictive in various ways.
Cowen: They limit your sports betting, don’t they?
Silver: Yes, I’ve been limited by six or seven of the nine New York retail sites.
Cowen: What’s the potential edge they think you might have?
Silver: It’s just that. If you’re betting $2,000 on the Wizards-Hornets game the moment the line comes out on DraftKings, you’re clearly not a recreational bettor. Just the hallmarks of trying to be a winning player, meaning betting lines early because the line’s early and you don’t have price discovery yet. The early lines are often very beatable. Betting on obscure stuff like “Will this player get X number of rebounds?” or things like that. If you have a knack for — if DraftKings has a line at -3.5 and it’s -4 elsewhere, then it can be called steam chasing, where you bet before a line moves in other places. If you have injury information . . .
It’s a very weird game. One thing I hope people are more aware of is that a lot of the sites — and some are better than others — but they really don’t want winning players. Their advertising has actually changed. It used to be, they would say for Daily Fantasy Sports, which was the predecessor, “Hey, you’re a smart guy” — the ads are very cynical — “You’re a smart guy in a cubicle. Why don’t you go do all your spreadsheet stuff and actually draft this team and make a lot of money, and literally, you’ll be sleeping with supermodels in two months. You win the million-dollar prize from DraftKings.”
Now, they don’t even try to advertise it as a skill game anymore, which in some ways is a mistake because the appeal to the male ego is a huge way to get new customers for sports betting and things like that. Every sports fan thinks he has some proprietary edge or knowledge or insight. +EV sports bettors are not a big lobbying group, or not a big cause, exactly.
I think there should be regulations on how much can you price-discriminate between your customers. Literally, they’ll take a million-dollar bet from somebody and wouldn’t take even a $50 bet from me on the same game, things like that, which also creates problems because money has a way to flow. Tyler, if you are able to bet a million dollars, and I’m able to bet $50, and I’m a winning bettor, then there are certain ways in which information will probably flow from me to you in an inefficient way, eventually.
Cowen: Sure.
Silver: But no, the industry is very cynical in some ways. The old-school Vegas idea of “We’re going to post our line, and everybody gets a crack. You can bet X amount at a time. When you make a bet, then we may change the line and you can bet again” — That attitude has been lost. More of this European, UK style, where you’re doing lots and lots of customer segmentation and trying to maximize the amount of money you make from whales, which are bad degenerate gamblers, and not take much action at all from sharps (https://www.nytimes.com/athletic/2579054/2022/01/27/who-is-considered-a-sharp-in-sports-betting/).
Of course, you lose the price-discovery element of that. It’s a pretty interesting industry economically. What happens is, there are a few sharp sites that will say, “Hey, we will take $5,000 from anybody, and that helps us have better pricing and discover better lines.” Because by the time you get to kick-off or tip-off of a game, then you’re taking $50,000 bets or more. So, to have someone who’s willing to give someone a small +EV bet for a smaller amount because then you’ll get your retail customers later on — that was the old model.
Cowen: Shouldn’t they just stop the betting on, say, how many rebounds a player pulls down? It encourages corruption. It’s not actually a suspenseful act, whether it’s seven or eight rebounds, whereas who wins the Super Bowl presumably is a suspenseful, meaningful act for many people.
Silver: That’s right. If you have a Jalen Brunson — I’m a Knicks fan — or someone who’s a major star, then it might make sense. But no, these books have way too wide a menu of events, and the sharper books don’t. The sharper books will pull a line down. If Steph Curry is questionable for the game, you can get a gigantic edge if you have any inside information about whether he’s going to play or not. They will just not take that bet, or they won’t do the more esoteric player prop stuff.
Or things like the NFL draft — if you are an NFL reporter for ESPN, then you could probably absolutely crush NFL draft bets. You might get fired if someone finds out, but the retail books are like, “Yes, we can put bets up that a knowledgeable person could make money on because we won’t let the knowledgeable people bet in the first place.”
Relatively, I guess it’s a sustainable equilibrium in the long run. I’m not quite so sure. One thing that sites like DraftKings are relying upon is, they’re basically piggybacking off the sharp sites, because you can just set your line based on Pinnacle, for example, or Circa. These are books that are sharp, and they actually do take bets from winning customers. DraftKings piggybacks off them.
Cowen: If we could enforce just an outright ban, what’s the cost-benefit analysis on banning all sports gambling?
Silver: I’m more of a libertarian than a strict utilitarian, I think.
Cowen: Sure, but what’s the utilitarian price of being a libertarian?
Silver: Look, I think most of the studies on gambling say that it’s a good transaction in terms of people getting some degree of enjoyment and excitement out of it, but maybe you have 5 percent of the population that becomes very addicted, and that 5 percent can account for a large share of volume. If it were me, if I were the gambling czar, I would probably ban slot machines and let everything else go, more or less.
The utilitarian part of me for slot machines is maybe enough to outweigh the libertarian part. They are deliberately designed to be addictive. It’s not very transparent what the odds actually are. You can’t actually go and it doesn’t say you have a -9 percent ROI at this particular slot machine. If you look at the demographics of slot machines, it’s much lower income. Sports betting and poker, which are the two forms I participate in myself, are mostly done by fairly high-income people who can, I think, afford to lose, but slot machines are nasty things.
Cowen: Speaking of scale, if we put you in a time machine, send you back to 1970, and you’re playing poker, why exactly is it that you would win so much?
Silver: One way to put it is that poker actually has been solved more or less with game theory, with big, complicated programs called solvers that calculate the Nash equilibrium for any situation, given certain inputs.
Cowen: But when you’re at the table, that’s of limited use to you, right?
Silver: No. If you think about the history of Texas hold ’em or poker, probably 99 percent of poker that’s ever been played, every hand that’s been played, counting online and things like that, has been played in the last 10 years. Poker’s not that old, the game. It goes back to the Mississippi riverboats. For many years, people weren’t really trying to use computers or anything to solve it. When Doyle Brunson played, he would literally, by hand, simulate hands by dealing out a deck hundreds of times to see, does a pair of twos beat ace-king off suit more often than not?
Cowen: Why isn’t there evolution across temperaments? Say people back then — they don’t know to be aggressive enough because they didn’t study game theory. But the ones who are aggressive enough naturally — they’re just going to win more money. It’ll become somewhat obvious over time that’s the way to play. You might be slightly better than the others in 1970 but not have a huge advantage. Is the abstract knowledge that powerful compared to market evolution?
Silver: See, if I went back today —
Cowen: Today. Everything you know, time machine, you sit down, you’re going to do really well, right?
Silver: — I would, I think, dominate the games. Yes, for sure. Anyone would.
Cowen: It’s because you know game theory and they don’t. Thomas Schelling was what, 1960; Von Neumann, Morgenstern just after World War II. Game theory is not that new. What exactly is it you know? To be a “Tight Aggressive” player with your strategy? None of them knew that? I feel I saw that in a lot of old movies.
Silver: “Tight Aggressive” is part of it. It’s very hard to maybe intuitively know what the right bluffing frequency is in a certain spot. For many years, people would also give away lots and lots and lots of tells. If you go back and watch footage of the 1987 World Series of Poker, there are incredibly obvious tells. I think it’s just like there’s pressure on the market to compress it into a diamond or — what am I even talking about? I think we were just very early in the life cycle of the competitive pressures on the game in poker.
In some ways it’s a metaphor for other capitalistic ventures. I think you of all people may be underestimating the efficiency gains that are to be had when there are proper incentives and proper technology — basically, the combination and just the sheer volume of the number of nodes on the game tree that have been explored.
Poker Players as Employees
Cowen: Let’s say you’re a poker champion, and you want to quit. You can prove you are a champion. You’re still young. Who is it who wants to hire you in the actual world? Where would you go? A trading firm?
Silver: Oh, hedge funds. Some of them, like Susquehanna or Jane Street in particular, are known for hiring ex–poker players.
Cowen: What’s the main flaw those individuals have as traders? Whatever their virtues may be. Chess players have flaws as traders, Math Olympiad types have flaws as traders. What are the flaws of the poker players?
Silver: I have done a little bit of consulting for financial firms. My experience doing that is that it’s actually very similar because if you’re working for a trading desk, and you’re being asked, “What’s your opinion of how event X will affect opportunity Y to trade in the market?” It’s very much a game of estimation, and it’s very much a game of incomplete information, and it’s making decisions quickly, which is very poker-like.
There can be value in running a formal model and being more complete about something. That’s what I do for the election modeling-type stuff. But the trading opportunities pass very quickly, and the premium on speed relative to . . . journalism, actually, there’s a little bit of premium on speed too.
But to negatively stereotype, academia would be the contrast to that, where there, you can have the perfect answer, but it takes you a year to publish a paper, whereas can you have a good answer in five minutes? If you’re trading some commodity, and Joe Biden has a face-plant at this debate, you have to make a decision within a couple of minutes about that.
Likewise in sports betting, you see some line that clearly doesn’t make sense, and you have to infer, “Is this a golden opportunity? Or did Patrick Mahomes just get injured?” Or something like that. You have to make inferences very, very quickly. I think the poker players probably do pretty well in that environment.
Cowen: Now, you’ve run FiveThirtyEight. Now your newsletter has evolved into being a true business. Do you seek to hire top poker players, or you avoid them like the plague? Like, one is enough. “I’m enough. We don’t need any more of that skill. Get lost, fellow.”
Silver: I would, for sure. Poker players are sometimes a little bit lacking in organization, and probably I’m a little bit lacking [laughs] in organization. Poker players are people who are sometimes a little bit irreverent, which is a quality I like.
The elections analyst I hired now — he’s great. Eli never failed to return a text message within 15 minutes or something like that. I don’t know when he sleeps. I need somebody like that because I’m running all over the place, and I can run a little hot and cold and be a little bit moody. I think you want someone who’s a little bit more steady for the newsletter.
I think also the writing skills are very important. I don’t know if this is becoming more important or less important in the world of ChatGPT, and so forth. Working on the book and then the newsletter, just to write every day, I feel like you can get 2x or 3x faster at writing, literally, if you just get a lot of reps in and things like that.
Cowen: Sure.
Silver: It was the first time I’ve ever hired someone for this job, as opposed to at FiveThirtyEight. I was very excited by how many smart, mostly young people there were out there. Hopefully, I’ll find other ways to hire more of them in the future, but people who are a little bit more directed, I think, and organized.
