Books: "On The Edge: The Art of Risking Everything" By Nate Silver

 

On The Edge: The Art of Risking Everything

By Nate Silver

Penguin Press; hardcover, 576 pages; $35.00

Nate Silver is a preeminent polling and data expert who founded FiveThirtyEight, and he writes the Substack Silver Bulletin. He is also the author of the New York Times bestseller The Signal and the Noise, in which he examined how forecasting would define the age of "big data."

In the new, engrossing book, On The Edge: The Art of Risking Everything, Silver investigates "the River," which is a vast ecosystem of like-minded people that has everyone from low-stakes poker pros to crypto kings, blue-chip art collectors, and venture-capital billionaires. It is a distinct culture because those involved share a way of thinking and a lifestyle whose mastery of risk allows them to shape, and ultimately dominate, a lot of modern life.

The River is not very well known, but Silver feels it should be, as while most involved aren't rich and powerful, those who are tend to be Riverians more than the wider population. The traits commonly found in the River are you need a high tolerance for risk, appreciation of uncertainty, and an affinity for numbers. Along with that is a distrust of conventional wisdom and a competitive drive that can border on irrational.

This is why some of the main figures in it that Silver examined are professional poker player Doyle Brunson, former CEO of PayPal Peter Thiel, Open AI CEO Sam Altman, and Sam Bankman-Fried, the founder of cryptocurrency exchange FTX.

Those big names are representative of where Silver went to deeply research this book, as he goes behind the scenes at the casinos and venture capital firms, and the inner sanctum of FTX, as well as meetings of the effective altruism movement.

Understanding their mindset, which includes the flaws in their thinking, is key to understanding what drives technology and the global economy, as those in the River have increasing amounts of wealth and power in our society. He did this by interviewing over 200 hundred people, most of whom are people who he describes as being in the River, but also outside observers.

Silver acknowledges that in the time he wrote this book, a lot could have affected their sphere of influence, from poker cheating scandals to the spectacular collapse of Bankman-Fried and FTX to Elon Musk transforming himself from a rocket-launching renegade to taking over Twitter and remaking it into X, and changing his identity along with it. Despite all that, the River is still winning, with Silicon Valley and Wall Street accumulating more wealth and Las Vegas taking in more and more money.

A professional poker player from 2004 to 2007, Silver is able to identify with this way of thinking, which is also related to what he does with FiveThirtyEight. He also delves into the differences when dealing with probabilities for elections and sports, the differences inherent in analyzing each, and which one he gets more grief over.

In this excerpt, Silver writes of how his thinking of the River evolved, "I'm one of those people with a mediocre memory for names - don't bet on me to recall the name of your puppy on the first try - but a good memory for places. When I'm stuck on a knotty problem, I need to get up and take a walk. So in thinking through the material for this book, I've been making a mental map of the landscape of the River.

When I first pitched this project, I had a different name for this metaphorical place: the Pool. I thought this was cute. Poker players and other gamblers love metaphors involving water (a bad player is called a 'fish'), and 'pool' itself is a gambling term, as in a betting pool. 

But the Pool implies some kind of exclusive membership, like a pool at a gym or a country club, when instead gambling is a relatively democratic institution. Imagine that you and your buddies could enter a 3-on-3 basketball tournament, and the first game you played was against LeBron James, Steph Curry, and Luka Doncic. In poker tournaments, that's exactly what you can get. Pay your buy-in, and you can literally play against the best players in the world - or against a celebrity that you'd never have a chance to meet otherwise. At one event at the 2022 World Series of Poker, the player seated one seat to my right was Neymar, the Brazilian great who is one of the best soccer players in the world. (Neymar got much too aggressive with a mediocre hand and I won a big pot off him. He's also scored seventy-nine career goals for the Brazilian national team and I've scored zero.)

So in my mental map, the River is not one discrete place so much as an ecosystem of people and ideas. Residents in different parts of the River don't necessarily know one another, and many don't think of themselves as part of some broader community. But their ties are deeper than I expected when I began working on this project. They speak one another's language with terms such as expected value, Nash equilibriums, and Bayesian priors. 

I think of the River as having several subregions. Let's start with the one that will require the most explanation: Upriver. I imagine Upriver as being like Northern California with its major research universities, rolling hills, and ocean views - but also eccentric and aloof, not quite fitting in with the rest of the country. The clearest manifestations of Upriver today are in two related intellectual movements, rationalism and effective altruism...Although EA ostensibly has a narrower focus, taking a data-driven approach toward altruism and philanthropy, in practice both EAs and rationalists have a catholic appetite for involving themselves in all sorts of controversies...

EAs and rationalists have close ties to the tech sector, and many of the leaders of the movement are based in Northern California. And in recent years, some EAs have become less concerned with traditional philanthropy and more interested in the development of artificial intelligence. Many EAs and rationalists believe that AI is an extremely high-stakes problem, one of the most important developments in the history of civilization. Some also believe that AI, if it sufficiently powerful, could end or profoundly harm civilization and pose an existential risk to humanity. So it has been an interesting time to write about these movements. Between their catastrophic association with Sam Bankman-Fried (SBF) on the one hand, and the astonishing progress of AI tools like ChatGPT on the other hand - progress that was well predicted by some EAs - it is vital to understand their mindset.

Further downstream, you'll find what I call Midriver, which I picture as having lots of tall, angular buildings, as Manhattan does. This is where people apply the EV maximizer skill set to make lots of money, such as through venture capital and hedge fund investing. There's more in this book on Silicon Valley than on Wall Street, though. The Silicon Valley guys are more of an open book, happier to flaunt their Riverian weirdness and show the middle finger to the East Coast establishment, and more explicitly aligned with movements like rationalism. But make no mistake: Wall Street is making money hand over fist from EV maximilization, too.

Then there's Downriver, the region we've talked about the most so far. I imagine Downriver as Las Vegas meets New Orleans: lots of tourists and lots of gambling. It's Downriver where the term 'edge' comes from (as in the title of this book). 'Edge' means having a persistent advantage in gambling - consistently making +EV bets. Against 99.99 percent of customers who set foot on a casino floor and the very large majority in a sportsbook, the house has the edge, but that doesn't stop Riverians from dreaming of being in the 0.01 percent."