zero-sum game

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The Moral Animal: Evolutionary Psychology and Everyday Life by Robert Wright

agricultural Revolution, Andrei Shleifer, Apollo 13, Asian financial crisis, British Empire, centre right, cognitive dissonance, cotton gin, double entry bookkeeping, double helix, Easter island, fault tolerance, Francis Fukuyama: the end of history, Garrett Hardin, George Gilder, global village, Great Leap Forward, invention of gunpowder, invention of movable type, invention of the telegraph, invention of writing, invisible hand, John Nash: game theory, John von Neumann, Marshall McLuhan, Multics, Norbert Wiener, planetary scale, planned obsolescence, pre–internet, profit motive, Ralph Waldo Emerson, random walk, Richard Thaler, rising living standards, Robert Solow, Silicon Valley, social intelligence, social web, Steven Pinker, talking drums, technological determinism, the medium is the message, The Wealth of Nations by Adam Smith, trade route, Tragedy of the Commons, your tax dollars at work, zero-sum game

It was discovered—or, if you prefer, invented—about half a century ago by the founders of game theory, John von Neumann and Oskar Morgenstern. They made a basic distinction between “zero-sum” games and “non-zero-sum” games. In zero-sum games, the fortunes of the players are inversely related. In tennis, in chess, in boxing, one contestant’s gain is the other’s loss. In non-zero-sum games, one player’s gain needn’t be bad news for the other(s). Indeed, in highly non-zero-sum games the players’ interests overlap entirely. In 1970, when the three Apollo 13 astronauts were trying to figure out how to get their stranded spaceship back to earth, they were playing an utterly non-zero-sum game, because the outcome would be either equally good for all of them or equally bad.

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Within almost any real-life non-zero-sum game lies a zero-sum dimension. When you buy a car, the transaction is, broadly speaking, non-zero-sum: you and the dealer both profit, which is why you both agree to the deal. But there is more than one price at which you both profit—the whole range between the highest you would rationally pay and the lowest the dealer would rationally accept. And within that range, you and the dealer are playing a zero-sum game: your gain is the dealer’s loss. That’s the reason bargaining takes place at car dealerships. Oddly, such zero-sum games are ultimately a tribute to the magic of non-zero-sumness.

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And so it is in all societies: one sure way to elevate your standing is to create something that is widely adopted and praised. There is an irony here. To compete for high-status positions is to play a zero-sum game, since they are by definition a scarce resource.Yet one way to compete successfully is to invent technologies that create new non-zero-sum games. This is one of various senses in which the impetus behind cultural evolution, behind social complexification, lies in a paradox of human nature: we are deeply gregarious, and deeply cooperative, yet deeply competitive. We instinctively play both non-zero-sum and zero-sum games. The interplay of these two dynamics throughout history is a story that takes some time to tell.

Theory of Games and Economic Behavior: 60th Anniversary Commemorative Edition (Princeton Classic Editions) by John von Neumann, Oskar Morgenstern

Abraham Wald, Albert Einstein, business cycle, collective bargaining, full employment, Isaac Newton, John Nash: game theory, John von Neumann, linear programming, Nash equilibrium, Parkinson's law, Paul Samuelson, profit motive, RAND corporation, the market place, zero-sum game

One must realize that the reasons for this are just as good in our present domain of constant-sum games as in the original (and narrower) one of zero-sum games. The reason is this: (42:C) Every constant-sum game is strategically equivalent to a zero-sum game. Proof: The transformation (27:2) obviously replaces the s of (42:3) above by . Now it is possible to choose the so as to make this i.e. to carry the given constant-sum game into a (strategically equivalent) zero-sum game. Second, our new concept of strategic equivalence was only necessary for the sake of the new (non-zero-sum) games that we introduced. For the old (zero-sum) games it is equivalent to the old concept. In other words: If two zero-sum games obtain from each other by means of the transformation (27:2) in 27.1.1., then (27:1) is automatically fulfilled.

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The next chapter starts with a discussion of one-person zero-sum games, for example, patience, then advances to zero-sum two-person games, the discussion being dominated by illustrations from chess, poker, bridge, etc., and not from cartels, markets, oligopolies. The theory now passes on to three-person zero-sum games. It is shown that whereas a one-person zero-sum game is merely a simple maximum problem, the passage from a one-person zero-sum game to a two-person zero-sum game obliterates the maximum problem, and the game is designated by a clear-cut opposition of interest. Similarly the passage to the three-person zero-sum game obliterates the opposition of interest.

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. , τn) general games.2 We have formulated the program of linking the theory of the general games in some way to the theory of the zero-sum games. It will actually be possible to do more: any given general game can be re-interpreted as a zero-sum game. This may seem paradoxical since the general games form a much more extensive family than the zero-sum games. However, our procedure will be to interpret an n-person general game as an n + 1-person zero-sum game. Thus the restriction caused by the passage from general games to zero-sum games will be compensated for—indeed made possible—by the extension due to the increase in the number of participants.1 56.2.2.

Prisoner's Dilemma: John Von Neumann, Game Theory, and the Puzzle of the Bomb by William Poundstone

90 percent rule, Albert Einstein, anti-communist, cuban missile crisis, Douglas Hofstadter, Dr. Strangelove, Frank Gehry, From Mathematics to the Technologies of Life and Death, Herman Kahn, Jacquard loom, John Nash: game theory, John von Neumann, Kenneth Arrow, means of production, Monroe Doctrine, mutually assured destruction, Nash equilibrium, Norbert Wiener, RAND corporation, Richard Feynman, seminal paper, statistical model, the market place, zero-sum game

This result is an important extension of von Neumann’s minimax theorem. The minimax solutions of zero-sum games qualify as equilibrium points, but Nash’s proof says that non-zero-sum games have equilibrium points, too. That is a new result. But there are a few catches. These equilibrium points can have “strange and undesirable properties,” as Philip D. Straffin, Jr., put it (1980). The above example was chosen to show a game where the equilibrium point solution clearly makes sense. Other times, equilibrium point solutions appear less inevitable than the solutions of zero-sum games. In fact, sometimes Nash equilibriums appear to be distinctly irrational.

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People learn how to play games not from the prisoner’s dilemma but from ticktacktoe, bridge, checkers, chess, Trivial Pursuit, Scrabble—all of which are zero-sum games. They are zero-sum games because all they have to offer players is the psychological reward of being the winner, a reward that comes at the expense of the losers. This is true even of some games that offer the illusion of being non-zero-sum. In Monopoly, you acquire “real estate” and “cash”—but at the end of the game, it’s just Monopoly money and the only thing that matters is who wins. It’s been speculated that this bent toward zero-sum games reflects the innately competitive nature of our society. I’m not so sure that it’s not just the practical difficulty of packaging a game with stakes that people really care about.

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Of course, White knows this, and tries to predict what Black will do based on what he thinks White will do … Borel and von Neumann realized that this sort of deliberation puts games beyond the scope of probability theory. The players would be wrong indeed to assume that their opponent’s choice is determined by “chance.” Chance has nothing to do with it. The players can be expected to do their very best to deduce the other’s choice and prepare for it. A new theory is called for. ZERO-SUM GAMES “Zero-sum game” is one of the few terms from game theory that has entered general parlance. It refers to a game where the total winnings or payoffs are fixed. The best example is a game like poker, where players put money in the pot, and someone wins it. No one ever wins a dollar but that someone else has lost it.

Trend Following: How Great Traders Make Millions in Up or Down Markets by Michael W. Covel

Albert Einstein, Alvin Toffler, Atul Gawande, backtesting, Bear Stearns, beat the dealer, Bernie Madoff, Black Swan, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, Carl Icahn, Clayton Christensen, commodity trading advisor, computerized trading, correlation coefficient, Daniel Kahneman / Amos Tversky, delayed gratification, deliberate practice, diversification, diversified portfolio, Edward Thorp, Elliott wave, Emanuel Derman, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, fiat currency, fixed income, Future Shock, game design, global macro, hindsight bias, housing crisis, index fund, Isaac Newton, Jim Simons, John Bogle, John Meriwether, John Nash: game theory, linear programming, Long Term Capital Management, managed futures, mandelbrot fractal, margin call, market bubble, market fundamentalism, market microstructure, Market Wizards by Jack D. Schwager, mental accounting, money market fund, Myron Scholes, Nash equilibrium, new economy, Nick Leeson, Ponzi scheme, prediction markets, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Feynman, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, shareholder value, Sharpe ratio, short selling, South Sea Bubble, Stephen Hawking, survivorship bias, systematic trading, Teledyne, the scientific method, Thomas L Friedman, too big to fail, transaction costs, upwardly mobile, value at risk, Vanguard fund, William of Occam, zero-sum game

To me, the results of this wealth transfer are inescapable.”38 Parks argues that the only choice he has been given is to lose. He loses; his union loses. It seems everyone loses in the zero-sum game. Of course, there are winners and he knows that. The zerosum game is, indeed, a wealth transfer. The winners profit from the losers. Parks correctly describes the nature of the zero-sum game, but positions the game in terms of morality. Life is not fair. If you don’t like being a loser in the zero-sum game, perhaps it is time to consider how the winners play the game. Although it might appear that I am defending Soros, I am not. The market is a zero-sum game. Trying to understand Soros’ reasons for denying this would be speculation on my part.

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Larry Harris, chair in Finance at the Marshall School of Business at University of Southern California, gets to the crux of the matter: Chapter 3 • Performance Data “Trading is a zero-sum game when gains and losses are measured relative to the market average. In a zero-sum game, someone can win only if somebody else loses.”31 Another good explanation of zero sum is found in “The Winners and Losers of the Zero-Sum Game: The Origins of Trading Profits, Price Efficiency and Market Liquidity,” a white paper authored by Harris. In speaking with Harris, he told me that he was amazed at how many people came from the TurtleTrader.com website to his site to download his white paper on zero-sum trading.

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If you are going to win, someone else has to lose. Don’t like these survival-of-the-fittest rules? Then stay out of the zero-sum game. Key Points • Trend followers always prepare for drawdowns after strong periods of performance. • An absolute return strategy means you are trying to make the most money possible. • The fact that markets are volatile is not a problem. The problem is you if volatility scares you. • Trading is a zero-sum game in an important accounting sense. In a zero-sum game, the total gains of the winners are exactly equal to the total losses of the losers. • Trend followers go to the market to trade trends.

Startup Communities: Building an Entrepreneurial Ecosystem in Your City by Brad Feld

barriers to entry, clean tech, cloud computing, corporate social responsibility, deal flow, fail fast, G4S, Grace Hopper, job satisfaction, Kickstarter, Lean Startup, Marc Benioff, minimum viable product, Network effects, paypal mafia, Peter Thiel, place-making, pre–internet, Richard Florida, Ruby on Rails, Salesforce, Silicon Valley, Silicon Valley startup, smart cities, SoftBank, software as a service, Steve Jobs, text mining, vertical integration, Y Combinator, zero-sum game, Zipcar

The risk of an occasional organ rejection is worth the risk of being completely inclusive, especially as the scale of the startup community grows. PLAY A NON-ZERO-SUM GAME Many people approach business as a zero-sum game: There are winners and losers. This is stupid and counterproductive in the context of a startup community. Startup communities are often a tiny fraction of what they could ultimately become. As a result, there is a huge amount of untapped opportunity. Approaching it as a non-zero-sum game is much more powerful. For starters, fully embrace the notion of increasing returns. The goal of everyone in the startup community should be to create something that is durable for a very long time.

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CONTENTS Foreword Preface Acknowledgments Chapter One: Introduction The Example of Boulder How this Book Works Chapter Two: The Boulder Startup Community Boulder as a Laboratory Before the Internet (1970–1994) Pre-Internet Bubble (1995–2000) The Collapse of the Internet Bubble (2001–2002) The Beginning of the Next Wave (2003–2011) An Outsider’s View of Boulder Chapter Three: Principles of a Vibrant Startup Community Historical Frameworks The Boulder Thesis Led by Entrepreneurs Long-Term Commitment Foster a Philosophy of Inclusiveness Engage the Entire Entrepreneurial Stack Chapter Four: Participants in a Startup Community Entrepreneurs Government Universities Investors Mentors Service Providers Large Companies The Importance of Both Leaders and Feeders Chapter Five: Attributes of Leadership in a Startup Community Be Inclusive Play a Non-Zero-Sum Game Be Mentorship Driven Have Porous Boundaries Give People Assignments Experiment and Fail Fast Chapter Six: Classical Problems The Patriarch Problem Complaining About Capital Being Too Reliant on Government Making Short-Term Commitments Having a Bias Against Newcomers Attempt by a Feeder to Control the Community Creating Artificial Geographic Boundaries Playing a Zero-Sum Game Having a Culture of Risk Aversion Avoiding People Because of Past Failures Chapter Seven: Activities and Events Young Entrepreneurs Organization Office Hours Boulder Denver New Tech Meetup Boulder Open Coffee Club Startup Weekend Ignite Boulder Boulder Beta Boulder Startupdigest Cu New Venture Challenge Boulder Startup Week Entrepreneurs Foundation of Colorado Chapter Eight: The Power of Accelerators The Spread of Techstars to Boston and Seattle Techstars Expands to New York Accelerators are Different than Incubators University Accelerators Chapter Nine: University Involvement Silicon Flatirons Some Components of CU Boulder Challenges to Entrepreneurship Programs at Universities Why they Don’t Work in Isolation The Real Value—Fresh Blood into the System The Power of Alumni Chapter Ten: Contrasts between Entrepreneurs and Government Self-Aware Versus Not Self-Aware Bottom Up Versus Top Down Micro Versus Macro Action Versus Policy Impact Versus Control Chapter Eleven: The Power of the Community Give Before You Get Everyone is a Mentor Embrace Weirdness Be Open to Any Idea Be Honest Go for a Walk The Importance of the After-Party Chapter Twelve: Broadening a Successful Startup Community Parallel Universes Integration With the Rest of Colorado Lack of Diversity Space Chapter Thirteen: Myths about Startup Communities We Need to Be Like Silicon Valley We Need More Local Venture Capital Angel Investors Must Be Organized Chapter Fourteen: Getting Started Getting Startup Iceland Started Big Omaha Startup America Partnership Do or Do Not, There is No Try About the Author Index Excerpt from Startup Life Cover illustrations: Silhoueted figure: © Leontura/istockphoto; Silhoueted women and man: © edge69/istockphoto; City Background: C.

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Entrepreneurs in the community need to welcome other entrepreneurs, viewing the growth of the startup community as a positive force for all, rather than a zero-sum game in which new entrepreneurs compete locally for resources and status. Employees of startups need to recruit their friends and open their homes and city to other people who have moved into the community. Everyone in the startup community should have a perspective that having more people engaged in the startup community is good for the startup community. Building a startup community is not a zero-sum game in which there are winners and losers; if everyone engages, they and the entire community can all be winners.

The Man From the Future: The Visionary Life of John Von Neumann by Ananyo Bhattacharya

Ada Lovelace, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, Alvin Roth, Andrew Wiles, Benoit Mandelbrot, business cycle, cellular automata, Charles Babbage, Claude Shannon: information theory, clockwork universe, cloud computing, Conway's Game of Life, cuban missile crisis, Daniel Kahneman / Amos Tversky, DeepMind, deferred acceptance, double helix, Douglas Hofstadter, Dr. Strangelove, From Mathematics to the Technologies of Life and Death, Georg Cantor, Greta Thunberg, Gödel, Escher, Bach, haute cuisine, Herman Kahn, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jacquard loom, Jean Tirole, John Conway, John Nash: game theory, John von Neumann, Kenneth Arrow, Kickstarter, linear programming, mandelbrot fractal, meta-analysis, mutually assured destruction, Nash equilibrium, Norbert Wiener, Norman Macrae, P = NP, Paul Samuelson, quantum entanglement, RAND corporation, Ray Kurzweil, Richard Feynman, Ronald Reagan, Schrödinger's Cat, second-price auction, side project, Silicon Valley, spectrum auction, Steven Levy, Strategic Defense Initiative, technological singularity, Turing machine, Von Neumann architecture, zero-sum game

Sometimes, everyone loses. ‘Zero-sum games are to the theory of games what the twelve-bar blues is to jazz: a polar case, and a historical point of departure,’ says economist Michael Bacharach.62 Von Neumann and Morgenstern knew they had to offer some way of tackling non-zero-sum games if their theory was to say anything useful about ‘economic behaviour’, as their book’s title promised. Towards the very end of Theory of Games, they do. The approach is something of a mathematical sleight-of-hand, lacking the rigour of von Neumann’s earlier treatment of two- and three-player zero-sum games. He introduces a passive ‘fictitious player’ whose only role in a game is to act as a kind of utility bank, losing the sum of whatever the other players win or winning what they lose.

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‘To von Neumann,’ says Leonard, ‘the formation of alliances and coalitions was sine qua non in any theory of social organisation.’ Theory of Games was not the complete guide to strategic behaviour that von Neumann and Morgenstern hoped. The two-person zero-sum game, perhaps the most elegant and immediately applicable part of the book, was rooted in von Neumann’s minimax theorem, first developed nearly twenty years earlier. Non-zero-sum games with an arbitrary number of players were a work in progress. However, von Neumann’s revolutionary work on utility, together with the rigorous description of games and their representations in extensive and normal form, would be the bedrock on which other talented mathematicians would soon build.

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One of the last at RAND to turn game theory to the question of nuclear deterrence was Harvard University economist Thomas Schelling. He conceived of war as bargaining by other means and he set out his new approach to conflict in a 1958 paper.87 ‘On the strategy of pure conflict – the zero-sum games – game theory has yielded important insight and advice,’ he says. ‘But on the strategy of action where conflict is mixed with mutual dependence – the non-zero-sum games involved in wars and threats of war, strikes, negotiations, criminal deterrence, class war, race war, price war, and blackmail; maneuvering in a bureaucracy or a social hierarchy or in a traffic jam; and the coercion of one’s own children – traditional game theory has not yielded comparable insight or advice.’

Open: The Story of Human Progress by Johan Norberg

Abraham Maslow, additive manufacturing, affirmative action, Albert Einstein, anti-globalists, basic income, Berlin Wall, Bernie Sanders, Bletchley Park, Brexit referendum, British Empire, business cycle, business process, California gold rush, carbon tax, citizen journalism, classic study, Clayton Christensen, clean water, cognitive dissonance, collective bargaining, Corn Laws, coronavirus, COVID-19, creative destruction, crony capitalism, decarbonisation, deindustrialization, Deng Xiaoping, digital map, Donald Trump, Edward Jenner, fake news, Fall of the Berlin Wall, falling living standards, Filter Bubble, financial innovation, flying shuttle, Flynn Effect, Francis Fukuyama: the end of history, future of work, Galaxy Zoo, George Gilder, Gini coefficient, global pandemic, global supply chain, global village, green new deal, humanitarian revolution, illegal immigration, income per capita, Indoor air pollution, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Islamic Golden Age, James Watt: steam engine, Jane Jacobs, Jeff Bezos, job automation, John von Neumann, joint-stock company, Joseph Schumpeter, Kickstarter, knowledge economy, labour mobility, Lao Tzu, liberal capitalism, manufacturing employment, mass immigration, negative emissions, Network effects, open borders, open economy, Pax Mongolica, place-making, profit motive, RAND corporation, regulatory arbitrage, rent control, Republic of Letters, road to serfdom, Ronald Reagan, Schrödinger's Cat, sharing economy, side project, Silicon Valley, Solyndra, spice trade, stem cell, Steve Bannon, Steve Jobs, Steve Wozniak, Steven Pinker, tacit knowledge, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade liberalization, trade route, transatlantic slave trade, Tyler Cowen, Uber for X, ultimatum game, universal basic income, World Values Survey, Xiaogang Anhui farmers, zero-sum game

More people began to see the world as a zero-sum game, not just trade relations with other countries, but the domestic economic and political situation as well. In a 2011 study, American whites said they thought many steps had been made towards racial equality in the US, but that this was now linked to a new ‘inequality’ at their expense. The less anti-black bias that whites perceive in society in a given decade, the greater they thought the anti-white bias was. In the very title of the paper, the two psychologists warned that, ‘Whites see racism as a zero-sum game that they are now losing.’37 If the world is a zero-sum game, and people perceive they are losing it, they will begin to man the barricades and fight back.

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In his intriguing book The Evolution of God, Robert Wright argues that the depiction of God reflects whether the authors’ groups were in a zero-sum relationship with other groups and nations or not. When the neighbourhood is hostile, God is full of anger against outgroups, but in times of peace – when goods cross borders instead of soldiers – his depiction becomes one of religious toleration.1 A zero-sum game is one in which the gains of one side are the losses of another. Football is a typical zero-sum game – every goal is a gain for one team and a loss for the other team, so you win only by defeating the other side. Within each football team, however, the game is non-zero. If your teammate scores it is a gain for you as well, so you benefit by helping each other and cooperating better.

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We are not just traders, we are also tribalists. We cooperate, but to defeat others. Both attributes are integral parts of our nature, but they push in opposite directions. One lets us find positivesum games, where we find new opportunities, new relationships and new exchanges that are mutually beneficial. The other primes us to be wary of zero-sum games, where we think others can only benefit at our expense. This drives a desire to defeat others and block exchange and mobility. This is the battle between ‘open and closed’, so much discussed in the context of populism, nationalism, Trump and Brexit. It is not being fought between two different groups, between globalists and nationalists, or anywheres and somewheres.

Smart Mobs: The Next Social Revolution by Howard Rheingold

"hyperreality Baudrillard"~20 OR "Baudrillard hyperreality", A Pattern Language, Alvin Toffler, AOL-Time Warner, augmented reality, barriers to entry, battle of ideas, Brewster Kahle, Burning Man, business climate, citizen journalism, computer vision, conceptual framework, creative destruction, Dennis Ritchie, digital divide, disinformation, Douglas Engelbart, Douglas Engelbart, experimental economics, experimental subject, Extropian, Free Software Foundation, Garrett Hardin, Hacker Ethic, Hedy Lamarr / George Antheil, Herman Kahn, history of Unix, hockey-stick growth, Howard Rheingold, invention of the telephone, inventory management, Ivan Sutherland, John Markoff, John von Neumann, Joi Ito, Joseph Schumpeter, Ken Thompson, Kevin Kelly, Lewis Mumford, Metcalfe's law, Metcalfe’s law, more computing power than Apollo, move 37, Multics, New Urbanism, Norbert Wiener, packet switching, PalmPilot, Panopticon Jeremy Bentham, pattern recognition, peer-to-peer, peer-to-peer model, pez dispenser, planetary scale, pre–internet, prisoner's dilemma, radical decentralization, RAND corporation, recommendation engine, Renaissance Technologies, RFID, Richard Stallman, Robert Metcalfe, Robert X Cringely, Ronald Coase, Search for Extraterrestrial Intelligence, seminal paper, SETI@home, sharing economy, Silicon Valley, skunkworks, slashdot, social intelligence, spectrum auction, Steven Levy, Stewart Brand, the Cathedral and the Bazaar, the scientific method, Tragedy of the Commons, transaction costs, ultimatum game, urban planning, web of trust, Whole Earth Review, Yochai Benkler, zero-sum game

In some non-zero-sum games, all players benefit if they cooperate. More people playing more complex non-zero-sum games create emergent effects like vibrant cities, bodies of knowledge, architectural masterpieces, marketplaces, and public health systems. Wright wrote that “cultural evolution has pushed society through several thresholds over the past 20,000 years. And now it is pushing society through another one.”85 The world has not and is not likely to become a happy-all-the-time, win-win enterprise. Starkly competitive zero-sum games coexist with increasingly sophisticated non-zero-sum games. We band together to bring down the big game and then fight over how to divide it.

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Wright avoided using the word “cooperation,” because the research he cites covers instances in which participation in non-zero-sum games is not consciously cooperative. I have used the term “smart mobs” because I believe the time is right to combine conscious cooperation, the fun kind, with the unconscious reciprocal altruism that is rooted in our genes. The technologies of mobile communication and pervasive computation could elevate to a new level the non-zero-sum game-playing Wright chronicles. Recall from Chapter 2 that a zero-sum game is winner-take-all. For every winner, there has to be a loser. Games like the Prisoner’s Dilemma have more subtle gradations of reward and punishment.

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He tested his hypothesis by putting a mirror near a predator in an aquarium. Lone sticklebacks reacted in a TIT FOR TATlike manner when observing what their mirror image did; that is, when they darted forward or backward spontaneously, they repeated the action after seeing their image. Later, when discussing zero-sum games versus non-zero-sum games, I’ll point out the ways that cooperative and competitive behaviors are nested within one another. Recall the first public goods, where early hunters may have cooperated in order to bring down game but reverted to more competitive strategies such as dominance hierarchies when it came to allocating that meat (although one of the oft-quoted observations about the emergence of food sharing is that “the Inuit knows that the best place for him to store his surplus is in someone else’s stomach”44).

Smarter Investing by Tim Hale

Albert Einstein, asset allocation, buy and hold, buy low sell high, capital asset pricing model, classic study, collapse of Lehman Brothers, corporate governance, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, fiat currency, financial engineering, financial independence, financial innovation, fixed income, full employment, Future Shock, implied volatility, index fund, information asymmetry, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, managed futures, Northern Rock, passive investing, Ponzi scheme, purchasing power parity, quantitative easing, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, South Sea Bubble, technology bubble, the rule of 72, time value of money, transaction costs, Vanguard fund, women in the workforce, zero-sum game

Before we begin the process of establishing which approach has the greatest chance of success, you need to be aware of the zero-sum game that actively trading investments represents in aggregate. Understanding the zero-sum game As we unravel the chances of success from adopting either a passive or an active approach to your investing, you need to make sure that you understand the game that is being played by active investors in aggregate who are trading securities between each other. It is a zero-sum game, assuming that we ignore for the moment the significant issue of costs, where one investor’s gain is another investor’s loss.

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Factoring in the costs of investing, it becomes a significantly less-than-zero-sum game. If you buy a share at a certain price believing it will rise faster than the market, and it does, you win and the person who sold it to you loses – you cannot both be right. Take a look at the simple market in Table 4.1, which consists of just two investors, me and you, and two shares, ABC plc and XYZ plc. As you can see, the combined returns over one year of our two-stock market must be the market return. You win and I lose relative to the market. The same applies for all investments. So, if you sell equities and buy bonds, again it has to be a zero-sum game before costs.

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After all, many people gamble on the lottery, despite the odds that a thirty-five-year-old man buying a lottery ticket on a Monday has a greater chance of dying than winning the jackpot! For some reason, we hate to be considered average. We seem to aspire to want to be winners, which is fine if it is winning an egg and spoon race, but dangerous in the less-than-zero-sum game that we play as investors. In investing, there is nothing wrong with being average if by average you mean achieving the market return for your buy-and-hold portfolio, as you will see. The problem with many investors is that they are attracted to active management because they have not thought through the issues clearly, and have not seen or read the evidence that exists that helps them to decide which course of action is likely to be best for their investing health.

Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris

active measures, Andrei Shleifer, AOL-Time Warner, asset allocation, automated trading system, barriers to entry, Bernie Madoff, Bob Litterman, book value, business cycle, buttonwood tree, buy and hold, compound rate of return, computerized trading, corporate governance, correlation coefficient, data acquisition, diversified portfolio, equity risk premium, fault tolerance, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, High speed trading, index arbitrage, index fund, information asymmetry, information retrieval, information security, interest rate swap, invention of the telegraph, job automation, junk bonds, law of one price, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, market clearing, market design, market fragmentation, market friction, market microstructure, money market fund, Myron Scholes, National best bid and offer, Nick Leeson, open economy, passive investing, pattern recognition, payment for order flow, Ponzi scheme, post-materialism, price discovery process, price discrimination, principal–agent problem, profit motive, proprietary trading, race to the bottom, random walk, Reminiscences of a Stock Operator, rent-seeking, risk free rate, risk tolerance, risk-adjusted returns, search costs, selection bias, shareholder value, short selling, short squeeze, Small Order Execution System, speech recognition, statistical arbitrage, statistical model, survivorship bias, the market place, transaction costs, two-sided market, vertical integration, winner-take-all economy, yield curve, zero-coupon bond, zero-sum game

If you want to design a new market, or if your business depends on trading in a successful market, you must understand why—and how—people trade. Trading is a zero-sum game in an important accounting sense. In a zero-sum game, the total gains of the winners are exactly equal to the total losses of the losers. Trading is a zero-sum game because the combined gains and losses of buyers and sellers always sum to zero. If a buyer profits from a trade, the seller loses the opportunity to profit by the same amount. Likewise, if a buyer loses from a trade, the seller avoids an identical loss. Successful traders must understand the implications of the zero-sum game. To trade profitably, traders must trade with people who will lose.

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Ananth Madhavan commented on early drafts of the book and supplied many bibliographic references. I have greatly appreciated having him as a colleague at USC. Finally, Jack Treynor was instrumental in helping me appreciate the importance of the zero-sum game in trading. Most principles of market microstructure somehow involve properties of zero-sum games. Several generous sponsors provided financial support for this project. I received “angel financing” from the New York Stock Exchange (Dick Grasso, Billy Johnston, Jim Cochrane, and George Sofianos), the Jefferies Group (Frank Baxter), Mellon Capital Management Corporation (Bill Fouse and Tom Loeb), Bernard L.

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In general, they can profit if the price impacts of their buying and selling are not exactly opposite to each other. Since dealers may trade when bluffers want them to trade, dealers must be highly disciplined to avoid losing to bluffers. Trading is a zero-sum game when gains and losses are measured relative to the market average. In a zero-sum game, someone can win only if somebody else loses. On average, well-informed speculators and bluffers win, and poorly informed traders and foolish traders lose. Informed traders can profit only to the extent that less informed traders are willing to lose to them.

Trend Commandments: Trading for Exceptional Returns by Michael W. Covel

Alan Greenspan, Albert Einstein, Alvin Toffler, behavioural economics, Bernie Madoff, Black Swan, business cycle, buy and hold, commodity trading advisor, correlation coefficient, delayed gratification, disinformation, diversified portfolio, en.wikipedia.org, Eugene Fama: efficient market hypothesis, family office, full employment, global macro, Jim Simons, Lao Tzu, Long Term Capital Management, managed futures, market bubble, market microstructure, Market Wizards by Jack D. Schwager, Mikhail Gorbachev, moral hazard, Myron Scholes, Nick Leeson, oil shock, Ponzi scheme, prediction markets, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Sharpe ratio, systematic trading, the scientific method, three-martini lunch, transaction costs, tulip mania, upwardly mobile, Y2K, zero-sum game

., 17 statistics in, 137-140 Ward, Anthony, 109 tips for, 239-241 Watts, Dickson, 227, 239 unpredictability in, 81-82 When Genius Failed, 216 “Trend-Following Methods in Commodity Price Analysis” (Donchian), 230 trend-following traders, net worth of, 15 trends, defined, 39 Tropin, Kenneth, 5, 15 The Truman Show (film), 162 Truth of the Stock Tape (Gann), 226 Tullis, Eli, 143 TurtleTrader.com, origins of, 155 TurtleTraders, 199 Twenty-eight Years (Clews), 224 The Twilight Zone (television program), 26 Twitter, 169 275 winners and losers crowd mentality, 117-120 during market crashes, 97-98 Efficient-Markets Hypothesis, 101-102 hatred of trend following, 109-110 unexpected events, 91 zero-sum game, 95 winning trades, percentage of, 85 Wired (magazine), 97 Wyckoff, Richard D., 226-227 zero-sum game, 95 This page intentionally left blank Press FINANCIAL TIMES In an increasingly competitive world, it is quality of thinking that gives an edge—an idea that opens new doors, a technique that solves a problem, or an insight that simply helps make sense of it all.

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However, the winners always seem to be missing from the after-the-fact analysis. The press and the public are only fascinated with the losers. Everyone is oblivious to the other side of the story: the winners and why. The academics locked away with job security tenure always come up short in their analysis: “It’s a zero-sum game. For every loser there’s a winner, but you can’t always be specific about who the winner is.”2 Not true. Bear markets cause events more than events cause bear markets. John W. Henry made a fortune going short the Nikkei, while Nick Leeson and Barings Bank were long. That’s a major winner right there.3 My political science background allowed me to see that; others should be able to see it too.

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Those with poor strategies are forever being cycled and recycled into the markets, giving continuous opportunities to capitalize on their missteps and take their money. And with so many people playing Isn’t history littered the big money game with such awful strategy, the with surprises? next surprise win for trend following traders is right around the corner. This page intentionally left blank The new normal is always the old always. Zero-Sum In a zero-sum game, someone can win only if somebody else loses.1 On any given market transaction, the chance of you winning or losing may be near even, but in the long run, you will only profit from trading because you have some persistent advantage (read: mathematical edge) that allows you to win slightly more often than losing.2 If you have ever played poker or studied edges in gambling, the words ring true: To trade profitably in the long run, you will know your edge, you will know when it exists, and you will exploit it when you can.

The Heart of Business: Leadership Principles for the Next Era of Capitalism by Hubert Joly

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, behavioural economics, big-box store, Blue Ocean Strategy, call centre, carbon footprint, Clayton Christensen, clean water, cognitive dissonance, commoditize, company town, coronavirus, corporate governance, corporate social responsibility, COVID-19, David Brooks, do well by doing good, electronic shelf labels (ESLs), fear of failure, global pandemic, Greta Thunberg, imposter syndrome, iterative process, Jeff Bezos, lateral thinking, lockdown, long term incentive plan, Marc Benioff, meta-analysis, old-boy network, pension reform, performance metric, popular capitalism, pre–internet, race to the bottom, remote working, Results Only Work Environment, risk/return, Salesforce, scientific management, shareholder value, Silicon Valley, social distancing, Social Responsibility of Business Is to Increase Its Profits, supply-chain management, TED Talk, Tim Cook: Apple, young professional, zero-sum game

Many companies, Best Buy included, have a system of scorecards and rankings to measure and reward performance. Rankings are everywhere. Being the best is even in Best Buy’s name. It is a disease—one that, according to psychologists, feeds a growing and self-defeating quest for perfection.7 The problem is, the idea of being the best implies that the world is a zero-sum game. There is room for only 10 people or companies in the top 10. You can only become number one by knocking off someone else. And then what do you do when you become number one? There is nowhere else to go but down. Of course, there is competition, and competition is important. But competition against oneself, or doing better tomorrow than we did yesterday, takes us much further than obsessively measuring ourselves against others.

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Traditionally, strategy is articulated around being the best or first in a category, the way GE always strove to be number one or two in its market segments. I have done this too. When I was CEO of Carlson Wagonlit Travel, I wanted us to overtake American Express’s corporate travel business for the number-one spot. But winning a race against another company cannot and should not dictate strategy. Such ambitions create zero-sum games that narrow strategy and execution. Also, they are not particularly inspiring, meaningful, or fulfilling. Imagine you are responsible for the strategy of a health and life insurance company. If your purpose is defined in terms of profits, then your best strategy is about making sure your customers use your services as little as possible.

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We maximize performance not by choosing between stakeholders, but by embracing and mobilizing all of them. We choose employees and customers and shareholders and the community. If, like me, you were trained to put profits first, you might dismiss this as overly optimistic. I will not say it is easy, but reframing zero-sum games can be done. Here are some ways Best Buy did it. Delighting customers After we formulated Best Buy’s noble purpose, it quickly became apparent that we had a lot more work to do. Something was missing: most employees did not grasp what it concretely meant for them and their work. Unless they could, the company’s noble purpose would fail to become reality.

Model Thinker: What You Need to Know to Make Data Work for You by Scott E. Page

Airbnb, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Alvin Roth, assortative mating, behavioural economics, Bernie Madoff, bitcoin, Black Swan, blockchain, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Checklist Manifesto, computer age, corporate governance, correlation does not imply causation, cuban missile crisis, data science, deep learning, deliberate practice, discrete time, distributed ledger, Easter island, en.wikipedia.org, Estimating the Reproducibility of Psychological Science, Everything should be made as simple as possible, experimental economics, first-price auction, Flash crash, Ford Model T, Geoffrey West, Santa Fe Institute, germ theory of disease, Gini coefficient, Higgs boson, High speed trading, impulse control, income inequality, Isaac Newton, John von Neumann, Kenneth Rogoff, knowledge economy, knowledge worker, Long Term Capital Management, loss aversion, low skilled workers, Mark Zuckerberg, market design, meta-analysis, money market fund, multi-armed bandit, Nash equilibrium, natural language processing, Network effects, opioid epidemic / opioid crisis, p-value, Pareto efficiency, pattern recognition, Paul Erdős, Paul Samuelson, phenotype, Phillips curve, power law, pre–internet, prisoner's dilemma, race to the bottom, random walk, randomized controlled trial, Richard Feynman, Richard Thaler, Robert Solow, school choice, scientific management, sealed-bid auction, second-price auction, selection bias, six sigma, social graph, spectrum auction, statistical model, Stephen Hawking, Supply of New York City Cabdrivers, systems thinking, tacit knowledge, The Bell Curve by Richard Herrnstein and Charles Murray, The Great Moderation, the long tail, The Rise and Fall of American Growth, the rule of 72, the scientific method, The Spirit Level, the strength of weak ties, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, Tragedy of the Commons, urban sprawl, value at risk, web application, winner-take-all economy, zero-sum game

To that end, we present examples of the three main classes of games: normal-form games, in which players choose from a discrete set of actions (typically two); sequential games, in which players choose actions sequentially; and continuous-action games, in which players can choose actions of any magnitude or effect size. These examples introduce the main concepts, help us to understand later models, and add value in their own right. The remainder of the chapter has four parts. We begin by covering 2-by-2 zero-sum games. In a zero-sum game, each of two players chooses among two actions. No matter what actions the players choose, the amount won by one player is exactly offset by the losses of the other. We use zero-sum games to define the basic terminology of game theory, to distinguish between strategies and actions, and to introduce the concept of iterated elimination of dominated strategies. We then study the Market Entry Game, a sequential game, in which an entrant competes against an existing firm, and we replicate that game many times to create what is known as the chain store paradox.

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In the third part, we consider an effort game in which individuals choose effort levels to win a prize of a fixed amount. Increasing effort improves a player’s chances of winning the prize. The chapter concludes with a brief discussion of the value of game theory models generally. Normal-Form Zero-Sum Games In this section we analyze two-player normal-form zero-sum games. In both games, each player chooses an action and receives a payoff that depends on the player’s own action and the other player’s action. In addition, the players’ payoffs sum to zero. In the first game, Matching Pennies shown in figure 21.1, each player chooses one of two actions: heads or tails.

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A budget relocation could be zero-sum in monetary terms but positive or negative sum in terms of human happiness or fulfillment. We should always explore whether a proposed policy change creates a zero sum game. For example, many people argue for school choice—giving parents the ability to choose the school their child will attend—because it increases competition. Market logic suggests that by being forced to compete, schools have incentives to improve quality. However, schools only have an incentive to improve quality if excess capacity exists. Otherwise, school choice can create a zero-sum game among the students. Imagine a city with 10,000 students and 10 schools each with a capacity for 1,000 students.

Bounce: Mozart, Federer, Picasso, Beckham, and the Science of Success by Matthew Syed

barriers to entry, battle of ideas, Berlin Wall, combinatorial explosion, deliberate practice, desegregation, Fall of the Berlin Wall, fear of failure, Isaac Newton, Norman Mailer, pattern recognition, placebo effect, seminal paper, sugar pill, zero-sum game

How about giving GPs a precious opportunity to “hit lot of balls”? How about a well-designed booster course handing GPs an opportunity to make as many diagnoses in one weekend as they would normally make in a year? Sure enough, when GPs were put through this kind of course, their diagnostic accuracy soared. Zero-Sum Games Sport is, to use the jargon of economics, a zero-sum game: if I win, you, by definition, lose. This may seem rather obvious, but it has weighty ramifications. Suppose that I am a top sprinter, and I go away and adopt the principles of purposeful practice and, as a result, reduce my time by 10 percent. When I come to run my next race, I will zoom past many of my competitors.

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Anders Ericsson, “The Path to Expert Golf Performance: Insights from the Masters on How to Improve Performance by Deliberate Practice,” in Optimizing Performance in Golf, ed. P. R. Thomas, 1–57 (Brisbane, Australia: Australian Academic Press, 2001). “I never hit a shot”: Jack Nicklaus with Ken Bowden, Golf My Way, 79. Sport is, to use the jargon of economics, a zero-sum game: For an introduction to zero-sum games and other aspects of game theory see Robert Gibbons, Game Theory for Applied Economists (Princeton, N.J.: Princeton University Press, 1992). 4. MYSTERIOUS SPARKS AND LIFE-CHANGING MIND-SETS “Camp was real competitive”: This is one of a series of fascinating interviews Marlo Thomas conducted for her book The Right Words at the Right Time (New York: Atria, 2002), which shows how chance events can have a huge influence on personal development.

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Much of the resistance to genetic enhancement seems to hinge on a kind of squeamishness, the idea that it is both a little creepy and a little presumptuous to interfere with the fabric of human DNA. But this squeamishness is surely misplaced. After all, the human genome is the product of an arbitrary process of evolution. Is it not time to embrace any safe genetic intervention that can improve lives or reduce suffering? Zero-Sum Games Suppose there was an enhancement that engineered immunity to the common cold. This is an enhancement that would make my life go a lot better. As someone who regularly suffers from colds, I would love to take advantage of any technology that helped me avoid my annual bout of sniffling and shivering.

A Beautiful Mind by Sylvia Nasar

Al Roth, Albert Einstein, Andrew Wiles, Bletchley Park, book value, Brownian motion, business cycle, cognitive dissonance, Columbine, Dr. Strangelove, experimental economics, fear of failure, Gunnar Myrdal, Henri Poincaré, Herman Kahn, invisible hand, Isaac Newton, John Conway, John Nash: game theory, John von Neumann, Kenneth Arrow, Kenneth Rogoff, linear programming, lone genius, longitudinal study, market design, medical residency, Nash equilibrium, Norbert Wiener, Paul Erdős, Paul Samuelson, prisoner's dilemma, RAND corporation, Robert Solow, Ronald Coase, second-price auction, seminal paper, Silicon Valley, Simon Singh, spectrum auction, Suez canal 1869, The Wealth of Nations by Adam Smith, Thorstein Veblen, upwardly mobile, zero-sum game

But when there is more than one agent but not so many that their influence may be safely ignored, strategic behavior raises a seemingly insoluble problem: “I think that he thinks that I think that he thinks,” and so forth. Von Neumann was able to give a convincing solution to this problem of circular reasoning for games that are two-person, zero-sum games, games in which one player’s gain is another’s loss. But zero-sum games are the ones least applicable to economics (as one writer put it, the zero-sum game is to game theory “what the twelve-bar blues is to jazz; a polar case, and a point of historical departure”). For situations with many actors and the possibility of mutual gain — the standard economic scenario — von Neumann’s superlative instincts failed him.

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43 It must have become obvious to Nash fairly early on that “the bible,” as The Theory of Games and Economic Behavior was known to students, though mathematically innovative, contained no fundamental new theorems beyond von Neumann’s stunning min-max theorem.44 He reasoned that von Neumann had succeeded neither in solving a major outstanding problem in economics using the new theory nor in making any major advance in the theory itself.45 Not a single one of its applications to economics did more than restate problems that economists had already grappled with.46 More important, the best-developed part of the theory — which took up one-third of the book — concerned zero-sum two-person games, which, because they are games of total conflict, appeared to have little applicability in social science.47 Von Neumann’s theory of games of more than two players, another large chunk of the book, was incomplete.48 He couldn’t prove that a solution existed for all such games.49 The last eighty pages of The Theory of Games and Economic Behavior dealt with non-zero-sum games, but von Neumann’s theory reduced such games formally to zero-sum games by introducing a fictitious player who consumes the excess or makes up the deficit.50 As one commentator was later to write, “This artifice helped but did not suffice for a completely adequate treatment of the non-zero-sum case. This is unfortunate because such games are the most likely to be found useful in practice.”51 To an ambitious young mathematician like Nash, the gaps and flaws in von Neumann’s theory were as alluring as the puzzling absence of ether through which light waves were supposed to travel was to the young Einstein.

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“The fundamental idea is that in a two-person zero-sum solution, the best strategy for both is … The whole theory is built on it. And it works with any number of people and doesn’t have to be a zero-sum game.”18 Gale recalls Nash’s saying, “I’d call this an equilibrium point.” The idea of equilibrium is that it is a natural resting point that tends to persist. Unlike von Neumann, Gale saw Nash’s point. “Hmm,” he said, “that’s quite a thesis.” Gale realized that Nash’s idea applied to a far broader class of real-world situations than von Neumann’s notion of zero-sum games. “He had a concept that generalized to disarmament,” Gale said later. But Gale was less entranced by the possible applications of Nash’s idea than its elegance and generality.

Free to Focus: A Total Productivity System to Achieve More by Doing Less by Michael Hyatt

Atul Gawande, Cal Newport, Checklist Manifesto, death from overwork, Donald Trump, Elon Musk, Frederick Winslow Taylor, informal economy, invention of the telegraph, Jeff Bezos, job automation, karōshi / gwarosa / guolaosi, knowledge economy, knowledge worker, lock screen, microdosing, Parkinson's law, remote work: asynchronous communication, remote working, side hustle, solopreneur, Steve Jobs, zero-sum game

If they play until “winner takes all,” that winner will take $500—no more, no less. Nothing anyone does throughout an entire night of card playing will create more money; all they have to play with is the original $500 from beginning to end. Time is just like that. It’s a zero-sum game. There’s only so much to go around because, as we saw in chapter 3, time is fixed. It can’t flex. You and I only get 168 hours each week. If time, and therefore your calendar, is a zero-sum game, we must realize saying yes to one thing means saying no to something else. Even if we hate saying no, we must understand that every yes inherently contains a no. For example, if someone asks to meet with me for breakfast at 7:00 a.m., I can’t say yes to that without saying no to my morning workout.

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Saying no may sound impossible today, but it’s easier than you think. Few things will energize you and your productivity more than the powerful little word no. Now let’s learn how to use it. Understand Time Dynamics Poker isn’t known for creating wealth; it’s more of a transfer of wealth. It is what’s commonly called a zero-sum game. Each player brings money to the table, and that’s all the money there is for the game. If five players each bring $100 to bet, then the stakes of the game are $500. That’s it. Throughout the course of the game, each player will control a different portion of that $500, but at any given moment, the sum of everyone’s holdings will be $500.

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Besides, if he did make a mistake, he knew he had plenty of other marble to work with on his way to creating a masterpiece. So, don’t be afraid to grab a chisel and get to work. You’ll never truly thrive as long as you’re carrying around the dead weight of your Drudgery, Disinterest, and Distraction Zones. Saying No to New Requests Once you understand that time is a zero-sum game, acknowledge the trade-offs you’re making, filter your commitments, and create your Not-to-Do List, it’s time to start saying no. Depending on your current list of tasks and commitments, not to mention the new ones that come flying in fast and furious every day, you’ll probably have to get comfortable saying no a lot.

The Internet of Money by Andreas M. Antonopoulos

AltaVista, altcoin, bitcoin, blockchain, clean water, cognitive dissonance, cryptocurrency, disruptive innovation, Dogecoin, Ethereum, ethereum blockchain, financial exclusion, global reserve currency, information security, litecoin, London Interbank Offered Rate, Marc Andreessen, Oculus Rift, packet switching, peer-to-peer lending, Ponzi scheme, QR code, ransomware, reserve currency, Satoshi Nakamoto, self-driving car, skeuomorphism, Skype, smart contracts, the medium is the message, trade route, Tragedy of the Commons, underbanked, WikiLeaks, zero-sum game

We are forced to use that currency in all of our interactions. We don’t have a choice — until 2008, that is. We now live in a slightly different world, but a lot of the old paradigm persists in our thinking. In a world where your currency is a monopolistic nation-state artifact that is constrained by geography, it’s a zero-sum game. The currency is the flag, is the nation-state. It is the expression of the economic value of your state. It defines your interactions in a world of geopolitics, in a global struggle for domination among nations. It’s not up to individual choice. It has nothing to do with the individual, except for that one individual whose face is on the currency — up until recently here in Canada, some old white lady named Elizabeth. 7.2.

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How will altcoins compete in a world of cryptocurrencies as we move into the future? Will there be hundreds of altcoins? If there are hundreds of altcoins, what does that mean for the value of each of the altcoins? How do they compete? That was the wrong way of thinking about it. I saw currency as a zero-sum game, just like it had been imposed on my worldview from the nation-states that created currency. Then, I started thinking of currency as an application. And then, I started thinking of currency as a means of expression. You see, money, at the very root of it, is a language. It’s a language we use to express value to each other.

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Really all of these things are forms of expression, and that comes back to the original point: that currency, in the end, is really a form of language. It’s a language by which we communicate our expectations and desires of value, and now that we can do it on such a massive scale, now that everyone can create currency, our choices will really matter. We’re past the zero-sum game. This isn’t about nation-states anymore. This isn’t about who adopts bitcoin first or who adopts cryptocurrencies first, because the internet is adopting cryptocurrencies, and the internet is the world’s largest economy. It is the first transnational economy, and it needs a transnational currency.

The Selfish Gene by Richard Dawkins

double helix, Garrett Hardin, Gregor Mendel, information retrieval, lateral thinking, Necker cube, pattern recognition, phenotype, prisoner's dilemma, zero-sum game

Do we assume, in real life as well as in psychological experiments, that we are playing a zero sum game when we are not? I simply pose these difficult questions. To answer them would go beyond the scope of this book. Football is a zero sum game. At least, it usually is. Occasionally it can become a nonzero sum game. This happened in 1977 in the English Football League (Association Football or 'Soccer'; the other games called football-Rugby Football, Australian Football, American Football, Irish Football, etc., are also normally zero sum games). Teams in the Football League are split into four divisions. Clubs play against other clubs within their own division, accumulating points for each win or draw throughout the season.

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Referee Ron Challis watched helpless as the players pushed the ball around with little or no challenge to the man in possession.' What had previously been a zero sum game had suddenly, because of a piece of news from the outside world, become a nonzero sum game. In the terms of our earlier discussion, it is as if an external 'banker' had magically appeared, making it possible for both Bristol and Coventry to benefit from the same outcome, a draw. Spectator sports like football are normally zero sum games for a good reason. It is more exciting for crowds to watch players striving mightily against one another than to watch them conniving amicably.

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It seems that many people, perhaps without even thinking about it, would rather do down the other player than cooperate with the other player to do down the banker. Axelrod's work has shown what a mistake this is. It is only a mistake in certain kinds of game. Games theorists divide games into 'zero sum' and 'nonzero sum'. A zero sum game is one in which a win for one player is a loss for the other. Chess is zero sum, because the aim of each player is to win, and this means to make the other player lose. Prisoner's Dilemma, however, is a nonzero sum game. There is a banker paying out money, and it is possible for the two players to link arms and laugh all the way to the bank.

Heads I Win, Tails I Win by Spencer Jakab

Alan Greenspan, Asian financial crisis, asset allocation, backtesting, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, book value, business cycle, buy and hold, collapse of Lehman Brothers, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, diversification, dividend-yielding stocks, dogs of the Dow, Elliott wave, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, fear index, fixed income, geopolitical risk, government statistician, index fund, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, Market Wizards by Jack D. Schwager, Mexican peso crisis / tequila crisis, money market fund, Myron Scholes, PalmPilot, passive investing, Paul Samuelson, pets.com, price anchoring, proprietary trading, Ralph Nelson Elliott, random walk, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, Robert Shiller, robo advisor, Savings and loan crisis, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, subprime mortgage crisis, survivorship bias, technology bubble, transaction costs, two and twenty, VA Linux, Vanguard fund, zero-coupon bond, zero-sum game

In fact, the questions come from readers or audience members at speaking engagements who are fairly financially savvy. Having a good idea of what long-run returns have been for stocks and bonds, they find the numbers impossible to reconcile with how little a typical investor makes. The explanation is that we’re all players in something called a zero-sum game. That dud investment, high fee, or unfortunate timing that caused you to lose money or earn less than you might have didn’t send the foregone dollars to money heaven. They went somewhere else—into the profits of a large financial services company or the pockets of an investor who usually doesn’t make those errors.

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Multiply that shortfall by the $23 trillion or so that Americans have stashed in retirement accounts and you begin to understand that the eye-popping compensation on Wall Street isn’t conjured out of thin air. They at least owe you a thank-you card. As financial types put it, investing is a zero-sum game. I compare it to a poker room in a casino where players’ money gets redistributed. There’s a reason I’m not using the example of a friendly neighborhood game of five-card stud. Unlike your buddy’s basement, the casino is a business and takes a “rake,” or a small cut, of every pot in order to pay the dealer, its overhead, and of course earn a profit.

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If I were a smart guy like Mauboussin and convinced that there’s such a thing as investment skill, I would relish the day when those waters became a puddle and nearly everyone just stuck their money into an index fund. With so much less competition, I would assume that I could run circles around the crowd and really be “the greatest investor of our time,” the way Bill Miller was described before it all unraveled. Or would he? I explained in the introduction to this book that investing is a zero-sum game. The only way that a handful of truly great investors such as Warren Buffett can beat the market consistently is because the majority of people, each with just a fraction of his money, do so poorly. But if nearly everyone just owned corporate America in equal measure, they wouldn’t live in Lake Moneybegone any longer.

Profiting Without Producing: How Finance Exploits Us All by Costas Lapavitsas

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, computer age, conceptual framework, corporate governance, credit crunch, Credit Default Swap, David Graeber, David Ricardo: comparative advantage, disintermediation, diversified portfolio, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, false flag, financial deregulation, financial independence, financial innovation, financial intermediation, financial repression, Flash crash, full employment, general purpose technology, Glass-Steagall Act, global value chain, global village, High speed trading, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, job satisfaction, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, London Interbank Offered Rate, low interest rates, low skilled workers, M-Pesa, market bubble, means of production, Minsky moment, Modern Monetary Theory, Money creation, money market fund, moral hazard, mortgage debt, Network effects, new economy, oil shock, open economy, pensions crisis, post-Fordism, Post-Keynesian economics, price stability, Productivity paradox, profit maximization, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Solow, savings glut, Scramble for Africa, secular stagnation, shareholder value, Simon Kuznets, special drawing rights, Thales of Miletus, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, total factor productivity, trade liberalization, transaction costs, union organizing, value at risk, Washington Consensus, zero-sum game

Transactions of loanable capital, as was argued in Chapter 5, involve the advance of value against future claims which continue to be traded. Profit emerges for counterparties in the first instance as a share of the loanable capital initially traded – that is, it derives from a zero-sum game. If the attached claims were validated out of future flows of value, however, the zero-sum game would become a preamble to drawing profits out of surplus value, or future income. If, on the other hand, the claims were not validated, profits from the initial trade would remain a share of someone else’s loanable capital. The economic relations involved in this complex process are analysed in the rest of this chapter; suffice it here to state that they are integral to all financial trading.

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For Steuart, ‘profit upon alienation’ belongs to the latter type, it constitutes ‘relative profit’. Steuart’s analysis contains manifest error, as Marx pointed out in Part 1 of Theories of Surplus Value, since it identifies capitalist profit in general with ‘profit upon alienation’.10 That is, Steuart considered capitalist profit generally to emerge from a zero sum game in exchange. For Marx, in contrast, capitalist profit is already contained in ‘real value’, not least as part of the ‘normal labour required for production’. Nonetheless, Marx was impressed by Steuart’s argument that the profit of one party in circulation could be the loss of another. This would be a type of profit that differed qualitatively from the flow of surplus value created in production through the exploitation of workers.

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They comprise the gist of the notion of ‘financial expropriation’, proposed elsewhere as an integral aspect of financialized capitalism.15 At core this is an exploitative relationship representing the direct appropriation of personal money income, or of loanable capital and plain money that belongs to others. But it is different from exploitation at the point of production and rests on a zero sum game between the counterparties to financial transactions. More complexly, it could also be an intermediate step to appropriating a share of the flow of surplus value, as is shown below. The social foundations of financial expropriation lie, in part, in the non-capitalist character of personal income.

Capital Ideas Evolving by Peter L. Bernstein

Albert Einstein, algorithmic trading, Andrei Shleifer, asset allocation, behavioural economics, Black Monday: stock market crash in 1987, Bob Litterman, book value, business cycle, buy and hold, buy low sell high, capital asset pricing model, commodity trading advisor, computerized trading, creative destruction, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, diversification, diversified portfolio, endowment effect, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, high net worth, hiring and firing, index fund, invisible hand, Isaac Newton, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, market bubble, mental accounting, money market fund, Myron Scholes, paper trading, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, price anchoring, price stability, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, seminal paper, Sharpe ratio, short selling, short squeeze, Silicon Valley, South Sea Bubble, statistical model, survivorship bias, systematic trading, tail risk, technology bubble, The Wealth of Nations by Adam Smith, transaction costs, yield curve, Yogi Berra, zero-sum game

Alpha plays an active role in the way David Swensen has * Joanne Hill, a Managing Director at Goldman Sachs, has made the case that alpha is not a zero-sum game. See Hill (2006). bern_c12.qxd 3/23/07 170 9:10 AM Page 170 THE PRACTITIONERS organized the Yale portfolio. Alpha is the focus of attention in most of what follows in this book. As we shall see, the widespread struggle to earn a return above what the market earns, after adjustment for risk, has become increasingly sophisticated and elaborate. Nevertheless, the search for alpha is a zero-sum game. Total alpha in excess of or lower than the return of the market as a whole is an impossibility, because the return on the market is the return on the market, no more and no less.

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Providing these services does not require predictions of macro forces or cash f lows, which is what beta and alpha predictions are bern_c09.qxd 3/23/07 112 9:06 AM Page 112 THE THEORETICIANS all about—and alpha and beta are the first two letters of the Greek alphabet. As Scholes describes it, “Omega has a nice ring to it. Best of all, omega is not a zero-sum game, like the search for alpha. We are providing a service, not seeking an edge in processing information. Simply put, people at our end of these transactions are paid for taking risks others do not want to carry.” Scholes likes the contrast of the last letter with the first two letters of the Greek alphabet, but his reasons for choosing omega were more serious.

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To Scholes, then, omega symbolizes the role his firm takes in seeking out opportunities where assets are underpriced because someone, somewhere, is attempting to transfer a risk to the market. Although Scholes explicitly excludes considerations of alpha and beta in the management of his hedge fund, and although he claims the search for omega is not a zero-sum game, the roots of his strategies are still deeply imbedded in the basic structures of Capital Ideas. Risk, in all its manifestations, is the central consideration in everything his fund undertakes, and the risk/return trade-off is basic to all decisions. He makes little use of the Capital Asset Pricing Model, but assumptions of market efficiency explain why he insists the investments in his fund are not based on “mispricings” but, rather, on value created by investors seeking to shed risks by making it profitable for others to assume those risks for them.

Defending the Free Market: The Moral Case for a Free Economy by Robert A. Sirico

Affordable Care Act / Obamacare, barriers to entry, Berlin Wall, corporate governance, creative destruction, delayed gratification, demographic winter, Fall of the Berlin Wall, financial engineering, Ford Model T, George Gilder, Gordon Gekko, greed is good, happiness index / gross national happiness, Herbert Marcuse, Hernando de Soto, informal economy, Internet Archive, liberation theology, means of production, moral hazard, obamacare, On the Revolutions of the Heavenly Spheres, Plato's cave, profit motive, road to serfdom, Tragedy of the Commons, zero-sum game

Such advances are possible only because of the dynamism of the market economy and the businesses that make it go. Many people miss the extraordinary power and value of ordinary business because—while far from being card-carrying Marxists—they have nevertheless inherited Marx’s understanding of business and markets, usually without even realizing it. Marx portrayed economies as zero-sum games, particularly when it came to the relationship between those with invested capital and the workers these capitalists employed. I mean, really—Marx just didn’t spend a whole lot of time celebrating the wealth-generating efforts of the entrepreneur or skilled manager. In his analysis, if anyone was creating new wealth, it was the poor laboring stiffs down in the trenches baking the bricks or planting the crops, not the rich guys in the offices who never broke a sweat.

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What’s missing from these contexts isn’t manual labor or a good work ethic. What’s missing are the entrepreneurs and the economic freedom necessary to channel all of this human energy into more efficient, creative, and productive labor. It’s easy for politicians to miss this fact because politics is a zero-sum game where the object is to divide up a static amount of pre-existing power and goods. The phenomenon of lobbying is a great instance of this because it is little more than a parasite on expansive government. Lobbyists only lobby those who have the power to influence things that will affect those they represent.

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Success in the political system is based not on economic prowess but on political acumen. Markets are very different. Consider the difference in atmosphere when you walk into a Hallmark card shop versus a post office. The incentives for advancement in government occupations are not the same as those for achieving success in private enterprise. The market is not a zero-sum game. Markets are dynamic; they grow; the people who work in them aim to please the customer, not the power holder. In a market economy where the rule of law is enforced, businesses don’t thrive by robbing others. They are successful when they have the foresight to anticipate the wants and needs of others and provide goods and services to customers at prices they are willing to pay.

The Power of Passive Investing: More Wealth With Less Work by Richard A. Ferri

Alan Greenspan, asset allocation, backtesting, Benchmark Capital, Bernie Madoff, book value, buy and hold, capital asset pricing model, cognitive dissonance, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, endowment effect, estate planning, Eugene Fama: efficient market hypothesis, fixed income, implied volatility, index fund, intangible asset, John Bogle, junk bonds, Long Term Capital Management, money market fund, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, survivorship bias, Tax Reform Act of 1986, too big to fail, transaction costs, Vanguard fund, yield curve, zero-sum game

This makes risk-adjusted portfolio comparisons easier and faster. Beta is elegant, logical, and simple, and it has been applied extensively over the decades in finance and business valuation. In summary, there’s only one market risk and one market return. No excess return or excess risk exists in the market. This makes all non-market risk a zero sum game. For every non-market risk winner there must be a non-market risk loser. However, no one invests for free. After fees and expenses, most non-market risk takers (i.e., active fund investors) must underperform the market by the costs they incur. It’s simple arithmetic. During 1964, Sharpe applied beta in his revolutionary Capital Asset Pricing Model (CAPM) for which he was awarded the Nobel Prize in Economic Science.

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A certain number of managers will outperform the market due to randomness, and there’s no telling when their luck will run out. Even if Alpha did indicate skill, that’s history. There’s no way to know which managers will show skill in the future. Chapter 7 explains why past performance is not an indicator of future returns. Alpha is always a zero sum game across the investment industry before fees and expenses. The cost of acquiring relevant investment information, analyzing the information, and making trading decisions is expensive. Even if active managers are correct on their analysis, the cost of active management often overwhelms whatever alpha they find.

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To be successful, an investor must rotate money into mutual funds that represent asset classes or market sectors before the superior performance occurs and out of the sectors prior to poor performance. These tactical shifts in allocation can be large or small depending on an investor’s strategy and conviction. Market timing strategies are a zero-sum game in the marketplace. The financial markets don’t earn any more or any less return just because one person is buying and another is selling. If one investor buys in at the right time it means another investor must have sold at the wrong time. There is academic precedence that points to measurable losses for investors who frequently trade their accounts.

Derivatives Markets by David Goldenberg

Black-Scholes formula, Brownian motion, capital asset pricing model, commodity trading advisor, compound rate of return, conceptual framework, correlation coefficient, Credit Default Swap, discounted cash flows, discrete time, diversification, diversified portfolio, en.wikipedia.org, financial engineering, financial innovation, fudge factor, implied volatility, incomplete markets, interest rate derivative, interest rate swap, law of one price, locking in a profit, London Interbank Offered Rate, Louis Bachelier, margin call, market microstructure, martingale, Myron Scholes, Norbert Wiener, Paul Samuelson, price mechanism, random walk, reserve currency, risk free rate, risk/return, riskless arbitrage, Sharpe ratio, short selling, stochastic process, stochastic volatility, time value of money, transaction costs, volatility smile, Wiener process, yield curve, zero-coupon bond, zero-sum game

When it is positive (negative) to the long, it is negative (positive) to the short. This is what is usually meant when people say that (naked) forward positions are a zero sum game. Your gains are my losses and vice versa. Of course, this assumes the long and short are holding naked forward positions. If they were hedgers (holding explicit or implicit spot positions at time t) as well, then those positions need not constitute a zero sum game. That is, their overall positions in spot and forwards can be win-win for both the long and the short! Unfortunately, a lot of the popular discussion simply drops the word ‘naked’ in its zero sum description and extrapolates to derivatives markets in general.

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Futures Contracts 7.5.8 Cross-Hedging, Adjusting the Hedge for non S&P 500 Portfolios 7.6 The Spot Eurodollar Market 7.6.1 Spot 3-month Eurodollar Time Deposits 7.6.2 Spot Eurodollar Market Trading Terminology 7.6.3 LIBOR3, LIBID3, and Fed Funds 7.6.4 How Eurodollar Time Deposits are Created 7.7 Eurodollar Futures 7.7.1 Contract Specifications 7.7.2 The Quote Mechanism, Eurodollar Futures 7.7.3 Forced Convergence and Cash Settlement 7.7.4 How Profits and Losses are Calculated on Open ED Futures Positions PART 2 Trading Structures Based on Forward Contracts CHAPTER 8 STRUCTURED PRODUCTS, INTEREST-RATE SWAPS 8.1 Swaps as Strips of Forward Contracts 8.1.1 Commodity Forward Contracts as Single Period Swaps 8.1.2 Strips of Forward Contracts 8.2 Basic Terminology for Interest-Rate Swaps: Paying Fixed and Receiving Floating 8.2.1 Paying Fixed in an IRD (Making Fixed Payments) 8.2.2 Receiving Variable in an IRD (Receiving Floating Payments) 8.2.3 Eurodollar Futures Strips 8.3 Non-Dealer Intermediated Plain Vanilla Interest-Rate Swaps 8.4 Dealer Intermediated Plain Vanilla Interest-Rate Swaps 8.4.1 An Example 8.4.2 Plain Vanilla Interest-Rate Swaps as Hedge Vehicles 8.4.3 Arbitraging the Swaps Market 8.5 Swaps: More Terminology and Examples 8.6 The Dealer’s Problem: Finding the Other Side to the Swap 8.7 Are Swaps a Zero Sum Game? 8.8 Why Financial Institutions Use Swaps 8.9 Swaps Pricing 8.9.1 An Example 8.9.2 Valuation of the Fixed-Rate Bond 8.9.3 Valuation of the Floating-Rate Bond 8.9.4 Valuation of the Swap at Initiation 8.9.5 Implied Forward Rates (IFRs) 8.9.6 Three Interpretations of the Par Swap Rate PART 3 Options CHAPTER 9 INTRODUCTION TO OPTIONS MARKETS 9.1 Options and Option Scenarios 9.2 A Framework for Learning Options 9.3 Definitions and Terminology for Plain Vanilla Put and Call Options 9.4 A Basic American Call (Put) Option Pricing Model 9.5 Reading Option Price Quotes 9.6 Going Beyond the Basic Definitions: Infrastructure to Understand Puts and Calls 9.7 Identifying Long and Short Positions in an Underlying CHAPTER 10 OPTION TRADING STRATEGIES, PART 1 10.1 Profit Diagrams 10.2 Eight Basic (Naked) Strategies Using the Underlying, European Puts and Calls, and Riskless, Zero-Coupon Bonds 10.2.1 Strategy 1.

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This includes a discussion of the difference between hedging stock portfolios with forwards and hedging with futures; 11. an entry into understanding swaps, by viewing them as structured products, based on the forward concept; 12. the difference between commodity and interest rate swaps, and a detailed explanation of what it means to pay fixed and receive floating in an interest rate swap; 13. understanding Eurodollar futures strips, notation shifts, and the role of the quote mechanism; 14. discussion of swaps as a zero-sum game, and research challenges to the comparative advantage argument; 15. swaps pricing and alternative interpretations of the par swap rate; 16. a step-by-step approach to options starting in Chapter 9 with the usual emphasis on the quote mechanism, as well as incorporation of real asset options examples; 17. an American option pricing model in Chapter 9, and its extension to European options in Chapter 11; 18. the importance of identifying short, not just long, positions in an underlying asset and the hedging demand they create; 19. two chapters on option trading strategies; one basic, one advanced, including the three types of covered calls, the protective put strategy, and their interpretations; 20. a logical categorization of rational option pricing results in Chapter 11, and the inclusion of American puts and calls; 21. neither monotonicity nor convexity, which are usually assumed, are rational option results; 22. partial vs. full static replication of European options; 23. working backwards from payoffs to costs as a method for devising and interpreting derivatives strategies; 24. the introduction of generalized forward contracts paves the way for the connection between (generalized) forward contracts and options, and the discussion of American put-call parity; 25. the Binomial option pricing model, N=1, and why it works—which is not simply no-arbitrage; 26. three tools of modern mathematical finance: no-arbitrage, replicability and complete markets, and dynamic and static replication, and a rule of thumb on the number of hedging vehicles required to hedge a given number of independent sources of uncertainty; 27. static replication in the Binomial option pricing model, N=1, the hedge ratio can be 1.0 and a preliminary discussion in Chapter 13 on the meaning of risk-neutral valuation; 28. dynamic hedging as the new component of the BOPM, N>1, and a path approach to the multi-period Binomial option pricing model; 29. equivalent martingale measures (EMMs) in the representation of option and stock prices; 30. the efficient market hypothesis (EMH) as a guide to modeling prices; 31. arithmetic Brownian motion (ABM) and the Louis Bachelier model of option prices; 32. easy introduction to the tools of continuous time finance, including Itô’s lemma; 33.

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle

asset allocation, backtesting, buy and hold, creative destruction, currency risk, diversification, diversified portfolio, financial intermediation, fixed income, index fund, invention of the wheel, Isaac Newton, John Bogle, junk bonds, low interest rates, new economy, passive investing, Paul Samuelson, random walk, risk tolerance, risk-adjusted returns, Sharpe ratio, stocks for the long run, survivorship bias, transaction costs, Upton Sinclair, Vanguard fund, William of Occam, yield management, zero-sum game

In a market that returns 7 percent in a given year, we investors together earn a gross return of 7 percent. (Duh!) But after we pay our financial intermediaries, we pocket only what remains. (And we pay them whether our returns are positive or negative!) Before costs, beating the market is a zero-sum game. After costs, it is a loser’s game. There are, then, these two certainties: (1) Beating the market before costs is a zero-sum game. (2) Beating the market after costs is a loser’s game. The returns earned by investors in the aggregate inevitably fall well short of the returns that are realized in our financial markets. How much do those costs come to? For individual investors holding stocks directly, trading costs may average 1.5 percent or more per year.

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Applying that figure to the annual return of 9.1 percent earned over the past 25 years by the Standard & Poor’s 500 Stock Index, your annual return has likely been in the range of 7 percent. Result: investors as a group have been served only about three-quarters of the market pie. In addition, as explained in Chapter 7, if you are a typical investor in mutual funds, you’ve done even worse. A zero-sum game? If you don’t believe that return represents what most investors experience, please think for a moment about “the relentless rules of humble arithmetic” (Chapter 4). These iron rules define the game. As investors, all of us as a group earn the stock market’s return. As a group—I hope you’re sitting down for this astonishing revelation—we investors are average.

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As a group—I hope you’re sitting down for this astonishing revelation—we investors are average. For each percentage point of extra return above the market that one of us earns, another of our fellow investors suffers a return shortfall of precisely the same dimension. Before the deduction of the costs of investing, beating the stock market is a zero-sum game. A loser’s game. As investors seek to outpace their peers, winners’ gains inevitably equal losers’ losses. With all that feverish trading activity, the only sure winner in the costly competition for outperformance is the person who sits in the middle of our financial system. As Warren Buffett recently wrote, “When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsize profits, not the clients.”

Cryptoeconomics: Fundamental Principles of Bitcoin by Eric Voskuil, James Chiang, Amir Taaki

bank run, banks create money, bitcoin, blockchain, break the buck, cashless society, cognitive dissonance, cryptocurrency, delayed gratification, en.wikipedia.org, foreign exchange controls, Fractional reserve banking, Free Software Foundation, global reserve currency, Joseph Schumpeter, market clearing, Metcalfe’s law, Money creation, money market fund, Network effects, peer-to-peer, price stability, reserve currency, risk free rate, seigniorage, smart contracts, social graph, time value of money, Turing test, zero day, zero-sum game

Bitcoin’s widespread use would prevent states from effectively levying the inflation tax [373] . State attacks are therefore expected, and analogous attacks are commonplace [374] . It is practically inevitable that states will subsidize attacks, but even the possibility invalidates the theory. Miner Business Model Miners play a zero sum game [375] within a positive sum [376] economy . They compete with each other, not the economy. Rising utility is the reflection of a positive sum and a natural consequence of trade . It has been argued that blocks mined in a period of rising price produce outsized returns for miners, at least until the difficulty adjustment .

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To do this hash power must be distributed broadly among people so that it becomes difficult to co-opt . However pooling pressures inherent in the consensus work against this objective. As such the characteristic is termed a flaw, though no way to eliminate the flaw has been discovered. Zero Sum Property Bitcoin mining is a zero sum game [426] . On average the chain grows by one block every 10 minutes, with the full reward controlled by its miner . Miners compete to achieve this reward and will, apart from pooling pressures [427] , each average a number of rewards proportional to hash rate . The difference between a miner’s cost and this reward over time is the interest on capital invested in the mine.

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* * * [10] https://libbitcoin.info [11] https://bitcoincore.org [12] Chapter: Dedicated Cost Principle [13] https://www.dtu.dk/english [14] https://twitter.com [15] https://libbitcoin.info [16] https://github.com/libbitcoin/libbitcoin-system/wiki/Cryptoeconomics [17] Chapter: Inflation Principle [18] Chapter: Savings Relation [19] https://en.wikipedia.org/wiki/Amir_Taaki [20] Chapter: Foreword [25] https://libbitcoininstitute.org [26] https://en.wikipedia.org/wiki/Free_Software_Foundation [27] https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-501c3-organizations [28] Chapter: Value Proposition [51] https://en.wikipedia.org/wiki/Ludwig_von_Mises [52] https://en.wikipedia.org/wiki/Murray_Rothbard [53] Chapter: Inflation Principle [54] Chapter: Money Taxonomy [55] Chapter: Full Reserve Fallacy [56] Chapter: Censorship Resistance Property [57] Chapter: Depreciation Principle [83] https://en.wikipedia.org/wiki/Spherical_geometry [84] Chapter: Permissionless Principle [85] Chapter: Censorship Resistance Property [86] Chapter: Hearn Error [87] https://en.wikipedia.org/wiki/Confinity [88] Chapter: Value Proposition [89] https://en.wikipedia.org/wiki/PayPal [90] Chapter: Risk Sharing Principle [91] Chapter: Proof of Work Fallacy [92] Chapter: Side Fee Fallacy [93] Chapter: Axiom of Resistance [94] Chapter: Qualitative Security Model [95] Chapter: Pooling Pressure Risk [96] Chapter: Risk Sharing Principle [98] Chapter: Threat Level Paradox [99] https://en.wikipedia.org/wiki/Foreign_exchange_controls [100] Chapter: Risk Sharing Principle [101] Chapter: Threat Level Paradox [102] Chapter: Balance of Power Fallacy [103] Chapter: Pooling Pressure Risk [104] http://www.imf.org/external/index.htm [105] https://en.wikipedia.org/wiki/Seigniorage [106] Chapter: Threat Level Paradox [107] https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/ [110] Chapter: Fragmentation Principle [111] Chapter: Consolidation Principle [112] Chapter: Risk Sharing Principle [115] Chapter: Risk Sharing Principle [116] Chapter: Proof of Stake Fallacy [117] Chapter: Censorship Resistance Property [118] Chapter: Axiom of Resistance [119] Chapter: Money Taxonomy [120] Chapter: Reservation Principle [121] Chapter: Blockchain Fallacy [122] Chapter: Axiom of Resistance [123] https://en.wikipedia.org/wiki/Cognitive_dissonance [124] https://en.wikipedia.org/wiki/Wikipedia:Rage_quit [125] Chapter: Dumping Fallacy [126] Chapter: Qualitative Security Model [127] Chapter: Inflation Principle [128] Chapter: Lunar Fallacy [131] Chapter: Hearn Error [132] Chapter: Value Proposition [134] Chapter: Other Means Principle [135] https://en.m.wikipedia.org/wiki/Seigniorage [136] https://www.imf.org [137] Chapter: Pooling Pressure Risk [138] Chapter: Axiom of Resistance [139] Chapter: Risk Sharing Principle [140] https://en.wikipedia.org/wiki/Seigniorage [141] Chapter: Money Taxonomy [142] Chapter: Qualitative Security Model [143] https://en.wikipedia.org/wiki/Seigniorage [144] Chapter: Hearn Error [145] Chapter: Fedcoin Objectives [146] Chapter: Public Data Principle [147] Chapter: Proof of Work Fallacy [148] Chapter: Other Means Principle [149] Chapter: Censorship Resistance Property [150] https://en.wikiquote.org/wiki/Carl_von_Clausewitz [151] Chapter: Threat Level Paradox [152] https://mises.org/library/man-economy-and-state-power-and-market/html/p/1075 [153] Chapter: Pooling Pressure Risk [154] https://www.asicboost.com/patent [155] Chapter: Axiom of Resistance [156] Chapter: Risk Sharing Principle [157] Chapter: Public Data Principle [158] Chapter: Qualitative Security Model [159] Chapter: Threat Level Paradox [160] Chapter: Cryptodynamic Principles [161] Chapter: Value Proposition [162] Chapter: Other Means Principle [174] https://coinweek.com/bullion-report/bitcoin-vs-gold-10-crystal-clear-comparisons [175] Chapter: Stability Property [176] Chapter: Proximity Premium Flaw [177] Chapter: Risk Sharing Principle [178] Chapter: Balance of Power Fallacy [181] Chapter: Threat Level Paradox [182] https://en.wikipedia.org/wiki/Anonymizer [183] Chapter: Side Fee Fallacy [184] Chapter: Social Network Principle [185] https://en.wikipedia.org/wiki/Graph_(discrete_mathematics)#Directed_graph [186] https://en.wikipedia.org/wiki/Goodwill_(accounting) [189] Chapter: Axiom of Resistance [190] Chapter: Public Data Principle [191] Chapter: Balance of Power Fallacy [192] Chapter: Cockroach Fallacy [193] https://en.wikipedia.org/wiki/Blockchain [194] https://en.wikipedia.org/wiki/Cryptography [195] https://en.wikipedia.org/wiki/Free_and_open-source_software [196] Chapter: Prisoner’s Dilemma Fallacy [201] Chapter: Axiom of Resistance [203] Chapter: Money Taxonomy [204] Chapter: Risk Sharing Principle [205] Chapter: Axiom of Resistance [206] Chapter: Zero Sum Property [207] https://en.wikipedia.org/wiki/Subsidy [208] https://en.wikipedia.org/wiki/Black_market [209] https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177 [210] Chapter: Axiom of Resistance [211] Chapter: Pooling Pressure Risk [212] Chapter: Risk Sharing Principle [213] https://en.wikipedia.org/wiki/Attack_surface [214] https://en.wikipedia.org/wiki/Foreign_exchange_controls [215] Chapter: Centralization Risk [216] https://en.m.wikipedia.org/wiki/Seigniorage [217] https://en.m.wikipedia.org/wiki/Foreign_exchange_controls [218] https://en.m.wikipedia.org/wiki/Know_your_customer [220] Chapter: Money Taxonomy [221] Chapter: Scalability Principle [222] Chapter: Risk Sharing Principle [223] Chapter: Axiom of Resistance [224] Chapter: Value Proposition [225] Chapter: Other Means Principle [226] Chapter: Money Taxonomy [227] Chapter: Axiom of Resistance [229] Chapter: Risk Sharing Principle [230] https://en.m.wikipedia.org/wiki/Inflation [231] https://en.m.wikipedia.org/wiki/Seigniorage [232] Chapter: Depreciation Principle [233] Chapter: Money Taxonomy [234] https://en.m.wikipedia.org/wiki/Subjective_theory_of_value [235] Chapter: Time Preference Fallacy [236] https://en.m.wikipedia.org/wiki/Marginal_utility [237] https://en.m.wikipedia.org/wiki/Murray_Rothbard [238] https://mises.org/library/what-has-government-done-our-money/html/p/81 [246] Chapter: Money Taxonomy [247] https://en.wikipedia.org/wiki/Foreign_exchange_controls [248] https://en.wikipedia.org/wiki/Seigniorage [249] https://www.investopedia.com/articles/personal-finance/081616/understanding-taxes-physical-goldsilver-investments.asp [250] https://en.wikipedia.org/wiki/Inflation [251] https://en.wikipedia.org/wiki/Monetary_inflation [252] https://en.wikipedia.org/wiki/Exchange_rate#Parallel_exchange_rate [261] Chapter: Reserve Currency Fallacy [262] https://wiki.mises.org/wiki/Money_substitutes [263] Chapter: Reservation Principle [264] Chapter: Money Taxonomy [265] https://en.wikipedia.org/wiki/Monetary_inflation [266] https://en.wikipedia.org/wiki/Promissory_note [273] Chapter: Fedcoin Objectives [274] Chapter: Censorship Resistance Property [275] Chapter: Axiom of Resistance [276] Chapter: Cryptodynamic Principles [277] https://en.wikipedia.org/wiki/Lender_of_last_resort [278] https://en.wikipedia.org/wiki/Free_banking [279] Chapter: Thin Air Fallacy [280] https://en.wikipedia.org/wiki/Central_bank [281] https://en.wikipedia.org/wiki/Discount_window [282] https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reserve_System [283] https://www.frbdiscountwindow.org/pages/discount-rates/current-discount-rates [309] Chapter: Money Taxonomy [310] https://www.washingtonpost.com/news/wonk/wp/2013/12/16/how-tight-jeans-almost-ruined-americas-money [311] https://www.nytimes.com/2018/11/21/business/sweden-cashless-society.html [312] Chapter: Fedcoin Objectives [313] https://www.riksbank.se/en-gb/payments--cash/e-krona [314] Chapter: Reserve Currency Fallacy [315] https://en.wikipedia.org/wiki/Gold_standard [316] Chapter: Value Proposition [320] https://en.wikipedia.org/wiki/Rate_of_return [324] Chapter: Pooling Pressure Risk [328] Chapter: Risk Sharing Principle [329] https://www.federalreserve.gov/aboutthefed/bios/board/default.htm [330] Chapter: Axiom of Resistance [331] https://www.coindesk.com/uasf-revisited-will-bitcoins-user-revolt-leave-lasting-legacy [332] Chapter: Proof of Work Fallacy [337] Chapter: Efficiency Paradox [338] Chapter: Stability Property [339] Chapter: Qualitative Security Model [340] Chapter: Variance Discount Flaw [341] Chapter: Censorship Resistance Property [342] Chapter: Axiom of Resistance [343] Chapter: Pooling Pressure Risk [344] Chapter: Relay Fallacy [345] Chapter: Censorship Resistance Property [346] Chapter: Efficiency Paradox [347] http://primecoin.io [349] https://en.wikipedia.org/wiki/Paradox [351] Chapter: Zero Sum Property [352] Chapter: Pooling Pressure Risk [355] https://en.wikipedia.org/wiki/Monotonic_function [356] Chapter: Money Taxonomy [357] https://en.m.wikipedia.org/wiki/Store_of_value [358] https://en.wikipedia.org/wiki/Subjective_theory_of_value [359] https://en.wikipedia.org/wiki/Proof-of-stake [360] Chapter: Proof of Stake Fallacy [361] Chapter: Utility Threshold Property [362] Chapter: Money Taxonomy [364] Chapter: Side Fee Fallacy [365] https://en.wikipedia.org/wiki/Step_function [366] http://www.investopedia.com/terms/e/economicprofit.asp [367] Chapter: Pooling Pressure Risk [368] https://en.wikipedia.org/wiki/Time_preference [369] Chapter: Proof of Work Fallacy [370] Chapter: Balance of Power Fallacy [371] https://en.wikipedia.org/wiki/Red_herring [372] Chapter: Risk Sharing Principle [375] https://en.wikipedia.org/wiki/Zero-sum_game [376] https://en.wikipedia.org/wiki/Win-win_game [377] https://en.wikipedia.org/wiki/Chaos_theory [379] Chapter: Side Fee Fallacy [380] Chapter: Pooling Pressure Risk [381] Chapter: Zero Sum Property [382] Chapter: Threat Level Paradox [385] Chapter: Balance of Power Fallacy [386] Chapter: Proximity Premium Flaw [387] Chapter: Variance Discount Flaw [388] https://en.wikipedia.org/wiki/Economies_of_scale [389] Chapter: Axiom of Resistance [390] https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/ [391] Chapter: Relay Fallacy [392] Chapter: Risk Sharing Principle [393] Chapter: Balance of Power Fallacy [394] https://www.federalreserve.gov [395] Chapter: State Banking Principle [396] https://en.wikipedia.org/wiki/Debasement [397] https://en.wikipedia.org/wiki/Legal_tender [398] https://en.wikipedia.org/wiki/Federal_Reserve_Note [399] Chapter: Money Taxonomy [400] https://en.wikipedia.org/wiki/Executive_Order_6102 [401] https://en.wikipedia.org/wiki/International_Monetary_Fund [404] https://en.wikipedia.org/wiki/Opportunity_cost [405] Chapter: Pooling Pressure Risk [406] Chapter: Variance Discount Flaw [407] Chapter: Axiom of Resistance [410] Chapter: Zero Sum Property [411] https://www.cs.cornell.edu/~ie53/publications/btcProcFC.pdf [413] Chapter: Pooling Pressure Risk [414] Chapter: Proximity Premium Flaw [416] https://en.wikipedia.org/wiki/Incentive_compatibility [418] Chapter: Pooling Pressure Risk [419] https://en.m.wikipedia.org/wiki/History_of_email_spam [420] Chapter: Risk Sharing Principle [423] Chapter: Pooling Pressure Risk [424] Chapter: Proximity Premium Flaw [425] Chapter: Axiom of Resistance [426] https://en.wikipedia.org/wiki/Zero-sum_game [427] Chapter: Pooling Pressure Risk [428] https://en.wikipedia.org/wiki/Closed_system [429] Chapter: Proximity Premium Flaw [430] Chapter: Variance Discount Flaw [431] https://en.wikipedia.org/wiki/Economies_of_scale [432] https://en.wikipedia.org/wiki/Subsidy [433] Chapter: Threat Level Paradox [434] http://gavinandresen.ninja/a-definition-of-bitcoin [435] https://bitcoin.org/bitcoin.pdf [436] Chapter: Cryptodynamic Principles [437] Chapter: Brand Arrogation [438] https://bitcoin.org/en/bitcoin-core [439] https://libbitcoin.info [440] Chapter: Maximalism Definition [441] Chapter: Custodial Risk Principle [443] https://en.wikipedia.org/wiki/Cryptographic_hash_function [444] Chapter: Risk Sharing Principle [446] Chapter: Money Taxonomy [447] Chapter: Cryptodynamic Principles [448] Chapter: Money Taxonomy [450] Chapter: Utility Threshold Property [451] Chapter: Money Taxonomy [452] https://en.wikipedia.org/wiki/Gresham%27s_law#Reverse_of_Gresham's_law_(Thiers'_law) [453] Chapter: Fragmentation Principle [460] Chapter: Money Taxonomy [461] https://en.wikipedia.org/wiki/Barter [462] https://en.wikipedia.org/wiki/Goods_and_services [463] Chapter: Consolidation Principle [464] Chapter: Network Effect Fallacy [465] Chapter: Dumping Fallacy [466] Chapter: Replay Protection Fallacy [467] https://en.m.wikipedia.org/wiki/Net_present_value [474] Chapter: Proof of Stake Fallacy [475] Chapter: Censorship Resistance Property [476] Chapter: Substitution Principle [478] Chapter: Consolidation Principle [479] Chapter: Side Fee Fallacy [482] Chapter: Money Taxonomy [483] Chapter: Censorship Resistance Property [484] Chapter: Axiom of Resistance [485] https://eprint.iacr.org/2017/893.pdf [486] Chapter: Energy Waste Fallacy [487] Chapter: Pooling Pressure Risk [488] Chapter: Proof of Memory Façade [489] Chapter: Energy Waste Fallacy [490] Chapter: Censorship Resistance Property [491] Chapter: Other Means Principle [495] Chapter: Cryptodynamic Principles [496] Chapter: Value Proposition [497] Chapter: Proof of Stake Fallacy [498] Chapter: Axiom of Resistance [499] Chapter: Proof of Memory Façade [500] Chapter: Credit Expansion Fallacy [501] Chapter: Money Taxonomy [502] https://en.wikipedia.org/wiki/Seigniorage [503] Chapter: State Banking Principle [504] https://www.frbdiscountwindow.org [505] https://www.fdic.gov/resources/deposit-insurance [507] Chapter: Dumping Fallacy [508] https://en.m.wikipedia.org/wiki/Hoarding_(economics) [509] Chapter: Replay Protection Fallacy [510] https://en.m.wikipedia.org/wiki/Net_present_value [511] Chapter: Consolidation Principle [515] Chapter: Depreciation Principle [516] https://mises.org/library/man-economy-and-state-power-and-market/html/p/996 [517] Chapter: Reserve Currency Fallacy [518] https://en.wikipedia.org/wiki/Foreign-exchange_reserves [519] https://en.wikipedia.org/wiki/Money_supply#United_States [520] https://en.wikipedia.org/wiki/Money_supply#Money_creation_by_commercial_banks [521] Chapter: State Banking Principle [522] https://www.federalreserve.gov/releases/h3/current/default.htm [543] Chapter: Savings Relation [544] https://en.wikipedia.org/wiki/Time_preference [545] Chapter: Unlendable Money Fallacy [548] Chapter: Production and Consumption [561] https://en.wikipedia.org/wiki/Monetary_inflation [562] Chapter: Unlendable Money Fallacy [563] https://en.m.wikipedia.org/wiki/Labor_theory_of_value [564] https://en.m.wikipedia.org/wiki/Catallactics [565] Chapter: Production and Consumption [566] Chapter: Depreciation Principle [569] Chapter: Time Preference Fallacy [570] Chapter: Labor and Leisure [571] https://en.wikipedia.org/wiki/Fractional-reserve_banking [572] Chapter: Money Taxonomy [573] Chapter: Thin Air Fallacy [574] https://en.wikipedia.org/wiki/Full-reserve_banking [602] https://en.wikipedia.org/wiki/Inflation [603] Chapter: Credit Expansion Fallacy [604] https://en.wikipedia.org/wiki/Gold_mining [605] Chapter: Time Preference Fallacy [607] Chapter: Risk Free Return Fallacy [635] https://en.wikipedia.org/wiki/Tautology_(logic) [636] Chapter: Production and Consumption [637] Chapter: Labor and Leisure [639] Chapter: Regression Fallacy [640] https://en.wikipedia.org/wiki/Seigniorage [641] https://en.wikipedia.org/wiki/Catallactics [642] Chapter: Speculative Consumption [643] https://en.wikipedia.org/wiki/Pump_and_dump [644] Chapter: Time Preference Fallacy [645] Chapter: Savings Relation [646] https://en.wikipedia.org/wiki/Use_value [647] https://en.m.wikipedia.org/wiki/Fungibility [648] Chapter: Dumping Fallacy [649] https://en.wikipedia.org/wiki/Action_axiom [650] Chapter: Production and Consumption [651] https://en.m.wikipedia.org/wiki/Goods_and_services [652] https://en.wikipedia.org/wiki/Waste [653] https://en.wikipedia.org/wiki/Murray_Rothbard [654] https://mises.org/library/man-economy-and-state-power-and-market/html/p/926 [655] Chapter: Expression Principle [656] Chapter: Time Preference Fallacy [657] Chapter: Pure Bank [658] Chapter: Reservation Principle [659] Chapter: Depreciation Principle [661] https://en.wikipedia.org/wiki/Action_axiom [662] https://en.m.wikipedia.org/wiki/Goods_and_services [663] Chapter: Depreciation Principle [664] Chapter: Labor and Leisure [665] https://en.wikipedia.org/wiki/Waste [666] Chapter: Pure Bank [667] Chapter: Reserve Definition [668] https://en.m.wikipedia.org/wiki/Dividend [677] https://en.wikipedia.org/wiki/Free_banking [678] https://en.wikipedia.org/wiki/Federal_Reserve [679] https://www.fdic.gov [680] https://en.wikipedia.org/wiki/Discount_window [681] https://en.wikipedia.org/wiki/Seigniorage [682] Chapter: Money Taxonomy [683] Chapter: Inflation Principle [684] https://en.wikipedia.org/wiki/Inflation [685] https://en.wikipedia.org/wiki/Deflation [686] Chapter: Time Preference Fallacy [687] https://en.m.wikipedia.org/wiki/Arbitrage [688] https://en.wikipedia.org/wiki/Demurrage_(currency) [689] https://en.wikipedia.org/wiki/Settlement_(finance) [690] https://en.wikipedia.org/wiki/Maturity_(finance) [691] Chapter: Depreciation Principle [692] https://en.wikipedia.org/wiki/Opportunity_cost [693] https://en.wikipedia.org/wiki/Compound_interest [699] Chapter: Savings Relation [700] Chapter: Inflation Principle [704] Chapter: Time Preference Fallacy [705] https://en.wikipedia.org/wiki/Catallactics [706] https://en.wikipedia.org/wiki/Murray_Rothbard [707] https://mises.org/library/man-economy-and-state-power-and-market/html/p/989 [708] https://en.wikipedia.org/wiki/Capital_requirement [709] Chapter: Expression Principle [715] Chapter: Depreciation Principle [726] Chapter: Savings Relation [727] Chapter: Time Preference Fallacy [732] Chapter: Depreciation Principle [733] Chapter: Full Reserve Fallacy [734] Chapter: Credit Expansion Fallacy [735] Chapter: Money Taxonomy [739] Chapter: Credit Expansion Fallacy [740] Chapter: Time Preference Fallacy [741] Chapter: Money Taxonomy [742] Chapter: Inflation Principle [756] Chapter: Speculative Consumption [757] Chapter: Regression Fallacy [758] https://en.m.wikipedia.org/wiki/Use_value [759] https://en.m.wikipedia.org/wiki/Barter [760] https://en.m.wikipedia.org/wiki/Medium_of_exchange [761] https://mises.org/library/human-action-0/html/pp/778 [762] Chapter: Money Taxonomy [763] https://en.m.wikipedia.org/wiki/Commodity [764] https://en.m.wikipedia.org/wiki/Tautology_(logic) [765] Chapter: Money Taxonomy [766] https://en.wikipedia.org/wiki/Currency [767] https://wiki.mises.org/wiki/Money_substitutes [779] Chapter: Credit Expansion Fallacy [780] https://en.wikipedia.org/wiki/Promissory_note [788] https://en.wikipedia.org/wiki/Legal_tender [789] https://en.wikipedia.org/wiki/Seigniorage [790] Chapter: Stability Property [791] https://en.wikipedia.org/wiki/Fiat_money [797] https://en.wikipedia.org/wiki/Monetary_inflation [798] https://en.wikipedia.org/wiki/Purchasing_power [799] Chapter: Inflation Principle [803] https://en.wikipedia.org/wiki/Commodity_money [808] https://wiki.mises.org/wiki/Money_substitutes [809] https://financial-dictionary.thefreedictionary.com/Contractual+Claim [810] Chapter: Debt Loop Fallacy [811] https://en.wikipedia.org/wiki/Securitization [812] https://en.wikipedia.org/wiki/Banknote [813] https://en.wikipedia.org/wiki/Gold_certificate [814] https://en.wikipedia.org/wiki/Representative_money [815] https://www.investopedia.com/terms/e/electronic-money.asp [816] Chapter: Regression Fallacy [819] https://en.wikipedia.org/wiki/Counterfeit_money [823] Chapter: Cryptodynamic Principles [824] https://en.wikipedia.org/wiki/Currency [825] Chapter: Credit Expansion Fallacy [826] Chapter: Reserve Definition [827] https://wiki.mises.org/wiki/Regression_theorem [828] Chapter: Money Taxonomy [829] https://en.m.wikipedia.org/wiki/Use_value [830] https://en.m.wikipedia.org/wiki/Barter [831] https://mises.org/library/human-action-0/html/pp/778 [833] Chapter: Collectible Tautology [837] Chapter: Depreciation Principle [838] Chapter: Savings Relation [843] https://en.wikipedia.org/wiki/Risk-free_interest_rate [844] Chapter: Credit Expansion Fallacy [855] Chapter: Full Reserve Fallacy [856] https://en.wikipedia.org/wiki/Representative_money [857] Chapter: Credit Expansion Fallacy [858] https://en.wikipedia.org/wiki/Inflation [860] https://wiki.mises.org/wiki/Money_substitutes [861] Chapter: Money Taxonomy [874] https://en.m.wikipedia.org/wiki/Talking_past_each_other [875] https://en.m.wikipedia.org/wiki/Use_value [876] Chapter: Value Proposition [877] https://en.m.wikipedia.org/wiki/Metallism [878] Chapter: Regression Fallacy [879] https://en.m.wikipedia.org/wiki/Chartalism [880] Chapter: Debt Loop Fallacy [886] https://en.wikipedia.org/wiki/Bank_run [887] https://en.wikipedia.org/wiki/Central_bank [888] https://en.wikipedia.org/wiki/Lender_of_last_resort [889] Chapter: State Banking Principle [890] https://en.wikipedia.org/wiki/Monetary_inflation [891] https://en.wikipedia.org/wiki/Fisher_equation [892] https://en.wikipedia.org/wiki/Monetary_inflation [893] Chapter: Depreciation Principle [894] Chapter: Money Taxonomy [895] https://en.wikipedia.org/wiki/Seigniorage [897] Chapter: Inflation Principle [898] https://en.wikipedia.org/wiki/Inflation [899] Chapter: Time Preference Fallacy [901] Chapter: Speculative Consumption [905] https://medium.com/@paulbars/magic-internet-money-how-a-reddit-ad-made-bitcoin-hit-1000-and-inspired-south-parks-art-b414ec7a5598 [906] Chapter: Money Taxonomy [907] Chapter: Depreciation Principle [908] Chapter: Stability Property [909] https://www.fool.com/investing/2017/05/25/could-the-price-of-bitcoin-go-to-1-million.aspx [910] https://en.wikipedia.org/wiki/Gross_world_product [911] https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25 [912] Chapter: Stock to Flow Fallacy [913] Chapter: Reservation Principle [914] Chapter: Reserve Currency Fallacy [915] https://en.wikipedia.org/wiki/Catallactics [916] https://mises.org/library/man-economy-and-state-power-and-market/html/p/949 [917] Chapter: Money Taxonomy [918] Chapter: Credit Expansion Fallacy [919] Chapter: Time Preference Fallacy [920] https://en.wikipedia.org/wiki/Central_bank [921] Chapter: State Banking Principle [922] https://en.wikipedia.org/wiki/Settlement_(finance) [923] Chapter: Debt Loop Fallacy [924] https://en.wikipedia.org/wiki/Money_supply#United_States [931] Chapter: Permissionless Principle [932] https://en.wikipedia.org/wiki/Seigniorage [933] https://voxeu.org/index.php?

This Will Make You Smarter: 150 New Scientific Concepts to Improve Your Thinking by John Brockman

23andMe, adjacent possible, Albert Einstein, Alfred Russel Wallace, Anthropocene, banking crisis, Barry Marshall: ulcers, behavioural economics, Benoit Mandelbrot, Berlin Wall, biofilm, Black Swan, Bletchley Park, butterfly effect, Cass Sunstein, cloud computing, cognitive load, congestion charging, correlation does not imply causation, Daniel Kahneman / Amos Tversky, dark matter, data acquisition, David Brooks, delayed gratification, Emanuel Derman, epigenetics, Evgeny Morozov, Exxon Valdez, Flash crash, Flynn Effect, Garrett Hardin, Higgs boson, hive mind, impulse control, information retrieval, information security, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jaron Lanier, Johannes Kepler, John von Neumann, Kevin Kelly, Large Hadron Collider, lifelogging, machine translation, mandelbrot fractal, market design, Mars Rover, Marshall McLuhan, microbiome, Murray Gell-Mann, Nicholas Carr, Nick Bostrom, ocean acidification, open economy, Pierre-Simon Laplace, place-making, placebo effect, power law, pre–internet, QWERTY keyboard, random walk, randomized controlled trial, rent control, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Satyajit Das, Schrödinger's Cat, scientific management, security theater, selection bias, Silicon Valley, Stanford marshmallow experiment, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, Stuart Kauffman, sugar pill, synthetic biology, the scientific method, Thorstein Veblen, Turing complete, Turing machine, twin studies, Vilfredo Pareto, Walter Mischel, Whole Earth Catalog, WikiLeaks, zero-sum game

Positive-Sum Games Steven Pinker Johnstone Family Professor, Department of Psychology, Harvard University; author, The Stuff of Thought: Language as a Window into Human Nature A zero-sum game is an interaction in which one party’s gain equals the other party’s loss—the sum of their gains and losses is zero. (More accurately, it is constant across all combinations of their courses of action.) Sports matches are quintessential examples of zero-sum games: Winning isn’t everything, it’s the only thing, and nice guys finish last. A nonzero-sum game is an interaction in which some combinations of actions provide a net gain (positive sum) or loss (negative sum) to the two participants.

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More despicable, if something happens that many regard as a bad outcome, this gives us the opportunity to sift through the causal nexus for the one thread that colorably leads back to our rivals (where the blame obviously lies). Lamentably, much of our species’ moral psychology evolved for moral warfare, a ruthless zero-sum game. Offensive play typically involves recruiting others to disadvantage or eliminating our rivals by publicly sourcing them as the cause of bad outcomes. Defensive play involves giving our rivals no ammunition to mobilize others against us. The moral game of blame attribution is only one subtype of misattribution arbitrage.

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A nonzero-sum game is an interaction in which some combinations of actions provide a net gain (positive sum) or loss (negative sum) to the two participants. The trading of surpluses, as when herders and farmers exchange wool and milk for grain and fruit, is a quintessential example, as is the trading of favors, as when people take turns baby-sitting each other’s children. In a zero-sum game, a rational actor seeking the greatest gain for himself or herself will necessarily be seeking the maximum loss for the other actor. In a positive-sum game, a rational, self-interested actor may benefit the other actor with the same choice that benefits himself or herself. More colloquially, positive-sum games are called win-win situations and are captured in the cliché “Everybody wins.”

The Clash of the Cultures by John C. Bogle

Alan Greenspan, asset allocation, buy and hold, collateralized debt obligation, commoditize, compensation consultant, corporate governance, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, estate planning, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Glass-Steagall Act, Hyman Minsky, income inequality, index fund, interest rate swap, invention of the wheel, John Bogle, junk bonds, low interest rates, market bubble, market clearing, military-industrial complex, money market fund, mortgage debt, new economy, Occupy movement, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, Ponzi scheme, post-work, principal–agent problem, profit motive, proprietary trading, prudent man rule, random walk, rent-seeking, risk tolerance, risk-adjusted returns, Robert Shiller, seminal paper, shareholder value, short selling, South Sea Bubble, statistical arbitrage, stock buybacks, survivorship bias, The Wealth of Nations by Adam Smith, transaction costs, two and twenty, Vanguard fund, William of Occam, zero-sum game

Never is this clearer than in his insistence that fees and costs are draining all the promised value out of the pockets of investors. Investors must know that they inevitably earn the gross return of the stock market, but only before the deduction of the costs of financial intermediation are taken into account. If beating the market is a zero sum game before costs, it is a loser’s game after costs are deducted. Which is why costs must be made clear to investors, and, one hopes, minimized. Pointing this out routinely surely cannot earn Jack Bogle many friends among Wall Street, which depends on the mystery surrounding financial innovations—as they are called euphemistically.

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To understand why speculation is a drain on the resources of investors as a group, one need only understand the tautological nature of the markets: Investors, as a group, inevitably earn the gross return of, say, the stock market, but only before the deduction of the costs of financial intermediation are taken into account. If beating the market is a zero-sum game before costs, it is a loser’s game after costs are deducted. How often we forget the power of these “relentless rules of humble arithmetic” (a phrase used in another context by former Supreme Court Justice Louis Brandeis a century ago), when we bet against one another, day after day—inevitably, to no avail—in the stock market.

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Our newly empowered institutions now hold 60 to 75 percent of the shares of virtually every U.S. publicly held corporation, giving them a firm grip on control over Corporate America. Renters and Owners With far too few exceptions, however, these powerful new institutional agents act less like owners of stocks than renters. They turn their portfolios over with abandon, trading (obviously) largely with one another, clearly engaging in a zero-sum game that enriches only Wall Street and ill-serves their principals. The average equity mutual fund turned over its portfolio at a 17 percent rate in the 1950s and 25 percent in the 1960s. But by 1985, turnover had leaped to 100 percent, and has remained around that astonishingly high level ever since.

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

Abraham Maslow, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, buy low sell high, capital controls, central bank independence, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, currency risk, diversification, diversified portfolio, family office, financial engineering, fixed income, glass ceiling, Glass-Steagall Act, global macro, Greenspan put, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, inverted yield curve, John Meriwether, junk bonds, land bank, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, Market Wizards by Jack D. Schwager, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, out of africa, panic early, paper trading, Paul Samuelson, Peter Thiel, price anchoring, proprietary trading, purchasing power parity, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, tail risk, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, Vision Fund, yield curve, zero-coupon bond, zero-sum game

In the interim, this little-known element hidden away inside one of the world’s most prestigious financial institutions helps to shed some light on market psychology and risk in the global macro markets. THE TREASURER 135 What did your junior trader ask that you thought was interesting? He asked, “What makes you unique? If the market is a zero-sum game, why should anyone be able to beat the market?” Well, in a zero-sum game, you have winners and losers. With a certain ability, one can be among the winners.What makes me unique is probably my background. I have a PhD in psychology and a master’s in economics. I was always more academically oriented and planned on going into teaching and research, which I did for a year.Trading wasn’t something that particularly interested me—I actually didn’t start trading until I was 35 years old.

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The efficient market guys say if there’s a $100 bill lying on the pavement, it always gets picked up. My view is that it sometimes gets picked up and sometimes new $100 bills appear. 178 INSIDE THE HOUSE OF MONEY Are global macro markets a zero-sum game? In large part, that’s true, because there’s got to be somebody else who’s on the other side. In the equity markets, there is genuine wealth creation.Almost by default in most markets it’s close to a zero-sum game, but that’s exactly who you are trying to exploit, the person on the other side of the trade. Do hedge funds have an advantage against the person on the other side of the trade? Yes. Take a mundane example: A hedge fund manager can move much more quickly to a piece of news than a larger institution.

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For them, price discovery is the market, and they live and die by taking its pulse.Walking on the floor of the MERC, I could feel the pulse of the markets. It is here where equilibrium levels are found in the markets for interest rates, currencies, stock indexes, and commodities. If macro markets are a zero-sum game, as many attest, there does not seem to be any place to hide from this cruel fact in the trading pits of Chicago. After spending time on the floor, I went upstairs to Harris’s office, a stark, simple room on one of the upper floors of the MERC, where the dull glow of a fluorescent light revealed an old computer monitor; gray, marked-up walls; and a variety of files and papers strewn about.

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, commodity super cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, equity risk premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, Minsky moment, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

The excess return is the difference between the fund’s actual return and the fund’s predicted return, the latter of which is defined by its beta to the benchmark. In hedge fund parlance, alpha represents the value that a portfolio manager adds to or subtracts from a fund’s return through active management, thus connoting a manager’s skill (or lack thereof). Is alpha extraction a zero-sum game? Alpha, by definition, is a zero-sum game—or at least by my definition. Before costs, that is. I don’t think there is that much alpha in hedge fund indices. Some hedge funds extract true alpha rather consistently, while others generate none, or even pay alpha. Then they hide it through beta, sometimes through difficult-to-see exotic betas.

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That way we get better allocation of resources in the real economy and fewer bubbles. If there had been more John Paulsons in the market during the last few years, and fewer gullible institutional investors in subprime, the global economy would have been much better off. But alpha in a strict sense is a zero-sum game, although with beneficial externalities for society. What else did you learn in 2008? Markets can go to even worse extremes than I thought possible. I was surprised to see the extent of arbitrage opportunities that emerged, although I was not very surprised by the extent of either stock market weakness or credit spread widening.

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I can think of many reasons why that could become an issue, so I have to take that into account but I would not want to buy oil based on my view that we are going to run out of oil. Are we headed towards inflation or deflation? I don’t think anybody knows the answer to that question. Everyone should be open-minded about this one, regardless of the strength of his opinions. Are the markets a zero sum game? No. Are they efficient? No. If you took 10 years off and were forced to put all your money in one trade, what would it be? Cash. Dollars? Pounds? Euros? Swiss francs? Probably euros but the question is difficult because it depends if my 10-year goal is to preserve my capital or maximize my wealth.

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

23andMe, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, Albert Einstein, Alvin Toffler, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, Big Tech, book value, Brexit referendum, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, cloud computing, cognitive bias, computer age, congestion pricing, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, driverless car, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial engineering, financial innovation, full employment, fundamental attribution error, future of work, gentrification, gigafactory, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, Jeremy Corbyn, job automation, Kanban, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low interest rates, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, Ocado, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, private spaceflight, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Robert Solow, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, sunk-cost fallacy, survivorship bias, tacit knowledge, tech billionaire, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, TSMC, Tyler Cowen, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

Some argue that marketing—especially that part of it concerned with advertising to build brands—is just a zero-sum game between companies: if my brand wins market share, yours loses. Some say that money spent on organizational development produces more bureaucracy and make-work. And some say that training should be excluded because it produces an asset for the person trained, not for the firm doing the training. Each of these criticisms has a kernel of truth, but not so much as to disqualify these sorts of spending as investments. Take the first objection, namely that branding is a zero-sum game and merely shifts sales from, say, Coke to Pepsi. This by itself is not an objection to it being an investment.

…

Up until 2000, Austria, which taxed advertising, had differential rates across regions. In 2000 a nationwide harmonization introduced a 5 percent tax rate in all regions. Thus the cost of advertising increased in some parts of the country while simultaneously decreasing in other parts. If advertising were simply a zero sum game, this tax change should have made no difference to company spending. After all, if they are simply in an arms race to outspend each other, they would be forced into doing this by competition, regardless of taxes. In fact, advertising did change, falling where it got more expensive and rising where cheaper.

…

Now, in some respects, this intangible asset provides a public as well as a private benefit: building a network of quality-assured, networked drivers is a valuable service for Uber’s customers. But critics have argued that at least in some respects, Uber’s “investment” in its driver network is a zero-sum game: the purpose of maintaining a network of drivers, they argue, is to allow Uber to get the benefits of hiring a lot of staff without having to comply with employment laws or minimum wages. To this extent, Uber’s investment in a network of drivers is valuable to Uber at least in part not because it creates new value but because it takes value away from drivers (who would otherwise benefit from minimum wages, etc.).

925 Ideas to Help You Save Money, Get Out of Debt and Retire a Millionaire So You Can Leave Your Mark on the World by Devin D. Thorpe

asset allocation, buy and hold, call centre, diversification, estate planning, fixed income, Home mortgage interest deduction, index fund, junk bonds, knowledge economy, low interest rates, money market fund, mortgage tax deduction, payday loans, random walk, risk tolerance, Skype, Steve Jobs, transaction costs, women in the workforce, zero-sum game

Some options can be purchased for pennies and have the potential to be worth several dollars. In other words, some stock options appear to have short-term investment potential of twenty fold. You wouldn’t have to be successful so often with that strategy to make a fortune, it seems. For basic and fundamental reasons, however, options are to be avoided. Zero Sum Game: Options are a zero sum game. If you buy an option, someone (probably another investor) has accepted an exactly opposite bet on the markets. Every penny you win, he loses. Every penny you lose, he wins. Not quite, actually. The broker also takes a commission. Just Like Gambling: Options are just like gambling.

…

If you keep 80 to 90% of your money cautiously invested—and keep contributing to your savings in the same proportion, you’ll keep your nest egg growing regardless of what happens with the money you’re putting at risk. Have caution with options: Investing in options over the long haul has a negative expected return. Options are a zero sum game—one player’s winnings are another’s losses. What’s worse is that the game is rigged: someone in the middle takes a commission so you aren’t even expected to get your money back. Writing naked calls is an easy way to make money until it bankrupts you. (If you don’t know what that is, you’re almost certainly not doing it.)

…

While it is true that in the short run, the odds of an individual stock rising or falling are almost exactly equal to 50/50, that changes over time. The longer you hold the stock, the greater the odds of its value rising. So, too, with bonds and funds. Stocks and bonds often pay dividends. Options do not. Stocks, bonds and funds are not a zero sum game. The expected return on these investments is distinctly positive (even though people can and do lose money in the stock market). Why Do Options Exist? “If options are so stupid, why do they exist?” you ask. There are legitimate uses for options as a hedge as a sort of insurance. If you own a million shares of IBM and the stock is trading for $105.

Hedgehogging by Barton Biggs

activist fund / activist shareholder / activist investor, Alan Greenspan, asset allocation, backtesting, barriers to entry, Bear Stearns, Big Tech, book value, Bretton Woods, British Empire, business cycle, buy and hold, diversification, diversified portfolio, eat what you kill, Elliott wave, family office, financial engineering, financial independence, fixed income, full employment, global macro, hiring and firing, index fund, Isaac Newton, job satisfaction, junk bonds, low interest rates, margin call, market bubble, Mary Meeker, Mikhail Gorbachev, new economy, oil shale / tar sands, PalmPilot, paradox of thrift, Paul Samuelson, Ponzi scheme, proprietary trading, random walk, Reminiscences of a Stock Operator, risk free rate, Ronald Reagan, secular stagnation, Sharpe ratio, short selling, Silicon Valley, transaction costs, upwardly mobile, value at risk, Vanguard fund, We are all Keynesians now, zero-sum game, éminence grise

The pressure for short-term performance versus a benchmark can easily disorient the investment brain of a portfolio manager. What should matter is capital enhancement in bull markets and capital preservation in bears; in other words absolute, not relative, returns. In this sense, professional alpha investing is not a winner’s game but a zero-sum game, because for every winner there has to be a loser. In fact professional investing is even worse than zero-sum games like the NFL, where every Sunday the number of winners matches the number of losers, because transaction and management costs make investment management marginally a negative-sum game. Because compensation levels for portfolio managers are exalted, the game attracts the best, the brightest, and the most obsessive.

…

However, again like Livermore and unlike the plungers and the peacocks of that speculative era that was coming to an ccc_biggs_ch03_21-33.qxd 11/29/05 6:58 AM Page 33 Short-Selling Oil 33 end, he understood that, without the cover of a pool or inside information, trading was essentially a zero-sum game but that investing could be a winner’s game. Without faith in his own judgment no man can go very far in this game.That is about all I have learned—to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary.

…

Magazines would run features on the rags-to-riches stories of some of the contestants, and others would make appearances on talk shows at $50,000 a crack describing their unique flipping skills, ability to divine a coin in midair, and their mystic reflexive vision when it was about to land. Several would be rushing out books with titles like How to Make Millions Flipping and Why Jesus Chose Me to Win. Meanwhile angry college professors would be publishing articles in the Wall Street Journal about efficient markets, coin flipping, zero-sum games, and how the contest really was a random walk. Of course the contestants would be replying that if it can’t be done, how come there are 32 of us who have done it? In the weeks before the round of 16, the winners would be much in demand by attractive members of the opposite sex, and some of them would be pricing ski houses in Aspen and condominiums in Florida.

Television Is the New Television: The Unexpected Triumph of Old Media in the Digital Age by Michael Wolff

activist fund / activist shareholder / activist investor, AOL-Time Warner, barriers to entry, Carl Icahn, commoditize, creative destruction, digital divide, disintermediation, Golden age of television, Great Leap Forward, hiring and firing, Joseph Schumpeter, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Michael Milken, Sheryl Sandberg, Silicon Valley, SoftBank, Steve Jobs, Susan Wojcicki, telemarketer, the medium is the message, vertical integration, zero-sum game

And yet that sentiment was divorced from the future as he saw it and as he described the complicated new terms and relationships in a world of digital media. Finally, to what had become from Morris a kind of plea—“Are we in this together?”—Andreessen replied, “Excuse me. We are against each other. This is a zero-sum game.” “We all wanted to run away,” recalled Matt Stone in 2014. A funny thing happened over the intervening years, though. A strange schism developed. While everywhere there was the belief, near absolute, that the future of media lay with some ever-transforming technology, twenty years into this revolution, the value of traditional media, even with big losses in print and music, dramatically grew, with an Ernst & Young study in 2014 finding traditional media and entertainment companies increasing “their lead as one of the most profitable industries,” with television margins as high as almost 50 percent.

…

Comcast, for its part, found itself with its NBC Universal acquisition in an ultimate schizoid business, owning two companies whose health depended on the competition with each other. NBC Universal with its network and its cable channels needed to be wholly focused on raising the fees it derived from the cable operators, notably Comcast, hence creating a strangely zero-sum game—Comcast paid NBC, which then gave the money back to Comcast, its owner (Comcast bought out GE’s remaining interest in 2013). Now, it was possible to look at this functionally closed system as a decent hedge—Comcast wasn’t going to win, but it wasn’t going to lose either. It balanced the push-pull of the business.

…

A&E Networks, 61, 65, 117 ABC, 183 Abrahamsen, Kurt, 2 Advance Communications, 116, 117 advertising: adjacency strategy of, 59 ad-skipping devices, 49, 84, 96 and audience, 63, 72–73, 87, 198–99 billboards, 77, 115 brand, 23–24, 25, 26, 49–50, 67, 182–83 buying space vs. making ads, 48, 57, 63, 87–88 classified, 69, 115 and content, 59, 63, 84, 158 CPMs, 52, 65, 66, 71–72, 73 direct mail, 55–56, 69–70, 86 direct-response, 24, 25, 26, 85, 87 display, 69 dual markets for, 80–81, 85–88 falling prices of, 33, 50, 51, 52, 70–73, 74, 78, 167 global online industry, 75–76 government regulation of, 56 low tolerance for, 83–85 market predictions for, 79 and mass media, 123 measuring effectiveness of, 71–72, 79, 84–85, 87 media, 18, 21, 52 print, 25, 54, 69–71 programmatic buying/selling, 73, 76–80 as pyramid scheme, 57–58 remnant space for, 78 response rate, 55, 56–57, 72 as revenue source, 41, 43, 48 revolution in, 69–74 sales, 40–41, 56 and sports, 181–88 television, 24, 25, 40, 70, 79–80, 83–84, 99, 115, 119, 125, 129 too much space, 76 and YouTube, 153, 154–55 Advertising Week, New York, 21 Aereo, 112 aggregation, 18–19, 50–51, 59, 66, 190, 195–96 Ailes, Roger, 119 Alibaba, 19, 20 Allen, Mel, 182 Amazon, 42, 110, 112, 142, 161, 169 Andreessen, Marc, 2, 3, 4, 39, 60, 83, 97 AOL: and Huffington Post, 12, 58 and newspaper format, 18, 33, 189 and Time Warner, 11, 117, 126, 132, 159 Apple, 101–5 Apple TV, 109, 112, 113 Arledge, Roone, 183, 187 AT&T, 135, 136 audience: and advertising, 63, 72–73, 87, 198–99 auctions for, 77 behavior patterns of, 50 building, 47, 48, 50 and carriage, 125, 184–85 cost vs. profitability of, 54 demographics of, 73, 78 downmarket vs. upmarket, 192 drive-by, 54 eyeballs of, 57, 77–78 holding the attention of, 32, 50, 67, 71, 74 identifying, 47–49 illusory nature of, 64, 73–74 manipulation of, 50 mass, 35, 76, 195 measuring and monitoring, 48–50, 57, 77 migration of, 70 monetizing, 16, 40 and pay cable, 47–48 programming focused on, 128 and scarcity premium, 72 self-selected, 78 stand-alone unbranded entities, 78–79 as traffic, 18–19, 49–53, 73, 86, 196 value of, 48, 49 you don’t own it, 53, 54 Auletta, Ken, 95–100 Bartz, Carol, 19 Bewkes, Jeffrey, 121, 126 Blockbuster, 91 Blu-ray DVD players, 110–11 books, 115, 117, 124 broadband, 109, 135, 138–41 broadcast, 108, 112, 131, 168 BSkyB, 120 bundling-unbundling-rebundling, 171–78 BuzzFeed, 12, 18, 23, 57, 58–61, 62, 66, 67, 87, 102, 189, 193–94, 195–96, 199 cable companies: and broadband, 140–41 and bundling/unbundling, 174–78 bypassing fees of, 112 and costs, 99–100, 174 declining quality of, 168 deregulation of, 127 and digital access, 133 and government bureaucracy, 139 and Internet, 125, 129, 130, 135 mean and stingy deals from, 10 and “must-carry rule,” 131 pay cable model, 47–48, 113, 127 paying content providers, 125–26, 127, 130, 133 and sports, 184–85 streaming, 99–100 and television, see television upgrades, 134, 168 Cable Television Consumer Protection and Competition Act (1992), 96, 131 Cannes Lions Festival, France, 21 Carey, Chase, 126 Carlson, Nicholas, 21–22 carriage, 125, 126, 131–32, 184–85 CBS, 97, 118, 121, 129, 130, 131, 160, 185, 198 Chiat, Jay, 101–2 Clear Channel, 116, 126 click fraud, 26, 74 CNN, 22, 32, 35, 65, 95, 126, 130, 132 Coleman, Greg, 58 Comcast, 10, 116, 120, 130, 132–36, 138, 143–44, 175, 185 Comedy Central, 3, 5, 130 computers: cloud, 108 as entertainment devices, 106 and television, 105, 108, 110, 111 comScore, 63 Condé Nast, 116, 117 consolivision, 114, 115–21 Consumer Electronics Show (CES), 83 “cool,” meanings of, 41, 63 copyright infringement, 146–49 Coupland, Douglas, 107 Couric, Katie, 21 Cue, Eddy, 103 curation, 36 Cusack, John, 2 Dacron Republican-Democrat, The, 18, 167 Dauman, Philippe, 126 Deadline Hollywood, 25 Delphi, 118 Demand Media, 52 Denton, Nick, 193–94, 196, 197 Deutsch, Donny, 2 digital convergence, 107 digital media: and advertising, 18, 21, 24, 25, 52, 70, 76, 84–85, 87, 128, 130 audience for, 16–17, 49, 54, 74, 87 and bundling/unbundling, 174–78 bureaucracies of, 19, 24, 138, 199 changed business of, 194–200 circulations strategy of, 56–57 click fraud on, 26, 74 and content producers, 189–92 as distribution deal, 104, 194, 199 efficiency of, 195 forecasts for, 25–26 functionality of, 16, 17, 41, 166, 168 image-based, 157–58 inevitability of the new, 5, 10, 12, 14, 15 life expectancy of, 194 lowered value of, 52, 81, 190 as news outlet, 33, 58 and profitability, 15, 49, 66 promotion as chief function of, 56–58 as reinvention of media business, 42, 168, 194 revenue sources of, 43 and sports, 181–88 digital media (cont.) stalled market of, 58 technology view of, 3, 11, 17, 43, 152–53, 166 traffic sought by, 14, 52, 59, 86 transitory nature of, 23, 194 unregulated, 138 and user satisfaction, 18 as video, 97–98, 109, 139, 157–59, 169 vs. traditional, 1–5, 14, 40, 190–91 as wasteland, 190 Digital Millennium Copyright Act (DMCA), 148 direct marketing, 55–56, 69–70, 86 Discovery Channel, 117 Disney, 60, 61, 102, 116, 117, 154, 185 dongle streaming device, 110, 111 dot-com crash, 65, 66, 134, 148 DoubleClick, 72 DSL, 133–34, 135 DVDs, 91–92, 111, 190 DVorkin, Lewis, 66–67 DVR, 83, 110, 146 entertainment businesses, 115, 142, 146, 168, 189–90, 192 ESPN, 95, 117, 120, 126, 127, 171, 184–85 Ethernet, 109 Everson, Carolyn, 40–41 Facebook, 86, 195 advertising on, 40–41, 161 and BuzzFeed, 59, 60, 102 News Feed, 33, 36–37, 157 rise of, 26, 117, 130–31 social strategy of, 52–53 and television, 157–62 as utility, 41, 42, 43 video on, 44, 158–62 FCC, 141–44, 174, 175 fiber optics, 135 Final Cut Pro, 62 Food Network, 21–22 Forbes, 57–58, 65–67, 161 Fox Broadcasting Company, 97 Fox Interactive Media, 20 Fox Network, 118, 120, 183, 185 Fox News Channel, 32, 35, 119 Freston, Tom, 62, 117, 126 Galloway, Scott, 99 Gannett, 116 Gawker media, 33, 193–97 generation gap, 13, 26 Godard, Jean-Luc, 31 Google, 42, 43, 52, 112 AdSense, 59 and Android, 102, 110 and digital vs. old media, 4, 40, 195 and DoubleClick, 72 income sources of, 26 and search engine wars, 15–16, 53 and sports, 181, 186 and traffic gaming, 59 and Yahoo, 16, 20 and YouTube, 1, 96, 147–49, 151–55, 158, 160 Google Chromecast, 110 Google News, 33 Greenfield, Richard, 96 Grey, Brad, 2 Guardian, The, 13 Hastings, Reed, 92–93, 98, 142, 187 HBO, 64, 95, 98, 100, 114, 117, 125, 126, 127, 130, 132, 171, 176, 177 Hearst, 61, 116, 117 Herzog, Doug, 2 Hirschhorn, Jason, 95 Hoffner, Jordon, 2 Holt, Dennis, 48 House of Cards, 94 Huffington, Arianna, 11–12, 34, 58–59 Huffington Post, The, 12, 18, 34, 58, 66, 189 Hughes, Chris, 196–97 Hulu, 5, 161 Icahn, Carl, 130, 132 information: bare minimum level of, 52 branding, 52 as currency, 32 personalized, 157, 158 real value of, 123 sources of, 52 surgical selection of, 51 too much, 35–36 transient nature of, 37 wanting to be free, 123, 124, 167, 189–90 intellectual property, 146–49, 194 Internet: bundling, 177–78 and cable, 125, 129, 130, 135 free, 123, 124, 139–41 moralistic intensity of, 191–92 “net neutrality,” 138–44 and OTT, 113 publishing, 65–66 and television, 91, 108, 111, 112, 139 two-speed, 143 and video, 26, 145, 159 Internet protocol (IP), 92, 94, 109, 110–11, 134 Jarvis, Jeff, 11 Jobs, Steve, 101–4, 105 Johansson, Scarlet, 2 journalists, technology, 10–11, 13 Kvamme, Mark, 2, 3 Kyncl, Robert, 96 Lauer, Matt, 21 Lerer, Ken, 11, 12, 58 Levinsohn, Ross, 20 licensing formats, 119–20, 126 LL Cool J, 2 Loeb, Dan, 19–20 magazines, 21, 56, 86, 104, 116 attention demands of, 71 CPMs, 52, 65, 66, 71–72, 73 production and distribution costs, 71 revenue sources, 48, 54, 115, 124 space limitations of, 72 Maker Studios, 154 Mann, Michael, 2 Martin, Laura, 175 Mayer, Marissa, 20–21 McCain, John, 174 McConaughey, Matthew, 2 McFee, Abigail, 27 McLuhan, Marshall, 107 media: advertising in, 18, 21, 52 and Apple, 101–3 audience for, 16–17, 40, 72 bundling/unbundling, 171–78 and consumer behavior, 12 content costs of, 165–67, 189 crossover executives in, 17, 20 deal-making in, 93 digital, see digital media disrupted paradigm of, 83 as entertainment, 31, 85 generation gap in, 13 hierarchical business of, 11 income sources for, 16 licensing and distribution, 104 low- vs. high-end, 85–88, 165, 187 and marketing, 64 mass, 39, 123, 195 as narrative, 31, 67 news outlets, 12, 18, 31–37 new world market for, 85 no-cost, 43 ownership trade-offs, 126–27 pirated, 146–49, 172 quest for new medium, 12 removing salesmen from, 76 and scarcity premium, 72, 76 and sports, 181–88 streaming media devices, 109–10 as television, 118, 121 traditional, value of, 4, 71 transformation of, 12–14 user-supported content, 127–28, 147–49, 190 as zero-sum game, 4, 23–24 media brand, 51 media business, 115–16 media buyer, 48 Microsoft, 16 Microsoft Xbox, 110 Milken, Michael, 11 Milner, Yuri, 43, 160 mobiles, 74, 102–3 Moonves, Les, 9–10, 12, 97, 131–32, 135–36 Morris, Kevin, 1–4 movies, 115, 123, 124, 146 MSN, 18, 33 MTV, 126, 130 Murdoch, Elisabeth, 119 Murdoch, James, 61, 119–20 Murdoch, Rupert, 103–4, 116–21 music industry, 1, 101–3, 146–47, 172, 173–74 Myspace, 20, 95, 117, 118 Napster, 146, 147 Nathanson, Michael, 25–26 NBC, 130, 132, 143, 160, 185 Netflix, 91–94, 97, 98–100, 139–40, 142–44, 155, 161, 169, 176, 177, 190 “net neutrality,” 138–44 Netscape, 39, 97 New Republic, The, 196–97 news: anchormen [-women] of, 35 as branding device, 59 declining value of, 34, 37, 168 economic triage of, 33 and elections, 59, 60 lower-cost, 32, 33, 35 media outlets for, 31–37, 58, 65 monetizing, 64 network, 35 as public good, 32 as reality, 31 repetitive, 33, 36 as storytelling, 31, 32 ubiquity of, 34 unprofitability of, 34, 35 and Vice, 63–64 News Corp, 20, 116, 117, 118 newspapers: attention demands of, 71 classified ads, 69, 115 consolidation of, 116 digital replacement of, 24–25, 167 entertainment supplements, 34 income sources of, 69, 124 local retailers publicized in, 115 nineteenth-century, 123 personalized, 33, 36–37 production and distribution costs, 71 space limitations of, 72 Web similarity to, 18, 33, 189 New Yorker, 94–100 New York magazine, 47, 48, 53, 61 New York Times, The, 12–13, 27, 35, 63, 73, 78, 165, 166 Nickelodeon, 95, 130 Nintendo Wii, 110 Oliver, John, 141 OTT (over-the-top) content venues, 84, 94, 100, 108, 109, 111–14, 130, 161, 175, 176–77 Outbrain, 53, 197 Paley, William, 160 Paramount Pictures, 2 Peretti, Jonah, 53, 58–59 pirated media, 146–49, 172 Pittman, Bob, 126 platform function, 93, 158, 161 Politico, 189 portal wars, 15 POTS (plain old telephone service), 135 programmatic buying, 73 publishing: business of, 55, 56, 115 Internet, 65–66 print, 66, 172 radio, 115, 116, 124 Redstone, Sumner, 121, 126, 147 Reilly, Kevin, 2 ReplayTV, 83 Roberts, Brian, 10 Rodman, Dennis, 64 Rogers Communications, 65 Roku, 109, 113 Rubicon Project, 75 Rutledge, Tom, 113 Saffo, Paul, 96–97 Sandberg, Sheryl, Lean In, 41 Scripps Networks, 21–22 search engine optimization (SEO), 51–53, 73 search engine wars, 15–16, 51, 53 Sears, Jay, 75–76, 80 Semel, Terry, 17 Sequoia Capital, 2 Showtime, 98, 177 60 Minutes, 64 smart phones, 105–6, 110, 111 smart TVs, 111, 113 Smith, Ben, 23 Smith, Shane, 62, 63–65 Snyder, Gabriel, 197 social media, 56–57, 62, 73, 158 Sony PlayStation, 110 Sorrell, Martin, 61, 99 South Park, 64 Spacey, Kevin, 94 sports events, 85, 181–88 Starz, 92, 93 Stewart, Adam, 2 Stone, Matt, 2, 4, 5 storytelling, 16, 31–32, 152, 190, 191, 199 Super Bowl, 23, 85 Supreme Court, U.S., 112 Swisher, Kara, 11 tablets, 103–6, 111 TCV, 61, 63 telephone companies (telcos), 135, 140–41, 177 television: advertising on, 24, 25, 40, 70, 79–80, 83–84, 99–100, 115, 119, 125, 129 anti-television views, 39–40 attention demands of, 71 as box, 107–8, 111, 113–14 broadcast, 108, 112, 132, 168 and bundling/unbundling, 173–75 cable networks, 95–96, 99–100, 109, 119, 124–25, 131–32, 139, 172, 184 comparisons with, 39, 167, 191–92, 197–98 and computers, 105, 108, 110, 111 deadwood on, 19 digital’s perceived threat to, 23, 25–27, 42–43 as distribution channel, 28, 94 entertainment, 111, 114, 190 evolution of, 190, 197–99 expanding, 94–96, 99–100, 107, 111–12, 120, 124, 132 and Facebook, 157–62 and family values, 191 free, 123 geographical organization of, 92 golden age of, 172 government regulation of, 137–38, 175 HDMI port, 110 income sources of, 24, 25, 28, 85, 93, 96, 99–100, 115, 117 and Internet, 91, 108, 111, 112, 139 licensing deals, 93, 97, 112, 126 as model, 21, 28, 58, 59, 64–65, 99–100, 114, 118, 168, 198 and Netflix, 91, 93–94 networks, 47, 64, 80, 131 pay for, 113, 124–28 prime time, 79–81, 96 profitability of, 4, 24 programming schedule, 83, 114, 128 ratings wars, 183 reality, 111–12, 191 as reborn industry, 96, 132, 191–92, 199 share price multiple, 40 smart TVs, 111, 113 and sports, 181–88 steady, old-fashioned nature of, 9–10, 24, 27 and storytelling, 16, 190, 191, 199 syndication, 96, 176 undifferentiated inventory supply, 79 value of, 85, 121, 198–99 and video, 96–97, 98, 108–9, 141–42, 145–46, 152–55, 158, 165–69 Thompson, Scott, 19 Time Inc., 159 Time Warner, 11, 61, 64–65, 116, 117, 119–21, 126, 130, 132, 159 Time Warner Cable (TWC), 120, 130, 135–36, 143, 185 TiVo, 83, 110 traffic: aggregation methods, 18–19, 50–51, 59, 66, 190, 195–96 audience as, 18–19, 49–53 exchanges of, 53 pumping, 73 traffic arbitrage, 52, 66 traffic loop aggregators, 73 transcendence, 42 transformation: inevitability of, 10, 12–13 print to digital, 65–67 as shell game, 66 Tribune, 116 True/Slant, 66–67 Turner, Ted, 126, 127 Turner Broadcasting, 117, 126, 127, 130, 132 21st Century Fox, 61, 118–21, 126 Twitter, 26, 33 unbundling, 171–78 utilities, 41–42 Verizon FiOS, 97, 135, 177 Viacom, 3, 116, 117, 118, 121, 126, 129, 130, 131, 147–49, 152 Vice, 57–58, 61–65, 67 video: ads on, 63, 158, 167 amateur (cheap), 167 and BuzzFeed.

The System: Who Rigged It, How We Fix It by Robert B. Reich

"World Economic Forum" Davos, Adam Neumann (WeWork), affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, Bernie Madoff, Bernie Sanders, Big Tech, Boeing 737 MAX, business cycle, Carl Icahn, clean water, collective bargaining, Cornelius Vanderbilt, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, crony capitalism, cryptocurrency, Donald Trump, ending welfare as we know it, financial deregulation, Glass-Steagall Act, Gordon Gekko, green new deal, Greta Thunberg, immigration reform, income inequality, independent contractor, Jeff Bezos, job automation, junk bonds, London Whale, Long Term Capital Management, market fundamentalism, mass incarceration, Michael Milken, mortgage debt, Occupy movement, opioid epidemic / opioid crisis, Paris climate accords, peak TV, Ponzi scheme, race to the bottom, Robert Bork, Ronald Reagan, Savings and loan crisis, shareholder value, Sheryl Sandberg, stock buybacks, too big to fail, trickle-down economics, union organizing, WeWork, women in the workforce, working poor, zero-sum game

In the last forty years, the opposite has occurred: The middle class has shrunk, democracy is too often malfunctioning, and the nation has turned its back on climate change, poverty, widening inequality, and the evils of racism and xenophobia. As I’ve said, the economy doesn’t have to be a zero-sum game in which winners do better only to the extent losers do worse. But power is necessarily a zero-sum game. Certain people possess it only to the extent other people don’t. Some people gain it only when others lose it. The connection between the economy and power is critical. As power has concentrated in the hands of a few, those few have grabbed nearly all the economic gains for themselves.

…

All this has been accompanied by a dramatic increase in the political power of the super-wealthy and an equally dramatic decline in the political influence of everyone else. As I will show, the average American now has no effect on public policy. Big corporations, CEOs, and a handful of extremely rich people have more influence than any comparable group since the robber barons. Unlike income or wealth, power is a zero-sum game. The more of it there is at the top, the less there is anywhere else. This power shift is related to a tsunami of big money into politics. In the election cycle of 2016, the richest one-hundredth of 1 percent of Americans—24,949 extraordinarily wealthy people—accounted for a record-breaking 40 percent of all campaign contributions.

Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim, Renée A. Mauborgne

Asian financial crisis, Blue Ocean Strategy, borderless world, call centre, classic study, cloud computing, commoditize, creative destruction, disruptive innovation, endogenous growth, Ford Model T, haute couture, index fund, information asymmetry, interchangeable parts, job satisfaction, Joseph Schumpeter, Kickstarter, knowledge economy, machine translation, market fundamentalism, NetJets, Network effects, RAND corporation, Salesforce, Skype, telemarketer, The Wealth of Nations by Adam Smith, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Vanguard fund, zero-sum game

And so strategy, as is commonly practiced, tees off with industry analysis—think five forces or its distant precursor SWOT analysis—where strategy is about matching a company’s strengths and weaknesses to the opportunities and threats present in the existing industry. Here strategy perforce becomes a zero-sum game where one company’s gain is another company’s loss, as firms are bound by existing market space. Blue ocean strategy, by contrast, shows how strategy can shape structure in an organization’s favor to create new market space. It is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players.

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Buyers prove that as they trade across alternative industries, refusing to see or be constrained by the cognitive boundaries industries impose upon themselves. And firms prove that as they invent and reinvent industries, collapsing, altering, and going beyond existing market boundaries to create all new demand. In this way, strategy moves from a zero-sum to a non-zero-sum game, and even an unattractive industry can be made attractive by companies’ conscious efforts. Which is to say a red ocean need not stay red. This brings us to a third point of distinction. Strategic creativity can be unlocked systematically. Ever since Schumpeter’s vision of the lone and creative entrepreneur, innovation and creativity have been essentially viewed as a black box, unknowable and random.3 Not surprisingly, with innovation and creativity viewed as such, the field of strategy predominantly focused on how to compete in established markets, creating an arsenal of analytic tools and frameworks to skillfully achieve this.

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Taking market structure as given, it drives companies to try to carve out a defensible position against the competition in the existing market space. To sustain themselves in the marketplace, practitioners of strategy focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Here, grabbing a bigger share of the market is seen as a zero-sum game in which one company’s gain is achieved at another company’s loss. Hence, competition, the supply side of the equation, becomes the defining variable of strategy. Such strategic thinking leads firms to divide industries into attractive and unattractive ones and to decide accordingly whether or not to enter.

The Perfect Bet: How Science and Math Are Taking the Luck Out of Gambling by Adam Kucharski

Ada Lovelace, Albert Einstein, Antoine Gombaud: Chevalier de Méré, beat the dealer, behavioural economics, Benoit Mandelbrot, Bletchley Park, butterfly effect, call centre, Chance favours the prepared mind, Claude Shannon: information theory, collateralized debt obligation, Computing Machinery and Intelligence, correlation does not imply causation, diversification, Edward Lorenz: Chaos theory, Edward Thorp, Everything should be made as simple as possible, Flash crash, Gerolamo Cardano, Henri Poincaré, Hibernia Atlantic: Project Express, if you build it, they will come, invention of the telegraph, Isaac Newton, Johannes Kepler, John Nash: game theory, John von Neumann, locking in a profit, Louis Pasteur, Nash equilibrium, Norbert Wiener, p-value, performance metric, Pierre-Simon Laplace, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, random walk, Richard Feynman, Ronald Reagan, Rubik’s Cube, statistical model, The Design of Experiments, Watson beat the top human players on Jeopardy!, zero-sum game

Von Neumann called it the “minimax” problem and wanted to prove that both players could find an optimal strategy in this tug-of-war. To do this, he needed to show that each player could always find a way to minimize the maximum amount that could potentially be lost, regardless of what their opponent did. One of the most prominent examples of a zero-sum game with two players is a soccer penalty. This ends either in a goal, with the kicker winning and the goalkeeper losing, or a miss, in which case the payoffs are reversed. Keepers have very little time to react after a penalty is taken, so generally make their decision about which way to dive before the kicker strikes the ball.

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While the fiery debate between von Neumann and Fréchet sparked and crackled, John Nash was busy finishing his doctorate at Princeton. By establishing the Nash equilibrium, he had managed to extend von Neumann’s work, making it applicable to a wider number of situations. Whereas von Neumann had looked at zero-sum games with two players, Nash showed that optimal strategies exist even if there are multiple players and uneven payoffs. But knowing perfect strategies always exist is just the start for poker players. The next problem is working out how to find them. MOST PEOPLE WHO HAVE a go at creating poker bots don’t rummage through game theory to find optimal strategies.

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., 47–48 Metropolis, Nicholas, 61, 63–64, 168–169, 180 Mezrich, Ben, 214 Michigan Lottery, 30 Midas algorithm, 87, 88, 89 Milgram, Stanley, 13 Miller, George, 179 Millman, Chad, 102 mind-set, 209 minimax approach, 145, 147–148, 155 minor sports, benefit of focusing on, 107 MIT gambling course, 213–214 MIT Sloan Sports Analytics Conference, 85, 105, 107 mixed strategies, 142–143, 147 Monte Carlo fallacy, 6, 200 Monte Carlo method, 61–62, 63, 64, 83, 178–179, 217 Morgenstern, Oskar, 139, 150, 181–182 mortgage loan crisis, 96–97 multiple regression, 49 Munchkin, Richard, 72, 214 Nadal, Rafael, 110 NASCAR, 107 Nash, John, 137, 148–149, 158 Nash equilibrium, 137–138, 148–149, 151, 154, 160, 161, 181, 183, 184, 185, 187 National Academy of Sciences, 133 Nature (journal), 48, 49, 51 NBA, 85 near-equilibrium strategies, 152–153, 153–154 neural networks, 173–174 new data, testing strategies against, 53, 54 New England Patriots, 88 new games, advantages in, 72–73 New York Stock Exchange, 117 New York Times (newspaper), 101, 172, 177, 178, 180 New Yorker (magazine), 143 newsfeeds, 120, 122, 133–134 NFL, 103, 209 NHL, 85, 205 no-limit poker, 189, 195 “nonlinear” trajectory, 12 Oakland A’s, 209 Occam’s razor, 53 Oller, Joseph, 44 online betting, 90 online blackjack, 71–73 online gambling, advantages of, 72–73, 90, 107, 132 online poker sites, 192–193, 194, 195, 198, 200 online security, 195 Onside Analysis, 78, 105 opponent modeling, 163, 181, 184, 187 optimal strategies in bankroll management, 65–67 in blackjack, 36–37, 40, 72 in checkers, 158 in chess, 161, 202 in get-so-many-in-a row-style games, 158–159 in poker, 143–144, 145, 147, 149, 151, 152, 153, 160, 161, 177, 181, 184, 188, 208 in rock-paper-scissors, 143, 178, 180 in soccer, 146, 147 and stock/financial markets, 161 See also game theory; perfect strategies “Optimum Strategy in Blackjack, The” (Baldwin, Cantey, Maisel, and McDermott), 37 order-routing algorithms, 115 Osipau, Andrei, 72 overestimating, 98 overlays bias, 56 oversimplification, 212 Packard, Norman, 14, 20, 120 Palacios-Heurta, Ignacio, 146, 147 panic, 99, 133 pari-mutuel betting system, 43–45, 66, 114 Pascal, Blaise, 10 Pasteur, Louis, 202 patience and ingenuity, 218 PDO statistic, 205 Pearson, Karl, 4–7, 15, 24, 46–47, 48–49, 54, 61, 217 Pentagon, 92 perfect bet, story of the, 218 perfect strategies, 37, 53, 146, 149, 154, 159, 160, 168, 187 See also optimal strategies performance measurement, 85, 102–105, 208–209 physical bias, 7, 8, 21 Picasso, Pablo, 209–210 Pinnacle Sports, 91–92, 93 Poincare, Henri, 2–3, 8–9, 9–10, 11, 12, 21, 22, 40, 41, 46, 62, 63, 127, 217 Poisson, Siméon, 75 Poisson process, 75–76, 78 poker abstractions and, 212 analysis of the endgame in, 143 applying game theory to, 141, 148, 181, 183 bankroll management in, 144–145 basic options in, 138–139, 142 behaviors in, 191–192 coalitions in, 181–183 combined approach to, 208 heads-up, 172, 186, 188, 195 incomplete information in, 168 in Internet chat rooms, 142 as less vulnerable to brute force methods, 171 limited-stakes, 172, 177, 185, 187, 189 luck versus skill in, 198–200, 201, 215 more options in, complexity of, 142 near-equilibrium strategy for, 152–153, 153–154 no-limit, 189, 195 optimal strategy in, 143–144, 145, 147, 149, 151, 152, 153, 160, 161, 177, 181, 184, 188, 208 potential for errors in, 160 prediction in, 163 randomness in, 152, 156 robot players in, 135–136, 149–150, 151, 153, 154, 161, 163, 167–168, 172, 173, 175, 176–177, 182, 184, 185–189, 190, 192–196, 212, 217 scientific idea inspired by, 217 Texas hold’em, 140–141, 151–152, 172, 177, 185–186, 187–188 university course studying, 214–215 well-known research into, 169 World Series, 140–141 as a zero-sum game, 145, 181 poker boom, 198 poker face, optimal, 192 poker industry, 198 poker websites. See online poker sites Polaris poker bot, 185–186 Polaris 2.0, 186–187 policy analysis market, 92 Poots, Brendan, 97, 98, 99, 100, 104 popularity, randomness of, 203–204 populations, 125–129 Power Peg program, 118 Powerball, 29 predator-prey relationships, 129–130 Prediction Company, 120, 131 predictions baseball and, 87, 88 basketball and, 82, 85–86 blackjack and, 40, 42 bookmakers and, 91–92, 93 checkers and, 156, 157 comparing, against new data, 53, 54 computerized, 2, 13, 14, 15–20, 22, 46, 51, 61, 68, 80–82, 87, 88, 89–90, 97, 105, 156, 157, 217 degree of ignorance and, 3, 8 external disruptions as a factor in, 19–20 focus in making, 205–206 football and, 79, 82, 87, 88 golf and, 84–85 horse racing and, 46, 49–50, 51–54, 55–58, 64, 68, 69, 74, 206, 207, 216, 218 hydrogen bomb building and, 59, 61 opponent behavior and the need for, 163 poker and, 163 problem with explaining, 206–207 roulette and, 2, 3–4, 5–8, 10–11, 12–13, 14, 15–20, 21–22, 124, 127, 162, 210–211, 218 soccer and, 73–79, 82, 86, 90, 97–98, 98–99, 218 weather and, 9, 13, 53 of worst-case scenarios, 74 Preis, Tobias, 96 Premium Bonds, 204 Priomha Capital, 97, 99, 100, 101 prisoner’s dilemma, 137–138, 160 probability basic, successful strategies go beyond, 208 in blackjack, 36 of default on a home loan, 96 different conclusions about, 212 of ecosystem survival, 128 in horse racing, 45, 46, 51, 56–57, 58, 66, 206, 207 in lotteries, 32, 98 in poker, 138, 152, 171, 208 in rock-paper-scissors, 143 in roulette, 6, 17–18, 98 in soccer, 75, 146, 147, 209 in solitaire, 60 weighing against, 216 probability theory, 73, 132, 216–217 professional sports bettors, 102 proof by contradiction, 158–159 pseudorandom numbers, 61 psychological bias, 6, 98 psychology, 171, 177, 189, 208 pure strategies, 142, 143, 147, 152 qualitative information, 105 quality measurement, 50–51, 74 quantitative information, 105 raising, 143 Random Strategies Investments, LLC, 30 randomness as an abstraction, 210–211, 212 in basketball, 85 in blackjack, 38, 40, 41, 42, 71, 212 in chess, 168, 176, 202 in coin tosses, 199 collecting data on, 4–8 controlled, 25–26, 28 in ecosystems, 128, 129 generating, in game moves, 179 in golf, 84 and the infinite monkey theorem, 156–157 logistic map and, 126 Monte Carlo method and, 61 nonrandom patterns in, 178–179 in poker, 152, 156 of popularity, 203–204 in rock-paper-scissors, 143, 178, 181 in roulette, 2, 3–4, 5–8, 9, 10–11, 12–13, 15–20, 21–22, 38, 162, 178–179, 202, 212 and uniform distribution, 41 rationality, 123–124, 160 reality, model of, 211, 212 rebates, 69 recruitment teams, 73 regression analysis, 47–49, 50, 52, 79, 106, 206 regression to mediocrity, 47, 48–49, 205 regression to the mean, 106 regret minimization, 152–154, 187–188 regulation, 91, 101, 133 Reinhart, Vincent, 133 Retail Liquidity Program, 117 risk, 32, 36, 65, 66, 78, 95, 96, 99, 102, 120, 133, 144–145, 153, 156, 171, 184, 216 Ritz Club, 1–2, 20, 21 Robinson, Michael, 97–98 robots (bots) and the ability to learn, 151, 161, 163, 173, 174, 176, 177, 187, 188, 190, 217 in backgammon, 172–173 betting exchanges and, 112–113, 116–117 as bookmakers, 130 in checkers, 155–156, 157–158, 159–160, 167, 168, 190 in chess, 166, 167, 168, 171, 176, 189, 190 cognitive, other useful applications for, 166, 188 different types of, 129–130 faulty, 116–117, 118, 119, 120 in horse racing, 115–117 hybrid, 184 in Jeopardy!

Digital Barbarism: A Writer's Manifesto by Mark Helprin

Albert Einstein, anti-communist, Berlin Wall, carbon footprint, computer age, cotton gin, crowdsourcing, Easter island, hive mind, independent contractor, invention of writing, Jacquard loom, lateral thinking, plutocrats, race to the bottom, semantic web, Silicon Valley, Silicon Valley ideology, the scientific method, Yogi Berra, zero-sum game

Intellectual works are abstract concepts and do not naturally operate as zero sum [sic] games.”91 This business about zero-sum games is repeated as gospel in the documents of the anti-copyright movement, notably in the Lessig (“Wow!…I would have focused the attack in much the same way”92) wiki.93 Of course, property does not “operate” as a game or anything else, and intellectual works are not “concepts,” but that is beside the point. This off-kilter allusion fails to recognize the very nature of replicability that it is intended to address. According to the logic presented, if Arthur Miller opened Death of a Salesman on Broadway, because it is not physical property and not a “zero-sum game,” I could therefore justifiably rent a theater across the street and put on Death of a Salesman, charging less, because I would not have had to go through the trouble of writing it.

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That this book was written in sight of Monticello makes honoring Jefferson by separating him from false claimants especially gratifying. The chapter also deals with some of the peculiar “microeconomic” arguments the opponents of copyright present, such as that copyright is a monopoly, a tax, and a gratuitous imposition upon a non-zero-sum game, all of which make it an inhibition to art. A machine that can print books individually, on demand, quickly, and at little cost is actually at work now. “The Espresso Book Machine,” Chapter four, considers the evolution of the technology that has given rise to the movement against copyright, and how the forces and capabilities that ushered-in the battle can almost effortlessly usher it out and make it moot.

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In the same vein, nothing would be amiss were the butcher, the baker, and the candlestick maker to sleep with Queen Victoria, because Prince Albert’s enjoyment would not be lessened—and, indeed in some quarters might conceivably be heightened—for the same reason that sexual pleasure, abstract in nature and wholly within the mind, is not a zero-sum game. The inapplicability of this strain of game theory to the notion it supposedly clarifies or impeaches is stunning. Let us say someone opens a golf course. Some people pay to use it. Others sneak on to it without paying. What these solons are saying is that because the nonpayers don’t spoil the enjoyment of those who do pay, no harm results.

The Future of Capitalism: Facing the New Anxieties by Paul Collier

"Friedman doctrine" OR "shareholder theory", accounting loophole / creative accounting, Airbnb, An Inconvenient Truth, assortative mating, bank run, Bear Stearns, behavioural economics, Berlin Wall, Bernie Sanders, bitcoin, Bob Geldof, bonus culture, business cycle, call centre, central bank independence, centre right, commodity super cycle, computerized trading, corporate governance, creative destruction, cuban missile crisis, David Brooks, delayed gratification, deskilling, Donald Trump, eurozone crisis, fake news, financial deregulation, full employment, George Akerlof, Goldman Sachs: Vampire Squid, greed is good, income inequality, industrial cluster, information asymmetry, intangible asset, Jean Tirole, Jeremy Corbyn, job satisfaction, John Perry Barlow, Joseph Schumpeter, knowledge economy, late capitalism, loss aversion, Mark Zuckerberg, minimum wage unemployment, moral hazard, negative equity, New Urbanism, Northern Rock, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, race to the bottom, rent control, rent-seeking, rising living standards, Robert Shiller, Robert Solow, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, too big to fail, trade liberalization, urban planning, web of trust, zero-sum game

Some behaviours of the highly skilled need to be curbed because they are predatory: the ability to win a ‘tournament’ can bring huge private gains at the expense of those who lose. Too many of our most talented people devote their abilities to such zero-sum games, while activities such as innovation, with large benefits for the entire society, are drained of talent. The sectors most prone to zero-sum games should be taxed more heavily than those in which little of the benefit accrues to those working in them. Narrowing the global divide between the rich societies of the world and those still stuck in poverty demands more than a big heart.

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Most strikingly, ‘patriotism’ gets these favourable responses across all age groups, and across people clustered into their otherwise disquietingly divergent political and social preferences. Patriotism is also sharply distinguished from nationalism in how nations behave towards each other. The discourse used by nationalists, bragging about putting their country ‘first’, portrays international relations as a zero-sum game in which the winner is the one that is the most inflexible. Patriotism, as exemplified by President Macron, promotes a discourse of co-operation for mutual benefit. He is quite explicitly seeking to build new reciprocal commitments within Europe on economic matters, within NATO on the security of the Sahel, and globally on climate change.

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This seems unlikely: would we really notice that much difference, were our financial sectors leaner? What is true of asset managers is true of lawyers. Willem Buiter, former Chief Economist for Citigroup, puts it aptly: the first third of lawyers produce the immense social value we know as the ‘rule of law’. The next third are working on legal disputes that are essentially zero-sum games: each side over-invests in winning the tournament and so they are socially useless. The rule of law is a huge public good, but no commercial lawyers are working to achieve ‘justice’; they work to win a case in a tournament. The last hour of such legal effort purchased by a party to a legal dispute yields its return not by generating more justice, but by increasing the chances of winning the tournament at the expense of the other party.

Darwin Among the Machines by George Dyson

Ada Lovelace, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, anti-communist, backpropagation, Bletchley Park, British Empire, carbon-based life, cellular automata, Charles Babbage, Claude Shannon: information theory, combinatorial explosion, computer age, Computing Machinery and Intelligence, Danny Hillis, Donald Davies, fault tolerance, Fellow of the Royal Society, finite state, IFF: identification friend or foe, independent contractor, invention of the telescope, invisible hand, Isaac Newton, Jacquard loom, James Watt: steam engine, John Nash: game theory, John von Neumann, launch on warning, low earth orbit, machine readable, Menlo Park, Nash equilibrium, Norbert Wiener, On the Economy of Machinery and Manufactures, packet switching, pattern recognition, phenotype, RAND corporation, Richard Feynman, spectrum auction, strong AI, synthetic biology, the scientific method, The Wealth of Nations by Adam Smith, Turing machine, Von Neumann architecture, zero-sum game

This conclusion has profound but mathematically elusive consequences; many complexities of nature, not to mention of economics or politics, can be treated formally as games. A substantial section of the 625-page book is devoted to showing how seemingly intractable situations can be rendered solvable through the assumption of coalitions among the players, and how non-zero-sum games can be reduced to zero-sum games by including a fictitious, impartial player (sometimes called Nature) in the game. Game theory was applied to fields ranging from nuclear deterrence to evolutionary biology. “The initial reaction of the economists to this work was one of great reserve, but the military scientists were quick to sense its possibilities in their field,” wrote J.

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Having suffered the first of a series of misfortunes that would follow him through life, Ampère saw games of chance as “certain ruin” to those who played indefinitely or indiscriminately against multiple opponents, “who must then be considered as a single opponent whose fortune is infinite.”4 He observed that a zero-sum game (where one player’s loss equals the other players’ gain) will always favor the wealthier player, who has the advantage of being able to stay longer in the game. Von Neumann’s initial contribution to the theory of games, extending the work of Émile Borel, was published in 1928. Where Ampère saw chance as holding the upper hand, von Neumann sought to make the best of fate by determining the optimum strategy for any game.

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“The average daily transactions in the London Bankers’ Clearing House amount to about twenty millions of pounds sterling, which if paid in gold coin would weigh about 157 tons,” reported Stanley Jevons in 1896.46 John von Neumann, although halted in midstream, was working toward a theory of the economy of mind. In the universe according to von Neumann, life and nature are playing a zero-sum game. Physics is the rules. Economics—which von Neumann perceived as closely related to thermodynamics—is the study of how organisms and organizations develop strategies that increase their chances for reward. Von Neumann and Morgenstern showed that the formation of coalitions holds the key, a conclusion to which all observed evidence, including Nils Barricelli’s experiments with numerical symbioorganisms, lends support.

Green Philosophy: How to Think Seriously About the Planet by Roger Scruton

An Inconvenient Truth, barriers to entry, carbon credits, carbon footprint, carbon tax, Cass Sunstein, Climategate, Climatic Research Unit, corporate social responsibility, demand response, Easter island, edge city, endowment effect, energy security, Exxon Valdez, failed state, food miles, garden city movement, Garrett Hardin, ghettoisation, happiness index / gross national happiness, Herbert Marcuse, hobby farmer, Howard Zinn, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, joint-stock company, joint-stock limited liability company, Kenneth Arrow, knowledge economy, Lewis Mumford, market friction, Martin Wolf, moral hazard, Naomi Klein, New Urbanism, Peter Singer: altruism, phenotype, precautionary principle, rent-seeking, Robert Solow, Ronald Coase, Sam Peltzman, Silicon Valley, Simon Kuznets, tacit knowledge, the built environment, The Death and Life of Great American Cities, the market place, Thomas Malthus, Tragedy of the Commons, transaction costs, University of East Anglia, urban planning, urban sprawl, Vilfredo Pareto, women in the workforce, zero-sum game

And his preferred form of regulation will have an absolute character: an uncompromising ‘no’, in the face of his opponent’s ‘yes and no’. He is playing a zero-sum game; if he wins, his opponent loses, and compromise is out of the question. The example points to a contrast that has been of considerable significance in environmental disputes. Local conflicts – for example, between polluting factories and those living downwind of them, between loggers and hunters, between weekenders and farmers – can often be resolved by discussion. But they will never be resolved if the parties believe themselves to be involved in a zero-sum game. They will be resolved by negotiation and compromise, and a shared willingness to give way for the sake of good relations.

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Conservatives tend to see the campaigning NGOs like Greenpeace and Earth First! not merely as institutions without internal equilibrium, but also as threats to the equilibrium of others, on account of their desire to pin on the big actors blame that should in fact be distributed across us all. And by casting the conflict in the form of a zero-sum game between themselves and the enemy, they obscure what it is really about, which is the accountability of both. It seems to me that the dominance of international decision-making by unaccountable bureaucracies, unaccountable NGOs and multinational corporations accountable only to their shareholders (who may have no attachment to the environment that the corporations threaten) has made it more than ever necessary for us to follow the conservative path.

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The Sierra Club, for example, which opposes all commercial logging in the national forests of America, could never have reached the agreement thrashed out in the Quincy Library, which finally ended the conflict between loggers, residents, farmers and environmentalists over a 2-million-acre patch. For this solution was a compromise, which allowed all parties to have some part of what they wanted.131 Likewise the conflict between hunt-followers and the big animal rights NGOs in Britain was a zero-sum game, pursued to the end through Parliament, when it was obvious to most reasonable observers that the matter concerned local communities who should have sat down together and worked out a compromise acceptable to all. In the next chapter I return to this point, since it is so important in understanding the contours of a viable conservative policy.

The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future by Jeff Booth

3D printing, Abraham Maslow, activist fund / activist shareholder / activist investor, additive manufacturing, AI winter, Airbnb, Albert Einstein, AlphaGo, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, basic income, bitcoin, blockchain, Bretton Woods, business intelligence, butterfly effect, Charles Babbage, Claude Shannon: information theory, clean water, cloud computing, cognitive bias, collapse of Lehman Brothers, Computing Machinery and Intelligence, corporate raider, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, dark matter, deep learning, DeepMind, deliberate practice, digital twin, distributed ledger, Donald Trump, Elon Musk, fiat currency, Filter Bubble, financial engineering, full employment, future of work, game design, gamification, general purpose technology, Geoffrey Hinton, Gordon Gekko, Great Leap Forward, Hyman Minsky, hype cycle, income inequality, inflation targeting, information asymmetry, invention of movable type, Isaac Newton, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, late fees, low interest rates, Lyft, Maslow's hierarchy, Milgram experiment, Minsky moment, Modern Monetary Theory, moral hazard, Nelson Mandela, Network effects, Nick Bostrom, oil shock, OpenAI, pattern recognition, Ponzi scheme, quantitative easing, race to the bottom, ride hailing / ride sharing, self-driving car, software as a service, technoutopianism, TED Talk, the long tail, the scientific method, Thomas Bayes, Turing test, Uber and Lyft, uber lyft, universal basic income, winner-take-all economy, X Prize, zero-sum game

This is the prisoner’s dilemma, one of the most famous examples in game theory. It is an example of a non-zero-sum game, where the actions of each player could make their combined situation better without taking from each other. Zero-sum games are different in that the gains from one person or group must equal the losses from another. An example of that is a cake being shared by ten people. If one person takes a bigger piece of the cake, the remaining nine all have equally smaller shares. The balance of trade in the world discussed in chapter 1 is another example of a zero-sum game in that if you combine all countries’ trade surpluses and deficits, the world’s trade balance must equal zero.

Wealth and Poverty: A New Edition for the Twenty-First Century by George Gilder

accelerated depreciation, affirmative action, Albert Einstein, Bear Stearns, Bernie Madoff, book value, British Empire, business cycle, capital controls, clean tech, cloud computing, collateralized debt obligation, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversified portfolio, Donald Trump, equal pay for equal work, floating exchange rates, full employment, gentrification, George Gilder, Gunnar Myrdal, Home mortgage interest deduction, Howard Zinn, income inequality, independent contractor, inverted yield curve, invisible hand, Jane Jacobs, Jeff Bezos, job automation, job-hopping, Joseph Schumpeter, junk bonds, knowledge economy, labor-force participation, longitudinal study, low interest rates, margin call, Mark Zuckerberg, means of production, medical malpractice, Michael Milken, minimum wage unemployment, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, mortgage debt, non-fiction novel, North Sea oil, paradox of thrift, Paul Samuelson, plutocrats, Ponzi scheme, post-industrial society, power law, price stability, Ralph Nader, rent control, Robert Gordon, Robert Solow, Ronald Reagan, San Francisco homelessness, scientific management, Silicon Valley, Simon Kuznets, Skinner box, skunkworks, Solyndra, Steve Jobs, The Wealth of Nations by Adam Smith, Thomas L Friedman, upwardly mobile, urban renewal, volatility arbitrage, War on Poverty, women in the workforce, working poor, working-age population, yield curve, zero-sum game

It is not the enlargement of incentives and rewards that generates growth and progress, profits for the entrepreneur and revenues for the government, but the expansion of information and knowledge. The competitive pursuit of knowledge is not a dog-eat-dog Darwinian struggle. In capitalism, the winners do not eat the losers but teach them how to win through the spread of information. Far from a zero-sum game, where the successes of some come at the expense of others, free economies climb spirals of mutual gain and learning. Far from a system of greed, capitalism depends on a golden rule of enterprise: The good fortune of others is also your own. Applying to both domestic and international trade and commerce, this golden rule is the moral center of the system.

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This mode of thinking, prominent in foundation-funded reports, bestselling economics texts, newspaper columns, and political platforms, is harmless enough on the surface. But its deeper effect is to challenge the golden rule of capitalism, to pervert the relation between rich and poor, and to depict the system as “a zero-sum game” in which every gain for someone implies a loss for someone else, and wealth is seen once again to create poverty. As Kristol said, a free society in which the distributions are widely seen as unfair cannot long survive. The distributionist mentality thus strikes at the living heart of democratic capitalism.

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This is the secret not only of riches but also of growth. This is also the essential insight of supply-side economics. Government cannot significantly affect real aggregate demand through policies of taxing and spending—taking money from one man and giving it to another, whether in government or out. All this shifting of wealth is a zero-sum game and the net effect on incomes is usually zero, or even negative. Even a tax cut does not work by a direct impact on total disposable incomes, since every dollar of resulting deficit must be financed by a dollar of government debt, paid by the purchaser of federal securities out of his own disposable income.

The London Problem: What Britain Gets Wrong About Its Capital City by Jack Brown

Big bang: deregulation of the City of London, Black Lives Matter, Boris Johnson, coronavirus, COVID-19, Crossrail, deindustrialization, Dominic Cummings, Donald Trump, Edward Glaeser, Etonian, gentrification, gig economy, Gordon Gekko, knowledge economy, lockdown, New Urbanism, Northern Rock, post-war consensus, quantitative easing, remote working, Richard Florida, sceptred isle, superstar cities, working-age population, zero-sum game

In between, both London and the UK had declined economically.68 It has been argued that London’s dominance of the national economy tends to increase in periods of globalisation, and these also tend to be periods in which the entire national economy does well in comparison to other nations or historical trends.69 This appears to be true. However, the idea that economic growth is a zero-sum game, with London required to ‘lose’ for others to gain, or that growth in London has a direct and inverse effect on growth in the rest of the country, has much less of a clear basis.70 While the nature of the national (and global) economy has changed over hundreds of years, the highly centralised nature of the UK’s political system has not.

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And ‘your GDP’ is actually ‘our GDP’: even when generated in London, the benefits are shared across the nation, paying for hospitals, schools, potholes, and bin collections across the country. As Mattinson also observed, some feel that London must lose so that they can gain. This is understandable, but it is also untrue. Regional growth is not a zero-sum game. Damaging London’s economy would hinder, not help, the nation as a whole. Hence the carefully worded phrase ‘levelling up’ – which, as Mattinson also found, is something that people in ‘red wall’ seats say they will believe when they see.21 The ‘fair share’ arguments still stand, though. In October 2020, two-fifths of residents in so-called ‘left behind’ places across the country felt they were getting ‘less than their fair share’ of resources; just 4 per cent felt they got more.22 Contrast this with the one-third of Londoners who agreed with the latter statement.

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, Black Swan, bond market vigilante , bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, Cornelius Vanderbilt, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, Glass-Steagall Act, God and Mammon, Golden arches theory, Gordon Gekko, greed is good, Hyman Minsky, income inequality, industrial research laboratory, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, price stability, principal–agent problem, profit motive, proprietary trading, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

From a more economic perspective, the bias against charging interest is perfectly logical if you bear in mind the context. The mindset stems not so much from a failure to grasp the time value of money as from the nature of a world where minimal or non-existent growth in per capita income was the norm. As the earlier quotation from Aristotle’s Politics implied, without growth, trade struck people as a zero-sum game where it was felt that one man’s profit could only be earned at the cost of inflicting loss on another man. The moral basis of trade thus appeared dubious, while usury, or making money out of money, was still worse. Even the Jews were constrained by their religion in lending to each other at interest, while being permitted to lend to non-Jews.

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Maddison’s work is an extraordinary statistical marathon. While some economists quibble about his methodology, few doubt that the broad picture is correct.14 The move towards a capitalist market economy that had started in the late medieval period thus became truly transformational. Economic activity was no longer perceived as a zero-sum game in which one man’s profit was another’s loss and thus morally questionable. It became easier to make great fortunes from industry and commerce than from the land, even if many landed aristocrats in Europe showed a remarkable tenacity in hanging on to their inherited assets. Wealth became increasingly intangible and the rich were rarely powerful in the military sense.

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His full name, imposed on him by a strongly puritan father, was Nicholas If-Jesus-Christ-Had-Not-Died-For-Thee-Thou-Hadst-Been-Damned Barbon.30 Yet little in his life appears to have been guided by religious principle. He was an early advocate of free markets and a critic of the mercantilists. They were the folk who believed that trade was a zero-sum game and that the way to enhance the prosperity and strength of a country was to boost exports and restrain imports in order to accumulate reserves of gold. His economic writings, of which A Discourse of Trade was the most important, were admired by Keynes, Schumpeter and Marx. He was also a pioneer of fire insurance after the Great Fire of London in 1666 and helped found England’s first mortgage bank.

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, behavioural economics, Berlin Wall, business cycle, colonial rule, company town, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Dr. Strangelove, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, Larry Ellison, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Patri Friedman, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, the strength of weak ties, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Tyler Cowen, women in the workforce, zero-sum game

In game theory von Neumann had crafted a tool that promised to analyze both poker and war. Yet rhetorically pleasing as the analogy is—and delighted as the RAND strategists were with game theory—analytically poker and war had very little in common. Poker is a zero-sum game: One player’s loss is another’s gain. It is also a game with well-defined rules. War is neither well defined nor a zero-sum game. (Nor is life. Von Neumann was too quick to draw the parallel between life and poker.) It is much more desirable to avoid war altogether than to fight a destructive war that does not change the balance of power, so while war is certainly a conflict of interests, there is nothing zero-sum about it.

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If you’re confused, you’re beginning to appreciate the difficulties of von Neumann’s creation. Fundamental to von Neumann’s approach was the assumption that both players were as clever as von Neumann himself. He wanted to understand what infallible play looked like, and his answer can, in principle, be applied to any two-player “zero-sum” game, including poker, where one player’s loss is the other player’s gain. But in practice, there are two problems. The first is that the game may be so complex that even the fastest computer could not calculate the perfect strategy. The poker model is a perfect illustration of why game theory began to feel like such a disappointment in the real world.

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Thomas Schelling was just one of many cold war intellectuals at RAND, the air force’s research arm, using von Neumann’s game theory to dissect the possibilities of an event nobody had yet experienced: thermonuclear war. Applying a theory of poker to try to understand the project of mutual annihilation may seem unhinged, but that is exactly what von Neumann and his disciples did. The theory of zero-sum games wasn’t up to the job, as we’ll shortly see. But how else to develop nuclear strategy? Practicing was not an option, while history, fortunately, could provide no exact parallels. Von Neumann demanded an aggressive approach. Coincidentally or not, his mathematical analysis backed his instinctive hatred of the Soviet Union, the occupier of his native Hungary.

Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy by George Gilder

23andMe, Airbnb, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, AlphaGo, AltaVista, Amazon Web Services, AOL-Time Warner, Asilomar, augmented reality, Ben Horowitz, bitcoin, Bitcoin Ponzi scheme, Bletchley Park, blockchain, Bob Noyce, British Empire, Brownian motion, Burning Man, business process, butterfly effect, carbon footprint, cellular automata, Claude Shannon: information theory, Clayton Christensen, cloud computing, computer age, computer vision, crony capitalism, cross-subsidies, cryptocurrency, Danny Hillis, decentralized internet, deep learning, DeepMind, Demis Hassabis, disintermediation, distributed ledger, don't be evil, Donald Knuth, Donald Trump, double entry bookkeeping, driverless car, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fake news, fault tolerance, fiat currency, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, floating exchange rates, Fractional reserve banking, game design, Geoffrey Hinton, George Gilder, Google Earth, Google Glasses, Google Hangouts, index fund, inflation targeting, informal economy, initial coin offering, Internet of things, Isaac Newton, iterative process, Jaron Lanier, Jeff Bezos, Jim Simons, Joan Didion, John Markoff, John von Neumann, Julian Assange, Kevin Kelly, Law of Accelerating Returns, machine translation, Marc Andreessen, Mark Zuckerberg, Mary Meeker, means of production, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, move fast and break things, Neal Stephenson, Network effects, new economy, Nick Bostrom, Norbert Wiener, Oculus Rift, OSI model, PageRank, pattern recognition, Paul Graham, peer-to-peer, Peter Thiel, Ponzi scheme, prediction markets, quantitative easing, random walk, ransomware, Ray Kurzweil, reality distortion field, Recombinant DNA, Renaissance Technologies, Robert Mercer, Robert Metcalfe, Ronald Coase, Ross Ulbricht, Ruby on Rails, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Singularitarianism, Skype, smart contracts, Snapchat, Snow Crash, software is eating the world, sorting algorithm, South Sea Bubble, speech recognition, Stephen Hawking, Steve Jobs, Steven Levy, Stewart Brand, stochastic process, Susan Wojcicki, TED Talk, telepresence, Tesla Model S, The Soul of a New Machine, theory of mind, Tim Cook: Apple, transaction costs, tulip mania, Turing complete, Turing machine, Vernor Vinge, Vitalik Buterin, Von Neumann architecture, Watson beat the top human players on Jeopardy!, WikiLeaks, Y Combinator, zero-sum game

In Japan, people know how to cooperate with each other. . . . We seem to think we need to fight each other in a zero-sum game. But trade is not a zero-sum game.” Then he got to the point. “In Japan, there was a Tokugawa-period [1603–1868] philosopher who talked about trade. He was named, as it happened, with part of Satoshi’s name. He was called Nakomoto. He was in favor of an open Japan. He wrote how if Japan was to grow great, it needed to stay open to the West. Trade is not a zero-sum game. We in the bitcoin movement need to remember Nakomoto’s lesson today.” According to Vaughn-Perling, Wright introduced himself as Satoshi Nakomoto years before the release of bitcoin.

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Renaissance’s improvement in market efficiency is small compared to the yield. As a result, too much American capital is migrating to Siren Servers and shunning “Zero to One” creative investments. Computerized index funds that “buy the market” thrive while IPOs languish. No net wealth is created, but money is arbitrarily siphoned off and redistributed in a zero-sum game. I pointed out that Renaissance’s “neutral” approach benefited from the counterproductive futility of insider-trading rules and fair disclosure requirements, which hobble rivals who are using their human brains in real time. Mercer disarmingly agreed. By remaining obtusely obsessed with the usually innocuous edge gained by people who laboriously investigate inside of companies, the Securities and Exchange Commission has driven the vast bulk of trading to purely algorithmic forms.

The Future Is Analog: How to Create a More Human World by David Sax

Alvin Toffler, augmented reality, autonomous vehicles, Bernie Sanders, big-box store, bike sharing, Black Lives Matter, blockchain, bread and circuses, Buckminster Fuller, Cal Newport, call centre, clean water, cognitive load, commoditize, contact tracing, contact tracing app, COVID-19, crowdsourcing, cryptocurrency, data science, David Brooks, deep learning, digital capitalism, Donald Trump, driverless car, Elon Musk, fiat currency, Francis Fukuyama: the end of history, future of work, gentrification, George Floyd, indoor plumbing, informal economy, Jane Jacobs, Jaron Lanier, Jeff Bezos, Kickstarter, knowledge worker, lockdown, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Minecraft, New Urbanism, nuclear winter, opioid epidemic / opioid crisis, Peter Thiel, RAND corporation, Ray Kurzweil, remote working, retail therapy, RFID, Richard Florida, ride hailing / ride sharing, Saturday Night Live, Shoshana Zuboff, side hustle, Sidewalk Labs, Silicon Valley, Silicon Valley startup, Skype, smart cities, social distancing, sovereign wealth fund, Steve Jobs, Superbowl ad, supply-chain management, surveillance capitalism, tech worker, technological singularity, technoutopianism, TED Talk, The Death and Life of Great American Cities, TikTok, Uber and Lyft, uber lyft, unemployed young men, urban planning, walkable city, Y2K, zero-sum game

The human cost of Amazon’s singular vision of commerce’s digital future does not come from some sadistic desire of Jeff Bezos to inflict pain on workers, suppliers, and others for his own pleasure. It is, rather, the necessary consequence of his libertarian worldview and the particular form of digital capitalism it justifies, which is that commerce is a zero-sum game. In that game there are either winners or losers. There is no sharing. No compromise. No middle ground. Everything Amazon does, from click to delivery, positions it to end up on the winning side, whatever the cost. The alternative this presents to anyone wishing to do commerce online—be it an individual entrepreneur looking to sell a product, an established retail store, like Surf Ontario, trying to diversify its customer base, or a large global brand like Nike—is pretty stark.

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Where consumers can access all the convenience, selection, and choice they need but also enjoy the benefits that real stores and restaurants bring to our communities, complete with the physical, human interactions and joys that we missed when we were forced to shop online. What if we can create alternatives to Amazon and revive the original promise of e-commerce, which was a win-win situation rather than a zero-sum game? Local and global. Clicks and bricks. What if digital technology could actually support the stores and restaurants that form the backbone of analog commerce rather than try to run them out of business? My pandemic experience began just weeks before my latest book, The Soul of an Entrepreneur, was supposed to come out.

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Computers and the internet were designed as democratizing tools, placing the same powers in the hands of small businesses as held by large corporations. Digital commerce was supposed to allow anyone to sell anything and compete on a level playing field. But as markets consolidated and companies like Amazon, Uber, and Grubhub pursued a zero-sum game of commerce, the scales tipped, and analog became subservient to digital. By putting the digital tools and even ownership of the software platform itself back in the hands of those small stores and restaurants, companies like Loco.Coop and Captain were restoring some of that balance and showing a potentially different future.

Rationality: What It Is, Why It Seems Scarce, Why It Matters by Steven Pinker

affirmative action, Albert Einstein, autonomous vehicles, availability heuristic, Ayatollah Khomeini, backpropagation, basic income, behavioural economics, belling the cat, Black Lives Matter, butterfly effect, carbon tax, Cass Sunstein, choice architecture, classic study, clean water, Comet Ping Pong, coronavirus, correlation coefficient, correlation does not imply causation, COVID-19, critical race theory, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, data science, David Attenborough, deep learning, defund the police, delayed gratification, disinformation, Donald Trump, Dr. Strangelove, Easter island, effective altruism, en.wikipedia.org, Erdős number, Estimating the Reproducibility of Psychological Science, fake news, feminist movement, framing effect, George Akerlof, George Floyd, germ theory of disease, high batting average, if you see hoof prints, think horses—not zebras, index card, Jeff Bezos, job automation, John Nash: game theory, John von Neumann, libertarian paternalism, Linda problem, longitudinal study, loss aversion, Mahatma Gandhi, meta-analysis, microaggression, Monty Hall problem, Nash equilibrium, New Journalism, Paul Erdős, Paul Samuelson, Peter Singer: altruism, Pierre-Simon Laplace, placebo effect, post-truth, power law, QAnon, QWERTY keyboard, Ralph Waldo Emerson, randomized controlled trial, replication crisis, Richard Thaler, scientific worldview, selection bias, social discount rate, social distancing, Social Justice Warrior, Stanford marshmallow experiment, Steve Bannon, Steven Pinker, sunk-cost fallacy, TED Talk, the scientific method, Thomas Bayes, Tragedy of the Commons, trolley problem, twin studies, universal basic income, Upton Sinclair, urban planning, Walter Mischel, yellow journalism, zero-sum game

The games of life sometimes leave rational actors no choice but to do things that make themselves and everyone else worse off; to be random, arbitrary, or out of control; to cultivate sympathies and nurse grievances; to willingly submit to penalties and punishments; and sometimes, to refuse to play at all. Game theory unveils the strange rationality beneath many of the perversities of social and political life, and as we will see in a later chapter, it helps explain the central mystery of this book: how a rational species can be so irrational. A Zero-Sum Game: Scissors-Paper-Rock The quintessential game-theoretic dilemma, which lays bare how the payoff of a choice depends on the other guy’s choice, is the game of Scissors-Paper-Rock.3 Two players simultaneously display a hand gesture—two fingers for scissors, flat for paper, clenched for rock—and the winner is determined by the rule “Scissors cuts paper, paper covers rock, rock blunts scissors.”

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The game can be displayed as a matrix in which the possible choices of the first player, Amanda, are shown as rows, the choices of the second, Brad, are shown as columns, and the payoffs are written in each cell, Amanda’s in the lower left corner, Brad’s in the upper right. Let’s give numerical values to the outcomes: 1 for a win, –1 for a loss, 0 for a tie. Amanda’s payoffs and Brad’s payoffs sum to 0 in every cell, giving us a technical term that has crossed over from game theory into everyday life: the zero-sum game. Amanda’s gain is Brad’s loss, and vice versa. They’re locked in a state of pure conflict, fighting over a fixed pie. Which move (row) should Amanda choose? The crucial technique in game theory (and indeed in life) is to see the world from the other player’s point of view. Amanda must examine Brad’s choices, the columns, one at a time.

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Even when a move is not literally picked at random (presumably in 1944 the Allies did not roll a die before deciding whether to invade Normandy or Calais), the player must assume a poker face and suppress any tell or leak, making the choice appear random to their opponents. The philosophers Liam Clegg and Daniel Dennett have argued that human behavior is inherently unpredictable not just because of random neural noise in the brain but as an adaptation that makes it harder for our rivals to outguess us.4 A Non-Zero-Sum Game: The Volunteer’s Dilemma Rational actors can end up in outguessing standoffs not just in games that pit them in zero-sum competition but in ones that partly align them with common interests. An example is the Volunteer’s Dilemma, which may be illustrated by the medieval story Belling the Cat.

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Black Swan, Bob Litterman, bond market vigilante , book value, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, carbon credits, Carmen Reinhart, central bank independence, classic study, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global macro, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, inverted yield curve, invisible hand, John Bogle, junk bonds, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, pension time bomb, performance metric, Phillips curve, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, savings glut, search costs, selection bias, seminal paper, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stock buybacks, stocks for the long run, survivorship bias, systematic trading, tail risk, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

Worse, and rarely mentioned, is the unpleasant fact that your most likely counterparty when you trade in markets is no longer a retired dentist or an unmotivated long-only manager—it is a HF manager. Admittedly, the zero-sum-game argument is clearest when all investors have the same benchmark; in the real world of segmented markets and multiple benchmarks this argument is more complicated. I am not sure how the zero-sum-game argument works in a technical sense if all benchmarks used by investors do not add up to the global all-asset market portfolio, but the argument is sound conceptually in that we cannot collectively be worth more than the sum of what we are worth individually

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The classic statement from Fama (1970) is that markets are informationally efficient if “prices reflect all available information”. The EMH is also closely tied to the assumption of investor rationality. The main practical implication of the EMH is investors’ inability to consistently beat the market. Why? Competition among many profit-seeking agents eliminates any easy pickings. Active management is a zero-sum game even before costs; after trading costs and fees it is a negative-sum game (this observation is mathematically true regardless of whether the market is efficient). Empirical analyses unequivocally confirm that most managers underperform passive indices after fees and leave open the possibility that winners have just been lucky.

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The main advantage of private equity over public markets is in better corporate governance, including closer supervision of management. PE funds can create wealth by improving operating efficiency and exploiting tax deductibility of interest payments through leverage—thus PE is not subject to the zero-sum-game argument of most active managers. Yet, PE also involves risks. PE and VC funds have especially high equity market betas if artificially smoothed returns are adjusted for, so they offer less diversification to an equity-dominated portfolio than do other alternatives. The characteristics of low liquidity and long holding periods have some advantages in enabling the PE fund to accomplish its goals with the companies it holds, but surely warrant some premium as compensation.

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

The key to this process was thought to lie in extending the solution methods that von Neumann and Morgenstern had introduced, most of which applied to zero-sum games, such as coin-tossing and poker. In games of that nature, the players compete against one another, and one player’s winnings are another player’s losses. But many types of economic activity, such as international trade and investing in the stock market, involve the possibility of cooperation and mutual gains: they are positive-sum games. During the late 1940s, some progress was made in tackling this broader category of problems when John Nash, a Princeton mathematician, introduced a general method for solving non-zero-sum games, but much remained unclear.

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According to William Poundstone, the author of an illuminating account of early game theory, from which I have taken some historical details, the founders of the problem felt the same way. “Both Flood and Dresher say they initially hoped that someone at RAND would ‘resolve’ the prisoner’s dilemma,” Poundstone writes. “They expected Nash, Von Neumann, or someone to mull over the problem and come up with a new and better theory of non-zero-sum games. The theory would address the conflict between individual and collective rationality typified by the prisoner’s dilemma. Possibly it would show, somehow, that cooperation is rational after all. The solution never came.” One criticism that is often made of the prisoner’s dilemma is that the noncooperative solution (Confess, Confess) can’t possibly be the rational outcome, because rational decision-makers would never choose an inferior outcome.

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If there is any wiggle room, excessive risk-taking and other damaging behavior will simply migrate to the unregulated sector. Imposing restrictions on the biggest hedge funds and private equity firms could well lead to a drastic shrinkage in these industries, which would be no great loss. Much of the activity that such firms engage in amounts to a zero-sum game, which doesn’t yield any economic gains for society at large. The proposed central clearinghouse for derivatives transactions is a good idea that doesn’t go far enough. By imposing leverage limits on traders, and demanding adequate collateral for exposed positions, the clearinghouse could eliminate a lot of counterparty credit risk.

Secrets of Sand Hill Road: Venture Capital and How to Get It by Scott Kupor

activist fund / activist shareholder / activist investor, Airbnb, Amazon Web Services, asset allocation, barriers to entry, Ben Horowitz, Benchmark Capital, Big Tech, Blue Bottle Coffee, carried interest, cloud computing, compensation consultant, corporate governance, cryptocurrency, discounted cash flows, diversification, diversified portfolio, estate planning, family office, fixed income, Glass-Steagall Act, high net worth, index fund, information asymmetry, initial coin offering, Lean Startup, low cost airline, Lyft, Marc Andreessen, Myron Scholes, Network effects, Paul Graham, pets.com, power law, price stability, prudent man rule, ride hailing / ride sharing, rolodex, Salesforce, Sand Hill Road, seminal paper, shareholder value, Silicon Valley, software as a service, sovereign wealth fund, Startup school, the long tail, Travis Kalanick, uber lyft, VA Linux, Y Combinator, zero-sum game

But failing to invest in a winner means that you forfeit all the asymmetric upside that comes along with that investment. Missing the next Facebook or Google is no doubt painful, and depending on the rest of your portfolio, can be career ending for a VC. VC Investing Is a Zero-Sum Game Another reason that success in venture capital seems to cluster is that VC investing is largely a zero-sum game. Let me explain this by analogy to public market investing. If you and I both think that Apple is a great stock to buy, we can both decide to buy it. Of course, if one of us is a really big buyer, the act of buying it might move the price such that my price might be different from yours (depending on which of us gets there first).

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See dot.com boom/bust term sheets, 140–169, 170–188 on aggregate proceeds, 142, 278 antidilution provisions in, 165–167, 280–281 on board of directors, 171–173, 281 on capitalization, 154, 278 on confidentiality, 285 on conversion/auto-conversion to common shares, 160–165, 280 on co-sale agreements, 181 on D&O insurance, 183, 284 on dividends, 154–155 drag-along provisions in, 182–183, 252, 284 on employee and consultant agreements, 187 and go-shop provisions, 239 on information rights, 282 on legal counsel and fees, 286 on liquidation preference, 155–159, 279 and no-shop provisions, 187–188, 239, 285 on preferred shares, 141–142 on price per share, 147–149, 278 on pro rata investments, 178–180, 283 on protective provisions, 173–177, 281–282 and recapitalizations, 281, 282 on redemption rights, 159 on registration rights, 178, 282 on right-of-first-refusal, 180–181 sample, 141, 277–286 on stock purchase agreement, 284 on stock restriction, 180–182, 283 on vesting, 183–187, 284 on voting rights, 167–169, 281 Tesla, 110 timing in startup world, importance of, 14 Tiny Speck, 137 Trados case, 220–231 and common shareholders, 221–222, 223 and conflict of board, 222–226 decision on, 227–228 distribution of proceeds from acquisition, 221 and entire fairness rule, 222, 226–229 guidelines stemming from, 225–226 and management incentive plan, 221, 226–227 takeaways from, 228–231 transfer restrictions, 98–99 Uber, 102, 172–173 United States and venture capital, 3, 271, 275 university endowments, 54–55, 56–57, 71 unrelated business income (UBIT), 93–94 use of proceeds, 278 vacation policies, 244–245 VA Linux, 264–265 valuation, 118–123 and antidilution provisions in term sheet, 165–167 and convertible notes, 144 pre- and post-money, 147–149 of very-early-stage startups, 153–154 valuation marks, understanding, 76–83 venture-backed companies economic impact of, 3–4, 41 exiting options of (see acquisitions; initial public offerings) five largest US market capitalization companies, 25, 41 and information asymmetry, 5, 140, 275 VC’s relationship with, 2–3, 4–5 venture capital (VC) and ability to raise new funds, 67–68 as asset class, 29–30 batting average of, 37–40 cardinal sins of, 44, 50–51, 179–180 competition for, 271–272 distribution of returns for, 30–32, 31, 35, 38, 40 and dot.com boom/bust, 64–65 early years in Silicon Valley, 19–20 as endorsement of a company, 43–44 equity financing as basis of, 26–27, 28 and evolution of VC industry, 270–273 extensions of last round of, 233 and institutional investors, 40–41 life cycle of, 7–8, 114–115, 268 and life cycle of fund, 152 measuring success of, 36–40 median ten-year returns in, 30 and multiple funds, 67 potential replacements for, 273–274 relationship of LPs to, 69–71 reserves set aside by, 66–67 restricted nature of, 35–36 risks inherent in, 39 rounds of, 34–35, 66–67, 115–117, 138–139, 151–152 signaling in, 32–33, 35, 37 size of industry, 40–41 and state of fund, 83–84 three professional roles in, 29 and Yale University endowment, 62–63, 64–65 as zero-sum game, 33–35 venture capitalists average duration of relationship with, 5, 115 creating incentives for, 114–115 as dual fiduciaries, 201–202 exit of, following IPO, 266–267 and failure to invest in winners, 33 funding from (see difficult financings; raising money from venture capitalists; term sheets) goals of, 114–115, 126, 139 and information asymmetry, 5, 140, 275 and opportunity costs, 43–44, 83, 212–213, 223 over-involvement with company, 203 and pitches (see pitching to venture capitalists) role of, 2–3, 29, 274–275 vesting accelerated, 99–101, 186–187, 250–251 and acquisitions, 250–251 and founders, 95–97, 99–101, 183, 186, 205–206 and general partners (GPs), 89 and term sheets, 183–187, 284 VMware, 132 voting on authorization of new classes of stock, 176 on corporate actions, 176 protective provisions on, 173–177 voting rights, 167–169, 281 WARN statutes, 243–244 waterfall valuation method, 77, 78–79 Waymo, 187 whaling industry, 53 winding down the company, 243–246 working capital, 150 Yale University endowment, 54, 59–65 Y Combinator (YC), 20–21 zero-sum game, venture capital as, 33–35 ABCDEFGHIJKLMNOPQRSTUVWXYZ ABOUT THE AUTHOR Scott Kupor is the managing partner of Andreessen Horowitz.

…

See dot.com boom/bust term sheets, 140–169, 170–188 on aggregate proceeds, 142, 278 antidilution provisions in, 165–167, 280–281 on board of directors, 171–173, 281 on capitalization, 154, 278 on confidentiality, 285 on conversion/auto-conversion to common shares, 160–165, 280 on co-sale agreements, 181 on D&O insurance, 183, 284 on dividends, 154–155 drag-along provisions in, 182–183, 252, 284 on employee and consultant agreements, 187 and go-shop provisions, 239 on information rights, 282 on legal counsel and fees, 286 on liquidation preference, 155–159, 279 and no-shop provisions, 187–188, 239, 285 on preferred shares, 141–142 on price per share, 147–149, 278 on pro rata investments, 178–180, 283 on protective provisions, 173–177, 281–282 and recapitalizations, 281, 282 on redemption rights, 159 on registration rights, 178, 282 on right-of-first-refusal, 180–181 sample, 141, 277–286 on stock purchase agreement, 284 on stock restriction, 180–182, 283 on vesting, 183–187, 284 on voting rights, 167–169, 281 Tesla, 110 timing in startup world, importance of, 14 Tiny Speck, 137 Trados case, 220–231 and common shareholders, 221–222, 223 and conflict of board, 222–226 decision on, 227–228 distribution of proceeds from acquisition, 221 and entire fairness rule, 222, 226–229 guidelines stemming from, 225–226 and management incentive plan, 221, 226–227 takeaways from, 228–231 transfer restrictions, 98–99 Uber, 102, 172–173 United States and venture capital, 3, 271, 275 university endowments, 54–55, 56–57, 71 unrelated business income (UBIT), 93–94 use of proceeds, 278 vacation policies, 244–245 VA Linux, 264–265 valuation, 118–123 and antidilution provisions in term sheet, 165–167 and convertible notes, 144 pre- and post-money, 147–149 of very-early-stage startups, 153–154 valuation marks, understanding, 76–83 venture-backed companies economic impact of, 3–4, 41 exiting options of (see acquisitions; initial public offerings) five largest US market capitalization companies, 25, 41 and information asymmetry, 5, 140, 275 VC’s relationship with, 2–3, 4–5 venture capital (VC) and ability to raise new funds, 67–68 as asset class, 29–30 batting average of, 37–40 cardinal sins of, 44, 50–51, 179–180 competition for, 271–272 distribution of returns for, 30–32, 31, 35, 38, 40 and dot.com boom/bust, 64–65 early years in Silicon Valley, 19–20 as endorsement of a company, 43–44 equity financing as basis of, 26–27, 28 and evolution of VC industry, 270–273 extensions of last round of, 233 and institutional investors, 40–41 life cycle of, 7–8, 114–115, 268 and life cycle of fund, 152 measuring success of, 36–40 median ten-year returns in, 30 and multiple funds, 67 potential replacements for, 273–274 relationship of LPs to, 69–71 reserves set aside by, 66–67 restricted nature of, 35–36 risks inherent in, 39 rounds of, 34–35, 66–67, 115–117, 138–139, 151–152 signaling in, 32–33, 35, 37 size of industry, 40–41 and state of fund, 83–84 three professional roles in, 29 and Yale University endowment, 62–63, 64–65 as zero-sum game, 33–35 venture capitalists average duration of relationship with, 5, 115 creating incentives for, 114–115 as dual fiduciaries, 201–202 exit of, following IPO, 266–267 and failure to invest in winners, 33 funding from (see difficult financings; raising money from venture capitalists; term sheets) goals of, 114–115, 126, 139 and information asymmetry, 5, 140, 275 and opportunity costs, 43–44, 83, 212–213, 223 over-involvement with company, 203 and pitches (see pitching to venture capitalists) role of, 2–3, 29, 274–275 vesting accelerated, 99–101, 186–187, 250–251 and acquisitions, 250–251 and founders, 95–97, 99–101, 183, 186, 205–206 and general partners (GPs), 89 and term sheets, 183–187, 284 VMware, 132 voting on authorization of new classes of stock, 176 on corporate actions, 176 protective provisions on, 173–177 voting rights, 167–169, 281 WARN statutes, 243–244 waterfall valuation method, 77, 78–79 Waymo, 187 whaling industry, 53 winding down the company, 243–246 working capital, 150 Yale University endowment, 54, 59–65 Y Combinator (YC), 20–21 zero-sum game, venture capital as, 33–35 ABCDEFGHIJKLMNOPQRSTUVWXYZ ABOUT THE AUTHOR Scott Kupor is the managing partner of Andreessen Horowitz. He has overseen the firm's rapid growth to one hundred fifty employees and more than $7 billion in assets under management. He is also a cofounder and codirector of the Stanford Venture Capital Director's College and teaches venture capital and corporate governance courses at Stanford Law School and the Haas School of Business and Boalt School of Law at UC Berkeley.

Mindf*ck: Cambridge Analytica and the Plot to Break America by Christopher Wylie

4chan, affirmative action, Affordable Care Act / Obamacare, air gap, availability heuristic, Berlin Wall, Bernie Sanders, Big Tech, big-box store, Boris Johnson, Brexit referendum, British Empire, call centre, Cambridge Analytica, Chelsea Manning, chief data officer, cognitive bias, cognitive dissonance, colonial rule, computer vision, conceptual framework, cryptocurrency, Daniel Kahneman / Amos Tversky, dark pattern, dark triade / dark tetrad, data science, deep learning, desegregation, disinformation, Dominic Cummings, Donald Trump, Downton Abbey, Edward Snowden, Elon Musk, emotional labour, Etonian, fake news, first-past-the-post, gamification, gentleman farmer, Google Earth, growth hacking, housing crisis, income inequality, indoor plumbing, information asymmetry, Internet of things, Julian Assange, Lyft, Marc Andreessen, Mark Zuckerberg, Menlo Park, move fast and break things, Network effects, new economy, obamacare, Peter Thiel, Potemkin village, recommendation engine, Renaissance Technologies, Robert Mercer, Ronald Reagan, Rosa Parks, Sand Hill Road, Scientific racism, Shoshana Zuboff, side project, Silicon Valley, Skype, Stephen Fry, Steve Bannon, surveillance capitalism, tech bro, uber lyft, unpaid internship, Valery Gerasimov, web application, WikiLeaks, zero-sum game

As part of our early exploration of American culture, we looked at two areas we thought might be at play in this social discord. First we looked at whether a sense of social identity threat was fueling some of these views. The second area was related but slightly different. A common logical fallacy that people have is seeing the world as a zero-sum game of winners and losers. This flawed logic extends into a perception that attention paid to other groups will ultimately mean less attention for people like them. Either way, minorities seemed to be “threats”—identity threats or threats to resources. Following this hypothesis of an underlying sense of threat, we wanted to see if we could mitigate some of these feelings, and we did so by trying to reduce the sense of threat.

…

Now CA had users who (1) self-identified as part of an extreme group, (2) were a captive audience, and (3) could be manipulated with data. Lots of reporting on Cambridge Analytica gave the impression that everyone was targeted. In fact, not that many people were targeted at all. CA didn’t need to create a big target universe, because most elections are zero-sum games: If you get one more vote than the other guy or girl, you win the election. Cambridge Analytica needed to infect only a narrow sliver of the population, and then it could watch the narrative spread. Once a group reached a certain number of members, CA would set up a physical event. CA teams would choose small venues—a coffee shop or bar—to make the crowd feel larger.

…

There had always been publications that parodied the “hicks” of flyover country, but social media represented an extraordinary opportunity to rub “regular” Americans’ noses in the snobbery of coastal elites. Cambridge Analytica began to use this content to touch on an implied belief about racial competition for attention and resources—that race relations were a zero-sum game. The more they take, the less you have, and they use political correctness so you cannot speak out. This framing of political correctness as an identity threat catalyzed a “boomerang” effect in people where counternarratives would actually strengthen, not weaken, the prior bias or belief. This means that when targets would see clips containing criticism of racist statements by candidates or celebrities, this exposure would have the effect of further entrenching the target’s racialized views, rather than causing them to question those beliefs.

Hit Refresh: The Quest to Rediscover Microsoft's Soul and Imagine a Better Future for Everyone by Satya Nadella, Greg Shaw, Jill Tracie Nichols

3D printing, AlphaGo, Amazon Web Services, anti-globalists, artificial general intelligence, augmented reality, autonomous vehicles, basic income, Bretton Woods, business process, cashless society, charter city, cloud computing, complexity theory, computer age, computer vision, corporate social responsibility, crowdsourcing, data science, DeepMind, Deng Xiaoping, Donald Trump, Douglas Engelbart, driverless car, Edward Snowden, Elon Musk, en.wikipedia.org, equal pay for equal work, everywhere but in the productivity statistics, fault tolerance, fulfillment center, Gini coefficient, global supply chain, Google Glasses, Grace Hopper, growth hacking, hype cycle, industrial robot, Internet of things, Jeff Bezos, job automation, John Markoff, John von Neumann, knowledge worker, late capitalism, Mars Rover, Minecraft, Mother of all demos, Neal Stephenson, NP-complete, Oculus Rift, pattern recognition, place-making, Richard Feynman, Robert Gordon, Robert Solow, Ronald Reagan, Salesforce, Second Machine Age, self-driving car, side project, Silicon Valley, Skype, Snapchat, Snow Crash, special economic zone, speech recognition, Stephen Hawking, Steve Ballmer, Steve Jobs, subscription business, TED Talk, telepresence, telerobotics, The Rise and Fall of American Growth, The Soul of a New Machine, Tim Cook: Apple, trade liberalization, two-sided market, universal basic income, Wall-E, Watson beat the top human players on Jeopardy!, young professional, zero-sum game

At first some product-line leaders within Microsoft felt uneasy about partnering with their competitor; I definitely heard some resistance behind closed doors. One way to explain the logic is by turning to game theory, which uses mathematical models to explain cooperation and conflict. Partnering is too often seen as a zero-sum game—whatever is gained by one participant is lost by another. I don’t see it that way. When done right, partnering grows the pie for everyone—for customers, yes, but also for each of the partners. Ultimately the consensus was that this partnership with Apple would help to ensure Office’s value was available to everyone, and Apple was committing to make its iOS really show off the great things Office can do, which would further solidify Microsoft as the top developer for Apple.

…

In fact, back then I was begging for customers and partners to work with us on our fledgling server business, a job that demanded an attitude of humility rather than one of hubris. One lesson I learned from the antitrust case (there were many lessons) was to compete hard and then equally celebrate the opportunities we create for everyone. It’s not a zero-sum game. I’ve taken that to heart. Google today is a dominant company in our industry. For years we’ve competed in the marketplace while also feuding through nonstop complaints to government regulators in the United States and abroad. As CEO, I decided to turn the page on that strategy, reasoning that it was time to end our regulatory battles and focus all of our energy on competing for customers in the cloud.

…

See also employee resource groups (ERGs) Word, 104, 121 workstations, 26–27 World Bank, 217 worldview, 69–70, 76–77 World War II, 188 Wright, Wilbur, 209–10 Xamarin, 137 Xbox, 2, 59, 65, 89, 106–8, 145 Xbox Live, 61 Xbox One, 161 Xbox Video, 171 Xerox PARC, 30 Xiaoice, 195–96 Yahoo, 3, 51, 52, 58, 134, 174 Yale Law School, 186 Yammer, 110 Young Men and Fire (Maclean), 56 Z80 computer, 21, 143 Zander, Jason, 58 zero-sum game, 124, 130 Zika epidemic, 142 Zo, 195–97 Zocdoc, 218 Zonis, Marvin, 29 About the Author Satya Nadella is a husband, father, and the chief executive officer of Microsoft—the third in the company’s forty-year history. On his twenty-first birthday, Nadella immigrated from Hyderabad, India, to the United States to pursue a master’s degree in computer science.

Ethics in Investment Banking by John N. Reynolds, Edmund Newell

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, banking crisis, Bear Stearns, collapse of Lehman Brothers, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, discounted cash flows, financial independence, Glass-Steagall Act, index fund, invisible hand, junk bonds, light touch regulation, margin call, Michael Milken, moral hazard, Nick Leeson, Northern Rock, proprietary trading, quantitative easing, shareholder value, short selling, South Sea Bubble, stem cell, the market place, The Wealth of Nations by Adam Smith, too big to fail, two and twenty, zero-sum game

The conflict may come in the investment bank’s advice about which financing structure to use to complete a transaction. Syndication and restructuring – Zero-sum games There are a number of areas in investment banking that can be typified by relatively aggressive behaviour, and it is usefully to consider each separately. We have taken two areas that involve situations where the outcome Ethical Issues – Clients 119 of a transaction can be a “zero-sum game” or the distribution of a finite pool of value, increasing the incentives for aggressive behaviour. Syndication In the sale of securities (whether a primary or secondary issue), a syndicate made up of a number of investment banks may be appointed.

…

., 78 “people-based” activity, 67 P:E ratio, 27 performance, 8–10 personal abuse, 159 personal account investments, 128, 156 personal account trading, 128 personal conflicts of interest, 45 pitching, 102, 159 Plato, 37 practical issues, 110–15 competitors, relationships with, 113 equity research, 113–15 pitching, 111 sell-side advisers, 111–13 pre-IPO financing, 110 prescriptive regulations, 31, 145 price tension, 79, 113 primary market, 103 prime-brokerage, 2 principal investment, 15, 28 private equity, 2–3, 12, 110 private trading, 94 Project Merlin, 133, 141 promises, 100–1 proprietary investment, 29 proprietary trading, 15, 25, 66, 150, 155 Prudential Regulation Authority (PRA), 26 public ownership, bonus pools in, 136–9 “pump and dump” strategy, 86 qualifying instruments, 70, 87 qualifying markets, 70, 82 quality-adjusted life year (QALY), 36 Quantitative Easing (QE), 23 Queen Elizabeth II, 42 Qu’ran, 54 rated debt, 77 rates attrition, 132 discount, 27 interest, 60 market, 117 tax, 140 rating agencies, 76 Rawls, John, 35, 136 recognised exchanges, 71 Regal Petroleum, 84 regulations banking, 16 compliance with, 28 external, 19, 31 light-touch, 4 prescriptive, 31, 145 regulatory changes and, 18–20 securities, 114 self, and impact on legislation, 19 regulatory compliance, 18 religion, business ethics in, 51–62 Buddhism, 56 Christianity, 52–4 Governments, 59 Hinduism, 56–7 interest payments, 59–60 Islam, 54–5 Judaism, 56 lending, 59–60 thresholds, 60 usury, 59–60 remuneration, 132–9 bonus pools in public ownership and, 136–9 claiming credit, 134 ethical issues with, 142–3 internal review process, managing, 134 1 Timothy 6:10, 135–6 Index research, 156 resources, abuse of, 127–8 restricted creditors, 120 restructuring of fees, 121–2 financial, 119–20 syndication and, 118–22 retail banks, 16 returns, 28, 156 Revised Code of Ethics, 47 right livelihood, 57 rights-based ethics, 66–8 rights vs. duties advisory vs. trading/capital markets, 73 conflict between, reconciling, 68–70 duty-based ethics, 66–8 off-market trading, ethical standards to, 71–2 on-market trading, ethical standards in, 70–1 opposing views of, 63–74 reconciling conflict between, 68–70 rights-based ethics, 66–8 Roman Catholic Church, 52 Royal Dutch Shell, 85 Sarbanes–Oxley Act, 20 Schwarzman, Stephen, 20 scope of ethical issues, 7–8 secondary market, 103 sector exclusions for investment banking, 58–9 securities investment grade, 76 issuing, 103–5 overvalued, 155 Securities and Exchange Commission (SEC), 7, 16 Goldman Sachs, charges against, 78 rating agencies, review by, 77 short-selling, review of, 96–7 securities insider dealing, 70 securities mis-selling, 77–9 securities regulations, 114 self-regulation, 19 sell recommendation, 115 177 sell-side advisers, 107, 111–13 Senate Permanent Subcommittee on Investigations, 46 senior debt, 118 sexist entertainment, 159 shareholders, 27–9 shares, deferred, 133 Shariah finance, 55 short-selling, 94–7, 154–5 Smith, Adam, 14, 35–6 social cohesion, 53 socially responsible investment (SRI), 56 Société Générale, 44, 80 solidarity, 53 Soros, George, 17 South Sea Bubble, 90 sovereign debt, 17 speculation, 91–4, 155 in financial crisis, 93 traditional views of, 91–3 speculative casino capitalism, 16, 91 spread, 21 stabilisation, 89 stock allocation, 94–7 stockholders, 41–2 stocks, dotcom, 17 Strange, Susan, 43 strategic issues with business ethics, 30–1 syndication, 119 and restructuring, 118–22 systemic risk, 24–5 Takeover Panel, 109 Talmud, 56 taxes, 139–41 tax optimisation, 158 tax rates, 140 tax structuring, 140 Terra Firma Capital Partners, 79, 112 Theory of Moral Sentiments, The (Smith), 14 3iG FCI Practitioners’ Report, 51 thresholds, 60 1 Timothy 6:10, 135–6 178 Index too big to fail concept, 21–7 ethical duties, and implicit Government guarantee, 22–3 ethical implications of, 26–7 in government, 22–3 insolvency, systemic risk and, 24–5 legislative change, 25–6 Lehman, failure of, 23 systemic risk, 24–5 toxic financial products, 5 trading abusive, 93 emissions, 14 insider, 12 market, 41 normal market, 71 off-market, 71–83, 90, 155 on-market, 70–1 personal account, 128 private, 94 proprietary, 15, 25, 66, 150, 155 unauthorised, 7 “trash and cash” strategy, 86 Travellers, 19 Treasury Select Committee, 26 Trinity Church, 53 Trouble with Markets, The (Bootle), 4 trust, 40, 53 trusted adviser, 108–9, 125 truth, 101–5 bait and switch, 102–3 misleading vs. lying, 101 securities, issuing, 103–5 2 and 20 fee, 13 UBS Investment Bank, 9 unauthorised trading, 7, 80–1, 155 unethical behaviour, 68 UK Alternative Investment Market, 89 UK Business Growth Fund, 133 UK Code of Practice, 141 UK Independent Banking Commission, 4, 22 United Methodist Church, 54, 59 United Methodist Investment Strategy Statement, 59 US Federal Reserve, 24, 25 US Financial Crisis Inquiry Commission, 4 US Open, 126 US Senate Permanent Subcommittee on Investigations, 64, 73 US Treasury Department, 132 universal banks, 2, 21, 28, 67 untoward movement, 85 usury, 59–60 utilitarian, 84 utilitarian ethics, 49, 84, 139 values, 9, 46, 119–21, 148 Vedanta, 57 victimless crime, 82 virtue ethics, 37–8, 43–4 virtues, 9, 34 virtuous behaviours, 37 Vishnu, 57 Volcker, Paul, 25 Volcker Rule, 2, 25 voting shareholders, 29 Wall Street, 12, 19, 53 Wall Street Journal, 20 Wealth of Nations, The (Smith), 14 Wesley, John, 53 Wharf, Canary, 18 Williams, Rowan, 53 Wimbledon, 127 WorldCom, 12, 17, 20, 76 write-off, 80 zakat, 55 zero-sum games, 118–22

The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon

airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, Big Tech, bitcoin, blockchain, book value, business cycle, business process, buy and hold, Cambridge Analytica, carbon tax, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, driverless car, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, flag carrier, Ford Model T, gig economy, Glass-Steagall Act, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, opioid epidemic / opioid crisis, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, robo advisor, Ronald Reagan, search costs, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, stock buybacks, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, vertical integration, Vilfredo Pareto, warehouse automation, zero-sum game

Put another way, if we hold the view that firms spend money on lobbying but it is useless, then we must recognize that this view is inconsistent with most of what we know about economics and human nature. It’s not strictly impossible, but I am not going to take this idea very seriously. Second, rent seeking is a zero-sum game, and zero-sum games are difficult to identify in the data. For instance, suppose firm A spends $100 to lobby for a regulatory change that would give it an advantage over firm B. Firm B then spends $200 to fight this change. Firm B prevails. What do we see? We see that they collectively spent $300 and that nothing has changed: the relative market shares, growth rates, and productivity of the two firms are the same as before.

…

—the idea being, if tariffs were announced, prices would rise, and all that cheap foreign metal would suddenly become more valuable. And that’s what happened.” Rent-seeking causes loss of wealth in two ways. First, the direct expenditures that interest groups spend on lobbying could be used for productive work, rather than zero sum games. The second loss is the policies themselves. The policies advocated by lobbyists are rarely efficient. They do not take the form of simple transfers or lump-sum taxes. Consider, for instance, the regulation of entry. Imagine a world where entrants pay a lump-sum tax to compensate for the disruption and harm they inflict on incumbents.

…

In most industries, innovation is good for growth, but financial innovations do not seem to improve capital allocation very much. What, then, is the matter with finance? Why does it appear to behave differently from other industries? I am going to highlight three main issues: a high prevalence of zero-sum games, entrenched market power, and heavy and sometimes misguided regulations. Harvard economists Robin Greenwood and David Scharfstein (2013) study what goes on inside the black box and provide an illuminating picture of the growth of modern finance. They show that growth of finance since 1980 comes mostly from asset management (in the securities industry) and the provision of household credit (in the credit intermediation industry).

Licence to be Bad by Jonathan Aldred

"Friedman doctrine" OR "shareholder theory", Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, availability heuristic, Ayatollah Khomeini, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Monday: stock market crash in 1987, Black Swan, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, Charles Babbage, clean water, cognitive dissonance, corporate governance, correlation does not imply causation, cuban missile crisis, Daniel Kahneman / Amos Tversky, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dr. Strangelove, Edward Snowden, fake news, Fall of the Berlin Wall, falling living standards, feminist movement, framing effect, Frederick Winslow Taylor, From Mathematics to the Technologies of Life and Death, full employment, Gary Kildall, George Akerlof, glass ceiling, Glass-Steagall Act, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jeff Bezos, John Nash: game theory, John von Neumann, Linda problem, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, meta-analysis, Mont Pelerin Society, mutually assured destruction, Myron Scholes, Nash equilibrium, Norbert Wiener, nudge unit, obamacare, offshore financial centre, Pareto efficiency, Paul Samuelson, plutocrats, positional goods, power law, precautionary principle, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, scientific management, Skinner box, Skype, Social Responsibility of Business Is to Increase Its Profits, spectrum auction, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, trickle-down economics, Vilfredo Pareto, wealth creators, zero-sum game

In cooperative games, players can make agreements or contracts before the game itself begins. Non-cooperative game theory assumes such agreements are impossible, because they are unenforceable (players will make promises then break them). But the book did not discuss most non-cooperative games. It only covered one type: zero-sum games between two players. Zero-sum games are those in which whatever is good for one player is bad for the other. This framing of the analysis can make a big difference. The nuclear stand-off between America and the USSR was a perilous, indisputably ‘non-cooperative’ game – but was it zero-sum? Should the strategists at RAND and the Pentagon rule out altogether, in the very set-up of their analysis, the possibility of an outcome in which neither side wins?

…

objection, 107, 119–20 Friedman, Milton, 4–5, 56, 69, 84, 88, 126, 189 awarded Nobel Prize, 132 and business responsibility, 2, 152 debate with Coase at Director’s house, 50, 132 as dominant Chicago thinker, 50, 132 on fairness and justice, 60 flawed arguments of, 132–3 influence on modern economics, 131–2 and monetarism, 87, 132, 232 at Mont Pèlerin, 5, 132 rejects need for realistic assumptions, 132–3 Sheraton Hall address (December 1967), 132 ‘The Methodology of Positive Economics’ (essay, 1953), 132–3 ‘The Social Responsibility of Business is to Increase Its Profits’ (article, 1970), 2, 152 Frost, Gerald, Antony Fisher: Champion of Liberty (2002), 7* Galbraith, John Kenneth, 242–3 game theory assumptions of ‘rational behaviour’, 18, 28, 29–32, 35–8, 41–3, 70, 124 Axelrod’s law of the instrument, 41 backward induction procedure, 36–7, 38 and Cold War nuclear strategy, 18, 20, 21–2, 24, 27, 33–4, 35, 70, 73, 198 focus on consequences alone, 43 as form of zombie science, 41 and human awareness, 21–3, 24–32 and interdependence, 23 limitations of, 32, 33–4, 37–40, 41–3 minimax solution, 22 multiplicity problem, 33–4, 35–7, 38 Nash equilibrium, 22–3, 24, 25, 27–8, 33–4, 41–2 the Nash program, 25 and nature of trust, 28–31, 41 the Prisoner’s Dilemma, 26–8, 29–32, 42–3 real world as problem for, 21–2, 24–5, 29, 31–2, 37–8, 39–40, 41–3 rise of in economics, 40–41 and Russell’s Chicken, 33–4 and Schelling, 138–9 and spectrum auctions, 39–40 theory of repeated games, 29–30, 35 tit-for-tat, 30–31 and trust, 29, 30–31, 32, 41 uses of, 23–4, 34, 38–9 view of humanity as non-cooperative/distrustful, 18, 21–2, 25–32, 36–8, 41–3 Von Neumann as father of, 18, 19, 20–22, 25, 26, 28, 30, 34, 41 zero-sum games, 21–2 Gates, Bill, 221–2 Geithner, Tim, 105 gender, 127–8, 130–31, 133, 156 General Electric, 159 General Motors (GM), 215–16 George, Prince of Cambridge, 98 Glass–Steagall Act, repeal of, 194 globalization, 215, 220 Goldman Sachs, 182, 184, 192 Google, 105 Gore, Al, 39 Great Reform Act (1832), 120 greed, 1–2, 196, 197, 204, 229, 238 Greenspan, Alan, 57, 203 Gruber, Jonathan, 245 Haifa, Israel, 158, 161 Harper, ‘Baldy’, 7 Harsanyi, John, 34–5, 40 Harvard Business Review, 153 Hayek, Friedrich and Arrow’s framework, 78–9 economics as all of life, 8 and Antony Fisher, 6–7 influence on Thatcher, 6, 7 and Keynesian economics, 5–6 and legal frameworks, 7* at LSE, 4 at Mont Pèlerin, 4, 5, 6, 15 and Olson’s analysis, 104 and public choice theory, 89 rejection of incentive schemes, 156 ‘spontaneous order’ idea, 30 The Road to Serfdom (1944), 4, 5, 6, 78–9, 94 healthcare, 91–2, 93, 178, 230, 236 hedge funds, 201, 219, 243–4 Heilbroner, Robert, The Worldly Philosophers, 252 Heller, Joseph, Catch-22, 98, 107, 243–4 Helmsley, Leona, 105 hero myths, 221–3, 224 Hewlett-Packard, 159 hippie countercultural, 100 Hoffman, Abbie, Steal This Book, 100 Holmström, Bengt, 229–30 homo economicus, 9, 10, 12, 140, 156–7 and Gary Becker, 126, 129, 133, 136 and behaviour of real people, 15, 136, 144–5, 171, 172, 173, 250–51 and behavioural economics, 170, 171, 172, 255 long shadow cast by, 248 and Nudge economists, 13, 172, 173, 174–5, 177 Hooke, Robert, 223 housing market, 128–9, 196, 240–41 separate doors for poor people, 243 Hume, David, 111 Huxley, Thomas, 114 IBM, 181, 222 identity, 32, 165–6, 168, 180 Illinois, state of, 46–7 immigration, 125, 146 Impossibility Theorem, 72, 73–4, 75, 89, 97 Arrow’s assumptions, 80, 81, 82 and Duncan Black, 77–8 and free marketeers, 78–9, 82 as misunderstood and misrepresented, 76–7, 79–82 ‘paradox of voting’, 75–7 as readily solved, 76–7, 79–80 Sen’s mathematical framework, 80–81 incentives adverse effect on autonomy, 164, 165–6, 168, 169–70, 180 authority figure–autonomy contradiction, 180 and behavioural economics, 171, 175, 176–7 cash and non-cash gifts, 161–2 context and culture, 175–6 contrast with rewards and punishments, 176–7 ‘crowding in’, 176 crowding out of prior motives, 160–61, 162–3, 164, 165–6, 171, 176 impact of economists’ ideas, 156–7, 178–80 and intrinsic motivations, 158–60, 161–3, 164, 165–6, 176 and moral disengagement, 162, 163, 164, 166 morally wrong/corrupting, 168–9 origins in behaviourism, 154 and orthodox theory of motivation, 157–8, 164, 166–7, 168–70, 178–9 payments to blood donors, 162–3, 164, 169, 176 as pervasive in modern era, 155–6 respectful use of, 175, 177–8 successful, 159–60 as tools of control/power, 155–7, 158–60, 161, 164, 167, 178 Indecent Proposal (film, 1993), 168 India, 123, 175 individualism, 82, 117 and Becker, 134, 135–8 see also freedom, individual Industrial Revolution, 223 inequality and access to lifeboats, 150–51 and climate change, 207–9 correlation with low social mobility, 227–8, 243 and demand for positional goods, 239–41 and economic imperialism, 145–7, 148, 151, 207 and efficiency wages, 237–8 entrenched self-deluding justifications for, 242–3 and executive pay, 215–16, 219, 224, 228–30, 234, 238 as falling in 1940–80 period, 215, 216 Great Gatsby Curve, 227–8, 243 hero myths, 221–3, 224 increases in as self-perpetuating, 227–8, 230–31, 243 as increasing since 1970s, 2–3, 215–16, 220–21 and lower growth levels, 239 mainstream political consensus on, 216, 217, 218, 219–21 marginal productivity theory, 223–4, 228 new doctrine on taxation since 1970s, 232–5 and Pareto, 217, 218–19, 220 poverty as waste of productive capacity, 238–9 public attitudes to, 221, 226–8 rises in as not inevitable, 220, 221, 242 role of luck downplayed, 222, 224–6, 243 scale-invariant nature of, 219, 220 ‘socialism for the rich’, 230 Thatcher’s praise of, 216 and top-rate tax cuts, 231, 233–5, 239 trickle-down economics, 232–3 US and European attitudes to, 226–7 ‘you deserve what you get’ belief, 223–6, 227–8, 236, 243 innovation, 222–3, 242 Inside Job (documentary, 2010), 88 Institute of Economic Affairs, 7–8, 15, 162–3 intellectual property law, 57, 68, 236 Ishiguro, Kazuo, Never Let Me Go, 148 Jensen, Michael, 229 Journal of Law and Economics, 49 justice, 1, 55, 57–62, 125, 137 Kahn, Herman, 18, 33 Kahneman, Daniel, 170–72, 173, 179, 202–3, 212, 226 Kennedy, President John, 139–40 Keynes, John Maynard, 11, 21, 162, 186, 204 and Buchanan’s ideology, 87 dentistry comparison, 258–9, 261 on economics as moral science, 252–3 Friedman’s challenge to orthodoxy of, 132 Hayek’s view of, 5–6 massive influence of, 3–4, 5–6 on power of economic ideas, 15 and probability, 185, 186–7, 188–9, 190, 210 vision of the ideal economist, 20 General Theory (1936), 15, 188–9 Khomeini, Ayatollah, 128 Khrushchev, Nikita, 139–40, 181 Kilburn Grammar School, 48 Kildall, Gary, 222 Kissinger, Henry, 184 Knight, Frank, 185–6, 212 Krugman, Paul, 248 Kubrick, Stanley, 35*, 139 labour child labour, 124, 146 and efficiency wages, 237–8 labour-intensive services, 90, 92–3 lumpenproletariat, 237 Olson’s hostility to unions, 104 Adam Smith’s ‘division of labour’ concept, 128 Laffer, Arthur, 232–3, 234 Lancet (medical journal), 257 Larkin, Philip, 67 law and economics movement, 40, 55, 56–63, 64–7 Lazear, Edward, ‘Economic Imperialism’, 246 legal system, 7* and blame for accidents, 55, 60–61 and Chicago School, 49, 50–52, 55 and Coase Theorem, 47, 49, 50–55, 63–6 criminal responsibility, 111, 137, 152 economic imperialist view of, 137 law and economics movement, 40, 55, 56–63, 64–7 ‘mimic the market’ approach, 61–3, 65 Posner’s wealth-maximization principle, 57–63, 64–7, 137 precautionary principle, 211–12, 214 transaction costs, 51–3, 54–5, 61, 62, 63–4, 68 Lehmann Brothers, 194 Lexecon, 58, 68 Linda Problem, 202–3 LineStanding.com, 123 Little Zheng, 123, 124 Lloyd Webber, Andrew, 234–5, 236 lobbying, 7, 8, 88, 115, 123, 125, 146, 230, 231, 238 loft-insulation schemes, 172–3 logic, mathematical, 74–5 The Logic of Life (Tim Harford, 2008), 130 London School of Economics (LSE), 4, 48 Long-Term Capital Management (LTCM), 201, 257 Machiavelli, Niccoló, 89, 94 Mafia, 30 malaria treatments, 125, 149 management science, 153–4, 155 Mandelbrot, Benoît, 195, 196, 201 Mankiw, Greg, 11 marginal productivity theory, 223–4 Markowitz, Harry, 196–7, 201, 213 Marx, Karl, 11, 101, 102, 104, 111, 223 lumpenproletariat, 237 mathematics, 9–10, 17–18, 19, 21–4, 26, 247, 248, 255, 259 of 2007 financial crash, 194, 195–6 and Ken Arrow, 71, 72, 73–5, 76–7, 82–3, 97 axioms (abstract assumptions), 198 fractals (scale-invariance), 194, 195–6, 201, 219 and orthodox decision theory, 190–91, 214 Ramsey Rule on discounting, 208–9, 212 and Savage, 189–90, 193, 197, 198, 199, 205 and Schelling, 139 Sen’s framework on voting systems, 80–81 standard deviation, 182, 192, 194 and stock market statistics, 190–91, 195–6 use of for military ends, 71–2 maximizing behaviour and Becker, 129–31, 133–4, 147 and catastrophe, 211 and Coase, 47, 55, 59, 61, 63–9 economic imperialism, 124–5, 129–31, 133–4, 147, 148–9 Posner’s wealth-maximization principle, 57–63, 64–7, 137 profit-maximizing firms, 228 see also wealth-maximization principle; welfare maximization McCluskey, Kirsty, 194 McNamara, Robert, 138 median voter theorem, 77, 95–6 Merton, Robert, 201 Meucci, Antonio, 222 microeconomics, 9, 232, 259 Microsoft, 222 Miles, David, 258 Mill, John Stuart, 102, 111, 243 minimum wage, national, 96 mobility, economic and social correlation with inequality, 226–8, 243 as low in UK, 227 as low in USA, 226–7 US–Europe comparisons, 226–7 Modern Times (Chaplin film, 1936), 154 modernism, 67 Moivre, Abraham de, 193 monetarism, 87, 89, 132, 232 monopolies and cartels, 101, 102, 103–4 public sector, 48–9, 50–51, 93–4 Mont Pèlerin Society, 3–9, 13, 15, 132 Morgenstern, Oskar, 20–22, 24–5, 28, 35, 124, 129, 189, 190 Mozart, Wolfgang Amadeus, 91, 92–3 Murphy, Kevin, 229 Mussolini, Benito, 216, 219 Nash equilibrium, 22–3, 24, 25, 27–8, 33–4, 41–2 Nash, John, 17–18, 22–3, 24, 25–6, 27–8, 33–4, 41–2 awarded Nobel Prize, 34–5, 38, 39, 40 mental health problems, 25, 26, 34 National Health Service, 106, 162 ‘neoliberalism’, avoidance of term, 3* Neumann, John von ambition to make economics a science, 20–21, 24–5, 26, 35, 125, 151, 189 as Cold War warrior, 20, 26, 138 and expansion of scope of economics, 124–5 as father of game theory, 18, 19, 20–22, 25, 26, 28, 30, 34, 41 final illness and death of, 19, 34, 35, 43–4 genius of, 19–20 as inspiration for Dr Strangelove, 19 and Nash’s equilibrium, 22–3, 25, 38* simplistic view of humanity, 28 theory of decision-making, 189, 190, 203 neuroscience, 14 New Deal, US, 4, 194, 231 Newton, Isaac, 223 Newtonian mechanics, 21, 24–5 Nixon, Richard, 56, 184, 200 NORAD, Colorado Springs, 181 nuclear weapons, 18–19, 20, 22, 27, 181 and Ellsberg, 200 and game theory, 18, 20, 21–2, 24, 27, 33–4, 35, 70, 73, 198 MAD (Mutually Assured Destruction), 35, 138 and Russell’s Chicken, 33–4 and Schelling, 138, 139 Nudge economists, 13, 171–5, 177–8, 179, 180, 251 Oaten, Mark, 121 Obama, Barack, 110, 121, 157, 172, 180 Olson, Mancur, 103, 108, 109, 119–20, 122 The Logic of Collective Action (1965), 103–4 On the Waterfront (Kazan film, 1954), 165 online invisibility, 100* organs, human, trade in, 65, 123, 124, 145, 147–8 Orwell, George, Nineteen Eighty-Four, 42–3 Osborne, George, 233–4 Packard, David, 159 Paine, Tom, 243 Pareto, Vilfredo 80/20 rule’ 218 and inequality, 217, 218–19, 220 life and background of, 216–17 Pareto efficiency, 217–18, 256* Paul the octopus (World Cup predictor, 2010), 133 pensions, workplace, 172, 174 physics envy, 9, 20–21, 41, 116, 175–6, 212, 247 Piketty, Thomas, 234, 235 plastic shopping bag tax, 159–60 Plato’s Republic, 100–101, 122 political scientists and Duncan Black, 78, 95–6 Black’s median voter theorem, 95–6 Buchanan’s ideology, 84–5 crises of the 1970s, 85–6 influence of Arrow, 72, 81–2, 83 see also public choice theory; social choice theory Posner, Richard, 54, 56–63, 137 ‘mimic the market’ approach, 61–3, 65 ‘The Economics of the Baby Shortage’ (1978), 61 precautionary principle, 211–12, 214 price-fixing, 101, 102, 103–4 Princeton University, 17, 19–20 Prisoner’s Dilemma, 26–8, 29–32, 42–3 prisons, cell upgrades in, 123 privatization, 50, 54, 88, 93–4 probability, 182–4 and Keynes, 185, 186–7, 188–9, 210 Linda Problem, 202–3 modern ideas of, 184–5 Ramsey’s personal probabilities (beliefs as probabilities), 187–8, 190, 197, 198, 199, 204–5 and Savage, 190, 193, 197, 198, 199, 203, 205 ‘Truth and Probability’ (Ramsey paper), 186–8, 189, 190 see also risk and uncertainty Proceedings of the National Academy of Sciences, 22 productivity Baumol’s cost disease, 90–92, 93, 94 and efficiency wages, 237–8 improvement in labour-intensive services, 92–3 labour input, 92 protectionism, 246, 255 psychology availability heuristic, 226 behaviourism, 154–8, 237 and behavioural economics, 12, 170–71 cognitive dissonance, 113–14 and financial incentives, 156–7, 158–60, 163–4, 171 framing effects, 170–71, 259 of free-riding, 113–14, 115 intrinsic motivations, 158–60, 161–3, 164, 165–6, 176 irrational behaviour, 12, 15, 171 learning of social behaviour, 163–4 moral disengagement, 162, 163, 164, 166 motivated beliefs, 227 ‘self-command’ strategies, 140 view of in game theory, 26–31 view of in public choice theory, 85–6 and welfare maximization, 149 ‘you deserve what you get’ belief, 223–6, 227–8, 236, 243 public choice theory as consensus view, 84–5 and crises of the 1970s, 85–6 foolish voter assumption, 86–8 ‘paradox of voter turnout’, 88–9, 95–6, 115–16 partial/self-contradictory application of, 86, 87–9 ‘political overload’ argument, 85, 86–7 ‘public bad, private good’ mantra, 93–4, 97 and resistance to tax rises, 94, 241 self-fulfilling prophecies, 95–7 and selfishness, 85–6, 87–8, 89, 94, 95–7 as time-bomb waiting to explode, 85 public expenditure in 1970s and ’80s, 89 Baumol’s cost disease, 90–92, 93, 94 and Keynesian economics, 4 and public choice theory, 85–8, 89, 241 and tax rises, 241–2 public-sector monopolies, 48–9, 50–51, 93–4 Puzzle of the Harmless Torturers, 118–19 queue-jumping, 123, 124 QWERTY layout, 42 racial discrimination, 126–7, 133, 136, 140 Ramsey, Frank, 186–8, 189, 190, 205, 208 Ramsey Rule, 208–9, 212 RAND Corporation, 17, 41, 103, 138, 139 and Ken Arrow, 70–71, 72–3, 74, 75–6, 77, 78 and behaviourism, 154 and Cold War military strategy, 18, 20, 21–2, 24, 27, 33–4, 70, 73, 75–6, 141, 200, 213 and Ellsberg, 182–4, 187, 197–8, 200 and Russell’s Chicken, 33 Santa Monica offices of, 18 self-image as defender of freedom, 78 rational behaviour assumptions in game theory, 18, 28, 29–32, 35–8, 41–3, 70, 124 axioms (abstract mathematical assumptions), 198 Becker’s version of, 128–9, 135, 140, 151 behavioural economics/Nudge view of, 173, 174–5 distinction between values and tastes, 136–8 economic imperialist view of, 135, 136–8, 140, 151 and free-riding theory, 100–101, 102, 103–4, 107–8, 109–10, 115–16 and orthodox decision theory, 198, 199 public choice theory relates selfishness to, 86 term as scientific-sounding cover, 12 see also homo economicus Reader’s Digest, 5, 6 Reagan, Ronald, 2, 87–8, 89, 104, 132 election of as turning point, 6, 216, 220–21 and top-rate tax cuts, 231, 233 regulators, 1–2 Chicago view of, 40 Reinhart, Carmen, 258 religion, decline of in modern societies, 15, 185 renewable energy, 116 rent-seeking, 230, 238 ‘right to recline’, 63–4 risk and uncertainty bell curve distribution, 191–4, 195, 196–7, 201, 203–4, 257 catastrophes, 181–2, 191, 192, 201, 203–4, 211–12 delusions of quantitative ‘risk management’, 196, 213 Ellsberg’s experiment (1961), 182–4, 187, 197, 198–200 errors in conventional thinking about, 191–2, 193–4, 195–7, 204–5, 213 financial orthodoxy on risk, 196–7, 201–2 and First World War, 185 and fractals (scale-invariance), 194, 195–6, 201 hasard and fortuit, 185* ‘making sense’ of through stories, 202–3 ‘measurable’ and ‘unmeasurable’ distinction, 185–6, 187–9, 190, 210–11, 212–13 measurement in numerical terms, 181–4, 187, 189, 190–94, 196–7, 201–2, 203–5, 212–13 orthodox decision theory, 183–4, 185–6, 189–91, 193–4, 201–2, 203–5, 211, 212–14 our contemporary orthodoxy, 189–91 personal probabilities (beliefs as probabilities), 187–8, 190, 197, 198, 199, 204–5 precautionary principle, 211–12, 214 pure uncertainty, 182–3, 185–6, 187–9, 190, 197, 198–9, 210, 211, 212, 214, 251 redefined as ‘volatility’, 197, 213 the Savage orthodoxy, 190–91, 197, 198–200, 203, 205 scenario planning as crucial, 251 Taleb’s black swans, 192, 194, 201, 203–4 ‘Truth and Probability’ (Ramsey paper), 186–8, 189, 190 urge to actuarial alchemy, 190–91, 197, 201 value of human life (‘statistical lives’), 141–5, 207 see also probability Robertson, Dennis, 13–14 Robinson, Joan, 260 Rodrik, Dani, 255, 260–61 Rogoff, Ken, 258 Rothko, Mark, 4–5 Rumsfeld, Donald, 232–3 Russell, Bertrand, 33–4, 74, 97, 186, 188 Ryanair, 106 Sachs, Jeffrey, 257 Santa Monica, California, 18 Sargent, Tom, 257–8 Savage, Leonard ‘Jimmie’, 189–90, 193, 203, 205scale-invariance, 194, 195–6, 201, 219 Scandinavian countries, 103, 149 Schelling, Thomas, 35* on access to lifeboats, 150–51 awarded Nobel Prize, 138–9 and Cold War nuclear strategy, 138, 139–40 and economic imperialism, 141–5 and game theory, 138–9 and Washington–Moscow hotline, 139–40 work on value of human life, 141–5, 207 ‘The Intimate Contest for Self-command’ (essay, 1980), 140, 145 ‘The Life You Save May be Your Own’ (essay, 1968), 142–5, 207 Schiphol Airport, Amsterdam, 172 Schmidt, Eric, 105 Scholes, Myron, 201 Schwarzman, Stephen, 235 Second World War, 3, 189, 210 selfishness, 41–3, 178–9 and Becker, 129–30 and defence of inequality, 242–3 as free marketeers’ starting point, 10–12, 13–14, 41, 86, 178–9 and game theory, 18 and public choice theory, 85–6, 87–8, 89, 94, 95–7 Selten, Reinhard, 34–5, 36, 38, 40 Sen, Amartya, 29, 80–81 service sector, 90–93, 94 Shakespeare, William, Measure for Measure, 169 Shaw, George Bernard, 101 Shiller, Robert, 247 Simon, Herbert, 223 Skinner, Burrhus, 154–5, 158 Smith, Adam, 101, 111, 122 The Wealth of Nations (1776), 10–11, 188–9 snowflakes, 195 social choice theory, 72 and Ken Arrow, 71–83, 89, 95, 97, 124–5, 129 and Duncan Black, 78, 95 and free marketeers, 79, 82 Sen’s mathematical framework, 80–81 social media, 100* solar panels, 116 Solow, Bob, 163, 223 Sorites paradox, 117–18, 119 sovereign fantasy, 116–17 Soviet Union, 20, 22, 70, 73, 82, 101, 104, 167, 237 spectrum auctions, 39–40, 47, 49 Stalin, Joseph, 70, 73, 101 the state anti-government attitudes in USA, 83–5 antitrust regulation, 56–8 dismissal of almost any role for, 94, 135, 235–6, 241 duty over full employment, 5 economic imperialist arguments for ‘small government’, 135 increased economic role from 1940s, 3–4, 5 interventions over ‘inefficient’ outcomes, 53 and monetarism, 87, 89 and Mont Pèlerin Society, 3, 4, 5 and privatization, 50, 54, 88, 93–4 public-sector monopolies, 48–50, 93–4 replacing of with markets, 79 vital role of, 236 statistical lives, 141–5, 207 Stern, Nick, 206, 209–10 Stigler, George, 50, 51, 56, 69, 88 De Gustibus Non Est Disputandum (with Becker, 1977), 135–6 Stiglitz, Joseph, 237 stock markets ‘Black Monday’ (1987), 192 and fractals (scale-invariance), 194, 195–6, 201 orthodox decision theory, 190–91, 193–4, 201 Strittmatter, Father, 43–4 Summers, Larry, 10, 14 Sunstein, Cass, 173 Nudge (with Richard Thaler, 2008), 171–2, 175 Taleb, Nassim, 192 Tarski, Alfred, 74–5 taxation and Baumol’s cost disease, 94 and demand for positional goods, 239–41 as good thing, 231, 241–2, 243 Laffer curve, 232–3, 234 new doctrine of since 1970s, 232–4 property rights as interdependent with, 235–6 public resistance to tax rises, 94, 239, 241–2 and public spending, 241–2 revenue-maximizing top tax rate, 233–4, 235 tax avoidance and evasion, 99, 105–6, 112–13, 175, 215 ‘tax revolt’ campaigns (1970s USA), 87 ‘tax as theft’ culture, 235–6 top-rate cuts and inequality, 231, 233–5, 239 whines from the super-rich, 234–5, 243 Taylor, Frederick Winslow, 153–4, 155, 167, 178, 237 Thaler, Richard, 13 Nudge (with Cass Sunstein, 2008), 171–2, 175 Thatcher, Margaret, 2, 88, 89, 104, 132 election of as turning point, 6, 216, 220–21 and Hayek, 6, 7 and inequality, 216, 227 privatization programme, 93–4 and top-rate tax cuts, 231 Theory of Games and Economic Behavior (Von Neumann and Morgenstern, 1944), 20, 21, 25, 189 Titanic, sinking of (1912), 150 Titmuss, Richard, The Gift Relationship, 162–3 tobacco-industry lobbyists, 8 totalitarian regimes, 4, 82, 167–8, 216, 219 see also Soviet Union trade union movement, 104 Tragedy of the Commons, 27 Truman, Harry, 20, 237 Trump, Donald, 233 Tucker, Albert, 26–7 Tversky, Amos, 170–72, 173, 202–3, 212, 226 Twitter, 100* Uber, 257 uncertainty see risk and uncertainty The Undercover Economist (Tim Harford, 2005), 130 unemployment and Coase Theorem, 45–7, 64 during Great Depression, 3–4 and Keynesian economics, 4, 5 United Nations, 96 universities auctioning of places, 124, 149–50 incentivization as pervasive, 156 Vietnam War, 56, 198, 200, 249 Villari, Pasquale, 30 Vinci, Leonardo da, 186 Viniar, David, 182, 192 Volkswagen scandal (2016), 2, 151–2 Vonnegut, Kurt, 243–4 voting systems, 72–4, 77, 80, 97 Arrow’s ‘Independence of Irrelevant Alternatives’, 81, 82 Arrow’s ‘Universal Domain’, 81, 82 and free marketeers, 79 ‘hanging chads’ in Florida (2000), 121 recount process in UK, 121 Sen’s mathematical framework, 80–81 Waldfogel, Joel, 161* Wanniski, Jude, 232 Watertown Arsenal, Massachusetts, 153–4 Watson Jr, Thomas J., 181 wealth-maximization principle, 57–63 and Coase, 47, 55, 59, 63–9 as core principle of current economics, 253 created markets, 65–7 extension of scope of, 124–5 and justice, 55, 57–62, 137 and knee space on planes, 63–4 practical problems with negotiations, 62–3 and values more important than efficiency, 64–5, 66–7 welfare maximization, 124–5, 129–31, 133–4, 148–9, 176 behavioural economics/Nudge view of, 173 and vulnerable/powerless people, 146–7, 150 welfare state, 4, 162 Wilson, Charlie, 215 Wittgenstein, Ludwig, 186, 188 Wolfenschiessen (Swiss village), 158, 166–7 Woolf, Virginia, 67 World Bank, 96 World Cup football tournament (2010), 133 World Health Organization, 207 Yale Saturday Evening Pest, 4–5 Yellen, Janet, 237 THE BEGINNING Let the conversation begin … Follow the Penguin twitter.com/penguinukbooks Keep up-to-date with all our stories youtube.com/penguinbooks Pin ‘Penguin Books’ to your pinterest.com/penguinukbooks Like ‘Penguin Books’ on facebook.com/penguinbooks Listen to Penguin at soundcloud.com/penguin-books Find out more about the author and discover more stories like this at penguin.co.uk ALLEN LANE UK | USA | Canada | Ireland | Australia India | New Zealand | South Africa Allen Lane is part of the Penguin Random House group of companies whose addresses can be found at global.penguinrandomhouse.com First published 2019 Copyright © Jonathan Aldred, 2019 The moral right of the author has been asserted Jacket photograph © Getty Images ISBN: 978-0-241-32544-5 This ebook is copyright 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A French mathematician who wrote one of the many stellar reviews of Theory of Games and Economic Behavior was also a book collector. In the 1960s he purchased a mathematical treatise from one of the stalls along the banks of the Seine in Paris. It included a letter describing the minimax solution to two-person zero-sum games. The letter was dated 1713. 2 RAND’s failure to produce useful research was becoming a joke. By the late 1950s outsiders said that RAND stood for ‘Research And No Development’. 3 However, in the film the US did not know in advance that the Doomsday machine existed, rendering it useless as a threat.

More: The 10,000-Year Rise of the World Economy by Philip Coggan

accounting loophole / creative accounting, Ada Lovelace, agricultural Revolution, Airbnb, airline deregulation, Alan Greenspan, Andrei Shleifer, anti-communist, Apollo 11, assortative mating, autonomous vehicles, bank run, banking crisis, banks create money, basic income, Bear Stearns, Berlin Wall, Black Monday: stock market crash in 1987, Bletchley Park, Bob Noyce, Boeing 747, bond market vigilante , Branko Milanovic, Bretton Woods, Brexit referendum, British Empire, business cycle, call centre, capital controls, carbon footprint, carbon tax, Carl Icahn, Carmen Reinhart, Celtic Tiger, central bank independence, Charles Babbage, Charles Lindbergh, clean water, collective bargaining, Columbian Exchange, Columbine, Corn Laws, cotton gin, credit crunch, Credit Default Swap, crony capitalism, cross-border payments, currency peg, currency risk, debt deflation, DeepMind, Deng Xiaoping, discovery of the americas, Donald Trump, driverless car, Easter island, Erik Brynjolfsson, European colonialism, eurozone crisis, Fairchild Semiconductor, falling living standards, financial engineering, financial innovation, financial intermediation, floating exchange rates, flying shuttle, Ford Model T, Fractional reserve banking, Frederick Winslow Taylor, full employment, general purpose technology, germ theory of disease, German hyperinflation, gig economy, Gini coefficient, Glass-Steagall Act, global supply chain, global value chain, Gordon Gekko, Great Leap Forward, greed is good, Greenspan put, guns versus butter model, Haber-Bosch Process, Hans Rosling, Hernando de Soto, hydraulic fracturing, hydroponic farming, Ignaz Semmelweis: hand washing, income inequality, income per capita, independent contractor, indoor plumbing, industrial robot, inflation targeting, Isaac Newton, James Watt: steam engine, job automation, John Snow's cholera map, joint-stock company, joint-stock limited liability company, Jon Ronson, Kenneth Arrow, Kula ring, labour market flexibility, land reform, land tenure, Lao Tzu, large denomination, Les Trente Glorieuses, liquidity trap, Long Term Capital Management, Louis Blériot, low cost airline, low interest rates, low skilled workers, lump of labour, M-Pesa, Malcom McLean invented shipping containers, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Mikhail Gorbachev, mittelstand, Modern Monetary Theory, moral hazard, Murano, Venice glass, Myron Scholes, Nelson Mandela, Network effects, Northern Rock, oil shale / tar sands, oil shock, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, popular capitalism, popular electronics, price stability, principal–agent problem, profit maximization, purchasing power parity, quantitative easing, railway mania, Ralph Nader, regulatory arbitrage, road to serfdom, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, scientific management, Scramble for Africa, Second Machine Age, secular stagnation, Silicon Valley, Simon Kuznets, South China Sea, South Sea Bubble, special drawing rights, spice trade, spinning jenny, Steven Pinker, Suez canal 1869, TaskRabbit, techlash, Thales and the olive presses, Thales of Miletus, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, transatlantic slave trade, transcontinental railway, Triangle Shirtwaist Factory, universal basic income, Unsafe at Any Speed, Upton Sinclair, V2 rocket, Veblen good, War on Poverty, Washington Consensus, Watson beat the top human players on Jeopardy!, women in the workforce, world market for maybe five computers, Yom Kippur War, you are the product, zero-sum game

The Old Testament book Ecclesiastes advises: “Send your grain across the seas, and in time, profits will flow back to you. But divide your investments among many places, for you do not know what risks might lie ahead.”4 Even at home, merchants might find that their local government had decided to seize their property. This certainly happened frequently in history and still occurs today. But this is a zero-sum game. If your crops are seized every year by the local bandit (or landlord), you will not bother to grow them next year. Long-term economic growth will not occur. As Thomas Hobbes, the gloomy 17th-century philosopher, wrote: “In such condition there is no place for industry; because the fruit thereof is uncertain.”5 The existence of modern states, which protect the rights of private property and the peaceful settlement of disputes, was needed before economic growth could take off.

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In The Wealth of Nations, he wrote: “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” He attacked the notion of mercantilism, which believed that trade was a zero-sum game in which the aim was to get more gold than other nations. On the contrary, the aim of trade was to import goods that one needed or desired. He emphasised the benefits of specialisation. One example was the pin factory, where the separation of tasks into discrete steps, handled by different workers, enabled pin production to soar.

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Only 9% of manufactured goods in Japan were imported, compared with 32% in the US.32 Japan’s consistent trade surpluses meant that it built up large holdings of US Treasury bonds and also privately held assets such as the Rockefeller Center in New York and Columbia Pictures in Hollywood. This led to some paranoid thrillers about a Japanese takeover of the global economy, such as Rising Sun by Michael Crichton and Debt of Honor by Tom Clancy.33 These fantasises were a sign that many people see trade as a “zero-sum game” in which if one side wins, the other might lose. The fact that, thanks to the Japanese, Americans got cheaper cars and electronic goods, as well as lower borrowing costs, tended to be overlooked. Another focus for trade talk was the strength of the dollar in the early 1980s, which flowed from Volcker’s high interest rate policy.

Ctrl Alt Delete: Reboot Your Business. Reboot Your Life. Your Future Depends on It. by Mitch Joel

3D printing, Amazon Web Services, augmented reality, behavioural economics, call centre, clockwatching, cloud computing, content marketing, digital nomad, do what you love, Firefox, future of work, gamification, ghettoisation, Google Chrome, Google Glasses, Google Hangouts, Khan Academy, Kickstarter, Kodak vs Instagram, Lean Startup, Marc Andreessen, Marc Benioff, Mark Zuckerberg, Network effects, new economy, Occupy movement, place-making, prediction markets, pre–internet, QR code, recommendation engine, Richard Florida, risk tolerance, Salesforce, self-driving car, Silicon Valley, Silicon Valley startup, Skype, social graph, social web, Steve Jobs, Steve Wozniak, TechCrunch disrupt, TED Talk, the long tail, Thomas L Friedman, Tim Cook: Apple, Tony Hsieh, vertical integration, white picket fence, WikiLeaks, zero-sum game

The thinking was fairly basic: Having ten raving fans is better than blasting thousands of people who couldn’t care less, and now these fans are self-identifying in places like Facebook, YouTube, Twitter… It seemed to make a plausible argument. My thinking has since evolved (dramatically). It’s not a zero-sum game anymore. A business that is strong must have both components: a mass number of fans who are also deeply engaged. In a Facebook world of over one billion people connected and sharing, you can have both a mass number of people as well as a better understanding of who they are and what their needs are.

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If you think about this integration of e-commerce at the retail level (be it on a smartphone or a touchscreen installation), retailers may discover that a store in Sioux Falls sells as much inventory on certain products (or maybe more) than a flagship store in Times Square. Thinking that e-commerce kills the retail experience is simply bad thinking. People still like to go out, wander the malls, touch and see what’s new and exciting. It’s not a zero-sum game. The smarter retailers are going to wake up and realize that e-commerce will no longer be a vertical business within their retail experience… it’s going to quickly become horizontal across the organization. The digitization and ability for consumers to hit the retail level, but have access to the full inventory (and maybe even more products… some of which can even be virtual goods), is going to be the true shopping experience of the soon-to-be-future for retail.

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Kids do not need Google, a great math teacher is much better than an iPad app, and it’s important that kids know what an actual book is. But there’s something else we need to remember: Our values were created in a different time and in a different place. Let’s rephrase the question: Am I doing my children a service or disservice by not allowing their education to include computers, technology, and connectivity? This is not a zero-sum game. Think about it this way: The jobs that the majority of my friends are currently working at didn’t even exist as occupations when I was in high school. Should children be lugging around five textbooks in a backpack, or does an iPad give them not only a lighter load but also the ability to create, collaborate, and engage more with their peers (when used correctly)?

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

Alan Greenspan, banking crisis, banks create money, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, bond market vigilante , Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, compensation consultant, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, currency risk, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, Glass-Steagall Act, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, junk bonds, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, low interest rates, market bubble, market clearing, Martin Wolf, means of production, Michael Milken, mobile money, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nixon triggered the end of the Bretton Woods system, Paul Volcker talking about ATMs, Ponzi scheme, profit motive, proprietary trading, prudent man rule, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, Savings and loan crisis, seigniorage, shareholder value, Silicon Valley, SoftBank, Solyndra, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

It is equally misleading to think that a country’s finances can be viewed in isolation from those of all other countries it trades with and in which it invests money or raises capital. Yet that is precisely what the political class and the general public naturally do. Global Trade Is Not a Zero-Sum Game The basic math is simple. If one country sells more stuff to another country than it buys in return, a trade deficit arises in the first country and a trade surplus in the second. These add up to zero, being mirror images of each other, and it is natural to assume that this is a zero-sum game where surplus countries win and deficit countries lose. However, bilateral trade is actually almost never in balance because countries have different stages of economic development and different business cycles, as well as different advantages in producing specific goods, services, and commodities. 94 Chapter 5 | Global Whirlwinds This is even more true when looking at multilateral trade, since every country actually trades and invests with many other countries at once.

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eBook <www.wowebook.com> 170 Index Global whirlwinds (continued) economic primacy, 113 European banking crisis ECB, 102–103 federal funds market, 102 Federal Reserve, 103 global money market, 102 interbank market, 101 interbank-lending market, 102 interest rate and currency risks, 101 investment-banking industry, 101 recession, 103 short-and medium-term credit, 101 short-term funding and liquidity, 101 sovereign risk, 102 steroids, 103 globalization, 113 global money pump, 103–105 global trade, zero-sum game ants and grasshoppers, 96 cheap TV deal, 94–95 Chinese Central Bank, 94 currency manipulation, 95–96 multilateral trade, 94 political demagoguery, 94 hegemon, 113–116 sustainable development, 112 technology vs. friction, 105–106 US global economic leadership, 112 US losing clout, 111–112 war, settlement risk, 108–109 Western decline acceleration, 113 Government-sponsored enterprises (GSEs), 17 Graham-Leach-Bliley Act, 36 Great Depression, 5, 44, 61 Great Moderation, 16–18, 21, 61 “Green” economy, 85 Growth-killing austerity, 111 H Home equity lines of credit (HELOCs), 16 I Industrial Revolution, 77 Infinite customization, 68 J Joint-stock banking, 63, 76 L Laissez-faire economy, 84–86 Liberal arts, 132 Life after finance, 75 credit-driven economy, 76–77 death knell, consumer credit American optimism, 90 big data, 90 entrepreneurs starvation, 91–92 loan factories, 90 per-account/per-transaction, 90 securitization, 90 unbanking, 91 financial repression Bretton Woods system, 79 capital exports and foreignexchange transactions, 79 captive domestic audience, 79 debt restructuring, 78 GDP, 79 government banks ownership, 79 industrial policy, 86 monopolies, 86 negative real interest rates, 78, 79 prudential regulation, 79 rules, 80 subsidized green energy, 86 tax raising and lowering, 81–82 World War II, 79 Government expenditure, 75–76 low interest rates, 77–78 political direction, credit and investment formal taxation, 82 government-run utility, 83 Japanese banks, 83 laissez-faire economy myth, 84–86 Index market-driven banking system, 83 winners and losers, 83–84 risky business amalgamation, 88 coincidence, 88 competition, 89–90 joint-stock banks, 87 often-contradictory rules and requirements, 88 private partnerships, 87 separation of functions, 87 shareholder-owned banks, 87 small-town banks, 87 Life-line banking, 70 R Liquidity trap, 72 Ring fencing, 88 London Interbank Offered Rate (LIBOR), 102 Rules-based regulation, 59, 61 M S “Market-centric” financial system, 110 Real Time Gross Settlement (RTGS), 108 Regulation process “Anglo-Saxon” world, 36 balance sheets and trading desks, 35 definition, 36 finance deregulation, 35–36 Graham-Leach-Bliley Act, 36 Triple A–rated bonds, 37 “ultra-safe” money market mutual fund, 37 Regulatory arbitrage, 61 Resolution Trust Corporation (RTC), 31 Savings-and-loan (S&L) industry, 28, 30 Mass-market retail banking, 66 Securities and Exchange Commission (SEC) rules, 33 McKinsey Global Institute (MGI), 110 S&L industry.See Savings-and-loan industry Micro-regulation, 92 Ministry of International Trade and Industry (MITI), 83 Society for Worldwide Interbank Financial Telecommunications (SWIFT), 107 Moral hazard, 18 Straight-through procession, 107 N National Bank Act, 49 National Bureau of Economic Research (NBER), 78 O Outsourcing, 13 P Personal Consumption Expenditure (PCE), 90 Price discovery, 104 Principles-based regulation, 59 Printing money, 78 Professional/proprietary trading, 12 Subprime mortgage market, 66 T The Dodd-Frank Act, 49 Trillion-pound banking groups, 60 Troubled Asset Relief Program (TARP), 39 U US Federal Reserve, 6 V Volcker rule, 88 W Working capital, 11 171 Broken Markets A User’s Guide to the Post-Finance Economy Kevin Mellyn Broken Markets: A User’s Guide to the Post-Finance Economy Copyright © 2012 by Kevin Mellyn All rights reserved.

The Pattern Seekers: How Autism Drives Human Invention by Simon Baron-Cohen

23andMe, agricultural Revolution, airport security, Albert Einstein, Apollo 11, Asperger Syndrome, assortative mating, autism spectrum disorder, bioinformatics, coronavirus, corporate social responsibility, correlation does not imply causation, COVID-19, David Attenborough, discovery of penicillin, Elon Musk, en.wikipedia.org, Fellow of the Royal Society, Greta Thunberg, intentional community, invention of agriculture, Isaac Newton, James Watt: steam engine, Jim Simons, lateral thinking, longitudinal study, Menlo Park, meta-analysis, neurotypical, out of africa, pattern recognition, phenotype, Rubik’s Cube, Silicon Valley, six sigma, Skype, social intelligence, Stephen Hawking, Steven Levy, Steven Pinker, systems thinking, theory of mind, twin studies, zero-sum game

But this may also reflect that there was negative selection pressure on individuals with this brain type. Perhaps as well as conferring remarkable advantages in spotting if-and-then patterns this brain type also carries certain disadvantages, namely, being challenged socially. This would be expected if the tuning of the Empathy Circuit and the Systemizing Mechanism is a zero-sum game.6 That is, the higher one of these is tuned, the lower the other is tuned. We’ll come back to look at evidence for this relationship between these two brain circuits. Let’s have a closer look at hyper-systemizers, who, according to my theory, are central to the story of human invention because they systemize non-stop.

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And we confirmed this in the UK Brain Types Study, this time with 600,000 people.12 Not only were those in STEM more likely to be Type S or Extreme Type S, compared to those in non-STEM occupations, but those in STEM occupations on average also had a higher AQ. In the UK Brain Types Study, we also found that people who were Type S or Extreme Type S had a higher score on the AQ. This nailed it for us. Those with autism and those who are strong systemizers have similar minds. Let’s return to the idea that systemizing and empathizing can be a zero-sum game: the more you have of one capacity, the less you have of the other. If this is the case, we should expect to see a trade-off, a negative correlation between empathy and systemizing: the better you are at one, the worse you are at the other. The results from the UK Brain Types Study did show a small trade-off.13 This suggests that, while these two dimensions are largely independent of each other, they may also share a common biological factor.

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Treffert (2009), “The savant syndrome: An extraordinary condition: A synopsis: Past, present, future,” Philosophical Transactions of the Royal Society of London: Series B, Biological Sciences 364(1522), 1351–1357; K. Hyltenstam (2016), Advanced proficiency and exceptional ability in second languages (Berlin: Walter de Gruyter GmbH); D. Kennedy and L. Squire (2007), “An analysis of calendar performance in two autistic calendar savants,” Learning and Memory 14(8), 533–538. 6. A zero-sum game would be expected if empathy and systemizing competed for some common biological resource. See N. Goldenfeld et al. (2005), “Empathizing and systemizing in males, females, and autism,” Clinical Neuropsychiatry 2, 338–345; and N. Goldenfeld et al. (2007), “Empathizing and systemizing in males, females, and autism: A test of the neural competition theory,” in T.

The Cult of Smart: How Our Broken Education System Perpetuates Social Injustice by Fredrik Deboer

accounting loophole / creative accounting, Affordable Care Act / Obamacare, anti-communist, assortative mating, basic income, Bernie Sanders, collective bargaining, deindustrialization, desegregation, Donald Trump, fiat currency, Flynn Effect, full employment, gentrification, Great Leap Forward, helicopter parent, income inequality, knowledge economy, labor-force participation, liberal capitalism, longitudinal study, meta-analysis, new economy, New Urbanism, obamacare, Own Your Own Home, phenotype, positional goods, profit motive, RAND corporation, randomized controlled trial, Richard Florida, school choice, Scientific racism, selection bias, Silicon Valley, single-payer health, Steven Pinker, survivorship bias, trade route, twin studies, universal basic income, upwardly mobile, winner-take-all economy, young professional, zero-sum game

For any one child to be gifted there must be others who are not. When I read policy writing and journalism about education, I am often reminded of Garrison Keillor’s fictional town of Lake Wobegon, where “all the children are above average.” By refusing to really define whose interests we’re advocating in a zero-sum game, we as a community of educators, researchers, and citizens have abdicated the basic intellectual work of our enterprise. Meritocracy, writ large, is a tool for reducing equality. That is its very function; the basic presumption is that some have more merit than others and should be rewarded for that merit.

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See teachers Eiseley, Loren Eisenhower era elementary schools median public school teacher pay norm-referenced state-mandated standardized tests and “Texas miracle” under socialism and universal childcare elite colleges and universities college admissions scandal of 2019 (Operation Varsity Blues) returns on attendance at and winning in contemporary capitalist society employment and advanced degree premium college unemployment premium and elite high schools and labor force participation rate under socialism and universal basic income enfranchisement, political Engels, Friedrich engineering programs equality and mobility social inequality types of equality equality of opportunity and behavioral genetics and blank-slate philosophy of education and Dewey, John impossibility of and income inequality and liberalism and mobility and morality Obama, Barack on and poverty and progressivism and racism equality of outcomes equality under socialism eugenics Every Student Succeeds Act extracurricular activities Facebook Fish, Jefferson M. Florida, Richard Flynn, James Flynn effect formative equality of opportunity. See also equality of opportunity Founding Fathers France, Anatole free college free market economics free trade Freud, Sigmund Friedman, Milton Friedman, Rose game theory. See zero-sum game gaps achievement and performance gaps gender gaps Obama on education gaps racial achievement gaps wage gaps Gates, Bill Gattaca (film) gender achievement gap gender essentialism gender wage gap genetic assortative mating genetics and achievement gaps and Flynn effect Genome-Wide Association Study and parenting and pseudoscientific racism Three Laws of Behavioral Genetics twin and adoption studies and Wilson effect See also behavioral genetics Genome-Wide Association Study (GWAS) Gentleman’s C gentrification genuine socialism gifted student programs globalization and collegiate arms race and knowledge economy and neoliberalism Goldin, Claudia “good life,” the Gottfredson, Linda GPA, high school graduation rates college high school and loosening of standards and moral choice and selection bias and special-needs students of women Great Recession Great Society liberals Green, Thomas Hill Greene, Jay P.

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wealth and bailouts and college admissions scandal of 2019 and equality of opportunity and inequality and social mobility and taxation and tutoring industry wealth segregation “weed out” classes Williams, Bernard Wilson, Ronald Wilson effect winners compared with being a person under socialism in contemporary capitalist society work. See employment; labor and teacher unions World War I World War II Yale University Yglesias, Matthew young adulthood zero-sum game of contemporary capitalism of meritocracy and mobility of traditional versus charter schools and value of college education zoning, residential About the Author FREDRIK DEBOER is a writer and academic. He has worked at Brooklyn College and has a PhD from Purdue University. His writing has appeared in such places as The New York Times, Harper’s, The Los Angeles Times, The Washington Post, Politico, Playboy, The New Republic, Foreign Policy, n+1, and Jacobin.

The Smartest Investment Book You'll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals by Daniel R. Solin

Alan Greenspan, asset allocation, buy and hold, corporate governance, diversification, diversified portfolio, index fund, John Bogle, market fundamentalism, money market fund, Myron Scholes, PalmPilot, passive investing, prediction markets, prudent man rule, random walk, risk tolerance, risk-adjusted returns, risk/return, transaction costs, Vanguard fund, zero-sum game

. • Many hyperactive brokers and advisors in this system have successfully avoided being held to a fiduciary standard because they know they cannot meet that standard in their relationships with investors. 38 Your Broker or Advisor Is Keeping You from Being a Smart Investor In short, being a Hyperactive Investor is a fool's errand. It is a zero-sum game (or worse, when you consider transaction costs), except from the perspective of the hyperactive brokers and advisors. They make out just fine. Chapter 11 Brokers Aren't on Your Side It [is} a fundamental dishonesty, a fundamental problem that cuts to the core of the lack of integrity on Wall Street.

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It really doesn't matter if you invest in a mutual fund or a wrap account. If either or both are hyperactively managed, they are poor choices. The bottom line is that the combination of higher costs, lower performance and greater tax consequences make all investments touted as being able to beat the markets worse than a zero-sum game, which is why Smart Investors avoid them. Chapter 20 Brokers Understand Fees but Not Risk Odds are you don't know what the odds are. -Gary Belsky and Thomas Gilovich, Why Smart Peopk Make Big Monry Mistake; Costs incurred are one of the twO major differences between Smart Investors and H yperactive Investors.

The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder

additive manufacturing, Atul Gawande, backtesting, behavioural economics, Benoit Mandelbrot, buy and hold, buy low sell high, Checklist Manifesto, computerized trading, deliberate practice, diversification, Elliott wave, endowment effect, fear index, loss aversion, mandelbrot fractal, margin call, offshore financial centre, paper trading, Ponzi scheme, price stability, psychological pricing, quantitative easing, random walk, Reminiscences of a Stock Operator, risk tolerance, short selling, South Sea Bubble, systematic trading, systems thinking, The Wisdom of Crowds, transaction costs, transfer pricing, traveling salesman, tulip mania, zero-sum game

Losers bring money into the markets, which is necessary for the prosperity of the trading industry. A Minus-Sum Game Winners in a zero-sum game make as much as losers lose. If you and I bet $20 on the direction of the next 100-point move in the Dow, one of us will collect $20 and the other will lose $20. A single bet has a component of luck, but the more knowledgeable person will keep winning more often than losing over a period of time. People buy the industry's propaganda about trading being a zero-sum game, take the bait, and open accounts. They don't realize that trading is a minus-sum game. Winners receive less than what losers lose because the industry drains money from the markets.

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It proposed new rules limiting leverage to 10 to 1. Frauds may include churning customer accounts, selling useless software, improperly managing “managed accounts,” false advertising, and Ponzi schemes. All the while, promoters claim that trading foreign exchange is a road to profits. The real forex market is a zero sum game, in which well-capitalized professional traders, many of whom work for banks, devote full-time attention to trading. An inexperienced retail trader has a significant information disadvantage. The retail trader always pays the bid-ask spread, which lowers his odds of winning. Retail forex traders are almost always undercapitalized and subject to the problem of “gambler's ruin.”

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See also Success bending the rules after desire for difficulty of and emotional trading essential components for and self-control vs. controlling markets by taking charge of your life and volume of trading Wisdom of crowds Wisdom of Crowds, The (James Surowiecki) Wishful thinking with classical charting giving trades “more room” as and stops Worldwide crowds Writing options Y Yahoo Finance Z Zero-sum game: forex market as trading as WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA. Table of Contents PREFACE Introduction 1. Trading—The Last Frontier 2. Psychology Is the Key 3. The Odds against You PART 1: Individual Psychology 4.

Value of Everything: An Antidote to Chaos The by Mariana Mazzucato

"Friedman doctrine" OR "shareholder theory", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, bank run, banks create money, Basel III, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, business cycle, butterfly effect, buy and hold, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon tax, Carmen Reinhart, carried interest, clean tech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, Evgeny Morozov, fear of failure, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Glass-Steagall Act, Google Hangouts, Growth in a Time of Debt, high net worth, Hyman Minsky, income inequality, independent contractor, index fund, informal economy, interest rate derivative, Internet of things, invisible hand, John Bogle, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, laissez-faire capitalism, light touch regulation, liquidity trap, London Interbank Offered Rate, low interest rates, margin call, Mark Zuckerberg, market bubble, means of production, military-industrial complex, Minsky moment, Money creation, money market fund, negative equity, Network effects, new economy, Northern Rock, obamacare, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, peer-to-peer lending, Peter Thiel, Post-Keynesian economics, profit maximization, proprietary trading, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Robert Solow, Sand Hill Road, shareholder value, sharing economy, short selling, Silicon Valley, Simon Kuznets, smart meter, Social Responsibility of Business Is to Increase Its Profits, software patent, Solyndra, stem cell, Steve Jobs, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, transaction costs, two and twenty, two-sided market, very high income, Vilfredo Pareto, wealth creators, Works Progress Administration, you are the product, zero-sum game

Annualized, the total comes to more than 2 trillion shares - in dollar terms, I estimate the trading to be worth some $33 trillion. That figure, in turn, is 220 per cent of the $15 trillion market capitalisation of U.S. stocks.41 Moreover, this massive trading is often between fund managers, which makes it truly a zero-sum game within the industry. The idea of a financial transaction tax (related to the Tobin Tax, named after the Nobel Prizewinning economist James Tobin, an early advocate) is to reduce this ‘churn' and make investors hold their stocks for longer, by raising the cost of each sale. It satisfies the conditions for an efficient tax in deterring a practice which imposes deadweight costs - the main obstacle to its introduction being that all large exchanges would have to impose it, to stop trade migrating to those that choose not to.

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Buyout funds performance vs S&P 50045 The fund management industry naturally argues that the returns it can make - seeking ‘alpha' - for clients justify the fees it charges. In an influential article,46 Joanne Hill, a Goldman Sachs partner, identifies conditions in which trying to achieve alpha need not be a zero-sum game -conveniently showing that investment banks' proprietary trading might have some social and economic value. But these conditions include an assumption that the market is divided into traders with short- or long-term horizons, who are pursuing alpha over different time periods and measuring it against different benchmarks.

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Yasuda, ‘The economics of private equity', Review of Financial Studies, 23(6) (2011), pp. 2303-41: https://doi.org/10.1093/rfs/hhq020 45. If ratio of proceeds from PE investments to public investment is > 1, PE is considered superior. Source: Journal of Finance, 69 (5) (October 2014), p. 1860. 46. J. M. Hill, ‘Alpha as a net zero-sum game: How serious a constraint?', Journal of Portfolio Management, 32(4) (2006), pp. 24-32; doi:10.3905/jpm.2006.644189 6. FINANCIALIZATION OF THE REAL ECONOMY 1. https://www.ft.com/content/294ff1f2-0f27-11de-ba10-0000779fd2ac 2. These figures give an approximate idea of the weight of large companies in the economy.

Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson

"World Economic Forum" Davos, Alan Greenspan, bank run, banking crisis, banks create money, Basel III, basic income, biodiversity loss, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, circular economy, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, critique of consumerism, David Graeber, decarbonisation, degrowth, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, Glass-Steagall Act, green new deal, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, impact investing, income inequality, income per capita, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, low interest rates, Mahatma Gandhi, mass immigration, means of production, meta-analysis, Money creation, moral hazard, mortgage debt, Murray Bookchin, Naomi Klein, negative emissions, new economy, ocean acidification, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, Post-Keynesian economics, profit motive, purchasing power parity, quantitative easing, retail therapy, Richard Thaler, road to serfdom, Robert Gordon, Robert Solow, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, TED Talk, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Tragedy of the Commons, universal basic income, Works Progress Administration, World Values Survey, zero-sum game

At the societal level, though, there is a clear danger that this positional race doesn’t contribute much to overall prosperity. ‘The stock of status, measured as positive advantages, showed a sustained increase in the post-war years’, acknowledges the economic historian Avner Offer. ‘Much of the pay-off, however, was absorbed in positional competition’.30 It begins to look as though economic growth is a kind of ‘zero sum game’. The population as a whole gets richer. Some people are better off than others and positions in society may change. But the process adds little or nothing to overall wellbeing. We might even have to dub this a ‘negative sum game’. Because, ultimately, the environmental and social costs of the ‘game’ can have a profoundly negative impact on all of us.

…

And there is little doubt that at the individual level social position counts. ‘A positive social ranking produces an inner glow that is also matched with a clear advantage in life expectation and health’, argues Avner Offer.13 But if this process is, as the previous chapter suggested, little more than a zero sum game, then there is little to lose, and perhaps quite a lot to gain, by changing it. A different form of social organisation – a more equal society – in which social positioning is either less important or signalled differently – is a clear possibility. This suggestion is borne out by the remarkable evidence marshalled by Richard Wilkinson and Kate Pickett in The Spirit Level.

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INDEX Locators in italic refer to figures absolute decoupling 84–6; historical perspectives 89–96, 90, 92, 94, 95; mathematical relationship with relative decoupling 96–101, 111 abundance see opulence accounting errors, decoupling 84, 91 acquisition, instinctive 68 see also symbolic role of goods adaptation: diminishing marginal utility 51, 68; environmental 169; evolutionary 226 advertising, power of 140, 203–4 Africa 73, 75–7; life-expectancy 74; philosophy 227; pursuit of western lifestyles 70; growth 99; relative income effect 58, 75; schooling 78 The Age of Turbulence (Greenspan) 35 ageing populations 44, 81 agriculture 12, 148, 152, 220 Aids/HIV 77 algebra of inequality see inequality; mathematical models alienation: future visions 212, 218–19; geographical community 122–3; role of the state 205; selfishness vs. altruism 137; signals sent by society 131 alternatives: economic 101–2, 139–40, 157–8; hedonism 125–6 see also future visions; post-growth macroeconomics; reform altruism 133–8, 196, 207 amenities see public services/amenities Amish community, North America 128 An Inquiry into the Nature and Causes of the Wealth of Nations (Smith) 123, 132 angelised growth see green growth animal welfare 220 anonymity/loneliness see alienation anthropological perspectives, consumption 70, 115 anti-consumerism 131 see also intrinsic values anxiety: fear of death 69, 104, 115, 212–15; novelty 116–17, 124, 211 Argentina 58, 78, 78, 80 Aristotle 48, 61 The Art of Happiness (Dalai Lama) 49 arts, Baumol’s cost disease 171–2 assets, stranded 167–8 see also ownership austerity policies xxxiii–xxxv, 189; and financial crisis 24, 42–3; mathematical models 181 Australia 58, 78, 128, 206 authoritarianism 199 autonomy see freedom/autonomy Ayres, Robert 143 backfire effects 111 balance: private interests/common good 208; tradition/innovation 226 Bank for International Settlements 46 bank runs 157 banking system 29–30, 39, 153–7, 208; bonuses 37–8 see also financial crisis; financial system basic entitlements: enterprise as service 142; income 67, 72–9, 74, 75, 76, 78; limits to growth 63–4 see also education; food; health Basu, Sanjay 43 Baumol, William 112, 147, 222, 223; cost disease 170, 171, 172, 173 BBC survey, geographical community 122–3 Becker, Ernest 69 Belk, Russ 70, 114 belonging 212, 219 see also alienation; community; intrinsic values Bentham, Jeremy 55 bereavement, material possessions 114, 214–15 Berger, Peter 70, 214 Berry, Wendell 8 Better Growth, Better Climate (New Climate Economy report) 18 big business/corporations 106–7 biodiversity loss 17, 47, 62, 101 biological perspectives see evolutionary theory; human nature/psyche biophysical boundaries see limits (ecological) Black Monday 46 The Body Economic (Stuckler and Basu) 43 bond markets 30, 157 bonuses, banking 37–8 Bookchin, Murray 122 boom-and-bust cycles 157, 181 Booth, Douglas 117 borrowing behaviour 34, 118–21, 119 see also credit; debt Boulding, Elise 118 Boulding, Kenneth 1, 5, 7 boundaries, biophysical see limits (ecological) bounded capabilities for flourishing 61–5 see also limits (flourishing within) Bowen, William 147 Bowling Alone (Putnam) 122 Brazil 58, 88 breakdown of community see alienation; social stability bubbles, economic 29, 33, 36 Buddhist monasteries, Thailand 128 buen vivir concept, Ecuador xxxi, 6 built-in obsolescence 113, 204, 220 Bush, George 121 business-as-usual model 22, 211; carbon dioxide emissions 101; crisis of commitment 195; financial crisis 32–8; growth 79–83, 99; human nature 131, 136–7; need for reform 55, 57, 59, 101–2, 162, 207–8, 227; throwaway society 113; wellbeing 124 see also financial systems Canada 75, 206, 207 capabilities for flourishing 61–5; circular flow of the economy 113; future visions 218, 219; and income 77; progress measures 50–5, 54; role of material abundance 67–72; and prosperity 49; relative income effect 55–61, 58, 71, 72; role of shame 123–4; role of the state 200 see also limits (flourishing within); wellbeing capital 105, 107–10 see also investment Capital in the 21st Century (Piketty) 33, 176, 177 Capital Institute, USA 155 capitalism 68–9, 80; structures 107–13, 175; types 105–7, 222, 223 car industry, financial crisis 40 carbon dioxide emissions see greenhouse gas emissions caring professions, valuing 130, 147, 207 see also social care Cat on a Hot Tin Roof (Williams) 213 causal path analysis, subjective wellbeing 59 Central Bank 154 central human capabilities 64 see also capabilities for flourishing The Challenge of Affluence (Offer) 194 change see alternatives; future visions; novelty/innovation; post-growth macroeconomics; reform Chicago school of economics 36, 156 children: advertising to 204; labour 62, 154; mortality 74–5, 75, 206 Chile xxxiii, xxxvii, 58, 74, 74, 75, 76 China: decoupling 88; GDP per capita 75; greenhouse gas emissions 91; growth 99; life expectancy 74; philosophy 7; post-financial crisis 45–6; pursuit of western lifestyles 70; relative income effect 58; resource use 94; savings 27; schooling 76 choice, moving beyond consumerism 216–18 see also freedom/autonomy Christian doctrine see religious perspectives chromium, commodity price 13 Cinderella economy 219–21, 224 circular economy 144, 220 circular flow of the economy 107, 113 see also engine of growth citizen’s income 207 see also universal basic income civil unrest see social stability Clean City Law, São Paulo 204 climate change xxxv, 22, 47; critical boundaries 17–20; decoupling 85, 86, 87, 98; fatalism 186; investment needs 152; role of the state 192, 198, 201–2 see also greenhouse gas emissions Climate Change Act (2008), UK 198 clothing see basic entitlements Club of Rome, Limits to Growth report xxxii, xxxiii, 8, 11–16, Cobb, John 54 collectivism 191 commercial bond markets 30, 157 commitment devices/crisis of 192–5, 197 commodity prices: decoupling 88; financial crisis 26; fluctuation/volatility 14, 21; resource constraints 13–14 common good: future visions 218, 219; vs. freedom and autonomy 193–4; vs. private interests 208; role of the state 209 common pool resources 190–2, 198, 199 see also public services/amenities communism 187, 191 community: future visions of 219–20; geographical 122–3; investment 155–6, 204 see also alienation; intrinsic values comparison, social 115, 116, 117 see also relative income effect competition 27, 112; positional 55–61, 58, 71, 72 see also struggle for existence complexity, economic systems 14, 32, 108, 153, 203 compulsive shopping 116 see also consumerism Conference of the Parties to the UN Framework Convention on Climate Change (CoP21) 19 conflicted state 197, 201, 209 connectedness, global 91, 227 conspicuous consumption 115 see also language of goods consumer goods see language of goods; material goods consumer sovereignty 196, 198 consumerism 4, 21, 22, 103–4, 113–16; capitalism 105–13, 196; choice 196; engine of growth 104, 108, 120, 161; existential fear of death 69, 212–15; financial crisis 24, 28, 39, 103; moving beyond 216–18; novelty and anxiety 116–17; post-growth economy 166–7; role of the state 192–3, 196, 199, 202–5; status 211; tragedy of 140 see also demand; materialism contemplative dimensions, simplicity 127 contraction and convergence model 206–7 coordinated market economies 27, 106 Copenhagen Accord (2009) 19 copper, commodity prices 13 corporations/big business 106–7 corruption 9, 131, 186, 187, 189 The Cost Disease: Why Computers get Cheaper and Health Care Doesn’t (Baumol) 171, 172 Costa Rica 74, 74, 76 countercyclical spending 181–2, 182, 188 crafts/craft economies 147, 149, 170, 171 creative destruction 104, 112, 113, 116–17 creativity 8, 79; and consumerism 113, 116; future visions 142, 144, 147, 158, 171, 200, 220 see also novelty/innovation credit, private: deflationary forces 44; deregulation 36; financial crisis 26, 27, 27–31, 34, 36, 41; financial system weaknesses 32–3, 37; growth imperative hypothesis 178–80; mortgage loans 28–9; reforms in financial system 157; spending vs. saving behaviour of ordinary people 118–19; and stimulation of growth 36 see also debt (public) credit unions 155–6 crises: of commitment 192–5; financial see financial crisis critical boundaries, biophysical see limits (ecological) Csikszentmihalyi, Mihalyi 127 Cuba: child mortality 75; life expectancy 74, 77, 78, 78; response to economic hardship 79–80; revolution 56; schooling 76 Cushman, Philip 116 Dalai Lama 49, 52 Daly, Herman xxxii, 54, 55, 160, 163, 165 Darwin, Charles 132–3 Das Kapital (Marx) 225 Davidson, Richard 49 Davos World Economic Forum 46 Dawkins, Richard 134–5 de Mandeville, Bernard 131–2, 157 death, denial of 69, 104, 115, 212–15 debt, public-sector 81; deflationary forces 44; economic stability 81; financial crisis 24, 26–32, 27, 37, 41, 42, 81; financial systems 28–32, 153–7; money creation 178–9; post-growth economy 178–9, 223 Debt: The First Five Thousand Years (Graeber) 28 decoupling xix, xx, xxxvii, 21, 84–7; dilemma of growth 211; efficiency measures 84, 86, 87, 88, 95, 104; green growth 163, 163–5; historical perspectives 87–96, 89, 90, 92, 94, 95; need for new economic model 101–2; relationship between relative and absolute 96–101 deep emission and resource cuts 99, 102 deficit spending 41, 43 deflationary forces, post-financial crisis 43–7, 45 degrowth movement 161–3, 177 demand 104, 113–16, 166–7; post-financial crisis 44–5; post-growth economy 162, 164, 166–9, 171–2, 174–5 dematerialisation 102, 143 democratisation, and wellbeing 59 deposit guarantees 35 deregulation 27, 34, 36, 196 desire, role in consumer behaviour 68, 69, 70, 114 destructive materialism 104, 112, 113, 116–17 Deutsche Bank 41 devaluation of currency 30, 45 Dichter, Ernest 114 digital economy 44, 219–20 dilemma of growth xxxi, 66–7, 104, 210; basic entitlements 72–9, 74, 75, 76, 78; decoupling 85, 87, 164; degrowth movement 160–3; economic stability 79–83, 174–6; material abundance 67–72; moving beyond 165, 166, 183–4; role of the state 198 diminishing marginal utility: alternative hedonism 125, 126; wellbeing 51–2, 57, 60, 73, 75–6, 79 disposable incomes 27, 67, 118 distributed ownership 223 Dittmar, Helga 126 domestic debt see credit dopamine 68 Dordogne, mindfulness community 128 double movement of society 198 Douglas, Mary 70 Douthwaite, Richard 178 downshifting 128 driving analogy, managing change 16–17 durability, consumer goods 113, 204, 220 dynamic systems, managing change 16–17 Eastern Europe 76, 122 Easterlin, Richard 56, 57, 59; paradox 56, 58 eco-villages, Findhorn community 128 ecological investment 101, 166–70, 220 see also investment ecological limits see limits (ecological) ecological (ecosystem) services 152, 169, 223 The Ecology of Money (Douthwaite) 178 economic growth see growth economic models see alternatives; business-as-usual model; financial systems; future visions; mathematical models; post-growth macroeconomics economic output see efficiency; productivity ‘Economic possibilities for our grandchildren’ (Keynes) 145 economic stability 22, 154, 157, 161; financial system weaknesses 34, 35, 36, 180; growth 21, 24, 67, 79–83, 174–6, 210; post-growth economy 161–3, 165, 174–6, 208, 219; role of the state 181–3, 195, 198, 199 economic structures: post-growth economy 227; financial system reforms 224; role of the state 205; selfishness 137 see also business-as-usual model; financial systems ecosystem functioning 62–3 see also limits (ecological) ecosystem services 152, 169, 223 Ecuador xxxi, 6 education: Baumol’s cost disease 171, 172; and income 67, 76, 76; investment in 150–1; role of the state 193 see also basic entitlements efficiency measures 84, 86–8, 95, 104, 109–11, 142–3; energy 41, 109–11; growth 111, 211; investment 109, 151; of scale 104 see also labour productivity; relative decoupling Ehrlich, Paul 13, 96 elasticity of substitution, labour and capital 177–8 electricity grid 41, 151, 156 see also energy Elgin, Duane 127 Ellen MacArthur Foundation 144 emissions see greenhouse gas emissions employee ownership 223 employment intensity vs. carbon dioxide emissions 148 see also labour productivity empty self 116, 117 see also consumerism ends above means 159 energy return on investment (EROI) 12, 169 energy services/systems 142: efficiency 41, 109–11; inputs/intensity 87–8, 151; investment 41, 109–10, 151–2; renewable xxxv, 41, 168–9 engine of growth 145; consumerism 104, 108, 161; services 143, 170–4 see also circular flow of the economy enough is enough see limits enterprise as service 140, 141–4, 158 see also novelty/innovation entitlements see basic entitlements entrepreneur as visionary 112 entrepreneurial state 220 Environmental Assessment Agency, Netherlands 62 environmental quality 12 see also pollution environmentalism 9 EROI (energy return on investment) 12, 169 Essay on the Principle of Population (Malthus) 9–11, 132–3 evolutionary map, human heart 136, 136 evolutionary theory 132–3; common good 193; post-growth economy 226; psychology 133–5; selfishness and altruism 196 exchange values 55, 61 see also gross domestic product existential fear of death 69, 104, 115, 212–15 exponential expansion 1, 11, 20–1, 210 see also growth external debt 32, 42 extinctions/biodiversity loss 17, 47, 62, 101 Eyres, Harry 215 Fable of the Bees (de Mandeville) 131–2 factor inputs 109–10 see also capital; labour; resource use fast food 128 fatalism 186 FCCC (Framework Convention on Climate Change) 92 fear of death, existential 69, 104, 115, 212–15 feedback loops 16–17 financial crisis (2008) 6, 23–5, 32, 77, 103; causes and culpability 25–8; financial system weaknesses 32–7, 108; Keynesianism 37–43, 188; nationalisation of financial sector 188; need for financial reforms 175; role of debt 24, 26–32, 27, 81, 179; role of state 191; slowing of growth 43–7, 45; spending vs. saving behaviour of ordinary people 118–21, 119; types/definitions of capitalism 106; youth unemployment 144–5 financial systems: common pool resources 192; debt-based/role of debt 28–32, 153–7; post-growth economy 179, 208; systemic weaknesses 32–7; and wellbeing 47 see also banking system; business-as-usual model; financial crisis; reform Findhorn community 128 finite limits of planet see limits (ecological) Fisher, Irving 156, 157 fishing rights 22 flourishing see capabilities for flourishing; limits; wellbeing flow states 127 Flynt, Larry 40 food 67 see also basic entitlements Ford, Henry 154 forestry/forests 22, 192 Forrester, Jay 11 fossil fuels 11, 20 see also oil Foucault, Michel 197 fracking 14, 15 Framework Convention on Climate Change (FCCC) 92 France: GDP per capita 58, 75, 76; inequality 206; life-expectancy 74; mindfulness community 128; working hours 145 free market 106: financial crisis 35, 36, 37, 38, 39; ideological controversy/conflict 186–7, 188 freedom/autonomy: vs. common good 193–4; consumer 22, 68–9; language of goods 212; personal choices for improvement 216–18; wellbeing 49, 59, 62 see also individualism Friedman, Benjamin 176 Friedman, Milton 36, 156, 157 frugality 118–20, 127–9, 215–16 fun (more fun with less stuff) 129, 217 future visions 2, 158, 217–21; community banking 155–6; dilemma of growth 211; enterprise as service 140, 141–4, 147–8, 158; entrepreneur as visionary 112; financial crisis as opportunity 25; and growth 165–6; investment 22, 101–2, 140, 149–53, 158, 169, 208; money as social good 140, 153–7, 158; processes of change 185; role of the state 198, 199, 203; timescales for change 16–17; work as participation 140, 144–9, 148, 158 see also alternatives; post-growth macroeconomics; reform Gandhi, Mahatma 127 GDP see gross domestic product gene, selfish 134–5 Genuine Progress Indicator (GPI) 54, 54 geographical community 122–3 Germany xxxi; Federal Ministry of Finance 224–5; inequality 206; relative income effect 58; trade balance 31; work as participation 146 Glass Steagal Act 35 Global Commodity Price Index (1992–2015) 13 global corporations 106–7 global economy 98: culture 70; decoupling 86–8, 91, 93–5, 95, 97, 98, 100; exponential expansion 20–1; inequality 4, 5–6; interconnectedness 91, 227; post-financial crisis slowing of growth 45 Global Research report (HSBC) 41 global warming see climate change Godley, Wynne 179 Goldman Sachs 37 good life 3, 6; moral dimension 63, 104; wellbeing 48, 50 goods see language of goods; material goods; symbolic role of goods Gordon, Robert 44 governance 22, 185–6; commons 190–2; crisis of commitment 192–5, 197; economic stability 34, 35; establishing limits 200–8, 206; growth 195–9; ideological controversy/conflict 186–9; moving towards change 197–200, 220–1; post-growth economy 181–3, 182; power of corporations 106; for prosperity 209; signals 130 government as household metaphor 30, 42 governmentality 197, 198 GPI (Genuine Progress Indicator) 54, 54 Graeber, David 28 Gramm-Leach-Bliley Act 35 Great Depression 39–40 Greece: austerity xxxiii–xxxiv, xxxvii, 43; energy inputs 88; financial crisis 28, 30, 31, 77; life expectancy 74; schooling 76; relative income effect 58; youth unemployment 144 Green Economy initiative 41 green: growth xxxvii, 18, 85, 153, 166, 170; investment 41 Green New Deal, UNEP 40–1, 152, 188 greenhouse gas emissions 18, 85, 86, 91, 92; absolute decoupling 89–92, 90, 92, 98–101, 100; dilemma of growth 210–11; vs. employment intensity 148; future visions 142, 151, 201–2, 220; Kyoto Protocol 18, 90; reduction targets 19–20; relative decoupling 87, 88, 89, 93, 98–101, 100 see also climate change Greenspan, Alan 35 gross domestic product (GDP) per capita 3–5, 15, 54; climate change 18; decoupling 85, 93, 94; financial crisis 27, 28, 32; green growth 163–5; life expectancy 74, 75, 78; as measure of prosperity 3–4, 5, 53–5, 54, 60–1; post-financial crisis 43, 44; post-growth economy 207; schooling 76; wellbeing 55–61, 58 see also income growth xxxvii; capitalism 105; credit 36, 178–80; decoupling 85, 96–101; economic stability 21, 24, 67, 80, 210; financial crisis 37, 38; future visions 209, 223, 224; inequality 177; labour productivity 111; moving beyond 165, 166; novelty 112; ownership 105; post-financial crisis slowing 43–7, 45; prosperity as 3–7, 23, 66; role of the state 195–9; sustainable investment 166–70; wellbeing 59–60; as zero sum game 57 see also dilemma of growth; engine of growth; green growth; limits to growth; post-growth macroeconomy growth imperative hypothesis 37, 174, 175, 177–80, 183 habit formation, acquisition as 68 Hall, Peter 106, 188 Hamilton, William 134 Hansen, James 17 happiness see wellbeing/happiness Happiness (Layard) 55 Hardin, Garrett 190–1 Harvey, David 189, 192 Hayek, Friedrich 187, 189, 191 health: Baumol’s cost disease 171, 172; inequality 72–3, 205–6, 206; investment 150–1; and material abundance 67, 68; personal choices for improvement 217; response to economic hardship 80; role of the state 193 see also basic entitlements Heath, Edward 66, 82 hedonism 120, 137, 196; alternatives 125–6 Hirsch, Fred xxxii–xxxiii historical perspectives: absolute decoupling 86, 89–96, 90, 92, 94, 95; relative decoupling 86, 87–9, 89 Holdren, John 96 holistic solutions, post-growth economy 175 household finances: house purchases 28–9; spending vs. saving behaviour 118–20, 119 see also credit household metaphor, government as 30, 42 HSBC Global Research report 41 human capabilities see capabilities for flourishing human happiness see wellbeing/happiness human nature/psyche 3, 132–5, 138; acquisition 68; alternative hedonism 125; evolutionary map of human heart 136, 136; intrinsic values 131; meaning/purpose 49–50; novelty/innovation 116; selfishness vs. altruism 133–8; short-termism/living for today 194; spending vs. saving behaviour 34, 118–21, 119; symbolic role of goods 69 see also intrinsic values human rights see basic entitlements humanitarian perspectives: financial crisis 24; growth 79; inequality 5, 52, 53 see also intrinsic values hyperbolic discounting 194 hyperindividualism 226 see also individualism hyper-materialisation 140, 157 I Ching (Chinese Book of Changes) 7 Iceland: financial crisis 28; life expectancy 74, 75; relative income effect 56; response to economic hardship 79–80; schooling 76; sovereign money system 157 identity construction 52, 69, 115, 116, 212, 219 IEA (International Energy Agency) 14, 152 IMF (International Monetary Fund) 45, 156–7 immaterial goods 139–40 see also intrinsic values; meaning/purpose immortality, symbolic role of goods 69, 104, 115, 212–14 inclusive growth see inequality; smart growth income 3, 4, 5, 66, 124; basic entitlements 72–9, 74, 75, 76, 78; child mortality 74–5, 75; decoupling 96; economic stability 82; education 76; life expectancy 72, 73, 74, 77–9, 78; poor nations 67; relative income effect 55–61, 58, 71, 72; tax revenues 81 see also gross domestic product INDCs (intended nationally determined commitments) 19 India: decoupling 99; growth 99; life expectancy 74, 75; philosophy 127; pursuit of western lifestyles 70; savings 27; schooling 76 indicators of environmental quality 96 see also biodiversity; greenhouse gas emissions; pollution; resource use individualism 136, 226; progressive state 194–7, 199, 200, 203, 207 see also freedom/autonomy industrial development 12 see also technological advances inequality 22, 67; basic entitlements 72; child mortality 75, 75; credible alternatives 219, 224; deflationary forces 44; fatalism 186; financial crisis 24; global 4, 5–6, 99, 100; financial system weaknesses 32–3; post-growth economy 174, 176–8; role of the state 198, 205–7, 206; selfishness vs. altruism 137; symbolic role of goods 71; wellbeing 47, 104 see also poverty infant mortality rates 72, 75 inflation 26, 30, 110, 157, 167 infrastructure, civic 150–1 Inglehart, Ronald 58, 59 innovation see novelty/innovation; technological advances inputs 80–1 see also capital; labour productivity; resource use Inside Job documentary film 26 instant gratification 50, 61 instinctive acquisition 68 Institute for Fiscal Studies 81 Institute for Local Self-Reliance 204 institutional structures 130 see also economic structures; governance intended nationally determined commitments (INDCs) 19 intensity factor, technological 96, 97 see also technological advances intentional communities 127–9 interconnectedness, global 91, 227 interest payments/rates 39, 43, 110; financial crisis 29, 30, 33, 39; post-growth economy 178–80 see also credit; debt Intergovernmental Panel on Climate Change (IPCC) 18, 19, 201–2 International Energy Agency (IEA) 14, 152 International Monetary Fund (IMF) 45, 156–7 intrinsic values 126–31, 135–6, 212; role of the state 199, 200 see also belonging; community; meaning/purpose; simplicity/frugality investment 107–10, 108; ecological/sustainable 101, 152, 153, 166–70, 220; and innovation 112; loans 29; future visions 22, 101–2, 140, 149–53, 158, 169, 208, 220; and savings 108; social 155, 156, 189, 193, 208, 220–3 invisible hand metaphor 132, 133, 187 IPAT equation, relative and absolute decoupling 96 IPCC (Intergovernmental Panel on Climate Change) 18, 19, 201–2 Ireland 28; inequality 206; life expectancy 74, 75; schooling 76; wellbeing 58 iron cage of consumerism see consumerism iron ore 94 James, Oliver 205 James, William 68 Japan: equality 206; financial crisis 27, 45; life expectancy 74, 76, 79; relative income effect 56, 58; resource use 93; response to economic hardship 79–80 Jefferson, Thomas 185 Jobs, Steve 210 Johnson, Boris 120–1 Kahneman, Daniel 60 Kasser, Tim 126 keeping up with the Joneses 115, 116, 117 see also relative income effect Kennedy, Robert 48, 53 Keynes, John Maynard/Keynesianism 23, 34, 120, 174, 181–3, 187–8; financial crisis 37–43; financial system reforms 157; part-time working 145; steady state economy 159, 162 King, Alexander 11 Krugman, Paul 39, 85, 86, 102 Kyoto Protocol (1992) 18, 90 labour: child 62, 154; costs 110; division of 158; elasticity of substitution 177, 178; intensity 109, 148, 208; mobility 123; production inputs 80, 109; structures of capitalism 107 labour productivity 80–1, 109–11; Baumol’s cost disease 170–2; and economic growth 111; future visions 220, 224; investment as commitment 150; need for investment 109; post-growth economy 175, 208; services as engine of growth 170; sustainable investment 166, 170; trade off with resource use 110; work-sharing 145, 146, 147, 148, 148, 149 Lahr, Christin 224–5 laissez-faire capitalism 187, 195, 196 see also free market Lakoff, George 30 language of goods 212; material footprint of 139–40; signalling of social status 71; and wellbeing 124 see also consumerism; material goods; symbolic role of goods Layard, Richard 55 leadership, political 199 see also governance Lebow, Victor 120 Lehman Brothers, bankruptcy 23, 25, 26, 118 leisure economy 204 liberal market economies 106, 107; financial crisis 27, 35–6 life expectancy: and income 72, 73, 74, 77–9, 78; inequality 206; response to economic hardship 80 see also basic entitlements life-satisfaction 73; inequality 205; relative income effect 55–61, 58 see also wellbeing/happiness limits, ecological 3, 4, 7, 11, 12, 20–2; climate change 17–20; decoupling 86; financial crisis 23–4; growth 21, 165, 210; post-growth economy 201–2, 226–7; role of the state 198, 200–2, 206–7; and social boundaries 141; wellbeing 62–63, 185 limits, flourishing within 61–5, 185; alternative hedonism 125–6; intrinsic values 127–31; moving towards 215, 218, 219, 221; paradox of materialism 121–23; prosperity 67–72, 113, 212; role of the state 201–2, 205; selfishness 131–8; shame 123–4; spending vs. saving behaviour 118–21, 119 see also sustainable prosperity limits to growth: confronting 7–8; exceeding 20–2; wellbeing 62–3 Limits to Growth report (Club of Rome) xxxii, xxxiii, 8, 11–16 ‘The Living Standard’ essay (Sen) 50, 123–4 living standards 82 see also prosperity Lloyd, William Forster 190 loans 154; community investment 155–6; financial system weaknesses 34 see also credit; debt London School of Economics 25 loneliness 123, 137 see also alienation long-term: investments 222; social good 219 long-term wellbeing vs. short-term pleasures 194, 197 longevity see life expectancy love 212 see also intrinsic values low-carbon transition 19, 220 LowGrow model for the Canadian economy 175 MacArthur Foundation 144 McCracken, Grant 115 Malthus, Thomas Robert 9–11, 132–3, 190 market economies: coordinated 27, 106; liberal 27, 35–6, 106, 107 market liberalism 106, 107; financial crisis 27, 35–6; wellbeing 47 marketing 140, 203–4 Marmot review, health inequality in the UK 72 Marx, Karl/Marxism 9, 189, 192, 225 Massachusetts Institute of Technology (MIT) 11, 12, 15 material abundance see opulence material goods 68–9; identity 52; language of 139–40; and wellbeing 47, 48, 49, 51, 65, 126 see also symbolic role of goods material inputs see resource use materialism: and fear of death 69, 104, 115, 212–15; and intrinsic values 127–31; paradox of 121–3; price of 126; and religion 115; values 126, 135–6 see also consumerism mathematical models/simulations 132; austerity policies 181; countercyclical spending 181–2, 182; decoupling 84, 91, 96–101; inequality 176–8; post-growth economy 164; stock-flow consistent 179–80 Mawdsley, Emma 70 Mazzucato, Mariana 193, 220 MDG (Millennium Development Goals) 74–5 Meadows, Dennis and Donella 11, 12, 15, 16 meaning/purpose 2, 8, 22; beyond material goods 212–16; consumerism 69, 203, 215; intrinsic values 127–31; moving towards 218–20; wellbeing 49, 52, 60, 121–2; work 144, 146 see also intrinsic values means and ends 159 mental health: inequality 206; meaning/purpose 213 metaphors: government as household 30, 42; invisible hand 132, 133, 187 Middle East, energy inputs 88 Miliband, Ed 199 Mill, John Stuart 125, 159, 160, 174 Millennium Development Goals (MDG) 74–5 mindfulness 128 Minsky, Hyman 34, 35, 40, 182, 208 MIT (Massachusetts Institute of Technology) 11, 12, 15 mixed economies 106 mobility of labour, loneliness index 123 Monbiot, George 84, 85, 86, 91 money: creation 154, 157, 178–9; and prosperity 5; as social good 140, 153–7, 158 see also financial systems monopoly power, corporations 106–7 The Moral Consequences of Economic Growth (Friedman) 82, 176 moral dimensions, good life 63 see also intrinsic values moral hazards, separation of risk from reward 35 ‘more fun with less stuff’ 129, 217 mortality fears 69, 104, 115, 212–15 mortality rates, and income 74, 74–6, 75 mortgage loans 28–9, 35 multinational corporations 106–7 national debt see debt, public-sector nationalisation 191; financial crisis 38, 188 natural selection 132–3 see also struggle for existence nature, rights of 6–7 negative emissions 98–9 negative feedback loops 16–17 Netherlands 58, 62, 206, 207 neuroscientific perspectives: flourishing 68, 69; human behaviour 134 New Climate Economy report Better Growth, Better Climate 18 New Deal, USA 39 New Economics Foundation 175 nickel, commodity prices 13 9/11 terrorist attacks (2001) 121 Nordhaus, William 171, 172–3 North America 128, 155 see also Canada; United States Norway: advertising 204; inequality 206; investment as commitment 151–2; life expectancy 74; relative income effect 58; schooling 76 novelty/innovation 104, 108, 113; and anxiety 116–17, 124, 211; crisis of commitment 195; dilemma of growth 211; human psyche 135–6, 136, 137; investment 150, 166, 168; post-growth economy 226; role of the state 196, 197, 199; as service 140, 141–4, 158; symbolic role of goods 114–16, 213 see also technological advances Nudge: Improving Decisions about Health, Wealth, and Happiness (Thaler and Sunstein) 194–5 Nussbaum, Martha 64 nutrient loading, critical boundaries 17 nutrition 67 see also basic entitlements obesity 72, 78, 206 obsolescence, built in 113, 204, 220 oceans: acidification 17; common pool resources 192 Offer, Avner 57, 61, 71, 194, 195 oil prices 14, 21; decoupling 88; financial crisis 26; resource constraints 15 oligarchic capitalism 106, 107 opulence 50–1, 52, 67–72 original sin 9, 131 Ostrom, Elinor and Vincent 190, 191 output see efficiency; gross domestic product; productivity ownership: and expansion 105; private vs. public 9, 105, 191, 219, 223; new models 223–4; types/definitions of capitalism 105–7 Oxfam 141 paradoxes: materialism 121–3; thrift 120 Paris Agreement 19, 101, 201 participation in society 61, 114, 122, 129, 137; future visions 200, 205, 218, 219, 225; work as 140–9, 148, 157, 158 see also social inclusion part-time working 145, 146, 149, 175 Peccei, Aurelio 11 Perez, Carlota 112 performing arts, Baumol’s cost disease 171–2 personal choice 216–18 see also freedom/autonomy personal property 189, 191 Pickett, Kate 71, 205–6 Piketty, Thomas 33, 176, 177 planetary boundaries see limits (ecological) planning for change 17 pleasure 60–1 see also wellbeing/happiness Plum Village mindfulness community 128 Polanyi, Karl 198 policy see governance political leadership 199 see also governance Political Economy Research Institute, University of Massachusetts 41 pollution 12, 21, 53, 95–6, 143 polycentric governance 191, 192 Poor Laws 10 poor nations see poverty population increase 3, 12, 63, 96, 97, 190; Malthus on 9–11, 132–3 porn industry 40 Portugal 28, 58, 88, 206 positional competition 55–61, 58, 71, 72 see also social comparison positive feedback loops 16–17 post-growth capitalism 224 post-growth macroeconomics 159–60, 183–4, 221; credit 178–80; degrowth movement 161–3; economic stability 174–6; green growth 163–5; inequality 176–8; role of state 181–3, 182, 200–8, 206; services 170–4; sustainable investment 166–70 see also alternatives; future visions; reform poverty 4, 5–6, 216; basic entitlements 72; flourishing within limits 212; life expectancy 74, 74; need for new economic model 101; symbolic role of goods 70; wellbeing 48, 59–60, 61, 67 see also inequality; relative income effect power politics 200 predator–prey analogy 103–4, 117 private credit see credit private vs. public: common good 208; ownership 9, 105, 191, 219, 223; salaries 130 privatisation 191, 219 product lifetimes, obsolescence 113, 204, 220 production: inputs 80–1; ownership 191, 219, 223 productivity: investment 109, 167, 168, 169; post-growth economy 224; services as engine of growth 171, 172, 173; targets 147; trap 175 see also efficiency measures; labour productivity; resource productivity profits: definitions of capitalism 105; dilemma of growth 211; efficiency measures 87; investment 109; motive 104; post-growth economy 224; and wages 175–8 progress 2, 50–5, 54 see also novelty/innovation; technological advances progressive sector, Baumol’s cost disease 171 progressive state 185, 220–2; contested 186–9; countering consumerism 202–5; equality measures 205–7, 206; governance of the commons 190–2; governance as commitment device 192–5; governmentality of growth 195–7; limit-setting 201–2; moving towards 197–200; post-growth macroeconomics 207–8, 224; prosperity 209 prosocial behaviour 198 see also social contract prosperity 1–3, 22, 121; capabilities for flourishing 61–5; and growth 3–7, 23, 66, 80, 160; and income 3–4, 5, 66–7; limits of 67–72, 113, 212; materialistic vision 137; progress measures 50–5, 54; relative income effect 55–61, 58, 71, 72; social perspectives 2, 22, 48–9; state roles 209 see also capabilities for flourishing; post-growth macroeconomics; sustainable prosperity; wellbeing prudence, financial 120, 195, 221; financial crisis 33, 34, 35 public sector spending: austerity policies 189; countercyclical spending strategy 181–2, 182; welfare economy 169 public services/amenities: common pool resources 190–2, 198, 199; future visions 204, 218–20; investment 155–6, 204; ownership 223 see also private vs. public; service-based economies public transport 41, 129, 193, 217 purpose see meaning/purpose Putnam, Robert 122 psyche, human see human nature/psyche quality, environmental 12 see also pollution quality of life: enterprise as service 142; inequality 206; sustainable 128 quality to throughput ratios 113 quantitative easing 43 Queen Elizabeth II 25, 32, 34, 37 quiet revolution 127–31 Raworth, Kate 141 Reagan, Ronald 8 rebound phenomenon 111 recession 23–4, 28, 81, 161–3 see also financial crisis recreation/leisure industries 143 recycling 129 redistribution of wealth 52 see also inequality reforms 182–3, 222; economic structures 224; and financial crisis 103; financial systems 156–8, 180 see also alternatives; future visions; post-growth economy relative decoupling 84–5, 86; historical perspectives 87–9, 89; relationship with absolute decoupling 96–101, 111 relative income effect 55–61, 58, 71, 72 see also social comparison religious perspectives 9–10, 214–15; materialism as alternative to religion 115; original sin 9, 131; wellbeing 48, 49 see also existential fear of death renewable energy xxxv, 41, 168–169 repair/renovation 172, 220 resource constraints 3, 7, 8, 11–15, 47 resource productivity 110, 151, 168, 169, 220 resource use: conflicts 22; credible alternatives 101, 220; decoupling 84–9, 92–5, 94, 95; and economic output 142–4; investment 151, 153, 168, 169; trade off with labour costs 110 retail therapy 115 see also consumerism; shopping revenues, state 222–3 see also taxation revolution 186 see also social stability rights: environment/nature 6–7; human see basic entitlements risk, financial 24, 25, 33, 35 The Road to Serfdom (Hayek) 187 Robinson, Edward 132 Robinson, Joan 159 Rockström, Johan 17, 165 romantic movement 9–10 Roosevelt, Franklin D. 35, 39 Rousseau, Jean Jacques 9, 131 Russia 74, 76, 77–80, 78, 122 sacred canopy 214, 215 salaries: private vs. public sector 130, 171; and profits 175–8 Sandel, Michael 150, 164, 218 São Paulo, Clean City Law 204 Sardar, Zia 49, 50 Sarkozy, Nicolas xxxi, 53 savage state, romantic movement 9–10 savings 26–7, 28, 107–9, 108; investment 149; ratios 34, 118–20, 119 scale, efficiencies of 104 Scandinavia 27, 122, 204 scarcity, managing change 16–17 Schumpeter, Joseph 112 Schwartz, Shalom 135–6, 136 schooling see education The Science of Desire (Dichter) 114 secular stagnation 43–7, 45, 173 securitisation, mortgage loans 35 security: moving towards 219; and wellbeing 48, 61 self-development 204 self-expression see identity construction self-transcending behaviours see transcendence The Selfish Gene (Dawkins) 134–5 selfishness 133–8, 196 Sen, Amartya 50, 52, 61–2, 123–4 service concept/servicization 140–4, 147–8, 148, 158 service-based economies 219; engine of growth 170–4; substitution between labour and capital 178; sustainable investment 169–70 see also public services SFC (stock-flow consistent) economic models 179–80 shame 123–4 shared endeavours, post-growth economy 227 Sheldon, Solomon 214 shelter see basic entitlements shopping 115, 116, 130 see also consumerism short-termism/living for today 194, 197, 200 signals: sent out by society 130, 193, 198, 203, 207; social status 71 see also language of goods Simon, Julian 13 simplicity/simple life 118–20, 127–9, 215–16 simulations see mathematical models/simulations slow: capital 170; movement 128 smart growth 85, 163–5 see also green growth Smith, Adam 51, 106–7, 123, 132, 187 social assets 220 social boundaries (minimum standards) 141 see also basic entitlements social care 150–1 see also caring professions social comparison 115, 116, 117 see also relative income effect social contract 194, 198, 199, 200 social inclusion 48, 69–71, 114, 212 see also participation in society social investment 155, 156, 189, 193, 208, 220–3 social justice 198 see also inequality social logic of consumerism 114–16, 204 social stability 24, 26, 80, 145, 186, 196, 205 see also alienation social status see status social structures 80, 129, 130, 137, 196, 200, 203 social tolerance, and wellbeing 59, 60 social unrest see social stability social wage 40 social welfare: financial reforms 182–3; public sector spending 169 socialism 223 Sociobiology (Wilson) 134 soil integrity 220 Solon, quotation 47, 49, 71 Soper, Kate 125–6 Soros, George 36 Soskice, David 106 Soviet Union, former 74, 76, 77–80, 78, 122 Spain 28, 58, 144, 206 SPEAR organization, responsible investment 155 species loss/extinctions 17, 47, 62, 101 speculation 93, 99, 149, 150, 154, 158, 170; economic stability 180; financial crisis 26, 33, 35; short-term profiteering 150; spending: behaviour of ordinary people 34, 119, 120–1; countercyclical 181–2, 182, 188; economic stability 81; as way out of recession 41, 44, 119, 120–1; and work cycle 125 The Spirit Level (Wilkinson and Pickett) 71, 205–6 spiritual perspectives 117, 127, 128, 214 stability see economic stability; social stability stagflation 26 stagnant sector, Baumol’s cost disease 171 stagnation: economic stability 81–2; labour productivity 145; post-financial crisis 43–7, 45 see also recession state capitalism, types/definitions of capitalism 106 state revenues, from social investment 222–3 see also taxation state roles see governance status 207, 209, 211; and possessions 69, 71, 114, 115, 117 see also language of goods; symbolic role of goods Steady State Economics (Daly) xxxii steady state economies 82, 159, 160, 174, 180 see also post-growth macroeconomics Stern, Nicholas 17–18 stewardship: role of the state 200; sustainable investment 168 Stiglitz, Joseph 53 stock-flow consistent (SFC) economic models 179–80 Stockholm Resilience Centre 17, 201 stranded assets 167–8 see also ownership structures of capitalism see economic structures struggle for existence 8–11, 125, 132–3 Stuckler, David 43 stuff see language of goods; material goods; symbolic role of goods subjective wellbeing (SWB) 49, 58, 58–9, 71, 122, 129 see also wellbeing/happiness subprime lending 26 substitution, between labour and capital 177–178 suffering, struggle for existence 10 suicide 43, 52, 77 Sukdhev, Pavan 41 sulphur dioxide pollution 95–6 Summers, Larry 36 Sunstein, Cass 194 sustainability xxv–xxvi, 102, 104, 126; financial systems 154–5; innovation 226; investment 101, 152, 153, 166–70, 220; resource constraints 12; role of the state 198, 203, 207 see also sustainable prosperity Sustainable Development Strategy, UK 198 sustainable growth see green growth sustainable prosperity 210–12; creating credible alternatives 219–21; finding meaning beyond material commodities 212–16; implications for capitalism 222–5; personal choices for improvement 216–18; and utopianism 225–7 see also limits (flourishing within) SWB see subjective wellbeing; wellbeing/happiness Switzerland 11, 46, 157; citizen’s income 207; income relative to wellbeing 58; inequality 206; life expectancy 74, 75 symbolic role of goods 69, 70–1; existential fear of death 212–16; governance 203; innovation/novelty 114–16; material footprints 139–40; paradox of materialism 121–2 see also language of goods; material goods system dynamics model 11–12, 15 tar sands/oil shales 15 taxation: capital 177; income 81; inequality 206; post-growth economy 222 technological advances 12–13, 15; decoupling 85, 86, 87, 96–8, 100–3, 164–5; dilemma of growth 211; economic stability 80; population increase 10–11; role of state 193, 220 see also novelty/innovation Teilhard de Chardin, Pierre 8 terror management, and consumption 69, 104, 115, 212–15 terrorist attacks (9/11) 121 Thailand, Buddhist monasteries 128 Thaler, Richard 194 theatre, Baumol’s cost disease 171–2 theology see religious perspectives theory of evolution 132–3 thermodynamics, laws of 112, 164 Thich Nhat Hanh 128 thrift 118–20, 127–9, 215–16 throwaway society 113, 172, 204 timescales for change 16–17 tin, commodity prices 13 Today programme interview xxix, xxviii Totnes, transition movement 128–9 Towards a Green Economy report (UNEP) 152–3 Townsend, Peter 48, 61 trade balance 31 trading standards 204 tradition 135–6, 136, 226 ‘Tragedy of the commons’ (Hardin) 190–1 transcendence 214 see also altruism; meaning/purpose; spiritual perspectives transition movement, Totnes 128–9 Triodos Bank 156, 165 Trumpf (machine-tool makers) Germany 146 trust, loss of see alienation tungsten, commodity prices 13 Turkey 58, 88 Turner, Adair 157 21st Conference of the Parties to the UN Framework Convention on Climate Change (2015) 19 UBS (Swiss bank) 46 Ubuntu, African philosophy 227 unemployment 77; consumer goods 215; degrowth movement 162; financial crisis 24, 40, 41, 43; Great Depression 39–40; and growth 38; labour productivity 80–1; post-growth economy 174, 175, 183, 208, 219; work as participation 144–6 United Kingdom: Green New Deal group 152; greenhouse gas emissions 92; labour productivity 173; resource inputs 93; Sustainable Development Strategy 198 United Nations: Development Programme 6; Environment Programme 18, 152–3; Green Economy initiative 41 United States: credit unions 155–6; debt 27, 31–32; decoupling 88; greenhouse gas emissions 90–1; subprime lending 26; Works Progress Administration 39 universal basic income 221 see also citizen’s income University of Massachusetts, Political Economy Research Institute 41 utilitarianism/utility, wellbeing 50, 52–3, 55, 60 utopianism 8, 38, 125, 179; post-growth economy 225–7 values, materialistic 126, 135–6 see also intrinsic values Veblen, Thorstein 115 Victor, Peter xxxviii, 146, 175, 177, 180 vision of progress see future visions; post-growth economy volatility, commodity prices 14, 21 wages: and profits 175–8; private vs. public sector 130, 171 walking, personal choices for improvement 217 water use 22 Wealth of Nations, An Inquiry into the Nature and Causes (Smith) 123, 132 wealth redistribution 52 see also inequality Weber, Axel 46 welfare policies: financial reforms 182–3; public sector spending 169 welfare of livestock 220 wellbeing/happiness 47–50, 53, 121–2, 124; collective 209; consumer goods 4, 21, 22, 126; growth 6, 165, 211; intrinsic values 126, 129; investment 150; novelty/innovation 117; opulence 50–2, 67–72; personal choices for improvement 217; planetary boundaries 141; relative income effect 55–61, 58, 71, 72; simplicity 129; utilitarianism 50, 52–3, 55, 60 see also capabilities for flourishing western lifestyles 70, 210 White, William 46 Whybrow, Peter 68 Wilhelm, Richard 7 Wilkinson, Richard 71, 205–6 Williams, Tennessee 213 Wilson, Edward 134 wisdom traditions 48, 49, 63, 128, 213–14 work: as participation 140–9, 148, 157, 158; and spend cycle 125; sharing 145, 146, 149, 175 Works Progress Administration, USA 39 World Bank 160 World Values Survey 58 youth unemployment, financial crisis 144–5 zero sum game, growth as 57, 71

Conscience of a Conservative: A Rejection of Destructive Politics and a Return to Principle by Jeff Flake

4chan, Affordable Care Act / Obamacare, battle of ideas, Berlin Wall, cognitive dissonance, crony capitalism, David Brooks, disinformation, Donald Trump, fake news, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global supply chain, immigration reform, impulse control, invisible hand, Mark Zuckerberg, obamacare, Potemkin village, race to the bottom, road to serfdom, Ronald Reagan, Silicon Valley, Steve Bannon, uranium enrichment, zero-sum game

The old adage holds true: When goods don’t cross borders, guns do. Trade and the global expansion of capitalism have been central to conservative economic philosophy for as long as there has been a conservative movement. But in 2016, nationalism merged with its cousin, populism, and suddenly there were winners and there were losers, trade was a zero-sum game, and enemies of the people were duly identified. The solution to our problems was to erect physical barriers between us and the world as well as metaphorical barriers between Americans, as populists will do. Our multilateral trade deals were suddenly the worst deals in the history of mankind, and other countries were benefiting and we had been left holding the bag—when in truth, all of the countries engaged in trade were doing better.

…

If the United States draws the shades and nails up a sign that says CLOSED UNTIL FURTHER NOTICE, these countries will simply go elsewhere. By the spring of 2017, they already were doing so. This part of trade economics is not at all complicated. That may well be the greatest danger of viewing trade as a zero-sum game and every relationship as adversarial—the punch you throw will more than likely strike your own face. Would the United States continue to champion free trade? In an extraordinary move, in Mr. Trump’s first spring in the White House, it was reported that the president’s own advisors would prevail upon the Canadian prime minister Justin Trudeau—a foreign head of state—to ask the president of the United States not to abandon NAFTA and instead take the more measured approach of renegotiating the agreement.

Tyler Cowen - Stubborn Attachments A Vision for a Society of Free, Prosperous, and Responsible Individuals by Meg Patrick

agricultural Revolution, behavioural economics, Berlin Wall, conceptual framework, Fall of the Berlin Wall, framing effect, hedonic treadmill, impulse control, Peter Singer: altruism, rent-seeking, Robert Solow, social discount rate, The Wealth of Nations by Adam Smith, total factor productivity, trade route, transaction costs, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, zero-sum game

To some extent the greater reported happiness of the wealthy may reflect a zero-sum relative status effect, namely that the wealthier people feel better but their possessions make the poor feel worse off. 20 See for instance Dieter (1984), among many other sources. 29 Nonetheless it is unlikely that the entire gains from wealth, or even most of the gains, dissipate in zero-sum games. Wealthier lives are easier and happier in absolute terms in numerous ways, as discussed above, and this is reflected by looking at where most immigrants wish to migrate, namely to the wealthier countries. If a wealthy man buys a Mercedes, his polled neighbor may express greater dissatisfaction with his Volkswagen.

…

Arguably the most important gifts of the past generation to the current generation come from wise investments, a belief in rules of just conduct, good political institutions, and good values, among other related historical factors. Growth-enhancing institutions do require hard work, but that investment is a positive-sum rather than a zero-sum game across the generations. Again, the moral intuition which results is the idea of strengthening good rules which are conducive to future economic growth, properly understood, and that is again not so far from common sense morality. 47 For a discussion of the issues surrounding our obligations to save, see Rawls (1999, p.252). 70 Our obligations to the elderly Given the limits on our obligations to the poor, we will have comparable limits on our obligations to the elderly, using the same logic.

Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals by Tyler Cowen

agricultural Revolution, behavioural economics, Berlin Wall, Branko Milanovic, butterfly effect, conceptual framework, Daniel Kahneman / Amos Tversky, Fall of the Berlin Wall, framing effect, hedonic treadmill, impulse control, Peter Singer: altruism, rent-seeking, Robert Solow, social discount rate, Steven Pinker, The Wealth of Nations by Adam Smith, trade route, transaction costs, trickle-down economics, Tyler Cowen, Tyler Cowen: Great Stagnation, zero-sum game

To some extent, the greater self-reported happiness of the wealthy may reflect a zero-sum relative status effect, namely that the wealthier people feel better, but their possessions make the poor feel worse off. Nonetheless, it is unlikely that all of the gains from wealth, or even most of the gains, dissipate in zero-sum games. Wealthier lives are easier and happier in absolute terms in numerous ways, as discussed above, and as evidenced by a quick look at where most immigrants wish to migrate, namely to the wealthier countries. If a wealthy man buys a Mercedes, his neighbor may express greater dissatisfaction with his Volkswagen.

…

Arguably the most important gifts of the past generation to the current generation come from wise investments, a belief in rules of just conduct, good political institutions, and good values, among other related historical factors. Growth-enhancing institutions do require hard work, but that investment is a positive-sum rather than a zero-sum game across the generations. The resulting moral impulse is one of strengthening good rules conducive to future economic growth, properly understood, and here again we approach a common sense morality. Our obligations to the elderly Given the limits on our obligations to the poor, we will have comparable limits on our obligations to the elderly.

Thinking in Bets by Annie Duke

banking crisis, behavioural economics, Bernie Madoff, Cass Sunstein, cognitive bias, cognitive dissonance, cognitive load, Daniel Kahneman / Amos Tversky, delayed gratification, Demis Hassabis, disinformation, Donald Trump, Dr. Strangelove, en.wikipedia.org, endowment effect, Estimating the Reproducibility of Psychological Science, fake news, Filter Bubble, Herman Kahn, hindsight bias, Jean Tirole, John Nash: game theory, John von Neumann, loss aversion, market design, mutually assured destruction, Nate Silver, p-value, phenotype, prediction markets, Richard Feynman, ride hailing / ride sharing, Stanford marshmallow experiment, Stephen Hawking, Steven Pinker, systematic bias, TED Talk, the scientific method, The Signal and the Noise by Nate Silver, urban planning, Walter Mischel, Yogi Berra, zero-sum game

Ideally, our happiness would depend on how things turn out for us regardless of how things turn out for anyone else. Yet, on a fundamental level, fielding someone’s bad outcome as their fault feels good to us. On a fundamental level, fielding someone’s good outcome as luck helps our narrative along. This outcome fielding follows a logical pattern in zero-sum games like poker. When I am competing head-to-head in a poker hand, I must follow this fielding pattern to square my self-serving interpretation of my own outcomes with the outcomes of my opponent. If I win a hand in poker, my opponent loses. If I lose a hand in poker, my opponent wins. Wins and losses are symmetrical.

…

Any other interpretation would create cognitive dissonance. Thinking about it this way, we see that the way we field other people’s outcomes is just part of self-serving bias. Viewed through this lens, the pattern begins to make sense. But this comparison of our results to others isn’t confined to zero-sum games where one player directly loses to the other (or where one lawyer loses to opposing counsel, or where one salesperson loses a sale to a competitor, etc.). We are really in competition for resources with everyone. Our genes are competitive. As Richard Dawkins points out, natural selection proceeds by competition among the phenotypes of genes so we literally evolved to compete, a drive that allowed our species to survive.

…

., 246n Slate.com, 6 slot machines, 87–88 smart, being, 62–64, 147 SnackWell’s, 85–86, 179 Social and Personality Psychology Compass, 95n social approval, 132–34 social contract, 121, 125 social media, 60–61, 148 social psychologists, 145–47 social scientists, 172n sociology, 154 Sotomayor, Justice, 144 sports, 108–9 baseball, see baseball football, see football golf, 83, 109 Stanford Law Review, 58 Stanford University, 181n–82n, 185 Stanovich, Keith, 62 start-up companies, 29, 35 State Department, 139–40, 170 statistics and data interpretation, 63–64, 181n Stockholm School of Economics, 149 stock tickers, ticker watching, 191–93, 196, 199, 200 strategic thinking, 211 Stumbling on Happiness (Gilbert), 50, 52, 104 Success Equation, The: Untangling Skill and Luck in Business, Sports, and Investing (Mauboussin), 83n sugar, 54, 85, 164–65 suited connectors, 53–55 Sunstein, Cass, 141–42 Super Bowl, 5–7, 10, 22, 46, 48, 165–66, 216–18, 241n–42n Supreme Court, 142–44 surfers, 197 swear jar, decision, 204–7 sweeping terms, 205 Syria, 140 System 1 and System 2, 12, 181n, 183, 203 Teller, Edward, 243n temporal discounting, 181–83, 226 10-10-10 process, 188–89, 191, 199 Tetlock, Phil, 126n, 128–29, 132, 146 Texas Hold’em, 53 Theory of Games and Economic Behavior (von Neumann and Morgenstern), 19 “They Saw a Game: A Case Study” (Hastorf and Cantril), 56–59 Thinking, Fast and Slow (Kahneman), 12, 52 Thomas, Justice, 144 Thoreau, Henry David, 186 ticker watching, 191–93, 196, 199, 200 tilt, 197–200 Time, 56 Timecop, 177–78 time travel, mental, 176, 177–231 backcasting, 218–22, 225, 226 decision swear jar, 204–7 flat tire scenario and, 190–91, 194–96, 200 moving regret in front of decisions, 186–89 Night Jerry and Morning Jerry, 180–87 perspective and, 227 premortems, 221–26 temporal discounting, 181–83, 226 10-10-10 process, 188–89, 191, 199 tilt and, 197–200 and time as tree, 227–31 Ulysses contracts (precommitment), 200–203 see also future; past Today, 7 Trivers, Robert, 91n–92n Trump, Donald, 32–33, 140, 230–31, 245n truth, 137, 169 truthseeking, 55, 70, 108, 110, 112, 115, 117, 120–23, 125, 126, 147, 150–51, 156–57, 172, 204, 207 accountability and, 176 agreement to engage in, 174 communication and, 172 truthseeking groups, see decision groups Tulving, Endel, 178n–79n tumors, 197 Tversky, Amos, 36 Twain, Mark, 144n Twitter, 148 type I and type II errors, 12, 52 Ulysses contracts, see precommitments uncertainty, 20, 26–30, 36, 47, 67–73, 80, 87, 94, 115, 139, 170, 230, 231 denial of, 206 expressing, 172–73, 246n hidden and incomplete information, 20–23, 25, 26, 33–35, 45, 81, 87 illusion of certainty, 204, 206, 207 luck, see luck universalism, 154, 155, 160–64, 173, 205 University of Pennsylvania, 1 USA Today, 5 visual illusions, 14–15, 64, 91 visualization, 223, 225 von Braun, Wernher, 243n von Neumann, John, 18–20, 23, 90, 243n, 246n Wall Street Journal, 32 Washington Post, 6 watching, 96–97, 102 weight gain and obesity, 55, 85–86, 164 weight loss, 221–23 Welch, Suzy, 188 Welles, Orson, 60 West, Richard, 62 White Castle, 135 Wilson, Russell, 5, 48, 218, 227 winning, 112, 130, 160, 224 WKRP in Cincinnati, 47, 49 Woodward, Bob, 143 World Poker Tour, 37 World Series, Bartman play and, 98–100, 114, 229, 247n World Series of Poker (WSOP), 1, 2, 37, 90–91, 106, 123n–24n, 248n “Would You Rather” game, 104–5 wrong, being, 61, 71, 94, 114, 206, 245n fear of being or suggesting, 172–73 redefining, 30–36, 73 “yes, and . . .,” 173–74, 207, 250n zero-sum games, 45, 103 Zolotow, Steve, 248n * Technically, they are continually evolving, but not fast enough to do us any good in our lifetimes. * The deal in Texas Hold’em begins with two cards, facedown, to each player. Following an initial round of betting, all additional cards are community cards, dealt faceup.

Exodus: How Migration Is Changing Our World by Paul Collier

Ayatollah Khomeini, Boris Johnson, charter city, classic study, Edward Glaeser, experimental economics, first-past-the-post, full employment, game design, George Akerlof, global village, guest worker program, illegal immigration, income inequality, informal economy, language acquisition, mass immigration, mirror neurons, moral hazard, open borders, radical decentralization, risk/return, Silicon Valley, sovereign wealth fund, Steven Pinker, tacit knowledge, The Wealth of Nations by Adam Smith, transaction costs, University of East Anglia, white flight, zero-sum game

Because training is costly and workers once trained can leave for other firms, the most profitable strategy for an individual firm is to poach those who are already skilled off other firms. Because poaching is a zero-sum game, industry associations sometimes try to organize a common commitment to training, policed by peer pressure. All firms in an industry accept the need to do their share of training. However, all outcomes that are dependent upon coordination are potentially fragile. A shock could break the pattern. An influx of trained immigrants could constitute such a shock, destabilizing industry-wide training. With an influx of trained immigrants, hiring already-trained workers temporarily ceases to be a zero-sum game because they do not have to be poached from other firms.

…

While outsiders to the organizations for which they work, such people are not immoral in their own terms: they are insiders to their clan, using their corruptly acquired money to help their extended family. Similarly, a common critique of Haitian society is that people have become mired in outsider attitudes: passive dependence on external aid, and a zero-sum game narrative in which there is an exaggerated fear of being exploited. So let us accept that outsider attitudes are a problem for many poor societies. What is much less clear is whether migration significantly accentuates this problem, as it appears to do in America’s inner cities. Even if insiders self-select into migration, in most occupations the scale of emigration is too modest to have much impact on the balance of attitudes.

The New Geography of Jobs by Enrico Moretti

assortative mating, Bill Gates: Altair 8800, business climate, call centre, classic study, clean tech, cloud computing, corporate raider, creative destruction, desegregation, Edward Glaeser, Fairchild Semiconductor, financial innovation, gentrification, global village, hiring and firing, income inequality, industrial cluster, Jane Jacobs, Jeff Bezos, Joseph Schumpeter, knowledge economy, labor-force participation, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, medical residency, Menlo Park, new economy, peer-to-peer lending, Peter Thiel, Productivity paradox, Recombinant DNA, Richard Florida, Sand Hill Road, Shenzhen special economic zone , Silicon Valley, Skype, Solyndra, special economic zone, Startup school, Steve Jobs, Steve Wozniak, tech worker, thinkpad, Tyler Cowen, Tyler Cowen: Great Stagnation, Wall-E, Y Combinator, zero-sum game

Once you see things from the point of view of comparative advantage, the standard perspective on international competition offered by many in the media starts to look silly. The traditional view is that if one of our trading partners, such as China, becomes more productive, it’s terrible news for us, because it means that that country will steal our jobs. But trade is not a zero-sum game like a football match, where if your opponent wins you lose. The reality is that if one of our trading partners becomes more productive, the goods we are buying from that country become cheaper. This makes us—the consumers—a little richer. Overall, the effect of imports from low-wage countries has been highly uneven, with less skilled workers taking most of the job losses.

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But what is costly from the point of view of an individual company is highly beneficial for the community as a whole, because it means more local jobs. Because of the magnetic attraction of clusters, offspring don’t stray too far from their parents. Research shows that the reproductive process is rarely a zero-sum game in which the young companies gain at the expense of their elders. Instead the process ends up resulting in a net gain in employment for the local community. And it gets even better: the children in turn produce their own children. Thus, from the perspective of local governments, attracting a high-tech job today will result in many more jobs in the future.

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In such a case, the only winners are the owners of the company being courted, since state and local governments end up stuck with the bill. And even when these subsidies make economic sense for a particular county, they do not always make sense for the country as a whole, as competition among municipalities for a given company can turn out to be a zero-sum game for the nation. Empowering Neighborhoods One example of a place-based policy that has been successful at helping struggling communities create jobs and raise salaries is the Empowerment Zone Program. Created in 1993, during the first Clinton administration, the program provided a package of employment tax subsidies and redevelopment funds to “distressed” urban areas.

The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom by Jonathan Haidt

Abraham Maslow, classic study, coherent worldview, crack epidemic, delayed gratification, do well by doing good, feminist movement, hedonic treadmill, Ignaz Semmelweis: hand washing, invisible hand, job satisfaction, Lao Tzu, longitudinal study, meta-analysis, Paradox of Choice, Peter Singer: altruism, PIHKAL and TIHKAL, placebo effect, prisoner's dilemma, Ralph Waldo Emerson, selective serotonin reuptake inhibitor (SSRI), social intelligence, stem cell, tacit knowledge, telemarketer, the scientific method, twin studies, ultimatum game, Walter Mischel, zero-sum game

Specifically , the tit-for-tat strategy is to be nice on the first round of interaction; b u t after that, do to your partner whatever your partner did to you on the previo u s r o u n d . 1 0 Tit for tat takes us way b e y o n d kin altruism. It o p e n s t h e possibility of forming cooperative relationships with strangers. Most interactions among animals (other than close kin) are zero-sum games: O n e animal's gain is the other's loss. But life is full of situations in which cooperation would expand the pie to be shared if only a way could be found to cooperate without being exploited. Animals that hunt are particularly vulnerable to the variability of s u c c e s s : They may find far more food than they can eat in one day, and then find no food at all for three weeks.

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If she knows something about the person or event in question, she is likely to speak up: " O h really? Well, I heard that he . . ." Gossip elicits gossip, and it enables us to keep track of everyone's reputation without having to witness their good and bad deeds personally. Gossip creates a non-zero-sum game because it costs us nothing to give each other information, yet we both benefit by receiving information. B e c a u s e I'm particularly interested in the role of gossip in our moral lives, I was p l e a s e d when a graduate student in my d e p a r t m e n t , Holly Horn, told me that she wanted to study gossip.

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T h e s e goods are subject to a kind of arms race, where their value comes not so much from their objective properties as from the statement they make about their owner. W h e n everyone wore Timex watches, the first person in the office buy a Rolex stood out. W h e n everyone moved up to Rolex, it took a $ 2 0 , 0 0 0 Patek Philip to achieve high status, and a Rolex no longer gave as m u c h satisfaction. C o n s p i c u o u s c o n s u m p t i o n is a zero-sum game: Each person's move up devalues the possessions of others. Furthermore, it's difficult to persuade an entire group or subculture to ratchet down, even though everyone would be better off, on average, if they all went back to simple watches. Inconspicuous consumption, on the other hand, refers to goods and activities that are valued for themselves, that are usually consumed more privately, and that are not bought for the purpose of achieving status.

Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen

asset allocation, asset-backed security, Benchmark Capital, book value, buy and hold, capital controls, classic study, cognitive dissonance, corporate governance, deal flow, diversification, diversified portfolio, equity risk premium, financial engineering, fixed income, index fund, junk bonds, law of one price, Long Term Capital Management, low interest rates, market bubble, market clearing, market fundamentalism, money market fund, passive investing, Paul Samuelson, pez dispenser, price mechanism, profit maximization, profit motive, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, shareholder value, Silicon Valley, Steve Ballmer, stocks for the long run, survivorship bias, technology bubble, the market place, transaction costs, Vanguard fund, yield curve, zero-sum game

If the aggregate mutual-fund performance deficit corresponds to the aggregate active management cost, one reasonable explanation implies that mutual-fund portfolio managers as a group exhibit no active management skill. Skillful security-selection on the part of active equity managers produces returns above the market return. Since active management constitutes a zero-sum game, mutual-fund managers win only if another set of market participants lose. Conversely, inept security-selection on the part of active equity managers produces returns below the market return. In the zero-sum game of active management, underperforming mutual-fund managers subsidize the gains of another set of market participants. Because the costs of playing the active management game correspond closely to the long-term performance deficit, it appears that mutual-fund managers produce results neither better nor worse than the aggregate of the other equity market players.

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Obviously, based on subsequent performance, the overweighters and underweighters turn into winners and losers (or losers and winners). If the stock in question performs well relative to the market, the overweighters win and the underweighters lose. If the stock performs poorly relative to the market, the overweighters lose and the underweighters win. Before considering transaction costs, active management appears to be a zero-sum game, a contest in which the winners’ gains exactly offset the losers’ losses. Unfortunately for active portfolio managers, investors incur significant costs in pursuit of market-beating strategies. Stock pickers pay commissions to trade and create market impact with buys and sells. Mutual-fund purchasers face the same market-related transactions costs in addition to management fees paid to advisory firms and distribution fees paid to brokerage firms.

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In 2002, management fees amounted to approximately1.5 percent of assets. Commissions consumed around 0.25 percent. Market impact extracted an estimated 0.60 percent. In aggregate, a total of 2.35 percent of assets disappeared from the median active investor’s account, representing a high price to pay to play a zero-sum game. Note that the annual 2.35 percent fails to include the debilitating costs of up-front sales loads or deferred contingent sales charges. Investors foolish enough to make a direct contribution to the financial well-being of a financial advisor face much worse odds of winning the active management game.

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

affirmative action, Alan Greenspan, Albert Einstein, Andrei Shleifer, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Boeing 747, Bretton Woods, business cycle, buy and hold, capital controls, carbon tax, Cass Sunstein, central bank independence, classic study, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, Great Leap Forward, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, junk bonds, Kenneth Rogoff, libertarian paternalism, low interest rates, low skilled workers, Malacca Straits, managed futures, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, seminal paper, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, tech worker, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

If this disparity goes on for a long time, one of them will become significantly richer than the other, which may become a source of envy or political friction, but they are both growing steadily better off. The important point is that productivity growth, like so much else in economics, is not a zero-sum game. What would be the effect on America if 500 million people in India became more productive and gradually moved from poverty to the middle class? We would become richer, too. Poor villagers currently subsisting on $1 a day cannot afford to buy our software, our cars, our music, our books, our agricultural exports.

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But the larger philosophical debate will rage on: If the pie is growing, how much should we care about the size of the pieces? The subject of human capital begs some final questions. Will the poor always be with us, as Jesus once admonished? Does our free market system make poverty inevitable? Must there be losers if there are huge economic winners? No, no, and no. Economic development is not a zero-sum game; the world does not need poor countries in order to have rich countries, nor must some people be poor in order for others to be rich. Families who live in public housing on the South Side of Chicago are not poor because Bill Gates lives in a big house. They are poor despite the fact that Bill Gates lives in a big house.

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All the frantic activity on Wall Street or LaSalle Street (home of the futures exchanges in Chicago) fits into one or more of those buckets. The world of high finance is often described as a rich man’s version of Las Vegas—risk, glamour, interesting personalities, and lots of money changing hands. Yet the analogy is terribly inappropriate. Everything that happens in Las Vegas is a zero-sum game. If the house wins a hand of blackjack, you lose. And the odds are stacked heavily in favor of the house. If you play blackjack long enough—at least without counting cards—it is a mathematical certainty that you will go broke. Las Vegas provides entertainment, but it does not serve any broader social purpose.

Utopia or Bust: A Guide to the Present Crisis by Benjamin Kunkel

Alan Greenspan, Anthropocene, anti-communist, Bear Stearns, Bretton Woods, business cycle, capital controls, Carmen Reinhart, creative destruction, David Graeber, declining real wages, full employment, Hyman Minsky, income inequality, late capitalism, Lewis Mumford, liberal capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, mortgage debt, Occupy movement, peak oil, price stability, profit motive, public intellectual, savings glut, Slavoj Žižek, The Wealth of Nations by Adam Smith, transatlantic slave trade, vertical integration, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, zero-sum game

Another solution would have been to create new jobs, turning out new commodities, to soak up excess currency. But this could only have been achieved at the cost, unthinkable to business, of greater power for labor. In the event, the international economy of the long downturn ever more closely approximated a zero-sum game in which no economy’s success could be purchased except at another’s expense. (See Brenner’s account of the seesawing fortunes of Germany, Japan, and the US.) The path toward prosperity for later-developing large economies lay in exporting “tradeables” to the international market. In Germany and Japan, and then in China, catering to external markets won out over nurturing internal demand.

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If the loaning of money at interest, stigmatized as usury during the Middle Ages, has seemed a more tolerable practice during much of the history of capitalism, its acceptance has been purchased through growth: increased income for rentiers didn’t necessarily imply a corresponding decrease for everyone else, only a share in the common expansion. The more nearly property relations approach a zero-sum game, the less we will be able to distinguish between what Adam Smith called productive and consumptive loans, the former contributing to the borrower’s prosperity and the latter merely draining it. Positive real interest rates per se will come to seem consumptive or parasitic, a straightforward transfer of wealth from debtor to creditor.

Capital Allocators: How the World’s Elite Money Managers Lead and Invest by Ted Seides

Albert Einstein, asset allocation, behavioural economics, business cycle, coronavirus, COVID-19, crowdsourcing, data science, deliberate practice, diversification, Everything should be made as simple as possible, fake news, family office, fixed income, high net worth, hindsight bias, impact investing, implied volatility, impulse control, index fund, Kaizen: continuous improvement, Lean Startup, loss aversion, Paradox of Choice, passive investing, Ralph Waldo Emerson, risk tolerance, Sharpe ratio, sovereign wealth fund, tail risk, The Wisdom of Crowds, Toyota Production System, zero-sum game

Yes, the absolute skill of investors is higher than it has ever been, but the breadth of that skill across so many outstanding participants has narrowed the relative skill against each other. It is harder to outperform the market than it has ever been. Passive management proponents all point out that investing in the public markets is a zero-sum game. For every investor who wins, another must lose. In aggregate, active managers earn the market return and charge a fee along the way, turning the zero sum game into a negative sum game. The case for active management The case for passive management is nearly bulletproof in theory. It is also nearly irrelevant in the practice of institutional asset management today.

If You're So Smart, Why Aren't You Happy? by Raj Raghunathan

behavioural economics, Blue Ocean Strategy, Broken windows theory, business process, classic study, cognitive dissonance, deliberate practice, do well by doing good, en.wikipedia.org, epigenetics, fundamental attribution error, hedonic treadmill, job satisfaction, longitudinal study, Mahatma Gandhi, market clearing, meta-analysis, Neil Armstrong, new economy, Phillip Zimbardo, placebo effect, science of happiness, Skype, sugar pill, TED Talk, The Fortune at the Bottom of the Pyramid, Thorstein Veblen, Tony Hsieh, work culture , working poor, zero-sum game, Zipcar

Happiness Is Our Nature How could it be that mindfulness mitigates negativity even as it enhances positivity? There appear to be several reasons for this. One reason has to do with something I call the BAA phenomenon, which is short for Behavior Affects Attitude. We all know that our attitudes affect our behavior. For instance, we can all see how a person who believes that “life is a zero-sum game”—that one can only win if someone else loses—is more likely to seek superiority than one who believes that “life’s pie can be grown.” Likewise, we can also see how a person who trusts others by default is more likely to be willing to sign off a deal on a handshake than one who distrusts others by default.

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As you can see from the figure above, I’ve labeled the first set of routes the “scarcity” route and the second set the “abundance” route. The word “scarcity” captures an important element common to all three of the first set of routes. A person who seeks superiority over others is someone who believes that life is a zero-sum game. This person thinks that the things (wealth, power, fame, etc.) she needs to be happy are scarce, which is why she ends up seeking superiority over others. If she didn’t perceive these things to be scarce, but believed they were in fact abundant, she wouldn’t be as motivated to seek superiority over others.

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A Win-Win-Win-Win Solution To summarize, it appears that the recipe for a happy and fulfilling life is, in fact, not just a “win-win-win” solution, but a “win-win-win-win” solution. Specifically, apart from boosting happiness levels, chances of success, and altruism at the personal level, it is likely to boost meaningful productivity at the societal level. Those who believe that “life’s a zero-sum game” and “people are lazy by nature” will find it difficult to come to terms with the idea that there’s seemingly no catch in the recipe for happiness. “If,” they may ask, “the recipe for happiness offers a win-win-win-win solution, how come no one seems to know this? Why hasn’t the recipe caught on?

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, benefit corporation, bitcoin, blockchain, Burning Man, business process, buy and hold, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, data science, deep learning, disintermediation, diversified portfolio, Dutch auction, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gamification, Garrett Hardin, gentrification, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, independent contractor, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, Large Hadron Collider, loss aversion, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Mitch Kapor, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, power law, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Russell Brand, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, stock buybacks, TaskRabbit, the Cathedral and the Bazaar, The Future of Employment, the long tail, trade route, Tragedy of the Commons, transportation-network company, Turing test, Uber and Lyft, Uber for X, uber lyft, unpaid internship, Vitalik Buterin, warehouse robotics, Wayback Machine, Y Combinator, young professional, zero-sum game, Zipcar

Companies depending on big data must necessarily reduce the spontaneity of their customers, so that they are satisfied with what amounts to fewer available choices. It’s a digitally complexified version of the one-size-fits-all values of industrialism. On the surface, the increase in customers for a product looks like growth. But it’s a limited, zero-sum game, in which the reduction in new possibilities cuts both ways. Many of the companies I’ve visited have been cutting back on expensive, unpredictable research and development (R & D) and spending resources instead on big data analysis. Why ideate in an open-ended fashion, they argue, when they’ve already got the data on what consumers are going to want next quarter?

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The problem with trying to get all human activity back on the books is that the books themselves are not neutral. They are artifacts of a very specific moment in human history—the beginning of the Renaissance—when the two-column ledger was instituted and everything came to be understood as a credit or a debit in a zero-sum game of capital management. Feeding more activity to the ledger simply cedes more of humanity and business alike to a growth-centric industrial model that was invented to thwart us to begin with. That’s the problem with any of the many new ways we have of earning income through previously off-the-books activities.

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There’s a lot of hope here, if for no reason other than the fact that the best choices for your own and your business’s future sustainability are the very same choices that make our collective economy more resilient and responsive to long-term human interests. Unlike industrialism, genuinely sustainable economics is not an either-or, zero-sum game. As I hope I’ve shown, digital commerce can be a whole lot more than taking traditional corporate capitalism to the next level. Actually—or at least potentially—it’s retrieving something much older and, to my mind, more positive for people and businesses alike. While the unimaginative big businesses of today see in the Internet a new way to automate labor, devalue human contributions, securitize wealth, build platform monopolies, and stage spectacular exits, stakeholders in tomorrow’s economy should be able to see an opportunity to participate in self-sustaining, highly reciprocal, peer-to-peer, worker-owned, and community-defined marketplaces.

Learn Algorithmic Trading by Sebastien Donadio

active measures, algorithmic trading, automated trading system, backtesting, Bayesian statistics, behavioural economics, buy and hold, buy low sell high, cryptocurrency, data science, deep learning, DevOps, en.wikipedia.org, fixed income, Flash crash, Guido van Rossum, latency arbitrage, locking in a profit, market fundamentalism, market microstructure, martingale, natural language processing, OpenAI, p-value, paper trading, performance metric, prediction markets, proprietary trading, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, Sharpe ratio, short selling, sorting algorithm, statistical arbitrage, statistical model, stochastic process, survivorship bias, transaction costs, type inference, WebSocket, zero-sum game

And are there any naive strategies that worked in the past that we can use by way of reference? As you read in the first chapter of this book, mankind has been trading assets for centuries. Numerous strategies have been created to increase the profit or sometimes just to keep the same profit. In this zero-sum game, the competition is considerable. It necessitates a constant innovation in terms of trading models and also in terms of technology. In this race to get the biggest part of the pie first, it is important to know the basic foundation of analysis in order to create trading strategies. When predicting the market, we mainly assume that the past repeats itself in future.

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Let's take a look at the risks involved before we look at what factors lead to increasing/decreasing these risks in the business of algorithmic trading. Risk of trading losses This is the most obvious and intuitive one—we want to trade to make money, but we always run through the risk of losing money against other market participants. Trading is a zero-sum game: some participants will make money, while some will lose money. The amount that's lost by the losing participants is the amount that's gained by the winning participants. This simple fact is what also makes trading quite challenging. Generally, less informed participants will lose money to more informed participants.

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To summarize this section, losing the trading edge when other participants discover the same signals that are working for us is a normal part of the business, but there is no direct solution to this problem, other than trying our best to keep discovering new trading signals ourselves to stay profitable. Profit decay due to exit of losing participants Trading is a zero-sum game; for some participants to make money, there must be less informed participants that lose money to the winning participants. The problem with this is that participants that are losing money either get smarter or faster and stop losing money, or they continue losing money and eventually exit the market altogether, which will hurt continued profitability of our trading strategies and can even get to a point where we cannot make any money at all.

Future Tense: Jews, Judaism, and Israel in the Twenty-First Century by Jonathan Sacks

Abraham Maslow, Alan Greenspan, Atahualpa, back-to-the-land, cognitive dissonance, invisible hand, Joseph Schumpeter, long peace, Socratic dialogue, Thorstein Veblen, trade route, zero-sum game

You are left not with less but with more. The reason is that love, friendship and influence are things that exist only by virtue of sharing. I call these covenantal goods—goods such that the more I share, the more I have. In the short term at least, wealth and power are zero-sum games. If I win, you lose. If you win, I lose. Covenantal goods are non-zero-sum games, meaning that if I win, you also win. Wealth and power, economics and politics, the market and the state, are arenas of competition. Covenantal goods are arenas of co-operation. The home of covenantal goods is not the state or the market but civil society: families, communities, schools, congregations, fellowships (chevrot), communities and society itself, once we have clearly differentiated society from state.

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If you take the left, then I will go to the right; or, if you go to the right, then I will go to the left’ (Gen. 13:8–9). Abraham was willing to make concessions for the sake of peace. So must Israel, and so most of its population still believe.16 A fundamental falsehood permeates almost every discussion of the Israel–Palestine conflict, namely that it is a zero-sum game in which one side loses and the other side wins. That is precisely what it is not. From peace both sides gain. From violence both sides suffer. That is why not only Israelis but also those who genuinely care for the Palestinians and for their children’s right to a future must give their support to peace.

The Flat White Economy by Douglas McWilliams

access to a mobile phone, banking crisis, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, Chuck Templeton: OpenTable:, clean tech, cloud computing, computer age, correlation coefficient, Crossrail, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, eurozone crisis, George Gilder, hiring and firing, income inequality, informal economy, Kickstarter, knowledge economy, loadsamoney, low skilled workers, mass immigration, Metcalfe’s law, military-industrial complex, Network effects, new economy, offshore financial centre, Pareto efficiency, Peter Thiel, Productivity paradox, Robert Metcalfe, Robert Solow, Shenzhen special economic zone , Silicon Valley, smart cities, special economic zone, Steve Jobs, vertical integration, working-age population, zero-sum game

The Economist claimed “That is contemptibly naive and also a shame”.13 Nigel Farage leader of UKIP and never one to be short of a pithy comment responded in a tweet “What utter drivel, highlighting a major lack of critical thinking and compassion”.14 There is a second way in which inequality can be a problem in itself – if the economy operates such that either production or consumption is a zero-sum game. On the production side, the issue is whether those who become wealthy do so at the expense of others. Here there seems to be a correlation between concern about inequality in and of itself with those countries where there has been a feudal history – for example most of Europe – and conversely those newer societies which do not have a feudal history.

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There is fairly good statistical information on the relationship between wealth creation and the extent to which that wealth is taken by the government in taxation.15 So in general it is reasonable to suppose that in an information society much of the wealth created is additional rather than being taken from someone else as in a feudal society. In these circumstances redistribution to reduce inequality alone is likely to destroy a proportion of the wealth that is redistributed. It is not a zero-sum game. Because of the different historical sources of wealth, public opinion in relatively new economies like the US, Hong Kong and Singapore that have not experienced a feudal system appears much less concerned about inequality than opinion in countries with a feudal history like much of Europe, where I suspect that because of the feudal origins of society, wealth is considered highly suspect by a significant proportion of the population.

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, carbon tax, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, Glass-Steagall Act, global reserve currency, Global Witness, Golden arches theory, Great Leap Forward, greed is good, Greenspan put, Hernando de Soto, illegal immigration, income inequality, invisible hand, It's morning again in America, Jeff Bezos, laissez-faire capitalism, Live Aid, low interest rates, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, Oklahoma City bombing, open borders, open economy, Peace of Westphalia, peak oil, pension reform, plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, Savings and loan crisis, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, Tax Reform Act of 1986, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, Timothy McVeigh, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

But he embraced a version of Bill Clinton’s view of a “win-win world,” in which globalization and rising prosperity potentially laid the foundation for a new era of peace and international harmony. He wrote: “Competition in the nineteenth century for political influence and territorial control was a zero-sum game. Competition in the second half of the twentieth century could become a positive-sum game. Growing economies could benefit, not harm, each other.”12 Unlike many thinkers in the West, Mahbubani was not a believer in democratic-peace theory. As far as he was concerned, democracy did not have much to do with it.

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One American who teaches at a Chinese university and is deeply sympathetic to the country nonetheless told me in 2007 that he was “disturbed by how many of the kids I teach have been taught that war with America is inevitable.”18 On his first visit to China, Barack Obama stuck doggedly to the mantras of the win-win world that he had inherited from Bill Clinton and George W. Bush. “We welcome China’s efforts to play a greater role on the world stage,” he declared. “Power does not need to be a zero-sum game and nations need not fear the success of each other.”19 And yet this is not entirely true. A more powerful China will inevitably threaten America’s ability to play the role in Asia and the Pacific to which it has become accustomed. This reality of growing rivalry with China was beginning to be reflected in U.S. foreign policy by the end of 2010.

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But when the G20 gets close to the really hard issues, zero-sum logic takes over. Fearful that it will be put under pressure to revalue its currency, China has effectively prevented all serious discussion of “global economic imbalances.” National interest and ideology also turn a potential win-win situation over climate change into a zero-sum game. In principle, all nations have an overriding shared interest in stopping global warming. But in fact all governments treat climate change as an argument about sharing economic pain—a lose-lose situation. Politicians often speak hopefully about the potential economic gains from “green growth”—all those jobs insulating houses and producing hybrid cars.

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, bank run, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, buy and hold, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, currency manipulation / currency intervention, currency peg, currency risk, Daniel Kahneman / Amos Tversky, deal flow, Deng Xiaoping, diversification, diversified portfolio, Dr. Strangelove, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, Great Leap Forward, guns versus butter model, high net worth, income inequality, interest rate derivative, it's over 9,000, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, Nixon triggered the end of the Bretton Woods system, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, power law, price mechanism, price stability, private sector deleveraging, proprietary trading, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, short squeeze, sovereign wealth fund, special drawing rights, special economic zone, subprime mortgage crisis, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, vertical integration, War on Poverty, Washington Consensus, zero-sum game

Finally, the white cell seemed to be impressed with Russia’s tenacity on the alternative currency, especially its overture to OPEC, and awarded the country additional national power points. This was a complete turnaround from day one, when Russia’s play had been ridiculed. China was awarded more points mostly for doing nothing. It was a case study in how to win a zero-sum game just by keeping your head down while everyone else blundered around. The United States lost national power, partly because of Russia’s dollar assault, but also because it appeared that East Asia was coalescing around a China-Japan bloc that would eventually include most of the region and exclude the United States from its key decisions on trade and capital flows.

…

One of the peculiarities of paper money is that it is simultaneously an asset of the party holding it and a liability of the bank issuing it. Gold, on the other hand, is typically only an asset, except in cases—uncommon in the 1920s—where it is loaned from one bank to another. Adjustment transactions in gold are therefore usually a zero-sum game. If gold moves from England to France, the money supply of England decreases and the money supply of France increases by the amount of the gold. The system could function reasonably well as long as France was willing to accept sterling in trade and redeposit the sterling in English banks to help maintain the sterling money supply.

…

Its adherents rely on closed markets and closed capital accounts to achieve their goal of accumulating wealth at the expense of others. Classical mercantilism rests on a set of principles that seem strange to modern ears. The main forms of wealth are tangible and found in land, commodities and gold. The acquisition of wealth is a zero-sum game in which wealth acquired by one nation comes at the expense of others. International economic conduct involves granting advantages to internal industries and imposing tariffs on foreign goods. Trading is done with friendly partners to the exclusion of rivals. Subsidies and discrimination are legitimate tools to achieve economic goals.

Present Shock: When Everything Happens Now by Douglas Rushkoff

"Hurricane Katrina" Superdome, algorithmic trading, Alvin Toffler, Andrew Keen, bank run, behavioural economics, Benoit Mandelbrot, big-box store, Black Swan, British Empire, Buckminster Fuller, business cycle, cashless society, citizen journalism, clockwork universe, cognitive dissonance, Credit Default Swap, crowdsourcing, Danny Hillis, disintermediation, Donald Trump, double helix, East Village, Elliott wave, European colonialism, Extropian, facts on the ground, Flash crash, Future Shock, game design, global pandemic, global supply chain, global village, Howard Rheingold, hypertext link, Inbox Zero, invention of agriculture, invention of hypertext, invisible hand, iterative process, James Bridle, John Nash: game theory, Kevin Kelly, laissez-faire capitalism, lateral thinking, Law of Accelerating Returns, Lewis Mumford, loss aversion, mandelbrot fractal, Marshall McLuhan, Merlin Mann, messenger bag, Milgram experiment, mirror neurons, mutually assured destruction, negative equity, Network effects, New Urbanism, Nicholas Carr, Norbert Wiener, Occupy movement, off-the-grid, passive investing, pattern recognition, peak oil, Peter Pan Syndrome, price mechanism, prisoner's dilemma, Ralph Nelson Elliott, RAND corporation, Ray Kurzweil, recommendation engine, scientific management, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, SimCity, Skype, social graph, South Sea Bubble, Steve Jobs, Steve Wozniak, Steven Pinker, Stewart Brand, supply-chain management, technological determinism, the medium is the message, The Wisdom of Crowds, theory of mind, Tragedy of the Commons, Turing test, upwardly mobile, Whole Earth Catalog, WikiLeaks, Y2K, zero-sum game

He has a decade to double his money. Where does the additional $100,000 come from? Ultimately, from other people and businesses who are in the same position, spending money that they have borrowed. Even the wages that workers receive to buy things with were borrowed somewhere up the chain. But this seems to suggest a zero-sum game. Each borrower must win some other borrower’s money in order to pay back the bank. If the bank has loaned out $100,000 to ten different businesses, all competing to earn the money they need to pay back their loans, then at least half of them have to fail. Unless, of course, someone simply borrows more money from the bank, by proposing an additional business or expansion.

…

But the more we ponder the future in this way, the more paralyzed we become by the prospect of the long now—frozen with that plastic bottle over the trash can. Inconvenient truths tend to create more anxious neurotics than they do enlightened stakeholders. Those most successfully navigating the short forever seem to be the ones who learn to think wider, not longer. We must be able to expand our awareness beyond the zero-sum game of individual self-interest. It’s not the longer time horizon that matters so much to alleviating our present shock as it is our awareness of all the other prisoners in the same dilemma. This is why the commons offers us not only the justification for transcending self-interested behavior but also the means to mitigating the anxiety of the short forever.

…

This was the climax of just one episode of The Walking Dead, which—like many others—spawned countless pages of online discussion. The Prisoner’s Dilemma–like clarity of the scenario reassures modern audiences the way Cain and Abel simplified reality for our ancestors. But in our case, there’s no God in judgment; rather, it’s the zero-sum game of people with none of civilization’s trappings to mask the stark selfishness of every choice, and no holy narrative to justify those choices. The zombie legend originated in the spiritual practices of Afro-Caribbean sects that believed a person could be robbed of his soul by supernatural or shamanic means and forced to work as an uncomplaining slave.

Nervous States: Democracy and the Decline of Reason by William Davies

active measures, Affordable Care Act / Obamacare, Amazon Web Services, Anthropocene, bank run, banking crisis, basic income, Black Lives Matter, Brexit referendum, business cycle, Cambridge Analytica, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Climategate, Climatic Research Unit, Colonization of Mars, continuation of politics by other means, creative destruction, credit crunch, data science, decarbonisation, deep learning, DeepMind, deindustrialization, digital divide, discovery of penicillin, Dominic Cummings, Donald Trump, drone strike, Elon Musk, failed state, fake news, Filter Bubble, first-past-the-post, Frank Gehry, gig economy, government statistician, housing crisis, income inequality, Isaac Newton, Jeff Bezos, Jeremy Corbyn, Johannes Kepler, Joseph Schumpeter, knowledge economy, loss aversion, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, mass immigration, meta-analysis, Mont Pelerin Society, mutually assured destruction, Northern Rock, obamacare, Occupy movement, opioid epidemic / opioid crisis, Paris climate accords, pattern recognition, Peace of Westphalia, Peter Thiel, Philip Mirowski, planetary scale, post-industrial society, post-truth, quantitative easing, RAND corporation, Ray Kurzweil, Richard Florida, road to serfdom, Robert Mercer, Ronald Reagan, sentiment analysis, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, smart cities, Social Justice Warrior, statistical model, Steve Bannon, Steve Jobs, tacit knowledge, the scientific method, Turing machine, Uber for X, universal basic income, University of East Anglia, Valery Gerasimov, W. E. B. Du Bois, We are the 99%, WikiLeaks, women in the workforce, zero-sum game

The founding claim of economics is that, where everyone is free to look out for themselves in a competitive market, the net effect will be positive. The argument for free trade and flexible markets rests on this scientific proposition, backed up by statistical economic evidence. The expert claim is that the free market is a “positive-sum game” (in contrast to a “zero-sum game”), in which one set of competitors can become extremely rich, without this having any negative effect on everybody else. By this account, there is no reason for the poor to resent the rich, as the fortunes of one party have not caused the misfortunes of another. While rational to an economist, this argument is psychologically naive.

…

The answer to this is found in moral psychology, not economics: their sense of self-worth depends on comparing themselves to each other and to their previous earnings, rather than by looking at their money in the aggregate. The hypocrisy of privileged elites on this issue is palpable. In one’s own day-to-day life, the economy feels like a zero-sum game in which one side wins and the other loses, regardless of what experts might say, a feeling that engulfs the rich just as much as the poor. We are all susceptible to the logic of resentment in our own lives, even those of us who adopt a perspective of cool scientific objectivity toward the lives of others.

…

(James), 140 whooping cough, 67 WikiLeaks, 196 William III & II, King of England, Scotland and Ireland, 55 World Bank, 78 World Economic Forum, 164 World War I (1914–18), 109–10, 130, 137, 143, 153, 159 World War II (1939–45), 114, 119, 132, 137, 138, 143, 147, 180, 222 Yellen, Janet, 33 Yiannopoulos, Milo, 22, 196 Yorkshire, England, 77 Zero to One (Thiel), 149 zero-sum games, 88, 89 Zuckerberg, Mark, 150, 156, 176–8, 181, 186, 188, 197–9 ALSO BY WILLIAM DAVIES The Limits of Neoliberalism The Happiness Industry Copyright © 2018 by William Davies First American Edition 2019 Originally published in Great Britain under the title Nervous States: How Feeling Took Over the World All rights reserved For information about permission to reproduce selections from this book, write to Permissions, W.

The Scandal of Money by George Gilder

Affordable Care Act / Obamacare, Alan Greenspan, bank run, behavioural economics, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, Claude Shannon: information theory, Clayton Christensen, cloud computing, corporate governance, cryptocurrency, currency manipulation / currency intervention, currency risk, Daniel Kahneman / Amos Tversky, decentralized internet, Deng Xiaoping, disintermediation, Donald Trump, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, glass ceiling, guns versus butter model, Home mortgage interest deduction, impact investing, index fund, indoor plumbing, industrial robot, inflation targeting, informal economy, Innovator's Dilemma, Internet of things, invisible hand, Isaac Newton, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jeff Bezos, John Bogle, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, Law of Accelerating Returns, low interest rates, Marc Andreessen, Mark Spitznagel, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, obamacare, OSI model, Paul Samuelson, Peter Thiel, Ponzi scheme, price stability, Productivity paradox, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, reality distortion field, reserve currency, road to serfdom, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, secular stagnation, seigniorage, Silicon Valley, Skinner box, smart grid, Solyndra, South China Sea, special drawing rights, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, time value of money, too big to fail, transaction costs, trickle-down economics, Turing machine, winner-take-all economy, yield curve, zero-sum game

It is rearview-mirror monetary policy reflecting the need of recumbent sectors for protection against more-creative domestic and foreign rivals. By seeking to impart a bias of inflation to prices, the commodity basket tends to a zero-sum vision that fosters trade wars of devaluation. The basket of commodities is the one part of the economy that operates as a zero-sum game. As it erodes through the advance of innovation, its prices tend to drift upward, skewing the time value of money. The redemptive force of gold is its neutrality in time and thus its orientation toward the future. Hayeks would substitute an anachronistic commodity basket for a predictable deflation based on the scarcity of time and abundance of learning.

…

And while Americans supposedly fret over the threat of foreign trade, the world suffers a rare seven-year 60 percent drop in the rate of trade growth in the midst of an alleged recovery. The class-fraught rhetoric of both parties confirms an economy split along class lines, yet no class can prosper alone for long. We are all in this together, in a crucible of change up and down. A zero-sum game, in which any advance for some comes at the expense of others, zeroes out future growth for all. Middle-class prosperity consists not only in a sense of accomplishment and security but also in ownership and progress, in a productive triad of Main Street with Wall Street and Silicon Valley. With the rise of the welfare state and the surge of payroll and healthcare taxes, wealth cannot consist of wages alone.

Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It by Richard V. Reeves

affirmative action, Affordable Care Act / Obamacare, An Inconvenient Truth, assortative mating, Bernie Sanders, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, circulation of elites, cognitive dissonance, desegregation, Donald Trump, Downton Abbey, full employment, ghettoisation, glass ceiling, helicopter parent, Home mortgage interest deduction, housing crisis, income inequality, knowledge economy, land value tax, longitudinal study, meritocracy, mortgage tax deduction, obamacare, Occupy movement, plutocrats, positional goods, precautionary principle, race to the bottom, randomized controlled trial, restrictive zoning, unpaid internship, upwardly mobile, W. E. B. Du Bois, War on Poverty, We are the 99%, working-age population, zero-sum game

Inequality and immobility thus become self-reinforcing. Downward mobility is not a wildly popular idea, to say the least. But it is a stubborn mathematical fact that, at any given time, the top fifth of the income distribution can accommodate only 20 percent of the population. Relative intergenerational mobility is necessarily a zero-sum game. For one person to move up the ladder, somebody else must move down. Sometimes that will have to be one of our own children. Otherwise the glass floor protecting affluent kids from falling acts also as a glass ceiling, blocking upward mobility for those born on a lower rung of the ladder. The problem we face is not just class separation, but class perpetuation.

…

Americans were likely to be better off than their parents but no more likely to move up or down the rungs of the income ladder. Politically, there is a critical difference between the two kinds of mobility. There is no limit to the number of people who can be absolutely upwardly mobile; everybody could, in theory, enjoy a higher standard of living than his or her parents. But relative mobility is by definition a zero-sum game—one reason it is more controversial. FIGURE 4-1 The Inheritance of Income Status Source: R. Chetty, N. Hendren, K. Kline, and others, “Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States.” Quarterly Journal of Economics 129 (2014): 1553–623. There are lots of ways to measure and illustrate relative mobility rates, including elasticity of income or earnings, rank-rank slopes, conditional transition probabilities, and rank directional mobility.

Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez

Airbnb, airport security, always be closing, Amazon Web Services, Big Tech, Burning Man, business logic, Celtic Tiger, centralized clearinghouse, cognitive dissonance, collective bargaining, content marketing, corporate governance, Credit Default Swap, crowdsourcing, data science, deal flow, death of newspapers, disruptive innovation, Dr. Strangelove, drone strike, drop ship, El Camino Real, Elon Musk, Emanuel Derman, Fairchild Semiconductor, fake it until you make it, financial engineering, financial independence, Gary Kildall, global supply chain, Goldman Sachs: Vampire Squid, Hacker News, hive mind, How many piano tuners are there in Chicago?, income inequality, industrial research laboratory, information asymmetry, information security, interest rate swap, intermodal, Jeff Bezos, Kickstarter, Malcom McLean invented shipping containers, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, means of production, Menlo Park, messenger bag, minimum viable product, MITM: man-in-the-middle, move fast and break things, Neal Stephenson, Network effects, orbital mechanics / astrodynamics, Paul Graham, performance metric, Peter Thiel, Ponzi scheme, pre–internet, public intellectual, Ralph Waldo Emerson, random walk, Reminiscences of a Stock Operator, Ruby on Rails, Salesforce, Sam Altman, Sand Hill Road, Scientific racism, second-price auction, self-driving car, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, Skype, Snapchat, social graph, Social Justice Warrior, social web, Socratic dialogue, source of truth, Steve Jobs, tech worker, telemarketer, the long tail, undersea cable, urban renewal, Y Combinator, zero-sum game, éminence grise

The net conclusion of all this was that Mick would go to Facebook, while Zynga would get James and the company. The major problem here was that both Zynga and Facebook had to make concessions to get the deal done, but neither wanted to subsidize the other’s acquisition by offering more value for the hybrid sale. They perceived themselves to be locked in a zero-sum game with a company they didn’t particularly like. The final terms, which I never got out of Mick, were some weird combo of cash up front, equity on separate vesting schedules in both companies, and a corollary deal that got the investors paid. As I would come to learn, my situation wasn’t unusual, though not generally talked about.

…

After all, they often stood by you when nobody else did and, like Sacca, potentially helped get the company sold. Thus, founders face a moral choice that’s quite ticklish. They can opt to reward their investors for their investments in time and money, but they’re essentially paying them out of their wallet. The deal is very much a zero-sum game between founders and investors in the final stages. To give you an idea of just how indifferent the acquiring company is to investors, keep in mind that Sacca was reputedly Twitter’s largest equity shareholder after its founders, and a vocal champion of the company. He had helped arrange its last funding round, and, somewhat notoriously, was helping insiders sell their stakes in Twitter early to Wall Street speculators.

…

Somerset, 200 Mayer, Marissa, 78 Mayfield Capital, 154, 156, 159, 162–63 McAfee, 382 McCorvie, Ryan, 16–17 McDonald’s, 82, 450 McEachen, Matthew (“MRM”), 41, 46, 62–63 call to, 123 CEO position, 249 chaos monkey suggestion, 103 codebase and, 66, 73, 184, 234 coding, 146 comrade-in-arms, 91 as daredevil, 136–37 deal details and, 251–52 earnestness, 68 Facebook and, 223, 225 family, 135, 205 getting to know, 88 irritation, 102–3 lost with, 109 paying off mortgage, 494 as resourceful savior, 100–101 as steadfast, 67 McGarraugh, Charlie, 14–15 McLean, Malcom, 447 media publishers, 387 MediaMath, 390 Menlo Park, 84 bedroom community, 338 conferences, 119 headquarters, 469 moving to, 337 schools, 306 meritocracy, 74 Merkle, 384 mesothelioma, 81 Miami drug trade, 304 Michelangelo, 334 Microsoft Adchemy and, 153–54, 161–62 Atlas, 383, 453–55 calendar, 340 dogfooding, 43 monopolist, 286 program managers, 272 middle managers, 359 Miller, Arthur, 104 Miller, Frank, 434 Milton, John, 475 minimum viable product (MVP), 434 miracles, 51 misleading, offensive, or sexually inappropriate (MOSI), 310 Mixpanel, 62 mobile commerce, 484–89 mobile data, 382, 477, 484, 486 Mobile Marketing Association (MMA), 448 monetary value, 317–19 monetization bet, 4 data-per-pixel, 274 digital, 184 Facebook, 5, 209, 275, 278, 298, 318, 425, 444 folly, 361–72 Google, 186 growth, 141 influences, 9 savvy, 486–89 tug-of-war, 379 Twitter, 190 zero-sum game, 319 money fuck-you money, 102, 415–16 investors, 74 outside, 155 pre-money valuation, 212 seed, 96 of VCs, 174 Moore’s law, 25 MoPub, 476–77, 479–81 morality, 226, 256, 284 Morgenstern, Jared, 218 Morishige, Sara, 183 Morris, Robert Tappan, 60–61 Mortal Kombat 3, 178 Moscone, George, 181 Moskovitz, Dustin, 284 Motwani, Rajeev, 138 Museum of Natural History, 366 My Life as a Quant (Derman), 16 MySpace, 283–84 N00b, 269 Nanigans, 480–81 Narasin, Ben, 128–31, 143–44 NASDAQ, 405, 410 National Socialism, 356 native ad formats, 448–49 Neko, 482 Netflix, 83, 103, 328 Netscape Navigator, 286 Neustar, 384, 386 New Rich, 357 New York Times, 448, 486 New Zealand, 318 News Feed addictive, 482 ads, 482–84, 488, 492 click-through rates, 487 content, 309 creation, 2 distribution, 364 as magic real estate, 362 spamming users, 372 versions, 444 newspaper advertising, 36–37 Nielsen, 385 1984 (Orwell), 433 noncash valuation, 212 no-shop contract, 201 Nukala, Murthy crossing paths, 167–68 ego, 42–43 greed, 44 hazing by, 71 immigrant worker, 72 lecture from, 65–66 manipulative rage, 136 pep rally, 36 saying good-bye to, 73 self-preservation and, 162–63 tantrums, 45 as tyrant, 158 vindictiveness, 134 wooing by, 154 Obama, Barack, 299–300 obscenity, 268 OkCupid, 54 Olivan, Javier, 410 Omnicom, 437, 443 on-boarding, 260–67, 271 one shot, one kill motto, 298 one-on-one, 434, 457, 469 online dating, 54–55 Opel, John, 148 Open Graph, 280, 364 optimization, 276, 302 Oracle investors, 111 job at, 193 logo, 124 product shindigs, 181 recruiting, 70 Orkut, 379 Orrick, Herrington & Sutcliffe, 193, 203, 253 Orwell, George, 433 outside money, 155 Ovid, 316 Oxford English Dictionary, 80 Page, Larry, 112, 428, 431 Pahl, Sebastien, 119 Palantir, 272 Palihapitiya, Chamath, 265–66 Palo Alto bosom of, 116 climate, 123 downtown, 333, 338 East, 404 hub, 109 old, 112, 158 posh, 84 shuttles, 289, 339 Stanford grads, 63 Pamplona running of bulls, 106–7 Pan-Arabism, 356 Pansari, Ambar, 210 Paper, 283 Parse, 155 Patel, Satya, 249–50 Patton, 369 Payne, Jim, 476 PayPal, 78, 124 personal wealth, 415 personally identifiable information (PII), 395 photo sharing, 286, 490–91, 493 photo-comparison software, 310 Pickens, Slim, 102 Piepgrass, Brian, 374 pings, 188, 327, 422 PMMess, 347–51, 407, 409 poker playing, 396–97 polyandry, 483 Polybius, 172, 316, 336 Pong, 150 Ponzi scheme, 16 pornography, 167, 262, 268, 312, 314, 315 post-valuation, 212 pregnancy, 58–59 pre-money valuation, 212 La Presse, 37 privacy Facebook and, 316–29 Irish Data Privacy Audit, 278, 320–23 PRIZM Segments, 385 product development, 47, 94, 191, 220, 334, 370, 389 product managers (PMs) as Afghan warlords, 273 earning money, 302 everyday work, 294 Facebook, 4, 6–7, 10, 91, 97, 202, 210, 271–79 Google, 192 habitat, 341 high-value, 246 ideal, 219 information and, 295 internal and external forces and, 316–17 last on buck-passing chain, 327 managing, 276 stupidity, 313 tech companies, 272 tiebreaker role, 292 product marketing manager (PMM), 277, 366 product navigators, 272 production, 94 product-market fit, 175 programmatic media-buying technology, 38 Project Chorizo, 296 pseudorandomness, 75 publishers, 37, 39 Putnam, Chris, 284 Qualcomm, 70 quants, 16–18, 24, 29, 141, 207 Quick and Dirty Operating System (QDOS), 149 Rabkin, Mark, 3, 312, 389, 398, 435 Rajaram, Gokul, 8, 10 accepting offer from, 248 banter with, 472–73 as boss, 3 bribery, 471 FBX and, 435 go big or go home ethos, 300 in great debate, 459 influence, 202 insubordination toward, 465 interview with, 221–22 leadership, 309 loss of trust, 468 lot with, 373 management of, 434 middle manager, 463–64 one-on-one and, 469 as product leader, 276–77 riding by, 346 stripping of duties, 452 word of, 252 Ralston, Geoff, 93 Rapportive, 96–97, 106 real-time bidding (RTB), 40–41 real-time data synchronization, 38 Red Rock Coffee, 84 RedLaser, 51 Reesman, Ben, 308, 389, 399–400, 475, 477 relativity, 25 replicating portfolio, 247–48 retargeting, 9, 381, 395, 438, 461 return of advertising spend (ROAS), 81 revenue dashboards, 274–75, 295–96 Right Media, 37–38 The Road Warrior, 134 Roetter, Alex, 185, 190, 493–94 romantic liaisons, 55–56 Romper Stomper, 202 Rosenblum, Rich, 21–22 Rosenn, Itamar, 368 Rosenthal, Brian, 389, 390 Ross, Blake, 444 Rossetti, Dante Gabriel, 303 rounds, 156 routing system, 324 Rubinstein, Dan, 312–13 Ruby on Rails, 155 Russia, 375–76 Sacca, Chris, 128, 141, 143 acquisition advice, 187–88, 212–13, 245–47 on deals, 205–7 ignoring inquiries, 201 pseudoangel, 113, 117–19 wisdom, 202 Safari, 484 safe sex, 58 safeguarding role, 315 sailboat living, 307, 332, 337–38 salaries, 358 San Francisco Museum of Modern Art (SFMOMA), 181 Sandberg, Sheryl, 2, 10 data joining and, 465 gatekeeper, 4–5 intimates, 3–4 leadership, 410 managerial prowess, 311–13 meetings, 371, 382, 459 PowerPoint and, 7 recommendations to, 462 schmoozing, 367 wiles of, 408 Sarna, Chander, 67–68, 71, 72 sausage grinder, 296 scale, 300 Scalps@Facebook, 314 scavenging foray, 116 schadenfreude, 16–17 Schopenhauer, Arthur, 282 Schrage, Elliot, 3–4, 410 Schreier, Bryan, 123–25 Schrock, Nick, 400 Schroepfer, Mike, 2 Schultz, Alex, 374 scientific racism, 122 Scoble, Robert, 100 Scott, George C., 24, 369 security, 314–15 seed money, 96 Sequoia, 122–25, 130, 159 severance package, 470–71 severity-level-one bug (SEV1), 323 sexual molestation, 17 Shaffer, Justin, 219–21, 444 Shakespeare, William, 120, 427, 456 Shapiro, Scott, 378, 459 Shelly, Percy Bysshe, 337 Shockley, William, 122 shuttles, 289, 339 Siegelman, Russell, 146, 201, 213, 397 angel investor, 110–13 commitment, 141–43 negotiations, 116–17 Silicon Valley.

Switched On: My Journey From Asperger's to Emotional Awakening by John Elder Robison

Albert Einstein, Atul Gawande, autism spectrum disorder, cognitive dissonance, Fellow of the Royal Society, Isaac Newton, Minecraft, mirror neurons, neurotypical, placebo effect, traumatic brain injury, zero-sum game

I sure didn’t want to end up like those two, but I didn’t know how much power I had over my fate. The Thompson quote felt disturbingly apt—my emotions were taking me for a ride, and all I could do was see where it led. * Flowers for Algernon was the basis for the Academy Award-winning 1968 movie Charly, starring Cliff Robertson. The Zero-Sum Game WE’VE ALL HEARD this myth: humans only use 10 percent of our brainpower. Usually, when people say that, they are suggesting that if we could learn to use the idle 90 percent we would become intellectual giants. Various supplements and therapies have been hawked over the years in pursuit of this lofty goal, but none of them has turned out to enrich minds, though I’m sure a few enriched their marketers.

…

I hated the idea of losing my special abilities, but I also felt alone so much of the time. And TMS had relieved that loneliness, at least temporarily. I had a return visit to the lab scheduled for more TMS in the not-too-distant future. But I was torn now that I’d come to believe that changing my brain might well be a zero-sum game. When I went back to the TMS lab for the last round of stimulations in their initial study, I was ready for anything. In earlier sessions I’d seen my emotions amped up and my senses fine-tuned. What would come next? The answer, to my dismay, was . . . nothing. The first round of TMS study concluded quietly, without a bang.

…

That’s what my next session would be—the hospital’s first off-label use of TMS to treat autism, one whose findings would guide a larger study. I was excited and hopeful but also a little bit afraid as I returned to the lab on August 12, the day before I turned fifty-one. The possibility of pain or medical catastrophe didn’t scare me anymore, but I was still preoccupied with the “zero-sum game” idea, the thought that enhancing my emotional sensitivity could somehow dull my mechanical awareness. In the absence of any proof one way or the other, in the months that had passed that idea had taken firm root in my mind. My new emotional insight seemed like just such a trade-off, given the emotional fragility I’d also had to contend with.

The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World by Shaun Rein

business climate, credit crunch, Deng Xiaoping, Donald Trump, facts on the ground, glass ceiling, high net worth, high-speed rail, illegal immigration, income per capita, indoor plumbing, job-hopping, Maui Hawaii, middle-income trap, price stability, quantitative easing, Silicon Valley, Skype, South China Sea, Steve Jobs, thinkpad, trade route, trickle-down economics, upwardly mobile, urban planning, women in the workforce, young professional, zero-sum game

As more Americans lost their jobs, China came to be viewed as a scapegoat for U.S. unemployment, rather than for the real reasons: poor regulation of Wall Street; a bickering political system; and average Americans’ addiction to debt, which went on for far too long. Now one hears the constant refrain from politicians and commentators on TV that China is stealing U.S. manufacturing jobs and that Americans should only buy products made in America. For these talking heads, China’s rise is a zero-sum game with the United States. While such arguments appeal to patriotic pride, giving in to these sentiments hurts Americans more than it helps them. Without China, many American families would not be able to afford quality furniture or the latest technology. If businesses like Laura or Apple were forced to bring their factories back to America, their prices would rise tenfold, causing rampant inflation and further hurting consumer sentiment and it is even doubtful these jobs would build consumer confidence if they came back.

…

They also adhere to the view that companies and countries constantly need to evolve and innovate to seize advantages in changes in the world, rather than erecting tariffs and other trade barriers in order to maintain their strength. This group tends to view China as a mix of white knight and mystical superhero who can magically save the world’s economy and increase global security. The other camp views China’s rise as a zero-sum game that will negatively impact the Western world’s ideological and economic dominance. They fear that China is a job stealer that manipulates currency in a mercantilist economic policy, and that it is a potential military enemy, to the detriment of America. They also feel that the Communist ideological strain in China, and the nation’s stance on human rights, are misguided at best but most likely evil, and that both threaten the American way of life.

Don't Burn This Book: Thinking for Yourself in an Age of Unreason by Dave Rubin

Affordable Care Act / Obamacare, An Inconvenient Truth, battle of ideas, Bernie Sanders, Black Lives Matter, Burning Man, butterfly effect, centre right, cognitive dissonance, Columbine, deplatforming, Donald Trump, failed state, fake news, gender pay gap, green new deal, Greta Thunberg, illegal immigration, immigration reform, job automation, Kevin Roose, low skilled workers, mutually assured destruction, obamacare, off-the-grid, Peter Thiel, pre–internet, Ronald Reagan, Saturday Night Live, school choice, Silicon Valley, Social Justice Warrior, Steven Pinker, Susan Wojcicki, Tim Cook: Apple, unpaid internship, War on Poverty, women in the workforce, zero-sum game

No, we’d think they were spoiled brats who needed to toughen up and own their lot in life. It may not always be easy for them, but expecting to be rescued is not independence. And independence is pivotal to being a classical liberal. So stop fixating on how many victim points you have (or don’t have)—it’s a zero-sum game. Instead, just do your thing in this wonderful country of ours. After all, at this rate, we might not have it for very long . . . DON’T TAKE YOUR RIGHTS FOR GRANTED In case you hadn’t noticed, the left wants you to believe that the United States is a lethal cocktail of imperialism, xenophobia, toxic masculinity, and capitalist greed designed to enslave the masses.

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As Sonny Bunch wrote in The Washington Free Beacon: There isn’t anything wrong with living a political life. Politics is important; political decisions have consequences; and passionately arguing for your preferred political outcomes is nothing to be ashamed of. [But] a politicized life is a different beast, however. It treats politics as a zero-sum game or a form of total warfare in which the other side must be obliterated. It alters every aspect of your being: where you shop; what you watch on TV; what sort of music you listen to; who you associate with. If you’re not with the politicized being, you’re against him—and if you’re against him, he is well within his rights to ruin you personally and economically.

WTF?: What's the Future and Why It's Up to Us by Tim O'Reilly

"Friedman doctrine" OR "shareholder theory", 4chan, Affordable Care Act / Obamacare, Airbnb, AlphaGo, Alvin Roth, Amazon Mechanical Turk, Amazon Robotics, Amazon Web Services, AOL-Time Warner, artificial general intelligence, augmented reality, autonomous vehicles, barriers to entry, basic income, behavioural economics, benefit corporation, Bernie Madoff, Bernie Sanders, Bill Joy: nanobots, bitcoin, Blitzscaling, blockchain, book value, Bretton Woods, Brewster Kahle, British Empire, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, Captain Sullenberger Hudson, carbon tax, Carl Icahn, Chuck Templeton: OpenTable:, Clayton Christensen, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, commoditize, computer vision, congestion pricing, corporate governance, corporate raider, creative destruction, CRISPR, crowdsourcing, Danny Hillis, data acquisition, data science, deep learning, DeepMind, Demis Hassabis, Dennis Ritchie, deskilling, DevOps, Didi Chuxing, digital capitalism, disinformation, do well by doing good, Donald Davies, Donald Trump, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, fake news, Filter Bubble, Firefox, Flash crash, Free Software Foundation, fulfillment center, full employment, future of work, George Akerlof, gig economy, glass ceiling, Glass-Steagall Act, Goodhart's law, Google Glasses, Gordon Gekko, gravity well, greed is good, Greyball, Guido van Rossum, High speed trading, hiring and firing, Home mortgage interest deduction, Hyperloop, income inequality, independent contractor, index fund, informal economy, information asymmetry, Internet Archive, Internet of things, invention of movable type, invisible hand, iterative process, Jaron Lanier, Jeff Bezos, jitney, job automation, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John Zimmer (Lyft cofounder), Kaizen: continuous improvement, Ken Thompson, Kevin Kelly, Khan Academy, Kickstarter, Kim Stanley Robinson, knowledge worker, Kodak vs Instagram, Lao Tzu, Larry Ellison, Larry Wall, Lean Startup, Leonard Kleinrock, Lyft, machine readable, machine translation, Marc Andreessen, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, McMansion, microbiome, microservices, minimum viable product, mortgage tax deduction, move fast and break things, Network effects, new economy, Nicholas Carr, Nick Bostrom, obamacare, Oculus Rift, OpenAI, OSI model, Overton Window, packet switching, PageRank, pattern recognition, Paul Buchheit, peer-to-peer, peer-to-peer model, Ponzi scheme, post-truth, race to the bottom, Ralph Nader, randomized controlled trial, RFC: Request For Comment, Richard Feynman, Richard Stallman, ride hailing / ride sharing, Robert Gordon, Robert Metcalfe, Ronald Coase, Rutger Bregman, Salesforce, Sam Altman, school choice, Second Machine Age, secular stagnation, self-driving car, SETI@home, shareholder value, Silicon Valley, Silicon Valley startup, skunkworks, Skype, smart contracts, Snapchat, Social Responsibility of Business Is to Increase Its Profits, social web, software as a service, software patent, spectrum auction, speech recognition, Stephen Hawking, Steve Ballmer, Steve Jobs, Steven Levy, Stewart Brand, stock buybacks, strong AI, synthetic biology, TaskRabbit, telepresence, the built environment, the Cathedral and the Bazaar, The future is already here, The Future of Employment, the map is not the territory, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Fadell, Tragedy of the Commons, transaction costs, transcontinental railway, transportation-network company, Travis Kalanick, trickle-down economics, two-pizza team, Uber and Lyft, Uber for X, uber lyft, ubercab, universal basic income, US Airways Flight 1549, VA Linux, warehouse automation, warehouse robotics, Watson beat the top human players on Jeopardy!, We are the 99%, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator, yellow journalism, zero-sum game, Zipcar

As shown in the figure below, the share of GDP going to wages has fallen from nearly 54% in 1970 to 44% in 2013, while the share going to corporate profits went from about 4% to nearly 11%. Wallace Turbeville, a former Goldman Sachs banker, aptly describes this as “something approaching a zero-sum game between financial wealth-holders and the rest of America.” Zero-sum games don’t end well. “The one percent in America right now is still a bit lower than the one percent in pre-revolutionary France but is getting closer,” says French economist Thomas Piketty, author of Capital in the Twenty-First Century. Lazonick believes his research demonstrates that this trend “is in large part responsible for a national economy characterized by income inequity, employment instability, and diminished innovative capability—or the opposite of what I have called ‘sustainable prosperity.’”

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We haven’t yet seen the equivalent of the “relationship banking team” in on-demand transportation (though there are signs of what that might be in Uber’s early experiments in making house calls to deliver flu shots and bringing elderly patients to doctors’ appointments). Uber and Lyft are on their way to becoming a generalized urban logistics system. It’s important to realize that we are still exploring the possibilities inherent in the new model. This is not a zero-sum game. The number of things that people can do for each other once transportation is cheap and universally accessible also goes up. This is the same pattern that we’ve seen in the world of media, where network business models have vastly increased the number of content providers despite centralizing power at firms like Google and Facebook.

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Louis, April 2, 2017; Corporate Profits After Tax (without IVA and CCAdj) (CP), retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred. stlouisfed.org/series/CP, April 2, 2017; Gross Domestic Product (GDP), retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed. org/series/GDP, April 2, 2017. 246 “something approaching a zero-sum game”: Rana Foroohar, Makers and Takers (New York: Crown, 2016), 18. 246 “the one percent in pre-revolutionary France”: Rana Foroohar, “Thomas Piketty: Marx 2.0,” Time, May 9, 2014, http://time.com/92087/thomas-piketty-marx-2-0/. Retrieved April 2, 2017, http://piketty. pse.ens.fr/files/capital21c/en/media/Time%20-%20Capital%20in%20the %20Twenty-First%20Century.pdf. 247 “‘sustainable prosperity’”: Lazonick, “Stock Buybacks,” 2. 247 more of the compensation moved to stock: Foroohar, Makers and Takers, 280. 247 options had to be disclosed, but not valued: Hal Varian, “Economic Scene,” New York Times, April 8, 2004, retrieved April 2, 2017, http://people.ischool.berkeley. edu/~hal/people/hal/NYTimes/2004-04-08.html. 248 “profit extracted through harm to others”: Umair Haque, “The Value Every Business Needs to Create Now,” Harvard Business Review, July 31, 2009, https://hbr.org/2009/07/the-value-every-business-needs. 248 disinformation firms used by the tobacco industry: Naomi Oreskes and Erik Conway, Merchants of Doubt (New York: Bloomsbury Press, 2011). 249 “left holding the bag”: George Akerlof and Paul Romer, “Looting: The Economic Underworld of Bankruptcy for Profit,” Brookings Papers on Economic Activity 2 (1993), http://pages.stern.nyu. edu/~promer/Looting.pdf. 250 “The customer is the foundation of a business”: Peter F.

Alpha Trader by Brent Donnelly

Abraham Wald, algorithmic trading, Asian financial crisis, Atul Gawande, autonomous vehicles, backtesting, barriers to entry, beat the dealer, behavioural economics, bitcoin, Boeing 747, buy low sell high, Checklist Manifesto, commodity trading advisor, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, currency risk, deep learning, diversification, Edward Thorp, Elliott wave, Elon Musk, endowment effect, eurozone crisis, fail fast, financial engineering, fixed income, Flash crash, full employment, global macro, global pandemic, Gordon Gekko, hedonic treadmill, helicopter parent, high net worth, hindsight bias, implied volatility, impulse control, Inbox Zero, index fund, inflation targeting, information asymmetry, invisible hand, iterative process, junk bonds, Kaizen: continuous improvement, law of one price, loss aversion, low interest rates, margin call, market bubble, market microstructure, Market Wizards by Jack D. Schwager, McMansion, Monty Hall problem, Network effects, nowcasting, PalmPilot, paper trading, pattern recognition, Peter Thiel, prediction markets, price anchoring, price discovery process, price stability, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, reserve currency, risk tolerance, Robert Shiller, secular stagnation, Sharpe ratio, short selling, side project, Stanford marshmallow experiment, Stanford prison experiment, survivorship bias, tail risk, TED Talk, the scientific method, The Wisdom of Crowds, theory of mind, time dilation, too big to fail, transaction costs, value at risk, very high income, yield curve, you are the product, zero-sum game

Intelligence and drive are the keys to success in most business pursuits, but this is not strictly true in trading. Intelligence and drive are necessary, but not sufficient conditions for trading success. Many people think of trading as a zero-sum game and that makes them feel optimistic. Since almost everyone believes themselves to be better than average in almost all pursuits, the thought is that if something is a zero-sum game, all you have to do is be better than the next guy to win. Wrong. Trading is a negative sum game. When I was day trading equities, most traders were gross positive and net negative in most periods. They could take money out of the market, but not enough to cover their brokerage, bid/offer spread and other slippage.

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The most damaging of all forms of trader kryptonite is biased or bad thinking and we will discuss bias in depth in Chapter 7. This chapter will focus on everything else that holds traders back, other than irrational and biased thinking. When thinking about why traders lose money, the starting point is simple. Trading is not a zero-sum game; it is a negative sum game. There are external costs (technology, hardware, research, data, personnel, etc.) and transaction costs (commissions, bid/offer, slippage) that eat away at your performance, day after day. If you generate small gains, your alpha will leak away in a steady stream of payments to vendors and market makers.

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When you buy and sell stocks at zero commission, you are still paying a toll of somewhere between 0.02% and 0.50% (2bps to 50bps) due to the bid/ask spread. Some stocks are much wider than 0.50% but you probably should not be trading those. Spreads and commissions are the main reason trading is a negative-sum game, not a zero-sum game. Spread is the invisible enemy, like a slow leak in a tire. It costs you a ton of P&L but it can be very hard to observe or measure correctly. Tiffany is an active day trader. She executes 15 round-trips per day (15 buys and 15 sells) and the stock she specializes in (Take Two Interactive, TTWO) has an average bid/ask of 38bps.

Succeeding With AI: How to Make AI Work for Your Business by Veljko Krunic

AI winter, Albert Einstein, algorithmic trading, AlphaGo, Amazon Web Services, anti-fragile, anti-pattern, artificial general intelligence, autonomous vehicles, Bayesian statistics, bioinformatics, Black Swan, Boeing 737 MAX, business process, cloud computing, commoditize, computer vision, correlation coefficient, data is the new oil, data science, deep learning, DeepMind, en.wikipedia.org, fail fast, Gini coefficient, high net worth, information retrieval, Internet of things, iterative process, job automation, Lean Startup, license plate recognition, minimum viable product, natural language processing, recommendation engine, self-driving car, sentiment analysis, Silicon Valley, six sigma, smart cities, speech recognition, statistical model, strong AI, tail risk, The Design of Experiments, the scientific method, web application, zero-sum game

Unified modeling language (UML)—A standard for the description of the structure and behavior of software systems using visual diagrams. See OMG’s UML site [189] for details. Unsupervised learning—A type of ML in which patterns are found in the unlabeled data. One example of unsupervised learning is clustering. Zero sum game—A game in which the success of one player comes at the expense of other players. In zero sum games, my gain is your loss, and vice versa. appendix B Exercise solutions This appendix provides solutions for the exercises in all of the chapters. To help you reference the questions, I repeat those questions for each chapter and then provide the answers beneath the questions.

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Foremost are the costs to the people whose jobs disappear. There are also costs to your company, not just monetary, but also in the goodwill of both the public and your remaining employees. It’s important to keep that human perspective in mind when you talk about automation of your processes, and to understand that this scenario is often a zero-sum game. If you’re limiting yourself when thinking about AI only to scenarios in which you’re replacing jobs with AI, then you’re actually missing an opportunity. AI can allow you to create new businesses that weren’t possible or economical before. This scenario generates new jobs—not only jobs building and supporting that AI system, but also all other jobs that come with such a business.

The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality by Branko Milanovic