By Walt Hickey

Welcome to the Numlock Sunday edition.

This week, I spoke to Nate Silver, author of the new book On The Edge: The Art of Risking Everything.

I worked for Nate for five years at FiveThirtyEight, and in a lot of ways this newsletter owes its whole existence to continuing the work I did there. Nate’s first book, The Signal and the Noise was a real inspiration to me, and this book is a fascinating continuation of that work. It dives into the world of risk-takers and those who spend much of their lives viewing the world probabilistically.

Silver can be found on X or at his newsletter, Silver Bulletin. The book, On the Edge, is available wherever books are sold.

This interview has been condensed and edited.

Nate, thank you so much for coming on.

Thank you, Walt. Thrilled to be with you.

You are the author of the brand-new book On The Edge. You’re known for other work; we’ve worked together in the past, and it’s a lot of fun. Before we dive in, can you take a second to go over a key conceit of the book, the idea of the Village and the River?

Everyone's been really interested in this contrast. These are really two rival groups of elites. They're both the one percent. And I know that adds up to 2 percent, so maybe they're both half a percent or something.

The Village is the more familiar term. That's a term that refers to the East Coast establishment, so media, government — particularly when a Democrat is an office — academia, The New York Times, Harvard, etc. The Village is a couple of things. One is that it's very community-centric. I'm trying to give a nice version of the Village, but in the Village, it's about consensus decision-making and the group, though that often overlaps into trying to promote the interests of progressive political parties like the Democratic Party, for example. So it's risk-averse. It's about consensus. If you say things that are wrong, you get ejected or canceled, I suppose, from the Village.

The contrasting group is what I call the River. The reason it's the River, by the way, and not a discrete place like a pool, which is the original name, is because it's a sprawling ecosystem with people in different parts of the world. Silicon Valley is a big part of it, or Las Vegas. Miami in the crypto boom days, especially. But it's people who are quantitative risk-takers, and they have things in common, too. They tend to be very analytical, but also insanely competitive and individualistic to the point of often being contrarian. They don't like all the contextualization that happens in the Village. They want to decouple, is the term I use, to separate out the art from the artist, so to speak. But they also have skills that in today's economy are rewarded handsomely financially. Wall Street and Silicon Valley are both growing as part of the economy. Las Vegas is bringing in record revenues. The Moneyball nerds have won, basically.

I’ve described your book to friends as very interesting people having very strange experiences in very beautiful places.

I get to do a lot of travel. I love going to the Bahamas for work. That's kind of cool. And they are interesting and talented people, but some of them are also difficult assholes, right? They're all nice to me, but they can be difficult.

Basically, I think both sides have good critiques of one another that are mostly true. The Village is often quite risk-averse, and it does often let its politics get in the way of its expertise — these things are true. But the River is also hypocritical in different ways.

There's a question, too, about is it a self-fulfilling prophecy at this point. The top venture capital firms have access to the best founding talent in the world. It's really hard to lose when you have infinite capital and you make these investments and some of them hit 100x big. I'm not super woke, but there are problems in Silicon Valley with a lack of money for anyone who's not a white man or an Asian man of a certain type. There are inequity issues, too.

I really enjoyed this book because it felt in many ways like a continuation of The Signal and the Noise. Your first book really felt like an exhortation to understand that your brain might feel averse to uncertainty, but there are reasons to try to get more comfortable in the space. This book feels very much like a celebration of the type of people who were able to do that and were able to reap success from that stability and uncertainty.

The Signal and the Noise is about the what, and this is more about the who. It's a much more personal book. It's getting inside people's heads a lot. The big five characters are, in a sense, Elon Musk, Peter Thiel, Sam Bankman-Fried, Sam Altman, and probably Marc Andreessen. They're the big bad boys of the tech/VC space.

I don't mean to compare them all. I think one of those people is an incredible fraud, obviously. One of those people has had two remarkable businesses but doesn't know his own limits. And then there are three other interesting characters who can be abrasive and rub people the wrong way.

We’ll leave it as an exercise to the reader to guess who's who.

Most of the reviews have been quite positive, but there are some reviews where it's like, because I don't say Peter Thiel's a bad person in between every sentence, they can't figure out it's actually not a particularly flattering portrait of him. It's nuanced, and he's an interesting guy, so that comes through in the book.

But if you have a book, you tend to do actual reporting, which I don't usually do. I don't usually call people on the phone — or, of course, this is done by Zoom now. But I think the politics of the book are different because there are some parts that are very pro-capitalist and some parts that are very anti-capitalist. You could read it left or right or different ways. When I go on different shows, I’m code-switching for the audience because it's immersing you in a different world, basically.

Part of this is just because I know you and I know your work, but politics weren't really on my mind when I was reading the book. I was mostly just interested in this cascade of people who are in very different fields who have done a lot of these things and been able to use this perspective to great effect.

Let's talk a little bit about the SBF of it all. Many of these books have an issue where they only talk to the winners and only follow the success stories, and it becomes a series of profiles of tall poppies. In this case, you were able to really get a front-row seat to what goes wrong when people think too hard in this direction.

That’s a fair criticism, that we should be hearing more from the losers. And there are a couple. There was a young man that cold emailed me and said, “I lost a million dollars doing day-trading with these different apps, so you should talk to me.” And I did. There's stuff about gambling addiction in the book. But because Sam Bankman-Fried figuratively blew up, there are enough bad boys in the book. I don’t need the down-on-his-luck sports bettor. And to be clear, a lot of these industries are quite predatory.

I really appreciated how you were able to dive into the whole perspective on this. You talked a little about the Village versus the River, and it was really interesting when the book talked about the tendencies of a lot of the institutions of the River becoming more and more like the Village — whether it's the EA crowd, the VC crowd, Silicon Valley, things like that. Once they get enough power and momentum, oftentimes the incentive can be to resort to much more Village-like tendencies.

Look, any time anyone accumulates a significant amount of power, that tends to be anything in their original mission. This is a classic argument. Why isn’t the Xerox company the biggest company in the world anymore? It was a leading-edge technology company for however many years. The answer is that the founding talent leaves, you have mission creep, and you get very bloated.

The book argues that, hey, the River has been on a winning streak. You can say, oh, AI or crypto, it's cringe, but the fact is that overall, they make good bets and they're growing as part of the economy. But I think that kind of power has gone to their heads a little bit. My day job is covering politics — and we should be clear, if you took a survey of people in the River, you'd probably find more Harris voters than the Trump voters. These are people who are generally college-educated, highly skilled, and that professional class is primarily Democratic in this day and age. But I think they have gotten headstrong and cocky.

People used to say, in my community in the River, that we're part of the gray tribe. We're apolitical. We think Trump is really bad and authoritarian, so we're not voting for him, but beyond that, we don't want to deal with this politics stuff. We have real problems to solve.

In some ways, the fact that you have Elon Musk or Peter Thiel at the tip of the spear for Trump, I understand why it's happening. There are also economic incentives. They don't like Lina Khan; they don't want higher taxes; they don't want to have their employees unionize. It's not shocking that rich business capitalists are Republican. That’s been since the dawn of the Republican Party, basically. But some of them have become more outspoken, shall we say.

Definitely. It was interesting to watch how sometimes the incentives can ossify these risk-taking tendencies. If you take enough risks and you diversify them enough, you're actually not taking a risk anymore, right? You've developed a diversified risk portfolio that is just good.

The founders do have to be risk-loving, because they’re betting on an idea for 10 years that probably won't work and by definition is not in the market currently, or it would be duplicative. But yeah, I'm not sure that the VCs are all that risk-taking, really.

The two things they do really well in Silicon Valley are, number one, they have a long time horizon. They're making investments that might not pay off for 10, 12, 15 years. Number two, they understand expected value and understand how the math works. You get to make a bunch of high-upside, high-risk bets and put them in a portfolio, call the fund, and do 15 or 20 of those every year. We got some proprietary data that Andreessen Horowitz shared with us, and yeah, this is a really, really good business. You're going to have good years and great years, and you're never going to have a bad year. So they’re not taking that many risks, in a way.

But those two things outweigh what I think is often an inadequate search for talent. They're not talking to enough women and minority founders, for sure. And a critique the Village has that I sort of agree with is the idea that they go way out of their lanes.

I'm an epistemic trespasser myself, so I think some of that is stupid. I do believe what matters really is that you're right, and you can prove that you're right through careful reporting or, even better, making a bet somehow. So I'm not a trust-the-experts guy; I think scientific skepticism is what makes science work.

But they can definitely get out over their skis, especially in politics, which has this ability to entrap people, to get people pilled. If you read the reporting on Elon Musk, apparently the first impetus was that Tesla was not getting invited to all these EV initiatives because the Biden administration didn't like the fact that they weren't unionized. So he's a little pissed about that, and then it feels naughty to start experimenting with frankly right-wing ideas. I have admiration for some of the things he did, but he's right-wing. It's not an unfair label.

You get very caught in this. Once you have that big contrarian win, and if you have two like Elon — or Peter Thiel's made various contrarian bets, including on Trump in 2016 — then you think you're God's gift to investing. “Everyone said I'd be wrong and I was right, twice.” You’re going to have that ego inflation for the rest of your career, probably.

That is a very interesting point. I want to make sure we’re also talking about Silver Bulletin, a newsletter that you maintain that’s very, very good. You were covering a lot of the Biden stuff, and I was always intrigued by that because Biden was right twice, too. He said, “I don't think we're running the 2016 campaign correctly,” and he was right, and then he was like, “I should be the president in 2020; I could beat him,” and he was right. So it was very hard to dislodge him from the notion that he would win in 2024, because he was right twice, and therefore it's tough to turn that around.

Every year there's some NCAA basketball team, a 12-seed that makes it to the Sweet 16, and they get really cocky. They're like, we have gods on our side, we're going to take this three-pointer from half-court, and likely lose by 32 points to Ohio State or something.

I was really excited by some of the characters you were able to talk to in this. You spend a lot of time in the AI chapter talking about John von Neumann, who I am fascinated by, and I'm super interested in how you got him on your radar for this book. You really talked to everyone, from bookies to even a professional slots player. What were some of your favorite conversations to have here?

The slots player actually said two-thirds of the way through the interview, “Please don't use my real name.” Buddy, that's not how journalism works. But there's no value in outing him. He's probably pretty identifiable.

I wanted to provide immersion in each of these worlds. That’s why the book took years: I wanted to make sure there was enough time for you to really know what it's like to be in these worlds. And by the way, they are overlapping, right? The other day I saw a couple of friends who were former poker players turned effective altruists, turned going to Burning Man this week, turned investment managers. There are people that actually, directly have some of these overlaps.

The biggest comment I've heard is from people in all these different spaces saying, hey, I didn't think of you as a crypto guy, for example, but you really did a good job of describing this world. That's very validating.

The book covers crypto, it covers gambling, it covers poker. At any point in writing, did you consider a chapter that was not bait for a spam filter for this specific interview?

There was going to be originally a COVID chapter, but that got cut. It got reduced to a page and a half, basically, because A) no one wants to be talking about COVID stuff anymore, and B) the rest of it is very hands-on. It's about the people, not just the ideas. So the COVID stuff got cut out a little bit.

There's less on Wall Street. There's half a chapter split up in different places. One reason is that the hedge fund guys, unlike the VC guys, don't have these huge egos. They're weird, but they don't have these huge egos, so they don't talk as much as the VCs do. I also thought the notion that they're just doing sports betting but in finance is basically true, but it would be so obvious that it wouldn't be as fun.

Wall Street is also, by definition, part of the River, but it's still more in the old money, establishment side. Its politics are usually more capital D Democratic Party, big donors, things like that. So I spent more time in Silicon Valley instead of the Hamptons.

I want to circle around to an argument you make in the book. It's in the chapter where you talk about venture capital, and I believe it might even be Thiel himself that makes this argument that the stats guys, that Moneyball, has won. It hasn't won everywhere, but it's won in most of the places that matter in this regard.

His interesting argument is that we actually need to find stuff that’s not quantifiable in order to get advantage, to get “alpha.” I'm really intrigued to hear your perspective on that because it was such an interesting point, not only coming from you, but just how we can see value in a world that a lot of times is reliant on quantification, and not always to positive effect.

I think that's right. Everything has been moneyball-ized and made more efficient. Look at the pricing of different things. At the luxury end of the spectrum, for example, things like fancy sushi bars and ski lodges can charge rich people a lot more money. They have a lot of income and they're pretty inelastic, so let's just 5x our prices for the ski resort, or 3x our prices for sushi dinner.

There are very few inefficiencies left, or they're less obvious. You see that in sports betting, too. One of my sources said they could just pull up their computer and there were two different odds for the same game at different sites, so you were guaranteed to make a profit through arbitrage. Now you can't do that anymore.

Like, you wrote about a guy who said they used to bet on the Canadians because their odds were looser.

I'm sure he was doing things that were a little bit in the gray market, shall we say.

But Peter Thiel's implication on that is that, therefore, vibes are where you add your value from, which I somewhat believe.

In poker, you have these things now called “solvers” that basically have the game solved. Imagine everyone was allowed to play with a solver on their phone, and they can even randomize, because solutions involve mixed strategies and randomization. Imagine you could do that and all that matters are just the physical reads, the stamina, the endurance. You see, by the way, that poker players becoming more fit. It's no longer a bunch of guys with whiskey and donuts — it's people who often take relatively good care of their health.

You wrote about a lot of poker. It was really fascinating diving into that world, and it was great to hear about the evolution of strategies over time and why we haven’t been able to crack it. Solvers, like you mentioned, exist, but chess has been very, very succinctly solved because it isn’t that kind of game. Poker just has too much of that human element, that vibe element, and I thought that connected really well with the idea of the book.

Why didn't solvers come along sooner? Partly it's because the solution requires a lot of computing power. Von Neumann thought this was actually too complex. They made a game theory based on it and poker was too complex. Theoretically it could be solved, but multiplayer equilibrium is very complicated, and now, with a number of caveats, it’s more or less on its way to being solved.

But it's still more of a people game than people let on, especially in high-stakes situations. Your body chemistry changes a lot when you're under stress, and you actually can't control it, nor do you necessarily want to. If I'm doing a live public appearance somewhere, I get the feeling of butterflies even though I've done it more than 99.9 percent of the population. I've done hundreds of public events in my life, but you get a feeling of butterflies because your body instinctively knows that this is a high-stakes situation. Being used to operating in that mode is not as easy as it might seem.

Just to bring things around to a close, what's got you more interested lately? At FiveThirtyEight, we didn’t have a tech vertical, but I was nevertheless really intrigued by how much of this book revealed that you’re increasingly interested in not only technology and the VC environment, but also the implications of AI and things like that. What are you more interested in than you used to be now that you've reported this thing out?

For sure. The AI stuff was a pretty minor part of the book in the outline, but I understand why so many people devote their lives to studying large language models. It's science-fiction come to life, in certain ways. I think people now have the treadmill effect where they don't realize how fascinating ChatGPT is and how unlikely it would have seemed five years ago.

Think about business for a second. There's a cluster of topics around things like investing in finance and tech that are probably a good fit for an audience, right? I think we were a little afraid to cultivate that audience at FiveThirtyEight, or maybe there are topics that are male-coded or nerd-coded or things like that. But there's a cluster of things that have a real audience, and post-election I hope to get to some of that on Silver Bulletin and do a little more hiring.

Totally. Hey, the newsletter's been really good. How's that process been for you?

Oh, it's been amazing. I had no idea how much demand there would be for it. Even though we knew how popular FiveThirtyEight and the election stuff was — though 2020 was a weird COVID year. I don't think I checked the data dashboard, I just wanted to make it through the day — it just converts really well to paid content.

And some things you might think of as bugs are actually features, like being able to have a model update once per day. That’s actually the original way we did it back in 2008, 2012. Once per day, you make a little event out of it, write a little narrative and tweet it and Substack Note it. It actually is a better way, I think, to engage with a product than constantly hitting F5 and refreshing. To be leaner and more nimble is really advantageous in digital media.

That’s as good a place as any to leave it. Nate, where can folks find the book? Where can they find you?

They can find On The Edge: The Art of Risking Everything pretty much everywhere. It’s on Amazon. We're also doing really well in independent bookstore retailers, which we appreciate a lot. We want to support those businesses. The newsletter is at natesilver.net and it's called Silver Bulletin.

Lovely. You do the audiobook, and it was a very, very good listen.

This is another industry not-very-well-kept secret, but we’re selling almost as many audiobooks as print books. The reason for that, I think, is that the best way to sell a book is on podcasts.

Really?

People are naturally used to listening to your voice. It's a huge audiobook market. If you're an author, it's worth taking the audiobook seriously, including things that are a little tricky to navigate. It's not totally a one-to-one mapping. We change or reorient sentence structures sometimes, and if there's a chart or a graph, we may actually describe it in different ways. We have to decide what to do with things like footnotes. But the audiobooks are a big market for “serious” nonfiction.

I might add, readers don't get your SBF impression in the physical book. That's an audiobook exclusive.

I do give a little flavor of people's intonations and others. But you can do things with verbal speech that you can't do with written speech, and vice versa. It was a fun project to do. It's like going from English spoken in England to English spoken in Texas: It's the same language, it's mutually intelligible, but there are meaningful differences.

Folks should check the book out. Nate, thanks so much for coming on.

Thanks, Walt. Talk to you soon.

Silver Bulletin Essays and analysis about elections, media, sports, poker, and all the other things I care about. By Nate Silver

Edited by Susie Stark.

If you have anything you’d like to see in this Sunday special, shoot me an email. Comment below! Thanks for reading, and thanks so much for supporting Numlock.

Thank you so much for becoming a paid subscriber!

Send links to me on Twitter at @WaltHickey or email me with numbers, tips or feedback at walt@numlock.news.