A popular approach to defining subjective probabilities is to ask, under what terms would you be willing to bet on this outcome. “I’d be willing to bet” is a common way of expressing confidence. Presumably that’s what Michael Gove is appealing to here:
Gove insisted the UK would still definitely leave on 31 October, saying he had even made a bet with Matt Hancock, the health secretary, that it would happen.
Sounds pretty convincing. Except… It’s another member of the cabinet that is taking the other side of the bet. And not just any other member, but the health secretary, whose preparations are kind of important.
So, we are left with the following options:
- The cabinet has no idea what’s going to happen next week. And instead of spending their time earnestly trying to figure it out, they’re gambling on the outcome.
- Insiders are entirely confident that Brexit will happen on 31 October, but the health secretary is clueless. And the Chancellor of the Duchy of Lanchester (that is genuinely his cabinet job title), instead of trying to bring him up to speed, is taking advantage of his cluelessness to make some money with a bet whose outcome he has covert information about.
- This is just another ridiculous story made up by what are supposed to be responsible public servants.
I suppose he didn’t say what odds he’d given Hancock…
Among the many recurring farcical features of the Brexit morass has been the British government’s willingness (as I discussed two years ago) to proclaim, that its Brexit plans and negotiating position needs to be kept secret from the UK public because, in its favoured gambling vernacular, its ability to bluff would be fatally undermined by showing its cards. In recent weeks we have learned that no-deal Brexit is easily managed, nothing to be frightened of; and yet, the EU will truckle at the whiff of grapeshot, once it is clear that Parliament cannot rescue them from this terrifying fate. That proroguing Parliament changes nothing, and yet will persuade the EU that the UK has thrown its steering wheel out of the car in its game of diplomatic chicken.
What is odd is not that the government might have a public posture (e.g. no-deal Brexit is easily manageable) at odds with its private beliefs (e.g. no-deal Brexit will be hugely destructive). It is that they openly and persistently proclaim these contradictions, using poker metaphors to justify their contradictions. As though their diplomatic counterparties in Brussels would not also read their allusions to bluffing and draw the appropriate conclusions.
I am reminded of an anecdote in David Sedaris’s Me Talk Pretty One Day. Sedaris, an American writer who lived many years in France, describes the conversation of two American tourists who were crammed in close to him in the Paris Metro:
“Peeew, can you smell that? That is pure French, baby.” He removed one of his hands from the pole and waved it back and forth in front of his face. “Yes indeed,” he said. “This little foggy is ripe.”
It took a moment to realize he was talking about me.
The woman wrinkled her nose. “Golly Pete!” she said, “Do they all smell this bad?”
“It’s pretty typical,” the man said. “I’m willing to bet that our little friend here hasn’t had a bath in a good two weeks. I mean, Jesus Christ, someone should hang a deodorizer around this guy’s neck.”
It’s a common mistake for vacationing Americans to assume that everyone around them is French and therefore speaks no English whatsoever… An experienced traveler could have told by looking at my shoes that I wasn’t French. And even if I were French, it’s not as if English is some mysterious tribal dialect spoken only by anthropologists and a small population of cannibals. They happen to teach English in schools all over the world. There are no eligibility requirements. Anyone can learn it. Even people who reportedly smell bad…
The title may suggest I’m talking about the gambling proclivities of investment banks, but actually I’m talking about the way the high street banks treat their customers.
Many years ago I got fascinated by the fact that my mother seemed to be able to spend many hours playing blackjack in casinos, and not lose anything. I calculated the expected returns on a blackjack hand played with optimal strategy (but without counting cards). It turned out that the expected returns on a $100 blackjack hand are something like -$0.04. That means that if you play 1000 hands, your chances of coming out ahead are about 49.4%. Ridiculously close. Furthermore, that is the result of all kinds of extra options that are given to the player, like splitting cards, which each allow the player to move the odds ever so slightly in their favour — but obviously, they’ve been precisely calculated to make sure the odds of winning don’t go over 50%, since that’s a tipping point for the casino. But it’s so close to even that she could play 1000 hands at $10 each, and lose only $4 on average, much less than the value of the free meals and other inducements offered by the casinos.
So why do they do it? Why do they give the players all these extra tools, like splitting cards, to shave fractions of a percent off the house advantage? I realised that it’s a matter of giving players enough rope to hang themselves with. Most of these extras are almost never beneficial to the player. Most players will use them incorrectly, thus increasing their losses while simultaneously acquiring a satisfying sense of control over their fate. Continue reading “Banks and casinos”
The 13th century University Church of St. Mary is an important Oxford landmark. It was the first building of the university, and stands as an imposing symbol of traditional Anglicanism on the High Street. And now, apparently, it is funded by the proceeds of gambling.
I’ve long been fascinated by the gradual moral detoxification of gambling, something that I discussed at some length in my review of The Quants. Christians have vacillated between viewing gambling as a heinous sin and as a good way to fund their churches. Not unlike their earlier views of loans at interest and capitalism more generally.
It’s particularly striking to see a church displaying the symbol of the cross in the sacrilegious form of the gambler’s crossed fingers. I wonder how Christians react to the symbol. It seems like a gestural swear word, as though a priest began his sermon with “God almighty, it sure is hot this week. What are we doing in church, for Christ’s sake?”
I’ve commented on the peculiar dissipation in recent times of the moral stench of gambling, particularly as practiced by the quant elite, who seem at times to revel in their role as gamblers. But I discover now that I was preceded by more than 3 centuries by Daniel Defoe, in his brilliant Essay on Projects:
Wagering, as now practised by politics and contracts, is become a branch of assurances; it was before more properly a part of gaming, and as it deserved, had but a very low esteem; but shifting sides, and the war providing proper subjects, as the contingencies of sieges, battles, treaties, and campaigns, it increased to an extraordinary reputation, and offices were erected on purpose which managed it to a strange degree and with great advantage, especially to the office-keepers; so that, as has been computed, there was not less gaged on one side and other, upon the second siege of Limerick, than two hundred thousand pounds.
This last extraordinary remark, that people were wagering vast sums on the outcomes of sieges. (£200 thousand in the 1690s is probably like £20 million today, or $30 million.) And he goes on to use gambling on the outcomes of siege warfare to present a fascinating example of a sort of arbitrage called a “dutch book”: Combining different wagers with different parties so as to obtain a cumulative certain profit. (De Finetti’s “Dutch Book Theorem”, stating that you need to calculate with something indistinguishable from the standard rules of probability if you don’t want to fall victim to someone else’s dutch book, is the basis of certain approaches to the foundations of probability.) Continue reading “Gambling and finance: The 17th century view”