a wisecrack Jared here full disclosure
this video was brought to you by
Showtime we were flattered to hear that
they dig our stuff so when they reached
out and asked us to watch their show
billions which is coming back for its
fourth season on March 17th
we were really stoked we checked it out
and it's pretty great
on the surface billions is a drama
chronicling the rivalry between a
ruthless billionaire and an equally
ruthless US Attorney vying for their own
brands of justice but today we're going
to argue that among its many facets
billions reflects on how games structure
our lives and how when we gamify our
goals it can have a corrosive effect on
our sense of morality and while people
losing sight of their morals is a common
refrain in media billions frames it in a
novel way with game theory welcome to
this wisecrack edition on billions and
as always spoilers ahead but first a
recap of the show thus far billions is
the story of Chuck Rhodes US Attorney
for the Southern District of New York
his billionaire nemesis Bobby Axelrod
and the people in meshed in their
personal war Rhodes is an ambitious
prosecutor who fights for the little guy
using his clout in office to put
white-collar criminals behind bars he
also has a penchant for cold calculus
bordering on sociopathy as he betrays
his friends and family to realize his
ends you used my company my career my
future what a Mooney and my own yeah
moves like that where do you get nerve
with higher public office in mind he
picks his cases forges alliances and
does a fair share of backroom dealing
he's flanked by Kate sacker and Brian
Connor t too ambitious and morally
driven prosecutors in his office all the
while he tries to maintain his
relationship with his wife Wendy who
works as a performance coach for the man
her husband is trying to imprison you
know there's a psychological profile for
people who self-sabotage and you're
starting to fit it Chuck the
manipulative man of justice is
contrasted with Bobby Axelrod a mega
rich hedge fund manager who never
forgets his humble beginnings you driven
the way only someone brought up from
nothing the way we were can be or his
love of Metallica his staff is
unflinchingly loyal
actually his right-hand man Michael
Wagener aka wags
but like roads Axelrod's drive to
succeed is marred by morally and legally
questionable behaviors insider trading
profiting off 9/11 victims as well as a
stubborn sense of pride that leads him
to flaunt his wealth to law enforcement
the house
I want it okay let's take a beat people
are gonna say they might offer 63
million cash take it or leave it on the
call
eventually this all contributes to an
ever-increasing divide between him and
his wife Lera and his protege Taylor
more than the clash of Chuck Rhodes
versus Bobby Axelrod billions explores
how the road to power is paved with
corruption lies and eroding morals and
it's the concept of game theory that
highlights just how this happens so what
is game theory while you may Intuit that
it's the study of things like poker and
that's not wrong it's more broadly the
study of how people make decisions in a
strategic manner so if you want to ask
your boss for a raise you want as much
money as possible and they want to give
you as little money as they think it
will take to keep you if you're the
employee should you set a number first
or let your boss did you ask for more
than you actually want how much more is
there a difference between asking on a
Monday rather than a Friday after lunch
or before lunch
this methodical approach can be applied
to online dating selecting a jury
running for office and of course playing
the stock market game theory is all over
billions sometimes explicitly and the
manager played some heavy game theory on
me boxed me into a spot essentially put
himself in a position to win no matter
what I said in the world of acts Capital
game theory is used in the name of
making more money so who is this fake
factory supposed to be supplying what
does this ripple out into you find that
you find crack house real investment
traders hedge their bets leverage
positions and take short-term losses for
long term gains they also mislead their
competitors when a bailing we're pruning
slowly so we don't scare the market and
keep this on the DL and try to manage
the flow of information to the outside
world for the office of Chuck Rhodes
game theory is employed a little
differently it's not a matter of
multiple parties trying to outsmart each
other on the stock market rather it
exists in the crafting of plea deals
pull
maneuvering and determining
investigative tactics we can from this
moment forward remember how the game is
supposed to be played but one game
theory principle that gets a specific
shout out is central to understanding
the show I like to call the prisoner's
dilemma no you don't like to call it
that that's what it's called started as
a thought experiment game theory in the
50s does no one ever check you on this
[ __ ] the prisoner's dilemma is as
follows two people commit a crime
together let's say robbing a bank they
get busted sorta the prosecutors only
have enough evidence to convict you of a
lesser crime let's say trespassing on
private property you're separated from
your fellow robber and not allowed to
talk but here's the deal if both of you
keep quiet you each get one year in jail
for trespassing
if you rat on your buddy they'll get the
maximum of 10 years and you'll get off
scot-free and vice versa if they rat on
mute but if you both rat on each other
you get a little leniency for the bank
robbery but still have to serve eight
years what's the ideal way to play this
if you said rat on your buddy so you can
walk free well they're also probably
thinking this and you'll both end up
worse with eight years behind bars
rather than if you both kept your mouth
shut and got one year billions employees
the prisoner's dilemma as Chuck's office
is trying to get a guy named Pete Decker
to testify about Axelrod's
insider trading if Decker cooperates
great he can stay out of jail if he
doesn't there's another investor more
than willing to snitch first mr. Decker
approximately two and a half hours ago
we had someone sitting where you are now
a young man from a fund that I'm not at
liberty to name and he was downright
chatty well sort of but to be clear we
don't really have anyone to be clear I
am making a play that second person was
invented by Rhodes to make him think
this was a kind of prisoner's dilemma
but Decker isn't falling for it
Chuck and spiros are acutely aware of
how their job intersects with game
theory the prisoner's dilemma can be
used to understand more than just who's
going to jail it can describe any
situation where there's an incentive to
betray your compatriots but where
everyone is worse off if everyone
doesn't think of waiting in line at a
show everyone gets inside quicker by
waiting their turn if one person cuts
ahead they get the benefit of
without paying the cost if everyone
tries to cut the line devolves into
anarchy and everyone has to wait longer
it's the prisoner's dilemma with more
than two people in this case it's called
the Free Riders dilemma it's also
something Chuck understands as he
accosts a man for not cleaning up after
his dog you know if I let your dog slide
then I have to be okay with this whole
Plaza filling up with it which it would
before we know it oh then it would be on
our pant legs and our shoes and we would
track it into our homes and then our
homes would smell like
according to author William Poundstone
the prisoner's dilemma acts as a
compelling metaphor for how society
works if we all do the right thing we
all win if almost everyone does the
right thing then the cheaters win but
we're mostly still all right and if
everyone is a cheater we all lose it's
Anarchy as Poundstone writes the
paramount importance of civilization in
human history rests with its role in
promoting cooperation the prisoner's
dilemma can help us understand why
loyalty is so important to ax capital in
an environment where anyone can get
caught by the feds and bring axes legacy
crumbling down
axe retains people who exhibit
unflinching loyalty and cuts loose
anyone who does not axes right hand man
wags makes this explicit when he
complains about an employee who shopped
an outside offer to increase her bonus
he vows to make her life miserable
despite the fact that she's great at her
job because she's disloyal so it's
really not because she's a woman
no it's because she got it aligned you
know that we're up being done in Kahn's
capital tripling it I asked ax why he
said Donny's loyal a good soldier the
name of the game is cooperating with
acts and not defecting to the feds if
you were to play the prisoner's dilemma
with a complete stranger divorced from
all outside consequence a savvy game
theorist might tell you that the most
rational thing to do is to betray the
other player but in the world of acts
capital these situations don't happen in
a vacuum
first off choosing to cooperate or
defect as the options are labeled
doesn't just happen once and then you go
home it happens over and over again it's
a game that gets repeated
if you defect once there's everyone else
in the office who could testify against
you at any time
access demands for loyalty beyond all
else removes any doubt in a situation
like the prisoner's dilemma
nobody defects to the feds and
everyone's better off in the end it's
essentially honor among thieves sure
they can starve a small town into
default spot like this we'll kick off
our astroturf campaign to make it look
like the area's getting a bailout not a
death sentence but the worst sin is to
pack up and start a rival firm games
like the prisoner's dilemma get a little
more interesting when played iteratively
that is over and over again and when we
frame the relationship between axe and
Chuck as an iterative game it starts to
look a lot like the prisoner's dilemma
throughout the show Chuck and axe go to
further and further extremes to hurt
each other
it starts with psychological warfare
Chuck tries to go to axe into buying a
beach house that will draw public
scrutiny well kids in my office really
thought you might buy that house and I
told him you got big balls but not that
big an axe knowingly obliges him to
satisfy his ego ax gets a seat on a
company's board just to spite Chuck's
father's mistress and Chuck arrests
dollar bill this dynamic is put on
display as ax is about to take a plea
deal with Chuck Chuck taunts him Ryan
didn't he say that he would never settle
causing axe and wax to respond in kind
you got me Rhoades 1.9 billion it's
gonna hurt but not like a shark bite see
more like what a bee sting bee sting no
that hurts more like a horse fly no more
like in the end Chuck takes the offer
off the table and ax rips up the check
in a fit of rage things of course
escalate Chuck snoops into his wife
Wendy's therapy notes to get dirt on axe
and axe and turn'd threatens to
blackmail Wendy Chuck leads ax to
believe falsely that his office is
bugged
causing axe to tear the whole place
apart at another point Chuck is forced
to sell a beloved rare book collection
which acts capitalizes on by buying it
and every other set in the world it's
tit for tat game theorists have studied
strategies to the prisoner's dilemma
when the players have to play out that
dilemma over
over again four points one of the most
effective strategies is tit for tat this
strategy in game theory was pioneered
during a computer tournament of the
prisoner's dilemma in 1980 hosted by
none other than a guy named Robert
Axelrod coincidence
this computer strategy was simple
cooperate and only defect after your
opponent had the price of any betrayal
always comes to in flesh if they go back
to cooperating you cooperate if they
don't you don't it's remarkably simple
and follows basic human morality play
nice unless you're wrong then see
justice tit-for-tat is an incredibly
effective strategy in an iterated
prisoner's dilemma and cleaned up at
Robert Axelrod tournament twice but
there's a problem if both parties are
abiding by tit-for-tat you can end up
precisely where axe and Chuck are where
one wrongdoing baguettes a spiral of
revenge we can translate the overall
dilemma into one of our handy-dandy
charts called payoff matrices Chuck is
player a axes player B cooperating more
or less means they leave each other
alone if Chuck isn't going after axe and
axe isn't bankrolling hundreds of
lawsuits against Chuck they're both kind
of happy but neither really got what
they wanted so we can say they're both
cooperating so I don't know 50 points
for each if axe leaves Chuck alone but
Chuck is still after axe that axe has no
leverage and will probably end up in
jail and Chuck will be well on his way
to being governor so a hundred points
for Chuck and negative 500 points for
axe if the opposite happens and Chuck
leaves axe alone but axe is still
seeking revenge Chuck may also end up in
jail and axes ego will be satisfied 100
points for axe negative 500 points to
chuck and if they both keep sabotaging
each other sure they may get the
satisfaction of revenge occasionally but
neither one of them is particularly
happy maybe negative 100 points to each
accent Chuck both choose defect
instead of cooperate and ultimately
enter a downward spiral as a result
Wendy kicks Chuck out of the house after
he spied on her notes and acts as legal
troubles contribute to him eventually
losing lera axe has to give up his
ability to trade and chuck faces the
prospect of going to jail as a result of
his need to get the upper hand on
the only resolution comes when the to
reach and impasse
enter the ice juice skin Chuck finds out
his father and friend IRA are going to
invest in an IPO for a company called
ice juice and leaks that information
knowing ax will manipulate the stock to
get back at Chuck
so axe fakes a listeria outbreak to tank
the stock which is just what Chuck
wanted to happen
Axelrod will go to jail for manipulating
the ice to stock but Chuck's wife Wendy
shorted the ice to stock making it look
like she and her husband benefited from
the stock manipulation Metheny it's
windy roads the ice juice short how do I
get a piece of that and since Chuck has
the evidence that incriminates Axelrod
for ice juice they're both stuck either
one of them getting revenge means they
both go to jail they both reach a
cooperative conclusion that isn't great
but certainly better than their
protracted war with the help of Wendy
they both have to give up their egos but
avoid jail time as a result here's why
all this matters billions illustrates
the shortcomings of living life like
it's some kind of hyper rational game
early in the series sackers father has
this conversation with Connor T
principal doesn't usually go away all at
once it's a creeping erosion for game
theorists are just hyper rational
decision makers life becomes a set of
strategic decisions to win the game or
optimize your outcomes but just as the
game slowly makes Chuck lose everything
he has other characters slowly lose all
sense of principle this business makes
Liars out of all of us eventually
perhaps the best example of this erosion
lies with Taylor an outsider intern of X
capital who quickly climbs their way to
being axes protege Taylor has an acute
understanding of game theory and used it
to crush their opponents in poker
but eventually realize that their love
of winning and empathy were incompatible
can I convince you to try one more time
to play I'd prefer not to
that kind of competition made me sick it
literally brought on feelings of malaise
for acts part of Taylor's value lies in
the fact that they're not playing the
same game as all the other traders
they're an outsider you see things
differently that's an edge but once
Taylor joins acts capital full-time we
slowly see how a person once involved in
Occupy Wall Street active in Occupy Wall
Street during their college years so
there's hope this person might still
have a heart can become just as
manipulative cruel and money-hungry as
acts oh no Taylor told you not to give
me the raise so that I would be
dissatisfied and go with them that's a
pretty sound from the game theory
perspective a person Conor D once
thought could be an ally eventually
rebuffs him entirely we're done here
Taylor eventually betrays even acts
because loyalty just didn't add up in
their long term calculus so how do you
escape the game so to speak you go meta
this game outside the game comes front
and center with Wendy what are you doing
there's no play to be made but no matter
what you choose a London disaster
classic double bind there's a Zen koan
where the teacher holds the stick he
says to his student if you tell me this
stick is real I will beat you with it if
you tell me it is not real I will beat
you with it if you say nothing I will
beat you with it and so the student
reaches out grabs a stick and breaks it
if the situation is untenable mrs.
Rhodes you break that stick the game so
far has been Chuck an axe and a revenge
spiral with Wendy stuck in between
instead wendy refrains it as not a
zero-sum game between two rivals but a
cooperative game of which she is the
mediator how do I know I can trust him
how do I know I can trust him trust me
so is game theory a tool for us to hack
our lives to get what we want when we
want or should we be cautious of how the
games we play can change us to the core
let us know in the comments and a big
shout out to show
for sponsoring this video be sure to
check out season for billions on
Showtime
starting March 17 and as always thanks
for watching guys peace
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