Half of Americans have gambled in the past year. Some play slots at Las Vegas casinos, others prefer blackjack. Still others try to make a profession at poker.
They don’t necessarily do so in person. Online gambling is one of the fastest growing segments of the gaming industry. According to the American Gaming Association, online revenues were $16.5bn in 2023.
For the most part, the “house” wins and gamblers lose out. Some, though, can beat the bookmakers. These “sharp” risk-takers weigh up the probabilities to determine a positive “expected value” (EV) on each wager.
For yet others it’s not just about what happens at the card table, but all their life decisions. These are the risk-takers, not just pro gamblers, but also military generals and astronauts.
These are also the people that Nate Silver wants to tell us about, the most effective risk-takers. Silver, a poker obsessive who sensibly earns his crust as a writer and commentator, sees the world in terms of risk and probabilities.
His 2012 book The Signal and the Noise aimed to demystify the business of prediction. He has some form in this, having built his reputation on his accurate predictions, including getting every US state result correct in the 2012 presidential election. His political forecasting business, originally known as FiveThirtyEight.com, became the go-to website for those interested in American politics.
Silver left the site, which had been sold to Disney, following a round of lay-offs in 2023 at the media group’s ABC News unit. But he has not been idle. Long a prolific contributor to social media, podcasts and via his own Silver Bullet newsletter, Silver has now published a long-awaited second book, On the Edge.
This he divides in two. First, he probes the minds and habits of those who put real money behind their wagers. He breaks in the middle to study the effective habits of these and other, non-gambling risk-takers. The book’s latter half is devoted to bridging some of his theories on risk-taking with how these are used (and misused) in the sphere of investing. Here Silver hints at the debate over skill versus luck and even the morality of investing in AI.
Silver has faith in his cohort’s qualities. “Gamblers, traders and model builders see the world as complicated . . . We recognise that it’s hard to beat the market — not impossible, but hard — and we have the battle scars to prove it.”
It’s a compelling read, even if Silver’s attempts to parse the varied groups he has encountered in his own career feels overwrought, sometimes clumsy. He envisions a tour through a mythical riverside landscape of poker pros, cryptocurrency traders (and fraudsters), venture capital investors and AI proselytisers.
The upriver zone is populated by lofty intellectuals; midriver is the province of traders and investors thriving midriver; furthest downstream we meet the true “Riverians” — poker players and other gamblers. Away from all this is the “Village”, a left-leaning intellectual network of media types and government officials, sometimes in opposition with “Riverians”.
Silver begins his tour downriver, working his way upstream. Poker dominates the early part of On the Edge — that last word refers to any sustainable betting advantage. Yet the author assumes no knowledge and offers explanatory sections on everything from the most popular game, seven-card Texas Hold ‘Em, to betting strategies.
His ability to sniff out the stories unearthed from hundreds of interviews with risk-takers, often playing in professional poker tournaments, is coupled with some useful statistical analysis. It all makes for a perky read.
One might justly moan that Silver only discusses US gambling. If he has done any international research — globally there are estimated to be a little over 672,000 listed poker winners — it does not appear. Then again, had he done so his book might have extended well beyond its lengthy 472 pages.
There are interviews regarding a cheating scandal and with some remarkably successful players. These include Canadian Daniel Negreanu — seventh on the all-time winner list with nearly $54mn, and also one of the few women in this male-dominated sport, Vanessa Selbst (about $12mn).
How these professionals assess expected value from these random outcome games, sometimes using strategies learned from poker software, allows Silver to flow his narrative towards casino games in a chapter aptly named “Consumption”. That nods to the broad base of leisure gamblers who visit the casinos which gobble up their customers’ money over time. As Silver wryly notes, the “overwhelming majority” of money wagered in casinos is “-EV” — in other words, loss making.
Taking readers into the casino world Silver reveals a perfectly legal (though not advisable) card-counting method at a blackjack table, used as a means of anticipating the dealer’s next draw. He focuses on blackjack and slot machines as opposite ends of the casino’s profitability spectrum — and thus the player’s potential to win. A casino’s blackjack profit margin can be a tenth of highly popular slots. The latter has grown as casino executives realised that they could tweak up their take from slot-playing punters without driving customers away. An average profit margin (“hold”) of 5.5 per cent of slot wagers at Las Vegas Strip casinos in 1992 had climbed to over 8 per cent by 2022 due to tweaks by the casinos.
Silver splits his book with a chapter on the 13 habits of highly successful risk-takers, the last of which is that “successful risk-takers are not driven by money.” This includes the astronauts and explorers that he interviews.
That marks an almost ironic transition for the second half of the book. Here the author investigates how venture capitalists invest in the promise of unbridled growth, and later the illusion of crypto’s promise of supernormal profits for altruistic purposes.
This is where Silver’s creation of the Village comes into play. He lays out why Silicon Valley dislikes the left-leaning Village. This is mostly due to excessive group allegiance in the latter versus the individuality more common among Silicon Valley’s top venture capital investors.
The politics embedded in this part of the book might distract some readers as the narrative drifts into the territory of ideological tribalism. But usefully Silver does actually draw out the similarities among those in Silicon Valley and most of those risk-taking Riverians. And he admits, as a gay man, that diversity could and should improve in the venture capital world.
He does raise other fair questions about the risk-taking among venture capitalists. Do they intentionally select crazy, disagreeable founders? The brightest of these sometimes misanthropic founders may become the most driven entrepreneurs in the world, viz Elon Musk. Yes, venture capitalists care about making money, not creating Samaritans, but Silver rightly ponders whether this style of founder selection is part of the model.
One oddball Silicon Valley did back was Sam Bankman-Fried, founder of cryptocurrency exchange FTX who was later convicted of fraud and other crimes in the US. Silver in the last third of his book spends a lot of time on Bankman-Fried and the philosophy of effective altruism — how wealth can be best deployed to good ends — which he popularised, perhaps too much.
Bankman-Fried made money by depending on excessive risk. At one point FTX had an $8bn hole in its balance sheet, unlawfully using his customers’ deposits to trade crypto within its related party company Alameda. Silver understandably disagrees with Bankman-Fried’s methods.
But Silicon Valley, including top venture capital shop Sequoia Capital, backed Bankman-Fried’s winner take all methods. They hoped, thinks one of Silver’s interviewees, that Bankman-Fried would take over the crypto market. Silver worries about a lack of due diligence. But, really, it was a cult of personality and investors’ own greed, plus a process failure by Bankman-Fried when calculating the expected value.
Which leaves Silver ending on the next big wager, AI, perhaps winking at his book’s subtitle, The Art of Risking Everything. “We’ve never invented a machine that worked so well but known so little about how it worked,” he points out.
Again, the author gives us a useful primer on the subject as well as detailing the arguments for and against allowing AI’s unrestricted development. Given his Riverian stance, no one will be shocked by his conclusion.
Silver covers a lot of ground in this likeable, insightful read, investigating risk-taking ability and how it applies to blue-sky investing. It’s worth the price of the tour.
On the Edge: The Art of Risking Everything by Nate Silver Penguin Press, $35/Allen Lane, £30, 576 pages
Alan Livsey is asset management reporter for the FT
