The Problem With Game Theory – The Philosophy of Billions

The Problem With Game Theory – The Philosophy of Billions


Hey Wisecrack, Jared here. Full disclosure
– This video is brought to you by Showtime. We were flattered to hear 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 Rhoades, US Attorney for the Southern District of NY, his billionaire
nemesis Bobby Axelrod, and the people enmeshed in their personal war. Rhoades is an ambitious
prosecutor who fights for the “little guy,” using his clout and office to put white collar
criminals behind bars. He also has a penchant for cold calculus bordering on sociopathy,
as he betrays friends and family to realize his ends. “You used my company, my career, my future”
“My money” “And my own, yeah”
“Moves like that. Where do you get the f*****g 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 Bryan Connerty, two 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 hedgefund manager who never forgets his humble
beginnings “You’re driven in the way only someone brought
up from nothing, the way we were, can be. Or his love of Metallica. His staff is unflinchingly
loyal, especially his right-hand man, Mike Wagner AKA: Wags. But like Rhoades, Axelrod’s
drive to succeed is marred by morally, and legally, questionable behaviors: Insider trading,
profiting off of 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 that -”
“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, Lara, and his protege Taylor. More than the clash of
Chuck Rhoades 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, 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? Should you ask for more than you actually want? How much
more? Is there a difference between asking on 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 Axe 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 Krakow’s real investment” Traders hedge their bets, leverage positions,
and take short term losses for long term gains. They also mislead their competitors. “We’re not bailing. We’re pruning slowly,
so we don’t scare the market, and keep this on the f*****g DL” and try to manage the flow of information
to the outside world. For the office of Chuck Rhoades, the 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, political 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 it the prisoner’s dilemma.” “No, you don’t like to call it that – that’s
what it’s called. It started as a thought experiment. Game theory in the 50s. Does no
one check you on this bullshit?” The prisoner’s dilemma is as follows: Two
people commit a crime together, let’s say robbing a bank. They get busted, sort of – 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 1 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 you. But if
you BOTH rat on each other, you get a little leniency for the bank robbery, but still have
to serve 8 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 8 years behind bars rather than if you both kept your mouth shut and
got 1 year. Billions employs 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 2 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 Rhoades
to make him THINK this was a kind of prisoner’s dilemma, but Decker isn’t falling for it.
Chuck and Spyros 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 does it. 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 the line 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 2 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, if – I let your dog shit slide
then I have to be ok with this whole plaza filling up with it, which it would. Before
we know it – oh. And 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 shit too.” 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 alright. 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 Axe Capital. In an environment where anyone can get caught
by the feds and bring Axe’s legacy crumbling down, Axe retains people who exhibit unflinching
loyalty and cuts loose anyone who does not. Axe’s 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 out of line. You know that we’re upping Donnie Kahn’s capital,
tripling it. I asked Axe why. He said Donnie’s loyal – good soldier.” The name of the game is cooperating with Axe,
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 Axe
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 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. Axe’s
demand 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: “A spot like this will kick off our astroturf
campaign, to make it look like the area is 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 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 goad Axe into buying a beach house that
will draw public scrutiny: “Well, the kids in my office really thought
you might buy that house. And I told them you’ve got big balls, but not that big.” and Axe knowingly obliges him to satisfy his
ego. Axe 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 Axe is about to take
a plea deal with Chuck. Chuck taunts him: “Brian. Didn’t he say that he would never
settle?” Axe and Wags to respond in kind: “You got me, Rhoades. 1.9 Billion. It’s gonna
hurt. But not – not like a sharkbite. More like a – a what – a bee sting.”
“A bee sting? No that hurts. More like a horsefly.” “No. More like an ant.” Chuck takes the offer off the table, and Axe
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 in turn threatens to blackmail
Wendy. Chuck leads Axe 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 Axe 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 players have to play out that dilemma over and over
again for 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 another 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
due 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 wronged, then seek justice. Tit for Tat is an incredibly effective
strategy in an iterated prisoner’s dilemma, and cleaned up at Robert Axelrod’s 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 wrong-doing begets a spiral
of revenge. We can translate the overall dilemma into
one of our handy dandy charts – called payoff matrices. Chuck is Player A, Axe is 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 got what they fully wanted. So, we can say they’re both cooperating.
So, I dunno, 50 points for each. If Axe leaves Chuck alone, but Chuck is still after Axe,
then Axe has no leverage and will probably end up in jail and Chuck will be well on his
way to being governor. So, 100 points for Chuck and -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 Axe’s ego will be satiated. 100 points to Axe, -500 points to Chuck. And
if they both keep sabotaging each other, sure they may get the satisfaction of revenge occasionally,
but neither of them is particular happy; maybe -100 points to each? Axe and 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 Axe’s legal troubles contribute to him
eventually lose Lara. 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 Axe. The only resolution comes when the two reach
an impasse. Enter the Ice Juice scandal. 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 Axe
will manipulate the stock to get back at Chuck. So Axe fakes a lysteria outbreak to tank the
stock, which is just what Chuck wanted to happen. Axelrod will go to jail for manipulating
the Ice Juice stock. But Chuck’s wife Wendy shorted the Ice Juice stock, making it look
like she, and her husband, benefited from the stock manipulation. “Mafee, it’s Wendy Rhoades. 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 this all matters: Billions illustrated
the shortcomings of living life like it’s some kind of hyper rational game. Early in
the series, Sacker’s father has this conversation with Connerty: “Principle doesn’t usually go away all at
once. It’s a – uh – creeping erosion.” For game theorists, or 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 of all eventually.” Perhaps the best example of this erosion lies
with Taylor, an outsider intern at Axe Capitol who quickly climbs their way to being Axe’s
protege. Taylor has an acute understanding of game theory, and used it to crush their
opponents in poker, but eventually realized 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 Axe, 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 join Axe full-time, we slowly
see how a person once involved in Occupy Wall St: “Active in Occupy Wall Street during their
college years.” “So there’s hope that this person may still
have a heart.” Can become as cruel and manipulative as Axe “Oh no. Taylor told you not to give me the
raise, so that I’d be dissatisfied and go with them. That’s pretty sound from a game
theory perspective.” A person Connerty once thought could be an
ally eventually rebuffs him entirely. “We’re done here.” Taylor eventually betrays even Axe, because
loyalty didn’t just 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 do you do when there’s no play to
make, when no matter what you choose it will end in 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 with you it.
If you say nothing, I will beat you with it. And so, the student reaches out, grabs the
stick, and breaks it. If the situation is untenable Mrs. Rhoades, you break that f*****g
stick.” The game, so far, has been Chuck and Axe in
a revenge spiral, with Wendy stuck in between. Instead, Wendy reframes it not as 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 big shoutout
to Showtime for sponsoring this video. Be sure to check out Season 4 of Billions on
Showtime starting March 17th. Thanks for watching. Peace!

100 thoughts on “The Problem With Game Theory – The Philosophy of Billions

  1. Fuck MatPat . . . .He's so awesome but he talked shit about mathematics this one time and I hate it when people do that so FUCK MatPat.

  2. Huge flaw in your reasoning. TFT is nice. It will never defect first. Therefore, two TFT players will NEVER get into this situation in the first place – signed a Professor of Game Theory

  3. I got here from a montage of Bill Stern clips including "Pretend we're having an argument" — https://www.youtube.com/watch?v=N21R9cPXYBs — and now this spoiler-filled analysis has… convinced me even more to watch this series!

  4. Free riders dilemma eh, If you're going to think of how to do the right thing for a selfish reason how about asking yourself what kind of world you want to live in. Love the show BTW its easily one of the best shows on tv.

  5. I preferred the first season, it was more realistic in my opinion, instead of the caricatures and pandering that exists now.

  6. please do the philosophy of "Funny Games" …there is a lot going on under the surface… economic class disparagement, social behavior and conflict issues, protagonist/antagonist weirdness with fourth wall breaks and whatnot… much more would like to hear your takr on it!

  7. never implement game theory against idiots….the whole premise of the game theory relies upon the other party knowing whats best for them and acting on it

  8. Soo. I'm on Season 2 and probably shouldn't have watched this. But come on, warn about spoilers. lol Now I know Axe loses Lara… 🙁

  9. I didn't know if I'd like Billions from the pilot, but the cast was a powerhouse of actors and actresses I love in Movies and TV and right from the start the show met all of my expectations and I can't say I dislike any of the cast in the show, I have issues with the BDSM because that kind of stuff makes me uncomfortable in anything it's put in but it does not make Billions less watchable in any way. I thought they would try to "The Wolf of Wall street" it making Axe Capital seem like a bunch of insane psychopaths instead of focusing on the shady business side of investing but they didn't and for the most part every character has redeemable qualities. I have already watched most of season 4 and like this video says, the shows concentration centers around power, how bad people want it, what they're willing to do for it, how they react when their decisions can set their world on fire if they're not careful and how they're able to pick themselves up and get back into the game. If you haven't watched Billions I honestly highly recommend it.

  10. Tylor may be the only good person of this serie. I as fun by Wendy but she is a B#%h to use her inside info against to Tylor. She deserve all what happens to her.

  11. I saw something about game theory on the internet and it got my attention, than i saw the beginning of this video on the they it was published and became aware of the existing of a tv series about the game theory, making me wonder how good this show could be, so i waited till i have watched all the seasons so i could watch this video, it took me 3 months (because i had college, work and stuff) and i can say it was worthy. Only the firsts 2 minutes of video already made me want to see the show, so congratulations to everyone involved here.

  12. Philosophy of Keanu Reeves? This guy is so interesting, I’ve been rewatching some of his movies and I can’t help but question why we like him. Some of his acting is so bad lol

  13. Please do a "philosophy of" vid on Better Call Saul, there are lots of interesting themes & ideas in there, would be really great to get your analysis of it!

  14. In modern capitalism it takes one rotten apple to rot the whole pile of apples. What I want to say, if someone starts to betray for his own benefits and believe me, someone will always do so, because who wouldnt like to be a millionaire, then everyone else will start to do so as well. Hence, we get the prisoners dilemma. We should start to move to a system, that doesnt require money for its own sustain. A system that shares the work and products between all members fairly. A system, in which betrayal simply doesnt make sense, because it doesnt benefit anyone. I know it sounds utopical, but it is actually possible. It just requires a huge step and a big organisation.

  15. 6:44 – The line does not "devolve into a state of anarchy". It may or may not exist in a state of anarchy. It devolves into chaos.
    Precise language matters. ESPECIALLY in philosophy.

  16. The problem of an economic model viewed through morality when economic models are amoral and interested more in predicting behavior. They may as well have thrown a pie in Friedman's face themselves. Yawn. But good for Showtime as I actually watched the show because of this and have enjoyed it.

  17. The wisecrack logo reminds me of the a knight in chess but a donkey instead of a horse…sup with That?

  18. Your integrity is what is most important and is what should come above all else. And that is only tested when it cost you, it is easy to have integrity when there is no cost. When you will lose everything for doing the right thing that is when you find out the type of person you really are. That said the ability to separate emotions from decision making and remain calm and methodical while everyone else is freaking out is a powerful skill. So I see using "Game Theory" to make what is truly the right decision (not just the one that benefits you) the way to go.

  19. I love Billions except the references that are being used. Billionaires arent like that. They are cold dead straight forward.

  20. I've been watching "Billions" since it first aired. It's been a fascinating show to watch. This video analysis takes it to a whole new level for me. Thank you, Showtime, for commissioning this analysis!

  21. Game theory might pose to change the "player", but without immersing oneself and personalize the game, winning might be difficult. Now, that level of immersion might be "becoming" someone else (instead of loosing oneself). And at the end, life is all about evolving – long as we evolve to be better human beings!

  22. Did nobody say anything of the set, during filming, about the specks of what I'm guess is dandruff on the black T-Shirt? You all need a last looks before you roll

  23. Great video! How do you think the show affects how we look at specific asset classes and commodities?

  24. I didn't finished the video. The description of the show was so interesting that I stopped to go to watch it

  25. Dude why do you even have beeps in this video? They are going off so late. It is as though you want us to hear the cuss word.

  26. someone needs to read up on the nash equilibrium by formula definition it iterative. All of the problems you described only exist because your not following the nash equilibrium function

  27. Game theory is such bullshit, the obvious problem with it is that it doesn't consider feedback loops (i.e. snitches get stitches)

  28. Billions is actually the best TV show I've ever watched. I honestly think that that was entirely an accident, or its because Aaron Sorkin is a producer. The dynamism between some of the characters is truly unparalleled.

  29. Libertarian Fascism is what most Americans engage in to acquire wealth. It is a type of Libertarianism that denies Libertarian values to the rest of humanity. I remember the Libertarian Trump that said he wouldn’t concede the election. Backed by Cigarette 🚬 Companies, Gun Manufacturers, Dirty Coal Industry, Koch Industries, and etc the fascist corporate tentacles 🦑is stripping the world ‘s Libertarian rights.

    Bourgeois Democracy is what those who acquire that wealth engage in to suppress the vote 🗳 and make sure social programs like the New Deal which never benefited Blacks and almost got FDR taken out in a coup, will never get implemented again. It has been a gradual erosion of rights and appointing fascist judges and government positions to suppress the proletariat votes.

    The proletariat is us who want change and understand that Affirmative Action was White and the Irish Became White by making blacks characterized as vagrants and contagions of wealth. To be a contagion 😷 of wealth creates a impression you don’t deserve wealth and what little you have should be taken away from you. The philosophy of making the poor poorer.

    They hate a successful Denmark Vessey style people uprising. They hate a smart Frederick Douglass type brother. They hate blacks that thinks collectively, instead individually. We have so much symmetry with poor whites, but since Bacons Rebellion, it has not been in the rich interest to show whites, you have more in common. It is sad that blacks have low confidence. It’s sad that blacks hate themselves or all the negative stereotypes and history that characterizes them as only slaves and not humans who fought to be there best. The self hate is so real and deep that blacks join conservative groups to be stroked intellectually for being smart.

    The bailout king Obama is a corporate fascist sellout that hurt many black families. But anyone could tell, with his tip toe approach to calling out the rich, who mostly happens to be whites.

    The stereotype of low IQ, low competency, lazy, and poor morality makes us the easiest targets of there eugenics agendas. Blue Dog Dems are the worst Libertarian Fascist. They give you false hope and keep the status quo.

    We are waking up and intellectually will be self sufficient people.

  30. Super interesting. As the Wargames movie and xkcd (https://www.explainxkcd.com/wiki/index.php/601:_Game_Theory) both said: the only winning move is not to play.

  31. Great video. But why is the language censored? "the philosophy of billions" implies an audience that can handle cursing.

  32. Billions is one of the best series I ve ever seen ! I don't know why it isn't viral ?!! I ve finished 4 seasons in less then 2 weeks !

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