On the Edge: The Art of Risking Everything

by Nate Silver

the prisoner’s dilemma only arises in situations that are not zero-sum. It’s what happens when people are unable to cooperate, even though they would be better off if they could.

Nevada casinos make roughly fifty bucks in profit from slots for every dollar they get out of the poker games they spread.

The Taj Mahal first filed for bankruptcy in 1991, only a year after it opened. Trump had financed it primarily through junk bonds with a 14 percent interest rate.

Atlantic City also proved to be a poor bet.[*15] Its gambling revenues actually exceeded those in Las Vegas throughout most of the 1980s and early 1990s but then declined by more than half.

Disneyworld is famous as a business case study because 70 percent of its first-time visitors eventually return. Well, typically about 80 percent of visitors to Las Vegas are repeat customers.

If a player is playing optimally and selects for tables with decent rules, then craps, blackjack, and baccarat all have a house advantage of around 1 percent or less. The average slot hold on the Las Vegas Strip is above 8 percent, however. And it’s even higher—around 11 percent—on penny slots, which are the most likely games for casual gamblers to encounter.

(On average, the government keeps about 35 cents of every dollar you spend on a lottery ticket, and some states keep 80 percent or more.

Casinos, even high-end ones like the Aria, have few right angles. Right angles create friction: an opportunity to opt out. Instead, modern casino interiors are curvy, with gaming areas flowing into one another.

Kyrollos told me that his return on the money he puts down is around 3 percent or “sometimes even less.” “I’d rather hold two percent of a billion than three percent of a million,” he said. A 2 or 3 percent profit margin is equivalent to winning just 53 or 54 percent of the time.

Three-thousand line moves per shift. Kornegay clarified for me that these are the moves his traders[*4] make by hand. Others are made algorithmically, but the most important ones aren’t.

Training, ironically, is often the best preparation to handle the situations that you don’t train for.

Successful risk-takers have selectively high attention to detail. They understand that attention is a scarce resource and think carefully about how to allocate it.

The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man. —George Bernard Shaw

the value of maintaining a long view may increase in a world where—and here I’m sounding like Thiel—data and analytics can sometimes lead to nearsightedness. It’s often easy to algorithmically optimize for a short-term fix—and much harder to know what will produce long-term brand value.

SpaceX, for instance, took six years until its first successful rocket launch and more than a decade until it turned a profit.

the J Curve: you know your failures before your successes, so your fund tends to have a negative return early.

‘lemons ripen...

The Times made a big deal of the fact that Russian hackers bought $100,000 worth of digital ads on Facebook, for instance—but this was a tiny fraction of the $2.4 billion spent during the election in total.

25 percent of investments make zero return. 25 percent produce a return greater than 0 but less than 1x. 25 percent produce a return between 1x and 3x. The next 15 percent produce a return between 3x and 10x. Finally, the top 10 percent produce a return of 10x or greater.

this data pertains only to what Andreessen calls “top-decile” venture firms like a16z—not just anybody renting a room in an office park on Sand Hill Road. The industry as a whole does not generate particularly attractive returns. But the top firms can be extremely profitable, targeting a 20 percent IRR and going north from there, perhaps even 25 or 30 percent or higher for high-risk sectors.

the Ethereum blockchain can do a whole lot more than just record ETH transactions. In particular, it allows for the creation of so-called smart contracts.

Smart contracts are the basis of DeFi, or decentralized finance—although some DeFi projects so far have turned out to be scams. They are also the basis of DAOs, or decentralized autonomous organizations—self-governing structures that are sometimes used by teams of investors to buy crypto assets together. And then there’s the most famous use case for smart contracts: the non-fungible token, or NFT.

The distinguishing features of an NFT are that it has a unique owner based on information disclosed within its smart contract and that—as the name implies—it’s non-fungible, or one of a kind.

“For the first time in history, you have provable scarcity and unquestionable provenance of a collectible,”