Hobson's Choice, a choice of taking what is available or nothing at all (i.e. take it or leave it).

"Real games":
Real life consists of bluffing, of little tactics of deception, of
asking yourself what is the other person going to think I mean to do.
The decisions you make in your life - in business, saving and spending,
health and lifestyle choices, raising your children, and relationships -
are "real games".

Life is not like chess. Chess contains no hidden information and very
little luck.
Life is more like poker. You could make the smartest, most careful
decision and still have it blow up in your face.

Play with others depends upon the collective establishment of a shared
goal with the child's play partners.
Games undertaken voluntarily will outcompete games imposed and played
under threat of force, given that some of the energy that could be
expended on the game itself, whatever its nature, has to be wasted on
enforcement.

An ethic emerges from the bottom up, across the set of all games.
The best player is therefore not the winner of any given game but, among
many other things, he or she who is invited by the largest number of
others to play the most extensive series of games.
This is why: "It's not whether you win or lose. It's how you play the game!"

Sanity is knowing the rules of the social game, internalizing them, and
following them.
Refusal to conform when the social surround has become pathological -
incomplete, archaic, willfully blind, or corrupt - is something of even
higher value.

- as is the capacity to offer creative, valid alternatives.

The true winner of any game is the person who plays fair.
A higher-order accomplishment than mere victory.
An indication of true personality development, predicated as it is on
concern for true reciprocity.

The Seeker - in real life, as well as in Rowling's Potter series and its
Quidditch game - is he or she who takes that sense of significance more
seriously than anything else.
The Seeker is therefore the person who is playing the game that everyone
else is playing (and who is disciplined and expert at the game), but who
is also playing an additional, higher-order game: the pursuit of what is
of primary significance.

Choose between a sure $30,000 or an 80 percent chance of winning $40,000 and a 20 percent chance of winning nothing?
The average expected gain in the latter choice is $32,000 (40,000 × .8).

People tend to avoid risk when seeking gains, but choose risk to avoid losses.

Social irrationality rests on a base of individual rationality.
Assume that one-third of the electorate prefers Dukakis to Gore to Jackson, that another one-third prefers Gore to Jackson to Dukakis, and that the last one-third prefers Jackson to Dukakis to Gore.
Dukakis will boast that two-thirds of the electorate prefer him to Gore, whereupon Jackson will respond that two-thirds of the electorate prefer him to Dukakis.
Finally, Gore will counter by noting that two-thirds of the electorate prefer him to Jackson.
If societal preferences are determined by majority vote, "society" prefers Dukakis over Gore, Gore over Jackson, and Jackson over Dukakis.
Even if the preferences of all the individual voters are rational, it doesn't necessarily follow that the societal preferences determined by majority rule are transitive, too.

There is never a way to derive societal preferences from individual preferences that can be absolutely guaranteed to satisfy these four minimal conditions:
1. the societal preferences must be transitive
2. the preferences (individual and societal) must be restricted to available alternatives
3. if every individual prefers X to Y, then the societal preference must be for X over Y
4. and no individual's preferences automatically determine the societal preferences.

Whether we're businessmen in a competitive market or spouses in a marriage or superpowers in an arms race, our choices can often be phrased in terms of the prisoner's dilemma.
The parties involved will be better off as a pair if each resists the temptation to double-cross the other and instead cooperates with or remains loyal to him or her.
If both parties pursue their own interests exclusively, the outcome is worse than if both cooperate.
Adam Smith's invisible hand ensuring that individual pursuits bring about group wellbeing is in these situations quite paralyzed.

The character of a society is reflected in which such transactions lead to cooperation between parties and which don't.
If the members of a particular "society" never behave cooperatively, their lives are likely to be, in Thomas Hobbes's words, "solitary, poor, nasty, brutish and short."

The game has two basic strategies. One is to always guess the color that you notice occurs more frequently. For instance, if green shows up 75 percent of the time and you decide to always guess green, you will be correct 75 percent of the time. The other strategy is to "match" your proportion of green and red guesses to the proportion of green and red you observed in the past. If the greens and reds appear in a pattern and you can figure out the pattern, this strategy enables you to guess right every time. But if the colors appear at random, you would be better off sticking with the first strategy. In the case where green randomly appears 75 percent of the time, the second strategy will lead to the correct guess only about 6 times in 10. Humans usually try to guess the pattern, and in the process we allow ourselves to be outperformed by a rat.

Infinite games are played for the privilege of playing. The purpose of an infinite game is to allow the other players to play better. The goal of your next move is to encourage your fellow game players to make their next moves even better.

[182: Nash - explain xkcd](https://www.explainxkcd.com/wiki/index.php/182:_Nash)

[Building arbitrary Life patterns in 15 gliders | Hacker News](https://news.ycombinator.com/item?id=33797799)
[a blog by biggiemac42](https://btm.qva.mybluehost.me/building-arbitrary-life-patterns-in-15-gliders/)

[An abundance of Katherines: The game theory of baby naming | Hacker News](https://news.ycombinator.com/item?id=40932006)
[[2404.00732] An Abundance of Katherines: The Game Theory of Baby Naming](https://arxiv.org/abs/2404.00732)

[525: I Know You're Listening - explain xkcd](https://www.explainxkcd.com/wiki/index.php/525)
[Pascal's wager - Wikipedia](https://en.wikipedia.org/wiki/Pascal's_wager)

[Monte Carlo methods | Hacker News](https://news.ycombinator.com/item?id=35927627)
[The Law of Large Numbers](https://easylang.dev/apps/tutorial_mcarlo.html)

[Steam Community :: Guide :: Queuing Theory Guide](https://steamcommunity.com/sharedfiles/filedetails?id=2808098164)

[Wounded Gazelle Gambit - TV Tropes](https://tvtropes.org/pmwiki/pmwiki.php/Main/WoundedGazelleGambit)

[The Thirty-Six Stratagems/Useful Notes - TV Tropes](https://tvtropes.org/pmwiki/pmwiki.php/UsefulNotes/TheThirtySixStratagems)

[The Fundamentals of Control Theory | Hacker News](https://news.ycombinator.com/item?id=33071119)
[Books - Engineering Media](https://engineeringmedia.com/books)

[Probability matching - Wikipedia](https://en.wikipedia.org/wiki/Probability_matching)

[Interactive introduction to game theory and trust | Hacker News](https://news.ycombinator.com/item?id=28114404)
[The Evolution of Trust](https://ncase.me/trust/)

[Parrondo's paradox - Wikipedia](https://en.wikipedia.org/wiki/Parrondo's_paradox)

[Chainstore paradox - Wikipedia](https://en.wikipedia.org/wiki/Chainstore_paradox)

[Allais paradox - Wikipedia](https://en.wikipedia.org/wiki/Allais_paradox)

[The Kelly criterion: How to size bets](https://explore.paulbutler.org/bet/)

[Taxi-cab problem explorable by Gal Green](http://galgreen.com/TaxiCabProblem/#0)

[Pippin Barr](https://pippinbarr.com/)

[How To Win A Nuclear Standoff | FiveThirtyEight](https://fivethirtyeight.com/features/how-to-win-a-nuclear-standoff/)

[Yao's principle - Wikipedia](https://en.wikipedia.org/wiki/Yao's_principle)

[Lanchester's laws - Wikipedia](https://en.wikipedia.org/wiki/Lanchester's_laws)

[The Dark Side of the Force: Economic Foundations of Conflict Theory - Jack Hirshleifer - Google Books](https://books.google.com/books/about/The_Dark_Side_of_the_Force.html?id=C5uYCmjn0DoC)

[Development and basics of game theory | Britannica](https://www.britannica.com/summary/game-theory)

[Ward Cunningham](http://wiki.c2.com/?AnalyzingXpWithOptionsPricing)
(2014) Analyzing Xp With Options Pricing
in XP, you should consider the Option to abandon, option to switch, option to defer investment and take advantage of possible future opportunity

## libertarianism

[Economic Calculation and the Limits of Organization | Mises Institute](https://mises.org/library/economic-calculation-and-limits-organization)

[Prof. Bryan Caplan](https://econfaculty.gmu.edu/bcaplan/e103/micro9.htm)

[The Progressive Era | Mises Institute](https://mises.org/library/progressive-era-0)

[Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era by Thomas C. Leonard | Goodreads](https://www.goodreads.com/book/show/26402848-illiberal-reformers)

[The Triumph of Conservatism: A Reinterpretation of American History, 1900-1916 by Gabriel Kolko | Goodreads](https://www.goodreads.com/book/show/832525.The_Triumph_of_Conservatism)

[Gabriel Kolko's "The Triumph of Conservatism: A Reinterpretation of American History 1900-1916" | libcom.org](https://libcom.org/article/gabriel-kolkos-triumph-conservatism-reinterpretation-american-history-1900-1916)

[Coase theorem - Wikipedia](https://en.wikipedia.org/wiki/Coase_theorem)

[Focal point (game theory) - Wikipedia](https://en.wikipedia.org/wiki/Focal_point_(game_theory))

[Cartels - Econlib](https://www.econlib.org/library/Enc/Cartels.html)

[100 Years of Myths about Standard Oil | Mises Institute](https://mises.org/library/100-years-myths-about-standard-oil)

## Self-interested actors - Matt Levine

### McRitchie

One theory is that, because most of the shareholders of most US public companies are diversified investors in lots of companies, each company’s managers should work, not to maximize the value of _their_ company, but to maximize the value of _all_ the companies. If the chief executive officer of a company can do a thing that reduces the value of her company by $1, but increases the value of her competitors (or suppliers, or customers, or neighbors, or any other publicly traded companies) by $2, then she should do that. Her shareholders will lose money on her stock but make money on their other stocks, and they will be happy and grateful to her. Maximizing the value of her company’s stock, at the expense of the other companies, _harms her shareholders_. She has fiduciary duties to those shareholders, and the way to fulfill those duties is by maximizing the value of their overall portfolio, which is, roughly speaking, the stock market.

This theory:

- makes a certain amount of sense (the shareholders really are largely diversified), and
- is [quite _fruitful_](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDEtMjIvc2hhcmVob2xkZXJzLWFyZS1wZW9wbGUtdG9vP2NtcGlkPUJCRDA1MjEyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMSZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96Ba21263de). It gives you lots of [interesting ideas](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjAtMDItMjEvdGhlLWNvbXBhbmllcy1hcmUtb24tdGhlLXNhbWUtdGVhbT9jbXBpZD1CQkQwNTIxMjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA1MjEmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96B89e0b47d) about the world. Much of ESG (environmental, social and governance) investing can be [thought of](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjEtMDktMTQvZG9uLXQtc3BlbmQteW91ci1saXRlY29pbnMtYXQtd2FsbWFydD9jbXBpZD1CQkQwNTIxMjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA1MjEmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96B98465992) in [these terms](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjEtMTAtMDQvZmFjZWJvb2std2hpc3RsZWJsb3dlci1zaG93cy1hLXNoaWZ0LWluLXNoYXJlaG9sZGVyLXZhbHVlcy1hd2F5LWZyb20tcHJvZml0cz9jbXBpZD1CQkQwNTIxMjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA1MjEmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96B0df02a14): Big diversified investors might care more about the _systemic_ effects of their companies (whether they cause climate change, etc.) than they do about their individual performance. Or there is a popular worry that common ownership of all the companies causes [antitrust problems](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL25ld3NsZXR0ZXJzLzIwMTgtMTItMDcvbW9uZXktc3R1ZmYtcmVndWxhdG9ycy1hc2staWYtaW5kZXgtZnVuZHMtYXJlLWJhZD9jbXBpZD1CQkQwNTIxMjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA1MjEmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96B61eddd81), because — if you believe this theory — companies won’t want to compete on price in a way that harms their collective bottom line. Or I have half-seriously proposed weird theories about [Covid](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL25ld3NsZXR0ZXJzLzIwMjAtMDctMjMvbW9uZXktc3R1ZmYteW91LWRvbi10LW5lZWQtcHJvZml0cy1hbnltb3JlP2NtcGlkPUJCRDA1MjEyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMSZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B270558a1) [vaccines](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjEtMDItMjQvdGhlLXZhY2NpbmUtaXMtbm90LWEtY29tcGV0aXRpb24_Y21waWQ9QkJEMDUyMTI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIxJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B3b5175ba) and [Ozempic](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMTAtMDkvb3plbXBpYy1pcy1iYWQtZm9yLWJ1c2luZXNzP2NtcGlkPUJCRDA1MjEyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMSZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B12f33276).

On the other hand this theory is, you know, _wrong_. It just isn’t the case that directors and managers of each public company “really” work for the collective set of all public companies, and have duties to that collective. They work for their individual companies. There are a few ways to tell:

1. All the laws and cases and stuff are about duties to the company, not about duties to shareholders’ overall portfolios.
2. “Corporate managers should maximize the overall value of their shareholders’ portfolios” is not a very good guide to behavior. The effects of a CEO’s decisions on her competitors and customers and suppliers and complementary businesses and potential future entrants and every other company will be mixed and complex, and a CEO can find a way to justify more or less any action by saying “well this will be good for the market as a whole.” Whereas it is relatively easy to measure if a company’s own business is doing well.
3. Relatedly, the _way_ to maximize overall value might be through competition among companies. Over the long term, what increases the overall value of the stock market is probably innovation, rather than careful slicing of existing entitlements, and competition is a good motivator of innovation.
4. The executives are generally _paid_ based on _their_ company’s performance. In particular, they are often paid in _stock_ — stock of their company, not index funds. The outside investors of a typical company will be broadly diversified, but the _executives_ of that company will have a disproportionate amount of their net worth in that company’s stock. If the executives were supposed to work on behalf of the market as a whole, they’d get paid in index funds.

There is probably something to the theory, both as a descriptive matter (do corporate executives sometimes act in the best interests of all of the companies rather than just their company?) and as a normative one (_should_ they?). But it captures an interesting weird tension in how the world works; it does not simply _describe_ how the world works.

Still the theory is such fun that (1) I can’t resist writing about it and (2) some people really believe it and try to make it true. We [talked last year](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMjIvZG9lcy1tYXJrLXp1Y2tlcmJlcmctb3duLXRvby1tdWNoLW1ldGE_Y21waWQ9QkJEMDUyMTI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIxJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bf4e8777e) about a guy named James McRitchie, who sued Mark Zuckerberg and other directors of Meta Platforms Inc. for caring too much about Meta and not enough about their shareholders’ diversified portfolios. The theory was that Zuckerberg owns a huge undiversified slug of Meta stock (because he is its founder!), and the directors work to maximize Meta’s value, and they _shouldn’t_. Instead, they should be better corporate citizens and consider the effects of Meta’s actions on “the global economy,” not just its own profits.

I was never clear on exactly what this would mean. (“Media reports make it clear that there are opportunities for the Company to improve its economic impact (and thus the financial position of its diversified stockholders) by investing some of its cash flows in greater security or by changing certain practices in a manner that would reduce those cash flows,” [said the complaint](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly9hc3NldHMuYndieC5pby9kb2N1bWVudHMvdXNlcnMvaXFqV0hCRmRmeElVL3J0bFozZ0c2VFJYWS92MA/60e87ce39a995a4b1a2deb96B782758df), meaning, like, being more worried about the effects of Instagram on teens’ mental health.) But the point was probably not so much to get Meta to change how it operates. The point was to try to get a Delaware court to declare a new theory of corporate governance, one where founder-CEOs who own a lot of stock have a _conflict_ of interest with their other shareholders, because the founder-CEOs are concentrated but the other shareholders are diversified.

This was never likely to happen. I [wrote at the time](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMjIvZG9lcy1tYXJrLXp1Y2tlcmJlcmctb3duLXRvby1tdWNoLW1ldGE_Y21waWQ9QkJEMDUyMTI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIxJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Cf4e8777e):

> The lawsuit is not so much a real lawsuit as it is a piece of performance art, or a philosophy paper. It doesn’t really provide a guide for corporate action; it is just an abstract inquiry into what the corporation is for. I love it so much. 

As it happens, the judge in the case, Delaware Vice Chancellor Travis Laster, seems to agree with me on both of those points: It’s not a real lawsuit, but he loved it so much. Here is his [April 30 opinion](https://link.mail.bloombergbusiness.com/click/35453198.271792/aHR0cHM6Ly9hc3NldHMuYndieC5pby9kb2N1bWVudHMvdXNlcnMvaXFqV0hCRmRmeElVL3IyYURzOVJMSS5oYy92MA/60e87ce39a995a4b1a2deb96B0babc27e), which (1) dismissed the case but (2) spent 102 pages engaged in the arguments:

> The “deep architecture” of Delaware corporate law reveals that directors owe firm-specific fiduciary duties. Numerous Delaware Supreme Court authorities rest on that implicit proposition. So does American corporate law generally, which has taken a firm-specific approach since courts first treated directors as fiduciaries during the first half of the nineteenth century.
> 
> The plaintiff has not made a persuasive case for change. At most, he has shown that some academics—primarily from the law and economics school—have assumed that a diversified-investor model is the norm. He has also shown that some investor advocacy organizations would prefer that model.

One important point in the opinion is that a lot of Delaware corporate law is about director duties in mergers and acquisitions, and basically none of the M&A cases even mention the idea that directors of the target company should consider the acquiring company’s shareholders:

> If sell-side directors had a duty to consider the interests of diversified stockholders, then one might expect the decisions to evaluate whether the directors properly considered factors relevant to diversified investors. If the acquirer (or topping bidder) were publicly traded, and if the sell-side board had a duty to consider the interests of diversified stockholders, then one would expect courts to consider the extent to which the sell-side directors considered whether the deal would create a positive surplus, regardless of the allocation between the two firms. The takeover premium would not be relevant, because diversified sell-side stockholders could be expected to own shares on the buy side as well. Assuming proportionate ownership, the cost of the premium to the buyer’s stockholders would offset the value of the premium to the target stockholders. Courts would ask whether directors considered how successful the combination would be, because diversified stockholders would benefit from productive combinations and suffer harm from unsuccessful ones.
> 
> Judicial analysis would change to a similar degree for cash deals, with courts expecting directors to consider the value of the combination to diversified investors. Under the plaintiff’s formulation, that would mean considering the value of the combination to the economy. Courts might expect sell-side directors to consider whether the acquirer planned to take on considerable debt to fund the acquisition, because a bankruptcy could cause economic dislocation. Or courts might expect sellside directors to resist or reject combinations resulting in excessive market concentration that could harm the economy by enabling the post-combination entity to extract monopoly rents. …
> 
> Yet there are no indications that courts expect directors to take those or similar factors into account. No cases suggest directors should consider whether a particular outcome would be harmful or beneficial to the economy. Nor do any cases suggest that sell-side directors should consider the transaction from the perspectives of both sellside and buy-side stockholders. Quite the opposite.

Still there is some hope:

> Still, there is a way to achieve the plaintiff’s desired result. Delaware’s governance model is flexible enough to accommodate corporations where directors pursue the interests of diversified investors. The Delaware General Corporation Law (the “DGCL”) authorizes private ordering and empowers corporate planners to tailor director duties through provisions in the certificate of incorporation. Using that authority, corporate planners who find the plaintiff’s arguments convincing can reorient director duties toward diversified stockholders.

So I guess the next campaign is to try to get companies to write into their charters that they will work on behalf of diversified shareholders.