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!
