Asymmetric Bets
N.Y.U. emeritus professor William Silber has written a
book about the influence of asymmetric bets have had on our lives. He is
basically writing about the importance of high payoff low risk bets in the
sense that the better has nothing to lose and much to gain. As his title notes the “Hail Mary” pass in
football comes into play when a team is losing by less than a touchdown with
seconds to go. Thus, the quarterback has no choice but to throw a long pass for
a score. If he connects the team wins and if he doesn’t the team loses, but it
would have lost anyway. Hence, nothing to lose.
In series of vignettes Silber discusses the risks that second term president take when they know they don’t have to face the voters again. His example is Woodrow Wilson going from anti-war in 1916 to all-out war in 1917. Other vignettes, among others, include Rosa Parks refusing to leave a white only section on a Montgomery bus, Hitler’s gambling it all at The Battle of the Bulge, Washington crossing the Delaware and Nick Leeson’s ever larger positions in his failed attempt to cover up his trading losses at Barings’ Singapore office in 1995.
This last example is of personal significance to me. I
was working at Salomon Brothers at the time and was quoted in a Bill Safire
column in The New York Times saying that what Leeson did could not happen in
the U.S. securities markets. Everything hit the fan at Salomon’s Singapore
office, and I was required to grovel which included writing a letter to Prime
Minister Lee Kwan Yew himself.
There are real lessons here, one of which is be wary
when you are opposed by someone who has nothing to lose. My one wish would have
been for Silber to discuss the power of nothing to lose in academic politics.
Simply put, there is much merit in the wag that the reason why fights in
academia are so fierce is because the stakes are so small. Tenured faculty have
nothing to lose.
For the full Amazon URL see: Asymmetric Bets (amazon.com)
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