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Several days ago, the USD/BTC exchange rate soared to dizzying heights, reaching almost $250 for one unit of the virtual, decentralized currency. Then it crashed to $55. But since then, it has gone back up to $100.

I’d heard of them before, but I had assumed it was some sort of pyramid, and that the train had already passed. Pyramids are only good for those at the top. It’s the creators of currencies who get rich, not their users. In short, I was skeptical.

Still, as someone on a perpetual lookout for lazy and socially unproductive ways of making money, I knew I had to check it out.

And I discovered some rather interesting things.

First, Bitcoins can’t be just created out of thin air. Just like gold or other minerals, they have to be “mined” by solving complex cryptographic puzzles. In practice, some users pool their computing power for this task. There is a theoretical limit to the total amount of Bitcoins that can enter circulation: 21 million. So you can’t inflate it like you can with any fiat currency.

Second, they offer real advantages over conventional currencies. There are no banking or transfer charges, because you are your own bank. Your Bitcoins are held in an encrypted file on your hard drive, and can easily be transferred between your own accounts, or “wallets,” and other accounts. These transactions can be completely anonymous, because your wallet isn’t linked to your “true name” (paging Vernor Vinge).

This anonymity means that you can, in relative ease and safety, avail yourself of online black markets selling all kinds of cool shit of dubious legality.

For instance, on April 15th 2011 – since known as “Black Friday” in certain circles – the DoJ flunky Preet Bharara shut down the three biggest online poker companies operating in the US. In the ensuing panic, dozens of others left of their own accord, voluntarily restricting access to US players to avoid any legal ramifications. But a few continue to operate here. Perhaps the most interesting case is that of Seals with Clubs, a site where you gamble with Bitcoins. This is an example of an innovative and dynamic enterprise that has bypassed real life problems to create a product that people enjoy and that is likely to continue to grow, especially if governments start taking a harder line against online poker. (Incidentally, the games at Seals seem to be very soft, even at high stakes – or at least that is the impression I got from observing them for 15 minutes or so. Definitely something to look into if you get some portion of your income from poker).

But this is just the tip of the iceberg.

Investigating Bitcoins led me, of course, to the “deep web,” the Silk Road, and even weirder places. I will retrace the journey, should you wish to undertake it yourself.

(1) Download the Tor browser. It makes your online comings and goings untraceable (more or less) by bouncing it off multiple proxies. Or something like that. I don’t claim to understand it.

(2) Using it you can access the “deep web.” The deep web are sites that are not indexed by search engines. Its most interesting component are the black markets that sell stuff that is frequently illegal or semi-legal in the real world, e.g. guns, drugs, stolen information, etc.

The central information directory for this deep web is the “Hidden Wiki.” Its precise .onion address changes from time to time – as with many of the sites there – so I will not bother linking to it. The address as of the time you read this article can be found easily enough by Googling.

hidden-wiki

As you can see from the screenshot above it’s clear that it’s dodgy as fuck from the very start. And that’s good.

(3) In the list you’ll find a link to the Silk Road. The Silk Road is sometimes called “the worst kept secret on the Internet.”

The Silk Road is to the deep web what the Ragged Flagon is to Skyrim: A massive black market selling all sorts of drugs, “services”, and “lab supplies” (har-har). After undergoing an easy registration process, you open up to this page:

silk-road-welcome

Once you get over the surreal nature of the products on offer, you’ll see that it’s quite civilized, really. The sellers have ratings (as on Amazon or Yelp) which is how they build up reputation. If you find you’ve been undersold your weed, you write a negative review. Enough negative reviews – and the dealer no longer has any customers, and goes out of business. You pay in Bitcoins, no questions asked, and you are delivered the products in envelopes that don’t bear you name – making the transaction much more secure than if you were to make it with a street dealer. The drugs are likely to be purer as well because the guys who traffic online have reputations to protect, and tend to approach it more professionally than street low-life’s anyway. Some even have refund policies if you are unhappy with your product.

In short, it is a truly inspiring and beautiful example of pure, unadulterated capitalism in action – one we should all strive to live up to.

It even has a code of ethics, of sort. Here are “a few words” from the Dread Pirate Roberts, the creator of the site:

You may be shocked to find listings here that are outlawed in your jurisdiction. That doesn’t mean Silk Road is lawless. In fact, we have a very strict code of conduct that, if given a chance, most people I think would agree with. Our basic rules are to treat others as you would wish to be treated, mind your own business, and don’t do anything to hurt or scam someone else. In the spirit of those rules, there are some things you will never see here, and if you do please report them. They include child pornography, stolen goods, assassinations and stolen personal information, just to name a few. We also hold our members to the highest standards of personal conduct and work tirelessly to prevent, root out and stop any scammers that may try to prey upon others.

(4) The Silk Road is really quite close to the surface comparing to some of the shadier sites that lurk on the deep web. Here are the main categories of “sleazy” services and products you can find there:

(a) Drugs. Drugs, drugs, drugs. It’s not just the Silk Road of course.

(b) Pornography. This of course means really hardcore stuff that is of questionable legality or child porn which is completely illegal. Obviously purveyors of the latter should all be rounded up and shot, but there is no obvious way to do this. Nobody ever pretended that the “deep web” is a pristine place. Just to clarify, while I saw some links to this stuff on the Hidden Wiki, I did not click on them of course.

(c) Stolen information. Hacked Paypal accounts, credit card details, personal identities, etc. I think how it works is that some “black hat” hackers specialize in stealing all this, and sell them on in these deep web markets to other criminals.

(d) Casinos. Anybody who plays anything other than poker in an online casino is an idiot. But, hey, it’s a free Internet.

hire-a-hitman(e) Hitmen. Yes, I actually did find a website purporting to offer contract killings from the Hidden Wiki. There was a veritable price menu for different marks: $20,000 is the standard price, while a policeman or journalist costs $50,000. If it’s an EU job it will be $5000 extra. The prices seem to be a bit low, and despite the deep web’s sleaziness, I *really* doubt that you can find any hitmen for hire on the Internet. Not that I’d know but I would imagine it’s a much more “face to face” kind of business. So frankly, I suspect it’s a scam. Not that anyone should care I suppose, since if so, it couldn’t victimize a nicer bunch of people. Or maybe it’s a sting operation project run by the police. If so, kudos for creativity!

That said, I’m not 100% sure that’s it’s not what it purports to be. Which is why I’m not going to give any specific details.

(f) Weapons. One site accessible from the Hidden Wiki delivers a rich variety of Glocks with scrubbed off serial numbers for $1,500 each (a bit more or a bit less depending on the specific model). They seem to be legit. Highly illegal, of course.

So if you’re the DIY type of guy, you don’t even need the hitman.

Hope you found you found this account of my adventures in the deep web useful. It’s a fascinating world for sure. But there are important caveats.

First, the above is about the “dodgy” part of the deep web. The deep web is much vaster, as it refers simply to websites that aren’t accessible via conventional search engines. E.g., the academic resource JSTOR. The guns n’ drugs account for an infinitesimal part of the “deep web”, which is in turn several orders of magnitude larger than the “normal” web.

The “shady” part of the deep web that you access via the Hidden Wiki is actually fairly small, I think – maybe a few tens of billions of dollars, at most. Yes, the Silk Road is big, but the drug transactions there go into the hundreds of millions, not the hundreds of billions. I would imagine that scales are similar or less for the other categories. If a product is legal, there is no particular incentive to trade it on the deep web, where traffic is much lower than on the normal Internet. I mean I don’t think buying drugs or untraceable weapons at shady sites on the deep web is something most people do everyday. Right, guys? Right??

There there’s money laundering. But while it is easy to imagine that you can do all sorts of creative financial operations with Bitcoin on the deep web, it has to be borne in mind that shady rich people have access to far more established, conventional, and respectable ways of legalizing their ill-gotten gains: Caribbean islands. The deep web strikes me as the poor man’s offshore haven.

But what do I know? An hour’s worth of trolling the Hidden Wiki isn’t going to make me an expert on this stuff.

A much more interesting topic for discussion is: Whither Bitcoins?

There are widely divergent views on them. On the one side you have the Cathedral, the representatives of bourgeois sensibilities, who insist that it is nothing but electrons and government paper is much better. On the other side you have various anarchists, hacker elements, Anon types who insist that it is the future of as people begin to throw off the rusted shackles of the bankster regime / as governments become ever bigger and more repressive control freaks (the contradictions between these two views are rarely pointed out).

My own two cents is much more modest. The future value of Bitcoins as they are currently construed will essentially depend on demand for them as a means of convenient, anonymous online transactions: Period. Say that tomorrow all the world’s governments were to ban online poker. In that case, demand for Bitcoins will soar, and the creators of Seals & Clubs will become very, very rich (at least until they’re thrown into prison). Or take an alternate scenario – say that tomorrow, the US were to legalize all drug consumption, on the grounds that the “pursuit of happiness” really is an unalienable Constitutional right. (52% of Americans already support the legalization of marijuana). In that case, demand for Bitcoins will plummet. Another, not non-negligible probability scenario is that the US will outlaw Bitcoins for being an illegitimate alternate currency. It’s inherent features means that it will survive, at least in the deeps of the deep web, but its value will plummet as it becomes inaccessible to the general public and utterly devalued on legitimate markets.

It’s probably not a bad idea to get a few Bitcoins as a “shits and giggles” type of investment, but I would not at this point – $110 as of the time of writing – advise it as something to sink a lot of your money into. If you *really* want to make money off online currencies, here is another, perhaps more productive idea: “Can you create an online currency based on “mining” big prime numbers? More useful than useless crypto-analytic exercises that produce Bitcoins, and it can theoretically continue forever.

(Republished from AKarlin.com by permission of author or representative)
 
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Confessions of an Online Hustler by Matt Forney, published in 2013. See the Amazon version of this review. Rating: 4/5.

confessions-of-an-online-hustler-matt-forney Let’s get one thing straight right off the bat: This book isn’t for the casual reader. Despite the title, it’s not a “life interest” story with a morass of prurient and scandalous details, nor is it a deep social or philosophical commentary. It is very specifically written for those who want to grind a living from online writing and punditry (especially those who write on controversial subjects like HBD and feminism, as does Matt Forney). If that doesn’t describe you, I can’t in good conscience recommend you buy this book. On the other hand, if you enjoy writing and wish to make a living as an iconoclastic blogger, then this book will definitely add much value and save you a lot of trouble.

Much of the book is taken up with the technical details of setting up a WordPress blog and publicizing it. As someone who has been blogging for 5 years and counting, I can testify that this book has an accurate and succinct summary of all the most important things you need to bear in mind. You can find the same information for free elsewhere, but the problem is that the Internet has a low signal to noise ratio – it will take time, and may well lead you down dead ends. Why not fork up the equivalent of an hour’s worth of a minimum wage job and spend a single evening’s reading time to avoid going through all that?

But at least to me the most interesting and original part was Matt’s (well, not entirely his, but he refined it) concept of “tiered blogging.” I have come to much the same conclusions on my own, if via annoying and costly errors, but it was great to see it so lucidly formulated and systematized. Here’s the lowdown. A Tier-3 blog is an everything-that-interests-me kind of blog, where you post whatever the fuck you feel like. The problem is that unless you develop a cult of personality, like Tucker Max, then you’re not going to get massive amounts of traffic (or money) through that alone. But you will notice that some posts of yours are going to get a much better response than others. Say, to take my own example, while most readers couldn’t care less for my ramblings on Human Biodiversty and dog pictures at AKarlin, a great many of them are interested in reading my ramblings on Russia. So I create a far more narrowly specialized Tier-2 blog like Da Russophile that is specifically about Russia just for them. This audience is much more homogeneous than my AKarlin audience – they, at least, are all interested in Russia at a minimum, whereas the AKarlin folks may be interested in HBD, dog pictures, professionally trolling me, and any combination thereof.

Once you get your Tier-2 hustle going, you can start thinking of making money. But it’s not as simple as putting up a ton of ads and retiring with your laptop to the Caribbean; unless you manage to become a “superstar” blogger, it is extremely unlikely that you will ever make any significant money from running ads. It’s virtually impossible if you are an original thinker and would rather cut off your hands than engage in the vacuous vapidity that passes for mainstream commentary. Getting money through donations and affiliate marketing can be more profitable, but they will (realistically) only get you a modest secondary income – and an unstable one at that. Selling information products is where the real game is at: DVD’s, software, music, and, of course, books. This is Tier-1, the “summit of hustle mountain.” Almost every “professional” pundit does that: Liberals like Glenn Greenwald and conservatives like Steve Sailer, players like Roosh Vorek and “online hustlers” like Matt Forney himself. And for that matter I too will soon be joining their ranks with my upcoming book The Dark Lord of the Kremlin about the Western media’s war against Putin’s Russia.

But at this point, I have to make my own confession. I lied to you back there. In reality, I got the whole “tiered blogging” thing ass backwards. I started out writing at Da Russophile, but did not have the discipline to keep it confined to Russia period, and started mixing it up with unrelated things like peak oil and my shifting political ideologies. That drove away a lot of people. Only gradually over several years did I realize the vital importance of compartmentalizing my interests – which can be fickle as well as controversial – away from “hustles” with dedicated but easily alienated audiences. To illustrate the concept, say my Da Russophile audience consists of 100 liberals, 100 conservatives, and 100 people who care nothing for anything not Russia related. Now suppose that for every post about Russia there I were to also write a post defending gun rights and a post on global warming. I would alienate both the liberals and the conservatives, bore the hardcore Russia watchers, and create three times the work for myself to boot. It’s raving lunacy!

But unfortunately, that’s only obvious in retrospect. I could have saved myself a lot of time and disillusioned readers had I practiced “tiered blogging” from the very start.

This does not mean I agree with everything here. I think Forney’s attitude to regular blogging is too strict and disciplinarian, and may well be part of the reason that writing a new blog post now brings him about as “as much joy as a crack whore sucking off another dirtbag behind the club dumpster.” While there’s no disputing that discipline in blogging is a good thing, is it really worth it if it sucks all the joy and passion from what should really be a hobby? If that’s how you look at it, then how is it any different from your bog-standard, soul-crushing 9-5 job then?

I appreciate Forney’s nods to the Cracked school of writing that intersperses bouts of flippant levity in between paragraphs of actual information. This makes it much more readable than your standard, dry as a nun’s nasty self-help book. (See what I did there?). For all that, perhaps the reader could have done with a couple less allusions to pasty-faced virgins and homosexual orgies, Matt.

The one very substantial issue I disagree with him is on optimal book pricing, especially as applied to e-books. He claims that $10 is an entirely normal price for a Kindle book, and that charging less can even hurt your total sales because customers have learned to associate low prices with poor quality. A nice and plausible enough theory, with only one problem: Actual data doesn’t support it. The “sweet spot” for Kindle books in terms of maximizing revenue has been convincingly demonstrated to be $3-$4 (with a 40% markup if said book is non-fiction).

Self-improvement is a roadmap, not a guided tour. There can be no guarantees of success – as Matt himself, unlike the vast majority of self-help gurus, is honest enough to admit. Nonetheless, it is safe to say that reading this book will appreciably improve your chances of success. And considering that a hell of a lot of money can depend on this – maybe even a new career – this book way more than pays for itself in terms of the additional positive expected value it generates for you. If you wish to make serious money through blogging – well, through writing books and propagandizing them on your blog – then you could do a lot worse than getting hold of Matt Forney’s literary debut and spending a couple of hours digesting the hard-won wisdom in its 120 pages.

At the very least, as Matt himself might say, it would be “healthier than some of the other things people do in their spare time, like going to furry conventions.”

(Republished from AKarlin.com by permission of author or representative)
 
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Many people dream of breaking free of the 9-5 rat race, e.g. by acquiring an income stream – or a “muse,” as Tim Ferriss calls it – that is independent of bosses, location, and schedules. For most it remains just a dream. But for some it comes from creating an Internet business, a profitable patent, or a good play on the financial markets. A few realize it through professional gambling.

Of course, to do this sustainably you need to maintain a positive rate of expected winnings, which is impossible with most casino games. For instance, even under optimal play, the house will always a retain a wafer-thin advantage in blackjack (unless you count cards, but casinos have caught on to that nowadays). The biggest exception is poker. Though luck is very significant for the first few hundreds of hands, the effects of skill begin to predominate after c.15,000 hands in Texas Holdem No-Limit.

My experience of poker, until recently, came from the odd home game and the one or two times I bought in at a casino table. I was pretty crap at it. I limped in with hands like K7 offsuit and went all-in chasing straight draws. But a few months ago, one of my net buddies pointed me to a thread in a forum he used to frequent, in which a Las Vegas hustler recounts how he started playing online poker and ended up making $100/hour by the end of the month. Then soon after I came across Tim Ferriss’ concept of the 4 hour workweek, and exploiting geoarbitrage – the art of earning money in high-income countries and spending it in cheap, low-income ones where one can live like a king on a US minimum wage. I added two and two, realizing that online poker has potential for a great synthesis of these principles; if you earn $200 in a day playing online poker, then you could spend the rest of the week lolling on the Thai beach in style and comfort. All you need are skills and a reliable Internet connection. I had all the Internet I wanted, but acquiring the poker skills was going to take a lot more work.

One of my friends, who dropped out of university a while ago to become a professional poker player – he earned $250,000 in the last fiscal year – recommended that I start with the classic in the genre: THE THEORY OF POKER by David Sklansky. I didn’t get much of it in my first read, but one thing did stick with me as encapsulating the meaning of expected value (EV) that underlies all poker calculations.

Lesson #1: The Fundamental Theorem of Poker:

Every time you play a hand differently from the way you would have played it if you could see all your opponents’ cards, they gain; and every time you play your hand the same way you would have played it if you could see all their cards, they lose.

I started trying to actively apply the lessons of the book to my play. I went from being a negative EV, or at best break-even, player in home games, to making substantial winnings. But it is hard to improve from playing in home games, because of their infrequency, the amateurishness of play, and above all the slow pace of the game – you can play 5x+ as many hands in one hour by playing on two tables online as you can in a live home game. Not only is the intensity of learning low, but another personal problem is that slow low-stakes games make me tilt, i.e. play sub-optimally because of boredom. It was time to go into the interwebs.

The mother of all bad beats.

The mother of all bad beats.

I could not have picked a more inauspicious moment. I deposited a $40 investment on April 14th. The day after, on the poker world’s “Black Friday,” the FBI shut down the three biggest poker sites operating in the US: Full Tilt Poker, Poker Stars, and Absolute Poker.

Fortunately, I made the right call – at least for now – by placing the money into Bodog, one of the few sites that continues to service US players. A few of my friends weren’t as lucky and have up to several $10,000′s in limbo.

Lesson #2: As an online poker player in the US, your property rights aren’t secure. More generally, there are Black Swans in poker just as in life, and capitalism.

Nonetheless, at this point, I’m driven not by pecuniary motives, but by the desire to improve my game. I spend my first two weeks, first going up, then down, and breaking even. I typically played, and continue to play, half an hour to an hour per day. It’s almost as interesting as writing about peak oil and geopolitics, and certainly far more profitable! ;)

Lesson #3: The importance of bank roll management. $40 is only good for the lowest-stakes 2/5c games offered at Bodog. To make a reliable cushion for the 5/10c games, something closer to $100 is preferable. Anything higher and you’ll need well more than $100.

Grinding at the SNGs.

Grinding at the SNGs.

What are the three characteristics of the successful poker player? In my opinion, they are iron discipline, theoretical mastery, and lots of practice. They are three legs of a tripod, as any two by themselves aren’t enough to win. In greater detail:

  1. Discipline. The discipline to fold second-best hands instead of calling to the end; the discipline to recognize tilt and move away from the tables if you can’t suppress it; the discipline to avoid calling raisers who you suspect are bluffing just to “see their cards”; and the most germane, at least for me, the discipline to avoid getting bored and playing too many bad hands. Good play can win with suboptimal hands, but there’s a limit to it – even the world poker champion with a KK on the preflop is an underdog to an amateur with an AA.
  2. Theory. Some degree of ease, if not mastery, with poker theory is essential. The math itself is pretty easy, but there are many marginal situations in which the right decision, as per the Fundamental Theorem, is hard to identify as it will vary based on position, relative bankrolls, player temperaments, history, and a host of other factors. Having a good grounding in pot and hand odds, and expected value, is enough to be a positive EV player at the micro-stakes; but among experts, these margins are the boundaries between mediocrity, and fame and glory.
  3. Practice. Play 100,000′s of hands, it’s as simple as that.

After two weeks, I established that I was best (in terms of expected winnings) playing two 6max tables at 5/10c. My winnings began to soar… and then they crashed.

I hope it will keep doubling in perpetuity.

I hope it will keep doubling in perpetuity.

So WTF happened on May 7th, 2011? I got a bad beat, on both tables, within 5 minutes of each other. My Two Pair A-high lost to a back-door flush on an all-in, then my K-high Three Of A Kind, all-in on the turn, lost to a Full House made on the river. Despite being a big favorite to make big bank when I enticed my opponents all in, I ended up blowing $20.

Needless to say, I was very happy about it.

Lesson #4: The better a player you are, the more “bad beats” you will experience, because your opponents can only win with Fortuna’s intervention.

What is luck? It's the discrepancy between expected and actual winnings. Here I am poor in dollars, but rich in Sklansky dollars!

What is luck? It’s the discrepancy between expected and actual winnings. Here I am poor in dollars, but rich in Sklansky dollars!

By then, I had began using a trial version of Poker Tracker to analyze my game. This allows us to graph actual amounts won and net expected amounts won. Note how sharply the two diverge, twice, at around the 260th hand, in the graph above. But you might object: “These “Sklansky bucks” aren’t going to buy me any value meals!?” Not now, no. But in the longterm, as per the laws of probability, the real winnings and expected winnings will inevitably converge.

Fail to internalize this, and you will eventually lose.

Of course, my journey is only begun. My hourly rate for the past two weeks is a meager $3.50 per hour, and it wouldn’t have made minimum wage even had I not experienced those bad beats that set me back $20 in five minutes. To earn a decent salary, in my estimation, one must learn how to maintain a positive EV while multi-tabling the 100/200c games.

Lesson #5: The insights drawn from playing poker can be productively applied applied across life. See the following articles:

I will continue writing about my experiments with poker in the coming months, and I hope it will be of interest to S/O regular readers. It’s not exactly the type of “job” that you can read about anywhere.

A short note on ethics. Some puritans (many of whom do not understand the game) condemn poker – it doesn’t produce anything useful; it fosters addiction and destitution; it corrupts morals; etc. All these criticisms have simple rejoinders. First, as an “entertainment” (or “financial transactions”?) industry, it might not produce much in the way of the public good; and yes, the suckers and “fish” who gamble without paying attention to bankroll management or expectations can and do go broke. But no-one is forcing them to play at gunpoint, so how exactly does it differ from the finance industry, or capitalism in general? At the very least, corrupt politicians don’t force taxpayers into providing free or subsidized rebuys for losing poker players. Those are reserved for Wall Street.

Second, the government has a vested interest in demonizing the gambling industry as it constitutes an alternate source of wealth, and hence independence, and a way for some people to escape the strictures of time and place imposed by wage slavery. Hence, it is logical for the forces of pro-regulation collectivist statism to unite with corporate neo-feudalism and the moralistic rhetoric of the Right to further advance its tyrannous agenda.

(Republished from Sublime Oblivion by permission of author or representative)
 
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waterloo“[Poker] exemplifies the worst aspects of capitalism that have made [the United States] so great.” Just consider the array of similarities:

1. Though there are rules and etiquette loosely associated with it, otherwise everything goes: in other words, its fundamental nature is profoundly amoral. (This is contrary to the ideologues who claim that capitalism is either A) “moral” / God-sanctioned / Rand-sanctioned / etc or B) “immoral” / “imperialist” / etc; newsflash, it’s NEITHER).

2. Players governed by emotions that cloud out calculation lose out in the long run. Blocking out emotions is harder than it sounds, because as in real economies, even able and rational poker players are sometimes overcome by the “animal spirits” of the moment.

3. It is important to maintain a good reputation: for instance, if you become known for bluffing too much (or not bluffing at all), you are going to get called out on it and lose money. Under advanced capitalism every major corporation maintains a PR department.

4. The majority of people in many capitalist societies such as the US believe that they are good enough to get well ahead, whereas in practice that is rarely the case (e.g. median household incomes have been more or less stagnant since 1973). Likewise in poker, most players believe they’re really good at it – ask around and you’ll find that 75%+ of people who play poker say they win on average, despite the mathematical impossibility – but in real life, only <10% end up corralling most of the gains.

5. Those who do lose attribute it to bad luck, rigged games, etc. -anything but their lack of ability. Likewise with the losers of capitalism.

6. The Matthew Principle: “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath”. Just as there is a tendency in capitalist economies for wealth to become concentrated, so the players with the biggest stacks have a major advantage.

7. Poker doesn’t make money, it only redistributes it. Likewise with capitalism, which doesn’t generate wealth per se, which only comes from labor, capital, (finite) natural resources, and the efficiency with which said factors are converted into useful work. The idea of capitalism (or of bankers, at least prior to 2008) as somehow generating value out of thin air, bypassing the laws of thermodynamics, is one of its most powerful myths. Poker players at least aren’t subject to this delusion.

8. As with effective capitalist systems, there is a lot of scope for social mobility based on specific talents; however, the adjustments can be very big from round to round in no limit poker. (More regulated capitalist systems are akin to limit poker; less regulated to no limit). Bad capitalist systems, e.g. ones dominated by oligarchs or monopolies, are akin to rigged games with insider dealings.

9. However, if you’re ruined, you can sometimes get back into the game. For instance, through buy-backs. But that is rare. More frequently, you are simply ruined.

10. Obviously, the elites at the top that run the poker games benefit through the casino rake, which they use to maintain their sites or brick-and-mortar casinos. This is equivalent to the government taxing capitalists in order to maintain the state apparatus (courts, police, etc) to sustain capitalism itself.

One exception I used to think existed is that there are no “fat tails” in poker, i.e. totally unexpected events that can completely upend normal risk assessments, whereas capitalism positively teems with them (e.g. the chaotic collapse of global stockmarkets on Black Monday in 1987; the collapse of Long Term Capital Management due to their models neglecting the risk of a Russian default). But whereas you can get “bad beats” in poker – in which your opponent plays wrong but beats your stronger hand by lucking out – they would still be within the realm of plausible expectation to anyone familiar with the rules of the game. Your Internet connection may snap, causing you to lose a big hand, but these events can be foreseen (and taken into account in calculations of hourly rate) and will in any case fail to cardinally change the size of your bankroll.

Today, the Feds proved me wrong by shuttering the three companies that dominate online gambling in the US and issuing arrest warrants for their CEO’s, in the latest display of creeping authoritarianism by the Obama regime. (The government only wants you to be able to gamble under their roofs – it’s a pretty sick deal, you get taxpayer funded bonuses for losing money and buy-backs are on the house – though granted, the entrance fee to that casino is just a bit too high for most people). It’s not clear if the players at those sites will be able to cash out their online chips; in fact, it’s even possible that the resulting panic will unleash an exodus that will bankrupt them before players from Europe and Asia can take up the slack. So I guess Black Swans can appear in gambling dens too.

ADDENDUM

Gambling card games as metaphors for political economic systems can be extended further. For instance, central planning / command economy can be productively compared with blackjack.

In the long-run, even assuming perfect play with *no* tricks, you are going to lose more than you win. Or, constrained Pareto optimality. This is certainly not the case for good poker players.

Of course, most people will never know how to play perfectly, and while they may get lucky and profit from the system, the long term expectation is always one of loss.

There is a solution to this: card-counting. The equivalent would be something along the lines of running a black market, or organizing a covert operation to buy up resources at (cheap) domestic prices and sell it at (higher) international prices. This is hugely destructive to the casino-state, of course, hence the penalties – both at the card table and in real life – are stiff. Card-counting is against the rules in casinos and can get you banned from them. Black marketeers in command economies can expect to get prison, hard labor, or even shot, if uncovered (to avoid this they usually co-opt corrupt members of the nomenklatura of the casino-state, sending them a slice of their profits in exchange for theirs turning a blind eye – or even aiding their operations).

Since it is the casino-state that wins out in the long-run, it is logical to scramble into its ranks. Hence the typical, intense competition for entrance into the nomenklatura seen in planned (and heavily socialist) economies from the USSR to modern Venezuela. But getting in by pure talent rarely works. In most cases, you need connections within the casino staff.
This is it for now, but I’m sure one can make plenty of other points, both pro and contra.

Finally, what about Communism? Well, it’s a utopian state that has never been close to achieved anytime, anywhere; it is a state where scarcity vanishes. Perhaps something like playing poker with stacks of (fake) money. Like Zynga on Facebook?

(Republished from Sublime Oblivion by permission of author or representative)
 
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Anatoly Karlin
About Anatoly Karlin

I am a blogger, thinker, and businessman in the SF Bay Area. I’m originally from Russia, spent many years in Britain, and studied at U.C. Berkeley.

One of my tenets is that ideologies tend to suck. As such, I hesitate about attaching labels to myself. That said, if it’s really necessary, I suppose “liberal-conservative neoreactionary” would be close enough.

Though I consider myself part of the Orthodox Church, my philosophy and spiritual views are more influenced by digital physics, Gnosticism, and Russian cosmism than anything specifically Judeo-Christian.