Eating Eric Roberts – – rational versus irrational desperation

Think about these two scenarios.

One. After a particularly fuzzy night you realize that you have spent most of this month's mortgage payment on strippers and cocaine. You decide to go to the track and try to get ahead by betting longshots before your wife finds out.

Two. You are thousands in debt to a loan shark and only have perhaps 1/10 of what you owe. If you can't come up with all the money tomorrow, you will be taken out to the desert, beaten, and shot in the head. You decide to go to the track and try to get ahead by betting longshots.

In both cases, opting to play the ponies is an act of desperation, but second case it is arguably a rational one. The odds are just as bad as they are for the first scenario, but assuming you have no other options, there's really no chance of your finding yourself worse off. If you lose you have the same outcome you would have if you didn't play at all.

(We discussed a related idea in our Ponzi threshold thread. If a company becomes sufficiently overvalued, it has an incentive to opt for business models with lower expected value but a better chance of having a huge windfall.)

The problem with this idea is that, while we can come up with endless hypotheticals sitting around in safe and, more importantly, calm surroundings, those conditions almost by definition seldom apply to real life desperate circumstances. Calculating expected values in complicated situations involving unlikely events is extraordinarily difficult even for those who keep their heads. For those who panic, rational desperation arguments are almost inevitably excuses for bad judgment.

Recent case in point is the small but still surprising number of respectable, center-left pundits continuing to call for the Democrats to somehow replace Joe Biden and second-in-line Kamala Harris with an unspecified dream candidate. There's a curious disconnect between the situation which is concerning but hardly Dukakis in October and the "solution," a plan with lottery ticket odds that, to the extent that it has precedents, follows the example of some of the most disastrous campaigns in living memory. It feels a bit like shipwreck survivors proposing setting the lifeboat on fire on the off chance that there might be a ship out there that could see the flames (which is basically an old Star Trek plot now that I think about it).

At least part of this curious reaction can be traced back to the mainstream press (with the exception of Amy Chozick and a few others) learning the wrong lessons from 2016. Rather than coming away saying perhaps we shouldn't use presidential elections settle old scores or allow ourselves to become accomplices of hostile foreign powers manipulating the election, the main take away apparently was we shouldn't of been so optimistic about the Democrats' chances.

For the rest of us, perhaps the best lesson for the rest of us is to try to keep track of who has been mostly right over the past nine years and who has been mostly wrong (at least when it mattered) over the same period, and to spend as little time as possible listening to the second group.

We'll close with perhaps the ultimate example of prematurely jumping to extreme measures.