Ben: Okay, are you ready?

Both: Rock paper scissors.

Liz: Oh, paper covers rock.

Ben: Okay, okay, you're up.

Liz: Hey, I'm Liz Landau.

Ben: Hi, and I'm Ben Klemens.

Liz: And this is

Both: Pod, Paper, Scissors.

[Intro music. Liz sings: You gotta make decisions...]

Liz: We're gonna be talking about the hidden games behind everyday life. Let's talk about this crazy Coronavirus situation.

Ben: Oh, yeah. Have you been to the supermarket lately?

Liz: Oh my gosh, I was just at Safeway last night here in DC, and the entire aisle that would have had paper towels and toilet paper was empty, Ben: empty.

Liz: totally empty. And it really makes you wonder, what do people think is going to happen that they would need all this extra toilet paper?

Ben: Well, it's not necessarily the case that they even need it all. It could be just that they think it's their last chance in life.

Liz: It's true. Like when I see an empty row of products at a supermarket except for like a couple of things. I think to myself, whoa, like, this product must be super popular, or we are running out of this product as a city, I better get in on this.

Ben: Yeah. And you know, you may have seen online, they tell you, you know, they're only three left in stock, you better buy it now.

Liz: It's kind of like we're playing this game with everyone else, where it's like, who can get as much toilet paper as we need so that—nobody wants to be the person stuck without any.

Ben: Do you remember the Great Depression, Liz?

Liz: I'm a little young for that. But why don't you tell me, Ben.

Ben: [Laughing] Sure. So there were these problems of bank rounds, where everybody would show up at the bank at the same time and demand their money. And how banks work is that they lend out more money than they have.

[1:59] Liz: Wait a minute. So when I look at my balance in my checking account, that money might not actually be physically present at the bank.

Ben: Yeah, and especially in the present day, like yeah, I don't really expect a big vault with you know, $100 bills, right?

Liz: Wait, there aren't leprechauns with vats of gold that correspond to my money in every bank?

Ben: Well, in some banks, yes. But in some banks, no. And those leprechauns say, they don't necessarily have all the pots that they need, right. So if you know that there are a lot of people who are coming to the bank, asking for their money back, you could actually be left out and the bank could go out of business. And your deposits are just ka-poof,

Liz: whoa, that sounds really dangerous.

Ben: Yeah. So in the 20s, and I believe in the 30s, that there would be these bank runs. Where—they could be super arbitrary, where there's just like, a couple too many people are hanging out outside the bank. And somebody says, Oh, wait, wait, is this this a bank run, and they just run in, and they demand demand their cash as soon as possible. And they tell their friends, and pretty soon everybody is running in, And then this bank run just comes into existence?

Liz: Well, how do we know that's not gonna happen? Like tomorrow?

Ben: Yeah. So it's apparently happening with toilet paper?

Liz: Yeah, well, so how do we know it's not gonna happen with the banks?

Ben: So it's a game that we've solved. It's a game that we've solved. There's now the Federal Deposit Insurance Corporation. So if you ever go to your, I don't know, like, I haven't been to my actual bank for like 10 years, but I fondly remember they had a little sticker by the window saying that your deposit's insured.

Liz: Ben if you just go to the bottom of your bank's website, it'll say in fine print that your deposits are insured by the FDIC up to $250,000.

Ben: Oh, yeah, okay. Yeah, I guess I've seen the logo. But yeah, I never clicked through, I guess,

Liz: You never bothered to see by how much the FDIC was protecting your money?

Ben: No, because I don't have to worry about it anymore.

Liz: And you don't have $250,000. [Laughs]


Ben: Okay, that's the other reason. But yeah, bank has done, bank runs don't happen anymore. Like picture that situation before where, you know, you think a bank run is happening. And you panic and you think, well, if, if I don't get in right now, then I don't get in, right, my money will be gone. Now I can think well, if I don't get in right now, well the insurance, the government insurance program will take care of it so I can stay home. So the end result is bank rounds just don't happen.

Liz: Well, that's fantastic. Because right now, I really need to save up my paychecks for some toilet paper.

Ben: [laughs] Yeah, yeah, it's pretty soon it'll be a million dollars a roll. So or you can save up to buy a bidet, and then you're covered.

Liz: Oh, you and your bidets.

Ben: They're great. Highly recommend and then you don't have to worry about this capitalist enterprise of buying paper every week,

Liz: I guess by having the FDICs $250,000 guarantee, that means that banks don't actually have to worry about runs anymore, because everybody trusts the fact that there's this insurance.

Ben: I guess the result is the FDIC doesn't actually have to pay out, right?

Liz: That's true. Huh. I went on a Hinge date with someone from FDIC, once. I wonder what his job actually is.

Ben: Yeah, his job is probably to just sit around and like, I don't know, put stickers on teller windows, because if there are no runs, they don't have to pay out, right? So the simple fact that they exist, the fact that you know, I guess not your future boyfriend, like the fact that he is sitting in a desk somewhere, just playing with paperclips, prevents runs and solves this problem. And I think that's pretty cool that, you know, there are all these problems that social interaction cause but now and then, we can find a solution.

Liz: You know, what would be really efficient is to not have anyone work for the FDIC—

Ben: and just lie about it.

Liz: —and just lie about it! [They laugh.]


Ben: That's next level.

Liz: It's almost like a placebo when you think about it.

Ben: Oh, and we can talk about this later, there are enforcement mechanism games that kind of simulate this sort of storyline. There are a lot of games that we could talk about, some of which, yeah, they're a little arbitrary, like the runs on toilet paper. And some of them have a solution. And some of them we're still looking.

Liz: So I bet people out there are wondering, Well, why is your podcast called Pod, Paper, Scissors? Why did you even play it at the beginning of this episode?

Ben: So this is going to be a podcast about game theory.

Liz: We should tell people what game theory is. Okay.

Ben: So game theory is, I'm willing to define it as the study of how people make decisions in groups.

Liz: Yeah, people make decisions in groups all the time.

Ben: And those involve not just—like the story of supply and demand, there are an infinite number of people who buy an infinite number of people who sell. That's not really how life is most of the time. There are just a small number of people in the actual or imaginary room, and they're all watching each other. So when we play rock, paper, scissors, I'm guessing what you're going to do, and you're guessing what I'm going to do, and I'm guessing what you think that I think that you think you're going to do and so on.

Liz: So we really base our actions, not just on our own beliefs and values, but what we think is going on inside other people's heads. And in turn, they're thinking about what we might be thinking about and what even other people are thinking about.

Ben: Oh, man, Liz, it gets complicated.

Liz: So complicated.

Ben: Yeah. So that's why we're doing an entire podcast about this.

Liz: Hey, Ben, let's tell people who we are.

Ben: I guess that's something we have to do, isn't it? Here I'll start with with you, Liz Landau is a science journalist. Also she spent over a decade teaching people who are not scientists about science. So she worked at places like the Cable News Network, CNN, Scientific American, Smithsonian, and lots of other venues. So for example, her last article in Smithsonian, I really liked it, it was about the knapsack problem, which is important in pure mathematics and cryptography. Also, her experience of the Cable News Network qualifies her very much for for a podcast, which I'm sure you're downloading onto your iPod.


Liz: But Ben has some amazing qualifications too in fact, his PhD is in Game Theory.

Ben: Yeah, I don't know how that happened.

Liz: That's because there's a kick ass social science department at Caltech.

Ben: Oh, yeah. Liz is such a fan of Caltech because she worked at the Jet Propulsion Laboratory, which is sort of a collaboration between NASA and Caltech.

Liz: Ben was also a Nonresident Fellow at Brookings Institution here in DC. And he's also done a lot of applications of social situations at the World Bank like projects on why people immigrate and why World Bank contractors are so unhappy.

Ben: We do other things, though.

Liz: Yeah, like we played Rock, paper, scissors.

Ben: We also play songs.

Liz: We also play songs. But first of all, we have to explain why our podcast is called Pod, Paper, Scissors.

Ben: Oh have we not done that, no. Okay, hit it.

Liz: We decided to call this podcast pod paper scissors. Because one of the classic games that illustrates what we're talking about when we look at life through the framework of game theory is rock, paper, scissors. It's a game in which there are only three possibilities, and you have no idea what the other person is going to do. And it's something that you play multiple times. So you know that if you pick one single strategy, like always play rock, the other person is going to figure that out pretty quickly. And then always play paper and you're always going to lose, it's gonna be really tough for you to just pick one thing. So people who are really good at rock, paper, scissors actually have to be constantly thinking about well, what is the other person expecting me to do, and then what how can I defy that expectation?


Ben: Do you remember that Simpsons episode? Yeah, Bart's kind of not good at these things, And so Lisa knows to play scissors every time and she keeps she keeps telling Bart like maybe you should try mixing it up and he doesn't get it.

Liz: Aww, Poor Bart.

Ben: Poor Bart. Okay, we got in a Simpsons reference. What else do we need to be a good podcast?

[Liz hums]

Liz: That's the Game of Thrones theme song for those who didn't know.

Ben: Okay, I did not know that. [Liz, quietly: whaaat?] No, no, I'll do Wire references, you do Game of Thrones references.

Liz: The Wire was awesome. But if you're recalling Game of Thrones, and more people will because that show finished up not that long ago, there were plenty of situations where a faction of people had to strategize about how to best attack some enemy based on what they thought the enemy thought that they were going to do. And there were several failures of calculation there when people did not adequately prepare for assaults from invading armies.

Ben: The story of game theory is also sometimes told, and I don't know the extent to which this is really how, how it evolved. But one of the early very prominent applications was about nuclear war and how that can, how nuclear war works out. It's a lot of like bank runs, believe it or not, but we'll have to save that for another episode.

Liz: Well, to close out I'd like to share with you a little song I wrote since I've been thinking about game theory so much I decided to write a song about it. Do you want to hear it Ben?

Ben: Hit it!

Who says that everything we do makes sense?
We're all just playing games of self-defense.
Is it Chicken, is it Chess, is the problem zero-sum,
or a Prisoner's Dilemma, that will reach an equilibrium?

You gotta make decisions
Will you coöperate or defect?
You gotta make decisions
And who's to say if you're correct?

Join the group or go on your own
but that would be meeean
that would be meeean.

They say all the world's a game
and all the people merely players
anticipating what comes next
but we can't all be soothsayers.

Make a move with what I know
with imperfect information
an asymmetry that leads
to my theory's refutation.

You gotta make decisions
Will you coöperate or defect?
You gotta make decisions
And who's to say if you're correct?

Join the group 'cause that would be nice.
Being selfish will pay off twice,
but that would be meeean
that would be meeean.

[More-or-less spoken: Now let me tell you about a little game that works on the principles of game theory It's called rock, paper, scissors rock, paper, scissors and that's the way it goes paper covers rock rock breaks scissors scissors cut paper and now it's your turn.


Join the group 'cause that would be nice.
Being selfish will pay off twice,
but that would be meeean
that would be meeean.