September 24, 2026 • 52 mins
In this classic episode of Stuff to Blow Your Mind, Robert and Joe discuss the psychological, economic and decision theory phenomenon known as ambiguity aversion. Find out how it relates to the Ellsberg paradox, madman theory and the balance of power in our world. (orignally published 8/26/2025)
See omnystudio.com/listener for privacy information.
Listen
Watch
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Hey, welcome to Stuff to Blow Your Mind. My name
is Robert Lamb. Today we have a Buffer Week Vault
episode for you. We are gathering our strength. We are
preparing for the October ahead, and we're going to try
and put out a whole lot of excellent Halloween content.
So get excited for that. And today we're going to
(00:26):
let you have it with The Devil You Know Part 1.
It originally published 8-26-2025.
Speaker 2 (00:32):
Let's do it.
Speaker 1 (00:36):
Welcome to Stuff to Blow Your Mind, a production of iHeartRadio. Hey,
welcome to Stuff to Blow Your Mind. My name is
Robert Lamb.
Speaker 2 (00:50):
And I'm Joe McCormick. And in today's episode, we're going
to begin a series in which we look at a
phenomenon studied in psychology, economics, and decision theory, which is
called ambiguity aversion. Ambiguity aversion is when we prefer risks
with known probabilities over risks with unknown probabilities. Even if
(01:13):
you have no reason for thinking that the unknown risks
will be worse than the known risks. And we'll get
to some concrete examples and foundational research on this in
a bit. But to an approximation, a good way to
think about this is that ambiguity aversion is the sentiment
expressed in the saying, better the devil you know than
(01:35):
the devil you don't. This is an aphorism I feel
like people often quote when they're about to justify making
a really bad or indefensible decision. And the whole point
of this saying is that the devil you know is
already bad. That's usually implied. And there's no indication that
the devil you don't know will be worse. It could
(01:56):
well be a kinder, gentler devil with a less pointy pitchfork.
But still, we often find ourselves thinking, I'd just rather
stick with the one where I know how pointy it
is up front.
Speaker 1 (02:08):
Yeah, it's often a form of indecision. Like, okay, I
refuse to do anything about the current devil situation. But,
you know, at least I know this devil. Next devil
could be worse. I don't want a worse devil.
Speaker 2 (02:20):
That's right. This is another one of those aphorisms. We
were talking about this just recently in the St. Swithin episode.
It's one of these aphorisms that I think is only
wisdom given certain assumptions or conditions that are not really
part of the saying. Like, as stated, it could be
purely terrible advice. Like, what if the devil you know
(02:41):
is really bad? Right. And what if going with the
devil you don't know gives you a really good shot
at improving your stay in hell? But also, I think
it does have a kind of wisdom if you don't
think of it as advice, but rather as an ironic
observation about human nature, in which case I think it's
sort of dead on. This is often how we think.
(03:02):
And that is the core observation also of the ambiguity
aversion literature.
Speaker 1 (03:07):
Yeah.
Speaker 2 (03:07):
Yeah.
Speaker 1 (03:07):
And I mean, because you can also also ask, well,
what if we just didn't have a devil? Is that
on the table? Can we just not have a devil?
Why do we have to worry about the devil we
have versus the devil we don't have yet? It's you know,
it can be. And I guess it's rather condemning of
human nature in that aspect as well, where the answer is, well,
you got to have a devil. We're humans. We make
(03:27):
our own and you've got to have one in play.
Speaker 2 (03:30):
You should have thought of that before you double parked, Rob.
Speaker 1 (03:32):
Yeah.
Speaker 2 (03:32):
Now you're here in hell with the rest of us.
Speaker 1 (03:34):
There's a rather keen Chinese saying that goes along these
lines as well. It's a well-known idiom that states that it's, quote,
easy to dodge the spear in the open, hard to
avoid a stab in the dark.
Speaker 2 (03:46):
Oh, that's interesting because, yeah, that's the same idea. Like,
it isn't necessarily true in all circumstances. Like, in the dark,
the person stabbing at you also can't see you very well.
So it might be hard to dodge, but it's also
hard for them to hit you. But in the dark...
You just don't really know. You don't really know what's
going on. So it just seems scarier. Yeah, absolutely.
Speaker 1 (04:09):
And it reminds me a bit of another Chinese saying,
better to be a dog in times of tranquility than
a human in times of chaos. And this has some
of the same sentiments as a 14th century Islamic saying
that is sometimes misattributed as being of Chinese origin itself.
And that is better a century of tyranny than one
day of chaos.
Speaker 2 (04:31):
Also don't know if I actually agree with that.
Speaker 1 (04:33):
Well, I don't know. I think about it a lot
for various reasons. And I do agree with the basic
sentiment of it when you find yourself dipping into chaos.
And I'm not talking about like capital C chaos, like
absolute chaos, but these little moments of chaos and disorder,
(04:56):
you can easily line yourself up with the idea of like, well, yeah,
this is why people you know, fall for tyranny. This
is because they have these moments of chaos and uncertainty,
and they're like, well, I would just rather have this
sort of known top-down oppression in place rather than some
sort of ambiguous chaos bubbling up around me.
Speaker 2 (05:16):
Better something that's definitely bad than something I don't understand
and can't predict.
Speaker 1 (05:21):
Yeah. Now, ambiguity and chaos, we should note here, are
not the same thing. Ambiguity is a lack of clarity,
while chaos is a state of disorder. And the former
may well lead into the other. And chaos may be
seen as a state of absolute ambiguity and uncertainty as well.
So in that respect, it becomes even more difficult when
(05:41):
we try and weigh chaos and ambiguity in our concerns
about the future.
Speaker 2 (05:46):
I was trying to think of familiar everyday examples of
ambiguity aversion. And I think I came across one internally
in the now commonly acknowledged sentiment of not wanting to
go out and try anything, you know, that, so like, um,
do you ever find yourself trying to find a way
(06:07):
to avoid going through an experience that is new and
unfamiliar and thus unpredictable to you? So it seems like,
I don't know, it just seems kind of fraught like
a hassle. And instead of doing that, choosing to have
an experience that you pretty much know that you will
probably not enjoy.
Speaker 1 (06:24):
Uh, yeah. Yeah, I think I know what you're saying here. Yeah,
I mean, life is perpetually a situation where it's like,
am I going to stick with what's comfortable or am
I going to say yes to adventure? Am I going
to try something new? And I often find myself at
(06:45):
the crossroads of that moment because there's a huge part
of me that doesn't want to try new things. And
I get anxious about the various experiences aligned with those
kinds of quests. But on the other hand, I have
to recognize that most of the really fulfilling things in
my life have been because I said yes to adventure
and because I took a chance on something and I
(07:08):
went out of my comfort zone. But then again, we
call it our comfort zone because it is comfortable. It
is a nice place. It is a comforting place. So
it's give and take.
Speaker 2 (07:19):
Yes, I think that's absolutely correct. But I think the
really weird thing is that sometimes your, quote, comfort zone
isn't comfortable. I mean, sometimes we prefer... an experience that's
not even very nice. It's just like something that we
know we won't like, but it's just, you know, it's familiar.
We at least know what we're getting with it over
something that is just question marks. Right, right.
Speaker 1 (07:40):
We'll choose a known okayness over a potentially amazing experience.
Speaker 2 (07:46):
So, One of the most important early writings on ambiguity
aversion is a classic paper in the Quarterly Journal of
Economics from 1961 by the American economist, whistleblower, and political
activist Daniel Ellsberg. The paper was called Risk, Ambiguity, and
the Savage Axioms. That's Savage with a capital S. That's
(08:09):
a person's name. It's not describing the axioms as savage.
And just to go ahead and mention it now, because
I also use this as a source in writing about
Ellsberg and this paper's impact. I was also reading a
paper called Ambiguity and Ambiguity Aversion in the Handbook of
the Economics of Risk and Uncertainty. This is by Mark J.
(08:31):
Machina and Marciano Siniscalchi, published by North Holland in 2014.
This is a sort of general overview of the concept
of ambiguity aversion and a survey of a bunch of
different models of it. Now, before we get into the
idea that Ellsberg explored in this very important paper, Rob,
you had a bit of bio on Ellsberg, didn't you?
Speaker 1 (08:52):
Yeah, yeah. Daniel Ellsberg, quite an interesting fellow, lived 1931
through 2023. In addition to Ellsberg's paradox, which we're getting
into here, He is he's also famous, perhaps more so
in a general sense, as the Rand Corporation employee who
photocopied and released what would come to be known as
(09:13):
the Pentagon Papers. This is a United States Department of
Defense history of the U.S. 's political and military involvement
in Vietnam from 1945 through 1968.
Speaker 2 (09:24):
The key point being that Ellsberg believed that getting these
papers out there was important in informing the public about
things that they didn't know about how the Vietnam War
was being prosecuted and represented. Right, right.
Speaker 1 (09:36):
It was very much a whistleblowing act on Ellsberg's part.
And these papers were published by The New York Times
in 1971. This would be a decade after the publication
regarding the Ellsberg paradox. And yeah, they detailed secretive elements
about the scope of the U.S. military efforts in Vietnam,
the real sticking points being the deception involving the Gulf
(09:59):
of Tonkin and unreported expansion of the war, the true
objective of the war post-1965, which basically was more about
containing China and preventing a humiliating U.S. defeat rather than
any specific objectives to help the people of Vietnam, and
the lack of a clear plan for victory as well.
(10:20):
So I imagine a lot of you have at least
heard of the Pentagon Papers, even if you're not familiar
with the full story, because this incident, this led to
conspiracy and espionage charges against Ellsberg that were then later dismissed,
greatly fueled the anti-war movement, as well as distrust in
the government at the time, and led to the Nixon
(10:40):
White House's use of the infamous White House plumbers to
discredit Ellsberg. And of course, all of this ends up
feeding into the Watergate scandal, which is another one of
those major historical touchstones from the time period that, again,
if you're not super familiar with Watergate, you've at least
heard of Watergate and you've heard about the other, you know,
different gates out there that allude back to what a
(11:03):
scandal it was.
Speaker 2 (11:05):
Now everything gets a gate suffix.
Speaker 1 (11:07):
Right. No matter how deserving or undeserving. Now, Ellsberg remained
an outspoken activist and whistleblower throughout his life, particularly regarding
the U.S. 's military actions under multiple presidents, including the
current one, the Russian invasion of Ukraine, and also in
support of various other whistleblowers. He was a vocal opponent
(11:28):
of the use and the threat of nuclear weapons and
the rhetoric around their use. And he is sometimes described
as a nuclear war planner turned nuclear war activist. And
his work at the Rand Corporation, did involve such contemplations.
Speaker 2 (11:44):
Yeah, I think a big part of his pitch in
his anti-war and anti-nuclear weapons activism was like, look, I've
been there where the power players are executing, you know,
global military and nuclear strategy. You should be worried. This is,
things are not okay.
Speaker 1 (12:01):
Yeah, one of his major overarching criticisms of nuclear weapons,
and I feel like we're probably preaching to the choir
on this one. I can't imagine we have any big
nuclear war fans out there. was that their use as
a deterrent, one of the major positive spins that are
often given about having a vast nuclear arsenal, this idea
(12:21):
of the nuclear deterrent was itself highly unreliable and unstable.
There were simply too many variables, human, technological, situational, that
could lead to not only catastrophic, but existential unintended consequences.
Speaker 2 (12:35):
Yeah, too many ways for it to go wrong. And
if it does go wrong, the consequences are too great.
Speaker 1 (12:41):
By the way, Ellsberg has been portrayed, I believe, twice
in major motion pictures, once by James Spader and once
by Matthew Rhys.
Speaker 2 (12:57):
So coming back to the Ellsberg paper from 1961, again,
that's Risk, Ambiguity, and the Savage Axioms. This is the
really important one. I looked it up. I think it
had like, I don't know... like tens of thousands of citations.
This is like a very, very famous and influential economics paper.
In this paper, he illustrates the idea of ambiguity aversion
(13:19):
with a number of thought experiments, and this is one
of them. So this is the three-color urn. Imagine that
there's an urn, like a jar, that is filled with
90 little ping pong balls that are a mix of
different colors. You cannot see inside the urn. It's opaque.
But you're going to play a game where you reach
(13:41):
into the urn and you pull out one ball at
a time. And you can win prizes based on the
color of the ball that you pull out. You know
that 30 of the balls inside the urn are red.
So since 30 out of 90 are red, there's a
1 in 3 chance that a random ball is going
to be red. The odds there are pretty clear. The
(14:01):
other 60 balls, however, are a mix of yellow and black.
And here's the really important part. You don't know the
composition of that group. So those 60 balls could be
30 yellow and 30 black. It could be 60 yellow
and 0 black. It could be 60 black and 0 yellow,
or any mix in between. Since you don't know the mix,
(14:24):
you don't know the probability of drawing a yellow ball
or a black ball ahead of time. For red, it's
1 in 3. For either yellow or black, it's question marks,
anywhere between 0 and 2 out of 3. Now imagine
it is your turn to draw a ball out of
the urn, and you can take one of two bets.
Bet A, you get $ 100 if your ball is red.
(14:47):
So if you pick this option, your chance of winning
$ 100 is 1 in 3. In bet B, you get
$ 100 if your ball is black. Since you don't know
the mix of yellow and black, You don't know your
odds of winning, but they are somewhere between 0 and
2 out of 3, with the midpoint being 1 out
(15:08):
of 3, which is the same as the odds on red.
Which one do you pick?
Speaker 1 (15:13):
Well, it sounds like bet A is the truer thing, right?
Speaker 2 (15:17):
If somebody offered me this game, I would probably pick
bet A. Yeah, it just seems safer. It's like, OK,
I know what I'm dealing with there, 1 in 3.
The other option, your odds could be better than 1
in 3, but you just don't know.
Speaker 1 (15:29):
They could be worse. It could be zero.
Speaker 2 (15:31):
They could be worse, could be better. You have no
way of knowing either way. Ellsberg suggested, and later experiments
would empirically demonstrate, that most people would bet on red
instead of black, even though there is no objective reason
to think that red is a better bet. Following the
pick red strategy will not necessarily earn you more money
(15:54):
in this game, but people really do, in fact, just
like it better to pick red. It feels right. That's
just what we think we should do. That in itself
is kind of weird and interesting. Like, why do we
prefer to avoid ambiguity even when there is no clear
advantage in doing so? Then there's a really interesting wrinkle.
(16:14):
Imagine you're playing the same game. You are drawing a
ball out of an urn. And this time you're given
assurance that the mix of the balls is the same
as it was the first time. So whatever was the
case with With the mix of yellow and black in there,
it's going to be the same as it was with
your last draw. And you get a chance to make
a second bet. You can take either bet C, where
(16:37):
you get $ 100 if the ball drawn out is either
yellow or red. And this one has an unknown chance
of winning because, of course, you don't know how many
yellow or black balls there are. You know that your
chance of winning is somewhere between 1 and 3 if
there are, you know, the 30 red balls and 0
yellow balls, or 100% if there are 60 yellow balls.
(17:00):
Or you can take bet D, where you get $ 100
if the ball is either yellow or black. This one
has a guaranteed two-thirds chance to win, because we know
that together yellow and black make 60 of the 90 balls,
though we don't know what the mix is. In this
second trial... People will tend to pick bet D, once again,
(17:21):
because the probabilities are known. With D, it's a guaranteed
two-thirds chance to win. With bet C, it's somewhere between
1 and 3 and 100%. Picking bet D allows them
to avoid placing bet C, which has ambiguous chances. Here's
the really interesting thing that Ellsberg pointed out. There's actually
(17:44):
a contradiction in people's behavior between between the first and
second round of this game. Assuming you are actually doing
your best to win the money, in round one, if
you bet on red instead of black, that implies you
believe that less than 30 of the unknown 60 balls
are black, right? That implies that red has a better
(18:06):
chance of winning. So less than half of them have
to be black. However, in the second round, if you
take the second option, picking yellow and black, it implies
that you think that more than 30 of the unknown
balls are black. Otherwise, the red and yellow combination option
would have the better chance of winning, right? These two
(18:27):
bets in combination make no sense because they imply self-contradictory beliefs.
It says that I believe that more balls are black
and less balls are black at the same time. Obviously,
that can't really be the case. But there could be
another issue driving this behavior, which is simply that people
(18:50):
don't like ambiguity and they will pay up for known odds,
even if doing so implies mutually exclusive assumptions. I was
trying to think, you know, as I said a minute ago,
I think I would probably pick red if given the
option to play this game. Obviously, I sort of already
knew the deal here, so I can't know what I
(19:10):
would do going into it blind like most people. But
I think I would, for no rational reason, prefer the
uncertainty-reducing options. I think the most likely reason for that is,
even if I were given assurances that this game was
on the up-and-up, I would suspect some kind of trick. Like,
if I'm being asked to bet on uncertainty, there's some
(19:33):
part of me that just kind of rises up and says, uh-uh,
there's a scam here that you are not seeing.
Speaker 1 (19:39):
Yeah, yeah. I mean, you'd kind of expect that within the...
constraints of a testing environment, and you'd definitely expect that
out of the world. Whatever form this was taking, you'd
assume that somebody had a vested interest in manipulating how
you were going to behave to the, how you're going
to respond to the two possibilities.
Speaker 2 (19:58):
Yeah. Ellsberg also in this paper, by the way, he
came up with a second illustration of the same principle.
So if you go reading about this You'll read about
the three-color urn and then the two-urn experiment. The second
illustration used two urns instead of one because it made
the contradiction between the different bets even clearer. And this
self-contradictory behavior is now called the Ellsberg paradox. Ellsberg himself
(20:24):
didn't call it that. That's what other people, they put
his name on it. Anyway, Ellsberg's paper about ambiguity aversion says,
was not just about observing a weird little quirk of
human behavior. It was especially of interest to the fields
of economics and decision theory, modeling how people make decisions,
(20:46):
because it sought to undermine some of the major underpinnings
of the fields, specifically providing evidence against some of the
tenets of a framework called Subjective Expected Utility Theory, or
Savage's Axioms, named after the American mathematician Leonard Savage, who
formulated them. Subjective Expected Utility Theory, or SCU theory, is
(21:11):
a way of modeling how people make decisions when we
don't have perfect or complete information, which of course in
life we rarely do, right? So, you know, this is
going to be relevant in understanding how people behave in
most real-world situations, most situations in life are not a
casino table game where you have known odds of winning.
Speaker 1 (21:33):
That's right. Or, you know, or, you know, you can
easily imagine to a situation where you're, you're playing some
sort of a game, be it a tabletop role playing
game or some sort of like a, you know, video game.
And you're given a choice between two items for your character, right? You,
you have the stats of those items right there. You know,
what kind of enemies you go up against in the game.
Maybe you've played through the game before you have something
(21:54):
at least approaching perfect knowledge. of a simplified world, and
our real world is not so simplified, and there are
so many variables to it.
Speaker 2 (22:03):
Exactly right. So the real world, we're constantly dealing with uncertainty,
ambiguous situations where we don't have all the information to
judge what outcomes are most likely, and yet somehow we
navigate this world making decisions all the time. The question
being addressed here is, how do people make those decisions
when they don't actually know what the relative likelihood of
(22:24):
different outcomes are? Subjective expected utility theory has several rules,
but a simplified version is that it says even when
people don't know the objective likelihood of an outcome, they
form beliefs about how likely that outcome is. And then
they act consistently with those beliefs in order to maximize
(22:47):
their personal benefit. I came across a passage by the
American economist Frank Knight, which I think summarizes this idea well.
Knight writes, quote, We must observe at the outset that
when an individual instance, i.e. a one-time event, only is
at issue, there is no difference for conduct between a
measurable risk and an unmeasurable uncertainty. The individual, as already observed,
(23:12):
throws his estimate of the value of an opinion into
the probability form of A successes in B trials, A
slash B being a proper fraction, and feels toward it
as toward any other probability situation. So we essentially, we
form a belief or a feeling about how likely something is,
(23:34):
and then we act as if that was like, you know,
that we know the odds of a coin flip coming
up heads are one in two, whether or not we're
actually right about those feelings or beliefs. Ellsberg used the
principle of ambiguity aversion to say, actually, no, people do
not always behave as if they have consistent beliefs about
(23:55):
what is more or less likely to happen. And you
can prove this because they make bets that would imply
self-contradictory beliefs in the same situation, meaning they either don't
actually have or act on consistent beliefs about a situation,
or they don't always act to maximize their own monetary benefit.
(24:17):
Ellsberg's point here was that we can have obscure previously
unacknowledged motivations like the desire to avoid dealing with ambiguity.
And that particular desire is so strong in some cases
that it overrides our consistent thinking and a simple dollar
value understanding of rational self-interest. Uh, and by the way,
(24:41):
the technical name of the savage axiom that Ellsberg was
attacking here was it's called the sure thing principle. Uh,
Another thing to understand about Ellsberg's paper was that he
was arguing that we need to make a stronger distinction
between two different concepts. Those are risk and ambiguity. Ellsberg
(25:02):
used the definition that risk is when we have a
stake in an outcome and we know the theoretical likelihood
of that outcome. So this is like the casino games
or a coin toss. A fair coin toss is 50-50.
We know what the outcome likelihood is and we can
take a risk. A fair die roll is one in
six to get a particular number. Ambiguity is when we
(25:25):
don't have an objective way of knowing what the probability
of our desired outcome is. To Ellsberg, ambiguity was, quote,
the nature of one's information concerning the relative likelihood of events,
a quality depending on the amount, And so it's worth
(25:50):
noting that you can have confidence or even what feels
like certainty or act as if you have confidence or
certainty without actually being correct. You can go through life
having high confidence in objectively low probability things. One of
the actually really useful things about SCU theories, the subjective
expected utility theory, was that it made things simple and
(26:13):
easier to understand because it treated risk and ambiguity the same.
So a person making bets on a die roll will
know that the probability of rolling a specific number is
one in six and they will behave accordingly. And a
person who has a stake in an outcome with an
unknown probability will, according to Savage's axioms, mentally, even subconsciously,
(26:38):
form an internal belief about the probability of that outcome.
So example is you imagine there is a one in
four chance it's going to rain today. That might not
have anything to do with reality, but you just take
that belief on. And you behave as if that is
that you make all of your decisions based on that belief.
(26:59):
They will act according to that belief the same way
they would act to knowing that a coin flip is 50-50.
And Ellsberg argued, no, that is not how we make decisions.
SCU theory with Savage's axioms failed to account for other
complexities in human behavior. For example, our deep desire to
get away from ambiguity. We don't like ambiguity so strongly
(27:23):
that We will make decisions that imply self-contradictory beliefs just
to avoid it. Now, there have been a lot of
arguments over the years about how to interpret ambiguity aversion.
Is it actually rational in ways that were not previously recognized?
Or is it more like some kind of systematic error
(27:43):
or cognitive bias? We might come back and revisit that
debate in the subsequent part of the series. But we've
got a couple other things we wanted to talk about today. First, Rob,
I know you have a really interesting place you want
to take this. But first, I wanted to mention the
idea just of experimental confirmation, because one important thing to
(28:04):
understand is that Ellsberg's original paper did not have an
experimental component. It was a thought experiment. And he realized
the phenomenon needed to be tested with real human subjects.
In the decades since his paper, it has been tested many,
many times, many different ways. And generally, it has proved robust.
There are some nuances and exceptions, but generally people behave
(28:28):
the way Ellsberg predicted they would. A majority of people
structure their choices to avoid ambiguity, even when there's no
clear objective benefit to doing so. And they even make
bets that would imply against self-contradictory beliefs, according to SCU theory.
if those bets can get them out of dealing with
ambiguous probabilities. So I don't have to mess with that.
(28:52):
Regarding those experiments, my main source here is, again, that
survey article by Machina and Siniscalchi. Again, that's Ambiguity and
Ambiguity Aversion from 2014. The authors here list a whole
bunch of experiments where people... carried out versions of like
the three color urn or this other experiment that Ellsberg described,
(29:14):
the two urn experiment. They list Fellner in 1961, which
found that people would rather take 50-50 odds than unknown odds,
which could be better or worse. They also cite Becker
and Brownson, 64, McCrimmon, 68, Slovik and Tversky from 1974,
Curley and Yates from 89, among others. all generally finding
(29:36):
confirmation of Ellsberg's predictions about ambiguity. aversion. Quote, Although most
of these experiments use students as subjects, researchers such as McCrimmon, 65,
Hogarth and Kuhnreuther, 89, Einhorn and Hogarth, 86, Viscousi and Chesson, 99, Ho, Keller,
and Kelticke, 2002 and Mafioletti and Centauri 2005 have examined
(30:01):
the ambiguity preferences of business owners, trade union leaders, actuaries, managers,
and executives with the same overall findings. So it appears
quite robust. The authors here also report some interesting findings
of McCrimmon and Larson from 79, which they looked into
it and they found that while the majority of people
(30:23):
did try to avoid ambiguity, some minority of people did
not and even just chose to embrace it. They also found,
as you might expect, that our relative tolerance for ambiguity
went up or down depending on how good the known
odds were in the known odds bet condition. So, for example,
(30:44):
if you do this three-color urn experiment, if you take
the number of red balls, that's the ones where you
know how many there are, if you take that down
to zero or even just down to five or ten,
Most people will take the gamble with the unknown odds
on yellow and black because the odds on red are
clearly very bad. If you make the odds on red
really good, even more people will stick with the known
(31:06):
odds and ambiguity aversion becomes even stronger. So that shouldn't
be all that surprising. But yeah, in the middle category
where the odds on red are somewhere in between good
and bad. you're just kind of like, I don't know,
but still people tend to go for the known odds
rather than the unknown odds. However, the authors also found
(31:26):
that even when the idea of subjective expected utility and
choice consistency was explained to the people doing this experiment,
explained to the subjects, or even in cases where the
known odds were bad, some subjects just stubbornly stuck to
red and avoided betting on any ambiguous conditions so most
(31:50):
of us seem to dislike ambiguity in in the majority
of cases and some of us just don't like it
at all and will not tolerate it now as is
often the case with uh stuff in decision theory and,
(32:13):
and economics and stuff, you start off playing these little
like gambling games with like balls in a jar or
something like that. And so it seems like, well, how
consequential could this really be? But actually I think you
can take the idea of ambiguity aversion to, uh, to
number one, it has been applied to very consequential situations
in real life and thus understanding it can have major consequences,
(32:36):
not only for people's individual lives, but for world events. Yeah.
Speaker 1 (32:40):
That's right. And that brings us back to Ellsberg, who, again,
in addition to crafting this highly influential paper, was also
a highly vocal critic of nuclear weapons and, again, the
rhetoric surrounding nuclear weapons. And I was reading a good
bit from his book, The Doomsday Machine, which came out
(33:02):
in 2012, which is quite a good read if you
want a much deeper dive into his thoughts on all
of this. But In that book, the subject of ambiguous
data comes up numerous times. How will a nuclear power
react in response to ambiguous data about a potential incoming attack?
(33:23):
And additionally, it talks about the purported advantage of ambiguity
in intent slash response, namely in the case of madman theory.
This is very closely associated with Richard Nixon, but also
tied to various other figures, domestic and international, including the
current U.S. president, a kind of supposed perceived madness or
(33:48):
volatility that would lead adversaries to second guess any plans
to move against them.
Speaker 2 (33:54):
Right. And we're going to get to some major criticisms
of the madman theory strategy in a bit. But the
idea of it is that you can leverage a reputation
for unpredictability to your advantage in negotiations.
Speaker 1 (34:09):
That's right. You know, this is very much the nobody
knows what I'm going to do approach. That's the message
you put out there. And the idea, part of the
idea here is that it makes logically empty or extreme
threats seem more possible.
Speaker 2 (34:23):
Yeah.
Speaker 1 (34:24):
Now, madman theory, we should point out, is a term
that Nixon even used himself when talking about this approach.
It was outlined by Daniel Ellsberg and Thomas C. Schelling
as well. But the basic concept Pretending to be erratic, irrational,
or unhinged to influence the other side of a bargaining table,
this goes back a long ways. Machiavelli wrote about it
in 1517, and it's probably as old as the first
(34:46):
prehistoric human to, like, go around hitting trees randomly with
a club, you know, and say, who knows what Thrag
is going to do? Why would you mess with Thrag
on this?
Speaker 2 (34:56):
Yeah, we better just give Thrag what he wants.
Speaker 1 (34:58):
Yeah. So, again, the Ellsberg paradox highlights a core flaw
in human decision making, the aversion to ambiguity. The madman
theory as a political strategy seeks to exploit this by
cultivating a reputation of irrationality, creating an ambiguous threat. The
adversary and their aversion to this ambiguity and the unknown
(35:18):
risk of an unpredictable response may be coerced into backing down.
Or at least this is the idea. This is the
logic behind the approach.
Speaker 2 (35:28):
Yeah. The classic example of madman theory in practice in
real life is that the Nixon administration could, for example,
have Kissinger call up his counterparts in the Kremlin and say, look,
you know, we're all trying to calm Nixon down, but
he's boiling mad at you. He's borderline crazy. You've got
to do X, Y and Z. You know, you've got
(35:48):
to give him these concessions he wants or we don't
know if we'll be able to control him.
Speaker 1 (35:52):
Yeah, kind of a good cop, bad cop thing, too,
I imagine. Yeah.
Speaker 2 (35:56):
And this was a way of making I think a
big part of it was it was a way of
making the nuclear deterrent feel once again like it had
force in matters other than just deterring a first strike.
Because the problem with using nuclear weapons as leverage in
negotiation between two nuclear armed powers is obviously if the
(36:18):
weapons get used at all, everyone loses. There is not
a winner in mutually assured destruction. So if the White
House was trying to get the Kremlin to do something
like I'll nuke you if you don't do it, that
was not a credible threat because both parties knew that
the other party knows that war would be the destruction
(36:38):
of them both. So no rational actor would ever strike first.
Between rational actors, I'll nuke you if you don't do X, Y,
Z is an empty threat. The goal of madman theory
is is to gain leverage in negotiations by introducing some
amount of fear that your counterparty may not be a
rational actor. He might be crazy enough to do it.
(37:01):
We don't know. Therefore, the madman strategy makes direct use
of the opponent's ambiguity aversion as a tactic to get
leverage over them. The madman player in this game is
betting that the fear and uncertainty about how to handle
their unpredictability will cause their counterparty to make concessions they
(37:21):
might not make otherwise. Like, you end up thinking, well,
I'll just take a bad deal rather than wander into
territory with unclear levels of risk. Right, right.
Speaker 1 (37:31):
And not to derail the point here, but I want
to bring it back to Ellsberg's other criticisms of nuclear
weapons and the rhetoric surrounding nuclear weapons, that being there's
all these other uncertainty factors and ambiguous data that would
be coming in about what the enemy is or is
not doing. And therefore, any given situation like this is
going to be just wrought with with potential ambiguity, potential
(37:55):
missteps and potential mistakes. So, like, if it were only
as easy as we're laying it out here, it would
almost be a different situation.
Speaker 2 (38:03):
Totally. I mean, Ellsberg's point about the all of the
uncertainty in the actual command and control of, you know,
nuclear strategy like that's true. That introduces real levels of
existential risk into playing games like this. There are a
lot of reasonable criticisms of madman theory, but I think
(38:24):
a major one, at least from my point of view,
is that at best, it is a strategy for short
term gain at the expense of long term stability and
negotiating power, because one way or another. It undercuts your
credibility and your ability to be seen as an honest
and reliable broker in future negotiations, either because you come
(38:47):
to be seen as actually irrational, in which case people
don't want to deal with you and they will find
what they may be motivated to do something bad to
strike first to you because you're too dangerous to be
let loose, or they may try to find ways to
cut you out of negotiations. So that could be one consequence,
or just because you are revealed to have been bluffing,
(39:09):
in which case you lose your credibility.
Speaker 1 (39:12):
Right, right. And yeah, this is all valid. I was
looking at a couple of papers on madman theory. And
madman theory, like ambiguity aversion itself, is something that has
been written about a lot. There are no shortage of
papers out there. But I looked at just a couple.
I looked at one titled Cravings. Like a Fox, Are
Leaders with Reputations for Madness More Successful at International Coercion?
(39:35):
by Roseanne W. McManus. This came out in 2019 from
Cambridge University Press. And in this, the author points out
that a reputation for madness is would seem to be
more often harmful than helpful in international coercion. So it
undercuts the leader's ability to make believable peace commitments, treaties,
(39:56):
and so forth, which, and it really almost feels absurd
that we need to stress this, these are all vital
for peaceful relations between nations. No one knows what I'll
do easily slides into no one knows what I'll honor.
No one knows what treaties I will actually stand by
and so forth. You know, to bring this back to
Dungeons and Dragons, I think any D & D player
(40:18):
worth their salt knows that while you might well enter
into a pact with a lawful evil devil, you never
enter into a pact with a chaotic evil demon because
the lords of the nine hell are going to stick
to their letter of the contract, if not the spirit
of the contract. But demon lords such as the Demogorgon
will honor nothing. And there is no coherence even within themselves.
(40:38):
They're just pure ambiguity. And you can't strike any sort
of deal because they won't they won't stand by it
no matter what. Whereas the devils being lawful evil, they
may look for that wiggle room. They may find ways to,
you know, to avoid the spirit of the deal, but
they're still bound to the letter.
Speaker 2 (40:55):
Right. So if you think you discover that your counterparty
is actually just chaotic evil, all you can do is
roll for initiative. Like there's no making a deal.
Speaker 1 (41:04):
Yeah. And then you slide into chaos, pure chaos. McManus,
back to her paper, though, she found that Mad Men
theory may be helpful in crisis bargaining, but only under
certain conditions, namely when employed by military weak leaders. So
we're not talking about a true superpower here that can
engage in like true mutually assured destruction. Rather, we would
(41:27):
be dealing with a state that could do a lot
of damage, but in striking out would just thoroughly destroy themselves.
So the idea here is that no one would take
this hypothetical nation or the leader of this hypothetical nation
seriously unless they presented an air of madness. And then perhaps, hey,
(41:47):
they might do it anyway if provoked. They're unhinged. And thus,
it can be a form of asymmetric leverage. So we're
talking low probability but high consequence. Yeah. And McManus also
points out that there would also seem to be more
of an advantage if you had a mild reputation for
madness rather than an extreme one. You don't want to
(42:08):
come off like, you know, a complete Dada, you know,
eye rolling maniac in one of these cases. The idea
would be like, well, you know, we can we can
still get this individual to the negotiation table, but we
just have to be hypersensitive. And I guess, again, kind
of avoiding that complete fall off into chaotic evil demon
(42:30):
hood and instead dealing with devils that can still be
bound by some sort of law. All right. I have
a hypothetical example here. So we have demigodic hero Hercules
and we have his mortal cousin Eurystheus. And they're grabbing
lunch at the local Euro place.
Speaker 2 (42:47):
Great.
Speaker 1 (42:49):
So. So Eurystheus warns his cousin that if he tries
to steal any of his fries, he's going to flip
the table and all their food's going to wind up
on the floor. And he acts just really sensitive and
unhinged about the whole thing. Yes.
Speaker 2 (43:01):
Okay.
Speaker 1 (43:02):
Hercules obviously knows that Eurystheus can't take him in a
fight and might not even be able to flip that
table over before Hercules stops him. And rationally, Eurystheus should
realize this and just let Big Herc have a few
extra fries if he wants. Like, what does it matter?
But from Hercules' standpoint, does he really want to risk
(43:24):
his lunch winding up on the floor? Maybe he should
just let Eurystheus keep all of his fries.
Speaker 2 (43:29):
Okay.
Speaker 1 (43:31):
The downside, of course, here is that maybe Hercules just
won't invite Eurystheus out for lunch next time. And he's
certainly not going to pick up the check. And on
top of all that, how are they going to work
together to defeat the Hydra? Because as you'll remember from
past episodes and from Greek mythology in general, Hercules can't
do that on his own. He has to have his
(43:52):
cousin's help to burn the stumps after each head of
the Hydra is cut off.
Speaker 2 (43:56):
Very good points. I mean, apart from any otherwise moral
considerations or honesty considerations about deploying something like madman theory,
just from a strategic point of view, it seems like
it is probably best for situations where Like your counterparty
has to deal with you. It is not optional for them.
(44:18):
And you don't have to like or respect each other
or ever work together on anything. And you don't care
about long-term goals. You are only interested in this situation
right now in extracting a short-term advantage.
Speaker 1 (44:34):
That's right. That's right. But some papers out there that
have crunched the numbers on all this and done some experimentation,
questionnaires and so forth, Do acknowledge that, you know, there
are multiple dimensions to any of these situations, namely, and
this is something I think everyone can relate to, like
you can have a leader that is engaging in an
international situation, but there is still the domestic view of
(44:59):
that situation. There's still the domestic response, the domestic relationship.
And so one of the papers that I was looking at,
this one is titled Madman or Mad Genius, the International
Benefits and Domestic Costs of Madman Strategy by Joshua A. Schwartz,
published in 2023 in Security Studies. And in this, the
author found that the madman approach can work in negotiations
(45:22):
with foreign adversaries, but, quote, entails significant domestic costs that
potentially erode its efficacy. He also points out that madman
theory may simply not work against major powers because while
it might, make a threat more credible that doesn't necessarily
make the threat more effective and make the adversary willing
to cave to those demands. So he points out that
(45:44):
this is perhaps why Nixon's use of madman theory didn't
work against the Soviets. Like, okay, it made Nixon's threat
more credible, but did it actually make it more effective?
Did he actually get what he wanted to out of
these bluffs, these threats? And then you have the domestic
side of things. With the hypothetical leader's own citizens not
(46:06):
loving the heightened stakes because, you know, obviously, I mean,
I say obviously, but this is one of those things
that we often have to be reminded of in a
case of mutually assured destruction or even a case of
asymmetric exchange involving nuclear weapons or some other kind of just,
you know, horrible weapon of mass destruction. A leader is
always bargaining with the lives of their own citizens. You
(46:29):
are the chips on the board in a no one
knows what I'll do wager. Yeah. And the author also
notes that, OK, you know, this is going to also
differ depending on how much of a voice the people
have in a given nation versus how much power the
ruler has. There's going to be less backlash in places
where the people have less of a voice and the
ruler has more absolute power.
Speaker 2 (46:49):
That's right. But one thing I did want to clarify
is that the sense in which you are the chips
on the board and no one knows what I'll do
wager is. is true is not just limited to like
the worst possible scenario, like nuclear warfare. I mean, it's
also the case in say like trade negotiations or something
like that. Like your economic prospects are in a way,
(47:12):
those are the chips on the board. Like the, the,
the citizens fates and futures are the things that are
being negotiated with. That's right.
Speaker 1 (47:20):
Yeah. In, in, in contemplating potential nuclear exchanges, everything is
a bit more stark and a bit more black and white,
but obviously, you know, any, You can think of any
number of scenarios where the stakes are still quite high
for the individual.
Speaker 2 (47:35):
So, yes, it's not hard to see at all why
a citizenry can easily become upset and annoyed if their leader,
who's supposed to be representing their interests in negotiations, is
acting unreliable and unpredictable. The leader may think that they
can get good gains out of that in the short term,
but the citizens are probably thinking about a lot of
these Even if not, you know, thinking specifically about them,
(47:58):
just thinking intuitively about there seems like there's a lot
of downside to this. Yeah.
Speaker 1 (48:03):
And again, coming back to what we mentioned earlier, the idea, too,
that by constant, if you swing around this, the sword
of madman theory too much, then it makes it more
difficult to engage in the other highly important tools of statecraft,
peace treaties and agreements and so forth. So it's like
(48:23):
you can only swing that sword around for so long.
And then you have to be able to engage in
these other acts as well. Again, short-term gain with madman theory,
not so in the long term. But, you know, unfortunately,
this ends up rolling out into so many things about
human experience and human perception is that we are so
(48:45):
focused on the short term and we don't think about
the long term.
Speaker 2 (48:48):
So we've just been talking about a lot of reasons
that it might actually be bad and not as clever
as it first seems. to try to leverage knowledge of
ambiguity aversion offensively in negotiations. But I think one way
that it can definitely be useful is to have knowledge
of ambiguity aversion to use defensively, to think about in
(49:09):
analyzing your own behavior and being aware of your bias
to avoid ambiguity and sort of check yourself and think like,
wait a minute, am I actually making the right decision here?
Is this actually what's rational or am I just having
a an irrational bias against situations with unknown probabilities that
(49:30):
are seeming having an outsized scariness in my mind because
of the ambiguity involved? Like the example we talked about
earlier with people being afraid to try new experiences because
there's some amount of ambiguity.
Speaker 1 (49:42):
Yeah, absolutely. Again, there's always ambiguity in any new experience.
There's so many ways it could go wrong, but there
are so many ways it could go right. A lot
of us do tend to focus more on the ways
it could go wrong.
Speaker 2 (49:53):
The devil you know is not necessarily better.
Speaker 1 (49:56):
Yeah, the devil you don't know could be really fun.
Give him a shot sometimes.
Speaker 2 (50:02):
The devil you know could be like a chaotic good devil.
Those are those exist, right? Are there some?
Speaker 1 (50:09):
You know, maybe under the new, it's possible under the
new rules, but.
Speaker 2 (50:12):
Maybe it's actually just a friendly tiefling that you give.
Speaker 1 (50:16):
There you go.
Speaker 2 (50:17):
There you go.
Speaker 1 (50:17):
You could have a chaotic good tiefling.
Speaker 2 (50:19):
There you go.
Speaker 1 (50:20):
It's entirely possible. All right.
Speaker 2 (50:21):
Well, that's going to do it for part one of
our look at ambiguity aversion, but we're going to be
back again next time to talk about how this applies
to some other domains of life and maybe some subsequent research.
I might get some into the different ways that the
ambiguity aversion observations have been interpreted in terms of different
(50:42):
types of decision theory, like is it an error or
is it actually a type of rationality that needs to
be better understood? So yeah, we'll talk about that kind
of stuff next time.
Speaker 1 (50:52):
Who knows what angles we'll actually discuss in the next episode?
You can tune in to find out. In the meantime,
certainly write in. We'd love to hear from you. And
we'd like to remind you that Stuff to Blow Your
Mind is primarily a science and culture podcast with core
episodes on Tuesdays and Thursdays, short-form episode on Wednesdays, and
on Fridays we set aside most serious concerns to just
talk about a weird film on Weird House Cinema.
Speaker 2 (51:14):
Huge thanks, as always, to our excellent audio producer, J.J. Posway.
If you would like to get in touch with us
with feedback on this episode or any other, to suggest
a topic for the future, or just to say hello,
you can email us at contact at stufftoblowyourmind.com. Stuff to
(51:36):
Blow Your Mind is a production of iHeartRadio. For more
podcasts from iHeartRadio, visit the iHeartRadio app. Apple Podcasts are
wherever you listen to your favorite shows.
Speaker 1 (51:51):
Thank you.
Hey, welcome to Stuff to Blow Your Mind. My name
is Robert Lamb. Today we have a Buffer Week Vault
episode for you. We are gathering our strength. We are
preparing for the October ahead, and we're going to try
and put out a whole lot of excellent Halloween content.
So get excited for that. And today we're going to
(00:26):
let you have it with The Devil You Know Part 1.
It originally published 8-26-2025.
Speaker 2 (00:32):
Let's do it.
Speaker 1 (00:36):
Welcome to Stuff to Blow Your Mind, a production of iHeartRadio. Hey,
welcome to Stuff to Blow Your Mind. My name is
Robert Lamb.
Speaker 2 (00:50):
And I'm Joe McCormick. And in today's episode, we're going
to begin a series in which we look at a
phenomenon studied in psychology, economics, and decision theory, which is
called ambiguity aversion. Ambiguity aversion is when we prefer risks
with known probabilities over risks with unknown probabilities. Even if
(01:13):
you have no reason for thinking that the unknown risks
will be worse than the known risks. And we'll get
to some concrete examples and foundational research on this in
a bit. But to an approximation, a good way to
think about this is that ambiguity aversion is the sentiment
expressed in the saying, better the devil you know than
(01:35):
the devil you don't. This is an aphorism I feel
like people often quote when they're about to justify making
a really bad or indefensible decision. And the whole point
of this saying is that the devil you know is
already bad. That's usually implied. And there's no indication that
the devil you don't know will be worse. It could
(01:56):
well be a kinder, gentler devil with a less pointy pitchfork.
But still, we often find ourselves thinking, I'd just rather
stick with the one where I know how pointy it
is up front.
Speaker 1 (02:08):
Yeah, it's often a form of indecision. Like, okay, I
refuse to do anything about the current devil situation. But,
you know, at least I know this devil. Next devil
could be worse. I don't want a worse devil.
Speaker 2 (02:20):
That's right. This is another one of those aphorisms. We
were talking about this just recently in the St. Swithin episode.
It's one of these aphorisms that I think is only
wisdom given certain assumptions or conditions that are not really
part of the saying. Like, as stated, it could be
purely terrible advice. Like, what if the devil you know
(02:41):
is really bad? Right. And what if going with the
devil you don't know gives you a really good shot
at improving your stay in hell? But also, I think
it does have a kind of wisdom if you don't
think of it as advice, but rather as an ironic
observation about human nature, in which case I think it's
sort of dead on. This is often how we think.
(03:02):
And that is the core observation also of the ambiguity
aversion literature.
Speaker 1 (03:07):
Yeah.
Speaker 2 (03:07):
Yeah.
Speaker 1 (03:07):
And I mean, because you can also also ask, well,
what if we just didn't have a devil? Is that
on the table? Can we just not have a devil?
Why do we have to worry about the devil we
have versus the devil we don't have yet? It's you know,
it can be. And I guess it's rather condemning of
human nature in that aspect as well, where the answer is, well,
you got to have a devil. We're humans. We make
(03:27):
our own and you've got to have one in play.
Speaker 2 (03:30):
You should have thought of that before you double parked, Rob.
Speaker 1 (03:32):
Yeah.
Speaker 2 (03:32):
Now you're here in hell with the rest of us.
Speaker 1 (03:34):
There's a rather keen Chinese saying that goes along these
lines as well. It's a well-known idiom that states that it's, quote,
easy to dodge the spear in the open, hard to
avoid a stab in the dark.
Speaker 2 (03:46):
Oh, that's interesting because, yeah, that's the same idea. Like,
it isn't necessarily true in all circumstances. Like, in the dark,
the person stabbing at you also can't see you very well.
So it might be hard to dodge, but it's also
hard for them to hit you. But in the dark...
You just don't really know. You don't really know what's
going on. So it just seems scarier. Yeah, absolutely.
Speaker 1 (04:09):
And it reminds me a bit of another Chinese saying,
better to be a dog in times of tranquility than
a human in times of chaos. And this has some
of the same sentiments as a 14th century Islamic saying
that is sometimes misattributed as being of Chinese origin itself.
And that is better a century of tyranny than one
day of chaos.
Speaker 2 (04:31):
Also don't know if I actually agree with that.
Speaker 1 (04:33):
Well, I don't know. I think about it a lot
for various reasons. And I do agree with the basic
sentiment of it when you find yourself dipping into chaos.
And I'm not talking about like capital C chaos, like
absolute chaos, but these little moments of chaos and disorder,
(04:56):
you can easily line yourself up with the idea of like, well, yeah,
this is why people you know, fall for tyranny. This
is because they have these moments of chaos and uncertainty,
and they're like, well, I would just rather have this
sort of known top-down oppression in place rather than some
sort of ambiguous chaos bubbling up around me.
Speaker 2 (05:16):
Better something that's definitely bad than something I don't understand
and can't predict.
Speaker 1 (05:21):
Yeah. Now, ambiguity and chaos, we should note here, are
not the same thing. Ambiguity is a lack of clarity,
while chaos is a state of disorder. And the former
may well lead into the other. And chaos may be
seen as a state of absolute ambiguity and uncertainty as well.
So in that respect, it becomes even more difficult when
(05:41):
we try and weigh chaos and ambiguity in our concerns
about the future.
Speaker 2 (05:46):
I was trying to think of familiar everyday examples of
ambiguity aversion. And I think I came across one internally
in the now commonly acknowledged sentiment of not wanting to
go out and try anything, you know, that, so like, um,
do you ever find yourself trying to find a way
(06:07):
to avoid going through an experience that is new and
unfamiliar and thus unpredictable to you? So it seems like,
I don't know, it just seems kind of fraught like
a hassle. And instead of doing that, choosing to have
an experience that you pretty much know that you will
probably not enjoy.
Speaker 1 (06:24):
Uh, yeah. Yeah, I think I know what you're saying here. Yeah,
I mean, life is perpetually a situation where it's like,
am I going to stick with what's comfortable or am
I going to say yes to adventure? Am I going
to try something new? And I often find myself at
(06:45):
the crossroads of that moment because there's a huge part
of me that doesn't want to try new things. And
I get anxious about the various experiences aligned with those
kinds of quests. But on the other hand, I have
to recognize that most of the really fulfilling things in
my life have been because I said yes to adventure
and because I took a chance on something and I
(07:08):
went out of my comfort zone. But then again, we
call it our comfort zone because it is comfortable. It
is a nice place. It is a comforting place. So
it's give and take.
Speaker 2 (07:19):
Yes, I think that's absolutely correct. But I think the
really weird thing is that sometimes your, quote, comfort zone
isn't comfortable. I mean, sometimes we prefer... an experience that's
not even very nice. It's just like something that we
know we won't like, but it's just, you know, it's familiar.
We at least know what we're getting with it over
something that is just question marks. Right, right.
Speaker 1 (07:40):
We'll choose a known okayness over a potentially amazing experience.
Speaker 2 (07:46):
So, One of the most important early writings on ambiguity
aversion is a classic paper in the Quarterly Journal of
Economics from 1961 by the American economist, whistleblower, and political
activist Daniel Ellsberg. The paper was called Risk, Ambiguity, and
the Savage Axioms. That's Savage with a capital S. That's
(08:09):
a person's name. It's not describing the axioms as savage.
And just to go ahead and mention it now, because
I also use this as a source in writing about
Ellsberg and this paper's impact. I was also reading a
paper called Ambiguity and Ambiguity Aversion in the Handbook of
the Economics of Risk and Uncertainty. This is by Mark J.
(08:31):
Machina and Marciano Siniscalchi, published by North Holland in 2014.
This is a sort of general overview of the concept
of ambiguity aversion and a survey of a bunch of
different models of it. Now, before we get into the
idea that Ellsberg explored in this very important paper, Rob,
you had a bit of bio on Ellsberg, didn't you?
Speaker 1 (08:52):
Yeah, yeah. Daniel Ellsberg, quite an interesting fellow, lived 1931
through 2023. In addition to Ellsberg's paradox, which we're getting
into here, He is he's also famous, perhaps more so
in a general sense, as the Rand Corporation employee who
photocopied and released what would come to be known as
(09:13):
the Pentagon Papers. This is a United States Department of
Defense history of the U.S. 's political and military involvement
in Vietnam from 1945 through 1968.
Speaker 2 (09:24):
The key point being that Ellsberg believed that getting these
papers out there was important in informing the public about
things that they didn't know about how the Vietnam War
was being prosecuted and represented. Right, right.
Speaker 1 (09:36):
It was very much a whistleblowing act on Ellsberg's part.
And these papers were published by The New York Times
in 1971. This would be a decade after the publication
regarding the Ellsberg paradox. And yeah, they detailed secretive elements
about the scope of the U.S. military efforts in Vietnam,
the real sticking points being the deception involving the Gulf
(09:59):
of Tonkin and unreported expansion of the war, the true
objective of the war post-1965, which basically was more about
containing China and preventing a humiliating U.S. defeat rather than
any specific objectives to help the people of Vietnam, and
the lack of a clear plan for victory as well.
(10:20):
So I imagine a lot of you have at least
heard of the Pentagon Papers, even if you're not familiar
with the full story, because this incident, this led to
conspiracy and espionage charges against Ellsberg that were then later dismissed,
greatly fueled the anti-war movement, as well as distrust in
the government at the time, and led to the Nixon
(10:40):
White House's use of the infamous White House plumbers to
discredit Ellsberg. And of course, all of this ends up
feeding into the Watergate scandal, which is another one of
those major historical touchstones from the time period that, again,
if you're not super familiar with Watergate, you've at least
heard of Watergate and you've heard about the other, you know,
different gates out there that allude back to what a
(11:03):
scandal it was.
Speaker 2 (11:05):
Now everything gets a gate suffix.
Speaker 1 (11:07):
Right. No matter how deserving or undeserving. Now, Ellsberg remained
an outspoken activist and whistleblower throughout his life, particularly regarding
the U.S. 's military actions under multiple presidents, including the
current one, the Russian invasion of Ukraine, and also in
support of various other whistleblowers. He was a vocal opponent
(11:28):
of the use and the threat of nuclear weapons and
the rhetoric around their use. And he is sometimes described
as a nuclear war planner turned nuclear war activist. And
his work at the Rand Corporation, did involve such contemplations.
Speaker 2 (11:44):
Yeah, I think a big part of his pitch in
his anti-war and anti-nuclear weapons activism was like, look, I've
been there where the power players are executing, you know,
global military and nuclear strategy. You should be worried. This is,
things are not okay.
Speaker 1 (12:01):
Yeah, one of his major overarching criticisms of nuclear weapons,
and I feel like we're probably preaching to the choir
on this one. I can't imagine we have any big
nuclear war fans out there. was that their use as
a deterrent, one of the major positive spins that are
often given about having a vast nuclear arsenal, this idea
(12:21):
of the nuclear deterrent was itself highly unreliable and unstable.
There were simply too many variables, human, technological, situational, that
could lead to not only catastrophic, but existential unintended consequences.
Speaker 2 (12:35):
Yeah, too many ways for it to go wrong. And
if it does go wrong, the consequences are too great.
Speaker 1 (12:41):
By the way, Ellsberg has been portrayed, I believe, twice
in major motion pictures, once by James Spader and once
by Matthew Rhys.
Speaker 2 (12:57):
So coming back to the Ellsberg paper from 1961, again,
that's Risk, Ambiguity, and the Savage Axioms. This is the
really important one. I looked it up. I think it
had like, I don't know... like tens of thousands of citations.
This is like a very, very famous and influential economics paper.
In this paper, he illustrates the idea of ambiguity aversion
(13:19):
with a number of thought experiments, and this is one
of them. So this is the three-color urn. Imagine that
there's an urn, like a jar, that is filled with
90 little ping pong balls that are a mix of
different colors. You cannot see inside the urn. It's opaque.
But you're going to play a game where you reach
(13:41):
into the urn and you pull out one ball at
a time. And you can win prizes based on the
color of the ball that you pull out. You know
that 30 of the balls inside the urn are red.
So since 30 out of 90 are red, there's a
1 in 3 chance that a random ball is going
to be red. The odds there are pretty clear. The
(14:01):
other 60 balls, however, are a mix of yellow and black.
And here's the really important part. You don't know the
composition of that group. So those 60 balls could be
30 yellow and 30 black. It could be 60 yellow
and 0 black. It could be 60 black and 0 yellow,
or any mix in between. Since you don't know the mix,
(14:24):
you don't know the probability of drawing a yellow ball
or a black ball ahead of time. For red, it's
1 in 3. For either yellow or black, it's question marks,
anywhere between 0 and 2 out of 3. Now imagine
it is your turn to draw a ball out of
the urn, and you can take one of two bets.
Bet A, you get $ 100 if your ball is red.
(14:47):
So if you pick this option, your chance of winning
$ 100 is 1 in 3. In bet B, you get
$ 100 if your ball is black. Since you don't know
the mix of yellow and black, You don't know your
odds of winning, but they are somewhere between 0 and
2 out of 3, with the midpoint being 1 out
(15:08):
of 3, which is the same as the odds on red.
Which one do you pick?
Speaker 1 (15:13):
Well, it sounds like bet A is the truer thing, right?
Speaker 2 (15:17):
If somebody offered me this game, I would probably pick
bet A. Yeah, it just seems safer. It's like, OK,
I know what I'm dealing with there, 1 in 3.
The other option, your odds could be better than 1
in 3, but you just don't know.
Speaker 1 (15:29):
They could be worse. It could be zero.
Speaker 2 (15:31):
They could be worse, could be better. You have no
way of knowing either way. Ellsberg suggested, and later experiments
would empirically demonstrate, that most people would bet on red
instead of black, even though there is no objective reason
to think that red is a better bet. Following the
pick red strategy will not necessarily earn you more money
(15:54):
in this game, but people really do, in fact, just
like it better to pick red. It feels right. That's
just what we think we should do. That in itself
is kind of weird and interesting. Like, why do we
prefer to avoid ambiguity even when there is no clear
advantage in doing so? Then there's a really interesting wrinkle.
(16:14):
Imagine you're playing the same game. You are drawing a
ball out of an urn. And this time you're given
assurance that the mix of the balls is the same
as it was the first time. So whatever was the
case with With the mix of yellow and black in there,
it's going to be the same as it was with
your last draw. And you get a chance to make
a second bet. You can take either bet C, where
(16:37):
you get $ 100 if the ball drawn out is either
yellow or red. And this one has an unknown chance
of winning because, of course, you don't know how many
yellow or black balls there are. You know that your
chance of winning is somewhere between 1 and 3 if
there are, you know, the 30 red balls and 0
yellow balls, or 100% if there are 60 yellow balls.
(17:00):
Or you can take bet D, where you get $ 100
if the ball is either yellow or black. This one
has a guaranteed two-thirds chance to win, because we know
that together yellow and black make 60 of the 90 balls,
though we don't know what the mix is. In this
second trial... People will tend to pick bet D, once again,
(17:21):
because the probabilities are known. With D, it's a guaranteed
two-thirds chance to win. With bet C, it's somewhere between
1 and 3 and 100%. Picking bet D allows them
to avoid placing bet C, which has ambiguous chances. Here's
the really interesting thing that Ellsberg pointed out. There's actually
(17:44):
a contradiction in people's behavior between between the first and
second round of this game. Assuming you are actually doing
your best to win the money, in round one, if
you bet on red instead of black, that implies you
believe that less than 30 of the unknown 60 balls
are black, right? That implies that red has a better
(18:06):
chance of winning. So less than half of them have
to be black. However, in the second round, if you
take the second option, picking yellow and black, it implies
that you think that more than 30 of the unknown
balls are black. Otherwise, the red and yellow combination option
would have the better chance of winning, right? These two
(18:27):
bets in combination make no sense because they imply self-contradictory beliefs.
It says that I believe that more balls are black
and less balls are black at the same time. Obviously,
that can't really be the case. But there could be
another issue driving this behavior, which is simply that people
(18:50):
don't like ambiguity and they will pay up for known odds,
even if doing so implies mutually exclusive assumptions. I was
trying to think, you know, as I said a minute ago,
I think I would probably pick red if given the
option to play this game. Obviously, I sort of already
knew the deal here, so I can't know what I
(19:10):
would do going into it blind like most people. But
I think I would, for no rational reason, prefer the
uncertainty-reducing options. I think the most likely reason for that is,
even if I were given assurances that this game was
on the up-and-up, I would suspect some kind of trick. Like,
if I'm being asked to bet on uncertainty, there's some
(19:33):
part of me that just kind of rises up and says, uh-uh,
there's a scam here that you are not seeing.
Speaker 1 (19:39):
Yeah, yeah. I mean, you'd kind of expect that within the...
constraints of a testing environment, and you'd definitely expect that
out of the world. Whatever form this was taking, you'd
assume that somebody had a vested interest in manipulating how
you were going to behave to the, how you're going
to respond to the two possibilities.
Speaker 2 (19:58):
Yeah. Ellsberg also in this paper, by the way, he
came up with a second illustration of the same principle.
So if you go reading about this You'll read about
the three-color urn and then the two-urn experiment. The second
illustration used two urns instead of one because it made
the contradiction between the different bets even clearer. And this
self-contradictory behavior is now called the Ellsberg paradox. Ellsberg himself
(20:24):
didn't call it that. That's what other people, they put
his name on it. Anyway, Ellsberg's paper about ambiguity aversion says,
was not just about observing a weird little quirk of
human behavior. It was especially of interest to the fields
of economics and decision theory, modeling how people make decisions,
(20:46):
because it sought to undermine some of the major underpinnings
of the fields, specifically providing evidence against some of the
tenets of a framework called Subjective Expected Utility Theory, or
Savage's Axioms, named after the American mathematician Leonard Savage, who
formulated them. Subjective Expected Utility Theory, or SCU theory, is
(21:11):
a way of modeling how people make decisions when we
don't have perfect or complete information, which of course in
life we rarely do, right? So, you know, this is
going to be relevant in understanding how people behave in
most real-world situations, most situations in life are not a
casino table game where you have known odds of winning.
Speaker 1 (21:33):
That's right. Or, you know, or, you know, you can
easily imagine to a situation where you're, you're playing some
sort of a game, be it a tabletop role playing
game or some sort of like a, you know, video game.
And you're given a choice between two items for your character, right? You,
you have the stats of those items right there. You know,
what kind of enemies you go up against in the game.
Maybe you've played through the game before you have something
(21:54):
at least approaching perfect knowledge. of a simplified world, and
our real world is not so simplified, and there are
so many variables to it.
Speaker 2 (22:03):
Exactly right. So the real world, we're constantly dealing with uncertainty,
ambiguous situations where we don't have all the information to
judge what outcomes are most likely, and yet somehow we
navigate this world making decisions all the time. The question
being addressed here is, how do people make those decisions
when they don't actually know what the relative likelihood of
(22:24):
different outcomes are? Subjective expected utility theory has several rules,
but a simplified version is that it says even when
people don't know the objective likelihood of an outcome, they
form beliefs about how likely that outcome is. And then
they act consistently with those beliefs in order to maximize
(22:47):
their personal benefit. I came across a passage by the
American economist Frank Knight, which I think summarizes this idea well.
Knight writes, quote, We must observe at the outset that
when an individual instance, i.e. a one-time event, only is
at issue, there is no difference for conduct between a
measurable risk and an unmeasurable uncertainty. The individual, as already observed,
(23:12):
throws his estimate of the value of an opinion into
the probability form of A successes in B trials, A
slash B being a proper fraction, and feels toward it
as toward any other probability situation. So we essentially, we
form a belief or a feeling about how likely something is,
(23:34):
and then we act as if that was like, you know,
that we know the odds of a coin flip coming
up heads are one in two, whether or not we're
actually right about those feelings or beliefs. Ellsberg used the
principle of ambiguity aversion to say, actually, no, people do
not always behave as if they have consistent beliefs about
(23:55):
what is more or less likely to happen. And you
can prove this because they make bets that would imply
self-contradictory beliefs in the same situation, meaning they either don't
actually have or act on consistent beliefs about a situation,
or they don't always act to maximize their own monetary benefit.
(24:17):
Ellsberg's point here was that we can have obscure previously
unacknowledged motivations like the desire to avoid dealing with ambiguity.
And that particular desire is so strong in some cases
that it overrides our consistent thinking and a simple dollar
value understanding of rational self-interest. Uh, and by the way,
(24:41):
the technical name of the savage axiom that Ellsberg was
attacking here was it's called the sure thing principle. Uh,
Another thing to understand about Ellsberg's paper was that he
was arguing that we need to make a stronger distinction
between two different concepts. Those are risk and ambiguity. Ellsberg
(25:02):
used the definition that risk is when we have a
stake in an outcome and we know the theoretical likelihood
of that outcome. So this is like the casino games
or a coin toss. A fair coin toss is 50-50.
We know what the outcome likelihood is and we can
take a risk. A fair die roll is one in
six to get a particular number. Ambiguity is when we
(25:25):
don't have an objective way of knowing what the probability
of our desired outcome is. To Ellsberg, ambiguity was, quote,
the nature of one's information concerning the relative likelihood of events,
a quality depending on the amount, And so it's worth
(25:50):
noting that you can have confidence or even what feels
like certainty or act as if you have confidence or
certainty without actually being correct. You can go through life
having high confidence in objectively low probability things. One of
the actually really useful things about SCU theories, the subjective
expected utility theory, was that it made things simple and
(26:13):
easier to understand because it treated risk and ambiguity the same.
So a person making bets on a die roll will
know that the probability of rolling a specific number is
one in six and they will behave accordingly. And a
person who has a stake in an outcome with an
unknown probability will, according to Savage's axioms, mentally, even subconsciously,
(26:38):
form an internal belief about the probability of that outcome.
So example is you imagine there is a one in
four chance it's going to rain today. That might not
have anything to do with reality, but you just take
that belief on. And you behave as if that is
that you make all of your decisions based on that belief.
(26:59):
They will act according to that belief the same way
they would act to knowing that a coin flip is 50-50.
And Ellsberg argued, no, that is not how we make decisions.
SCU theory with Savage's axioms failed to account for other
complexities in human behavior. For example, our deep desire to
get away from ambiguity. We don't like ambiguity so strongly
(27:23):
that We will make decisions that imply self-contradictory beliefs just
to avoid it. Now, there have been a lot of
arguments over the years about how to interpret ambiguity aversion.
Is it actually rational in ways that were not previously recognized?
Or is it more like some kind of systematic error
(27:43):
or cognitive bias? We might come back and revisit that
debate in the subsequent part of the series. But we've
got a couple other things we wanted to talk about today. First, Rob,
I know you have a really interesting place you want
to take this. But first, I wanted to mention the
idea just of experimental confirmation, because one important thing to
(28:04):
understand is that Ellsberg's original paper did not have an
experimental component. It was a thought experiment. And he realized
the phenomenon needed to be tested with real human subjects.
In the decades since his paper, it has been tested many,
many times, many different ways. And generally, it has proved robust.
There are some nuances and exceptions, but generally people behave
(28:28):
the way Ellsberg predicted they would. A majority of people
structure their choices to avoid ambiguity, even when there's no
clear objective benefit to doing so. And they even make
bets that would imply against self-contradictory beliefs, according to SCU theory.
if those bets can get them out of dealing with
ambiguous probabilities. So I don't have to mess with that.
(28:52):
Regarding those experiments, my main source here is, again, that
survey article by Machina and Siniscalchi. Again, that's Ambiguity and
Ambiguity Aversion from 2014. The authors here list a whole
bunch of experiments where people... carried out versions of like
the three color urn or this other experiment that Ellsberg described,
(29:14):
the two urn experiment. They list Fellner in 1961, which
found that people would rather take 50-50 odds than unknown odds,
which could be better or worse. They also cite Becker
and Brownson, 64, McCrimmon, 68, Slovik and Tversky from 1974,
Curley and Yates from 89, among others. all generally finding
(29:36):
confirmation of Ellsberg's predictions about ambiguity. aversion. Quote, Although most
of these experiments use students as subjects, researchers such as McCrimmon, 65,
Hogarth and Kuhnreuther, 89, Einhorn and Hogarth, 86, Viscousi and Chesson, 99, Ho, Keller,
and Kelticke, 2002 and Mafioletti and Centauri 2005 have examined
(30:01):
the ambiguity preferences of business owners, trade union leaders, actuaries, managers,
and executives with the same overall findings. So it appears
quite robust. The authors here also report some interesting findings
of McCrimmon and Larson from 79, which they looked into
it and they found that while the majority of people
(30:23):
did try to avoid ambiguity, some minority of people did
not and even just chose to embrace it. They also found,
as you might expect, that our relative tolerance for ambiguity
went up or down depending on how good the known
odds were in the known odds bet condition. So, for example,
(30:44):
if you do this three-color urn experiment, if you take
the number of red balls, that's the ones where you
know how many there are, if you take that down
to zero or even just down to five or ten,
Most people will take the gamble with the unknown odds
on yellow and black because the odds on red are
clearly very bad. If you make the odds on red
really good, even more people will stick with the known
(31:06):
odds and ambiguity aversion becomes even stronger. So that shouldn't
be all that surprising. But yeah, in the middle category
where the odds on red are somewhere in between good
and bad. you're just kind of like, I don't know,
but still people tend to go for the known odds
rather than the unknown odds. However, the authors also found
(31:26):
that even when the idea of subjective expected utility and
choice consistency was explained to the people doing this experiment,
explained to the subjects, or even in cases where the
known odds were bad, some subjects just stubbornly stuck to
red and avoided betting on any ambiguous conditions so most
(31:50):
of us seem to dislike ambiguity in in the majority
of cases and some of us just don't like it
at all and will not tolerate it now as is
often the case with uh stuff in decision theory and,
(32:13):
and economics and stuff, you start off playing these little
like gambling games with like balls in a jar or
something like that. And so it seems like, well, how
consequential could this really be? But actually I think you
can take the idea of ambiguity aversion to, uh, to
number one, it has been applied to very consequential situations
in real life and thus understanding it can have major consequences,
(32:36):
not only for people's individual lives, but for world events. Yeah.
Speaker 1 (32:40):
That's right. And that brings us back to Ellsberg, who, again,
in addition to crafting this highly influential paper, was also
a highly vocal critic of nuclear weapons and, again, the
rhetoric surrounding nuclear weapons. And I was reading a good
bit from his book, The Doomsday Machine, which came out
(33:02):
in 2012, which is quite a good read if you
want a much deeper dive into his thoughts on all
of this. But In that book, the subject of ambiguous
data comes up numerous times. How will a nuclear power
react in response to ambiguous data about a potential incoming attack?
(33:23):
And additionally, it talks about the purported advantage of ambiguity
in intent slash response, namely in the case of madman theory.
This is very closely associated with Richard Nixon, but also
tied to various other figures, domestic and international, including the
current U.S. president, a kind of supposed perceived madness or
(33:48):
volatility that would lead adversaries to second guess any plans
to move against them.
Speaker 2 (33:54):
Right. And we're going to get to some major criticisms
of the madman theory strategy in a bit. But the
idea of it is that you can leverage a reputation
for unpredictability to your advantage in negotiations.
Speaker 1 (34:09):
That's right. You know, this is very much the nobody
knows what I'm going to do approach. That's the message
you put out there. And the idea, part of the
idea here is that it makes logically empty or extreme
threats seem more possible.
Speaker 2 (34:23):
Yeah.
Speaker 1 (34:24):
Now, madman theory, we should point out, is a term
that Nixon even used himself when talking about this approach.
It was outlined by Daniel Ellsberg and Thomas C. Schelling
as well. But the basic concept Pretending to be erratic, irrational,
or unhinged to influence the other side of a bargaining table,
this goes back a long ways. Machiavelli wrote about it
in 1517, and it's probably as old as the first
(34:46):
prehistoric human to, like, go around hitting trees randomly with
a club, you know, and say, who knows what Thrag
is going to do? Why would you mess with Thrag
on this?
Speaker 2 (34:56):
Yeah, we better just give Thrag what he wants.
Speaker 1 (34:58):
Yeah. So, again, the Ellsberg paradox highlights a core flaw
in human decision making, the aversion to ambiguity. The madman
theory as a political strategy seeks to exploit this by
cultivating a reputation of irrationality, creating an ambiguous threat. The
adversary and their aversion to this ambiguity and the unknown
(35:18):
risk of an unpredictable response may be coerced into backing down.
Or at least this is the idea. This is the
logic behind the approach.
Speaker 2 (35:28):
Yeah. The classic example of madman theory in practice in
real life is that the Nixon administration could, for example,
have Kissinger call up his counterparts in the Kremlin and say, look,
you know, we're all trying to calm Nixon down, but
he's boiling mad at you. He's borderline crazy. You've got
to do X, Y and Z. You know, you've got
(35:48):
to give him these concessions he wants or we don't
know if we'll be able to control him.
Speaker 1 (35:52):
Yeah, kind of a good cop, bad cop thing, too,
I imagine. Yeah.
Speaker 2 (35:56):
And this was a way of making I think a
big part of it was it was a way of
making the nuclear deterrent feel once again like it had
force in matters other than just deterring a first strike.
Because the problem with using nuclear weapons as leverage in
negotiation between two nuclear armed powers is obviously if the
(36:18):
weapons get used at all, everyone loses. There is not
a winner in mutually assured destruction. So if the White
House was trying to get the Kremlin to do something
like I'll nuke you if you don't do it, that
was not a credible threat because both parties knew that
the other party knows that war would be the destruction
(36:38):
of them both. So no rational actor would ever strike first.
Between rational actors, I'll nuke you if you don't do X, Y,
Z is an empty threat. The goal of madman theory
is is to gain leverage in negotiations by introducing some
amount of fear that your counterparty may not be a
rational actor. He might be crazy enough to do it.
(37:01):
We don't know. Therefore, the madman strategy makes direct use
of the opponent's ambiguity aversion as a tactic to get
leverage over them. The madman player in this game is
betting that the fear and uncertainty about how to handle
their unpredictability will cause their counterparty to make concessions they
(37:21):
might not make otherwise. Like, you end up thinking, well,
I'll just take a bad deal rather than wander into
territory with unclear levels of risk. Right, right.
Speaker 1 (37:31):
And not to derail the point here, but I want
to bring it back to Ellsberg's other criticisms of nuclear
weapons and the rhetoric surrounding nuclear weapons, that being there's
all these other uncertainty factors and ambiguous data that would
be coming in about what the enemy is or is
not doing. And therefore, any given situation like this is
going to be just wrought with with potential ambiguity, potential
(37:55):
missteps and potential mistakes. So, like, if it were only
as easy as we're laying it out here, it would
almost be a different situation.
Speaker 2 (38:03):
Totally. I mean, Ellsberg's point about the all of the
uncertainty in the actual command and control of, you know,
nuclear strategy like that's true. That introduces real levels of
existential risk into playing games like this. There are a
lot of reasonable criticisms of madman theory, but I think
(38:24):
a major one, at least from my point of view,
is that at best, it is a strategy for short
term gain at the expense of long term stability and
negotiating power, because one way or another. It undercuts your
credibility and your ability to be seen as an honest
and reliable broker in future negotiations, either because you come
(38:47):
to be seen as actually irrational, in which case people
don't want to deal with you and they will find
what they may be motivated to do something bad to
strike first to you because you're too dangerous to be
let loose, or they may try to find ways to
cut you out of negotiations. So that could be one consequence,
or just because you are revealed to have been bluffing,
(39:09):
in which case you lose your credibility.
Speaker 1 (39:12):
Right, right. And yeah, this is all valid. I was
looking at a couple of papers on madman theory. And
madman theory, like ambiguity aversion itself, is something that has
been written about a lot. There are no shortage of
papers out there. But I looked at just a couple.
I looked at one titled Cravings. Like a Fox, Are
Leaders with Reputations for Madness More Successful at International Coercion?
(39:35):
by Roseanne W. McManus. This came out in 2019 from
Cambridge University Press. And in this, the author points out
that a reputation for madness is would seem to be
more often harmful than helpful in international coercion. So it
undercuts the leader's ability to make believable peace commitments, treaties,
(39:56):
and so forth, which, and it really almost feels absurd
that we need to stress this, these are all vital
for peaceful relations between nations. No one knows what I'll
do easily slides into no one knows what I'll honor.
No one knows what treaties I will actually stand by
and so forth. You know, to bring this back to
Dungeons and Dragons, I think any D & D player
(40:18):
worth their salt knows that while you might well enter
into a pact with a lawful evil devil, you never
enter into a pact with a chaotic evil demon because
the lords of the nine hell are going to stick
to their letter of the contract, if not the spirit
of the contract. But demon lords such as the Demogorgon
will honor nothing. And there is no coherence even within themselves.
(40:38):
They're just pure ambiguity. And you can't strike any sort
of deal because they won't they won't stand by it
no matter what. Whereas the devils being lawful evil, they
may look for that wiggle room. They may find ways to,
you know, to avoid the spirit of the deal, but
they're still bound to the letter.
Speaker 2 (40:55):
Right. So if you think you discover that your counterparty
is actually just chaotic evil, all you can do is
roll for initiative. Like there's no making a deal.
Speaker 1 (41:04):
Yeah. And then you slide into chaos, pure chaos. McManus,
back to her paper, though, she found that Mad Men
theory may be helpful in crisis bargaining, but only under
certain conditions, namely when employed by military weak leaders. So
we're not talking about a true superpower here that can
engage in like true mutually assured destruction. Rather, we would
(41:27):
be dealing with a state that could do a lot
of damage, but in striking out would just thoroughly destroy themselves.
So the idea here is that no one would take
this hypothetical nation or the leader of this hypothetical nation
seriously unless they presented an air of madness. And then perhaps, hey,
(41:47):
they might do it anyway if provoked. They're unhinged. And thus,
it can be a form of asymmetric leverage. So we're
talking low probability but high consequence. Yeah. And McManus also
points out that there would also seem to be more
of an advantage if you had a mild reputation for
madness rather than an extreme one. You don't want to
(42:08):
come off like, you know, a complete Dada, you know,
eye rolling maniac in one of these cases. The idea
would be like, well, you know, we can we can
still get this individual to the negotiation table, but we
just have to be hypersensitive. And I guess, again, kind
of avoiding that complete fall off into chaotic evil demon
(42:30):
hood and instead dealing with devils that can still be
bound by some sort of law. All right. I have
a hypothetical example here. So we have demigodic hero Hercules
and we have his mortal cousin Eurystheus. And they're grabbing
lunch at the local Euro place.
Speaker 2 (42:47):
Great.
Speaker 1 (42:49):
So. So Eurystheus warns his cousin that if he tries
to steal any of his fries, he's going to flip
the table and all their food's going to wind up
on the floor. And he acts just really sensitive and
unhinged about the whole thing. Yes.
Speaker 2 (43:01):
Okay.
Speaker 1 (43:02):
Hercules obviously knows that Eurystheus can't take him in a
fight and might not even be able to flip that
table over before Hercules stops him. And rationally, Eurystheus should
realize this and just let Big Herc have a few
extra fries if he wants. Like, what does it matter?
But from Hercules' standpoint, does he really want to risk
(43:24):
his lunch winding up on the floor? Maybe he should
just let Eurystheus keep all of his fries.
Speaker 2 (43:29):
Okay.
Speaker 1 (43:31):
The downside, of course, here is that maybe Hercules just
won't invite Eurystheus out for lunch next time. And he's
certainly not going to pick up the check. And on
top of all that, how are they going to work
together to defeat the Hydra? Because as you'll remember from
past episodes and from Greek mythology in general, Hercules can't
do that on his own. He has to have his
(43:52):
cousin's help to burn the stumps after each head of
the Hydra is cut off.
Speaker 2 (43:56):
Very good points. I mean, apart from any otherwise moral
considerations or honesty considerations about deploying something like madman theory,
just from a strategic point of view, it seems like
it is probably best for situations where Like your counterparty
has to deal with you. It is not optional for them.
(44:18):
And you don't have to like or respect each other
or ever work together on anything. And you don't care
about long-term goals. You are only interested in this situation
right now in extracting a short-term advantage.
Speaker 1 (44:34):
That's right. That's right. But some papers out there that
have crunched the numbers on all this and done some experimentation,
questionnaires and so forth, Do acknowledge that, you know, there
are multiple dimensions to any of these situations, namely, and
this is something I think everyone can relate to, like
you can have a leader that is engaging in an
international situation, but there is still the domestic view of
(44:59):
that situation. There's still the domestic response, the domestic relationship.
And so one of the papers that I was looking at,
this one is titled Madman or Mad Genius, the International
Benefits and Domestic Costs of Madman Strategy by Joshua A. Schwartz,
published in 2023 in Security Studies. And in this, the
author found that the madman approach can work in negotiations
(45:22):
with foreign adversaries, but, quote, entails significant domestic costs that
potentially erode its efficacy. He also points out that madman
theory may simply not work against major powers because while
it might, make a threat more credible that doesn't necessarily
make the threat more effective and make the adversary willing
to cave to those demands. So he points out that
(45:44):
this is perhaps why Nixon's use of madman theory didn't
work against the Soviets. Like, okay, it made Nixon's threat
more credible, but did it actually make it more effective?
Did he actually get what he wanted to out of
these bluffs, these threats? And then you have the domestic
side of things. With the hypothetical leader's own citizens not
(46:06):
loving the heightened stakes because, you know, obviously, I mean,
I say obviously, but this is one of those things
that we often have to be reminded of in a
case of mutually assured destruction or even a case of
asymmetric exchange involving nuclear weapons or some other kind of just,
you know, horrible weapon of mass destruction. A leader is
always bargaining with the lives of their own citizens. You
(46:29):
are the chips on the board in a no one
knows what I'll do wager. Yeah. And the author also
notes that, OK, you know, this is going to also
differ depending on how much of a voice the people
have in a given nation versus how much power the
ruler has. There's going to be less backlash in places
where the people have less of a voice and the
ruler has more absolute power.
Speaker 2 (46:49):
That's right. But one thing I did want to clarify
is that the sense in which you are the chips
on the board and no one knows what I'll do
wager is. is true is not just limited to like
the worst possible scenario, like nuclear warfare. I mean, it's
also the case in say like trade negotiations or something
like that. Like your economic prospects are in a way,
(47:12):
those are the chips on the board. Like the, the,
the citizens fates and futures are the things that are
being negotiated with. That's right.
Speaker 1 (47:20):
Yeah. In, in, in contemplating potential nuclear exchanges, everything is
a bit more stark and a bit more black and white,
but obviously, you know, any, You can think of any
number of scenarios where the stakes are still quite high
for the individual.
Speaker 2 (47:35):
So, yes, it's not hard to see at all why
a citizenry can easily become upset and annoyed if their leader,
who's supposed to be representing their interests in negotiations, is
acting unreliable and unpredictable. The leader may think that they
can get good gains out of that in the short term,
but the citizens are probably thinking about a lot of
these Even if not, you know, thinking specifically about them,
(47:58):
just thinking intuitively about there seems like there's a lot
of downside to this. Yeah.
Speaker 1 (48:03):
And again, coming back to what we mentioned earlier, the idea, too,
that by constant, if you swing around this, the sword
of madman theory too much, then it makes it more
difficult to engage in the other highly important tools of statecraft,
peace treaties and agreements and so forth. So it's like
(48:23):
you can only swing that sword around for so long.
And then you have to be able to engage in
these other acts as well. Again, short-term gain with madman theory,
not so in the long term. But, you know, unfortunately,
this ends up rolling out into so many things about
human experience and human perception is that we are so
(48:45):
focused on the short term and we don't think about
the long term.
Speaker 2 (48:48):
So we've just been talking about a lot of reasons
that it might actually be bad and not as clever
as it first seems. to try to leverage knowledge of
ambiguity aversion offensively in negotiations. But I think one way
that it can definitely be useful is to have knowledge
of ambiguity aversion to use defensively, to think about in
(49:09):
analyzing your own behavior and being aware of your bias
to avoid ambiguity and sort of check yourself and think like,
wait a minute, am I actually making the right decision here?
Is this actually what's rational or am I just having
a an irrational bias against situations with unknown probabilities that
(49:30):
are seeming having an outsized scariness in my mind because
of the ambiguity involved? Like the example we talked about
earlier with people being afraid to try new experiences because
there's some amount of ambiguity.
Speaker 1 (49:42):
Yeah, absolutely. Again, there's always ambiguity in any new experience.
There's so many ways it could go wrong, but there
are so many ways it could go right. A lot
of us do tend to focus more on the ways
it could go wrong.
Speaker 2 (49:53):
The devil you know is not necessarily better.
Speaker 1 (49:56):
Yeah, the devil you don't know could be really fun.
Give him a shot sometimes.
Speaker 2 (50:02):
The devil you know could be like a chaotic good devil.
Those are those exist, right? Are there some?
Speaker 1 (50:09):
You know, maybe under the new, it's possible under the
new rules, but.
Speaker 2 (50:12):
Maybe it's actually just a friendly tiefling that you give.
Speaker 1 (50:16):
There you go.
Speaker 2 (50:17):
There you go.
Speaker 1 (50:17):
You could have a chaotic good tiefling.
Speaker 2 (50:19):
There you go.
Speaker 1 (50:20):
It's entirely possible. All right.
Speaker 2 (50:21):
Well, that's going to do it for part one of
our look at ambiguity aversion, but we're going to be
back again next time to talk about how this applies
to some other domains of life and maybe some subsequent research.
I might get some into the different ways that the
ambiguity aversion observations have been interpreted in terms of different
(50:42):
types of decision theory, like is it an error or
is it actually a type of rationality that needs to
be better understood? So yeah, we'll talk about that kind
of stuff next time.
Speaker 1 (50:52):
Who knows what angles we'll actually discuss in the next episode?
You can tune in to find out. In the meantime,
certainly write in. We'd love to hear from you. And
we'd like to remind you that Stuff to Blow Your
Mind is primarily a science and culture podcast with core
episodes on Tuesdays and Thursdays, short-form episode on Wednesdays, and
on Fridays we set aside most serious concerns to just
talk about a weird film on Weird House Cinema.
Speaker 2 (51:14):
Huge thanks, as always, to our excellent audio producer, J.J. Posway.
If you would like to get in touch with us
with feedback on this episode or any other, to suggest
a topic for the future, or just to say hello,
you can email us at contact at stufftoblowyourmind.com. Stuff to
(51:36):
Blow Your Mind is a production of iHeartRadio. For more
podcasts from iHeartRadio, visit the iHeartRadio app. Apple Podcasts are
wherever you listen to your favorite shows.
Speaker 1 (51:51):
Thank you.
Stuff To Blow Your Mind News
Hosts And Creators
Robert Lamb
Joe McCormick
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Bobby Bones Show
Listen to 'The Bobby Bones Show' by downloading the daily full replay.