There’s one player who hasn’t been mentioned, the House. He truly sets the rules of the game. He’s not involved in just trying to turn a profit, but to make sure that the game keeps going. And let’s expand the game: it’s not just one table, it’s 500 of them. There are only 5 or 6 Whales, but they’re each playing simultaneously at multiple tables, so there’s one Whale at every table. What’s more, the Whales have one private table, where they’re betting only with each other.
At that private table, even a couple of the Whales got into trouble. They were passing around IOU’s from the players at the smaller tables, and trading many multiples of what they actually had. When it came time to pay, they couldn’t collect from all of the players they’re busting out at the smaller tables, and so they couldn’t pay their own IOU’s. They go to the House. The House gives them some more credit – a few chips to stay liquid in the Whale game while they wait to earn the money back from the smaller games (where they have such a built-in edge). Eventually they do get liquid again, and they pay back the House.
The players at the smaller table? They’re wondering why they don’t get the same deal. Of course, if any single one of them gives up and leaves, it’s not going to bring down the entire room, so the House disregards them. But collectively, they can say “What the fuck, you bailed out the Whales, why can’t we get a little help? If we bust out, our only option is to go deeper into debt, and on such lousy terms that it keeps us from ever having any hope of getting ahead.” That’s OWS.
The house, obviously, is the government. There are a lot of things that the house can do. For one, they can recognize that the blinds are way too high, so they can alter the way the chips are valued. Keep the blinds at $1000, but let’s make all of the chips you have worth 10x as much. Now you have $10k, and the Whale has $5 Million. You have better risks (because the blinds are comparatively lower, but they’re lower for everyone). You past debts to the Whale? Well, they’re still what they were – but you have a better shot at paying them off.
This is what the effect inflation would have on our situation right now.
OK, maybe that’s not the perfect solution. Let’s try something else.
Some of their tables are falling apart – so the House offers a deal to a bunch of the guys who are busted out of the game “build us some new tables, and we’ll give you $20,000 in chips to play. That’s what the stimulus is. Paying for things you need anyway, at a time when the influx of chips will help the game.
Heck, some players are busted out but because they had to borrow so much to play in the first place, they can’t ever get to a point where they don’t owe more than they have. The House says “Tell you what. I’m going to talk to the Whale, and we’re going to tell him that you’ll give him a fraction of what you owe, and he wipes the slate clean.” This is Bankruptcy – an option that’s increasingly being taken off the table in real life (ie. non-dischargeable student loan debt, or credit card debt with the 2004 bankruptcy reforms.)
Now, to see where the criticisms of OWS are coming from, let’s add one more player to these game, we’ll call him the fish. He started playing ages ago. He sat down to the table with $1500, and the blinds were only $30, maybe there was a whale at the table, but it was a lot smaller at the time, and the rules didn’t favor the whale as greatly. Maybe he played a low risk strategy, maybe he got lucky. Most of the people he started with are gone (he assumes it’s because he’s better than them, most of us can recognize that that may not be entirely the case, but we’ll even grant that).
So now he’s sitting there with a sizable pile in front of him. The blinds have increased over time, to $1000, but he’s managed to increase his stake to something along the lines of $10,000, and only owes $2000 of that to the $500,000 whale sitting at the head of the table. Everyone else? They’re kids just joining the game, with $2000 each, all borrowed from the Whale, and almost guaranteed to go belly up within the next few hands.
He’s sneering at the new kids, as though they’re doing something wrong “I managed to survive, and I had less money than they did when I started, they should just make things better for themselves like I did.” It’s a particularly ironic statement, because it fails to appreciate just how close the fish is to being busted himself. He sees a qualitative difference between himself and the new crop of players, confusing survivorship bias with skill. He thinks he’s closer to the whale than he is to the new guys, and sympathizes with him, when he’s about 2 unlucky decisions from being knocked out as well. If you can’t see the sucker at the table, it’s probably you.
Most of the criticisms I see of OWS are along the same lines – “Just don’t make bad decisions in the first place and you wouldn’t have to worry.” The problem with these criticisms is the source. Even just 20 years ago, the costs of entry were different – education, housing, etc. Tuition has skyrocketed, and at the same time, there has been a push to reduce government grants and scholarships, so that students are increasingly dependent upon loans. You have to borrow just to get in to the game, giving up your winnings before you even start. In our example, this is the equivalent of raising the blinds faster than the participants can account for with their own bankroll, and the criticisms are mostly coming from people who played with much lower blind bets, or got lucky cards on the few times that they’ve had to bet. The critics myopically see their own situation, and can’t imagine that the risks and odds for someone else may have been substantially different.
What’s happening at OWS is that you have a large segment of society that has been participating in this unfair game, and they’re pointing out that it’s not working. That it is designed such that the winners will continue to win, and everyone else has bad odds – even the fish who are mocking them.
No, I don’t believe that all of the participants understand all of the rules of the game stacked against them, they just see the fundamental unfairness. But those who are sneeringly dismissing them understand even less – because not only do they not appreciate the rules of the game, they haven’t been screwed over by those rules, so they remain blind to the unfairness – whether passively naïve, or willfully dense, it’s the same outcome.