Be Civilized …

Want to know the secret of success in today’s civilized world?

Be civilized. More on that in one moment …

First, we note that the Dow hit a new record high on Tuesday of 17,688, after rising 40 points. And gold was just a buck shy of the $1,200-an-ounce mark. It appears to have bottomed out. Time will tell.

Remember that gold is not an investment. It is money – the best money. You keep some on hand; you never know when you may need it.

Now, back to the secret of success …





The Prisoner’s Dilemma

In 1962, Robert Axelrod was still a student. But he had access to the University of Michigan’s only computer – a primitive, clunky machine. Students were just starting to figure out what to do with computers. And Axelrod’s idea was to program it to play a game.

The game was meant to resolve what is known as the prisoner’s dilemma. You and a friend get busted for drugs. If you keep your mouths shut, you will both walk away. But if one of you rats out the other, the snitch will go free and the other will do time. If you both turn on each other, both of you will do time … but probably not as much, since you have both cooperated with the prosecution.

You are in separate cells being sweated by the cops. What to do?

The question is not just theoretical. In many situations – business and personal – you have to make a decision about what to do. Are you nice to the people you deal with? Or do you look out for No. 1, regardless of the consequences to others?

In a divorce, for example, do you try to get the most you can get? Or do you work together for the best outcome for both of you? What’s the best strategy?

A subculture of logicians arose trying to answer this question. Inevitably, the geeks were pulled into action. Axelrod developed computer algorithms to model the choices.

One was always nasty (which he called “Lucifer”). One was always nice (which he called “Jesus”). Others were more complicated. The game was played over and over again, allowing the programs to modify their behavior depending on the reception they received.


prisoners_dilemmaThe classical prisoner’s dilemma example


How to Succeed

Which was most successful? A program called “GTFT” – Generous Tit for Tat. It always opened like a saint, with a generous move. But if it was met with a nasty move, it retaliated like a sinner. One time out of ten, though, it answered nastiness with undeserved generosity.

GTFT is a stick-figure version of how you succeed in modern civilization. You are nice. You expect others to be nice. And you retaliate when they’re not. It works well, more or less, on a personal level. And it works in an economy.

We have already seen why command economies do not work: They are not very nice. Instead of the give and take of a market economy, everyone is forced to take what he is given. There is no room for tit or tat; central planners tell everyone what to do.

But they never have enough information or bandwidth. They don’t know what producers can produce or what consumers want. They try to compensate for ignorance of the specifics by putting people into categories: proletariat, bourgeoisie, rich, poor, young and old – whatever seems convenient at the time. And they simplify quantity and quality with heavy-handed statistics that are largely meaningless.

In one famous example from the Soviet Union, central planners gave the nail producers their quotas in terms of weight. Their work assignment had nothing to do with what customers wanted; they simply were required to produce a predetermined number of pounds of nails.

They met their quotas by producing huge, largely unusable 10-lb. spikes. Realizing the problem, the planners switched to a quota based on the number of nails produced. This led manufacturers to produce millions and millions of tiny pins.


The Fatal Conceit

Once you ignore the civilized market system – in which people come to terms with one another voluntarily, tit for tat – you are headed for trouble.

The Soviet Union provided us with a case study over a 70-year period that involved roughly 300 million unwilling participants. The results were conclusive: Command economies cannot compete with market economies, for reasons explained by Friedrich Hayek 80 years ago in his book The Fatal Conceit.

Hayek was talking about economics. Our colleague Porter Stansberry’s insight was that the same principle applies to individuals in their personal and business lives. All transactions – in business, career, love and daily commerce – are based on mutual advantage. You can’t expect to get without giving.


Why there are no co-ed prisons …



Yes, you can bully. You can threaten. You can deceive. You may get what you want… for a while. But it is the win-win deal that keeps friends, and customers, happy. It’s the generous tit-for-tat program that works. But that’s not the end of the story …

As Axelrod’s computer models kept playing the prisoner’s dilemma, GTFT evolved. The less often it retaliated, the better it worked. The parallel in the real world is obvious: The more trust in a society, the more efficient its tit-for-tat games become.

When you can trust your counterparties to do the right thing, you don’t need to pay for security, verification, audits, police, courts, surveillance, lawyers and other costs of protection and enforcement.

But the more you let down your defenses, the more you lay yourself open to nasty surprises. As the computer models happily played “Jesus,” a rogue program – resembling “Lucifer” – attacked. The whole system broke down.

The lesson? Be generous. Be nice. But keep some gold, just in case.


the-prisoners-dilemmaInterview in the dilemma prison.

(Photo: Flickr/drewdlecam)


The above article first appeared as “The Number 1 Reason to Buy Gold” from the Diary of a Rogue Economist originally written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.




Emigrate While You Can... Learn More




Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.


Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA


Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • A Golden Renaissance – Precious Metals Supply & Demand
      Battles for Civilization A major theme of my work — and raison d’etre of Monetary Metals — is fighting to prevent collapse. Civilization is under assault on all fronts.   Battling the barbarians at the gate... [PT]   There is the freedom of speech battle, with the forces of darkness advancing all over. For example, in Pakistan, there are killings of journalists. Saudi Arabia apparently had journalist Khashoggi killed. New Zealand now can force travelers to...
  • The Federal Punch Bowl Removal Agency
      US Money Supply and Credit Growth Continue to Slow Down Not to belabor the obvious too much, but in light of the recent sharp rebound, the stock market “panic window” is almost certainly closed for this year.* It was interesting that an admission by Mr. Powell that the central planners have not the foggiest idea about the future which their policy is aiming to influence was taken as an “excuse” to drive up stock prices. Powell's speech was regarded as dovish. If it actually was,...
  • The Non-Expiring Hedge - Precious Metals Supply and Demand
      The “Risk Asset” Dip Not Worth Buying is on its Way The prices of the metals rose, gold by +$11 and silver by +$0.25. The question on everyone’s mind (including ours) is: what will cause a change in the gold price trend, or what will make gold go up in a large and durable way? And that leads to another way of looking at this question.   Here is a very good technical reason to adopt a constructive attitude toward gold despite the fact that its nominal price in USD terms...
  • A Global Dearth of Liquidity
      Worldwide Liquidity Drought - Money Supply Growth Slows Everywhere This is a brief update on money supply growth trends in the most important currency areas outside the US (namely the euro area, Japan and China)  as announced in in our recent update on US money supply growth (see “Federal Punch Bowl Removal Agency” for the details).   Nobody likes a drought. This collage illustrates why.   The liquidity drought is not confined to the US – it is fair to...
  • The Zealous Pursuit of State Sponsored Wealth Destruction
      How to Blow $9 Billion The life cycle of capital follows a wide-ranging succession. It is imagined, produced, consumed, and destroyed. How exactly this all takes place involves varying and infinite undulations.   The Stroh Brewery in Detroit. The company provided an example of how wealth that has been accumulated over generations can be completely destroyed due to just a handful of really bad decisions. [PT]   One generation may produce wealth, while the...
  • Debt, Death, and the US Empire
      Yosemite Sam Gets Worried About Federal Debt In a talk which garnered little attention, one of the Deep State’s prime operatives, National Security Advisor John Bolton, cautioned of the enormous and escalating US debt.   Deep State operative John Bolton, a.k.a. Yosemite Sam [PT] Photo credit: Mark Wilson / Getty Images   Speaking before the Alexander Hamilton Society, Bolton warned that current US debt levels and public obligations posed an “economic...
  • The Bien Pensants Agree: The World Doesn’t Need Gold – Precious Metals Supply and Demand
      The Last Thing to be Left Standing – Alas, Not Yet  The price of gold was about unchanged this week, whereas that of silver fell another nine cents. All Serious Right Thinking people agree that the world does not need gold. Indeed our monetary system produces Great Moderations that are totally unlike the incredible volatility of the gold standard era. They wish they could kill all memory of gold as money.   Ben Bernanke, the inventor of the “Great Moderation” fairy tale,...
  • How To Give Thanks Like Socrates
      Political Correctness Indoctrination [ed note: we are posting this belatedly as it was originally supposed to be published on Thanksgiving Day. Unfortunately your editor was out of commission... but MN Gordon's article is still worth reading. - PT]  Ordinary ideals of Americana range as far and wide as the North American continent.  The valued conviction of one American vastly differs from that of another.  For example, someone from the Mid-Atlantic may have little connection...
  • Trump or Seasonality: Which One is Going to Prevail in the Dollar's Late Year Surge?
      A Plethora of Headaches We hope the recent market turmoil is not giving our readers too much of a headache. As you are no doubt aware, the events of the last few weeks have made maneuvering around global markets rather difficult.   A less than happy NYSE floor trader [PT] Photo crdit: Brendan McDermit   The US faces uncertain economic times, as Trump and Xi Jinping remain locked in a bitter trade dispute that is likely to go on for some time, creating uncertainty...
  • Paper Lanterns
      Mud Volcanoes There are numerous explanations for just what in the heck is going on with the economy.  Some are good.  Many are bad.  Today we’ll do our part to bring clarity to disorder...   Two data series it is worth paying attention to at the moment: the unemployment rate (U3) and initial claims. As the chart at the top shows, when the former makes a low it is time to worry about the economy. Low points in the U3 UE rate slightly lead the beginning of recessions....

Support Acting Man

Item Guides

Austrian Theory and Investment


The Review Insider


Dog Blow


THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


Mish Talk

Buy Silver Now!
Buy Gold Now!