Riskgaming State of the Union

Danny Crichton:

Laurence, we're here in Carmel in our first outdoor risk gaming episode. This is very, very exciting stuff. We're usually in the studio. We are out and about as they say, and we just launched your new game, Gray Matter, at two locations in New York and here in Carmel for our Lux Leaders retreat for all of our CEOs. How did it go?

Laurence Pevsner:

It was a smashing success, I think, but I'm a little biased.

Danny Crichton:

You designed the games [inaudible 00:00:24].

Laurence Pevsner:

Yes, yes.

Danny Crichton:

That's unbelievable.

Laurence Pevsner:

There's nothing quite like you have all of these ideas in your head. You're designing the game. You're thinking about how players are going to interact, and what they're going to do, and then when they actually do it's always different, and it's always incredible. That's the beauty of these games is the emergent quality. People do things that you don't expect. In New York, for example, just to call out one funny incident. One of the players at one point dinged ... they took a champagne glass and they wrapped their spoon against it as if they were making an announcement. And I think a lot of players, the whole crowd hushed because they thought it was one of us making an announcement about the game.

And instead this player went on a rant about how all of the neural lifts were terrible, and that was part of their character. And then all of a sudden other people in the crowd started shouting back with their opinions based on their characters.

Danny Crichton:

Exactly.

Laurence Pevsner:

And it really felt like, okay, this is happening. These people are really embodying these roles. And we didn't tell the players to do anything like that.

Danny Crichton:

Right, right. We also had players who somehow ended up with no cards at the end of the game.

Laurence Pevsner:

Yes.

Danny Crichton:

Which is a mystery, because you have to barter trade in the game. You're negotiating, and theoretically you're not negotiating for nothing. So I don't know. But we had two players in New York who somehow ended up running out of-

Laurence Pevsner:

I mean, this is amazing. This is human nature where there's no way logically that this could happen. But people do stupid things sometimes, or I shouldn't say stupid. Sometimes it's against their self-interest, but they're doing it anyway. They're being generous. The human factor here, right?

Danny Crichton:

They said they were being selfless.

Laurence Pevsner:

Yes.

Danny Crichton:

They thought the goal was to get rid of their cards for free.

Laurence Pevsner:

Yeah.

Danny Crichton:

Which ...

Laurence Pevsner:

By the way, this is how people are in real life. Right?

Danny Crichton:

Yes.

Laurence Pevsner:

There are some philanthropists, there are some schmucks.

Danny Crichton:

Exactly. Yes.

Laurence Pevsner:

And that's the way that it works. And some people came out with triple the amount of cards I thought they would have. I mean, some people are really good maker.

Danny Crichton:

I was really surprised. And there's not really a mechanism in the game that allows you to accumulate an exponential set of cards. But what was amazing even last night is most people come in, they have five to six cards, some folks will have four. And then someone came up with 16 cards, and I have absolutely no idea. I didn't track it down last night when we were playing, but I just have no idea how this person got all these cards.

Laurence Pevsner:

It's negotiation. If you watch the players doing their thing, some players are just better at negotiating. And that's the point of the game, is to bring out these qualities and these skill sets and show, hey, roughly speaking in the way the game is designed, almost everybody starts off on an even playing field. There's little bits of advantages and disadvantages here and there, but mostly everyone's got an equal shot. And so when we see these imbalances by the end of the game, it shows that some people use their cards better than others.

Danny Crichton:

Right, right. Well, and the other thing I was really impressed by, I mean last night we said I think 96 publications of clues. I think New York was a little bit smaller than that. I don't know if that was because that room was tighter, unless it was much easier to get to the publication center. A little bit like the R&R process for an academic. It takes a little bit of work to get to the publication on the other side and weaving and turning through a crowd of drunken revelers, we'll call it. But we had a lot of people publishing last night, and that really changed the game as well.

Laurence Pevsner:

Yeah, I mean, I think there's something about ... this is just human nature where if you see other people putting out information, all of a sudden you want to put out your opinion too. Right? So the more that once the publication train gets rolling, and we should take a step back here maybe and say how this game works and why publication matters.

So this is a game about the intersection of informational markets, attentional markets and money markets. Who has information? Who's putting that information out there and making it go viral? And who's using that information to make money? And one of the main aspects of this game is people can take private information and make it public to everybody. Everybody includes all the other players. It includes the FDA, which is monitoring decision. It includes the fact-checkers, which are looking at the truth environment of the game. And there are some players who are heavily incentivized to publish their private information. And there are some players who are heavily incentivized to keep that information private. And it actually makes a lot of sense. Logically, it's the attention agents, the people who are podcasters or they're just like us, or maybe they're substacker just like us, or maybe they are a TV host. Maybe that'll be us one day, but they're-

Danny Crichton:

I don't want to be on any dying medium, but WD, Disney and one glorified massive mega corp.

Laurence Pevsner:

Yes. That's our ultimate goal with risk gaming. Right?

Danny Crichton:

Exactly.

Laurence Pevsner:

No. So there's the people who command attention, and so obviously they want to put out the information that they get. That's their whole stock-in-trade. And then you've got the people who have money, and sometimes people who have money want to put information out there. Think about the investor who wants to pump their product and make sure that their company is getting the eyeballs that they need. But sometimes if you're an investor, you want to keep that information private. Right? It's like the whole point is, "I know something that nobody else knows, and I can actually act on that and make some money off of that." Danny's being attacked by a gnat, and this is why we don't do them outdoors.

Danny Crichton:

We're just being attacked by gnats.

Laurence Pevsner:

Yes.

Danny Crichton:

This is what we don't do in risk gaming. It's like release the deer.

Laurence Pevsner:

Yes.

Danny Crichton:

I go out of my hotel room last night. There's literally a deer in front of my door.

Laurence Pevsner:

There were raccoons.

Danny Crichton:

It just jumps like crazy. And I was effing scared to death. I just had no idea what it was. I thought it was a goddam bear. We're in California. California black bears, brown bears, all the grizzlies, whatever the hell is around here. And I don't know what's going on.

Laurence Pevsner:

This is when Bill Gates released the mosquitoes at the Ted Talk and all of the privileged people there were freaking out about the mosquitoes. And they should.

Danny Crichton:

I mean, Chris, our producer, was just talking about how many people have died from mosquitoes.

Laurence Pevsner:

The falconry expert on this trip was talking to us and hawking the idea, pun intended, that you should never be afraid of anything but a mosquito in terms of animal welfare.

Danny Crichton:

What a great way to.

Laurence Pevsner:

The number one killer of humans. And then he's like, "What's the number two killer of humans?" Humans.

Danny Crichton:

Humans. World War Z, World War mosquito. I don't know. Our next risk gaming. All right, we were talking about information markets, and we're talking about attention markets and money markets. You have money markets as you're concluding there where people have money, they want to get attention to some of their stuff. But the most important thing is keeping it proprietary. And specifically you have a mechanism, and I don't know if this happened in either of the games where if you can keep one of your clues completely unpublished, that it doesn't become available to the public, it's basically held only by you. There's basically bonuses in the game, a small bonus for one of your clues doing this massive shoot the moon bonus if you can get both. Did anyone actually succeed?

Laurence Pevsner:

Yes. Not only that, but the two players who won here in Carmel Valley both succeeded on that front.

Danny Crichton:

Amazing.

Laurence Pevsner:

Right? And actually it was amazing to watch. I was watching one of the players, our own Lux Capitals, Michelle. There was a player who was going to publish information, and she literally dove in front of the public board, was like, "Wait, I need that not to be published. What can we do to make that happen?"

Danny Crichton:

Wow.

Laurence Pevsner:

And she gave away quite a lot from what I could tell. And literally Yuma will attest, who was also there with me, it was a back and forth, back and forth. He kept being like, "I'm going to publish this." And then she was like, "Wait, don't do it." And he was like, yes, no, yes, no, he was really ... She was like, "You'll lose your leverage as soon as you publish that." And it was a little bit of carrot, a little bit of stick, and eventually they got a deal done, and she was able to maintain that high quality, highly credible clue that didn't get published, that ultimately allowed her to be tied for first at the end of the game.

Danny Crichton:

Unbelievable. Unbelievable. So a lot of fun with this game. And then the other side that's going on right now. So you have been working on Grey Matter the last two, three months, but you're not the only designer here going on. We also just launched two weeks ago, literally the day we're recording this for Southwest Silicon with our risk gaming designer, Ian Curtis. So we did an episode with him two weeks ago, and he just did an episode last week by himself, because at this point, we're on vacation. Although I know that on this video we look like we're on vacation. We're actually working right now.

Laurence Pevsner:

Hard knock life.

Danny Crichton:

We are in a very, very tough existence. But let's talk about Southwest Silicon because one of the things that we're really just learning as entrepreneurs around risk gaming is we've come to this model of having two types of games. We have these full immersion simulations, smaller groups of people, six to eight, six to nine, multi-hour. We really go in depth on a specific topic. And then your game Grey Matter. And we also have two others, D-Fake and D-6 on the website, are these sort of salon experiences. These big games that are designed oftentimes with partners. They are hosting a conference or meeting or something like this. They have an hour and a half at an hour and they want to do something much more interesting than sitting at cocktail tables with flutes in their hands and going and regaling about their LinkedIn. But we just launched Southwest Silicon, which is a full immersion game focused on Arizona. You were there as we played it with me in London. What was your experience with that?

Laurence Pevsner:

Yeah, so it's so interesting. Right? If you think about a game like Grey Matter where we are covering a lot of different subjects. We're looking at all kinds of things in the field of biotech, new tropics where it's a metaphor for AI. We're thinking about Ritalin and psychedelics and all these crazy topics. And it's a big broad-based view. And I had people come up to me and there were lessons and they learned. But it's different fundamentally than a game like Southwest Silicon, which you go really deep on one particular topic. Right? And in this case I think most people don't really understand. Everyone's talking about chips these days. Right? And we brought a lot of people into that room in London who were ... a lot of those folks were very familiar with the topic. Right? They knew about the importance of chips and how it's changing the future of tech.

And they knew about Nvidia. They're familiar with CSMC. But almost none of them knew about the water security element of this. Right? And the game is based in Arizona, and that there's particular reasons. But I think in addition to the local elements of Arizona, this applies broadly. Every chip fab has to deal with water security, and it's just particularly acute in Arizona. I was struck in that game by a couple of things. One, how much the background really helped the players. Right? So we gave a really in-depth pre-brief for that game where we walked through this fact that you need to prove in Phoenix, 100 of water supply, which I think is a mind-blowing idea to folks. When the players were negotiating, they had that really deep sense of the policy landscape, and I think that helped them play the game appropriately.

The second thing that I was surprised by, and I'm curious if you expected this as well, is that game, it was a slow burn, right? It was like the trades were being, deals were happening, people were making moves, but it wasn't frenetic with energy until the very end. And then all of a sudden there was this amazing auction that took place where the person deciding where the factory was going to go was literally wheeling and dealing between the various cities, and they were tripping over themselves to get the deal and then seeing what they could tolerate, and it was like ...

And all of a sudden it went from this, people are muttering in corners and trying to get things done to a loud blaring auction full of energy. And I think that to me, that was demonstrative of how these things often work in real life, where there's a lot of quiet conversations that happen behind the scenes. Maybe it's boring paperwork. People are making their moves, but then it comes to a head, right? Then there's a moment when it explodes onto the scene, and the big conflict happens, and the news reports on that. But to get to that moment, there was a lot of setup that had to take place. I'm curious if you feel like you've seen that in other risk gaming scenarios that we've run before?

Danny Crichton:

I think it depends on the run through. It really depends on the group of people. Some people don't want to make decisions upfront. We actually played this game. It was a beta test in Tokyo, and that was a slow burn. And in that case, it was a very cultural dynamic of people were just trying to learn the rules and experience. And at some point, you're almost towards the end of the game and it's like, no, no, it's time to make decisions and then go from there.

In other cases, groups don't compete or they're trying to figure out whether they should compete or cooperate and exactly when. And so there's just a miscalibration, whereas some other cases we have business execs or folks who are in much more intense industries, they just make decisions instantaneously. Often is the wrong decision, and sometimes they're basically revocably going to lose in the first round because they've made a terrible colossal mistake early on.

And so it just really depends. I mean, to me, the thing that's interesting about this and our contribution to the debate is everyone's focused on data centers, water, security, how much water is being used. And there is a big debate on how much this matters versus a golf course, which is a huge issue. Or an Arizona alfalfa farming.

Laurence Pevsner:

Alfalfa, yeah.

Danny Crichton:

Which is a massive issue. What they're not focused on though is the water rights and the complexity in the American Southwest and west in general, where over the last 150 years, in order to get water to a place, you either have to channel it, you have to dam it, you have to go through an irrigation district, et cetera. And so there's just thousands of these water districts. And in order to get water to your chip fab in the center of Phoenix, you have to cobble together a path of all these individual water rights from Point A to Point B in order to supply that facility.

And to your point, yes, it's 100 years to do residential growth, but it's a little bit like trying to cobble together a property to build a building. You don't want people to know you're doing it. So there's all this skullduggery going on. You have all of these LLC corps that no one knows who owns them. They're trading these rights. It's very, very opaque. And yet water is the elixir of life. It's the most important resource, particularly in the desert, particularly in these American Southwest, which is going through a drought with the Colorado rivers at historic lows.

We try to offer a little bit of a different perspective of saying, we should really focus on what these rights are, how they work in the American West. And we played in London, people ask. They didn't understand any of this. It just doesn't work that way, obviously in London. So on top of the value of understanding the chip fabs and water and security and economic growth, et cetera, we also have this another layer when we go global of, well, people don't understand the American political system [inaudible 00:15:34] contracts.

Laurence Pevsner:

They didn't know. They're like, "How does a Native American tribe work?" Right?

Danny Crichton:

Correct.

Laurence Pevsner:

One of the important players in the game is a Native American tribe because they in real life own quite a bit of water rights. And I remember they asked, "Can you give us a metaphor for a UK equivalent?" It's hard to do, right?

Danny Crichton:

Right.

Laurence Pevsner:

It's like, yeah, there is a very deep and complicated history that most Americans know, but if you're from a European country, I understand why it's a bit of a mystery to you.

Danny Crichton:

See, it's the equivalent to the Welsh, and how do you handle-

Laurence Pevsner:

Yeah. We gave that as the metaphor, and it was still like, "That's not quite right, but it's like, okay, we'll get closer there."

Danny Crichton:

And look on these issues, this is something that's going on in real time. So the Gila River Indian community, which is in central Arizona, obviously named for a river that has water, but the water was stolen by the federal government a century ago, and recent Supreme Court cases has basically returned access to that water to the Indian nation. And so all of a sudden, you had this bounty of resource that everyone needs. You want to protect it for yourself and for legacy and heritage, but you also have this economic resource that's valuable to the community. And so just in the last couple of years, we've seen this massive shift around those rights led by Neil Gorsuch and others on the Supreme Court that have made that an issue for the first time in almost 100 years. And so these water rights are not just a couple sheets of paper in the game. They're literally being traded at the highest levels of American jurisprudence and massively can affect communities throughout Arizona and the American Southwest.

Laurence Pevsner:

One other thing I noticed about the game as we were doing what's called in game design terms, the teach, when we were trying to explain to players how to play the game, one of the more complicated aspects of the game are the water rights themselves. Right? And there's different kinds of water, and there's different levels of rights that you can have. And the players are like, "Wow, this is complicated." And what's funny about that is we have massively oversimplified the different ways that water rights work to make the game function. And yet, that was the most complicated part of the game still.

Danny Crichton:

Yes, yes. So that's a game that is online. You can download it. It's a fourth one that's published. We have a total of seven games that have been designed. We have three others that someday I and you will get around to actually publishing on the internet, which is more than just hitting a button. But we need to produce the booklets. We need to get all the stuff cleaned up. We've actually run all those games multiple times with great groups of folks. We actually need to produce. So what's next? What are we doing? We're on vacation. And I know that I am zoned out, zonked out and enjoying a lot of spicy food right now, which my doctor tells me is going to kill me. But what are we up to next?

Laurence Pevsner:

I don't know about you, Danny, but I am really excited about the games we have coming up in the hopper. We have a number of new games and a number of new partners that we're going to be working with to develop those games and to put them out. We have one game I'm particularly excited about, that exploring automation in cities. You actually will get to play different kinds of cities and different places. So think the resort town versus the college town versus the manufacturing town. Everyone's thinking about AI. And of course, we were just at our CEO leaders retreat, and all of the CEOs who work in AI are like, "Yeah, there's a really good point about potential job loss here."

And there's some that are obviously arguing that it's going to be a boon for jobs. And there's some that are saying, "Yeah, if I'm being honest, it's going to be really tough, especially for white collar workers and especially for workers coming direct out of college who aren't already at the top of their field." So having that game I think is going to be particularly applicable. It's only going to become more and more relevant as time goes on. So I think we're slightly ahead of the curve there on that one. Yeah. What games are you excited about?

Danny Crichton:

I'm excited. Ian is working on his next game, which is focused on critical minerals. We finally gave in to the constant demand for a critical mineral supply chain game. Although I think we have quite the twist coming up that we're working on that I think will make it way more fun than people expect. So looking forward to that in the next couple of months, hopefully publish early to mid next year. I should never quote myself on that because we're always off by years on everything going on over here.

We are a very high production team that never actually publishes, like most creatives. So I'm really excited for that. And then we have a lot of conceptual stuff going on. We have stuff around Taiwan. We have stuff around space war, specifically the balance between space commerce and space security. And we're seeing more and more nation-state actors as well as just everyday hackers going into these systems, going through it.

I'm particularly interested these days in civil security. So looking at civil infrastructure, think power plants, sewage, water systems. These are increasingly been digitized. They're on the web. In many cases in California where we're sitting right now, PG&E has connected its grid to the internet to be able to monitor it, to be able to check for wildfires, given the campfire that happened here a couple of years ago. But that means that these are now available, their surface area, and they need to be secured. And in many cases, there's no security at all in these systems. And so they're much more vulnerable to hacking. It's a huge topic that we've had senators mention. We've had folks from the private sector talk about, and so I want to try to create a unique experience there.

And then I think the last is going back to the sign of sci-fi. We have a lot of science fictional companies, companies like in xenotransplantation, orbital mirrors for sunlight. So many interesting new businesses that are going to come in the next five, seven years and are going to transform humanity. I feel like we have a lot of present day security problems, and that's always the bias is what's happening today. But we really want to have us walk around the corner and say, "What happens if all these technologies come together?" A world in which photovoltaic farms are fed 24/7, 365. Does that transform the energy grid? What does that do? Suddenly solar doesn't turn off at 8:00 PM, and you have a power voltage in Texas or California with the air condition envelope that oftentimes happens. That would go away. And so we have these huge changes and shifts that are underway in the next couple of years from science and technology, and I'm really excited to try to model those in real games.

Laurence Pevsner:

Yeah. I've been thinking along the same lines. I've been toying around and exploring the idea of the cutting edge science research and how that happens at the university. And specifically I'm interested in, I didn't go to a big university. I went to a small little liberal arts college. And so I find universities totally bizarre once I've started looking into them and all the different functions and how cutting edge science gets developed there.

This has especially become relevant. A lot of our companies are spun out of labs at these schools, and it's become a big problem because all of their science research is getting cut in terms on the federal level. Right? We have of course, the Lux science helpline, which you can still dial and call in if you need help. We are here to help. But as we were getting tons of reach out from that, it started to make me think like, well, what is it about the university that relies on federal funding in this way? And how would they do without it? How would that work?

And so I'm interested in exploring why the different members of the university, why the president has a different set of intuitions than the PIs, which has different set of intuitions and motives from the provost and maybe the football coach. And so trying to understand what is the crown jewel of America, but is also heavily under attack and also in need of desperate reform, all wrapped into one.

Danny Crichton:

And then I'd say the last thing for me is thinking about the next generation of institutions like USAID and others that have been demolished. Regrettably, in many cases, these have good missions, and there's definitely a diversity of views on the effectiveness of those agencies. But now that they have been dismantled, what does 2.0 look like? USAID ultimately goes back to JFK, early 1960s. You're at the peak of the Cold War. Think Bay of Pigs, think Cuban Missile Crisis, Clash of Civilizations, et cetera. But what does it look like in 2025? How does technology influence this when we build these institutions the exact same way?

Given what we know about giving money directly to folks as opposed to large aid programs that are highly bureaucratic and have a lot of overhead, will we reconfigure them in a new way using the best effective research that we have available from the social sciences, et cetera. So I do have a belief there's a real opportunity from the risk game perspective to simulate new types of institutions, whether it's science or universities, whether it's research funding, whether it's USAID and global development, et cetera, et cetera, et cetera. There's a whole new set of institutions that can come up in the AIH.

Laurence Pevsner:

Yeah. When I was at the State Department and traveling around, one of the most consistent findings when we would talk to people on the ground in say in Niger or in Mali or these kinds of places that where USAID used to have a heavy presence, they would say, "Yes, we really need humanitarian aid, but we also really need your business. We really need investment." And that's what Belt and Road Initiative comes in, and they're offering investment in that way.

And as we start to think about USAID 2.0, and we've done both articles and podcasts on this topic, but it seems like super important that these things can be better. And even if you didn't want to see it destroyed, now there is an opportunity here. And I think that's the exact same thing is true with the universities. It's true with some of these big companies that are being disrupted. It's true even with the game that we have with the chip fabs. Okay, yes, we had the CHIPS Act. What's next, and how do we actually make this work? That's what we're always trying to search for, is how to actually improve these things out of the rubble.

Danny Crichton:

And always a pursuit of the future. And now that we are at time, it's time to pursue the open bar that just opened right down the hall. With that, Laurence, thank you so much for joining us.

Laurence Pevsner:

Thank you, Danny.

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