Epsilon Theory - Salient Partners | Viewing Capital Markets through the Lenses of Game Theory and History

Epsilon Theory - Salient Partners | Viewing Capital Markets through the Lenses of Game Theory and History



Jesse: And why’d you go and tell her I was selling you weed? 

Walt: Because somehow it seemed preferable to admitting that I cook crystal meth and
killed a man.
― “Breaking Bad” 



(2008)
Meadow: Are you in the Mafia? 

Tony: Am I in the what? 

Meadow: Whatever you want to call it. Organized crime. 

Tony: Who told you that?
Meadow: 

Dad, I’ve lived in the house all my life. I’ve seen the police come with warrants. I’ve
seen you going out at three in the morning. 

Tony: So you never seen Doc Cusamano going out at three in the morning on a call? 

Meadow: Did the Cusamano kids ever find $50,000 in Krugerrands and a .45 automatic while
they were hunting for Easter eggs? 

Tony: I’m in the waste management business. Everybody immediately assumes you’re
mobbed up. It’s a stereotype. And it’s offensive. And you’re the last person I would
want to perpetuate it. There is no Mafia. 

Meadow: Fine. 

Tony: [pause] Alright … look, Mead, you’re a grown woman, almost. Some of my money …
comes from illegal gambling and whatnot. How does that make you feel? 

Meadow: At least you don’t keep denying it, like Mom. 

― “The Sopranos” (1999) 



Jane: You’re lying! Now I know why Ed’s been calling every half hour. You’ve been back on
the case, haven’t you? 

Frank: No! I swear it’s another woman! 

― “Naked Gun 33 1/3: The Final Insult” (1994) 



Always confess to a small crime if you want to hide the big stuff. I remember reading this in a Robert
Heinlein sci-fi novel when I was a kid, and it’s stuck with me ever since. Once you start looking for this
trope you see it everywhere, and even if it goes a little over the top at times in scripted media (anyone
remember the “24” season where Jack Bauer tortures his own brother, who gives up a partial truth to
hide their father’s role as an arch-villain of treason?), I’m always on the look-out for it in the Narrative
construction of our unscripted investment news media. 



The problem in mass Narrative construction is not (or at least is very rarely) an issue of intentional
misdirection through selective confession. But you don’t need intentionality for this dynamic to take
root and misdirect all the same. Much more commonly, it’s the spreading of an easy to
understand revelation of old fashioned greed that generates such a sense of outrage among all
of us that regulators and policy makers mobilize to “crack down” on a few obvious bad guys
while leaving the underlying flawed system intact. The result is that the flawed system often gets a
new lease on life, as both the popular and regulatory attitude becomes “Oh … well, I guess so long as
you’re not doing THAT, then I suppose we’ve got nothing to worry about.”



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