Category: Games

On April 15, 2011, a day that has been dubbed “Black Friday” in the poker community, the DOJ shut down the American operations of three major sites: PokerStars, Full Tilt Poker, and Ultimate Bet.

Michael Kaplan has an update on the story:

In January of this year, Full Tilt and the DOJ worked out an arrangement in which the DOJ took ownership of Full Tilt with the intention of selling it to raise funds to pay back American players. Seven months later, on July 31, PokerStars purchased Full Tilt from the DOJ. Businessweek estimated that the transaction would make $547 million for the U.S. government. At the time, the DOJ vowed to reimburse Full Tilt’s U.S. players; Stars said that it would take responsibility for returning $184 million to non-American customers.

PokerStars followed through on its end of the deal and recently relaunched the Full Tilt site outside of the U.S.

So has the DOJ paid the U.S. players? Of course not.

According to Steven L. Kessler, an attorney based in New York City who specializes in forfeiture law…“In one of its publications [the ‘National Asset Forfeiture Strategic Plan 2008–2012’], the government talks about bringing in $2 billion in forfeitures and returning only $700 million.” Recouping Full Tilt funds will be “a long, drawn-out process to the point that you will need to be out five or six or seven figures for it to be worth pursuing. The system is set up so that you are discouraged from going after your money….Plus, look at what you’re exposing to get back what belongs to you. You have to wonder if it will turn into a tax case.”

In other words, as in other asset forfeiture cases, the government is grabbing up property and keeping as much as it can for its own coffers. Even if some of these sites were fraudulent, one wonders if the players would not have better off without government “protection.”

The full article also includes a good markets in everything item.

Hat tip: Ben Mathis-Lilley.

Valve’s Chief Economist tries to explain the Valve Model:

A corporation that tries to function as a type of ‘spontaneous order’ (i.e. without an internal system of command/hierarchy) seems like a contradiction in terms. Smith’s and Hayek’s spontaneous orders turn on price signals. As Coase et al explained in the previous section, the whole point about a corporation is that its internal organisation cannot turn on price signals (for if it could, it would not exist as a corporation but would, instead, contract out all the goods and services internally produced). So, if Valve’s own spontaneous order does not turn on price signals, what does it turn on?

The answer is: on time and team allocations. Each employee chooses (a) her partners (or team with which she wants to work) and (b) how much time she wants to devote to various competing projects. In making this decision, each Valve employee takes into account not only the attractiveness of projects and teams competing for their time but, also, the decisions of others. The reason is that, especially when insufficiently informed about projects and teams (e.g. when an employee has recently joined Valve), an employee can gather much useful information about projects and teams simple by observing how popular different projects and teams are (a) with others in general, (b) with others whose interests/talents are closer to their own.

Just like in a marketplace, everything in Valve is in flux. People move about (making use of their desk’s wheels), new teams are formed, new projects are concocted. All this information is observable by the naked eye (one notices an empty spot where David’s desk used to be, and then finds out that David moved to the 4^th floor to work with Tom, Dick and Harriet), on the company’s intranet, in cross-team meetings where teams inform each other on what they are working on). People learn constantly, both by observing and by doing, the value to them of different projects and teams. These subjective values keep changing, as the time and team formation signals that are emitted by everyone else are updated.

The idea here is that, through this ever-evolving process, people’s capacities, talents and ideas are given the best chance possible to develop and produce synergies that promote the Common Good. It is as if an invisible hand guides Valve’s individual members to decisions that both unleash each person’s potential and serve the company’s collective interest (which does not necessarily coincide with profit maximisation).

It’s an interesting post, much longer than I have quoted here, although no evidence is given that the time allocation system works anything like an invisible hand–a few good games do not a social revolution make.

Coase’s islands of conscious decision are also often misunderstood. The islands are not cut off from the market sea but are permeated by the sea. Everything that goes on within the firm does so in light of the shadow prices projected from outside. Absent those prices the firm fails into socialist miscalculation.

Still, there is something to be said for how modern technology can coordinate mass action. The phenomena is perhaps most evident in the way that distributed computing coordinates the actions of thousands of computers to solve various problems, each day and each hour drawing on a different set of computers. Coordinating people in this way allows them to quickly participate in joint actions, such as a flash mob. (See also anonymous). Indeed, silicon Valley writ large is not that different from internal Valve, people end and form new firms all the time.

Capitalism allows within itself many alternative social arrangements, to think, however, that one particular such arrangement is the one that must govern the whole is badly to miss the point.