There’s a Twitter account, called “When playing it out of the back goes wrong,” that is really objectively funny, but drives me absolutely crazy sometimes. For those who don’t watch soccer, “playing it out of the back” is a strategy where you prize possession of the ball over everything. Players are told not to kick the ball away even when under pressure, sometimes, arguably, too much pressure.

There are instances in which defenders attempt to keep passing the ball even when they are under intense pressure from the other team. Obviously, this sometimes backfires and causes a seemingly very embarrassing goal when they turn it over and the other team scores immediately.

Despite these occasional and inevitable mistakes, coaches and players will nevertheless tell reporters after the game that they are committed to playing this style and they will continue to play this way. So why would the top coaches in the world still insist on this after topping the charts in Sports Center’s NOT Top 10 over the weekend?

What’s funny is that the teams accused of being most committed to this playing style in the past 20 or so years have been teams coached by Pep Guardiola, one of the best coaches of the past 20 years. He implemented this at Barcelona, and with slightly modified version at Bayern Munich and Manchester City. The strategy is clearly paying off (Manchester City has won the Premier League 6 times under Pep since he joined in 2016) despite there being such an obvious and easily mockable cost incurred from playing this way.

So what does this have to do with nuclear energy or protectionism?

There is a concept in zoology/conservation called “Charismatic Megafauna” which explains that certain animals are really appealing to people and are more useful than others to fundraise or raise awareness about conservation efforts.

These animals have certain features that people are drawn to and are quite literally charismatic. The key here is that there are a select few that, for whatever reason, are more marketable. They tell stories that people enjoy hearing or captivate them in some way. You hear about lions and tigers and elephants. They’re majestic or cute or relatable in some way that humans just like.

I’m using charismatic in a similar way. “Charismatic costs'' are costs that are associated with a particular strategy in any field. These costs are unreasonably captivating and do not outweigh the benefits from the alternative. A team like Manchester City might suffer from charismatic costs - embarrassing goals that sometimes happen from playing it out of the back.

But the coach understands that this system is giving him better results than other teams over the entire season, year over year. What the blooper reels will never show are all the times the team manages to make that pass, not turn it over, and they catch the other team out and score because of it. The bottom line is these strategies get results over time in a way that distributes the benefits in a boring and less marketable way, but the costs of the approach are very marketable. The coaches understand what is good for the team in the big picture using long term data. They look through the veil of a funny story to see the actual costs and the benefits.

Where else can we see charismatic costs? 

One of the most obvious examples of this is nuclear energy. 

There is already massive concern that our current staple energy source, fossil fuels, may be causing irreversible damage to the temperature and consequently the ecology of the Earth. People are incredibly concerned about energy. 

Yet nuclear energy only accounts for about 20% of electricity consumption in the United States despite being a carbon neutral solution. If you ask somebody what kind of energy source they would want in their neighborhood, the last type they mention is nuclear. We are culturally terrified of nuclear radiation, despite being easily the safest form of energy, accounting for basically zero deaths compared to oil and coal.

But when we think of nuclear reactors, we don’t think of easy, carbon-free energy. We think of Chernobyl, Fukushima, and Three Mile Island (which caused zero deaths!) In other words, nuclear energy has charismatic costs. The benefits would be immense but would be distributed and boring. The costs are few and far between, but are incredibly captivating and easily send people into trances imagining nuclear apocalypse. How many movies and TV shows are based on the idea of stray nuclear radiation causing shocking defects or civilization wide collapse? Could you make a movie about the steady flow of tons of new carbon neutral electricity from your local nuclear reactor?

The other, maybe more controversial, but great example of both ends of charismatic costs, is free trade. Free trade has distributed benefits but very concentrated costs. When you eliminate your country’s tariffs and make it more profitable for foreign competitors to make something, the cost is clear - fewer jobs for the people of your country. Foreigners are making it cheaper, so your neighbor could lose their job. These are real people who tell their stories and are angry about them. A foreigner or foreign government or business undercutting native workers’ wages are a clear and easily identifiable villain, and your neighbor is a clear and easily identifiable victim.

But free trade is necessarily efficient. Preventing people from making voluntary transactions means that those resources will be going somewhere they are valued less by definition. Being able to freely trade means getting the best possible things at the best possible prices. The fact that jobs will be lost to foreign producers is only true because they offer it at lower prices. You don’t get the domestic unemployment without the foreign price decrease.

The benefits from free trade are clear, but they are not charismatic. So everybody in the country gets $50 off their new dryer, but your buddy at Maytag loses his job? Which is the more compelling story? Which gets press coverage? Who is going out in the street to advocate for cheaper appliances vs. who is going out there to protest foreigners who are stealing hard earned American jobs?

Entire industries can suffer from charismatic costs. The crypto industry is still scarred by things like Mt. Gox, FTX, Terra/Luna, and maybe the most widespread of all of them, the various pump and dump schemes on memecoins. One guy that lost all his money because he trusted the wrong Discord server is a very charismatic cost. 

But look at the growth of something like stablecoins. They’re a huge way for people around the world to escape volatile local currencies and use digital dollars that retain their value. Even in more stable currency conditions, using stablecoins could drastically reduce transaction fees that businesses are charged by payment processors.

Ironically, the key part about charismatic costs is not actually the costs themselves, it’s the benefits that they are used to hide.

They can be incredibly useful for people who have specific interests that rely on emotional reactions to specific edge cases. If everybody else has been tricked into believing something by manipulating what is appealing to people, then you need people who can dispassionately see through it to guide us in making better decisions. If, while everybody else is captivated or scared into one particular strategy (whether deliberately or not), you can see that an alternative actually has more benefits, you can both capture value where others don’t see it and help people in general to do the same.

There’s a Twitter account, called “When playing it out of the back goes wrong,” that is really objectively funny, but drives me absolutely crazy sometimes. For those who don’t watch soccer, “playing it out of the back” is a strategy where you prize possession of the ball over everything. Players are told not to kick the ball away even when under pressure, sometimes, arguably, too much pressure.

There are instances in which defenders attempt to keep passing the ball even when they are under intense pressure from the other team. Obviously, this sometimes backfires and causes a seemingly very embarrassing goal when they turn it over and the other team scores immediately.

Despite these occasional and inevitable mistakes, coaches and players will nevertheless tell reporters after the game that they are committed to playing this style and they will continue to play this way. So why would the top coaches in the world still insist on this after topping the charts in Sports Center’s NOT Top 10 over the weekend?

What’s funny is that the teams accused of being most committed to this playing style in the past 20 or so years have been teams coached by Pep Guardiola, one of the best coaches of the past 20 years. He implemented this at Barcelona, and with slightly modified version at Bayern Munich and Manchester City. The strategy is clearly paying off (Manchester City has won the Premier League 6 times under Pep since he joined in 2016) despite there being such an obvious and easily mockable cost incurred from playing this way.

So what does this have to do with nuclear energy or protectionism?

There is a concept in zoology/conservation called “Charismatic Megafauna” which explains that certain animals are really appealing to people and are more useful than others to fundraise or raise awareness about conservation efforts.

These animals have certain features that people are drawn to and are quite literally charismatic. The key here is that there are a select few that, for whatever reason, are more marketable. They tell stories that people enjoy hearing or captivate them in some way. You hear about lions and tigers and elephants. They’re majestic or cute or relatable in some way that humans just like.

I’m using charismatic in a similar way. “Charismatic costs'' are costs that are associated with a particular strategy in any field. These costs are unreasonably captivating and do not outweigh the benefits from the alternative. A team like Manchester City might suffer from charismatic costs - embarrassing goals that sometimes happen from playing it out of the back.

But the coach understands that this system is giving him better results than other teams over the entire season, year over year. What the blooper reels will never show are all the times the team manages to make that pass, not turn it over, and they catch the other team out and score because of it. The bottom line is these strategies get results over time in a way that distributes the benefits in a boring and less marketable way, but the costs of the approach are very marketable. The coaches understand what is good for the team in the big picture using long term data. They look through the veil of a funny story to see the actual costs and the benefits.

Where else can we see charismatic costs? 

One of the most obvious examples of this is nuclear energy. 

There is already massive concern that our current staple energy source, fossil fuels, may be causing irreversible damage to the temperature and consequently the ecology of the Earth. People are incredibly concerned about energy. 

Yet nuclear energy only accounts for about 20% of electricity consumption in the United States despite being a carbon neutral solution. If you ask somebody what kind of energy source they would want in their neighborhood, the last type they mention is nuclear. We are culturally terrified of nuclear radiation, despite being easily the safest form of energy, accounting for basically zero deaths compared to oil and coal.

But when we think of nuclear reactors, we don’t think of easy, carbon-free energy. We think of Chernobyl, Fukushima, and Three Mile Island (which caused zero deaths!) In other words, nuclear energy has charismatic costs. The benefits would be immense but would be distributed and boring. The costs are few and far between, but are incredibly captivating and easily send people into trances imagining nuclear apocalypse. How many movies and TV shows are based on the idea of stray nuclear radiation causing shocking defects or civilization wide collapse? Could you make a movie about the steady flow of tons of new carbon neutral electricity from your local nuclear reactor?

The other, maybe more controversial, but great example of both ends of charismatic costs, is free trade. Free trade has distributed benefits but very concentrated costs. When you eliminate your country’s tariffs and make it more profitable for foreign competitors to make something, the cost is clear - fewer jobs for the people of your country. Foreigners are making it cheaper, so your neighbor could lose their job. These are real people who tell their stories and are angry about them. A foreigner or foreign government or business undercutting native workers’ wages are a clear and easily identifiable villain, and your neighbor is a clear and easily identifiable victim.

But free trade is necessarily efficient. Preventing people from making voluntary transactions means that those resources will be going somewhere they are valued less by definition. Being able to freely trade means getting the best possible things at the best possible prices. The fact that jobs will be lost to foreign producers is only true because they offer it at lower prices. You don’t get the domestic unemployment without the foreign price decrease.

The benefits from free trade are clear, but they are not charismatic. So everybody in the country gets $50 off their new dryer, but your buddy at Maytag loses his job? Which is the more compelling story? Which gets press coverage? Who is going out in the street to advocate for cheaper appliances vs. who is going out there to protest foreigners who are stealing hard earned American jobs?

Entire industries can suffer from charismatic costs. The crypto industry is still scarred by things like Mt. Gox, FTX, Terra/Luna, and maybe the most widespread of all of them, the various pump and dump schemes on memecoins. One guy that lost all his money because he trusted the wrong Discord server is a very charismatic cost. 

But look at the growth of something like stablecoins. They’re a huge way for people around the world to escape volatile local currencies and use digital dollars that retain their value. Even in more stable currency conditions, using stablecoins could drastically reduce transaction fees that businesses are charged by payment processors.

Ironically, the key part about charismatic costs is not actually the costs themselves, it’s the benefits that they are used to hide.

They can be incredibly useful for people who have specific interests that rely on emotional reactions to specific edge cases. If everybody else has been tricked into believing something by manipulating what is appealing to people, then you need people who can dispassionately see through it to guide us in making better decisions. If, while everybody else is captivated or scared into one particular strategy (whether deliberately or not), you can see that an alternative actually has more benefits, you can both capture value where others don’t see it and help people in general to do the same.