
A Tiny, $25 Million Mistake (2014) - unmole
https://www.npr.org/sections/money/2014/09/16/348975479/a-tiny-25-million-mistake
======
numlocked
Levine constantly brings this up related to blockchain; people (for the most
part) don't actually want completely and utterly binding contracts. We want
things that reflect what we bargained for and protects us when things go
sideways, but not something that arbitrarily and absolutely enforces
technicalities that perhaps weren't in the spirit of the agreement. Turns out
it's useful to have wiggle room; it's a feature, not a bug.

~~~
comex
A bunch of replies to your comment, but none have (clearly) pointed out that
this isn't actually an example of "wiggle room" in action.

The mistake was corrected because both parties agreed to change the contract.
If they hadn't agreed and the issue had been brought to court, the $400
million number almost certainly would have been enforced. In cases where
contract text is ambiguous, unclear, or just self-evidently illogical, the
legal system does grant some wiggle room for a judge to try to tease out the
intent. But a mere disagreement between the text and some email(s), AFAIK,
wouldn't meet that standard.

On the other hand, even on the blockchain it's not hard to make a contract
amendable with unanimous consent.

~~~
bunderbunder
> even on the blockchain it's not hard to make a contract amendable with
> unanimous consent.

Unanimous consent is nice when it happens, but we typically want the ability
to make amendments _without_ unanimous consent, too.

Concrete examples: I wouldn't want to use an electronic payment card that
doesn't have some sort of chargeback mechanism. My mutual funds want the
exchanges they operate on to have some mechanism for busting erroneous trades,
and I'm glad that they do. When I check in at a hotel, they want a credit card
on file, so that they can charge me if I steal the towels.

All of these mechanisms involve retroactively altering the financial terms of
a contract in a way that causes one person to lose some money without their
consent. For the most part, people agree that this is just and desirable,
because they also value fairness.

That said, I agree on the point at hand -- I don't think that the example from
the story is particularly relevant here.

~~~
atomical
Chargebacks can be settled by arbitration with the merchant in the case of a
purchase. That's actually more in line with the dispute resolution pushed by
sharing economy services that people are familiar with like Uber, Lyft,
Airbnb, etc.

~~~
mcguire
...where the arbitrator works for the merchant.

~~~
atomical
Amazon has more of a vested interest in resolving a dispute with a customer
than say Uber resolving a dispute with a rider. Even if the rider stops using
the service Uber still has the business of the driver.

Consumers, knowingly or not, have shown that they are okay with this model. I
think arbitration would likely be seen as an acceptable option.

------
ternaryoperator
In Truman Capote's history of a Kansas massacre, In Cold Blood, he mentions
that purely fortuitously the father/husband of the murdered family had taken
out a life insurance policy on himself a few days before. The insurance agent
had accepted his check, but told him that the policy was not in force until
the check cleared. At the time of the family was killed, the check had not yet
cleared. The agent called his supervisor as soon as he heard the news about
the murders and asked whether the insurer would pay. The supervisor said
without hesitation, "Of course we will."

This to me is one of the finest examples of living the spirit of the contract,
rather than wriggling off responsibilities because you can legally do so.

At the same time, I have to wonder how many insurers today would so quickly
affirm their intention to pay in such a circumstance.

~~~
patio11
I would expect substantially every adjuster at every life insurance company in
the United States to pay a claim for a life insurance policy which a non-
specialist might think was bound but which was not factually bound yet given a
death for any reason but suicide absent fairly clear indications of insurance
fraud.

I realize technologists feel like insurance companies are malevolent entities,
but they're a) highly regulated financial institutions b) staffed by
professionals in risk management with c) significant exposure to negative
public attention.

Additionally, every insurance regulator has Thou Shalt Not #)%( Around With
Paying Out Life Insurance Claims as their #1 rule, principally for historical
reasons.

Coming to the opposite intuition on this requires one to believe that, for an
actuarially insignificant improvement in their loss rates so small as to be
undetectable, insurance companies like jousting with regulators and the public
while screaming "Catch me if you can, suckers!" (Indeed, when it came to light
that some insurance companies were just sitting on unclaimed payments for
small-dollar life insurance policies, the regulators had them reopen the books
going back _sixty years_.)

~~~
frgtpsswrdlame
>(Indeed, when it came to light that some insurance companies were just
sitting on unclaimed payments for small-dollar life insurance policies, the
regulators had them reopen the books going back sixty years.)

Doesn't this undermine your point? Insurers were plenty happy to sit on life
insurance payments and not even attempt to figure out who to pay them to, thus
betraying what you state as their #1 rule and jousting with regulators and the
public over actuarially insignificant improvements in their loss rates.

~~~
btilly
The key phrase is, "actuarially insignificant improvements".

With small dollar life insurance policies, "Nobody showed up to ask for the
money" is not actuarially insignificant.

------
MrEldritch
This kind of aspect is exactly why I'm fairly wary of smart contracts as a
general concept.

The problem with "law is code" is that the entire functioning of society
depends on law _not_ being code. Think of how broken all software is,
everywhere, all the time. Now multiply that by how messy the legal system
already is.

~~~
codethief
While I was reading your comment I couldn't help myself thinking that, even
though laws are not code, our society does run on code now and algorithms
start reflecting the laws we chose and in fact, in some cases, pre-date the
laws and in this sense effectively _become_ the law until lawmakers or judges
object. So I wonder in how far the question is not whether law is (will
become) code or not but whether code will become law.

Somewhat relevant: "Code is law" by Lawrence Lessig from 2001.
([https://www.harvardmagazine.com/2000/01/code-is-law-
html](https://www.harvardmagazine.com/2000/01/code-is-law-html))

Side remark: I find it amusing and terrifying at the same time how Lessig
distinguished between "the real world" and cyberspace, whereas nowaways these
boundaries are a lot more blurry.

------
dspillett
Plain text version for people not wanting to agree to the tracking etc:
[https://text.npr.org/s.php?sId=348975479](https://text.npr.org/s.php?sId=348975479)

(the "decline tracking and go plain-text instead" link goes to the front page
not the article requested, which in plain form does not make finding the
target article easy as there is no search, list by date, or other such useful
mechanism)

------
haser_au
Generally, I'd agree. Contracts in big business aren't typically enforced by
the letter. You sign a 5-year contract, with +1 year extensions up to 5 years,
you aren't going to start enforcing things that don't really matter in the
grand scheme of things.

Contracts are generally about reducing risk. Reducing the risk that you're
going to steal my IP, and reducing your risk that I'm not going to pay you.

In saying that, I've seen some be enforced to the letter. So if you're a
start-up, take your contracting seriously.

------
an4rchy
The Caesar's case that he mentions was an interesting case study, they totally
tried to get away with it -- in that case it was the $450 million mistake.

In case people are interested:
[https://www.bloomberg.com/view/articles/2014-05-13/caesars-a...](https://www.bloomberg.com/view/articles/2014-05-13/caesars-
and-the-450-million-and)

~~~
dannyw
What was the outcome of that case?

~~~
ChoGGi
I was curious too, seems they filed for chapter 11 and are hoping that debt
gets canceled as well?

[https://money.cnn.com/2015/07/22/news/companies/caesars-
bank...](https://money.cnn.com/2015/07/22/news/companies/caesars-bankruptcy-
court/index.html)

------
DreamSpinner
It's an interesting item - especially since his latest column
[https://www.bloomberg.com/view/articles/2018-07-31/sometimes...](https://www.bloomberg.com/view/articles/2018-07-31/sometimes-
the-documents-are-wrong) discusses a similar kind of problem that is going
through negotiation now.

~~~
tanderson92
Not a coincidence -- he links to the OP's link in yesterday's column when
discussing precisely that similar problem. It is likely how the OP found this
older article; I know I read it earlier today due to Matt's link.

~~~
unmole
Yup, that's how I found the link.

------
dctoedt
Commercial motivations matter — smart parties try to play fair, because they
realize they're likely to have to deal with the other side again, _and_
because at some point they're likely to need a break themselves, whether from
the other side or from some other party.

That's especially true in garden-variety commercial contracts: Suppliers want
repeat business, while customers want reliable suppliers who will go the extra
mile when necessary, e.g., in a crunch. Neither of those is likely if you get
a reputation as uncooperative.

The nut graf of the NPR piece is this: " _Business may be a game, Levine
realized, but it 's not a one-time game. It's more like an infinite game. It's
a game in which people have to live with each other, work with each other
again, and perhaps, write another big contract. ¶ The only time the words in a
contract really matter, Levine says, is when things start to get ugly — like
when people start suing each other._"

------
smpetrey
> Update: There was a typo in the original post -- the word "word" was
> misspelled as "world." Thank you to the commenters for bringing it to our
> attention.

Lovely serendipity.

~~~
perl4ever
The word for world is word...

------
jwilk
Text-only version:

[https://text.npr.org/s.php?sId=348975479](https://text.npr.org/s.php?sId=348975479)

~~~
poizan42
This is also a dark pattern by NPR. It is nice to have a plaintext version
available, but

1\. The "DECLINE AND VISIT PLAIN TEXT SITE" button does not go to the text
version of the article, and you have to actually figure out that the id is
part of the url to find the article.

2\. The only alternative to all the sharing of personal information is heavily
degraded - there might be multimedia that is part of the article that is
actually necessary for it. This is probably a violation of GDPR Art. 7. part
4.

~~~
torstenvl
I'd sure love to see the EU try and assert extraterritorial jurisdiction over
an American organization publishing news explicitly intended for American
audiences...

~~~
poizan42
Time will tell, but at least NPR takes it serious enough that they added their
"opt in" page[1].

[1]: At least from within the EU their page has been redirecting to
[https://choice.npr.org/index.html?origin=https://www.npr.org...](https://choice.npr.org/index.html?origin=https://www.npr.org/)
since GDPR came into force.

~~~
torstenvl
Fair enough, although I suspect someone just figured (basic) compliance was
less expensive than litigation. Either way, I bristle at the idea that EU law
applies to NPR's main site. That's like saying the U.S. Congress can require
things of bbc.co.uk

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soperj
Sometimes I think the long form is over blown, but did I miss half this
article or something?

~~~
pietroglyph
I don't think there's anything missing here. I actually really appreciate the
brevity. It's a small, informative, and relatively humorous anecdote that
knows what it is, no frills included.

~~~
soperj
I agree, just something I'm not used to seeing on the internet, I felt like it
was just getting into it, and then it was over, and I start to wonder how it
became an article in the first place...

~~~
khazhoux
Modern long-form articles online are legally required to cut away in the 3rd
paragraph to a story about the protagonist's upbringing, then go back to the
main story for 4 paragraphs, then 3 paragraphs about the protagonist's parents
(or, grandparents if they're Japanese) before returning to the main story for
a paragraph or two, which must end by teasing the headline again. Just when
the article gets actually informative, the article must tell you about a
competing politician/businessman/musician/whatever, which will surprisingly
end with an warm endorsement of our protagonist. The article must then on some
choice quote, and leave you somewhat surprised you read it all the way
through.

------
pmarreck
"The Evolution of Cooperation" by Robert Axelrod is a great book that
basically makes the case that cooperation is rational _as long as there is the
promise of more interaction in the future_.

[https://smile.amazon.com/Evolution-Cooperation-Revised-
Rober...](https://smile.amazon.com/Evolution-Cooperation-Revised-Robert-
Axelrod/dp/0465005640?sa-no-redirect=1)

------
Sharlin
> Business may be a game, Levine realized, but it's not a one-time game. It's
> more like an infinite game. It's a game in which people have to live with
> each other, work with each other again, and perhaps, write another big
> contract.

In technical terms, it can be modeled as an iterated prisoner's dilemma [1].
In a regular one-off prisoner's dilemma, it always makes sense for both
players to defect, as does in an iterated PD with a set number of rounds,
known to both players. That is the only Nash equilibrium. But in an iterated
PD where the number of rounds is unknown in advance, more cooperative
strategies can be superior.

[1]
[https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_itera...](https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_iterated_prisoner%27s_dilemma)

------
nemo1618
>Business may be a game, Levine realized, but it's not a one-time game. It's
more like an infinite game. It's a game in which people have to live with each
other, work with each other again, and perhaps, write another big contract.

In other words, it's an _iterated_ prisoner's dilemma, not a one-off. Success
is determined by your skill at playing the _meta-game_ , the set of all games,
moreso than your ability to crush your opponent mercilessly in every
individual game. See [https://ncase.me/trust/](https://ncase.me/trust/)

------
mapcars
>It's a game in which people have to live with each other, work with each
other again, and perhaps, write another big contract.

It's the same in whole life actually, you never know how being bad to someone
will turn in the future.

------
vilhelm_s
See also this column, also by Matt Levine,
[https://www.bloomberg.com/view/articles/2018-07-31/sometimes...](https://www.bloomberg.com/view/articles/2018-07-31/sometimes-
the-documents-are-wrong), where someone made a typo which changes the payout
of some bonds issued by a company from $640 million to $3.9 billion. Oops.

------
KSS42
There seems to have been a failure in the review process at the client. In the
contracts that I have been involved in, there is always a business
person/accountant that reviews the contracts for the business terms.

------
tomxor
This site is lame... you decline their tracking and they send you to a plain
text version of the front page, not the article. Fuck them.

------
vmarshall23
aka the Golden Rule. aka "don't be a dick"

------
codethief
> Update: There was a typo in the original post -- the word "word" was
> misspelled as "world." Thank you to the commenters for bringing it to our
> attention.

How appropriate. :) I'm trying to come up with a phrase where this typo could
mean all the difference.

~~~
pbhjpbhj
"From any country found in the wor(l)d scuba equipment may be imported."

You can import equipment from Cuba.

Not a great example as it needs bad punctuation; and it's the name of the
country that's in the word "scuba".

Most uses like "imports from anywhere in the Word will be taxed at the rate
given in regulations issued by ..." will be nonsensical if taken literally and
so wouldn't have any power unless apparent intent was considered.

------
grosjona
That's the problem with corporations getting bigger; because executives make
huge deals all the time, they forget the true value of money (from the
perspective of the majority of the population) and they become inefficient in
how they spend it... To the point that they can just round off $25 million.

