"Never Trust Anyone Who Doesn't Have Skin in the Game."

(AP Photo/Peter Morgan)

I am reading Nassim Nicholas Taleb’s new book Skin in the Game: Hidden Asymmetries in Daily Life and he has some interesting things to say about risk management and human nature. From the description:


In his most provocative and practical book yet, one of the foremost thinkers of our time redefines what it means to understand the world, succeed in a profession, contribute to a fair and just society, detect nonsense, and influence others. Citing examples ranging from Hammurabi to Seneca, Antaeus the Giant to Donald Trump, Nassim Nicholas Taleb shows how the willingness to accept one’s own risks is an essential attribute of heroes, saints, and flourishing people in all walks of life.

As always both accessible and iconoclastic, Taleb challenges long-held beliefs about the values of those who spearhead military interventions, make financial investments, and propagate religious faiths. Among his insights:

• For social justice, focus on symmetry and risk sharing. You cannot make profits and transfer the risks to others, as bankers and large corporations do. You cannot get rich without owning your own risk and paying for your own losses. Forcing skin in the game corrects this asymmetry better than thousands of laws and regulations.
• Ethical rules aren’t universal. You’re part of a group larger than you, but it’s still smaller than humanity in general.
• Minorities, not majorities, run the world. The world is not run by consensus but by stubborn minorities imposing their tastes and ethics on others.
• You can be an intellectual yet still be an idiot. “Educated philistines” have been wrong on everything from Stalinism to Iraq to low-carb diets.
• Beware of complicated solutions (that someone was paid to find). A simple barbell can build muscle better than expensive new machines.
• True religion is commitment, not just faith. How much you believe in something is manifested only by what you’re willing to risk for it.

The phrase “skin in the game” is one we have often heard but rarely stopped to truly dissect. It is the backbone of risk management, but it’s also an astonishingly rich worldview that, as Taleb shows in this book, applies to all aspects of our lives. As Taleb says, “The symmetry of skin in the game is a simple rule that’s necessary for fairness and justice, and the ultimate BS-buster,” and “Never trust anyone who doesn’t have skin in the game. Without it, fools and crooks will benefit, and their mistakes will never come back to haunt them.”


One of the author’s dictums is “Don’t tell me what you think, tell me what you have in your portfolio.” He gives an example of journalists having no skin in the game when giving advice on stocks. If they do not own the stock or have any experience with it, any advice they give can be good, bad or indifferent but the advice does not affect them. “….[I]n the absence of skin in the game, journalists will imitate, to be safe, the opinion of other journalists, thus creating monoculture and collective mirages.”

So much of the media, academia and politicians have no skin in the game which is why they rake individuals and groups they don’t like over the coals; there is little or no cost to them. If a student pays for college and can’t finish because the rules and regulations make it impossible, he or she loses all his or her time and money but the school gains whatever tuition has been paid and loses nothing. If their degree is worthless? No worries, the individual is out of luck and the school postures about the PC majors they include.

Politicians make all kinds of laws and regulations on healthcare such as the ACA even if they don’t work because their own healthcare is fine. The media glorifies killers and blares their antics 24/7, giving the next mentally unhealthy person the urge to copy such crimes — but they never pay a price. In fact, they get higher ratings so there is no reason for them to restrain themselves or think that — ethically — it might not be the best option.


We are fast becoming a society where some people have little or no skin the game (such as those who pay no taxes) and others have a lot of skin in the game (those who pay high levels of taxes). Where will it end? What are the repercussions to our society? How different would our institutions be if administrators had skin the game?


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