The Less Obvious Aspects of Skin in The Game

Those Hidden Asymmetries and Their Consequences

Early in the introduction, Taleb, the author, says the book is mistitled. He would’ve preferred to call it something else. It’s very typical of him as you’ll come to learn. His preferred name would have been: 

“ The Less Obvious Aspects of Skin in The Game: Those Hidden Asymmetries and Their Consequences” (Skin In The Game, 4) 

The concept of skin in the game alone could be a blog post.

Skin in the game represents the idea of sharing in the upside and downside of a decision or situation.

My least favorite books are books that should be blog posts (most self-help books). What makes this different? What does he talk about, if not what’s in the title of the book? 

The Less Obvious Aspects 

Taleb ruthlessly demeans academics (he is a professor), economists (he is/was a quantitative trader), psychologists and politicians. He criticizes them for their inability to think beyond first order consequences. 

First order consequences are the first thing to happen in response to your action. Second order consequences are the things that happen because of the first order consequence. For (an oversimplified) example, if a parent hits their kid when they misbehave, the first order consequence is they stop misbehaving. The second order consequence is that the kid grows up to be violent. They didn’t look beyond the initial consequence, even though with some thought, it’s obvious that might happen.

So while he judges academics, bureaucrats and more, it doesn’t mean we can’t learn from it too. We’re all guilty of the same faults in our decision-making.

The Hidden Asymmetries 

We think in today’s world of skin in the game as having aligned incentives. But we need equally aligned disincentives as well. Consider for example that as the homeless problem in California continues to get worse, the groups in charge of solving the problem get more and more money. There’s no disincentives.

Philosophy

Why is this guy a philosopher and not just another economist? It sounds like he works in policy on the surface level but everything comes back to one central theme.

“...to this author, skin in the game is mostly about justice, honor, and sacrifice, things that are existential for humans.” (Skin In the Game, 6). 

Question of the Day

What example can you think of where somebody made a decision for another group of people without having any skin in the game?

Your Friend,

Noah “BigNerd” Sochaczevski