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How is it that maximally intolerant minorities run the world and impose their taste on us? How does universalism destroy the very people it means to help? How is it that we have more slaves today than we did during Roman times? Why shouldn’t surgeons look like surgeons? Why did Christian theology keep insisting on a human side for Jesus Christ that is necessarily distinct from the divine? How do historians confuse us by reporting on war, not peace? How is it that cheap signaling (without anything to risk) fails equally in
economic and religious environments? How do candidates for political office with obvious character flaws seem more real than bureaucrats with impeccable credentials? Why do we worship Hannibal? How do companies go bust the minute they have professional managers interested in doing good? How is paganism more symmetrical across populations? How should foreign affairs be conducted? Why should you never give money to organized charities unless they operate in a highly distributive manner (what is called Uberized in modern lingo)? Why do genes and languages spread differently? Why does the scale of
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survival and survival only? What is the foundational logic of risk bearing? But, to this author, skin in the game is mostly about justice, honor, and sacrifi...
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you cannot separate knowledge from contact with the ground. Actually, you cannot separate anything from contact with the ground. And the contact with the real world is done via skin in the game—having an exposure to the real world, and paying a price for its consequences, good or bad.
In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and have too little accountability.
The principle of intervention, like that of healers, is first do no harm (primum non nocere); even more, we will argue, those who don’t take risks should never be involved in making decisions.
British Royal family made sure that one of its scions, Prince Andrew, took more risks than “commoners” during the Falkland war of 1982, his helicopter being in the front line. Why? Because noblesse oblige; the very status of a lord has been traditionally derived from protecting others, trading personal risk for prominence—and they happened to still remember that contract. You can’t be a lord if you aren’t a lord.
Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.
Decentralization is based on the simple notion that it is easier to macrobull***t than microbull***t. Decentralization reduces large structural asymmetries.
it is government, not markets, that makes these things possible by the mechanisms of bailouts. It is not just bailouts: government interference in general tends to remove skin in the game. The good news
The interventionista case is central to our story because it shows how absence of skin in the game has both ethical and epistemological effects (i.e., related to knowledge).
interventionistas don’t learn because they are not the victims of their mistakes,
The same mechanism of transferring risk also impedes learning.
You will never fully convince someone that he is wrong; only reality can.
There is no evolution without skin in the
I keep seeing academics with no skin in the game defend evolution while at the same time rejecting skin in the game and risk sharing. They refuse the notion of design by a creator who knows everything, while, at the same time, want to impose human design as if they knew all the consequences.
the more people worship the sacrosanct state (or, equivalently, large corporations), the more they hate skin in the game.
we saw that people don’t learn so much from their—and other people’s—mistakes; rather it is the system that learns by selecting those less prone to a certain class of mistakes and eliminating others. Systems learn by removing parts, via
Many bad pilots, as we mentioned, are currently in the bottom of the Atlantic, many dangerous bad drivers are in the local quiet cemetery with nice walkways bordered by trees. Transportation didn’t get safer just because people learn from errors, but because the system does. The experience of the system is different from that of individuals; it is grounded in filtering.
Skin-in-the-game-style symmetry, until the recent intellectualization of life, had been implicitly considered the principal rule for organized society, even for any form of collective life in which one encounters or deals with others more than once.
What is a tail? Take for now that it is an extreme event of low frequency. It is called a “tail” because, in drawings of bell-curve style frequencies, it is located to the extreme left or right (being of low frequency), and for some reason beyond my immediate understanding, people started calling that a “tail” and the term stuck.
The more robust Silver Rule says Do not treat others the way you would not like them to treat you.
The very idea behind the First Amendment of the Constitution of the United States is to establish a silver rule–style symmetry: you can practice your freedom of religion so long as you allow me to practice mine; you have the right to contradict me so long as I have the right to contradict you.
the gravest threat is the slippery slope in the attempts to limit speech on grounds that some of it may hurt some people’s feelings. Such restrictions do not necessarily come from the state itself, rather from the forceful establishment of an intellectual monoculture by an overactive thought police in the media and cultural life.
Universal behavior is great on paper, disastrous in practice.
In fact, the deep message of this book is the danger of universalism taken two or three steps too far—conflating the micro and the macro.
don’t give crap, don’t take crap.
Start by being nice to every person you meet. But if someone tries to exercise power over you, exercise power over him.
In an option, one person (the buyer of the option), contractually has the upside (future gains), the other (the seller) has a liability for the downside (future losses), for a pre-agreed price.
if bankers’ profits accrue to them, while their losses are somewhat quietly transferred to society (the
Spanish grammar specialists, assistant schoolteachers…), there is a fundamental problem by which hidden risks will continuously increase, until the final blowup.
Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.
element of fools of randomness and crooks of randomness in matters of uncertainty; one has a lack of understanding, the second has warped incentives. One, the fool, takes risks he doesn’t understand, mistaking his own past luck for skills, the other, the crook, transfers risks to others. Economists, when they talk about skin in the game, are only concerned with the second.
the fool is a real thing. Some people do not know their own interest—just consider addicts, workaholics, people trapped in a bad relationship, people who support large government, the press, book reviewers, or respectable bureaucrats, all of whom for some mysterious reason act against their own interest.
fools of randomness are purged by reality so they stop harming others. Recall that it is at the foundation of evolution that systems get smart by elimination.
You do not want to win an argument. You want to win. Indeed you need to win whatever you are after: money, territory, the heart of a grammar specialist, or a (pink) convertible car. For focusing just on words puts one on a very dangerous slope, since We are much better at doing than understanding.
The doer wins by doing, not convincing. Entire fields (say economics and other social sciences) become themselves charlatanic because of the absence of skin in the game connecting them back to earth
Even economics is based on the notion of “revealed preferences.” What people “think” is not relevant—you want to avoid entering the mushy-soft and self-looping discipline of psychology.
What they do, on the other hand, is tangible and measurable and that’s what we should focus on.
I personally know rich horrible forecasters and poor “good” forecasters. Because what matters in life isn’t how frequently one is “right” about outcomes, but how much one makes when one is right.
Skin in the game helps to solve the Black Swan problem and other matters of uncertainty at the level of both the individual and the collective: what has survived has revealed its robustness to Black Swan events and removing skin in the game disrupts such selection mechanisms.
1) time removes the fragile and keeps the robust, and 2) the life expectancy of the nonfragile lengthens with time).
By definition, what works cannot be irrational; about every single person I know who has chronically failed in business shares that mental block, the failure to realize
that if something stupid works (and makes money), it cannot be stupid. A system with skin-in-the-game requirements holds together through the notion of a sacrifice in order to protect the collective or entities higher in the hierarchy that are required to survive. “Survival talks and BS walks.”
What is rational is what allows the collective—entities meant to live for a long time—to survive.
Our message is to focus on those who are professionally slanted, causing harm without being accountable for it, by the very structure of their own occupation.
Those who talk should do and only those who do should talk
People who see complicated solutions do not have an incentive to implement simplified ones.
Things designed by people without skin in the game tend to grow in complication (before their final collapse).
Non-skin-in-the-game people don’t get simplicity.
