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A confession. When I don’t have skin in the game, I am usually dumb. My knowledge of technical matters, such as risk and probability, did not initially come from books.
So, to find errors in the estimation of these probabilistic securities, I had to study probability, which mysteriously and instantly became fun, even gripping.
what you learn from the intensity and the focus you had when under the influence of risk stays with you. You may lose the sharpness, but nobody can take away what you’ve learned.
The first one is to enact regulations—but these, aside from restricting individual freedoms, lead to another predation, this time by the state, its agents, and their cronies.
For there are always parasites benefiting from regulation, situations where the businessperson uses government to derive profits, often through protective regulations and franchises.
The other solution is to put skin in the game in transactions, in the form of legal liability, and the possibility of an efficient lawsuit. The Anglo-Saxon world has traditionally had a predilection for the legal approach instead of the regulatory one: if you harm me, I can sue you.
If you can’t effectively sue, regulate.
If you do not take risks for your opinion, you are nothing.
I have no other definition of success than leading an honorable life.
Honor implies that there are some actions you would categorically never do, regardless of the material rewards.
honor means that there are things you would do unconditionally, regardless of the consequences.
“With it or on it,” meaning either return with your shield or don’t come back alive (the custom was to carry the dead body flat on it); only cowards throw away their shields to run faster.
People who are not morally independent tend to fit ethics to their profession (with a minimum of spinning), rather than find a profession that fits their ethics. Now there is another dimension of honor: engaging in actions going beyond mere skin in the game to put oneself at risk for others, have your skin in other people’s game; sacrifice something significant for the sake of the collective.
Compendiaria res improbitas, virtusque tarda—the villainous takes the short road, virtue the longer one.
Entrepreneurs are heroes in our society. They fail for the rest of us. But owing to funding and current venture capital mechanisms, many people mistaken for entrepreneurs fail to have true skin in the game in the sense that their aim is to either cash out by selling the company they helped create to someone else, or “go public” by issuing shares in the stock market.
The skills at making things diverge from those at selling things.
There is something offensive in having a nationality without skin in the game, just to travel and pass borders, without the downside that comes with the passport.
If wanted to lower taxes for myself, and I do, I am obligated to fight for it, for both myself and the collective, other taxpayers, and to not run away. Skin in the game.
Or read commentators on the classics who were doers themselves, such as Montaigne—people who at some point had some skin in the game, then retired to write books. Avoid the intermediary, when possible.
For studying courage in textbooks doesn’t make you any more courageous than eating cow meat makes you bovine.
So remember that the heroes of history were not classicists and library rats, those people who live vicariously in their texts. They were people of deeds and had to be endowed with the spirit of risk taking. To get into their psyches, you will need someone other than a career professor teaching
“Do not do unto others what you would not have them do unto you” (Isocrates, Hillel the Elder, Mahabharata).
asymmetry in risk bearing leads to imbalances and, potentially, to systemic ruin. The Bob Rubin trade connects to my business as a trader (as we saw, when these people make money, they keep the profits; when they lose, someone else bears the costs while they do their Black Swan invocation).
am never bothered by normal people; it is the bull***tter in the “intellectual” profession who bothers
learning is rooted in repetition and convexity, meaning that the reading of a single text twice is more profitable than reading two different things once, provided of course that said text has some depth of content.
Book 3, “That Greatest Asymmetry,” is about the minority rule by which a small segment of the population inflicts its preferences on the general population.
Chapter 6, “The Intellectual Yet Idiot,” presents the IYI who doesn’t know that having skin in the game makes you understand the world (which includes bicycle riding) better than lectures.
Chapter 9 shows that, viewed from the standpoint of practice, the world is simpler and solid experts don’t look like actors playing the part. The chapter presents BS detection heuristics.
Chapter 11 explains the difference between threats and real threats and shows how you can own an enemy by not killing him.
thus establishing the principle that you need to eat what you feed others.
Beware of the person who gives advice, telling you that a certain action on your part is “good for you” while it is also good for him, while the harm to you doesn’t directly affect him.
when said advice applies to you but not to him—he may be selling you something, or trying to get you to marry his daughter or hire his son-in-law.
As is typical with people who volunteer unsolicited advice, I smelled a rat: at no phase in the discussion did he refrain from letting me know that it was
“good for me.” As a sucker, while
it always turns out that what is presented as good for you is not really good for you but certainly good for the other party.
Salespeople are experts in the art of psychological manipulation, making the client trade, often against his own interest, all the while being happy about it and loving them and their company.
The ethical is always more robust than the legal. Over time, it is the legal that should converge to the ethical, never the reverse.
Laws come and go; ethics stay.
“If a man knowingly offers for sale wine that is spoiling, ought he to tell his customers?,” the world is getting closer to the position of transparency, not necessarily via regulations as much as thanks to tort laws, and one’s ability to sue for harm in the event a seller deceives him or her. Recall
No person in a transaction should have certainty about the outcome while the other one has uncertainty.
Selling a defective product (where there is certainty as to the defect), on the other hand, is illegal. So the knowledge by the seller of corn in Rhodes in my first example does not fall under gharar, while the second case, that of a defective liquid, would.
The question we will reexamine later, after deeper discussion of complexity theory, is whether it is possible to be both ethical and universalist. In theory, yes, but, sadly, not in practice. For whenever the “we” becomes too large a club, things degrade, and each one starts fighting for his own interest.
But every single individual farmer would personally gain from his own overgrazing or overfishing under, of course, the condition that others don’t. And that is what plagues socialism: people’s individual interests do not quite work well under collectivism. But it is a critical mistake to think that people can function only under a private property system.
I am, at the Fed level, libertarian; at the state level, Republican; at the local level, Democrat; and at the family and friends level, a socialist.
A doctor is pushed by the system to transfer risk from himself to you, and from the present into the future, or from the immediate future into a more distant future.
In sum, both the doctor and the patient have skin in the game, though not perfectly, but administrators don’t—and they seem to be the cause of the troubling malfunctioning of the system. Administrators everywhere on the planet, in all businesses and pursuits, and at all times in history, have been the plague.
The main idea behind complex systems is that the ensemble behaves in ways not predicted by its components. The interactions matter more than the nature of the units.
This is called an “emergent” property of the whole, by which parts and whole differ because what matters are the interactions between such parts. And interactions can obey very simple rules. The rule we discuss in this chapter is the minority rule, the mother of all asymmetries. It suffices for an intransigent minority—a certain type of intransigent minority—with significant skin in the game (or, better, soul in the game) to reach a minutely small level, say 3 or 4 percent of the total population, for the entire population to have to submit to their preferences.
A disabled person will not use the regular bathroom, but a nondisabled person will use the bathroom for disabled people.
Let us call such minority an intransigent group, and the majority a flexible one. And their relationship rests on an asymmetry in choices.
