Skin in the Game: Hidden Asymmetries in Daily Life (Incerto, #5)

by Nassim Nicholas Taleb

An honest person will never commit criminal acts, but a criminal will readily engage in

Let us call such minority an intransigent group, and the majority a flexible one. And their relationship rests on an asymmetry in choices.

Second, the cost structure matters quite a bit. It happens in our first example that making lemonade compliant with kosher laws doesn’t change the price by much—it is a matter of avoiding some standard additives.

If it costs ten times as much to make kosher food, then the minority rule will not apply, except perhaps in some very rich neighborhoods.

The method of analysis employed here is called a “renormalization group,” a powerful apparatus in mathematical physics that allows us to see how things scale up (or down). Let us examine it next—without mathematics.

What we saw in the renormalization group was the “veto” effect, as a person in a group can steer choices.

Rory wrote to me about the beer-wine asymmetry and the choices made for parties: “Once you have 10 percent or more women at a party, you cannot serve only beer. But most men will drink wine.

Genes follow majority rule; languages minority rule. Languages travel; genes less so.

Egypt’s Copts suffered from an additional problem: the irreversibility of Islamic conversions.

So all Islam did was out-stubborn Christianity, which itself won thanks to its own stubbornness.

And it was not because pagans had an intellectual deficit: in fact, my heuristic is that the more pagan, the more brilliant one’s mind, and the higher one’s ability to handle nuances and ambiguity.

Purely monotheistic religions such as Protestant Christianity, Salafi Islam, or fundamentalist atheism accommodate literalist and mediocre minds that cannot handle ambiguity.*4

This is the reason the U.S.A. works so well. As I have been repeating to everyone who listens, we are a federation, not a republic. To use the language of Antifragile, decentralization is convex to variations.

a law-abiding (or rule-abiding) fellow always follows the rules, but a felon or someone with looser sets of principles will not always break the rules.

Once a moral rule is established, it will suffice to have a small, intransigent minority of geographically distributed followers to dictate a norm in society. The sad news is that one person looking at mankind as an aggregate may mistakenly believe that humans are spontaneously becoming more moral, better, and more gentle, with better breath, when this applies to only a small proportion of mankind. But things work both ways, the good and the bad. While some believe that the average Pole was complicit in the liquidation of Jews, the historian Peter Fritzsche, when asked, “Why didn’t the Poles in Warsaw help their Jewish neighbors more?,” responded that they generally did. But it took seven or eight Poles to help one Jew. It took only one Pole, acting as an informer, to turn in a dozen Jews. Even if such select anti-Semitism is contestable, we can easily imagine bad outcomes stemming from a minority of bad agents.

And one property of these laws: they are black-and-white, binary, discrete, and allow no shadow. You cannot steal “a little bit” or murder “moderately”—just as you cannot keep kosher and eat “just a little bit” of pork at Sunday barbecues.

Outcomes are paradoxically more stable under the minority rule—the variance of the results is lower and the rule is more likely to emerge independently across

separate populations. What emerges from the minority rule is more likely to be black-and-white, binary rules.

Simply, the majority rule leads to fluctuations around the average, with a high rate of survival. Not the minority rule. The minority rule produces low-variance in outcomes.

“Should a society that has elected to be tolerant be intolerant about intolerance?” This is in fact the incoherence that Kurt Gödel (the grandmaster of logical rigor) detected in the United States Constitution while taking the naturalization exam.

The philosopher of science Karl Popper independently discovered the same inconsistency in democratic systems.

I wrote about people with logical flaws asking me if one should be “skeptical about skepticism”; I used a similar answer as Popper when I was asked if “one could falsify falsification.” I just walked away.

We can answer these points using the minority rule. Yes, an intolerant minority can control and destroy democracy. Actually, it will eventually destroy our world. So, we need to be more than intolerant with some intolerant minorities. Simply, they violate the Silver Rule. It is not permissible to use “American values” or “Western principles” in treating intolerant Salafism (which denies other ...

We can say that markets aren’t the sum of market participants, but price changes reflect the activities of the most motivated buyer and seller.

The market is like a large movie theater with a small door.

Richard Feynman, the most irreverent and playful scientist of his day. His book of

anecdotes, What Do You Care What Other People Think?, conveys the idea of the fundamental irreverence of science, which proceeds through a similar mechanism as the kosher asymmetry.

How? Science isn’t the sum of what scientists think, but exactly as with markets, it is a procedure that is highly skewed. Once you debunk something, it is now wrong. Had science operated by majority consensus, we would be still stuck in the Middle Ages, and Einstein wou...

Hannibal terrorized Rome for a decade and a half with a tiny army of mercenaries, winning twenty-two battles against the Romans, battles in which he was outnumbered each time.

“There is one thing that’s more wonderful than their numbers…in all that vast number there is not one man called Gisgo.”*5

“Never doubt that a small group of

thoughtful citizens can change the world. Indeed, it is the only thing that ever has,” wrote Margaret Mead. Revolutions are unarguably driven by an obsessive minority. And the entire growth of society, whether economic or moral, comes from a small number of people.

Individual, community, and its power

Society doesn’t evolve by consensus, voting, majority, committees, verbose meetings, academic conferences, tea and cucumber sandwiches, or polling; only a few people suffice to disproportionately move the needle. All one needs is an asymmetric rule somewhere—and someone with soul in the game. And asymmetry is present in about everything.*6

ntifragile has been about the failure of the average to represent anything in the presence of nonlinearities and asymmetries similar to the minority rule.

The average behavior of the market participant will not allow us to understand the general behavior of the market.

The psychological experiments on individuals showing “biases” do not allow us to automatically understand aggregates or collective behavior, nor do they enlighten us about the behavior of groups.

Remember that we do not live alone, but in packs, and almost nothing of relevance concerns a person in isolation—which is what is typically done in laboratory-style works.*1

When we focus on commonalities, we get confused, but, at a certain scale, things become different. Mathematically different.

The higher the dimension, in other words, the higher the number of possible interactions, and the more disproportionally difficult it is to understand the macro from the micro, the general from the simple units.

Understanding how the subparts of the brain (say, neurons) work will never allow us to understand how the brain works.

So far we have no f***ing idea how the brain of the worm C. elegans works, which has around three hundred neurons.

Understanding the genetic makeup of a unit will never allow us to understand the behavior of the unit itself.

A reminder that what I am writing here isn’t an opinion. It is a straightforward mathematical property.

Under the right market structure, a collection of idiots produces a well-functioning market.

Complete freedom is the last thing you want if you have an organized religion to run.

In short, every organization wants a certain number of people associated with it to be deprived of a certain share of their freedom. How do you own these people? First, by conditioning and psychological manipulation; second, by tweaking them to have some skin in the game, forcing them to have something significant to lose if they disobey authority—something hard to do with gyrovague beggars who flout their scorn for material possessions.

Contractors are exceedingly free; as risk-takers, they fear mostly the law. But employees have a reputation to protect. And they can be fired.

Someone who has been employed for a while is giving you strong evidence of submission.

Evidence of submission is displayed by the employee’s going through years depriving himself of his personal freedom for nine hours every day, his ritualistic and punctual arrival at an office, his denying himself his own schedule, and his not having beaten up anyone on the way back home after a bad day.

A company man is someone who feels that he has something huge to lose if he doesn’t behave as a company man—that is, he has skin in the game.