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

by Nassim Nicholas Taleb

The Paradox of progress, and the paradox of choice:

Why? Simply the one who doesn’t look the part, conditional on having made a (sort of) successful career in his profession, had to have much to overcome in terms of perception.

When results come from dealing directly with reality rather than through the agency of commentators, image matters less, even if it correlates to skills. But image matters quite a bit when there is hierarchy and standardized “job evaluation.”

Now there may be some correlation between looks and skills (someone who looks athletic is likely to be athletic), but, conditional on having had some success in spite of not looking the part, it is potent, even crucial, information.

In any type of activity or business divorced from the direct filter of skin in the game, the great majority of people know the jargon, play the part, and are intimate with the cosmetic details, but are clueless about the subject.

“all that glitters is not gold”—something it has taken consumers half a century to figure out;

Hire the successful trader, conditional on a solid track record, whose details you can understand the least.

In any activity, hidden details are only revealed via Lindy.

What can be phrased and expressed in a clear narrative that convinces suckers will be a sucker trap.

I also learned, in my early twenties, that the people you understand most easily were necessarily the bull***tters.

But for a real business (as opposed to a fund-raising scheme), something that should survive on its own, business plans and funding work backward. At the time of writing, most big recent successes (Microsoft, Apple, Facebook, Google) were started by people with skin and soul in the game and grew organically—if they had recourse to funding, it was to expand or allow the managers to cash out;

Never hire an academic unless his function is to partake of the rituals of writing papers or taking exams.

Just as the slick fellow in a Ferrari looks richer than the rumpled centimillionaire, scientism looks more scientific than real science. True intellect should not appear to be intellectual.

No “successful” academic could ever afford to follow such a policy. And no Intellectual Yet Idiot. It took medicine a long time to realize that when a patient shows up with a headache, it is much better to give him aspirin or recommend a good night’s sleep than do brain surgery, although the latter appears to be more “scientific.” But most “consultants” and others paid by the hour are not there yet.

People who have always operated without skin in the game (or without their skin in the right game) seek the complicated and centralized, and avoid the simple like the plague.

People who are bred, selected, and compensated to find complicated solutions do not have an incentive to implement simplified ones.

This is particularly acute in the meta-problem, when the solution is about solving this very problem.

Now the mere fact that an evaluation causes you to be judged not by the end results, but by some intermediary metric that invites you to look sophisticated, brings some distortions.

But we have evidence that collectively society doesn’t advance with organized education, rather the reverse: the level of (formal) education in a country is the result of wealth.*2

hire, conditional on an equal set of skills, the person with the least label-oriented education.

In addition, people who didn’t go to Harvard are easier to deal with in real life.

In low-quality fields like academic finance (where papers are usually some form of complicated storytelling), the “prestige” of the journal is the sole criterion.

Things appear maximally sophisticated and scientific—but remember that what looks scientific is usually scientism, not science.

Lindy again: weight lifters have known the phenomenology for at least two and a half millennia.

This is a skin-in-the-game problem, as the choices of the rich are dictated by others who have something to gain, and no side effects, from the sale.

If anything, being rich you need to hide your money if you want to have what I call friends. This may be known; what is less obvious is that you may also need to hide your erudition and learning. People can only be social friends if they don’t try to upstage or outsmart one another.

Book of the Courtier: people need to be equal, at least for the purpose of the conversation, otherwise it fails. It has to be hierarchy-free and equal in contribution. You’d rather have dinner with your friends than with your professor, unless of course your professor understands “the art” of conversation.

This reasoning shows that sophistication can, at some level, cause degradation, what economists call “negative utility.”

It is detectable only if you get rid of constructed preferences.

So long as society is getting richer, someone will try to sell you something until the point of degradation of your well-being, and a bit beyond that.

The best enemy is the one you own by putting skin in his game and letting him know the exact rules that come with it. You keep him alive, with the knowledge that he owes his life to your benevolence.

They preferred to own their enemies. And the only enemy you cannot manipulate is a dead one.

It asserts that one does not need complex models as a justification to avoid a certain action.

If we don’t understand something and it has a systemic effect, just avoid it.

It is immoral to be in opposition to the market system and not live (somewhere in Vermont or Northwestern Afghanistan) in a hut or cave isolated from it. But there is worse: It is much more immoral to claim virtue without fully living with its direct consequences.

If your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life.

If your private actions do not generalize, then you cannot have general ideas.

So these global causes—poverty (particularly children’s), the environment, justice for some minority trampled upon by colonial powers, or some as-yet-unknown gender that will be persecuted—are now the last refuge of the scoundrel advertising virtue.

Virtue is not something you advertise. It is not an investment strategy. It is not a cost-cutting scheme. It is not a bookselling (or, worse, concert-ticket-selling) strategy.

“Look it. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?”

Indeed, simony and indulgences reincarnated themselves in lay society in the form of charity dinners (for some reason, black tie), of people feeling useful engaging in the otherwise selfish activity of running marathons—no longer selfish as it aims at saving other people’s kidneys (as if kidneys could not be saved by

people writing checks to save kidneys), and of executives giving their names to buildings so they could be remembered as virtuous.

Further, the highest form of virtue is unpopular.

Courage is the only virtue you cannot fake.

1) Never engage in virtue signaling; 2) Never engage in rent-seeking; 3) You must start a business. Put

yourself on the line, start a business.

Yes, take risk, and if you get rich (which is optional), spend your money generously on others. We need p...

Doing business will always help (because it brings about economic activity without large-scale risky changes in the economy); institutions (like the aid industry) may help, but they are equally likely to harm (I am being optimistic;

Courage (risk taking) is the highest virtue. We need entrepreneurs.

People on the ground, those with skin in the game, are not too interested