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

by Nassim Nicholas Taleb

A few definitions: Static inequality is a snapshot view of inequality; it does not reflect what will happen to you in the course of your life. Consider that about 10 percent of Americans will spend at least a year in the top 1 percent, and more than half of all Americans will spend a year in the top 10 percent.*3 This is visibly not the same for the more static—but nominally more equal—Europe. For instance, only 10 percent of the wealthiest five hundred American people or dynasties were so thirty years ago; more than 60 percent on the French list are heirs and a third of the richest Europeans were the richest centuries ago. In Florence, it was just revealed that things are even worse: the same handful of families have kept the wealth for five centuries. Dynamic (ergodic) inequality takes into account the entire future and past life. You do not create dynamic equality just by raising the level of those at the bottom, but rather by making the rich rotate—or by forcing people to incur the possibility of creating an opening. The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the 1 percent.*4 Our condition here is stronger than mere income mobility. Mobility means that someone can become rich. The no-absorbing-barrier condition means that someone who is rich should never be certain to stay rich. Now, even more mathematically, Dynamic equality is what restores ergodicity, making time and ensemble proba...