SKIN IN THE GAME : HIDDEN ASSYMMETRIES IN DAILY LIFE

Nassim Nicholas Taleb is a known name amongst the academics and practitioners alike. He is a Bond in the field who has written multi-book series Incerto which means uncertainity in Latin. So in the series he talks about the uncertainity as it plays out in our daily life. This book is one of the constituent in likes of The Black Swan, AntiFragile, Fooled by Randomness amongst others. The book is published by Penguin Randomhouse, UK in 2018. 

The book is divided into 19 chapters. The basic premise of the book is to explain that whatever person gives advice he should have a skin in the game which roughly translates to that a person should not advise when he has nothing to lose about an investment and advisor should not advise if he have nothing to lose about. As he writes in the introduction that Skin in the Game is about four topics in one. Firstly it is about uncertainity and reliability of knowledge, secondly, symmetry in human affairs like justice, fairness, responsibility and reciprocity, thirdly it is about infromation sharing in the transactions and lastly rationality in complex world systems. These all four pillars of the book are related with each other like a knot.

As I stated earlier that to understand Taleb, you have to read his entire literature to explore connetedness and it’s not an easy read because the way he delves into the subjects connecting history, statistics, mathematics, and philosophy is something very unique to him. He states that historically all warlords and warmongers were warrior himself, and societies were meant by risk takers and not risk transferors. Taleb is strong critic of bureacracy and mentions,

Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions. 

He further add that "The curse of modernity is that we are increasingly populated by a class of people who are better at explaining, than understanding." In chapter 2, "A brief tour of symmetry", the author introduces the concept of Hammurabi who for all of us is a known name, but most of us don’t know his contribution. He states that the law “an eye for an eye” along with other legal maxims comes from Hammurabi‘s code and it is a metaphorical, not literal rule. He states that there is a fallacy in academics where people generalise from local to universal and expect that it should behave in the same manner. However, when things are universalised, they do not behave in such a manner leading to his failure. He writes universal behaviour is great on paper, disasterous in practice. One interesting observation, which he makes is,

“Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.”

He states that the 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. Giving an example of architecture, he states that "architects today build to impress other architects, and we end up with strange – irreversible – structures that do not satisfy the well-being of the residence, it takes time and a lot of progressive tinkering for that." In a discussion with regulations versus legal systems, he says that there are two ways to make citizens safe from large predators that is big powerful Corporation. The first one is regulation, but it is prone to misuse by lawyers leading to regulatory capture. The second is by introducing a skin in the game by the government for the business person in the form of legal liability and an efficient lawsuit. He differentiate that in the common law, it is the spirit while regulation is all about letter. 

“If you do not take risk for your opinion, you are nothing.”

He says the ethical is always more robust than the legal. Over time, it is the legal that should convert to the ethical, never the reverse when he adds "Laws come and go, ethics stay." Because Law is ambiguous and is highly dependent on the jurisdiction. In US, Civil law is very strong, in Europe and Asia it is English Common Law which rules. On certainity he writes, "No person in a transaction should have a certainty about the outcome while the other one has uncertainty." He points out that information of the outcomes should be equal to both the parties so that they make proper decision. He is inspired by Herbert Simon in the decision-making who has stated that information is key for decision making process and as there is no perfect information, people make for satisficing decision. 

It may not be ethically required, but the most effective, shame- free policy is maximal transparency, even transparency of intentions. 

In the chapter, “The most intolerant wins”, he discusses the evolution of religion and how they have been conflicts and conciliation across the history. He states that societies don’t evolve by consensus or voting. It is a minority which set the rule and brings revolutionary changes that minority, which is inspired, intolerant and courageous. In the chapter, "How to legally own another person", he discusses how people turn into submissive and what are the factors leading to dependability. He discusses Coases theory of the firm and says freedom is never free. A very good point he makes which is applicable on the decision making process in government set up like India is,

“People whose survival depends on qualitative job assessments by someone of higher rank in an organisation cannot be trust for critical decisions.”  

In the chapter 6, “Inequality and the skin in the game” he discusses what is inequality and an important part is dedicated to Ethics in Civil service which is a must read for civil service aspirants. 

In the chapter "Deeper into agency", he discusses the concept of the assassins. He states that killing was low on agenda for the assassins and the word assassins originated from word Hassassins which has which resulted into its present format. The word Hassassins originated from the drug hashish which they used to take before taking any action and went into trance. On censorship and freedom he writes that "Give me a few lines written by any man and I will find enough to get him hung." which is so true.

The chapter “The merchandising of virtue” is very interesting one and relevant to today’s scenario in which activists have a perceptible difference between what they preach and how they live, that they are exploiting virtue for image, personal gain, careers social status. These kind of things are worse. Some quotable quotes from the book are below:

“It is much more immoral to be explain 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 generalise, then you cannot have general ideas." 

"Courage is the only virtue you cannot fake." 

"Sticking up for truth when it is, unpopular is far more of a virtue, because it costs you something – your reputation." 

"Survival comes first, truth, understanding, and science later."

"Not everything that happens happens for a reason, but everything that arrives for a reason." 

"The difference between successful people and really successful people is that really successful people say no to almost everything."  

He gives three suggestions to tackle this issue: 

1. Never engage in virtual signaling. 

2. Never engage in rent seeking.

3. You must start a business. Put yourself on the line, start a business.

Last portion of the books discusses rationality and risk as both are interlinked. He mentions that one may be risk loving yet completely averse to ruin and defines it as "Rationality is avoidance of systemic ruin."

The book is a extremely rewarding if you are interested in the fields and approach it with unbiased mind and like quality content. One interesting fact I got to know is that he commisions his own studies and research and does not take grants as it may influence his study like having real skin in the game.