A reading of Skin in the Game-Hidden Asymmetries in Daily Life (2018)

Book Name: Skin in the Game-Hidden Asymmetries in Daily Life (2018)

Author: Nassim Nicholas Taleb

This book is from the author of The Black Swans which was termed as one of the 12 most influential books since World War II by The Sunday Times. My expectations from this book were already very high because of his previous book which impressed me a lot. Especially the idea that only few extreme events/things which are insignificant, numerically and statistically, can make a gigantic effect on the world, life and systems, appealed to me. To bring this point home Professor Taleb borrowed examples from various fields of life including science, technology, history, finance, economics etc. The variety of his examples made a boring subject like statistics an interesting reading for everyone. The present book is also linked with the idea of Black Swans. The central idea in this book, as the name itself suggests, is that systems work efficiently when the actors have their skin in the game. Decisions which have far reaching implications taken by persons who don't have to face the negative consequences of those decisions are a ready recipe for disaster and crisis. This idea of Professor Taleb can be implemented in every field of life including politics, religion, and finance. In his standard pungent critical style, he advices the readers "Don't take advice from someone who gives advice for a living, unless there is a penalty for their advice". This advice stems from his central idea that risk takers should be taken seriously not the charlatans without their skin in the game.

He spares no one from his stark criticism especially policy makers, corporate executives, theoreticians, bankers, and journalists are the main targets of his bitter provocative criticism. The source of all vices of our present day world can be traced in the divorce between decisions and real risk. Those who are taking the real risk in their life are the one who command respect in Taleb's world. All others who don't take risk like the "Fat Tony" who decides to bomb Iraq to bring democracy without having to bear the cost of this decision, the banker who lends to crony capitalists knowing that if the loans would go bad the government  would bail out them,  the forecaster who doesn't have to lose anything if his prediction goes wrong, the consultant who charges hefty fees but can't be held responsible if the outcomes are not satisfactory, are among the persons who are behind the current mess in the world.  On the other hand, he is all praise for those who take risks and sometimes fail also like entrepreneurs, hedge fund managers, artisans, lab experimenters, and political activists.  In his words, all these people have skin in the game.

Throughout the book he keeps questioning the very nature and credibility of the knowledge itself. Perhaps this has to do something with him being a keen researcher of epistemology. He keeps teasing and provoking the torch bearers of present day knowledge and research including Nobel laureates who according to him take their knowledge "too seriously". His main angst against them stems from the fact that they are not "risk takers" but are running the show in the world. In his world, an academician who makes a forecast does not have skin in the game and a speculator who risks his money in the derivatives market has skin in the game. So according to him in matters of risk and trading the words and advice of the speculator is more reliable than that of the academicians. He also coined a new term for intellectuals who can fake discussions on topics such as evolution, neuroscience, cognitive bias, quantum mechanics, and never curse on social media, talk about “equality of races” and “income inequality” but never drink with the cab drivers, attend TED talks, Intellectual-Yet-Idiot (IYI). These intellectual yet idiots have no real skin in the game.

His book is full of aphorisms which are defiantly quotable quotes. Some of the quotations are:

On the futility of debate:

“You will never convince someone that he is wrong; only reality can.”

On the absence of accountability of the bureaucrats:

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

On the perils of centralization:

“Decentralization is based on the simple notion that it is easier to macrobull***t than microbull***t.”

On taking advice from someone:

“Don’t tell me what you “think” just tell me what’s in your portfolio”

On the functioning of the market:

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

On the true independence of a person:

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

On how intellect looks like:

“True intellect should not appear to be intellectual”

On how seriously one should take the criticism of peers:

“Contemporary peers are valuable collaborators, not final judges” and many more.

Taleb has a piece of advice for everyone. You are a doctor, lawyer, businessman, entrepreneur, carpenter, electrician, academician, trader, investor, researcher, scientist, motivational speaker, social worker, agriculturist, villager, corporate executive; there is something Professor Taleb has to impart to you in this book. The notion of risk elaborated by him in this book makes the epistemologists, statisticians, mathematicians and philosophers envious as he made it easily comprehensible, readable, and enjoyable as well as thought provoking at the same time. Compared to his past works “The Black Swans”, “Antifragility”, and “Fooled by Randomness”, I found this book to be more readable and enjoyable. If you are looking for a book which can deepen your understanding of the world then perhaps this book should be your next reading target. If you are looking to sharpen your skills to differentiate between bullshit and knowledge, charlatans and serious scholars, this book will certainly enhance your bullshit detection skills.