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We’ve explored the different ways in which skin in the game helps create a better world: It gets people to form productive organizations, provides economic rewards for those who create value, allows passionate people to change the world, and acts as the definition of virtuous, socially constructive behavior.
Now, let’s explore the other side: We’re going to discuss defective institutions and areas of life in which a lack of skin in the game creates fatal flaws. Before we dive into specifics, however, we have to explain the process by which this occurs. Taleb argues that skin in the game is a necessary component of human progress, and that those who deny the need for skin in the game create systems that are doomed to fail.
First, we’ll define the “Lindy effect,” a principle that explains how systems with skin in the game self-correct and improve as time goes on. Then, we'll take a closer look at the ideology that directly opposes skin in the game, which Taleb refers to as “Intellectualism.” Finally, we’ll show why, in the absence of the Lindy effect, false appearances slowly tear apart systems without skin in the game.
Skin in the game makes the world better by allowing only the most effective ideas, inventions, and institutions to survive. This process is called the “Lindy effect.”
Named after a deli in which actors are said to have casually invented the idea, the Lindy effect states that a nonperishable thing’s longevity is roughly equal to its current age. In other words, truly effective ideas, inventions, and institutions become less likely to die as time goes on.
As Taleb puts it, if something is “Lindy,” it “ages in reverse.” As conceptual, nonperishable things like stories, companies, and religions age, they fall into two categories: they either get weaker or stronger. If a concept is fundamentally flawed, as time passes it is more likely to fail. Think of all the movies that succeed with huge box office numbers at release, but as years pass, no one watches them anymore.
On the other hand, if a concept is useful and/or effective, as time passes, the less likely it is to fail. Think of old classic movies like The Wizard of Oz and It’s a Wonderful Life that are still regularly watched today. As time goes by, the fact that people still value these movies attests to their lasting quality. Their old age actually makes them more likely to survive for even longer. This is the Lindy effect.
Antifragile on the Lindy Effect
Taleb first discusses the Lindy effect by name in Antifragile, where he includes several details about the rule that didn’t make it into this book.
Taleb is generally skeptical about the impact future technology will have on the human race. He asserts that people who try to predict the future assume that much more is going to change than actually does, overestimating the impact of new technology. It’s counterintuitive, but according to the Lindy effect, the newer a technology is, the less likely it is to be truly impactful. Although many new technologies end up changing the world, we ignore the countless new technologies that failed and faded from the public consciousness—a manifestation of the survivorship bias.
People often argue that if you value old ideas, you’re adopting an old or outdated mindset. People who hang on to traditional ideas are sometimes said to be “stuck in the past.” Taleb claims that this is an unfounded criticism. The Lindy effect shows that ideas age in reverse—they get stronger over time.
The Lindy effect functions through skin in the game. When people with skin in the game make efforts to minimize risk and loss, they eliminate whatever is ineffective. But if people are shielded from the consequences of their actions, ineffective or harmful ideas are indistinguishable from beneficial ideas.
Taleb states that the test of time in conjunction with skin in the game is the only inerrant judge of quality. Given enough time and skin in the game, everything effective will survive and everything ineffective will die out. This is the mechanism behind humanity’s advancement. (We’ll expand on this in the next section.)