Those who have the most skin in the game often have a disproportionate impact on a system because they are exposed to consequences. Those who aren’t exposed to the consequences don’t suffer from mistakes, hence, they don’t learn.
Another consequence is that anyone who has no skin in the game, can make catastrophic decisions because they won’t suffer from the consequences. This is the case with centralized systems.
Centralized systems like bureaucracies take the skin of everyone out of the game, hence, they don’t move forward…until they collapse.
This shows how someone taking a risk should always suffer the consequences (good or bad), in order to make life fair. This is why laws exist. If you do X, you will suffer Y. Laws force people’s skin into the game.
When it’s not the case, when risk < reward, rewards will tend to be maximized without taking risk into account, hence increasing the risk until the system explodes, like the crisis of 2008 -> getting people’s skin into the game forces them to do better work.
People consider they have their skins in the game up to a certain point. Eg: you will feel more responsible in a small company than in a big one -> things don’t scale. Small ≠ big.
Having your skin in the game means that you are exposed to winning, or losing. Those who lose disappear. Those who won are still there. Time acts as a filter. This is called the Lindy effect.
Lindy states that the longer something has been existing, the longer it will exist. This is why when you are looking for the best practices, you are likely to find them in the oldest ones.
Skin in the Game is an expression that reflects the idea to have stakes in something. Having stakes means that you are taking a certain amount of risk. It means you have something to lose, it means having exposure to the downside.
You can have stakes in a group of people (your family), a project (your company), or a situation (going out with friends).
That risk is exposure to consequences, no matter if the exposure is positive, or negative.
This book examines the effects of skin in the game in life.
Because I do not like this skin in the game expression, I will call it SIG, exposure, or stakes from now on.