• Discover • Books • Articles • My library • Search
Now that we’ve covered the basics of skin in the game and risk-based ethics, we’re going to take a closer look at the specific ways in which skin in the game helps our civilization operate as effectively as it does.
We’ll start by discussing Taleb’s view on employment—the cornerstone of our modern capitalist society. Taleb argues that employment is a mutually beneficial agreement in which employees give up their freedom to a company that, in exchange, bears some of their personal risk. In other words, employees put their skin in the company’s game.
This highlights one of Taleb’s key ideas that will form the backbone of this section: Freedom comes from bearing one’s own risks.
First, we’ll take a closer look at the risk-freedom trade-off made by employees, detailing the benefits employees receive from employers and the ways in which their freedom is limited. Next, we’ll discuss the exceptions to this rule: employees who manage to keep their freedom by embracing greater risk. Then, we’ll discuss where the employee-employer relationship falls short and identify its inherent inefficiencies. Finally, we’ll show how you can apply this understanding of freedom and risk in your own life.
For businesses, hiring employees is a way to minimize risk. Today’s corporations are so efficient and produce goods at such a massive scale that any obstacle in the assembly line comes at enormous cost. Undependability and errors are more costly than ever before.
Employers do what they can to make sure their employees keep production running and subjugate their desires for the sake of the company. As Taleb puts it, employers want to take away their employees’ freedom.
Employers give employees something to lose—skin in the company’s game—so they’re more likely to reliably fulfill their duty. The ideal employee is scared enough of losing what the company gives him that he makes his duty to the company a central priority of his life. People are far more motivated by fear of losing what they have than the desire for something they don’t—employers use this fact to ensure their employees’ loyalty.
Essentially, employers pay employees to put skin in their game and accept some of the company’s risk for a share of its rewards. This not only benefits the employers, who earn profits from the work of their employees, but also the consumers, who get to buy the things they want.
(Shortform note: While Taleb argues that the employee relationship is driven by fear, this doesn’t mean that the workplace itself needs to be driven by fear. If workers are constantly threatened with being fired or otherwise punished, the miserable work experience will make them less afraid of losing their job, making employees less reliable and defeating the purpose of employment. On top of this, studies have shown that fear-based workplaces hinder productivity, further incentivizing owners to maintain a positive work environment.)
What does this skin in the game look like? What does the employee receive in exchange for their freedom that they’re so afraid to lose?