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In this book, Nassim Nicholas Taleb deconstructs what we know about life and society with a new ideological framework that’s both unconventional in its insights and fundamentally human. By reinterpreting life in terms of risk and reward, Taleb demonstrates how “skin in the game” is the foundation of an honorable, fulfilling life and why shirking your fair share of risk is the root of all evil.
Someone who has “skin in the game” has a vested interest in the outcome of an event—and, more importantly, has something to lose. At a rodeo, the rider on the bucking bronco has skin in the game, while the audience member eating popcorn in the bleachers does not.
Essentially, Taleb equates skin in the game to risk. The more you have to lose, the more skin you have in the game.
According to Taleb, our first impressions of how the world works are often not just wrong, but dangerously contradictory to reality. Understanding skin in the game is vitally necessary to accurately understand law, morality, politics, science, religion, and many other driving forces of our world.
Origins of “Skin in the Game”
Taleb originally formalized his view of “skin in the game” in his 2012 book Antifragile. The main idea of Antifragile is that a certain amount of stress and chaos makes some “antifragile” things stronger, like how breaking down muscle during a workout triggers growth. “Skin in the Game” was the name of a chapter near the end of that book, in which Taleb applies the idea of antifragility to ethics.
People who don’t have skin in the game are essentially stealing antifragility, which is unethical. For example, if a popular finance pundit offered bad investment advice that drove up sales of his book, he would become more antifragile, profiting from uncertainty. It doesn’t matter if the advice works or not—he comes out ahead either way. However, the investors taking the bad advice would become more fragile, as they’re at greater risk of losing money.
Most of the ideas present in the Skin in the Game chapter of Antifragile are repeated in this book.
In this section, we’ll first more closely define skin in the game and explain why Taleb finds it so important. Next, we’ll cover some basic principles surrounding skin in the game that will remain relevant throughout the book. Finally, we’ll define the key concept of asymmetry of skin in the game, explain why it’s unethical, and show how it applies to unethical transactions.
Taleb believes that an ideal system—whether it’s a country, a company, or even a religion—is made up of as many people with as much skin in the game as possible. Why? Let’s go over the primary benefits of having skin in the game.
Taleb is adamant that knowledge gained through direct experience is vastly superior to knowledge sussed out through abstract reasoning.