Skin in the Game

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

What a poetic quote.

Nassim Taleb is a polarising figure; yet there is no doubt that he is on top form in Skin In The Game. Less academic and mathematical heavy than some of his previous work; Skin In the Game hits the sweet spot between common sense and uncommon knowledge.

Much the book deals with the differences between individual and group risk and ruin – that is the nuances of probability theory that we tend to forget when dealing with potentially ruinous risks – otherwise known as ergodicity, or the difference of 1 million people flipping a coin once, and one person flipping a coin a million times. On average, the group will break even. In reality, the probability of the single repeat player going broke approaches certainly. In other words what is good for the geese is not good for the gander (or what is for the greater good is not necessarily that good or that great for the individual).

Also worth mentioning is the section on the tyranny of the majority (you can read the full essay here, it’s one of my all time favourites) another example of how seemingly small and insignificant numbers can have outsize impact – on other individuals and groups at large.

It is also highly quotable and bitingly witty.

“The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the one percent.”

We could all do with a bit more skin in the game; more reciprocity in upside and downside risk – across both space and time. Equality of outcome might be a pipe-dream; but equality of risk and potential reward is quite possibly within our grasp. In other words, we should stop rigging the system by offering private companies tax-payer funded guaranteed bailouts. We should stop protecting the rich from ruin at the expense of the general public. We should stop subsidising the wealthy with price-floors in recessions. We should let our giants fall. Forget eating the rich, we should let capitalism chew eat its own.

We should stop politicians and public servants from being personally immune from the consequences of their policy actions.

We should stop kicking our can down the road for future generations to pick up.

And we should start taking responsibility for our own actions. What a novel idea!

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