''Skin in the Game: Hidden Asymmetries in Daily Life'' (acronymed: SITG) is a 2018 nonfiction book by
Nassim Nicholas Taleb, a former
options trader with a background in the mathematics of
probability
Probability is the branch of mathematics concerning numerical descriptions of how likely an event is to occur, or how likely it is that a proposition is true. The probability of an event is a number between 0 and 1, where, roughly speakin ...
and
statistics.
Taleb's thesis is that
skin in the game—i.e., having a measurable risk when taking a major decision—is necessary for fairness, commercial efficiency, and risk management, as well as being necessary to understand the world.
The book is part of Taleb's multi-volume philosophical essay on uncertainty, titled the ''
Incerto'', which also includes ''
Fooled by Randomness
''Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets'' is a book by Nassim Nicholas Taleb that deals with the fallibility of human knowledge. It was first published in 2001. Updated editions were released a few years later. ...
'' (2001), ''
The Black Swan'' (2007–2010), ''
The Bed of Procrustes
''The Bed of Procrustes: Philosophical and Practical Aphorisms'' is a philosophy book by Nassim Nicholas Taleb written in the aphoristic style. It was first released on November 30, 2010 by Random House. An updated edition was released on Octo ...
'' (2010–2016), and ''
Antifragile'' (2012). The book is dedicated to "two men of courage":
Ron Paul, "a Roman among Greeks"; and
Ralph Nader
Ralph Nader (; born February 27, 1934) is an American political activist, author, lecturer, and attorney noted for his involvement in consumer protection, environmentalism, and government reform causes.
The son of Lebanese immigrants to the U ...
, "Greco-Phoenician saint".
Asymmetry and missing incentives
If an actor pockets some rewards from a policy they enact or support without accepting any of the risks, economists consider it to be a problem of "missing incentives". In contrast, to Taleb, the problem is more fundamentally one of asymmetry: one actor gets the rewards, the other is stuck with the risks.
[
Taleb argues that "For social justice, focus on symmetry and risk sharing. You cannot make profits and transfer the risks to others, as bankers and large corporations do... Forcing skin in the game corrects this asymmetry better than thousands of laws and regulations."]
The centrality of negative incentives
Actors - per Taleb - must bear a cost when they fail the public. A fund manager that gets a percentage on wins, but no penalty for losing is incentivized to gamble with his clients funds. Bearing no downside for one's actions means that one has no "Skin In The Game", which is the source of many evils.
An evolutionary process is an additional argument for SITG. Those who err and have SITG will not survive, hence evolutionary processes will eliminate (physically or figuratively by going bankrupt etc) those tending to do stupid things. Without SITG, this process cannot work.
Examples
Robert Rubin
Robert Edward Rubin (born August 29, 1938) is an American retired banking executive, lawyer, and former government official. He served as the 70th United States Secretary of the Treasury during the Clinton administration. Before his government ...
, a highly-paid director and senior advisor at Citigroup, paid no financial penalty when Citigroup had to be rescued by U.S. taxpayers due to overreach.[ Taleb calls this sort of a trade, with upside gain but no or limited downside risk, a "Bob Rubin trade".
Many ]war hawk
In politics, a war hawk, or simply hawk, is someone who favors war or continuing to escalate an existing conflict as opposed to other solutions. War hawks are the opposite of doves. The terms are derived by analogy with the birds of the same name ...
s don't themselves bear any risks of dying in a war they advocate.
Intellectual Yet Idiot
''Intellectual Yet Idiot (IYI)'' is a term coined by Nassim Nicholas Taleb in his essay by the same name that refers to the semi-intelligent well-pedigreed "who are telling us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think... and 5) who to vote for". They represent a very small minority of people but have an overwhelming impact on the vast majority because they affect government policy. IYI are often policy makers, academics, journalists, and media pundits.
Taleb points out that being educated and "intellectual" does not always mean that someone isn't an idiot for most purposes. "You can be an intellectual yet still be an idiot. 'Educated philistines' have been wrong on everything from Stalinism to Iraq
Iraq,; ku, عێراق, translit=Êraq officially the Republic of Iraq, '; ku, کۆماری عێراق, translit=Komarî Êraq is a country in Western Asia. It is bordered by Turkey to the north, Iran to the east, the Persian Gulf and K ...
to low-carb diets."
Taleb dedicates a chapter to IYIs in his book Skin in the Game.
Usage
The term was picked up and used late in the 2016 U.S. presidential election by Newt Gingrich when he criticized the negative response Trump received after the first presidential debate stating that "The Intellectual Yet Idiot class is so out of touch with America that they don't even realize how badly they are doing and how well Trump is doing." Gingrich has mentioned the term in interviews and speeches since then and has included in his book ''Understanding Trump'' a chapter called "The Rise of the IYI".
The term has since been used extensively and has been cited in numerous periodicals including ''The Guardian
''The Guardian'' is a British daily newspaper. It was founded in 1821 as ''The Manchester Guardian'', and changed its name in 1959. Along with its sister papers ''The Observer'' and ''The Guardian Weekly'', ''The Guardian'' is part of the Gu ...
'', ''Financial Times
The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Ni ...
'', and ''New Statesman
The ''New Statesman'' is a British Political magazine, political and cultural magazine published in London. Founded as a weekly review of politics and literature on 12 April 1913, it was at first connected with Sidney Webb, Sidney and Beatrice ...
''. Jonah Goldberg
Jonah Jacob Goldberg (born March 21, 1969) is an American conservative syndicated columnist, author, political analyst, and commentator. The founding editor of ''National Review Online'', from 1998 until 2019 he was an editor at '' National Revie ...
, in an article from ''National Review
''National Review'' is an American conservative editorial magazine, focusing on news and commentary pieces on political, social, and cultural affairs. The magazine was founded by the author William F. Buckley Jr. in 1955. Its editor-in-chief ...
'', references the term in defense of non-liberal intellectuals who have been branded "anti-intellectual" by the Left.
Graham Vyse in his article "Democrats Should Stop Talking About Bipartisanship and Start Fighting" from ''The New Republic
''The New Republic'' is an American magazine of commentary on politics, contemporary culture, and the arts. Founded in 1914 by several leaders of the progressive movement, it attempted to find a balance between "a liberalism centered in hu ...
'' referenced Gingrich's use of IYI as divisive and that until the Republicans become more collaborative, "Democrats need to drop the subject, too, and fight like hell instead."
Other ideas
Minority rules
A "stubborn minority" can impose its will on the relatively disinterested majority. A halal
''Halal'' (; ar, حلال, ) is an Arabic word that translates to "permissible" in English. In the Quran, the word ''halal'' is contrasted with '' haram'' (forbidden). This binary opposition was elaborated into a more complex classification k ...
eater, for example, will never eat non-halal food, but a non-halal eater isn't banned from eating halal. Thus, a catering company switches to serving halal meat despite its being preferred only by a tiny minority of its customers.[
]
Christology
The book delves into Christology
In Christianity, Christology (from the Greek grc, Χριστός, Khristós, label=none and grc, -λογία, -logia, label=none), translated literally from Greek as "the study of Christ", is a branch of theology that concerns Jesus. Differ ...
. Michael Bonner writes: "Observers who are interested in, or baffled by, the Christological debates of the first five hundred years of Christianity may be shocked by Taleb’s explanation for the Church’s insistence upon the full humanity of Jesus. The short answer is that it was essential for God to have—literally—skin in the game, and that Christ’s full participation in crucifixion, self-sacrifice, and death made him the archetypal risk-taker."
Reception and criticism
Branko Milanović wrote that Taleb has created "a full system that goes from empirics to ethics, a thing which is exceedingly rare in modern world." ''The Economist
''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...
'' described reading the book as similar to "being trapped in a cab with a cantankerous and over-opinionated driver."
Matthew Syed of ''The Times
''The Times'' is a British daily national newspaper based in London. It began in 1785 under the title ''The Daily Universal Register'', adopting its current name on 1 January 1788. ''The Times'' and its sister paper '' The Sunday Times'' (f ...
'' was "mostly persuaded" by the main argument of the book. ''The Guardian
''The Guardian'' is a British daily newspaper. It was founded in 1821 as ''The Manchester Guardian'', and changed its name in 1959. Along with its sister papers ''The Observer'' and ''The Guardian Weekly'', ''The Guardian'' is part of the Gu ...
'' published an ambivalent review, noting that Taleb's "combination of fearlessness, self-belief and immodesty adds up to charisma on the page" but that "every idea that sounds as if it might work in the abstract fails in the particular". Taleb responded with a list of the flaws and "reading comprehension" in the reviews in ''The Economist'' and ''The Guardian'' (claiming that journalists have an agency problem
Agency may refer to:
Organizations
* Institution, governmental or others
** Advertising agency or marketing agency, a service business dedicated to creating, planning and handling advertising for its clients
** Employment agency, a business that ...
with subjects criticizing their profession for lack of skin of the game).
Audiobook
The audiobook version is narrated by Joe Ochman
Joe Ochman is an American actor who is most active in voice over roles in various animation shows, films, and video games. He is the fourth and current voice of Jiminy Cricket since 2014.
Filmography Live-action
* '' Adventures in Voice Acting' ...
and reached #4 on the Audible.com
Audible is an American online audiobook and podcast service that allows users to purchase and stream audiobooks and other forms of spoken word content. This content can be purchased individually or under a subscription model where the user receiv ...
's nonfiction list in March 2018.
References
External links
{{Nassim Nicholas Taleb
2018 non-fiction books
Books by Nassim Nicholas Taleb