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New York Times bestselling author Nassim Nicholas Taleb challenges long-held beliefs about the values of those who spearhead military interventions, make financial investments and propagate religious faith. He also shows how the willingness to accept one’s own risks is an essential attribute of heroes, saints, and flourishing people in all walks of life. Taleb warns, “Never trust anyone who doesn’t have skin in the game.”

The Symmetry of Skin in the Game

Taleb provides a diverse and comprehensive collection of examples to support his core message: “If you have the rewards, you must also get some of the risks, not let others pay the price for your mistakes.”

The practices of the financial services industry are an easily identified topic in this argument: “Don’t tell me what you ‘think,’ just tell me what’s in your portfolio.”
However, Taleb goes further to underline the ubiquity of this perceived lack of skin in the game by calling out “interventionista” politics, where governments intervene in other countries to achieve short-term economic or political goals with no accountability for the longer-term consequences of those actions.

The hidden asymmetries referenced in the title continue this proposition by recognizing “informational differentials” between people in a transaction. While technology may be driving increased transparency, a legal framework based on caveat emptor (buyer beware) undermines any commitment to knowledge equality.

Tort laws that require sellers to have some skin in the game, such as the automotive “lemon laws” that require dealers and manufacturers to take back defective vehicles, may offer some aspects of redress, but, Taleb argues, that system can still be “gamed” in favor of the dealers and manufacturers.

Regulatory capture, otherwise known as the fox guarding the henhouse, is a classic example of regulations being gamed. When the appointed regulator is a former trade-association member or lobbyist, for example, the necessary objectivity and neutrality are thrown out of the window. With no harsh regulations in place to prevent such behavior, there is no risk (skin in the game) to prevent it.

Moral Symmetry

Any treatise on fairness and equality must inevitably address morality and ethics, and Taleb deals with both on multiple fronts, from the social injustice of capitalism to the “stubborn minorities” that impose their tastes and ethics on others.

Rather than simply dissecting the flawed methodologies of the works of others, as he has done in his earlier works, Taleb portrays the presence of skin in the game as a framework by which to judge the assertions, arguments and actions of others.

Ethical rules, for example, may convey a sense of moral righteousness, but only within the larger group of which you are a part (religious, societal or demographic). That, Taleb argues, does not guarantee universality, since your group is still smaller than humanity as a whole.

In the same context, religious or political extremes deserve the same scrutiny of skin in the game, since many of those dictating the rules and regulations have no perceived risk in the successful or unsuccessful outcome of their campaigns.

After a fascinating journey that takes us from Antaeus to Hammurabi to Seneca to Donald Trump, Skin in the Game, the fifth installment of Taleb’s Incerto, arrives at a deceptively simple conclusion: “Skin in the game keeps human hubris in check.” This is by no means a light read, but Taleb’s incisive analysis and provocative worldview will leave you thinking long after the last page.