Here are my notes on Skin in the Game by Nicholas Nassim Taleb.


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  • Skin in the game (accountability) means having to pay for your mistakes.
    • Put your name on it. Eponymy is skin in the game. Putting your name on a product or company means that you are risking your reputation, that you have something to lose. (× reputation (Naval) — “without accountability there is no credibility”)
    • Transferred risk impedes learning.
    • Transferred risk incites taking more and more risks, until a final blowup. You are encouraged to take more risk, as you will not suffer the consequences (you have only upside, no downside)
  • Bureaucracy is a machine for no skin in the game. “Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.” (× Shop Class as Soulcraft
    • Bureaucracy promotes searching for complicated solutions. More complicated (or more technology) doesn’t mean better.
      • Theories looking for applications vs applications looking for theories. Start in the real world — answer real problems.
  • Regulatory capture: making law, leaving office, getting hired at a company to work around the laws one created. (Conflict of interests; corruption.)
  • Enforcing skin in the game via law (Hammurabi’s law): “If a house collapses, the builder should be put to death.”
  • Gamed metrics (skin in the wrong game) — enforcing accountability to the wrong things. If metrics, then game-able. Basing performance reviews based on certain metrics (but then also, what else could it be based on?) means people will optimize for them (“game them”), rather than act in their profession’s best interest. (× manipulated OKRs) Wrong incentives (× Nudge).
    • A hedge fund having positive returns 251 out of 252 days doesn’t mean much, it can even be a red flag.
  • The system learns, not the people. (evolution, Darwin) The system learns, the people just die from their errors.
  • Rationality (Taleb) is what helps with survival — it can be superstitious, so long as it helps.
  • Things that have survived are things that work.
  • Lindy effect: the longer it has survived, the longer it is likely to continue surviving.
  • Via negativa (Taleb): it’s easier to know what’s bad, than to know what’s good.
  • Things don’t scale. What works in a family doesn’t work in a village; what works in a village doesn’t work in a country, etc. Federate/decentralize (network of tribes) (× Microsolidarity) rather than merge.
    • Community size: There is a community size below which people act as a collective, protecting the commons. (Ostrom) (× density reference (The Art of Gathering))
    • “It’s easier to macrobullshit than to microbullshit.”
    • Decentralization leverages the fact that micro works better than macro (and that it’s easier to macrobullshit than to microbullshit)
      • Decentralization reduces large structural asymmetries.
  • In craftsmanship, you cannot scale the output. You cannot produce at an industrial scale. (× Degrowth)
  • An ant colony is not a collection of ants. It’s not “more” than the sum of its parts; it’s different altogether.
    • Parts and whole differ because what matters is the interactions between such parts — even if the interactions obey simple rules (emergence) (× Thinking in Systems; emergent strategy).
  • Minority rule (“the most intolerant wins”): a small intransigent group will eventually let everyone convert to their choices, to accomodate them. (The flexible group doesn’t mind either option, but the intransigent group will only go with one; so everybody goes with one to simplify — there is no downside) The majority eventually submits to the minority. Inclusivity/inclusiveness. (Applies to neurons? × Traumata)
    • Finding the greatest common factor (× sacred middle ground)
    • Examples
      • Inclusive bathrooms; kosher food; organic food; veganism; choice of messaging apps (network effect and boycotting/strong boundaries); wine over beer (“women will only drink wine, but men don’t mind either; only serve wine to reduce glassware”); language (one person doesn’t speak German, so the whole group switches to English); cancel culture; civil rights.
    • Conditions
      • The minority choice must not incur excessive extra costs
      • The intransigent group must be mixed with the flexible group — not segregated in heir own district
  • “Never doubt that a small group of thoughtful citizens can change the world. Indeed, it is the only thing that ever has.” (Margaret Mead) Revolutions are driven by an obsessive minority.
  • (Purported) Renormalization: the minority rule effecting upwards, at bigger and bigger scales. (e.g. vegan child ⇒ vegan family ⇒ vegan bbq party)
  • Employees & contractors as slaves & freemen
    • Employing someone is owning them — they lose agency over their time. (× an agreement between equals to not be equals (Debt)). They have skin in the game — are at your mercy, can be fired, so have to watch their behaviour (≠ informal shop talk, where it’s mostly contractors/craftsmen (Shop Class as Soulcraft)).
    • Employing someone is buying dependability. You give them job safety (regular paychecks), they give you dependability.
      • Employees are expensive — you have to pay them even if you’ve got nothing for them to do.
      • In exchange, you get safety and dependability from your employees. You can rely on them at any time. An employee is a risk-management strategy.
      • Employees have skin in the game — a reputation to protect (in the workplace); can be fired. Their skin in the game is enough deterrent for acts of undependability, such as failing to show up on time.
    • Contractors are opportunistic — can ditch you last-minute because they found a better work opportunity on that day. “Lovers of paychecks are lazy, but they would never let you down at times like these.” Employees are dependable, freelancers are opportunistic. Contractors as relationship anarchists.
    • Employees & contractors as dogs & wolves: a dog’s life may appear smooth and secure, but in the absence of an owner, a dog does not survive. Employees abandoned by their employers cannot bounce back (IBM).
  • Principal-agent problem (agency problem): the agent acts in their best interest, rather than in the principal’s best interest.
    • e.g. a seller wants to get rid of his ware — is not incentivized to reveal its defects.
    • Inequality of uncertainty: when one party has more risk than the other in a deal
      • e.g. knows less about the product than the other
  • Static inequality (snapshot) vs dynamic inequality (over time — mobility across classes). “Economists have trouble with things that move.” Equal chances mean dynamic equality (America, on paper). To fix dynamic inequality, the rich have to rotate.
  • Ergodicity (whether your average over time matches the average of all people at a given moment — whether time average and group average are the same).
    • Ergodicity experiment: living the distribution of the world’s wealth classes over the course of your life. “Each of us would spend a proportion of time in the economic conditions of the entire cross-section: out of, say, a century, an average of 60 years in the lower middle class, 10 years in the upper middle class, 20 years in the blue collar class, and perhaps one single year in the one percent” => Spending a certain amount of time homeless. Getting a broad picture of life.
      • “The intelligentsia deals with the poor as a construct — one they created. I have yet to see a bien-pensant Cambridge don hanging out with Pakistani cab drivers or lifting weights with cockney speakers.”
    • Non-ergodicity. If there is a benefit of ruin, cost-benefit analyses are no longer possible. (e.g. 6 people playing Russian Roulette once for 1 million dollar (=”830k€ average return”) doesn’t translate to a single person playing Russian Roulette 6 times.)
      • Mediocristan vs Extremistan: small risks that moderately affect the person; vs small risks that catastrophically affect the individual (and/or the whole system).
  • History books are biased; real life is boring. “Reading a history book is like experiencing New York from a hospital’s emergency room.”
  • When you grow up with a hammer… Ruling the world and thinking all religions work similarly to yours, while in fact they differ greatly in their structure and paradigm. (× e.g. constructs around relationships growing up — but other people actually don’t think in those terms at all!; × the voice of other people, that other people actually don’t have (Improvise))
    • Interventionista compare with their points of reference, rather than with the local alternatives.
  • Teachers can only teach you how to teach. The main thing you can learn from a professor is how to be a professor. The main thing you can learn from a life coach is how to be a life coach.