Back in March 2017 I purchased Taleb\u2019s four volume set \u201cIncerto: Fooled by Randomness, The Black Swan, The Bed of Procrustes, Antifragile.\u201d\u00a0 Taleb is a retired options trader.\u00a0 He made his fortune betting on unlikely events.\u00a0 And the topic of that whole, almost sixteen hundred page work, was the concept of the Black Swan.\u00a0 The Black Swan is the very rare but extremely disruptive event.\u00a0 It\u2019s the thousand-year storm, the \u201cextinct\u201d volcano eruption, the Black Monday stock crash.\u00a0 The subject is extremely interesting and I plan to review these books in the future.\u00a0 \u201cSkin in the Game,\u201d on the other hand is not about any of that.\u00a0 It\u2019s more or less exactly about what it\u2019s named, skin in the game.\u00a0 Well let me qualify that.\u00a0 He explains why those without skin in the game shouldn\u2019t be trusted with deciding what is and isn\u2019t risky.<\/p>\n
Taleb\u2019s writing style is iterative.\u00a0 He provides numerous examples of various aspects of this thesis.\u00a0 I will now distill the whole book into one sentence.\u00a0 Never trust anyone who doesn\u2019t have skin in the game.\u00a0 That\u2019s the whole thing right there.\u00a0 But Taleb provides the logic, the applications and the ethical underpinning for why those who avoid a risk have no credibility talking about risk.\u00a0 One of his prime examples are the big banks who benefitted phenomenally from financial practices that ignored the risks associated with their business practices but when the meltdown finally came were bailed out by the federal government by claiming the meltdown was an act of God.\u00a0 So, if they know they can\u2019t lose they have no skin in the game and therefore can\u2019t be trusted to avoid endangering everyone.<\/p>\n
The list of untrustworthy authorities is defined to include any entity that is centralized, bureaucratic and otherwise insulated from accountability.\u00a0 Highest on that list is anyone who either directly or indirectly partakes in the immunity of the federal bureaucracy.\u00a0 EPA administrators, climate and wildlife scientists, IRS agents, FDA and banking regulators and all other petty mandarins that are immunized against real life consequences but revel in their ability to bully and dictate to the productive sectors of the population.<\/p>\n
Taleb makes a lot of good points and reinforces his theories with examples from normal life and even adds some mathematical rigor to his argument to show that these unaccountable experts that benefit from heads-I-win-tails-the-fed-bails-me-out tactics need to be made accountable for benefitting from Black Swan government insurance.<\/p>\n
Throughout the book Taleb makes use of concepts that he explored in his larger study Incerto.\u00a0 The concepts of fragility and the above described Black Swan.\u00a0 He also mentions the \u201cLindy Effect.\u201d\u00a0 It\u2019s the phenomenon that the longer something is successful the longer it is predicted to continue being successful.\u00a0 This highlights that one of the real advantages of skin in the game is the sorting of winners and losers along an evolutionary and survival of the fittest mechanism.\u00a0 Without this accountability it\u2019s possible for hidden bubbles to grow unnoticed and take down the system they reside in.<\/p>\n
Skin in the Game is a strange combination of philosophical meditation and real-world critique of the unaccountable entities that put us all at risk.\u00a0 I can\u2019t and won\u2019t pretend that this book will be enjoyed by everyone.\u00a0 Taleb has an odd repetitive style that at times can seem almost garrulous.\u00a0 He has many axes to grind and he can be both petty and somewhat gossipy in his personal anecdotes.\u00a0 But he has a very strong case for his thesis.\u00a0 And the point is a valuable one to keep in mind.\u00a0 Basically, he is providing a tool to evaluate experts.\u00a0 The question to ask yourself about them is what would they lose if they are wrong.\u00a0 If the answer is not much then run away.<\/p>\n
And finally, this reminds me of a story I once heard about Grouch Marx.\u00a0 It might be apocryphal.\u00a0 When the New York Stock Exchange crashed in 1929 Groucho Marx lost $800,000.\u00a0 When Groucho received this news in his stockbroker\u2019s office he was devastated and became almost incoherent.\u00a0 His broker tried to console him by saying Marx wasn\u2019t alone and that everyone had lost.\u00a0 When Groucho thought about this he regained some composure and asked the broker how much he had lost.\u00a0 When the broker replied $350, Groucho then attempted to strangle him.<\/p>\n
Remember.\u00a0 Look for skin in the game.<\/p>\n","protected":false},"excerpt":{"rendered":"
Back in March 2017 I purchased Taleb\u2019s four volume set \u201cIncerto: Fooled by Randomness, The Black Swan, The Bed of Procrustes, Antifragile.\u201d\u00a0 Taleb is a<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[241,237],"tags":[702,1268,705],"class_list":["post-3888","post","type-post","status-publish","format-standard","hentry","category-book-reviews","category-reviews","tag-nassim-nicholas-taleb","tag-skin-in-the-game","tag-the-black-swan"],"yoast_head":"\n