Skin in the Game – by Nassim Taleb
Date read: 3/21/19. Recommendation: 9/10.

True to form, Taleb challenges standard conventions and long-held beliefs about a range of topics including uncertainty, symmetry, risk sharing, and rationality in complex systems. Skin in the game means having exposure to the real world and paying a price for consequences, good or bad. He explains that it’s necessary for fairness, commercial efficiency, and risk management. But most importantly, it’s necessary to understand the world. Taleb digs into real-world applications of his ideas and explains important heuristics like the Lindy effect. This will give you an entirely new lens to view the world and open your eyes to things you might never have questioned before. I cannot recommend his books enough, this is as great of a starting place as any. Love him or hate him, he’s one of the most original minds of our time.

See my notes below or Amazon for details and reviews.

My Notes:

The core of the book focuses on four topics: a) uncertainty and the reliability of knowledge, b) symmetry in human affairs (fairness, justice, responsibility, reciprocity), c) information sharing in transactions, d) rationality in complex systems and the real world. 

Importance of skin in the game:
Necessary for fairness, commercial efficiency, risk management, but most importantly, it’s necessary to understand the world. It’s about the things that existential for humans (justice, honor, sacrifice).

Skin in the game means having exposure to the real world and paying a price for consequences, good or bad. Keeps human hubris in check.

Soul in the game: “If you do not take risks for your opinions, you are nothing.” NT

Natural filter: if you can’t put your soul into something, leave it for someone else. 

No skin in the game (keep upside, transfer downside to others): Bureaucrats, consultants, administrators, politicians, corporate executives.
*See diagram on page 47 for list of asymmetries.

Asymmetries in life come from agency problems – absence of skin in the game contaminates fields and produces distortions. Skin in the game demands symmetry. 

Modernity:
“The curse of modernity is that we are increasingly populated by a class of people who are better at explaining than understanding, or better at explaining than doing.” NT 

“Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.” NT

Thinking in high, not low, dimensions:
Many people struggle to understand multidimensional problems – cholesterol reading is a single-dimensional representation that isn’t necessarily representative of complex system of multidimensional health. Another extension of this problem, comparing actions of dictators in war torn countries to the prime minster of Norway, not the local alternative. 

The Silver Rule:
“Do not treat others the way you would not like them to treat you.” NT

Mind your own business, don’t try to decide what’s good for others (The Golden Rule). 

Via negativa:
“Via negativa (acting by removing) is more powerful and less error-prone than via positiva (acting by addition).” NT

Don’t ever allow yourself to have an assistant, it hinders your natural filtering system. Without one you’ll only be able to do the things you truly enjoy. “You want maximal free time, not maximal activity, and you can assess your own ‘success’ according to such a metric.”

“Assistance moves you one step away from authenticity.” NT - for example, using Google Translate as opposed to learning the language through interactions with locals. 

Decentralization:
Decentralization and fragmentation help stability and improve people’s connection to their work. In a way, preserves a deep sense self-sufficiency that we all crave.

Minorities, not majorities, rule:
All it takes to get a book banned is a few intolerant activists who create a fuss. In a way, the most intolerant minority rules.

Revolutions aren’t always favored by the majority, in fact they’re often driven by an obsessive minority. 

It’s okay to be intolerant with intolerant minorities. They’re violating the Silver Rule (see above). Can’t use “American values” when treating intolerant extremists who deny people’s right to their own religion. 

Humility:
Cato’s injunction: he preferred to be asked why he didn’t have a statue than why he had one. One of the most important lessons I learned early on in life and helps demand far greater respect than people who overshare/overpromote and are focused on “personal brand.”

“A free person does not need to win arguments – just win.” NT

The Lindy effect:
Heuristic explaining that time removes the fragile and keeps the robust. If something is “Lindy” then it ages in reverse, life expectancy lengthens with time, conditional on survival. E.g., book with life expectancy of 100 years and has a future life expectancy of 100 more. 

There’s only one effective judge of things: time. 

“Burn old logs. Drink old wine. Read old books. Keep old friends.” Alfonso X

Summarizing Wittgenstein: knowledge is the reverse of an athletic contest. In philosophy, the winner is the one who finished last. 

An idea will survive the test of time not only if it does not harm, but also if it favors one’s survival. 

Paradox of Progress: Story of New York banker vacationing in Greece, talking to a fisherman. Consider Robert Green’s insight from The 48 Laws of Power, “In victory, learn when to stop.

“When the beard (or hair) is black, heed the reasoning, but ignore the conclusion. When the beard is gray, consider both reasoning and conclusion. When the beard is white, skip the reasoning, but mind the conclusion.” NT

The Gordian Knot:
Greek story about Alexander the Magnus untying a wagon with dozens of knots (oracle predicted that whoever did it would rule over all of Asia). Instead of overcomplicating the solution, drew his sword and cut the knot. Theme: what matters is not complexity of presentation but results.

Modern dilemma - patient shows up with a headache, much better to give him aspirin or tell him to get a full night of sleep than do brain surgery (even though it might appear more scientific)

Disagreements:
You can criticize what a person said (more sensational) or what a person meant. Figuring out what a person meant requires you have a better grasp of the idea. Charlatan’s can be identified by their criticism of specific statements. 

Virtue:
Virtue signaling: exploiting virtue for personal gain, image, career, status. Immoral to claim virtue without living with its consequences. 

“Courage is the only virtue you cannot fake.” NT 

The Law of the Jungle:
The world belongs to the collaborative. Consider how few predators there are in comparison to collaborative animals (think of a watering hole). 

Rationality:
What you do, not what you think or what you believe. At it’s core, it’s rationality is about survival.