Skin in the Game Summary - Unearned Wisdom

Taleb’s Incerto concludes with Skin in the Game. This book makes the argument that some people, who are not engaging directly with reality, are not capable of understanding risks. This class of people includes academics (especially in the social sciences), bureaucrats, and advisers. What these people have in common is that they are isolated from the direct consequences of their behavior.

They have ideas about how the world ought to be, but they have no appreciation for what is. They judge people to be irrational when they do not conform to their expectations. And when they make decisions to influence society, they think that what is known about individuals in experimental settings, can inform us about the behavior of populations (far more complex). But there is a replication crisis in psychology, and outside of the their bureaucratic niche, these people find it very difficult to adapt to the world. This class of people is also known as the Intellectual Yet Idiot (IYI).

Traders and practical minded people do not rely on abstract theories and ideals to make their decisions, they are empiricists in the real sense — that is, they rely on experience to make decisions. They understand the central point of this book: risk is not the same as ruin.

Some risk-taking is beneficial and should be encouraged. If you take risks and are not ruined from them, then you will benefit (the point of Anti-fragile), but if you take risks with even a small chance of ruin, then it is better to not take this risk at all. It is better to err on the side of conservatism (better safe than sorry) when there is a risk of total demise.

This justifies the logic of religion and superstitious behavior. Further, what we define as “rational” should be based on survival, and not some kind of intellectual preference.

Below are links to summaries of each section (books) of Skin in the Game.

Hierarchies are not inherently bad, they are only harmful when they result in bureaucracies that help people separate themselves from the consequences of their decisions. Hierarchies should exist, and if they are localized and decentralized then they would not result in the same errors.

Be careful of taking advice from people with misaligned incentives. If someone advises you to do something that is mutually beneficial, realize they may not care if you end up being harmed.

An intolerant minority will set the rules for everyone else. People in the U.S eat Kosher food not because most of the U.S is Jewish, but because non-Jews tolerate Kosher while Jews don’t tolerate non-Kosher. This asymmetry informs us about what will happen with GMO’s. Companies can promote genetically modified food, but it only takes a minority of people to stop GMO’s from being ubiquitous.

Employees exist because they have a lot of skin in the game, they share risk with their employers — enough for it prevent them from being undependable.

In Christianity, it would have been easier to separate Jesus from God, but there was an insistence on the Trinity. The duality of Jesus (being both man and God) is central, and has caused monotheists to see traces of polytheism in Christianity and Christians to be beheaded by the Islamic State.

Taleb’s point in Skin in the Game can be summed up with this observation. Anyone who needs to appease his colleagues to make progress, or his superiors, or deal with commentators, will have to take on the role of an actor, and by doing so, they trade results in the real world for their position in whatever artificial bureaucracy they find themselves in.

Words have ambiguous meanings — this is bad for decision making. Philosophy was born out of the need for rigor in discourse — Socrates asked people what they thought they meant about what they said. This is in opposition to the sophist’s promotion of rhetoric.

Skin in the Game: Hidden Asymmetries in Daily Life

You don’t need science to survive, but you need to survive to do science. The best definition of rationality: actions that increase the chances of survival.

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