Skin in the Game: The Hidden Asymmetries in Daily Life by Nassim Nicholas Taleb. Nassim is a mathematical statistician, and risk analyst. Today he is a Distinguished Professor of Risk Engineering at New York University.
He is a co-editor-in-chief of the academic journal Risk and Decision Analysis since September 2014. Nassim has also been a practitioner of mathematical finance, a hedge fund manager, and a derivatives trader.
His previous book The Black Swan is via The Sunday Times (London) one of the 12 most influential books since World War II. Simply cannot believe it has been 14 years since I read this book. In addition, it would appear that having The Black Swan under your belt helps keep his messaging here accurate.
He has written a five volume set regarding uncertainty called Incerto. In Skin in the Game, Talib mixes a series of ancient fables and maps them to modern subjects. In the age of iPhones and COVID however, these stories seem out of the ordinary in standing up a fable from 2,500 years ago.
However, attempts to apply Wall Street commissions seems like a phish out of water today. As an example, Robert Rubin, the former US Secretary of the Treasury accepted $120 million in compensation from Citibank as the bank was trading at $0.97/share. Rubin’s position was declaring a ‘Black Swan’ event.
Ready, Fire, Aim?
Nassim does provide interesting storylines. Yet he is misfiring on many elements. At at the same time, he does make a logical argument for holding Wall Street accountable, and interestingly how a risk analyst sees the GOP nomination in 2016 built upon many businesses failures, and yet this somehow was appealing to voters.
Designers without skin in the game
Ultimately Skin in the Game is Nassim’s foundation for any functioning system. Consider industrial designers without skin in the game. they create products that increase in in complication:
Metro North, the railroad between New York City and its northern suburbs, renovated its trains, in a total overhaul. Trains look more modern, neater, have brighter colors, and even have such amenities as power plugs for your computer (that nobody uses). But on the edge, by the wall, there used to be a flat ledge where one can put the morning cup of coffee: it is hard to read a book while holding a coffee cup. The designer (who either doesn’t ride trains or rides trains but doesn’t drink coffee while reading), thinking it is an aesthetic improvement, made the ledge slightly tilted, so it is impossible to put the cup on it.
pgs. 71-72.
So, until key decisions are taken by people who pay for the consequences, there is no accountability. He makes no apologies for attacking noted economists who have, as the title suggests, no skin in the game. Nassim has suggested that in major metropolitans food quality at restaurants actually improves from repeated bankruptcies rather than any one chef’s skill. Again, this is the impact of functioning systems and a rather unique view.
The Lindy Effect
In Chapter Eight: Risk and Rationality, Nassim tackles the experts including plumbers, bakers, engineers, and piano tuners. They are assessed by their clients. In contrast, mathematicians, physicists, and hard scientists are judged according to rigorous and often unambiguous principles.
Yet, Nassim goes off the rails against macroeconomists, behavioral economists, psychologists, and those political “scientists/commentators. He sees this group incentivized by being published on the right topic in the right journal. He praises Joan C. Williams, yet has been an extremely vocal critic of Richard Thayler.
In conclusion, Nassim holds deep insights to statistics and risk. While I certainly appreciate his intellect and the book does have select stories that resonate, however it fell flat for me.