Only those, who have skin in the game know what they are talking about, because they cannot afford cheap talk.
In the modern world, very often we have situation where one side has much more risk than the other. It is baffling that usually the side that has almost no risk advises the side that gets the consequences.
Examples would be:
- Financial advisors offloading risk on the clients
- Corporations with their rules
- Academics and economy professors
- Real – estate salespeople
They all can theorize and they will not suffer any consequences if their theories are wrong. Naturally, that makes them create situation where they are more and more isolated from the real world and practical applicability of their suggestions.
In history, there were laws protecting people against this kind of situation – for example – Sharia law protects against information asymmetry (I know the car Im selling is broken).
“True equality is equality in probability.”
Taleb states that „The knowledge we get by tinkering, via trial and error, experience, and the workings of time, in other words, contact with the earth, is vastly superior to that obtained through reasoning,”.
He calls this practical approach to life „Being Roman” – as opposed to „Being Greek” and focusing on theories.
In a typical Taleb manner, he introduced the notion of a „Intellectual Yet Idiot”. Intellectualism is separating theory from practice and naive perception that everything can be solved in a typical top-down manner.
I dont know what it has to do with the skin in the game, but Taleb suggests there is something like „Minority Rule”. Small, but inflexible minority will convert the flexible majority. Every time member of majority comes in contact with the member of minority – a small convert is born. Slowly, but surely, the conversion spreads. He suggests GMO crops are such example where minority of non-GMO eaters converted the rest.
All in all – this book is very entartaining, but a bit full of Taleb’s ego. Still, very much worth a read.
- in academia there is no difference between academia and the real world; in the real world, there is.
- For I just don’t like reading books that inform me of the obvious.
- one debases a principle by endlessly justifying it.
- The abrasions of your skin guide your learning and discovery, a mechanism of organic signaling,
- The knowledge we get by tinkering, via trial and error, experience, and the workings of time, in other words, contact with the earth, is vastly superior to that obtained through reasoning,
- buzzword-laden discourse. Their three flaws: 1) they think in statics not dynamics, 2) they think in low, not high, dimensions, 3) they think in terms of actions, never interactions.
- should avoid engaging in an action with a big downside if one has no idea of the outcomes.
- In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and have too little accountability.
- The principle of intervention, like that of healers, is first do no harm (primum non nocere); even more, we will argue, those who don’t take risks should never be involved in making decisions.
- Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.
- You will never fully convince someone that he is wrong; only reality can.
- The curse of modernity is that we are increasingly populated by a class of people who are better at explaining than understanding,
- In general, the more people worship the sacrosanct state (or, equivalently, large corporations),
- The more they wear suits and ties, the more they hate skin in the game.
- Effectively, there is no democracy without such an unconditional symmetry in the rights to express yourself, and the gravest threat is the slippery slope in the attempts to limit speech on grounds that some of it may hurt some people’s feelings.
- Such restrictions do not necessarily come from the state itself, rather from the forceful establishment of an intellectual monoculture by an overactive thought police in
- Immanuel Kant’s categorical imperative, which I summarize as: Behave as if your action can be generalized to the behavior of everyone in all places, under all conditions.
- Even worse: the general and the abstract tend to attract self-righteous psychopaths similar to the interventionistas of Part 1 of the Prologue.
- Start by being nice to every person you meet. But if someone tries to exercise power over you, exercise power over him.
- Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.
- You do not want to win an argument. You want to win.
- “natural” rational; to the contrary. By definition, what works cannot be irrational;
- By definition, what works cannot be irrational;
- Intellectualism is the belief that one can separate an action from the results of such action, that one can separate theory from practice, and that one can always fix a complex system by hierarchical approaches, that is, in a (ceremonial) top-down manner.
- Those who talk should do and only those who do should talk
- This explains the more severe problems of landscaping and architecture: architects today build to impress other architects, and we end up with strange—irreversible—structures that do not satisfy the well-being of their residents;
- Specialization, as I will keep insisting, comes with side effects, one of which is separating labor from the fruits of labor.
- Things designed by people without skin in the game tend to grow in complication (before their final collapse).
- when you are rewarded for perception, not results, you need to show sophistication. Anyone
- Many kids would learn to love mathematics if they had some investment in it, and, more crucially, they would build an instinct to spot its misapplications.
- Being somewhat tribal is not a bad thing—and we have to work in a fractal way in the organized harmonious relations between tribes, rather than merge all tribes in one large soup. In that sense, an American-style federalism is the ideal system.
- What Ostrom found empirically is that there exists a certain community size below which people act as collectivists, protecting the commons, as if the entire unit became rational. Such a commons cannot be too large. It is like a club.
- I am, at the Fed level, libertarian; at the state level, Republican; at the local level, Democrat; and at the family and friends level, a socialist.
- French was supposed to be the language of diplomacy, as civil servants coming from aristocratic backgrounds used it, while their more vulgar compatriots involved in commerce relied on English. In the rivalry between the two languages, English won as commerce grew to dominate modern life;
- So all Islam did was out-stubborn Christianity, which itself won thanks to its own stubbornness.
- it is the most intolerant person who imposes virtue on others precisely because of that intolerance.
- The best slave is someone you overpay and who knows it, terrified of losing his status.
- There is a category of employees who aren’t slaves, but these represent a very small proportion of the pool. You can identify them as follows: they don’t give a f*** about their reputation, at least not their corporate reputation.
- traders cursed like sailors, and I have kept the habit of strategic foul language, used only outside of my writings and family life.
- dogs. Ironically the highest status, that of a free man, is usually indicated by voluntarily adopting the mores of the lowest class.
- Consider that English “manners” were imposed on the middle class as a way of domesticating them, along with instilling in them the fear of breaking rules and violating social norms.
- What matters isn’t what a person has or doesn’t have; it is what he or she is afraid of losing.
- People whose survival depends on qualitative “job assessments” by someone of higher rank in an organization cannot be trusted for critical decisions.
- If you do not undertake a risk of real harm, reparable or even potentially irreparable, from an adventure, it is not an adventure.
- What we saw worldwide from 2014 to 2018, from India to the U.K. to the U.S., was a rebellion against the inner circle of no-skin-in-the-game policymaking “clerks” and journalists-insiders, that class of paternalistic semi-intellectual experts with some Ivy League, Oxford-Cambridge or similar label-driven education who are telling the rest of us 1) what to do, 2) what to eat, 3) how to speak, 4) how to think, and … 5) whom to vote for.
- The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited.
- They are what Nietzsche called Bildungsphilisters—educated
- The IYI has been wrong, historically, about Stalinism, Maoism, GMOs, Iraq, Libya, Syria, lobotomies, urban planning, low carbohydrate diets, gym machines, behaviorism, trans-fats, Freudianism, portfolio theory, linear regression, HFCS (High-Fructose Corn Syrup), Gaussianism, Salafism, dynamic stochastic equilibrium modeling, housing projects, marathon running, selfish genes, election-forecasting models, Bernie Madoff (pre-blowup), and p-values. But he is still convinced that his current position is right.
- True equality is equality in probability.
- The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the 1 percent.
- So class envy doesn’t originate from a truck driver in South Alabama, but from a New York or Washington, D.C., Ivy League–educated IYI (say Paul Krugman or Joseph Stiglitz) with a sense of entitlement, upset some “less smart” persons are much richer.
- Traders, when they make profits, have short communications; when they lose they drown you in details, theories, and charts.
- That which is “Lindy” is what ages in reverse, i.e., its life expectancy lengthens with time, conditional on survival.
- You can define a free person precisely as someone whose fate is not centrally or directly dependent on peer assessment.
- the people you understand most easily were necessarily the bull***tters.
- the class of intellectuals is all about rituals: without pomp and ceremony, the intellectual is just a talker, that is, pretty much nothing.
- Poison is drunk in golden cups (Venenum in auro bibitur).
- If you understand nothing about the problem (like D.C. pundits) and have no skin in the game, then everything is seen through the prism of geopolitics.
- But it remains that nobody in the Vatican seems to ever take chances by going first to the Lord, subsequently to the doctor,
- So when we look at religion, and, to some extent, ancestral superstitions, we should consider what purpose they serve, rather than focusing on the notion of “belief,” epistemic belief in its strict scientific definition.
- Survival comes first, truth, understanding, and science later.
- There is nothing particularly irrational in beliefs per se (given that they can be shortcuts and instrumental to something else):
- It is therefore my opinion that religion exists to enforce tail risk management across generations,
- If one claimed that there is “statistical evidence that a plane is safe,” with a 98 percent confidence level (statistics are meaningless without such confidence bands), and acted on it, practically no experienced pilot would be alive today.
- It doesn’t cost me much to go with my “refined paranoia,” even if wrong. For all it takes is for my paranoia to be right once, and it saves my life.
- Never compare a multiplicative, systemic, and fat-tailed risk to a non-multiplicative, idiosyncratic, and thin-tailed one.
- In a strategy that entails ruin, benefits never offset risks of ruin.