Skin in the Game by Nassim Taleb — Notes
5 min readJan 13, 2021
- The best slave is someone you overpay and who knows it, terrified of losing his status.
- An employable person is the one you will never find in a history book, because these people are designed to never leave their mark on the course of events.
- An employee is—by design—more valuable inside a firm than outside of it; that is, more valuable to the employer than the marketplace.
- An employee signal a certain type of domestication. Someone who has been employed for a while is giving you strong evidence of submission.
- He is an obedient, housebroken dog. A dog claiming to be a wolf.
- 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.
- People follow what’s optimal for their jobs, not what’s optimal for their company/country
- It is no secret that large corporations prefer people with families; those with downside risk are easier to own, particularly when they are choking under a large mortgage.
- To make ethical choices you cannot have dilemmas between the particular (friends, family) and the general.
- The type of distributions—called fat tails—associated with it made the analyses more delicate, far more delicate, and it had become my mathematical specialty. In Mediocristan, changes over time are the result of the collective contributions of the center, the middle. In Extremistan these changes come from the tails. Sorry if you don’t like it, but that is purely mathematical.
- If the process is fat-tailed (Extremistan), then wealth is generated at the top, which means increases in wealth lead to increases of measured inequality.
- thieves do not enter impecunious homes, and one is more likely to be drinking poison in a golden cup than an ordinary one. Poison is drunk in golden cups
- It is easy to scam people by getting them into complications — the poor are spared that type of scamming. Academics sell the most possibly complicated solution when a simple one can do. Further, the rich start using “experts” and “consultants.” An entire industry meant to swindle you will swindle you: financial consultants, diet advisors, exercise experts, lifestyle engineers, sleeping councilors, breathing specialists, etc.
- if wealth is giving you fewer options instead of more (and more varied) options, you’re doing it wrong.
- Being rich you need to hide your money if you want to have what I call friends. This may be known; what is less obvious is that you may also need to hide your erudition and learning.
- Community as a space within which many rules of competition and hierarchy are lifted, where the collective prevails over one’s interest.
- Sophistication can, at some level, cause degradation, what economists call “negative utility.” This tells us something about wealth and the growth of gross domestic product in society; it shows the presence of an inverted U curve with a level beyond which you get incremental harm. It is detectable only if you get rid of constructed preferences.
- The best enemy is the one you own by putting skin in his game and letting him know the exact rules that come with it. You keep him alive, with the knowledge that he owes his life to your benevolence.
- An enemy you own is better than 10 dead ones.
- Anonymity brings out the a**hole in people. So I accidentally discovered a way to change the behavior of unethical and abusive persons without verbal threat . Take their pictures. Just the act of taking their pictures is similar to holding their lives in your hands and controlling their future behavior thanks to your silence. They don’t know what you can do with it, and will live in a state of uncertainty.
- In the past, bad deeds were only transmitted to acquaintances who knew how to put things in perspective. Today, strangers, incapable of judging a person’s general character, have become self-appointed behavior police. Web-shaming is much more powerful than past reputational blots, and more of a tail risk.
- Plato anticipated the later Christian contrivance “you are watched.” The discussion was whether people behave in a right manner because they are watched — or, according to Socrates, because of their character.
- If we don’t understand something and it has a systemic effect, just avoid it.
- Unreliable people carried less weight than reliable ones. You can’t fool people more than twice.
- In business me-tooism is penalized.
- You can criticize either what a person said or what a person meant. The former is more sensational, hence lends itself more readily to dissemination. The mark of a charlatan — say the writer and pseudo-rationalist Sam Harris — is to defend his position or attack a critic by focusing on some specific statement (“look at what he said”) rather than blasting his exact position (“look at what he means” or, more broadly, “look at what he stands for”) — for the latter requires an extensive grasp of the proposed idea.
- A group of neurons or genes, like a group of people, differs from the individual components—because the interactions are not necessarily linear
- Going from 1,000 to 1,001 may cause complexity to be multiplied by a billion times. — Curve of dimensionality
- Understanding how the subparts of the brain (say, neurons) work will never allow us to understand how the brain works.
- The average behavior of the market participant will not allow us to understand the general behavior of the market.
- You can examine markets as markets and individuals as individuals, but markets are not sums of average individuals (a sum is an average multiplied by a constant so they are both equally affected)
- Society doesn’t evolve by consensus, voting, majority, committees, verbose meetings, academic conferences, tea and cucumber sandwiches, or polling; only a few people suffice to disproportionately move the needle. All one needs is an asymmetric rule somewhere—and someone with soul in the game. And asymmetry is present in about everything.
- Never doubt that a small group of thoughtful citizens can change the world. Indeed, it is the only thing that ever has,” wrote Margaret Mead. Revolutions are unarguably driven by an obsessive minority. And the entire growth of society, whether economic or moral, comes from a small number of people.
- Science isn’t the sum of what scientists think, but exactly as with markets, it is a procedure that is highly skewed. Once you debunk something, it is now wrong. Had science operated by majority consensus, we would be still stuck in the Middle Ages, and Einstein would have ended as he started, a patent clerk with fruitless side hobbies.
- The overall stock markets currently represent more than thirty trillion dollars, but a single order in 2008, only fifty billion, that is, less than two-tenths of a percent of the total, triggered a drop of close to 10 percent, causing losses of around three trillion dollars.
- Genes follow majority rule; languages minority rule. Languages travel; genes less so.
- Understanding the genetic makeup of a unit will never allow us to understand the behavior of the unit itself.
- Under the right market structure, a collection of idiots produces a well-functioning market.
- Individuals don’t need to know where they are going; markets do.
- Leave people alone under a good structure and they will take care of things.
- Complete freedom is the last thing you want if you have an organized religion to run.
- Survival comes first, truth, understanding, and science later.
- First, live; then philosophize— Hobbes
- Not everything that happens happens for a reason, but everything that survives survives for a reason. — Lindy Effect
- Never compare a multiplicative, systemic, and fat-tailed risk to a non-multiplicative, idiosyncratic, and thin-tailed one.
