Minding the Consequences.

• Author: Leef, George
• Position: Skin in the Game: Hidden Asymmetries in Daily Life - Book review

Skin in the Game: Hidden Asymmetries in Daily Life

By Nassim Nicholas Taleb

279 pp.; Random House, 2018

I had heard about Nassim Nicholas Taleb for years, going back to his 2001 book Fooled by Randomness, which Fortune named one of the 75 "smartest books we know" in 2005. Taleb followed that with The Black Swan in 2007 (probably his most famous work), The Bed of Procrustes in 2010, and Antifragile in 2012. But I had not read any of his books until his latest, Skin in the Game. For reasons that aren't explained, he calls these five books "The Incerto" and describes the whole project as "an investigation of opacity, luck, uncertainty, probability, human error, and decision making when we don't understand the world."

That's quite an undertaking.

Taleb currently holds a part-time post as professor of risk engineering at New York University's Tandon School, but he began his career as a market trader who faced risk every day. He was very good at that, making enough money that he was able to devote increasing amounts of his time to reading, thinking, and writing. His views are shaped by his distinctive career path. He maintains 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, something self-serving institutions have been busy hiding from us." (Emphasis in original.)

Ignoring long-term consequences / The book's principal concern is that decisions are often made by people who don't stand to directly gain if the decisions prove right or lose if they prove wrong. That is, these decision-makers have no "skin in the game." For Taleb, this is not just an incentive problem but also a moral one because he believes decision-makers are obligated to be "sharing in harm, paying a penalty if something goes wrong."

His first example of a disastrous decision made by people without skin in the game is the Obama administration's 2011 intervention in Libya. Encouraged by intellectual "interventionistas" who claimed that Muammar Qaddafi had to be removed from power because he was a dictator, the United States helped Qaddafi's enemies overthrow him. The result has been an even worse regime in Libya that tolerates slave markets. The trouble with allowing people who have no skin in the game to make such decisions, Taleb argues, is that they think only about the immediate effect of their decisions and not the subsequent...