Skin In The Game

Written By Nicholas McCay

Table of Contents:

Skin In The Game—

  • “With it. Or on it.”

  • Antifragile, Black Swans, and The Incerto Series

  • Skin In The Game

  • Four Topics of Consideration

    1) Bullshit Detection

    2) Symmetry in human affairs

    3) Information sharing in transactions

    4) Rationality in complex systems

  • What Lindy Told Us

  • Text (1 book, 1 paper)

  • Audio (5 pieces of content)

  • Video (5 pieces of content)

Skin In The Game

Abstract: “Skin In The Game” is a multilayered & continuously evolving aphorism about viewing the world through incurred risk to yourself and others. Risk *should* be shared more symmetrically. If we look at history, then systems that evolve, and thus survive, fundamentally have “Skin In The Game” characteristics.

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"With it. Or on it."

The above saying supposedly goes back to ancient Greece and recently made a cameo in the movie 300. Parting mothers would basically cry “Come back with your shield, or on it” to their sons heading off to war. The premise being - dying in battle was the noblest of deaths. “Mothers whose sons died in battle openly rejoiced, mothers whose sons survived hung their heads in shame…

Asked why it was dishonorable to return without a shield and not without a helmet, the Spartan king, Demaratos (510 - 491) is said to have replied: "Because the latter they put on for their own protection, but the shield for the common good of all." (Plutarch, Mor.220 & 241)”

The now re-popularized phase is a good primer for our current essay’s subject matter. A helmet to the ancient Spartan was a necessary protection for the individual, but the shield was a symbol for the “common good.”

So, what is the common good exactly?

Dishonor, especially in battle or in death, was so taboo in Spartan culture that doing the opposite, acting honorably in battle or death, was the only *real* way to live. Anything short of this standard would probably mean death, or possibly exile, but most definitely shame. Still to this day, we remember the Spartans for their ferocious courage at the Battle of Thermopylae, but how do you get ~300 humans to literally die for their beliefs? The ancients knew something intuitively about “Skin In The Game” (SITG), as they applied the principle to war strategy that trickled down into everyday life and culture.

Collective behavior doesn’t flow from individual behavior because of the increasingly interconnected asymmetries in life.

BUT, when you create a “culture” of symmetry, the sum total of individual behaviors moves toward a better collective behavior with a longer survival time. (The initial goal direction of honor in this example that is.) 

—

Antifragile, Black Swans, & The Incerto Series 

SITG is the 5th installment of Nassim Nicholas Taleb’s Incerto series, “an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we don’t understand.” “In a world we don’t understand” is the key to this particular essay. Incerto means “uncertainty” in Latin.

Consider the following questions for yourself, and then for society:

How best should I make decisions? Should those answers differ when dealing with myself compared to others?

Am I ever *only* making decisions for myself or my circle, family, and tribe?… Or am I, and my decisions, *always* affecting others? Are their decisions affecting me?

How does society move toward a more symmetrical, and thus beneficial, outcome through the sum total of ALL decisions from ALL individuals?

Are there unifying principle(s) or heuristics in dealing with reality to answer these questions?

Taleb’s answer is his Incerto series. My answer is what you are currently reading.

What is your answer?

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Before we go deeper into SITG, it is beneficial to bring up two topics of other Incerto books, AntiFragile & Black Swan (events), that our current topic of investigation builds upon.

The 2008 sub-prime mortgage crisis and the Fukushima nuclear reactor disaster in Japan (even Chernobyl, and the recent HBO series effectively critiquing what can happen when you don’t heed these principles) are catastrophic events that are unpredictable as specific occurrences but are predictable as rare-but-known phenomena. These events are called “Black Swans.” The only way to avoid Black Swans, is to give structures resilience, or “Antifragility.”

Taleb describes structures with antifragile characteristics as the ability to fail in small doses, and to use that failure to “gain from disorder” over time—counterintuitively producing a greater order. These principles would in theory, and, as we will see soon also in practice, impart resiliency to the structure, so that the system has the ability to transmit lessons from those small failures (by learning, adapting, and evolving) into developing new strengths.

Keeping things “small enough to fail” (as opposed to “too big to fail”) is the cornerstone. The 2008 financial crisis, and its “too big too fail” banks, was a prophetic moment for all of modernity in that it showed precisely what’s going on in too many places today. Bacon’s Rebellion says more about what kind of fragile world this creates when Black Swans appear :

“The result of this dynamic is that there is very little learning within the system, and we go right back to making structures that are more unstable over time. In evolutionary terms, we are not advancing into greater resilience, but lesser resilience.

Thus, instead of creating a world in which the most destructive Black Swans are more survivable, all the emphasis is on preventing such Black Swans, and creating an unsustainable state of normality. The inevitable result is that these Black Swans come anyway—with ever more catastrophic results.”

Nicholas McCay
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