In the Realist Commonsense Tradition

Skin in the Game: Hidden Asymmetries in Daily Life
by Nassim Nicholas Taleb
Allen Lane, 2018, 304 pages, $35
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The people need prophets. And those servants or prophets of the people are not—not necessarily—elected representatives of the people. Their mission starts in their own hearts and consciousness. In this sense, they are self-appointed prophets. They are needed in the normal functioning of a democratic society. They are needed especially in the periods of crisis, birth, or basic renewal of a democratic society.

That was not written by Nassim Taleb. That is Jacques Maritain, the French neo-Thomist philosopher in his 1951 essay Man and the State. I begin with this excerpt because I think Nassim Taleb is one of these prophets, a member of what Maritain calls “prophetic shock minorities”. The prophets that Maritain says are needed for the proper functioning of society do not foretell, in the sense of predicting future events. Rather, they tell-forth, reminding society of important values and truths that are in danger of being neglected in the pursuit of ease, power and pleasure. Soren Kierkegaard was perhaps one such prophet in nineteenth-century Denmark; G.K. Chesterton one for the early twentieth-century Anglosphere; Alexander Solzhenitsyn and John Paul II perhaps two more for the late twentieth-century West. These men were animated by a profound spiritual vision and hence are major prophets. Nassim Taleb’s chief concerns are immanent rather than transcendent; thus, a more minor prophet. This is not a fault, because living well is, of course, of vital importance.

Skin in the Game is therefore an important book. And this review of it is somewhat unusual because it is based on a second reading of the book. In Skin in the Game, Taleb laments that book reviewers write their reviews based only on a first, sometimes cursory reading of a new book. But a second reading is fairer to the author because it is usually a deeper reading. In fact, I only took stock of this point and its ramifications for me as a reviewer when I re-read the book.

Skin in the Game is the fifth book in the Incerto series. A brief—albeit inadequate—reminder of the concerns of the previous Incerto books is necessary because there is a unifying master-theme which links them all, and Skin in the Game further develops this theme: living well with uncertainty. Nassim Taleb’s first book, Fooled by Randomness (2001), was a best-seller. In it he highlighted the role that luck plays in human affairs and some of the implications of luck. For example, too often we ascribe our successes to our skills, our acumen and our talents, when luck was a large part of those successes. Thus, experts may not be experts but beneficiaries of good fortune. Qoheleth made the same point over 2500 years ago: “The race is not to the quick, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happen to them all.” I quote it to imitate Taleb’s delight in wise, ancient writers.

Next came The Black Swan (2007) which looked at the limitations of inductive reasoning, especially the way in which it could expose us—for better or much worse—to the unforeseen. Taleb says the “crux of the idea in The Black Swan was Platonification, missing central but hidden elements of a thing in the process of transforming it into an abstract construct, then causing a blow-up”. The Bed of Procrustes (2010) was a collection of philosophical maxims. In Antifragile: Things that Gain from Disorder (2012), he explored the manner in which some systems gain from stresses—even repeated stresses—while others collapse. Such super-resilient systems abound in nature. For instance, the arm bones of archers grow thicker as a result of the stresses placed on their skeletons from drawing powerful bows. In contrast to dynamic and responsive natural systems, human enterprises that are inflexible, centralised, expert or bureaucratically-driven are very vulnerable to stresses.

There is a further consistency throughout the Incerto books which is not accidental but principled. At no point has Taleb used the services of an editor, because he wants his books to stand or fall on his work alone (he puts his skin in the game) and because he wants an unmediated exchange with the reader. There are a few idiosyncrasies that an editor might have excised—such as the oft-used phrase “fuhgedaboud it”—but these add to the sense that you are reading an individual’s work. Another example: some reviewers charge Taleb with using his books to pursue personal quarrels because he names people who perpetrate the selfish/arrogant/incompetent policies that he believes have caused widespread harm. Ben Bernanke, Hillary Monsanto-Malmaison “sometimes known as Hillary Clinton”, and the Saudi plutocrats are just some of the people Taleb targets. But this naming and shaming is based on a principle provided in the earlier Incerto books: If you see fraud and don’t shout fraud, you are a fraud.

On the first page he introduces his new book:

Skin in the Game is about four topics in one: a) uncertainty and the reliability of knowledge (both practical and scientific, assuming there is a difference), or in less polite words bull***t detection, b) symmetry in human affairs, that is fairness, justice, responsibility, and reciprocity, c) information sharing in transactions, and d) rationality in complex systems and in the real world. That these four cannot be disentangled is something that is obvious when one has … skin in the game.

A few pages later, he says “the deep message of this book is the danger of universalism taken two or three steps too far—conflating the micro and the macro”.

The chapters are quite brief and always engaging. They entertain and stimulate with wit, amusing—sometimes bellicose—sniping, and lots of solid sense interspersed with snappy aphorisms that are distillations of each chapter or section. It is quickly apparent that Nassim Taleb is suspicious of head knowledge divorced from experience. This is the domain of over-reaching experts: masters of complex theory but without the street-smarts that come with risking and doing. Such a person is an Intellectual Yet Idiot (IYI). They can talk, but do not do, and so their knowledge is always flawed because our experiences teach us much more than we can rationally integrate. Thus, “We are better at doing than understanding.” And, “You may not know in your mind where you are going but you know it by doing.”

We gain much of our survival nous from committing ourselves to action, failing, getting hurt, learning, trying again, finessing, and amending techniques. We put our skin in the game and reap the good consequences of our prudent actions and learn from the painful consequences of our imprudent actions. A damaging asymmetry is created when people who influence, advise or teach other people are shielded from the consequences of their advice or tutelage when it is put into practice by other people. They don’t have their skin in the game—and they get their salary no matter what happens. Bureaucrats, academics and financial advisers are among those in this category.

Nassim Taleb is wary of “Platonifications”; it is far better to tinker heuristically at the micro-level than to grandly plan at the macro-level. He is therefore sceptical of politicians and lobbyists who urge interventions in other countries. For the same reason he is sceptical of the lofty ambitions of social-justice lobbyists. When earnest young people come to him asking:

“What should I do? I want to reduce poverty and save the world,” and similar noble aspirations at the macro-level, my suggestion is:

1) Never engage in virtue signaling;

2) Never engage in rent-seeking;

3) You must start a business. Put yourself on the line, start a business.

I’d have that advice framed and placed in every high school classroom and university lecture hall. It demands integrity and credibility in one’s personal life. The related aphorisms are: “If your private actions do not generalize, then you cannot have general ideas.” And, “If your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life.”

In a way, Skin in the Game reinforces the great value of the traditional virtues: prudence, temperance, fortitude and justice. A virtue-ethics motivates people to act with honesty and humility. Without virtue, endless laws and regulation become the default. And despite the tendency to make the regulations tighter, smart people will always find ways to circumvent them. Moreover, regulations give power to the regulators and they stifle the initiatives of entrepreneurs who are the true wealth-creators and innovators in a society.

Taleb favours decentralised administration because there are gains in flexibility and responsiveness in the face of uncertainty. He doesn’t use the word subsidiarity, but he champions the principle. The federal forms of government in the United States and especially Switzerland are his preferred systems. They are more accountable than big, centralised governments. Taleb’s guiding aphorism is: “Decentralization is based on the simple notion that it is easier to macro-bull***t than to micro-bull***t.” For a similar reason, although expressed differently, Chesterton likewise favoured small, decentralised government: it is easier for the ordinary citizen to confront and berate—for bad policy and falsehoods—a local councillor than it is a distant senator.

These ideas are related to scale. One of the asymmetries of daily life, missed by experts, is that many things don’t scale up. If you make them bigger, you destroy their qualities. What works for an individual doesn’t work for a crowd. What works for a nation doesn’t work for a continent. The world is not a global village—that idea is a monumental mistake of up-scaling.

In all of these deliberations, time sorts out what concepts and practices will endure and what will not. This is the Lindy Effect, so-called because it was in Lindy’s deli in New York that the show-biz principle was articulated. If a show has lasted six months, it is likely to go for six months longer. If it has lasted a year, it is likely to last another year. Something that has lasted for centuries may not be able to be rationally certified to an IYI’s satisfaction, but it has survival credibility. Aspects of religions, some art, virtue-ethics, long-standing traditions, customs and rituals all have this credibility. One scorns them at one’s peril. So, in the absence of a rigorous and consensual definition of human rationality, Nassim Taleb offers this principle: “What is rational is what allows the collective—entities meant to live for a long time—to survive.”

Like his other books, Skin in the Game is likely to sell millions of copies and be translated into more than three dozen languages. Such popularity is justified because of the wealth of shrewd observations and perceptive principles expressed in a muscular, combative style. It is foreseeable that the phrase “skin in the game” and the initialism “IYI” will become common parlance. Someone will be disparaged for not having “skin in the game”. Someone else will be praised because he or she has “skin in the game”. Nassim Taleb might possibly say that using the phrase “skin in the game” without having gone to the trouble of reading his book proves that you don’t have skin in the game and are unlikely to really appreciate the concept: you just want to seem intellectually hip. An IYI.

When I finished re-reading Skin in the Game, I read Sir Roger Scruton’s The Uses of Pessimism and the Dangers of False Hope (2010). The resonances between the two books, although so different in style and the authors so different in personality and experience, were striking. Both men belong to the realist commonsense tradition of philosophy and are united in their scepticism about abstract constructions. They both have esteem for the local, the tried and true, together with respect for the practical, good sense of the much-put-upon common man. Both are suspicious of IYIs. They also share a love of plain words to create a vibrant text. I suggest reading both books, one after the other, for a double-dose of reinvigorating good sense.