Trendy academia seems to appeal to us that everything true in this world is exactly the opposite of what your grandmother might tell you. “Hey, you know, you might think that male and female have distinct biological characteristics, but actually …” “Hey, actually, you might think that you think the Holocaust was an atrocious act of malevolence, but actually it’s just an emotional reaction to the clash of particular atoms. Now please be quiet so as to give me enough time to roll my eyes at you poor neanderthal.” Skin in the Game appeals to humility.
You know what? Your grandmother’s beliefs might not be perfect, politically incorrect, etc. but they have survived the test of time, emerging out of a lifetime of risk-taking and mistake-making. If they’re not perfect, they at the very least allowed her to survive, and incidentally, allowed you to exist and perhaps have a decent life. That’s where such timeless wisdom as “respect your elders” come from.
Perhaps when humanity finally achieves perfect knowledge, it will be something we all knew anyway. It won’t be something so out of left field that it upturns everything we know about existence.
My overriding experience with discussing my non-fiction reading with my mother has been her just being reaffirmed in her beliefs. I will excitedly explain new research in some area, and she will respond with, “We all knew that though, didn’t we?” She hasn’t done the double-blind studies with peer review, but somehow she just knew that already. I knew it too, intuitively, but I suppose it’s nice to have it confirmed.
Youngsters are not likely to heed this advice, nor should they – they’re biologically wired not to listen to timeless wisdom so that they do take more risks and streamline the evolutionary process.
Death, ruin and Thomas Piketty
Although “What doesn’t kill me makes me stronger,” of course, you should probably protect your children from death or ruin. You don’t want your child piled up with his buddy in the bucket of JCB digger like the teenage gangsters from Gomorrah, nor in prison. Though if you’re talking about adults, death or at least ruin should always be on the table.
According to Taleb, this especially applies to those individuals whose decisions affect the largest number of people. If the risk you take on has the potential to destroy an entire economy, you should pay the price for that by complete and utter ruin. In other words, the opposite of what happened to the large banks after the 2008 financial crisis.
“We’re too big to fail”, they said, and so appealed to the government/central bank cartel for a helping hand. Jobs were still lost, millions of lives were ruined, but the bankers suffered little. The ones responsible for the mess were not called upon to clean it up.
This is an example of asymmetrical risk. There’s nothing wrong with big risks that involve others, provided there’s at least as much risk of failure as there is an opportunity for success. This is the logic behind punishment as a deterrent – it is no guarantee that someone won’t go on a killing spree, but at least the respective punishment is drastic enough to de-incentivize it. Not going on killing sprees would be pretty hard compared to striving for a productive non-violent life, but heck, the potential consequence of at least not trying to be a decent human is either an entire life wasted in shame and isolation or death.
Well duh, right? We all understand that incentive matters. Maybe not. The popular perception of inequality, for instance, is so lack of nuance it’s almost as if the people responsible for peddling it might personally profit by widespread confusion over the issue (I mean, what’s the point of someone like Thomas Piketty if inequality isn’t actually a problem?). It might be worth wringing one’s hands over inequality if we ignored skin in the game, symmetry, rent-seeking, overall wealth and the very concept of time. Let’s not do that.
Yes, it’s true, the 1% own an extraordinarily large amount of wealth in comparison to the bottom. Yet, if you look at that figure over time, it paints an entirely different story. Those in the 1% today are not necessarily the same individuals that were in the 1% 30 or even 20 years ago.
Piketty and other inequality hawks ignore symmetry and consequently get incentive all wrong. Obviously, the capital class has the desire to drive down wages and increase profits. What’s left out of the equation is the symmetrical desire (all things remaining equal) from employees to increase their pay, combined with new capital that wants to compete.
If the game is set up symmetrically, i.e. we have a system of truly free enterprise and competition, those that make their wealth are anxious about losing it twice as fast as they made it. They have to continually make good decisions to maintain it. They can’t just bank on their previous good decisions. What’s the fastest way to have $1 million? Lose $4 million.
That’s ruin – 21st Century societies are not too comfortable with death. Death in the market is symbolic of nature, if not exactly like it. Even those that are ruined find they can learn from their own mistakes and build themselves back up again.
Though it’s worth pointing out again that the learning process is primarily evolutionary, and not necessarily on the individual level. You can conceive of a person that will continually make the same mistakes over and over again, and keep paying for them. We all know this kind of person. But we also have this person to point to as an example of what not to do. And there’s always the possibility that this person, as the Lindy effect comes into play, that they will die (figuratively or literally.) This behavior is then no longer represented in the dataset.
There’s something slightly intimidating about venturing into the work of someone whose Twitter feed sports references to Phoenician wines, ancient languages, and long probability formulas. He’s so blase, one can’t help but imagine that the key content is impossibly complex. Luckily, Taleb writes breathlessly, and with the enthusiasm of an evangelist, but in the parlance of someone who lives and works and drinks in the real world, i.e. with Skin in the Game.
I read a lot of non-fiction; it’s no surprise that many do not. Much work is a deluge of apparently rigorous empirical data in the guise of argument. Many writers seem to forget that popular literature is meant to be entertaining. The search for knowledge is supposed to be fun, right? Not according to the trendies. Popular non-fiction is not meant to be read with interest. It’s not even required to be read at all. You grasp some sense of what the book is about from the media and your clever friends, buy the book, flick through it (maybe), then put it in a prominent place in your shelf. Then when someone in the real world says something with common sense, “Well actually … “
Here’s an intuitive idea for writers: people don’t want to read graphs and tables. This is an empirical fact – Thomas Piketty’s greatly cited, greatly unread treatise Capital in the 21st Century, has most its Kindle highlights in the first 26 pages. Not to pick on IYIs (Taleb’s bane, Intellectual Yet Idiots), also scoring poorly on this unread index is the book that Taleb likes, Thinking Fast and Slow by Daniel Kahneman. Maybe it’s a good book, I wouldn’t know – I fell asleep after the fifth study analysis. Learn from Bill Bryson – non-fiction can be something that people want to read, not just refer to.
Skin in the Game is not like that at all. He writes like a good reporter, or even better, your friend you’ve bumped into in the street, who has only 30 seconds to tell you the gossip. What’s the most important thing you need to know right now? Start with that first. All the empirical and theoretical stuff is in the technical appendix. Taleb writes to elucidate, not obfuscate.
Elucidated, I am indeed. Read properly, these ideas will have you and take you on wild intellectual flights of fancy. If you’re into ideas as much as I am, you’re going to love this book. If you have any residual respect for politicians or university professors, you might have an issue.