My Note
My highlights
517 highlights from Kindle. These are the lines I stopped at.
Skin in the Game is about four topics in one:
bull***t detection,
skin in the game is necessary to understand the world.
First, it is bull***t identification and filtering,
To emit a Yogiberrism, in academia there is no difference between academia and the real world; in the real world, there is
If you have the rewards, you must also get some of the risks, not let others pay the price of your mistakes.
it is about the distortions of symmetry and reciprocity in life:
If you give an opinion, and someone follows it, you are morally obligated to be, yourself, exposed to its consequences.
Don’t tell me what you “think,” just tell me what’s in your portfolio.
the book is about how much information one should practically share with others,
it is about rationality and the test of time.
Do not mistake skin in the game as defined here and used in this book for just an incentive problem, just having a share of the benefits (as it is commonly understood in finance).
No. It is about symmetry, more like having a share of the harm, paying a penalty if something goes wrong.
Understanding the workings of skin in the game allows us to understand serious puzzles underlying the fine-grained matrix of reality.
But, to this author, skin in the game is mostly about justice, honor, and sacrifice, things that are existential for humans.
The entire point of the book is that in the real world it is hard to disentangle ethics on one hand from knowledge and competence on the other.
you cannot separate anything from contact with the ground.
And the contact with the real world is done via skin in the game—having an exposure to the real world, and paying a price for its consequences, good or bad.
guide your learning through pain,” something mothers of young children know rather well).
“guide your learning through pain,” something mothers of young children know rather well).
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 very busy hiding from us.
Their three flaws: 1) they think in statics not dynamics, 2) they think in low, not high, dimensions, 3) they think in terms of actions, never interactions.
should avoid engaging in an action with a big downside if one has no idea of the outcomes.
What is crucial here is that the downside doesn’t affect the interventionist.
In general, when you hear someone invoking abstract modernistic notions, you can assume that they got some education (but not enough, or in the wrong discipline) and have too little accountability.
The principle of intervention, like that of healers, is first do no harm (primum non nocere); even more, we will argue, those who don’t take risks should never be involved in making decisions.
Because noblesse oblige; the very status of a lord has been traditionally derived from protecting others, trading personal risk for prominence—and they happened to still remember that contract.
Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.
what can we do since a centralized system will necessarily need people who are not directly exposed to the cost of errors?
Well, we have no choice but to decentralize or, more politely, to localize; to have fewer of these immune decision makers.
Decentralization is based on the simple notion that it is easier to macrobull***t than microbull***t. Decentralization reduces large structural asymmetries.
if we do not decentralize and distribute responsibility, it will happen by itself, the hard way: a system that doesn’t have a mechanism of skin in the game, with a buildup of imbalances, will eventually blow up and self-repair that way. If it survives.
it is government, not markets, that makes these things possible by the mechanisms of bailouts.
It is not just bailouts: government interference in general tends to remove skin in the game.
they personally go down with the ship.
We saw that interventionistas don’t learn because they are not the victims of their mistakes, and, as we hinted at with pathemata mathemata: The same mechanism of transferring risk also impedes learning.
You will never fully convince someone that he is wrong; only reality can.
Actually, to be precise, reality doesn’t care about winning arguments: survival is what matters.
The curse of modernity is that we are increasingly populated by a class of people who are better at explaining than understanding, or better at explaining than doing.
Evolution can only happen if risk of extinction is present.
Skin in the game keeps human hubris in check.
Interventionistas have in common one main attribute: they are usually not weight lifters.
Via negativa: the principle that we know what is wrong with more clarity than what is right, and that knowledge grows by subtraction.
Actions that remove are more robust than those that add because addition may have unseen, complicated feedback loops.
Also, it is easier to know that something is wrong than to find the fix.
The code has one central theme: it establishes symmetries between people in a transaction, so nobody can transfer hidden tail risk, or Bob Rubin–style risks.
What is a tail? Take for now that it is an extreme event of low frequency. It is called a “tail” because, in drawings of bell-curve style frequencies, it is located to the extreme left or right
“If a builder builds a house and the house collapses and causes the death of the owner of the house—the builder shall be put to death.”
For, as with financial traders, the best place to hide risks is “in the corners,” in burying vulnerabilities to rare events that only the architect (or the trader) can detect—the
the idea being to be far away in time and place when blowups happen.
idea being to be far away in time and place when blowups happen.
The well-known lex talionis, “an eye for one eye,” comes from Hammurabi’s rule.
some even accused me of wanting to bring back the guillotine for bankers. I am not that literal: it is just the matter of inflicting some penalty, just enough to make the Bob Rubin trade less attractive, and protect the public.
Silver Rule says Do not treat others the way you would not like them to treat you.
First, it tells you to mind your own business and not decide what is “good” for others.
via negativa (acting by removing) is more powerful and less error-prone than via positiva (acting by addition
“Deal with weaker states as you think it appropriate for stronger states to deal with you.
“Conduct yourself toward your parents as you would have your children conduct themselves toward you.”
Yogi Berra
“I go to other people’s funerals so they come to mine.”
Kant’s categorical imperative, which I summarize as: Behave as if your action can be generalized to the behavior of everyone in all places, under all conditions
Universal behavior is great on paper, disastrous in practice.
Why? As we will belabor ad nauseam in this book, we are local and practical animals, sensitive to scale.
In fact, the deep message of this book is the danger of universalism taken two or three steps too far—conflating the micro and the macro.
Fat Tony’s terms: don’t give crap, don’t take crap. His more practical approach is
Start by being nice to every person you meet. But if someone tries to exercise power over you, exercise power over him.
Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.
Recall that it is at the foundation of evolution that systems get smart by elimination.
There is another point: we may not know beforehand if an action is foolish—but reality knows.
Skin in the game is about the real world, not appearances.
You do not want to win an argument. You want to win.
Indeed you need to win whatever you are after: money, territory, the heart of a grammar specialist, or a (pink) convertible car.
There is a difference between a charlatan and a genuinely skilled member of society, say that between a macrobull***ter political “scientist” and a plumber, or between a journalist and a mafia made man.
The doer wins by doing, not convincing.
Entire fields (say economics and other social sciences) become themselves charlatanic because of the absence of skin in the game connecting them back to earth
Forecasting (in words) bears no relation to speculation (in deeds).
Because what matters in life isn’t how frequently one is “right” about outcomes, but how much one makes when one is right.
I personally know rich horrible forecasters and poor “good” forecasters.
Being wrong, when it is not costly, doesn’t count—in a way that’s similar to trial-and-error mechanisms of research.
Many exposures are highly nonlinear: you may be beneficially exposed to rain, but not to floods.
it is harder for us to reverse-engineer than engineer; we see the result of evolutionary forces but cannot replicate them owing to their causal opacity.
Skin in the game helps to solve the Black Swan problem and other matters of uncertainty at the level of both the individual and the collective:
what has survived has revealed its robustness to Black Swan events and removing skin in the game disrupts such selection mechanisms.
Without skin in the game, we fail to get the Intelligence of Time (a manifestation of the Lindy effect,
time removes the fragile and keeps the robust, and 2) the life expectancy of the nonfragile lengthens with time).
Ideas have, indirectly, skin in the game, and populations that harbor them do as well.
By definition, what works cannot be irrational; about every single person I know who has chronically failed in business shares that mental block, the failure to realize that if something stupid works (and makes money), it cannot be stupid
“Survival talks and BS walks.”
What is rational is what allows the collective—entities meant to live for a long time—to survive.
Using mathematics when it’s not needed is not science but scientism
Replacing the “natural,” that is age-old, processes that have survived trillions of high-dimensional stressors with something in a “peer-reviewed” journal that may not survive replication or statistical scrutiny is neither science nor good practice.
Those who talk should do and only those who do should talk
architects today build to impress other architects, and we end up with strange—irreversible—structures that do not satisfy the well-being of their residents;
some specialist sitting in the ministry of urban planning who doesn’t live in the community will produce the equivalent of the tilted ledge—as an improvement, except at a much larger scale.
Specialization, as I will keep insisting, comes with side effects, one of which is separating labor from the fruits of labor.
People who see complicated solutions do not have an incentive to implement simplified ones.
Things designed by people without skin in the game tend to grow in complication (before their final collapse).
when you are rewarded for perception, not results, you need to show sophistication.
Non-skin-in-the-game people don’t get simplicity.
Let us return to pathemata mathemata (learning through pain) and consider its reverse: learning through thrills and pleasure.
When I don’t have skin in the game, I am usually dumb.
It came from the thrills and hormonal flush one gets while taking risks in the markets.
Applying math to practical problems was another business altogether; it meant a deep understanding of the problem before writing the equations.
Many kids would learn to love mathematics if they had some investment in it, and, more crucially, they would build an instinct to spot its misapplications.
politicians are afraid of repealing them, under pressure from those benefiting from them. Given that regulations are additive, we soon end up tangled in complicated rules that choke enterprise. They also choke life.
For there are always parasites benefiting from regulation, situations where the businessperson uses government to derive profits, often through protective regulations and franchises.
Anglo-Saxon world has traditionally had a predilection for the legal approach instead of the regulatory one: if you harm me, I can sue you
This has led to the very sophisticated, adaptive, and balanced common law, built bottom-up, via trial and error.
Common law is about the spirit while regulation, owing to its rigidity, is all about the letter.
This doesn’t mean one should never regulate at all. Some systemic effects may require regulation (say hidden tail risks of environmental ruins that show up too late). If you can’t effectively sue, regulate.
I would still prefer to be as free as possible, but assume my civil responsibility, face my fate, and pay the penalty if I harm others.
This attitude is called deontic libertarianism (deontic comes from “duties”): by regulating you are robbing people of freedom.
This includes the freedom to make mistakes (those that harm only you); it is sacred to the point that it must never be traded against economic or other benefits.
If you do not take risks for your opinion, you are nothing.
And I will keep mentioning that I have no other definition of success than leading an honorable life. We intimated that it is dishonorable to let others die in your stead.
Honor implies that there are some actions you would categorically never do, regardless of the material rewards.
honor means that there are things you would do unconditionally, regardless of the consequences.
Living as a coward was simply no option, and death was vastly preferable, even if, as in the case of Galois, one invented a new and momentous branch of mathematics while still a teenager.
“With it or on it,” meaning either return with your shield or don’t come back alive (the custom was to carry the dead body flat on it); only cowards throw away their shields to run faster.
play the usual unethical academic game, come to grips with their condition by producing arguments such as “I have children to put through college.” People who are not morally independent tend to fit ethics to their profession (with a minimum of spinning), rather than find a profession that fits their ethics.
there is another dimension of honor: engaging in actions going beyond mere skin in the game to put oneself at risk for others, have your skin in other people’s game; sacrifice something significant for the sake of the collective.
Compendiaria res improbitas, virtusque tarda—the villainous takes the short road, virtue the longer one.
In other words, cutting corners is dishonest.
The mere presence of an assistant suspends your natural filtering—and its absence forces you to do only things you enjoy, and progressively steer your life that way.
you want maximal free time, not maximal activity, and you can assess your own “success” according to such metric.
Having an assistant (except for the strictly necessary) removes your soul from the game.
Entrepreneurs are heroes in our society. They fail for the rest of us.
many people mistaken for entrepreneurs fail to have true skin in the game in the sense that their aim is to either cash out by selling the company they helped create to someone else, or “go public” by issuing shares in the stock market.
(this form of entrepreneurship is the equivalent of bringing great-looking and marketable children into the world with the sole aim of selling them at age four).
Companies beyond the entrepreneur stage start to rot. One of the reasons corporations have the mortality of cancer patients is the assignment of time-defined duties.
The skills at making things diverge from those at selling things.
Products or companies that bear the owner’s name convey very valuable messages.
They are shouting that they have something to lose.
A country should not tolerate fair-weather friends. There is something offensive in having a nationality without skin in the game, just to travel and pass borders, without the downside that comes with the passport.
But I came to the U.S., embraced the place, and took the passport as commitment: it became my identity, good or bad, tax or no tax. Many people made fun of my decision, as most of my income comes from overseas and, if I took official residence in, say, Cyprus or Malta, I would be making many more dollars.
If wanted to lower taxes for myself, and I do, I am obligated to fight for it, for both myself and the collective, other taxpayers, and to not run away. Skin in the game.
Read the texts themselves: Seneca, Caesar, or Marcus Aurelius, when possible. Or read commentators on the classics who were doers themselves, such as Montaigne—people who at some point had some skin in the game, then retired to write books.
Avoid the intermediary, when possible. Or fuhgetaboud the texts, just engage in acts of courage.
the principal thing you can learn from a professor is how to be a professor—and the chief thing you can learn from, say, a life coach or inspirational speaker is how to become a life coach or inspirational speaker. So remember that the heroes of history were not classicists and library rats, those people who live vicariously in their texts.
They were people of deeds and had to be endowed with the spirit of risk taking.
To get into their psyches, you will need someone other than a career professor teaching stoicism.*8 They almost always don’t get it (actually, they never get it).
As I said earlier in the chapter, it is not irrational, according to economic theory, to leave money on the table because of your personal preference;
I write because that’s what I am designed to do, just as a knife cuts because that’s what its mission is, Aristotle’s arête—and subcontracting my research and writing to China or Tunisia would (perhaps) increase my productivity, but deprive me of my identity.
So people might want to do things. Just to do things, because they feel it is part of their identity.
In that sense, decentralization and fragmentation, aside from stabilizing the system, improves people’s connection to their labor.
People want to have their soul in the game.
The most skilled traders are often wealthy, but not the wealthiest; many traders trade out of passion and aren't interested in running a business. To become a billionaire, one needs an appetite for meetings, discussions with lawyers and regulators, that type of thing.
Skin in the Game was a segment of Antifragile under the banner: Thou shalt not become antifragile at the expense of others
Simply: if you can’t put your soul into something, give it up and leave that stuff to someone else.
the reading of a single text twice is more profitable than reading two different things once, provided of course that said text has some depth of content.
Books should be organized the way the reader reads, or wants to read, and according to how deep the author wants to go into a topic, not to make life easy for the critics to write reviews. Book reviewers are bad middlemen; they are currently in the process of being disintermediated just like taxi companies (what some call Uberized
How? There is, here again, a skin-in-the-game problem: a conflict of interest between professional reviewers who think they ought to decide how books should be written, and genuine readers who actually read books because they like to read books.
Book reviews are judged according to how plausible and well written they are, never in how they map to the book
It took close to three years for Fooled by Randomness to be understood as “there is more luck than you think,” rather than the message people were getting from reviews: “it is all dumb luck.” Most books don’t survive three months.
Beware of the person who gives advice, telling you that a certain action on your part is “good for you” while it is also good for him, while the harm to you doesn’t directly affect him.
I can pull from memory, it always turns out that what is presented as good for you is not really good for you but certainly good for the other party.
Salespeople are experts in the art of psychological manipulation, making the client trade, often against his own interest, all the while being happy about it and loving them and their company.
“giving advice” as a sales pitch is fundamentally unethical—selling cannot be deemed advice. We can safely settle on that. You can give advice, or you can sell (by advertising the quality of the product), and the two need to be kept separate.
The ethical is always more robust than the legal. Over time, it is the legal that should converge to the ethical, never the reverse.
Laws come and go; ethics stay.
Which brings us to asymmetry, the core concept behind skin in the game.
No person in a transaction should have certainty about the outcome while the other one has uncertainty.
It may not be ethically required, but the most effective, shame-free policy is maximal transparency, even transparency of intentions.
The more confined our ethics, the less abstract, the better it works.
Things don’t “scale” and generalize, which is why I have trouble with intellectuals talking about abstract notions.
When Athenians treat all opinions equally and discuss “democracy,” they only apply it to their citizens, not slaves or metics (the equivalent of green card or H-1B visa holders).
the very purpose of a club is exclusion and size limitation.
For whenever the “we” becomes too large a club, things degrade, and each one starts fighting for his own interest.
Blaming people for being “sectarian”—instead of making the best of such a natural tendency—is one of the stupidities of interventionistas.
You know instinctively that people get along better as neighbors than roommates.
I am, at the Fed level, libertarian; at the state level, Republican; at the local level, Democrat; and at the family and friends level, a socialist.
If that saying doesn’t convince you of the fatuousness of left vs. right labels, nothing will.
Don’t tell me what you think, tell me what you have in your portfolio. There
In general, skin in the game comes with conflict of interest.
Genes follow majority rule; languages minority rule. Languages travel; genes less so.
on the other hand, we merge all states in one, then the minority rule will prevail all across. This is the reason the U.S.A. works so well.
As I have been repeating to everyone who listens, we are a federation, not a republic. To use the language of Antifragile, decentralization is convex to variations.
How do books get banned? Certainly not because they offend the average person—most persons are passive and don’t really care, or don’t care enough to request the banning.
(at least not from within the tribe); do not hunt orphans for entertainment; do not gratuitously beat up Spanish grammar specialists for training, instead use boxing bags (unless you are Spartan and even then you can only kill a limited number of helots for training purposes), and similar interdicts.
The market is like a large movie theater with a small door.
And the best way to detect a sucker is to see if his focus is on the size of the theater rather than that of the door.
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.
Alexander (or whoever produced this probably apocryphal saying) understood the value of the active, intolerant, and courageous minority.
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.
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.
Today Shiites (and some Sunnis not yet brainwashed by Saudi Arabia) would wish a Christian “Merry Christmas.”
The average behavior of the market participant will not allow us to understand the general behavior of the market.
Remember that we do not live alone, but in packs, and almost nothing of relevance concerns a person in isolation—which is what is typically done in laboratory-style works.
This disproportionate increase of computational demands is called the curse of dimensionality
Understanding how the subparts of the brain (say, neurons) work will never allow us to understand how the brain works.
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.
What I just said explains the failure of the so-called field of behavioral economics to give us any more information than orthodox economics (itself rather poor) on how to play the market or understand the economy, or generate policy.
Complete freedom is the last thing you want if you have an organized religion to run. Total freedom for your employees is also a very, very bad thing if you have a firm to run, so this chapter is about the question of employees and the nature of the firm and other institutions.
In short, every organization wants a certain number of people associated with it to be deprived of a certain share of their freedom.
People who are employees for a living don’t behave so opportunistically.
Contractors are exceedingly free; as risk-takers, they fear mostly the law. But employees have a reputation to protect. And they can be fired.
But employees are expensive. You have to pay them even when you’ve got nothing for them to do. You lose your flexibility. Talent for talent, they cost a lot more. Lovers of paychecks are lazy…but they would never let you down at times like these.
So employees exist because they have significant skin in the game—and the risk is shared with them, enough risk for it to be a deterrent and a penalty for acts of undependability, such as failing to show up on time. You are buying dependability.
And dependability is a driver behind many transactions. People of some means have a country house—which is inefficient compared to hotels or rentals—because they want to make sure it is available if they decide they want to use it on a whim.
“Never buy when you can rent the three Fs: what you Float, what you Fly, and what you…(that something else
Someone who has been employed for a while is giving you strong evidence of submission.
Evidence of submission is displayed by the employee’s going through years depriving himself of his personal freedom for nine hours every day, his ritualistic and punctual arrival at an office, his denying himself his own schedule, and his not having beaten up anyone on the way back home after a bad day. He is an obedient, housebroken dog.
FROM THE COMPANY MAN TO THE COMPANIES PERSON
The longer the person stays with a company, the more emotional investment they will have in staying, and, when leaving, are guaranteed in making an “honorable exit.”
The company man is best defined as someone whose identity is impregnated with the stamp his firm wants to give him.
He dresses the part, even uses the language the company expects. His social life is so invested in the company that leaving it inflicts a huge penalty, like banishment from Athens under the Ostrakon.
A company man is someone who feels that he has something huge to lose if he doesn’t behave as a company man—that is, he has skin in the game.
In return, the firm is bound by a pact to keep the company man on the books as long as feasible, that is, until mandatory retirement, after which he would go play golf with a comfortable pension, with former coworkers as partners. The system worked when large corporations survived a long time and were perceived to be longer lasting than nation-states.
By the 1990s, however, people started to realize that working as a company man was safe…provided the company stayed around. But the technological revolution that took place in Silicon valley put traditional companies under financial threat.
If the company man is, sort of, gone, he has been replaced by the companies person. For people are no longer owned by a company but by something worse: the idea that they need to be employable
Perhaps, by definition, 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.
the solution is to incorporate your business and hire employees with clear job descriptions because you can’t afford legal and organizational bills for every transaction.
Slave ownership by companies has traditionally taken very curious forms. The best slave is someone you overpay and who knows it, terrified of losing his status.
Ninety-five percent of the employee’s mind will be on company politics…which is exactly what the company wants.
The question is: what would you like to be, a dog or a wolf?
The original Aramaic version had a wild ass, instead of a wolf, showing off his freedom. But the wild ass ends up eaten by the lion. Freedom entails risks—real skin in the game. Freedom is never free.
Whatever you do, just don’t be a dog claiming to be a wolf. In
Another aspect of the dog vs. wolf dilemma: the feeling of false stability. A dog’s life may appear smooth and secure, but in the absence of an owner, a dog does not survive.
Most people prefer to adopt puppies, not grown-up dogs; in many countries, unwanted dogs are euthanized. A wolf is trained to survive. Employees abandoned by their employers, as we saw in the IBM story, cannot bounce back.
There is a category of employees who aren’t slaves, but these represent a very small proportion of the pool. You can identify them as follows: they don’t give a f*** about their reputation, at least not their corporate reputation.
Salespeople had tension with the firm as the firm tried to dissociate accounts from them by depersonalizing the relationships with clients, usually unsuccessfully: people like people, and they drop business when they get some generic and polite person on the phone in place of their warm and often exuberant salesperson-friend. The other type was the trader about whom only one thing mattered: the profits and losses,
Firms had a love-hate relationship with these two types as they were unruly—traders and salespeople were only manageable when they were unprofitable, in which case they weren’t wanted.
Traders who made money, I realized, could get so disruptive that they needed to be kept away from the rest of the employees. That’s the price you pay for turning individuals into profit centers, meaning no other criterion mattered.
the people you meet when riding high are also those you meet when riding low, and I saw the fellow getting some (more subtle) abuse from the same accountant before he got fired, as he eventually ran out of luck.
You are free—but only as free as your last trade. As we saw with Ahiqar’s wild ass, freedom is never free.
If you were profitable you could give managers all the crap you wanted and they ate it because they needed you and were afraid of losing their own jobs.
Risk takers can be socially unpredictable people. Freedom is always associated with risk taking, whether it leads to it or comes from it.
You take risks, you feel part of history. And risk takers take risks because it is in their nature to be wild animals.
So cursing today is a status symbol,
Ironically the highest status, that of a free man, is usually indicated by voluntarily adopting the mores of the lowest
Diogenes (the one with the barrel) insulting Alexander the Great by asking him to stand out of his sun, just for signaling (legend, of course).
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.
What matters isn’t what a person has or doesn’t have; it is what he or she is afraid of losing.
The more you have to lose, the more fragile you are.
I’ve seen numerous winners of the so-called Nobel in Economics (the Riksbank Prize in Honor of Alfred Nobel) concerned about losing an argument. I noticed years ago that four of them were actually concerned that I, a nonperson and trader, publicly called them frauds. Why did they care? Well, the higher you go in that business, the more insecure you get, as losing an argument to a lesser person exposes you more than if you lose to some hotshot.
It is much easier to do business with the owner of the business than some employee who is likely to lose his job next year; likewise it is easier to trust the word of an autocrat than a fragile elected official.
People whose survival depends on qualitative “job assessments” by someone of higher rank in an organization cannot be trusted for critical decisions.
Although employees are reliable by design, it remains the case that they cannot be trusted in making decisions, hard decisions, anything that entails serious tradeoffs.
Now compare these policies to ones in which decision makers have skin in the game as a substitute for their annual “job assessment,” and you will picture a different world.
some more intelligent corporate representatives had the strategy of cursing while talking to journalists in a way to signal that they were conveying the truth, not reciting some company mantra.
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.
Intellectual and ethical freedom requires the absence of the skin of others in one’s game, which is why the free are so rare.
But neither celibacy nor financial independence makes one unconditionally immune, as we see next.
To be free of conflict you need to have no friends.
Hammurabi’s code actually makes such a provision, transferring liability across generations. For, on that same basalt stele surrounded by Korean selfie sticks,
If you do not undertake a risk of real harm, reparable or even potentially irreparable, from an adventure, it is not an adventure.
People can detect the difference between front- and back-office operators.
action without talk supersedes talk without action
note that even the fact that Trump expressed himself in an unconventional manner was a signal that he never had a boss before, no supervisor to convince, impress, or seek approval from: people who have been employed are more careful in their choice of words.
their main skill is a capacity to pass exams written by people like them, or to write papers read by people like them. Some of us—not Fat Tony—have been blind to their serial incompetence.
main skill is a capacity to pass exams written by people like them, or to write papers read by people like them. Some of us—not Fat Tony—have been blind to their serial incompetence.
people are perfectly entitled to rely on their own ancestral instincts and to listen to their grandmothers (or to Montaigne and such filtered classical knowledge), who have a better track record than these policymaking goons.
in fact in their eyes scientism looks more scientific than real science.
—in fact in their eyes scientism looks more scientific than real science.
They can’t tell science from scientism
The Intellectual Yet Idiot (IYI) is a product of modernity, hence has been proliferating since at least the mid-twentieth century, to reach a local supremum today, to the point that we have experienced a takeover by people without skin in the game.
The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited.
He thinks people should act according to their best interests and he knows their interests, particularly if they are “rednecks” or from the English non-crisp-vowel class who voted for Brexit.
When plebeians do something that makes sense to themselves, but not to him, the IYI uses the term “uneducated.”
he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when plebeians dare to vote in a way that contradicts IYI preferences.
While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one vote, with some equivalence for foreign elite schools and PhDs, as these are needed in the club.
the barber who decides to perform brain surgery. The IYI also fails to naturally detect sophistry.
He speaks of “equality of races” and “economic equality,” but never goes out drinking with a minority cab driver (again, no real skin in the game, as, I will repeat until I am hoarse, the concept is fundamentally foreign to the IYI).
But he is still convinced that his current position is right.
The IYI likes to use buzzwords from philosophy of science when discussing unrelated phenomena; he goes two or three levels too theoretical for a given problem.
The first is the inequality people tolerate, such as one’s understanding compared to that of people deemed heroes, say, Einstein, Michelangelo, or the recluse mathematician Grisha Perelman, in comparison to whom one has no difficulty acknowledging a large surplus. This applies to entrepreneurs, artists, soldiers, heroes, the singer Bob Dylan, Socrates, the current local celebrity chef, some Roman Emperor of good repute, say, Marcus Aurelius;
in short, those for whom one can naturally be a “fan.”
The second is the inequality people find intolerable because the subject appears to be just a person like you, except that he has been playing the system, and getting himself into rent-seeking, acquiring privileges that are not warranted—and although he has something you would not mind having (which may include his Russian girlfriend), you cannot possibly become a fan.
Michèle Lamont, the author of The Dignity of Working Men, cited by Williams, did a systematic interview of blue-collar Americans and found a resentment of high-paid professionals but, unexpectedly, not of the rich.
It is safe to say that the American public—actually all publics—despises people who make a lot of money on a salary, or, rather, salarymen who make a lot of money.
Further, in countries where wealth comes from rent-seeking, political patronage, or regulatory capture (which, I remind the reader, is how the powerful and the insiders use regulation to scam the public, or red tape to slow down competition), wealth is seen as zero-sum.
people resent—or should resent—is the person at the top who has no skin in the game, that is, because he doesn’t bear his allotted risk,
There is something respectable in losing a billion dollars, provided it is your own money.
True equality is equality in probability. and Skin in the game prevents systems from rotting.
Visibly, a problem with economists (particularly those who never took risk) is that they have mental difficulties with things that move and are unable to consider that things that move have different attributes from things that don’t.
Static inequality is a snapshot view of inequality; it does not reflect what will happen to you in the course of your life.
Dynamic (ergodic) inequality takes into account the entire future and past life. You do not create dynamic equality just by raising the level of those at the bottom, but rather by making the rich rotate—or by forcing people to incur the possibility of creating an opening.
The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the 1 percent.
The no-absorbing-barrier condition means that someone who is rich should never be certain to stay rich.
Perfect ergodicity means that each one of us, should he live forever, would spend a proportion of time in the economic conditions of the entire cross-section: out of, say, a century, an average of sixty years in the lower middle class, ten years in the upper middle class, twenty years in the blue-collar class, and perhaps one single year in the one percent.
And no downside for some means no upside for the rest.
Now consider that the likes of Krugman and Piketty have no downside in their existence—lowering inequality brings them up in the ladder of life. Unless the university system or the French state goes bust, they will continue receiving their paychecks.
We’ve made a big deal out of Piketty here because the widespread enthusiasm for his book was representative of the behavior of that class of people who love to theorize and engage in false solidarity with the oppressed, while consolidating their privileges.
So class envy doesn’t originate from a truck driver in South Alabama, but from a New York or Washington, D.C., Ivy League–educated IYI (say Paul Krugman or Joseph Stiglitz) with a sense of entitlement, upset some “less smart” persons are much richer.
lower classes are more likely to experience envy toward their cousins or the middle class than toward the very rich.
Nobody is a prophet in his own land, making envy a geographical thing
cobbler envies cobbler, carpenter envies carpenter
One reason I—as a probability professional—left data out of The Black Swan (except for illustrative purposes) is that it seems to me that people flood their stories with numbers and graphs in the absence of solid or logical arguments.
So I’ve discovered, with experience, that when you buy a thick book with tons of graphs and tables used to prove a point, you should be suspicious. It means something didn’t distill right!
But for the general public and those untrained in statistics, such tables appear convincing—another way to substitute the true with the complicated.
statistics isn’t about data but distillation, rigor, and avoiding being fooled by randomness—but no matter, the general public and his state-worshipping IYI colleagues found it impressive (for a while).
Let us finish this discussion with an unfairness that is worse than inequality: the sore sight of back office, non-risk-takers getting rich from public service.
I had a rough time explaining that having rich people in a public office is very different from having public people become rich—again, it is the dynamics, the sequence, that matters.
It came to my notice that in countries with high rent-seeking, wealth is seen as something zero-sum: you take from Peter to give to Paul. On the other hand, in places with low rent-seeking (say the United States before the Obama administration), wealth is seen as a positive-sum game, benefiting everybody.
Complex regulations allow former government employees to find jobs helping firms navigate the regulations they themselves created.
wealth tax favors the salaryperson over the entrepreneur.
A physical copy of War and Peace can age (particularly when the publisher cuts corners to save twenty cents on paper for a fifty-dollar book); the book itself as an idea doesn’t.
The pre-Socratic thinker Periander of Corinth wrote, more than twenty-five hundred years ago: Use laws that are old but food that is fresh
Burn old logs. Drink old wine. Read old books. Keep old friends.
“The Romans judged their political system by asking not whether it made sense but whether it worked,”
They just need to avoid having a documented record of (some) ethical violations. Furthermore, not only did you not want peer approval, you wanted disapproval (except for ethical matters):
“If people over here like you, you are doing something wrong.”
You can define a free person precisely as someone whose fate is not centrally or directly dependent on peer assessment.
And as an essayist, I am not judged by other writers, book editors, and book reviewers, but by readers.
Being reviewed or assessed by others matters if and only if one is subjected to the judgment of future—not just present—others. And recall that, a free person does not need to win arguments—just win.
Contemporary peers are valuable collaborators, not final judges.
it is easier to macrobull***t than microbull***t—nobody can tell if a theory really works.
Academia has a tendency, when unchecked (from lack of skin in the game), to evolve into a ritualistic self-referential publishing game.
Someone with a high public presence who is controversial and takes risks for his opinion is less likely to be a bull***t vendor.
(There is this illusion that just as businessmen are motivated and rewarded by profits, scientists should be motivated and rewarded by honors and recognition. That’s not how it works. Remember, science is a minority rule: a few will run it, others are just back-office clerks.)
The longer an idea has been around without being falsified, the longer its future life expectancy.
If you hear advice from a grandmother or elders, odds are that it works 90 percent of the time. On the other hand, in part because of scientism and academic prostitution, in part because the world is hard, if you read anything by psychologists and behavioral scientists, odds are that it works at less than 10 percent, unless it is has also been covered by the grandmother and the classics, in which case why would you need a psychologist?
warnings of your grandmother or interdicts aren’t “irrational”; most of what is called “irrational” comes from misunderstanding of probability.)
While our knowledge of physics was not available to the ancients, human nature was.
Cognitive dissonance
in order to avoid inconsistent beliefs, rationalize
a loss is more painful than a gain is pleasant):
Loss aversion
Men feel the good less intensely than the bad.*6 Nearly all the letters of Seneca have some element of loss aversion.
We know the wrong better than what’s right; recall the superiority of the Silver over the Golden Rule.
Negative advice (via negativa
Skin in the game
“Your fingernail can best scratch your itch,”*8 picked up by Scaliger circa 1614 in Proverborum Arabicorum. Antifragility:
Time discounting: “A bird in the hand is better than ten on the tree.”*9 (Levantine proverb)
Madness of crowds: Nietzsche: Madness is rare in individuals, but in groups, parties, nations, it is the rule.
Less is more: Truth is lost with too much altercation,
Overconfidence: “I lost money because of my excessive confidence,”
The Paradox of progress,
Prizes as a Curse: In fact, there is a long-held belief among traders that praise by journalists is a reverse indicator.
collective praise by journos is at the least suspicious and, at best, a curse.
learned to avoid honors and prizes partly because, given that they are awarded by the wrong judges, they are likely to hit you at the peak (you’d rather be ignored, or, better, disliked by the general media).
The difference is risk-taking and whether the person worries about his or her reputation.
And if we are lucky enough to have people who do not look the part, it is thanks to the presence of some skin in the game, the contact with reality that filters out incompetence, as reality is blind to looks.
When results come from dealing directly with reality rather than through the agency of commentators, image matters less, even if it correlates to skills. But image matters quite a bit when there is hierarchy and standardized “job evaluation.”
as I will keep reminding the reader, counter to the common belief, executives are different from entrepreneurs and are supposed to look like actors.
a closer look at Barack Obama shows that he was even more of an actor: a fancy Ivy League education combined with a liberal reputation is compelling as an image builder.
Much has been written about the millionaire next door: the person who is actually rich, on balance, but doesn’t look like the person you would expect to be rich, and vice versa.
By the same reasoning, and flipping the arguments, skilled thieves at large should not look like thieves. Those who do are more likely to be in jail.
Don’t think that beautiful apples taste better, goes the Latin saying.
Hire the successful trader, conditional on a solid track record, whose details you can understand the least.
I’ve introduced this point in Antifragile, where I called it the green lumber fallacy. A fellow made a fortune in green lumber without knowing what appears to be essential details about the product he traded—he wasn’t aware that green lumber stood for freshly cut wood, not lumber that was painted green. Meanwhile, by contrast, the person who related the story went bankrupt while knowing every intimate detail about the green lumber.
In any activity, hidden details are only revealed via Lindy.
What can be phrased and expressed in a clear narrative that convinces suckers will be a sucker trap.
Likewise, the illusion prevails that businesses work via business plans and science via funding. This is strictly not true: a business plan is a useful narrative for those who want to convince a sucker.
At the time of writing, most big recent successes (Microsoft, Apple, Facebook, Google) were started by people with skin and soul in the game and grew organically—if they had recourse to funding, it was to expand or allow the managers to cash out; funding was not the prime source of creation. You don’t create a firm by creating a firm; nor do you do science by doing science.
Never hire an academic unless his function is to partake of the rituals of writing papers or taking exams.
Mediterranean societies are traditionally ones in which the highest-ranking person is the one with the most skin in the game. And if anything characterizes today’s America, it is economic risk taking, thanks to a happy transfer of martial values to business and commerce in Anglo-Saxon society—remarkably, traditional Arabic culture also puts the same emphasis on the honor of economic risk-taking.
Even within the “normal” warrior-run or doer-run societies, the class of intellectuals is all about rituals: without pomp and ceremony,
the intellectual is
A bishop on rollerblades would no longer be a bishop. There is nothing wrong with the decorative if it remains what it is, decorative, as remains true today. However, science and business must not be decorative.
just a talker, that is, pretty much nothing.
Just as the slick fellow in a Ferrari looks richer than the rumpled centimillionaire, scientism looks more scientific than real science. True intellect should not appear to be intellectual.
Never pay for complexity of presentation when all you need is results.
This error by the science writer Richard Dawkins generalizes to, simply, overintellectualizing humans in their responses to all manner of natural phenomena, rather than accepting the role of a collection of mental heuristics used for specific purposes.
People who have always operated without skin in the game (or without their skin in the right game) seek the complicated and centralized, and avoid the simple like the plague. Practitioners, on the other hand, have opposite instincts, looking for the simplest heuristics. Some rules:
People who are bred, selected, and compensated to find complicated solutions do not have an incentive to implement simplified ones.
In other words, many problems in society come from the interventions of people who sell complicated solutions because that’s what their position and training invite them to do.
hire, conditional on an equal set of skills, the person with the least label-oriented education. It means that the person had to succeed in spite of the credentialization of his competitors and overcome more serious hurdles. In addition, people who didn’t go to Harvard are easier to deal with in real life.
This education labeling provides a lot of cosmetic things but misses something essential about antifragility and true learning, reminiscent of gyms.
remember that what looks scientific is usually scientism, not science.
Yet people into strength training (those who are actually strong across many facets of real life) know that users of these machines gain no strength beyond an initial phase.
As with label universities, you pay quite a bit of money to join, largely for the benefit of the real estate developer.
The equipment may have some use in a hospital or a rehabilitation program, but that’s about it. On the other hand, the simpler barbell (a metal bar with two weights on both ends) is the only standard piece of equipment that gets you to recruit your entire body for exercises—and it is the simplest and cheapest to get.
And if gyms should not look like gyms, exercise should not look like exercise. Most gains in physical strength come from working the tails of the distribution, close to your limit.
Non teneas aurum totum quod splendet ut aurum/nec pulchrum pomum quodlibet esse bonum.
When people get rich, they shed their skin-in-the-game-driven experiential mechanism. They lose control of their preferences, substituting constructed preferences for their own, complicating their lives unnecessarily, triggering their own misery.
But because the dinner partner could afford the expensive restaurant, we ended up the victims of some complicated experiments by a chef judged by some Michelin bureaucrat.
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.
My idea of the good life is to not attend a gala dinner, one of those situations where you find yourself stuck seated for two hours between the wife of a Kansas City real estate developer (who just visited Nepal) and a Washington lobbyist (who just returned from a vacation in Bali).
Same with real estate: most people, I am convinced, are happier in close quarters, in a real barrio-style neighborhood, where they can feel human warmth and company. But when they have big bucks they end up pressured to move into outsized, impersonal, and silent mansions, far away from neighbors.
And nobody today will come to console you for having a mansion—few will realize that it is quite sad to be there on Sunday evening.
small is preferable owing to what we would call in today’s terms scale properties. Some things can be, simply, too large for your heart.
Prosperous people of the type who don’t look rich are certainly aware of the point—they live in comfortable quarters and instinctively know that a move will be a mental burden. Many still live in their original houses.
Very few people understand their own choices, and end up being manipulated by those who want to sell them something.
To put it another way: if wealth is giving you fewer options instead of more (and more varied) options, you’re doing it wrong.
If anything, 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.
People can only be social friends if they don’t try to upstage or outsmart one another.
people need to be equal, at least for the purpose of the conversation, otherwise it fails.
You’d rather have dinner with your friends than with your professor, unless of course your professor understands “the art” of conversation.
$200 for a pizza or $6.95 for the French complicated experience, I would readily pay $200 for the pizza, plus $9.95 for a bottle of Malbec wine. Actually I would pay to not have the Michelin experience.
sophistication can, at some level, cause degradation, what economists call “negative utility.”
pizza with fresh natural ingredients will be always cheaper than the complicated crap.
So long as society is getting richer, someone will try to sell you something until the point of degradation of your well-being, and a bit beyond that.
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.
The most interesting thing about the Assassins is that actual assassination was low on their agenda. They understood non-cheap messaging. They preferred to own their enemies.
And the only enemy you cannot manipulate is a dead one.
Mongols weren’t interested in killing everybody; they just wanted submission, which came cheaply through terror.
While today’s politicians have no skin in the game and do not have to worry so long as they play the game, they stay longer and longer on the job, thanks to the increased life expectancy of modern times.
We used to live in small communities; our reputations were directly determined by what we did—we were watched. Today, anonymity brings out the a**hole in people.
Web-shaming is much more powerful than past reputational blots, and more of a tail risk.
If we don’t understand something and it has a systemic effect, just avoid it.
It asserts that one does not need complex models as a justification to avoid a certain action.
Models are error-prone, something I knew well with finance; most risks only appear in analyses after harm is done.
INFORMATION DOESN’T LIKE TO BE OWNED
Unreliable people carried less weight than reliable ones. You can’t fool people more than twice.
“Give me a few lines written by any man and I will find enough to get him hung” goes the saying attributed to Richelieu, Voltaire, Talleyrand, a vicious censor during the French revolution phase of terror, and a few others.
As Donald Trump said, “The facts are true, the news is fake”—ironically at a press conference in which he subsequently suffered the same selective reporting as my RSA event.
The great Karl Popper often started a discussion with an unerring representation of his opponent’s positions, often exhaustive, as if he were marketing them as his own ideas, before
proceeding to systematically dismantle them.
Also, take Hayek’s diatribes Contra Keynes and Cambridge: it was a “contra,” but not a single line misrepresents Keynes or makes an overt attempt at sensationalizing. (It helped that people were too intimidated by Keynes’s intellect and aggressive personality to risk triggering his ire.)
Note the associated straw man arguments by which one not only extracts a comment but also provides an interpretation or promotes misinterpretation. As an author, I consider straw man no different from theft.
It is immoral to be in opposition to the market system and not live (somewhere in Vermont or Northwestern
Afghanistan) in a hut or cave isolated from it.
It is much more immoral to claim virtue without fully living with its direct consequences.
This will be the main topic of this chapter: exploiting virtue for image, personal gain, careers, social status, these kinds of things—and by personal gain I mean anything that does not share the downside of a negative action.
Likewise, if you believe that you are “helping the poor” by spending money on PowerPoint presentations and international meetings, the type of meetings that lead to more meetings (and PowerPoint presentations) you can completely ignore individuals—the poor become an abstract reified construct that you do not encounter in your real life.
one of them could not answer Dinesh D’Souza’s simple and logical suggestion: Why don’t you go to the registrar’s office and
Kids with rich parents talk about “class privilege” at privileged colleges such as Amherst—but
give your privileged spot to the minority student next in line?
Clearly the defense given by people under such a situation is that they want others to do so as well—they require a systemic solution to every local perceived problem of injustice. I find that immoral.
says, “I will save people from drowning only if others too save other people from drowning.”
If your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life.
If your private actions do not generalize, then you cannot have general ideas.
This is not strictly about ethics, but information. If a car salesman tries to sell you a Detroit car while driving a Honda, he is signaling that the wares he is touting may have a problem.
This is similar to the salesperson telling you what is good for you when it is mostly (and centrally) good for him.
Virtue is not something you advertise. It is not an investment strategy. It is not a cost-cutting scheme. It is not a bookselling (or, worse, concert-ticket-selling) strategy.
Matthew 6:1–4,
Be careful not to practice your righteousness in front of others to be seen by them. If you do, you will have no reward from your Father in heaven.
So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by others. Truly I tell you, they have received their reward in full. But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you.
TO BE OR TO SEEM?
“Look it. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?”
Charlie Munger once said:
esse quam videri, which I translate as to be or to be seen as such.
It can be found in Cicero, Sallust, even Machiavelli, who, characteristically, inverted it to videri quam esse, “show rather than be.”
Virtue isn’t in just being nice to people others are prone to care about.
So true virtue lies mostly in also being nice to those who are neglected by others, the less obvious cases, those people the grand charity business tends to miss. Or people who have no friends and would like someone once in while to just call them for a chat or a cup of fresh roasted Italian-style coffee.
Courage is the only virtue you cannot fake.
If I were to describe the perfect virtuous act, it would be to take an uncomfortable position, one penalized by the common discourse.
“What should I do? I want to reduce poverty, save the world,” and similar noble aspirations at the macro-level, my suggestion is:
when young people who “want to help mankind” come to me asking,
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.
Courage (risk taking) is the highest virtue. We need entrepreneurs.
One of the problems of the interventionista—wanting to get involved in other people’s affairs “in order to help”—results in disrupting some of the peace-making mechanisms that are inherent in human affairs, a combination of collaboration and strategic hostility.
speculate that had IYIs and their friends not gotten involved, problems such as the Israeli-Palestinian one would have been solved, sort of—and both parties, especially the Palestinians, would have been better off.
I am writing these lines the problem has lasted seventy years, with way too many cooks in the same tiny kitchen, most of whom never have to taste the food.
I conjecture that when you leave people alone, they tend to settle for practical reasons.
People on the ground, those with skin in the game, are not too interested in geopolitics or grand abstract principles, but rather in having bread on the table, beer (or, for some, nonalcoholic fermented beverages such as yoghurt drinks) in the refrigerator, and good weather at outdoor family picnics.
No peace proceeds from bureaucratic ink. If you want peace, make people trade, as they have done for millennia. They will be eventually forced to work something out.
We are largely collaborative—except when institutions get in the way. I surmise that if we put those “people wanting to help” in the State Department on paid vacation to do ceramics, pottery, or whatever low-testosterone people do when they take a sabbatical, it would be great for peace.
If you understand nothing about the problem (like D.C. pundits) and have no skin in the game, then everything is seen through the prism of geopolitics.
For these ignorant pundits, it is all Iran vs. Saudi Arabia, the U.S. vs. Russia, Mars vs. Saturn.
But to those of us on the ground, the objective was to make things work and have a life, not sacrifice our existence for the sake of geopolitics.
Real people are interested in commonalities and peace, not conflicts and wars.
The problem is that we humans are prone to the availability heuristic, by which the salient is mistaken for the statistical, and the conspicuous and emotional effect of an event makes us think it is occurring more regularly
History is largely peace punctuated by wars, rather than wars punctuated by peace.
than in reality.
We are fed a steady diet of histories of wars, fewer histories of peace. As a trader, I was trained to look for the first question people forget to ask: who wrote these books? Well, historians, international affairs scholars, and policy experts did.
Can these people be fooled? Let’s be polite and say that they are in the majority no rocket scientists, and operate under a structural bias.
Journalism is about “events,” not absence of events, and many historians and policy scholars are glorified journalists with high fact-checking standards who allow themselves to be a little boring in order to be taken seriously.
But being boring doesn’t make them scientists, nor does “fact checking” make them empirical, as these scholars miss the notion of absence of data points and silent facts.
Learning from the Russian school of probability makes one conscious of the need to think in terms of one-sided inequalities: what is
absent from the data should be taken into account—absence of Black Swans in the record doesn’t mean these were not there.
The same is true for State Department employees, since these are not hired among adventurers and doers, but students of these scholars.
spending part of your life reading archives in the stacks of the Yale Library doesn’t fit the nonacademic temperament of someone who has to be aware and watch his back, say, a debt-collector for the Mafia or a pit speculator in fast commodities. (If you don’t get this, you are an academic.)
As the reader will know by now, I have myself lived through the worst part of the civil war in Lebanon. Except for areas near the Green Line, it didn’t feel like war. But those reading about it in history books will not understand my experience.
We just saw in Book 6 various asymmetries in life coming from largely undetected agency problems, where absence of skin in the game contaminates fields and produces distortions.
What to read? It would not cure the via negativa problem, but, for a start, instead of studying Roman history in terms of Caesar and Pompey, or Peloponnesian balances of power or diplomatic intrigues in Vienna, consider studying instead the daily life and body of laws and customs.
The more they talk. the less you understand—Law or nomous?—In religion, as in other things, you pay for the label
objects and relations, jurists and legal thinkers in constructs, logicians in maximally abstract operators, and…fools in words.
mathematicians think in (well, precisely defined and
Different people rarely mean the same thing when they say “religion,” nor do they realize
Din means law in Hebrew and religion in Arabic.
To conclude, beware labels when it comes to matters associated with beliefs.
THE GODS DO NOT LIKE CHEAP SIGNALING
Hebrews 9:22:
are by the law purged with blood; and without shedding of blood is no remission.”
“And almost all things
But Christianity ended up removing the idea of such sacrifice under the notion that Christ sacrificed himself for others.
Love without sacrifice is theft (Procrustes). This applies to any form of love, particularly the love of God.
To summarize, in a Judeo-Christian place of worship, the focal point, where the priest stands, symbolizes skin in the
game.
atheists in actions, religious in words (most Orthodox and Catholic Christians)
religious in actions, religious in words (Salafi Islamists and suicide bombers)
but I know of nobody who is atheist in both actions and words, completely devoid of rituals, respect for the dead, and superstitions
rationality resides in what you do, not in what you think or in what you “believe” (skin in the game), and b) rationality is about survival.
Survival comes first, truth, understanding, and science later.
In other words, you do not need science to survive (we’ve survived for several hundred million years or more, depending on how you define the “we”), but you must survive to do science.
better safe than sorry.
This logical precedence is well understood by traders and people in the real world, as per the Warren Buffett truism “to make money you must first survive”—skin in the game again; those of us who take risks have their priorities firmer than vague textbook pseudo-rationalism.
Primum vivere, deinde philosophari (First, live; then philosophize).
Rationality does not superficially look like rationality—just as science doesn’t look like science as we’ve seen.
Judging people by their beliefs is not scientific.
There is no such thing as the “rationality” of a belief, there is rationality of action.
The rationality of an action can be judged only in terms of evolutionary considerations.
What matters, in the end, is what they pay for goods, not what they say they “think” about them, or the various possible reasons they give you or themselves for that. If you think about it, you will see that this is a reformulation of skin in the game.
Beliefs are…cheap talk. There may be some type of a translation mechanism too hard for us to understand, with distortions at the level of the thought process that are actually necessary for things to work.
you often get better results making “errors,” as when you aim slightly away from the target when shooting.
Recall that skin in the game means that you do not pay attention to what people say, only to what they do, and to how much of their necks they are putting on the line. Let survival work its wonders.
we do not have enough grounds to discuss “irrational beliefs.” We do with irrational actions.
There is a difference between beliefs that are decorative and different
sorts of beliefs, those that map to action.
How much you truly “believe” in something can be manifested only through what you are willing to risk for it.
what is rational is that which allows for survival. Unlike modern theories by psychosophasters, it maps to the classical way of thinking. Anything that hinders one’s survival at an individual, collective, tribal, or general level is, to me, irrational.
Rationality does not depend on explicit verbalistic explanatory factors; it is only what aids survival, what avoids ruin.
Not everything that happens happens for a reason, but everything that survives survives for a reason.
Rationality is risk management, period.
no individual can get the same returns as the market unless he has infinite pockets and no uncle points.
I believe that risk aversion does not exist: what we observe is, simply, a residual of ergodicity. People are, simply, trying to avoid financial suicide and take a certain attitude to tail risks.
Unless you are perfectly narcissistic and psychopathic—even then—your worst-case scenario is never limited to the loss of only your life.
Thus, we see the point that individual ruin is not as big a deal as collective ruin.
I have a finite shelf life, humanity should have an infinite duration.
I am renewable, not humanity or the ecosystem.
Courage is when you sacrifice your own well-being for the sake of the survival of a layer higher than yours.
Selfish courage is not courage. A foolish gambler is not committing an act of courage, especially if he is risking other people’s funds or has a family to feed.
One may be risk loving yet completely averse to ruin.
In a strategy that entails ruin, benefits never offset risks of ruin.
Ruin and other changes in condition are different animals. Every single risk you take adds up to reduce your life expectancy.
Rationality is avoidance of systemic ruin.