Book summary: Skin in the game by Nassim Nicolas Taleb

Skin in the game

1. Skin in the game creates a diversity of beliefs and ideas, for example, restaurant businesses. Lack of it creates a monoculture, for example, journalism.
2. Skin in the game comes with a conflict of interest. For example, a shareholder is more inclined to say positive things about the company, whose shares he holds. Even then, skin in the game is preferable over no skin in the game. A lack of skin in the game, usually, produces a monoculture of beliefs.
3. Bureaucrats, with no skin the game, usually make the problems worse by deciding things from the top.
4. Beware of “good” advice where you will get both the good and the adverse outcomes of that advice while the advice-giver will only get a good result.
5. Metrics puts one’s skin in the wrong game. For example, a doctor who has to optimize for a five-year survival rate of a cancer patient might go for radiation therapy as opposed to laser surgery even though radiation therapy has worse 20-year survival rates.
6. Pilots have more skin in the game than surgeons. If a plane has a 98% chance of surviving a flight, then all pilots would have been dead for now, while medical science can operate with a much lower survival rate since skin in the game is primarily of the patients and much lower of surgeons.
7. An academic experiment where one is supposed to wager a bet and hypothetically believe in a specific scenario is devoid of real risk and hence devoid of skin in the game.
8. Academia, when left unchecked, for the lack of skin in the game, evolves into a ritualistic self-referential publishing game.

Minority Rule

1. A stubborn minority can dictate rules for the majority, which does not care.
2. Most food in the US is kosher since Jews care and non-Jews don’t. (ashishb’s note: Most meat in India and Indian restaurants outside India is halal since minority Muslims want halal and non-Muslims don’t care)
3. GMOs did not succeed much in the US despite lobbying since a small minority would only eat organic food, and the vast majority do not care.
4. In the US, in a men-only event, beer might suffice, but with a decent fraction of women attendees, the organizer switches to wine to avoid having separate glasses to serve beer and wine.
5. For a child born in the middle east, if at least one parent is Muslim, then the child is Muslim; Judaism only considers children of a Jewish mother to be Jewish, and for a child to be Ezidi (Yazidi), both parents have to be Ezidis. Over centuries these differences added up, making Islam the dominant religion in the middle east.
6. Minority rule results in a low-variant binary-outcomes.
7. An intolerant minority can win over a majority-lead democracy.
8. Science is not the total of what all scientists think, but it is highly skewed. Once you prove something is wrong, it is wrong.

A free person is someone whose fate is not dependent on peer assessment.

Modern Slavery

1. Employees, as opposed to contractors, are like domesticated wild animals. They cost more, but the employers buy dependability in return. An employee has a status and a reputation to protect.
2. What matters most is not what the employee gets but what he’s afraid of losing.
3. Freedom is always associated with risk-taking; it is never free.
4. A master protects a domesticated dog while those in the wilderness die. When the master dies, the domesticated dog will most likely be euthanized since people prefer adopting puppies and not the grown-up dogs.
5. Employees know how to fulfill a task which his master deems necessary or satisfy a gameable metric but cannot be trusted to do decision making, which entails serious trade-offs.
6. A free person is someone whose fate is not dependent on peer assessment. A restaurant owner cares about the judgment of the customers; an academician cares about the judgment of his peers.

Inequality

1. Europe is statically more equal; the US is dynamically more equal. While there is relatively less inequality across people in Europe, economic mobility is missing. While in the US, people move in and out of the top 1% rapidly.
2. Lower classes are more likely to exhibit envy towards their cousins than the super-rich. Academicians think otherwise since the hierarchy of academia makes them compare themselves to the rich. Hence, they assume the same for the “abstract” poor, with whom they don’t even interact.
3. Inequality is acceptable to humans when they see skin in the game that comes with the privilege. It’s the rewards devoid of any risk that bothers us as [unacceptable] inequality.
4. A community is a space where the interest of the collective prevails; it is the outsiders with whom you compete.

Wealth

1. Rich people are targeted by a whole industry of experts and consultants whose goal is to deceive money by selling complicated solutions. The simplest example is buying a bigger house just because you are rich and devoiding yourself of the warmth and the human company coming from a more dense settlement.
2. If wealth reduces your choices, you are doing it wrong.

If wealth reduces your choices, you are doing it wrong.

Experts

1. Lindy Effect: Things that have stood the test of time are expected to last longer. A year-old book is expected to last another year, a century-old another century.
2. An award, recognition, acceptance of a paper are not usually indicative of the quality of the work; it usually indicates that a specific section of currently influential people is happy with it.

Appearance

1. The richness in appearance usually covers for the lack of substance.
2. Among two surgeons of equal caliber, the one who does not look like a surgeon is the more skilled one; since he has to cross more hurdles for the lack of his appearance. (ashishb’s note: That’s what Ben Horowitz did in case of Mark Cranney)
3. A discipline is bull-shit if what matters more is the prestige of the institution granting it.
4. People who are bred, selected and compensated for finding complicated solutions do not have an incentive to implement a simplified one.
5. Traders, when they make profits have short communications. When they lose, they drown you with theories, charts, and details. When a book tries to claim a point by tons of data, one should be suspicious of believing in the outcome. Since more often than not, the consequences are determined by a few extremes points, and rest all is usually the noise.

Virtue

1. It is immoral to claim virtue without living for its direct consequences.
2. If your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life.
3. Courage is the only virtue you cannot fake. For example, when you are standing up for an unpopular truth.

Same words different meanings

1. The term “Religion” can mean different things to different individuals; it could be rituals, celebrations, a way of life, law, or even a political system.
2. A “belief” could be epistemic (knowledge-related) or procedural.
3. A person can be religious in words but atheist in actions. For example, Pope John Paul, who was shot, was taken to a hospital, not to a worship house. A person can be religious in words and religious in action, for example, suicide bombers.
4. The fundamentalists take not only their own beliefs literally but also think that the more evolved ones take their beliefs literally too. While the more evolved believers think that the fundamentalists have some metamorphic concept about their beliefs. Literal interpretations don’t leave room for adaptation.
5. A pagan mind handles nuances and ambiguity more easily than a pure monotheist like the followers of Salafi Islam.
6. Julian The Apostate, raised Christian, wanted to return to the pagan roots failed to find an equivalent God to worship since all pagan temples had different practices.
7. A restaurant in the US, primarily, exists not to sell food but to use food as a bait to make people buy expensive liquor. Similarly, religious beliefs are more about the purpose they serve and less about the beliefs themselves.
8. Some beliefs are decorative, while some lead to action. Their actions demonstrate One’s commitment to a belief.

A person can be religious in words but atheist in actions.

Rationality, survival, and risk vs. ruin

1. The goal of the eyes is not to produce the most accurate description of the world but the most useful one for survival.
2. Survival comes first; truth, understanding, and science later.
3. A sound political system is judged not by whether it makes sense, but whether it works.
4. The ensemble analysis of a system cannot merely be applied to a single person if the outcomes include ruin. A person playing Russian roulette has an 83% chance of making money, but a person who plays it repeatedly is bound to die, the payoff is not computable.
5. Risk implies recoverable downside; ruin implies unrecoverable devastation. One can be risk-loving but can be averse to ruin. Rationality is the avoidance of ruin.

The goal of the eyes is not to produce the most accurate description of the world but the most useful one for survival.