Skin in the Game: Hidden Asymmetries in Daily Life
Your highlights:What’s in it for me? Learn a better, fairer way to analyze risk.
The first is the symmetry, or balance, of the interaction
5 August, 2019 11:31 Share
The second factor is risk. In many situations in our daily lives, whether a visit to the doctor or an interaction with a salesperson, we rarely stop and ask ourselves about the risk.
5 August, 2019 11:32 Share
Any asymmetry of information between buyer and seller is morally wrong.
Well, this myth establishes an important lesson that the fisherman learned the hard way: it's immoral to disguise a sales pitch as well-intentioned advice.
5 August, 2019 11:33 Share
But is there really something wrong with this? After all, their behavior was legal, and we’re all familiar with these sales tactics. Interestingly though, while this behavior may be legal in many secular countries, it’s much less acceptable under some religious legal systems.
5 August, 2019 11:34 Share
This term refers to an asymmetry of information between two agents. If one agent, the seller, has much more information about the transaction than the other agent, the buyer, then the seller could be said to have too much certainty about the outcome of the transaction, and the buyer too little. In this case, Gharar would exist in the transaction, and thus it might be forbidden from taking place until the information asymmetry was redressed, and the buyer was given more information.
5 August, 2019 11:34 Share
For instance, Sharia law, the Islamic legal code, contains the concept of Gharar. This term refers to an asymmetry of information between two agents. If one agent, the seller, has much more information about the transaction than the other agent, the buyer, then the seller could be said to have too much certainty about the outcome of the transaction, and the buyer too little. In this case, Gharar would exist in the transaction, and thus it might be forbidden from taking place until the information asymmetry was redressed, and the buyer was given more information.
5 August, 2019 11:35 Share
Many people fail to understand that the minority rules the majority.
Minority rule refers to the fact that it only takes the existence of a tiny, yet inflexible, minority – as little as 3 percent of the total population – before the whole population must go along with their preferences.
5 August, 2019 11:35 Share
Companies condition their employees to accept a loss of freedom.
By hiring employees rather than getting freelancers or contractors to do the work, employers can curtail workers’ personal freedom. Controlling them ensures the company can depend on them. For example, if forced into a rigid 9 a.m. to 5 p.m. schedule, five days a week, the worker will be available to do the work – unlike a freelancer, who might have a better offer and who has the freedom to take it. By hiring employees, organizations buy themselves peace of mind. But what about the employee? Why don’t more of us resist being treated like a pliant pet, having our freedom removed for eight hours a day, Monday to Friday, for the sake of the company’s convenience? Well, the uncomfortable truth is that many of us have been psychologically conditioned to obedience.
5 August, 2019 11:40 Share
Conditioned employees are individuals whose personal identities are intrinsically tied to the companies for which they work. They dress as their company expects them to and even use the language of their organization, speaking in company jargon. These workers have been conditioned to have skin in the game, that is, they themselves have something to risk. If they walk away from their constricting jobs, they’ll lose part of themselves, too.
5 August, 2019 11:41 Share
Success is based on your competence or your image, depending on your profession.
Imagine you need to choose one of two surgeons to perform surgery on you. The first surgeon looks exactly as you might expect a surgeon to look. He has a slim build, delicate hands and is highly articulate. The second surgeon is very different. He is badly dressed, overweight and looks more like a butcher than a doctor.
5 August, 2019 11:43 Share
Surprisingly, the author would choose the second one. He doesn’t look like a surgeon, and provided he has had some success in his career, he must have had to overcome a lot of negative perceptions. In other words, he has probably had to jump over more hurdles to prove himself than the surgeon who looks more like a surgeon.
5 August, 2019 11:43 Share
Therefore, with so much less to risk, those who recruit chief executives don’t bother evaluating their actual competence. Instead, they evaluate their image. Just consider that Ronald Reagan, a Hollywood actor, was elected to the presidency – America’s highest executive position. His victory was made possible because, just like other CEOs, presidents are elected on people’s opinions, rather than by an objective measure of their competence.
5 August, 2019 11:44 Share
Rich people care less about their spending and are exploited as a result.
or instance, when many people become rich, they move into big mansions set in large, secluded grounds. However, the author is convinced that most only do so because they are pressured by real-estate agents and marketing that advises them how to live. In reality, most people are far happier living in lively neighborhoods with plenty of company and fellow human warmth than in silent, vast mansions. Perhaps you won’t be taking pity on them anytime soon, but these lonely rich people are the victims of an elaborate scam – all because they don’t have enough skin in the game
5 August, 2019 11:46 Share
Final summary
Therefore, in any given situation, we should examine the knowledge that each stakeholder has, and who has the most to lose if we want to truly understand why people behave as they do.
5 August, 2019 11:46 Share
About the book:
Skin in the Game (2018) explores the ways in which our interactions with others are secretly influenced by risk and symmetry. By drawing on ideas from the field of probability, and applying them to everyday scenarios, Taleb reveals unexpected and often dazzling insights about what really makes society tick.
About the author:
Nassim Nicholas Taleb is a scholar, statistician and former investment banker. He is the bestselling author of the 2007 book Black Swan.
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