Skin in the Game

Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice. (Location 624)

Let us now take the epistemological dimension of skin in the game to an even higher level. Skin in the game is about the real world, not appearances. As per Fat Tony’s motto: You do not want to win an argument. You want to win. (Location 642)

personally know rich horrible forecasters and poor “good” forecasters. Because what matters in life isn’t how frequently one is “right” about outcomes, but how much one makes when one is right. (Location 661)

Another small example of top-down progress: Metro North, the railroad between New York City and its northern suburbs, renovated its trains, in a total overhaul. Trains look more modern, neater, have brighter colors, and even have such amenities as power plugs for your computer (that nobody uses). But on the edge, by the wall, there used to be a flat ledge where one can put the morning cup of coffee: it is hard to read a book while holding a coffee cup. The designer (who either doesn’t ride trains or rides trains but doesn’t drink coffee while reading), thinking it is an aesthetic improvement, made the ledge slightly tilted, so it is impossible to put the cup on it. (Location 730)

This explains the more severe problems of landscaping and architecture: 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; it takes time and a lot of progressive tinkering for that. (Location 735)

Now skin in the game brings simplicity—the disarming simplicity of things properly done. People who see complicated solutions do not have an incentive to implement simplified ones. As we saw, a bureaucratized system will increase in complication from the interventionism of people who sell complicated solutions because that’s what their position and training invite them to do. Things designed by people without skin in the game tend to grow in complication (before their final collapse). There is absolutely no benefit for someone in such a position to propose something simple: when you are rewarded for perception, not results, you need to show sophistication. Anyone who has submitted a “scholarly” paper to a journal knows that you usually raise the odds of acceptance by making it more complicated than necessary. (Location 740)

Anything you do to optimize your work, cut some corners, or squeeze more “efficiency” out of it (and out of your life) will eventually make you dislike it. Artisans have their soul in the game. Primo, artisans do things for existential reasons first, financial and commercial ones later. Their decision making is never fully financial, but it remains financial. Secundo, they have some type of “art” in their profession; they stay away from most aspects of industrialization; they combine art and business. Tertio, they put some soul in their work: they would not sell something defective or even of compromised quality because it hurts their pride. Finally, they have sacred taboos, things they would not do even if it markedly increased profitability. Compendiaria res improbitas, virtusque tarda—the villainous takes the short road, virtue the longer one. In other words, cutting corners is dishonest. (Location 821)

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. (By assistant here I exclude someone hired for a specific task, such as grading papers, helping with accounting, or watering plants; just some guardian angel overseeing all your activities). This is a via negativa approach: you want maximal free time, not maximal activity, and you can assess your own “success” according to such metric. (Location 841)

By some mysterious mental mechanism, people fail to realize that 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. (Location 890)

So people might want to do things. Just to do things, because they feel it is part of their identity. A shoemaker in Westchester County wants to be a shoemaker, to enjoy the fruits of his labor and the pride of seeing his merchandise in the stores, even if his so-called “economic” condition might benefit from letting a Chinese factory make the shoes and converting to another profession. Even if such a new system allows him to buy flat-screen TV sets, more cotton shirts, and cheaper bicycles, something is missing. It may be cruel to cheat people of their profession. People want to have their soul in the game. (Location 915)

he has never read Frédéric Dard, Libanius Antiochus, Michael Oakeshott, John Gray, Ammianus Marcellinus, Ibn Battuta, Saadia Gaon, or Joseph de Maistre; (Location 2209)

But we have evidence that collectively society doesn’t advance with organized education, rather the reverse: the level of (formal) education in a country is the result of wealth.fn2 (Location 2821)

Models are error-prone, something I knew well with finance; most risks only appear in analyses after harm is done. As far as I know, we only have one planet. So the burden is on those who pollute—or who introduce new substances in larger than usual quantities—to show a lack of tail risk. In fact, the more uncertainty about the models, the more conservative one should be. (Location 3038)

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.) Read Aquinas’s Summa Theologica, written eight centuries ago; you will notice sections titled “Questio,” then “Praeteria,” “Objectiones,” “Sed Contra,” etc., describing with a legalistic precision the positions being challenged and looking for a flaw in them before (Location 3090)

your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life. (Location 3147)

As usual, if it makes sense, it has to be in the classics, (Location 3172)

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. (Location 3239)

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. (Location 3602)

And if you dream of making people use probability in order to make decisions, I have some news: more than ninety percent of psychologists dealing with decision making (which includes such regulators and researchers as Cass Sunstein and Richard Thaler) have no clue about probability, and try to disrupt our efficient organic paranoias. (Location 3608)

But it remains the case that whatever their purpose, kashrut laws survived several millennia not because of their “rationality” but because the populations that followed them survived. (Location 3655)

Not everything that happens happens for a reason, but everything that survives survives for a reason. (Location 3662)