On “Skin In The Game”: my two caveats

Ruben’s “The Judgement of Solomon”

It is written in the back cover of his latest book “Skin in the Game” (SITG): Nicholas Taleb is the kind of asshole that you need to read.

The main thesis of the book is quite simple. In Taleb’s own words:

“What is Skin in the Game? The phrase is often mistaken for one-sided incentives: the promise of a bonus will make someone work harder for you. For the central attribute is symmetry: the balancing of incentives and disincentives, people should also penalized if something for which they are responsible goes wrong and hurts others: he or she who wants a share of the benefits needs to also share some of the risks.”

You may want to read an example of an appreciative and detailed summary/review of the book here, or an example of less enthusiastic one here.

I like Taleb’s work because I think that epistemologically acknowledges the value of heuristics and pre-modern forms of knowing, which expands the mind of scientists and also has -let us say- “decolonizing effects”. But more importantly, that legitimization, combined with the unveiling of common statistical thinking flaws, shows the way for establishing a new rigor in Social Sciences and Humanities. Taleb’s SITG is also an example of why we need more Aristotelian phronesis than Kantian universal reason and shows us how to rethink our societies and orient them to ethics based in life, by proposing operational ideas, teknés and even some askesis to do that. I would like eventually to show how all these contributions are related to notions of prominent scholars that have been neglected in the last half-century.

But first, I want to be sure that I understood the book correctly. So I share my main caveats, to discuss if they are relevant, or if I missed something important. The problem, as I see it, is not as much what is said in the book as what remains unsaid, despite sometimes, maybe it is implied. There are two aspects that I have to expand or clarify to accept the general orientations of Taleb’s book.

Firstly, a more precise taxonomy of the different “skins” in the game is needed; otherwise, SITG can hide inadvertent risk-transfers or unfair distribution of risks.

Secondly, SITG understood as honor and sacrifice because of taking other’s risks, is not the only pillar of human systems’ viability, as the book sometimes seems to defend. Although “care” is an equally important one, it appears to be presented as a subset of the first. Below I discuss the consequences of these two problems.

Whose skin, whose game

Through different examples, Taleb describes various situations in which individuals can have SITG.

#1. There are obvious cases in which the very nature of the game implies unavoidable risk-taking. If you own and fly the little plane that tours the Grand Canyon, you have SITG. You will pay for the consequences of lousy maintenance or inexperienced piloting right away.

In most of the cases, a bad professional practice will not have a direct and equal consequence for everyone. A bad haircut will affect the customer, not the hairdresser. Yet…

#2. The community size of the activity introduces mechanisms of SITG (as in markets in which your record is known, or clubs in which members know your past behavior). Not assuming the adverse consequences or your pitfalls will expel you from the community/game.

I would say that those scenarios of having SITG are the ideal ones for Taleb, and are the ones used to describe the most desirable situation and the “paradigmatic” SITG. It is like you can hardly escape from it.

In fact, the rest of the categories of having SITG are qualitatively quite different from the previous two. They exist because of many reasons: it is not unusual that outcomes are (wrongly) perceived as loosely related to your action; or deferred so much in time that when the time comes for accountability you are no longer in the game, or the information is so asymmetric that your wrongdoing is unnoticed; or because the consequences of your bad call is not an ugly look because of an awful haircut, but the ruin or even death of someone, and being kicked out of the game is not enough punishment for that. We will keep our taxonomy simple by skipping all those nuances:

#3. There are laws — and effective law enforcement — that purposefully introduces SITG. Opposed to the previous ones, this SITG is not mostly peer or community driven, but State driven.

That means that the game is decided not by the ones that are affected by the game, but by others, most of the time without SITG themselves. In the worst case scenario, lawmakers are bribed by those that want to avoid having SITG and own means to interfere in lawmaking (the rules of the game). That is why federation of communities is a solution for scaling up the nice properties of the previous SITG types.

There is still another form of SITG, even more artificial, than the previous one. Is that by which SITG it is arbitrary and privately constructed:

#4. When someone legally — or illegally — owns you because you work for that person, he or she can decide, almost unilaterally, the SITG that you must have.

The more asymmetric the power relation is, the more abusive and arbitrary it can be. Even more, a wealthy person may be putting SITG by investing 10% of its fortune in the company, and losing it can lead to a temporary delay of the next real state acquisition. But in f***** up job markets, being fired is a far most significant punishment. When you win, you gain your salary and maybe an incentive, but if you lose, you lose your means of livelihood. If life (yours and those that depend on you) is what matters, asymmetry is more meaningful when measured in relative terms, not in absolute terms. Or as the Spanish grammar specialist Slim Trish (Fat Tony’s neighbor) puts it:

“When they owe you, they will likely put some skin in the game, but also will force you to put most of your flesh in the game.”

Even more: because successful people are usually fooled by randomness, and therefore think their fortune is due to their excellent skills, they will blame the people they own for any adverse outcome.

Aaaand furthermore: since they think they are smarter than you because they own you, they will decide what you need for executing your work, and several aspects of how you have to do it. The fact that you cannot choose about the conditions of success of your work is a blatant transfer of risk that also is undermining our economic system. As Castoriadis put it:

“It requires that people, as producers or as citizens, remain passive and restrict themselves to performing the task it has imposed on them. When it notices that this passivity is like cancer within it, it encourages initiative and participation, only to discover that it cannot bear them, for they question the very essence of the existing order”.

Owning people sort of worked in the past, but it may have reached its economic potential. In the United States, “6% of employees are actively disengaged — they are miserable in the workplace and seem to exist only to destroy what the most engaged employees are building. The remaining 51% of employees are not engaged — they’re just there” (see 2017 Gallup’s Report). And the main reason (>50%) for leaving the company is because they want to stay away from their bosses.

Also, inequality of departure conditions makes SITG ineffective for those that put the same amount of skin, but have the resources for bouncing back as much as they need if things go wrong.

To put in simply, not all forms of SITG are equally valid, or desirable, or fair. I think Taleb knows, and SITG says it, but not as clear as I would like. SITG appears to be the “silver bullet” for healthy societies. But there is none.

Now, I want to address another unfair form of risk transfer. The one that ignores the interdependence of human beings and generations. The one that suffers those that take care of others.

No care, no life

Taleb recently twitted:

“The wisdom of Solomon: he had to rule between two women both claiming to be the mother of an infant. By offering to split the child in half, he figured out who was the mother: she was the one who cared the most. She had more #SkinintheGame”

There is a qualitative difference, again, between a mother’s skin in the game, and most of the examples we saw before. This “kind” of skin in the game would be close to a #1 type in our taxonomy. But it has a name: care. “The mother was the one who cared the most”, says Taleb. In ancient Athens, for instance, “care” was a matter of not citizens (women and slaves), people with no full political rights for managing the oikos. And still today it is mostly in the hands of women that financially depend on men, and/or undocumented migrants.

Saying that risk management is critical for survival, may sounds like a tautology. Great risk takers in the past were warriors and hunters. In practical terms, risk managing nowadays is key for providing for oneself and providing to those that, for any reason, cannot provide for themselves. But life, and reproduction of life, not only depends on assuring access to goods and resources needed for surviving. Life is also about caring. And care is not as much assessing or taking risks for getting those resources, as it is empathy, and anticipating and meeting other’s needs. Caring and risk-taking have a complex relationship. A little part of caring is about seizing risks, particularly fatal accidents. But most of the time is routine work that cannot scale, that is face-to-face and leave no noticeable heroic scars or records. Caring is not defending. Caring is not providing. It is even not seen as a “game.” In the best of the cases, is a “minor league.”

As Slim Trish says:

“Providing is not caring. Providing is providing. When you bring food because you guessed it or somebody asked for it or told you that it was needed, you are not actually caring: you are (generously) providing. When you bring food or any particular thing needed because you were concerned and attentive, you are stepping into caring.”

From the perspective of risk, which is what Taleb’s work is about, we could say that an ethical reason for caring is the randomness of the conditions in which every individual enters the game, or gets big results from it. Because as Rawls argued, the luck-based origin of our individual talents and skills should be seen as “commons assets” for sustaining life (e.g., our family, society, environment, etc.). This is not about reversing the consequences of the downsides when taking risks (e.g., expelling a bad hairdresser from the market). This is, literally, about the life of the most vulnerable that exist so the rest can exist.

When you take care for others, you are putting “skin in the care” or even “soul in the care” (like the mom in Solomon’s story), in the same way that, when you assume risk for the benefit of others, you put “soul in the game”. Everyone, to some extent, needs care. In some point in our lives, we have been, and we will be, vulnerable and dependent on others. When we were born our lives and future were, literally, in the hands of others. On the other hand, neither nature nor culture escapes form risk. The smaller is a society or group, the more their members are aware of their independence either in facing risk and receiving care and the more they are sustained in their reciprocal thick relationships.

Conversely, in large groups, the contribution of a single individual is less significant, and so the existence of thick relationships is. That makes groups more tolerant of differences among members, but also less concerned about their safety and well-being. Soul in the care is substituted by skin in the game dynamics, and we could call that skin in the care. I take care of others, so I can make my living.

Caring for someone may trigger the sentiment of reciprocity, but it cannot take reciprocity for granted. Care, opposed to violence and coercion (non-voluntary skin in the game), requires empathy and kindness. You can force someone to take care of you, but care will not force someone to take care of you back, nor to stop coercing you. For instance, in our present reduction of resources for public services, it is not unusual to see carers suffering violence from both managers and users because they do not have the material conditions to provide proper care. This major asymmetry between coercion and care explains why coercion is a popular coordination mechanism in human history. It also explains why care, under coercion or free of it, has been moved successfully to market coordination, so people no longer can put soul in the care, but skin in the game. People do not take care of their children or elderly anymore, but put “skin in the game” in order to pay someone to put “skin in the care.”

Taleb’s pragmatism is quite clear about life: if there is no life, there is no game. And if there is no “Life” with capitals letters, there is also no “Game” with capitals letters. He is also very convincing about the fact that in risk management, the distinction between ergodic and non-ergodic is key for survival. For providing. But regarding life, he does not explicitly write about care. Yet, caring is about the possibility of literally surviving. At the community level, we need both soul in the game and skin in the game. After reading SITG, it is tempting to think that any type of skin in the game is the silver bullet. But it is not for care. Substituting soul in the care for skin in the game is eroding communities and societies, and promoting an increasing crisis in the care children, elderly, and sick or persons with disabilities. As Slim Trish says:

“When caring, there is not an invisible hand. It is always your own f***ing hand.”

Researching organizational theory useful for p2p organizations. https://pantheon.work/en/ https://blog.p2pfoundation.net/author/antonio-blanco-gracia

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