Book Summary: Skin In The Game Summary Nassim Nicholas

skin in the game summary nassim nicholas

Skin in the game summary

Chapter 1. Why Each One Should Eat His Own Turtles: Equality in Uncertainty


I have learned a lesson from my own naive experiences:

Beware ofthe 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.

You need to remember that, when you visit a medical office, you will be facing

someone who, in spite of his authoritative demeanor, is in a fragile situation. He

is not you, not a member of your family, so he has no direct emotional loss

should your health experience a degradation. His objective is, naturally, to avoid

a lawsuit, something that can prove disastrous to his career

skin in the game summary

Chapter 2 The Most Intolerant Wins: The Dominance of the Stubborn Minority

This large payoff from stubborn courage is not limited to the military. “Never

doubt that a small group of thoughtful citizens can change the world. Indeed, it is

the only thing that ever has,” wrote Margaret Mead. 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.

Antifragile has been about the failure of the average to represent anything in the

presence of nonlinearities and asymmetries similar to the minority rule. So let us

go beyond:

The average behavior ofthe market participant will not allow us to understand the general

behavior ofthe market.

You can examine markets as markets and individuals as individuals, but

markets are not sums of average individuals (a sum is an average multiplied by a

constant so they are both equally affected). These points now appear clear thanks

to our discussion about renormalization. But to show how claims by the entire

field of social science may fall apart, take one step further:

The psychological experiments on individuals showing “biases” do not allow us to

automatically understand aggregates or collective behavior, nor do they enlighten us about the

behavior ofgroups.

Human nature is not defined outside of transactions involving other humans.

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.

Chapter 3 How to Legally Own Another Person

Even the church had its hippies—Coase does not need math—Avoid lawyers during Oktoberfest

—The expat life ends one day—People who have been employees are signaling domestication

The Obama administration was complicit with the Bob Rubin trade. We have plenty

of evidence that they were afraid of rocking the boat and contradicting the cronies.

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.

Chapter 4 The Skin of Others in Your Game

How to be a whistleblower—James Bond isn’t a Jesuit priest, but he is a bachelor—So are both

Professor Moriarty and Sherlock Holmes—Total intelligence in the P.R. firm Ketchum—Putting the skin on terrorists


Imagine working for a corporation that produces a (so far) hidden harm to the

community, in concealing a cancer-causing property that kills thousands by an

effect that is not (yet) fully visible. You could alert the public, but you would

automatically lose your job. There is a risk that the company’s evil scientists

would disprove you, causing additional humiliation.

The only way we have left to control suicide-terrorists would be precisely to

convince them that blowing themselves up is not the worst-case scenario for

them, nor the end scenario at all. Making their families and loved ones bear a

financial burden—just as Germans still pay for war crimes—would immediately

add consequences to their actions. The penalty needs to be properly calibrated to

be a true disincentive, without imparting any sense of heroism or martyrdom to

the families in question

Chapter 5 Life in the Simulation Machine

How to dress while reading Borges and Proust—There are many ways to convince with an ice

pick—Councils ofbickering bishops—Theosis—Why Trump will win (he actually did win)

So it appears that the church founders really wanted Christ to have skin in the

game; he did actually suffer on the cross, sacrifice himself, and experience death.

He was a risk taker. More crucially to our story, he sacrificed himself for the

sake ofothers. A god stripped of humanity cannot have skin in the game

Chapter 6 The Intellectual Yet Idiot

People who don’t have skin in the game—Lipid phobias—Teach a professor how to deadlift

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

Chapter 7 Inequality and Skin in the Game

The static and the dynamic—How to go bankrupt and be loved by the many—Piketty’s equals

So there is an implicit bribe in civil service: you act as a servant to an industry,

say, Monsanto, and they take care of you later on. They do not do it out of a

sense of honor: simply, it is necessary to keep the system going and encourage

the next guy to play by these rules.

Chapter 8 An Expert Called Lindy

She is the one and only expert—Don’t eat their cheesecake—Meta-experts judged by meta-meta

experts—Prostitutes, nonprostitutes, and amateurs

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?

skin in the game summary

Chapter 9 Surgeons Should Not Look Like Surgeons

Literature doesn’t look like literature—Donaldo hiring practitioners—The glory ofbureaucracy

—Teach a professor how to deadlift—Looking the part

So it becomes no wonder that the job of chief executive of the country was

once filled by a former actor, Ronald Reagan. Actually, the best actor is the one

nobody realizes is an actor: 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. About every private banker is taught to not be fooled by the

looks of the client and avoid chasing Ferrari owners at country clubs

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.

skin in the game summary skin in the game summary

Chapter 10 Only the Rich Are Poisoned: The Preferences of Others

The salesman is the boss—How to drink poison—Advertising and manipulation—The

unbearable silence oflarge mansions on Sunday evening

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. Indeed, the classical art of

conversation is to avoid any imbalance, as in Baldassare Castiglione’s Book of

the Courtier: people need to be equal, at least for the purpose of the

conversation, otherwise it fails. It has to be hierarchy-free and equal in

contribution. You’d rather have dinner with your friends than with your

professor, unless of course your professor understands “the art” of conversation

Now, many societies have been getting wealthier and wealthier, many beyond

the positive part of the inverted U curve, not counting the effect of the increased

comfort on their spoiled children. And I am certain that if pizza were priced at

$200, the people with corks plugged in their behinds would be lining up for it.

But it is too easy to produce, so they opt for the costly, and 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.

skin in the game summary skin in the game summary

Chapter 11 Facta non Verba (Deeds Before Words)

Dead horse in your bed—Friendship via poisoned cake—Roman emperors and U.S. presidents

—A living enemy is worth ten dead ones

I never thought handhelds could be

such a weapon. And it would be unfair to use their pictures for web-mobbing. In

the past, bad deeds were only transmitted to acquaintances who knew how to put

things in perspective. Today, strangers, incapable of judging a person’s general

character, have become self-appointed behavior police. Web-shaming is much

more powerful than past reputational blots, and more of a tail risk.

Chapter 12 The Facts Are True, the News Is Fake

I never said that I said—No news is mostly news—Information flows in both directions

Unreliable people carried less weight than reliable ones. You can’t fool people

more than twice.

skin in the game summary

Chapter 13 The Merchandising of Virtue

Sontag is about Sontag—Virtue is what you do when nobody is looking—Have the guts to be

unpopular—Meetings breed meetings—Call someone lonely on Saturdays after tennis

Finally, when young people who “want to help mankind” come to me asking,

“What should I do? I want to reduce poverty, save the world,” and similar noble

aspirations at the macro-level, my suggestion is:

1) 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.

Yes, take risk, and if you get rich (which is optional), spend your money

generously on others. We need people to take (bounded) risks.

Chapter 14 Peace, Neither Ink nor Blood

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.

Chapter 15 They Don’t Know What They Are Talking About When They Talk About Religion

The more they talk. the less you understand—Law or nomous?—In religion, as in other things,

you pay for the label

Religions such as Christianity, Judaism, and, to some extent Shiite Islam,

evolved (or, rather, let their members evolve in developing a sophisticated

society) precisely by moving away from the literal

skin in the game summary

Chapter 16 No Worship Without Skin in the Game

no worship was done without sacrifice. The gods did not accept cheap talk. It was all about

revealed preferences. Also, burnt offerings were precisely burnt so no human

would consume them.

But Christianity ended up removing the idea of such sacrifice under the notion

that Christ sacrificed himself for others. But if you visit a Catholic or Orthodox

church on Sunday service, you will see a simulacrum. It has wine representing

blood, which, at the close of the ceremony is flushed in the piscina (the drain).

Exactly as in the Maaloula altar.

Christianity used the personality of the Christ for the simulacrum; he

sacrificed himself for us.

skin in the game summary

Chapter 17 Is the Pope Atheist?

It is dangerous to be a Pope, but you get good medical attention—Talk is just talk—Religion

manages rituals

After Pope John Paul II was shot in 1981, he was rushed to the emergency room

of the Agostino Gemelli University Polyclinic, where he met a collection of

some of the most skilled doctors—modern doctors—Italy could produce, in

contrast with the neighboring public hospital with lower-quality care. The

Gemelli clinic later became the preferred destination for the pontiff at the first

sign of a health problem.

At no point during the emergency period did the drivers of the ambulance

consider taking John Paul the Second to a chapel for a prayer, or some

equivalent form of intercession with the Lord, to give the sacred first right of

refusal for the treatment. And not one of his successors seemed to have

considered giving precedence to dealing with the Lord with the hope of some

miraculous intervention in place of the trappings of modern medicine.

skin in the game summary

Chapter 18 How to Be Rational About Rationality

Restaurants without kitchens—Science from the grave—Do not shoot to the left ofpiano players

—Merchants ofrationality

My friend Rory Sutherland claims that the real function of swimming pools is to

allow the middle class to sit around in bathing suits without looking ridiculous.

Same with New York restaurants: you think their mission is to feed people, but

that’s not what they are about.

The fact to consider is not that beliefs have survived a long time—the

Catholic church as an administration is close to twenty-four centuries old (it is

largely the continuation of the Roman Republic). The point is that people who

have religion—a certain religion—have survived.

Chapter 19 The Logic of Risk Taking

Anyone who has survived in the risk-taking business more than a few years

has some version of our by now familiar principle that “in order to succeed, you

must first survive.”

Let us return to Warren Buffett. He did not make his billions by cost-benefit

analysis; rather, he did so simply by establishing a high filter, then picking

opportunities that pass such a threshold. “The difference between successful

people and really successful people is that really successful people say no to

almost everything,”


What Lindy Told Me

No muscles without strength,
friendship without trust,
opinion without consequence,
change without aesthetics,

age without values,
life without effort,
water without thirst,
food without nourishment,

love without sacrifice,
power without fairness,
facts without rigor,
statistics without logic,

mathematics without proof,
teaching without experience,
politeness without warmth,

values without embodiment,
degrees without erudition,
militarism without fortitude,
progress without civilization,

friendship without investment,
virtue without risk,
probability without ergodicity,
wealth without exposure,

complication without depth,
fluency without content,
decision without asymmetry,
science without skepticism,
religion without tolerance,

and, most of all:

nothing without skin in the game.

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