I’m now so taken with this skin in the game idea that I’m pasting a chunk of wiki to illustrate Taleb’s ideas. Something in here for everyone.
Asymmetry and missing incentives
If an actor pockets some rewards from a policy they enact or support without accepting any of the risks, economists consider it to be a problem of "missing incentives". In contrast, to Taleb, the problem is more fundamentally one of asymmetry: one actor gets the rewards, the other is stuck with the risks.
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Taleb argues that "For social justice, focus on symmetry and risk sharing. You cannot make profits and transfer the risks to others, as bankers and large corporations do... Forcing
skin in the game corrects this asymmetry better than thousands of laws and regulations."
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The centrality of negative incentives
Actors - per Taleb - must bear a cost when they fail the public. A fund manager that gets a percentage on wins, but no penalty for losing is incentivized to gamble with his clients funds. Bearing no downside for one's actions means that one has no "Skin In The Game", which is the source of many evils.
An evolutionary process is an additional argument for SITG. Those who err and have SITG will not survive, hence evolutionary processes will eliminate (physically or figuratively by going bankrupt etc) those tending to do stupid things. Without SITG, this process cannot work.
Examples
Robert Rubin, a highly-paid director and senior advisor at
Citigroup, paid no financial penalty when Citigroup had to be rescued by U.S. taxpayers due to
overreach.
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Many
war hawks don't themselves bear any risks of dying in a war they advocate.
Other ideas
Minority rules. A "stubborn minority" can impose its will on the relatively disinterested majority. A
halal eater, for example, will never eat non-halal food, but a non-halal eater isn't banned from eating halal. Thus, a catering company switches to serving halal meat despite its being preferred only by a tiny minority of its customers.
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Intellectual Yet Idiot (IYI), is where Taleb argues that being educated and "intellectual" does not always mean that someone isn't an idiot for most purposes. "You can be an intellectual yet still be an idiot. 'Educated
philistines' have been wrong on everything from
Stalinism to
Iraqto
low-carb diets."
Catchy stuff.
