Skin in the Game | Nassim Nicholas Taleb

Summary of: Skin in the Game: The Hidden Asymmetries in Daily Life
By: Nassim Nicholas Taleb

Introduction

Dive into the intriguing world of Nassim Nicholas Taleb’s ‘Skin in the Game: The Hidden Asymmetries in Daily Life’. This compelling book explores the significance of having ‘skin in the game’ – taking personal risks and being directly involved in the consequences of one’s decisions. The concepts of Minority Rule, information asymmetry, and societal behavior are critically examined, providing valuable insights into the way transactions and interactions take place in our daily lives. Through fascinating examples and powerful anecdotes, this summary will open your eyes to the ethical implications of actions in a commercial world, and the consequences of not having skin in the game.

Immoral Sales Tactics

The ancient Roman myth about fishermen who disguised a disaster as a delicacy and coerced a god to eat it, is a lesson modern sales personnel should heed. Contemporary financial traders often use underhand tactics; they sell unwanted stocks as a great portfolio addition. This deception is disguised as well-intentioned advice, which is immoral because traders hide vital information about their motives. Thus, sales pitches become manipulative and morally wrong under religious legal systems like Sharia law. The concept of Gharar refers to information asymmetry in transactions; thus, it would be unlawful until buyers are given more information.

The Power of Minority Rule

Human societies are like ant colonies, where individual behavior doesn’t explain how the whole system operates. Societal behavior is determined by interpersonal interactions that follow simple rules with bizarre consequences, such as minority rule. It only takes a tiny, inflexible minority to determine preferences for the whole population. This phenomenon occurs when the majority is more flexible than the minority. Companies seeking to change consumer behavior often make the mistake of ignoring the concept of minority rule, as exemplified by the failure of big agricultural corporations to persuade Americans to eat genetically modified food. The inflexible minority still rules.

Modern-day Gyrovagues

In the fifth century, there existed a group of monks called Gyrovagues. These monks were unlike the rest since they belonged to no particular monastic group and roamed Europe, living off the kindness of townspeople. The Church disliked the Gyrovagues because it couldn’t control them, so it worked hard to introduce rules that would curb their freedom. This has a striking resemblance to modern-day companies and how they strive to control their employees. By hiring them, companies curtail their personal freedom and ensure they can be depended on. Unfortunately, many people have been conditioned to obedience, and their personal identities are intrinsically tied to the companies they work for. This conditioning ensures that they remain obedient at all times.

The Two Types of Income Inequality

Income inequality affects two types of people according to the author of the book. The first group is composed of successful individuals such as entrepreneurs, celebrity chefs, and famous singers. The second group includes wealthy bankers, chief executives, and bureaucrats. Surprisingly, society tends to accept the wealth of the first group but not the second. It all boils down to the perception that entrepreneurs and celebrities took big risks to get to where they are, while highly-paid professionals reaped the rewards without taking on big risks. This explains why working-class Americans view entrepreneurs and celebrities as role models, while they resent highly-paid professionals such as chief executives and bureaucrats. Interestingly, this perception also explains why working-class voters viewed Donald Trump’s wealth and previous bankruptcies as evidence of his entrepreneurial success, and not as deterrents.

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