A Review of Skin in the Game by Nassim Nicholas Taleb

The IYEA
The IYEA
Apr 2, 2018 · 13 min read

By Ajay Sabharwal

Source: penguin.com

Skin in the Game: Hidden Asymmetries in Daily Life by Nassim Nicholas Taleb, Allen Lane, 2018, Rs.699, 272 pages

A fair and accurate review of Nassim Nicholas Taleb’s Skin in the Game: Hidden Asymmetries in Daily Life could not be limited to analyzing the text of the 250-odd pages of the book that released in late February of 2018. To understand the origins of Taleb’s idea of skin in the game, one must look back to the last chapters of his previous book, Antifragile (2012). In Antifragile, Taleb argued about the novel idea of certain systems and their ability to gain from volatility, randomness, and being under stress as opposed to breaking as a result of being fragile. It was in Book VII of Antifragile where Taleb introduced his idea of skin in the game and how bankers, interventionists, academics, journalists and bureaucrats avoid facing the negative consequences of their actions, while still benefiting from the potential upside. For example, Taleb has spoken against what he calls the ‘Bob Rubin trade’. The Bob Rubin trade is defined by, say a Treasury Secretary or a Goldman Sachs banker (Rubin was both) or other individuals with enough agency to manage a system, who end up neglecting their responsibilities, weakening the system and crying ‘Black Swan.’ and when crisis strikes, calls. In a sense, rather than taking the blame for their actions (or omissions) they blame the entire thing on unforeseeable circumstances that were completely out of their control. Thus, as the stance of those in the ‘Bob Rubin trade’ towards society lacks symmetrical incentives with proportional upsides and downsides, they do not have skin in the game. Sowing seeds of the next book in the previous, is commonplace in Taleb’s view of presenting the entire Incerto collection as one series rather than separate books. A sense of continuation prevails which leads the reader to gain more depth into the issues covered by Taleb.

As a part of Skin in the Game, Taleb explores the idea of disincentive undesirable behavior by enabling decisions makers to be more accountable by exposing them to the negative consequences of their actions. Bankers, bureaucrats, journalists and academicians seem natural examples for such cases, and Taleb seems to have great contempt for these career professionals. Such a tendency, according to Taleb, stems from a natural desire for what is beneficial for society or the public good.

In a world where leftist academics and journalists criticize Wall Street bankers and politicians for perpetuating inequality, Taleb’s demand is not for equality, but instead, for symmetry. “Taleb argues for decision makers to be held accountable by exposing them to the downsides of their actions. Thus, his approach is to preserve the market place and to not kill it with regulations but instead to make sure the rules are same for everyone. The old ‘equality of opportunity’ requires a base to build on, which Taleb says is symmetry in terms of incentives or disincentives. Once incentives are aligned with actions and the downside is inescapable, economic systems will become more robust. Thus, those with skin in the game, will strive to make the system more efficient, because their incentives are aligned that way. For example, someone who spends billions of dollars on hardware to mine bitcoin wouldn’t want to wreck the blockhain to gain just one block valued at a minuscule fraction of the investment. Having skin the game, thus ensures ethical robustness. As far as the question of inequality resulting from such a symmetrical system is concerned, Taleb finds it tolerable. Why? Because it is no longer because of systemic faults but because an entity might have proposed a better deal or worked on a better technology.

Thus, Taleb kick starts the discussion on something that has been lacking a mention in the academic or journalistic world for a long time — the morality of capitalism. Taleb isn’t against capital creation but against rent-seeking. His broader point is that real value creation is not possible without skin in the game, i.e. being exposed to the downside as much as one can gain from the upside. Thus, society can accept it without bearing the burden for the costs of the actions of others, such as bankers or lobbyists. This, cleanses the system of ethically negligent practices which in turn, presents a permissible form of capitalism.


In the introduction, Taleb mentions the story of the Greek mythological creature, Antaeus to make the point that keeping contact with the ground is essential. This forms the beginning of the skin in the game argument. One can only claim to have skin in the game if one is constantly in touch with the ground. Taleb’s tendency to mention mythical figures is not lost in Skin in the Game. Indeed, the classic example for the central argument in Antifragile was that of another Greek legend/myth — the Hydra. Though many IYI journalists have criticized this as anecdotal and mythical they fail to realize what Taleb mentions in the The Bed of Procrustes (2010) and at the beginning of the fifteenth chapter of the book — he says that “Mathematicians think in symbols, physicists in objects, philosophers in concepts, geometers in images, jurists in constructs, logicians in operators, writers in impressions, and idiots in words.” Taleb’s insistence on mythology does not have as much to do with his religious inclination as it has to do with the fact that many new concepts that he brings to the table are lost out as a result of modernity. These concepts however are in abundance in antiquity even when they lack a proper word for them — for example, antifragility and Hydra. Thus, it is not just permissible but encouraging that Taleb, as a philosopher, brings in concepts, the narratives or examples for which are completely lacking both in modernity and in the thinking of modern IYI journalists.

Taleb further extends Hammurabian principle of an eye for an eye to the Torah and Kant and explains how it is the same principle of symmetrical action. While the likes of Gandhi would disagree with ‘eye for an eye’ but agree with the Rabbi’s interpretation of the Torah as “do unto others as you want them to do to you” Taleb points that it is the same principle that has been mellowed down through the ages. The symmetrical application of laws, (and metaphorical rather than literal interpretation of ‘eye for an eye’) has been at the core of any system in any country dispensing justice. It has been, in fact the bedrock of civilization.

Taleb furthers his argument for symmetry by suggesting that war mongers have existed in the past but those who advocated war were bound to be most effected by it. Warmongers in medieval or classical times lead from the front in the battlefield, as opposed to modern-day journo-academic war mongers in the West who face no consequences whether they advocate invasion in Iraq or Libya or Syria for that matter. He then extends the argument to highlight the asymmetrical information problem in making sales, such as that of the ‘lemons’ or second-hand cars.

Taleb suggests that the seller must reveal all that he knows to ensure a level playing field and not restrict himself to what the law requires him to reveal. Ethics, Taleb says are robust, as compared to the law, which he rightly suggests, become restrictive in terms of jurisdiction or in terms of practice (See: Expensive and shady lawyers bending or fixing the law). Taleb says that one can either give advice or sell but cannot do both at the same time. In recalling classical Roman wisdom, he says that by pitching the product’s benefits one is longer giving genuine advice because the interests of the seller cannot be aligned with those of the potential buyer. This asymmetry in information or the seller’s lack of skin in the game is what makes the deal unfavourable for the buyer who will never get to ascertain the true value or the proverbial ‘lemon’. In such a case, the most credible supporter for the product being sold becomes someone who truly has skin in the game, i.e. a real customer. Thus, Taleb, who objects to such unethical practices in the marketplace takes the classical ‘ethical way’ of approaching the economy in opposition to the modern approach to political economy.

In rejecting more aspects of modernity, Taleb is keen to denounce universality. Apart from rejecting universal behaviour which doesn’t work beyond paper, he also rejects political universalism or the idea that political beliefs or inclinations can be stretched out to scale. He draws from Geoff and Vince Graham who say –

“I am, at the fed level, Libertarian;

at the state level, Republican;

at the local level, Democrat;

at the family and friends level, a socialist.”

Even though at first glance this may sound a bit counter intuitive, it is rooted in reality. ‘How can someone been a Libertarian, Republican and socialist at the same time?’ one may ask. The answer lies in having skin in the game. Even those most shrewd businessmen who do not want to give up even a single extra penny to their clients or suppliers or in taxes could still be open to splurging a lot more on family and friends. Why? Skin in the game. They tend to care for their parents, children and spouse, but may not want to have their skin in someone else’s game in a distant part of the country. The group of which one is a part in a given situation, at a given time would impact their behavior towards other group members and robust political system would not attempt to change these behavioral impulses but instead, aim at incorporating them within the system.


Though Taleb warns against having your skin in the game of others, he does say that this cannot always be escaped. This is where he brings in the question of the most intolerant minority. This group, though small is not willing to change its preferences and if it is not too inconvenient for other groups to accept the demands of this sizable minority, they will eventually be imposed on virtually the entire population. In short, the most intolerant minority wins. Halal is the preferred in many parts of Europe despite the percentage of Muslims being in single digits. In the same way, a small group can impact politics by being on one extreme end, by making sure that others vote for their preference whereas they never shift their own. These minorities ensure that you end up following their rules because you really don’t have many of your own, thus ensuring that they end up winning. While it is possible that an intolerant minority can bring about positive changes in a society, it is equally possible that it forces negative changes as well. Hence, Taleb argues against being tolerant of intolerant forces.

Having brought in mythological examples to explain certain new (but old and forgotten) concepts, Taleb doesn’t shy away from writing three chapter solely dedicated to religion and skin in the game apart from touching upon the most intolerant minorities (which is not about religion in itself). Taleb argues against equating all religions at the same level suggesting the differences in terms of how the worshipers view their respective religions and how they have evolved over time. A proponent religion, he denounces those who denounce religion by claiming that they indulge in some other kind of ritualistic practice which is no different from how the old regions were practiced. In fact, he says that skin in the game is essential for worshipers in the traditional sense. Just as he has argued earlier in the book that ideologies or beliefs without the willingness to fight for them are useless, in the same way Taleb claims that religious beliefs without sacrifice or fasting is nothing more than virtue signalling. This doesn’t hold up for real worshipers for the gods, he says, reject cheap signalling. In the chapter on the Pope, Taleb tacitly suggests that when it comes to the pope’s having his life on the line (or skin in the game) it becomes obvious that the priority isn’t to look up to the lord and pray for a longer life but to rush to the doctor or the hospital. Skin in the game changes the attitude or approach one takes to life and death and god, even if one is the pope, himself.

Taleb’s discourse on symmetry in daily life would be incomplete if it were to only mention religion but not virtues and ethics separately. With respect to virtues, he takes the old road — the path described by the ancients; that it is only virtuous to act in a certain way if it is not being done for show. It is when no one is watching, when someone can truly be virtuous. Standing for certain values in real life can come at a great cost to the individual (or a group) and thus requires a lot of courage and courage, Taleb is correct in pointing out, cannot be faked. Why? Because to practice courage in the real world (and while not faking it) you need to have skin in the game (or better still, soul in the game). Thus, even having strong opinions about something are completely irrelevant unless someone is exposed to the risks of holding that opinion. A decent example is that of Thatcherites before it was popular to be one. This sort of approach to virtues also stems from Taleb’s ardent support for a classical way of thinking.

Being an adherent of classic thought, it is apparent that Taleb would value tradition (which is something that can be drawn from his past works as well as his tweets). His citation of the Lindy effect, time and again, is not surprising. As per the Lindy effect, the longer something has been around, the higher its probability to stick around longer. The bible for example, which has been around for two millennia is bound to be around two more millennia later as compared to a recent murder mystery. Drawing from Antifragile, and considering time to be the greatest stress inducer, one can argue that those institutions, whether they are books, religions or ways of structuring the economy or a political system, that have stood the test of time will only have a stronger chance to be able to persevere in the future.


In a larger move away from modernity, Taleb has been able to create a system of thinking which looks at issues from different perspectives. While most modern philosophers look at an issue from one point of view, say economic, political, pragmatic or ethical, Taleb reaches back to the classic period in creating a system of thinking, (with all of Incerto and not just SITG) which brings together different ways in which one can view risk and related systems of symmetry. Thus, he encapsulates ethical, political, economic and practical arguments to connect to and build the system of thinking. Taleb’s work isn’t bereft of any way of thinking that may be remotely connected, let alone instrumental in dealing with the matters he takes up. So, unlike those political philosophers who disregard morality or those ethical philosophers who disregard economic pragmatism, Taleb is able to satisfy all paradigms by the system of thinking he has developed. In that Taleb’s approach is robust. Once can assume it will stand the test of time.

Skin in the game is also required for, (as we learn form Taleb) true learning. Taleb reverts to Roman times again to recall the principle of ‘pathemata mathemata’ — there can be no true learning without pain. In broader terms, one must suffer through the consequences of one’s actions to be learn about the real world, which can only be possible with skin in the game. Without being exposed to a real downside there can be no possible pain, which is necessary for the real kind of learning — the sort that Taleb wen through. (Taleb has been an options trader for over twenty one years before becoming an essayist.)

Towards the end, Taleb brings the Incerto story to full circle with the chapters on the logic of risk taking and being rational about rationality. The larger take away from this is that there must be distinction between rationality and logic. Preliminary logical apparatus cannot be used to do away with reasonable approach to problems in the real world. Just as the prisoner’s dilemma cannot be an ideal as a model to test the interactions between a parent and an offspring, one cannot deduce simply from logical statements or the use of logic to suggest what is wise. And why? Because we have more skin in the game in matters such as personal relationships. As individuals are more invested in terms of personal bonds or emotions, to suggest that cold logic will always prevail is almost irrational. To know when to use logic and when not to is a mark of rationality, which one can only know by how much skin one has in a particular game.

This review began by suggesting that the origins of skin in the game can be found at least six years before, in the epilogue of Taleb’s previous book. It would only be a fitting ending to this review if it could be argued that Taleb’s approach to skin in the game does not end with the book itself. He makes a genuine attempt to get those who have lacked skin in the game for long to be forced to face the consequences of their actions. In this post on his Medium blog, similar to many others over Twitter, Taleb calls out some journalists who have been reviewing his books. Though it could be argued by many that he is not open to other opinions or cannot take criticism or is arrogant, these arguments would only hold if he is wrong. Irrespective, Taleb has been able to ensure one thing — these journalists now have skin in the game. They could previously review a book or criticize a piece of work or a politician without being challenged on what they said. They stood to lose nothing even if their reviews or reports were factually or logically wrong. What Taleb has made sure of, is that even if this class of journalists is upset with him (and it does not seem that Taleb cares one bit about it) he has forced them to take cognizance of their mistakes. He makes sure that those ‘impartial judges’ in the mainstream media are knocked off their perches of intellectual superiority even if they don’t part with a chunk of their pay packages.

It is unlikely that charlatans in the media or academia would lose out financially because they have been wrong time and again, or that Goldman Sachs will file for bankruptcy anytime soon but Taleb’s position says more about him than about those he disagrees with. The line of thinking developed by Taleb suggests the opinions don’t matter if you don’t have skin in the game and that courage cannot be faked. The way Taleb takes on the mainstream media, bankers, bureaucrats and professors shows his skin in the game, more than anything else. He is willing to take the risk of alienating himself from these ecosystems just by calling out their BS. In that Taleb is courageous and it is in that he has skin in the game. This volume, just like all others by Taleb, is not to be taken as a theoretical framework with a practical approach but it is Taleb’s actions that are to be understood with the approach put forth in this book.


Skin in the Game by Nassim Nicholas Taleb was also reviewed and discussed on The Agenda’s Facebook Live podcast on 13th March 2018. The video can be found here.


Author’s biases

The author is a supporter of NN Taleb’s ideas.

The IYEA

Written by

The IYEA

The Indian Youth Economic Association is an independent, non-profit research trust that promotes research in economics, law, history, strategy & governance.

The Agenda (IYEA)

The Agenda is an online news platform that covers and critiques economic and political issues.

More From Medium

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade