Skin in the Game
Hidden Asymmetries in Daily Life
By Nassim Nichola Taleb.
Random House. 279 pp. $30.
Reviewed by Glenn C. Altschuler
In The Black Swan (2007), Nassim Taleb, a former hedge-fund manager and derivatives trader, argued that "faux experts" had built systems that made modern economies vulnerable to rare, unforecastable, high-impact events. When the Great Recession ravaged global markets in 2008-09, Taleb became an immensely influential risk analyst.
More recently, Taleb has drawn on a mix of autobiographical reflections, parables, philosophy, and history in a slew of articles and books about uncertainty, probability, human error, and decision-making, becoming one of our most prominent public thinkers. In Skin in the Game, he maintains that success comes only to those who take risks of real harm: Contact with reality filters out incompetence, giving "doers" a firmer and more reliable perspective than "vague textbook pseudo-rationalists."
Smart and iconoclastic, Taleb challenges many entrenched beliefs and behaviors. He compares the impact of laws and regulations on modern economies. He shows how small minorities impose their preferences on others. Taleb reminds us that political values vary according to scale, with some individuals siding with Republicans at the federal level, Democrats at the local level, and embracing socialism with family members. He complicates concerns about inequality by noting that 56 percent of Americans will spend at least one year in the top 10 percent of income distribution and 73 percent in the top 20 percent. And Taleb teaches us not to equate thin-tailed events that affect individuals (people drowning in their bathtubs) with multiplicative risks, like Ebola epidemics, that can have a systemic impact.
Unfortunately, Taleb is also a snide, smug, one-size-fits-all ideologue. As he celebrates "doers," Taleb trashes professors, politicians, government, policy analysts, physicians, journalists, and book reviewers as "delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions." For their findings to be valid, he adds, researchers should first spend 10 years "in a real world day job."
Watching Vladimir Putin, "who acts as a free citizen confronting slaves" who need the approval of committees, Taleb concludes that "domesticated (and sterilized) animals don't stand a chance against a wild predator." He believes that punishing the families of terrorists will serve as a deterrent. Taleb advises young people who want to reduce poverty to "start a business." He insists that if "IYIs" (Intellectuals Yet Idiots) had not intervened and had left the people in the Middle East with skin in the game alone, they would now be far better off. And in an evaluation of "beliefs in evolutionary terms," with Jewish kashrut as his prime example, Taleb concludes, fatuously, that "everything that survives survives for a reason."
Skin in the Game, then, may leave you, as it did me, agreeing with Taleb about at least one thing. "Far-fetched comparisons," he writes, "are more likely to discredit the commentator than the commentated."