The skin and the game

The concept of skin in the game, as recently popularized by Nassim Nicholas Taleb in his collection of essays, is a more nuanced concept, I believe, than the slogan might imply. The notion of standing to lose proportionately with one’s wrongness seems straightforward enough on the surface, though proportions aren’t always accurately measurable, just as loss and wrongness also sometimes appear arbitrary and subjective.

But I believe the professor’s idea isn’t as much about nuance within the concept as to draw contrast with instances where there is none. Such as, for instance, the recommendations of a writer, say, who has no interest in the outcome of being taken seriously. But even then, I think, there’s reputational loss, or its risk, at least in principle, which can lead to other kinds of losses, more quantifiable in nature.

And then there is a conceptual opposite, the talking of one’s book. This is the case where skin is clearly in the game and the investor is at risk, but, just because of this the views and insights shared are to be taken with some caution. There may be comfort knowing that the captain goes down with the ship, as it were, but as a passenger along for the sail, that comfort may be fleeting, especially if you don’t really know the captain’s circumstances.

For instance, the loss may matter much more to the follower than to the leader, if the latter has a more diversified portfolio of gains and losses. And in some cases, the portfolio is so large and diverse, you have to wonder if there is really any skin in the game at all, whereas, on the other hand, the follower may be all-in.

With all of this in mind, another philosopher’s precepts seem to me more correct and practical, although the honor system needs to factor in: “What can be said, can be said clearly. Whereof one cannot speak, one must remain silent.”


And there’s one other notion, which relates and overlaps, although perhaps not fully:

Authority without responsibility is no skin in the game at all, just as responsibility without authority is probably all skin and very little game, so to speak.