Skin in the Game is about four topics in one: a) uncertainty and the reliability of knowledge (both practical and scientific, assuming there is a difference), or in less polite words bull***t detection, b) symmetry in human affairs, that is, fairness, justice, responsibility, and reciprocity, c) information sharing in transactions, and d) rationality in complex systems and in the real world.
The knowledge we get by tinkering, via trial and error, experience, and the workings of time, in other words, contact with the earth, is vastly superior to that obtained through reasoning, something self-serving institutions have been very busy hiding from us.
A collection of people classified as interventionists (to name names of people operating at the time of writing: Bill Kristol, Thomas Friedman, and others)not only lack practical sense, and never learn from history, but they even fail at pure reasoning, which they drown in elaborate semiabstract buzzword-laden discourse. Their three flaws:
1) they think in statics not dynamics,
2) they think in low, not high, dimensions,
3) they think in terms of actions, never interactions.
We will see in more depth throughout the book this defect of mental reasoning by educated (or, rather, semi-educated) fools. The first flaw is that they are incapable of thinking in second steps and unaware of the need for them—and about every peasant in Mongolia, every waiter in Madrid, and every car-service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single-dimensional representations. They can’t get the idea that, empirically, complex systems do not have obvious one-dimensional cause-and-effect mechanisms, and that under opacity, you do not mess with such a system. The third flaw is that they can’t forecast the evolution of those one helps by attacking, or the magnification one gets from feedback.
Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.
Kant: theory is too theoretical for humans. The more confined our ethics, the less abstract, the better it works.
A saying by the brothers Geoff and Vince Graham summarizes the ludicrousness of scale-free political universalism.
I am, at the Fed level, libertarian;
at the state level, Republican;
at the local level, Democrat;
and at the family and friends level, a socialist.
If that saying doesn’t convince you of the fatuousness of left vs. right labels, nothing will.
You need to remember that, when you visit a medical office, you will be facing someone who, in spite of his authoritative demeanor, is in a fragile situation. He is not you, not a member of your family, so he has no direct emotional loss should your health experience a degradation. His objective is, naturally, to avoid a lawsuit, something that can prove disastrous to his career. both the doctor and the patient have skin in the game, though not perfectly, but administrators don’t—and they seem to be the cause of the troubling malfunctioning of the system. Administrators everywhere on the planet, in all businesses and pursuits, and at all times in history, have been the plague.
Muslims and Jews have near-identical slaughter rules (all kosher is halal for most Sunni Muslims or was so in past centuries, but the reverse is not true). Now consider this manifestation of the dictatorship of the minority. In the United Kingdom, where the (practicing) Muslim population is only 3 to 4 percent, a very high proportion of the meat we find is halal. Close to 70 percent of lamb imports from New Zealand are halal. Close to 10 percent of Subway stores carry halal-only meat (meaning no pork), in spite of the high costs of losing the business of ham eaters (like myself). The same holds in South Africa, which has about the same proportion of Muslims. There, a disproportionately high share of chicken is halal certified.
THE ONE-WAY STREET OF RELIGIONS
The two asymmetric rules are as follows. First, under Islamic law, if a non-Muslim man marries a Muslim woman, he needs to convert to Islam—and if either parent of a child happens to be Muslim, the child will be Muslim.*3 Second, becoming Muslim is irreversible, as apostasy is the heaviest crime under the religion, sanctioned by the death penalty. The famous Egyptian actor Omar Sharif, born Mikhael Demetri Shalhoub, came from a Lebanese Christian family. He converted to Islam to marry a famous Egyptian actress and had to change his name to an Arabic one. He later divorced but did not revert to the faith of his ancestors.
Under these two asymmetric rules, one can do simple simulations and see how a small Islamic group occupying Christian (Coptic) Egypt can lead, over the centuries, to the Copts becoming a tiny minority. All one needs is a small rate of interfaith marriages. Likewise, one can see how Judaism doesn’t spread and tends to stay in the minority, as the religion has weaker rules: the mother is required to be Jewish.
So all Islam did was out-stubborn Christianity, which itself won thanks to its own stubbornness. For before Islam, the original spread of Christianity in the Roman empire was largely due to…the blinding intolerance of Christians; their unconditional, aggressive, and recalcitrant proselytizing.
If, on the other hand, we merge all states of the USA in one, then the minority rule will prevail all across. This is the reason the U.S.A. works so well. How do books get banned? Certainly not because they offend the average person—most persons are passive and don’t really care, or don’t care enough to request the banning. From past episodes, it looks like all it takes is a few (motivated) activists for the banning of some books or the blacklisting of some people. The great philosopher and logician Bertrand Russell lost his job at the City University of New York owing to a letter by an angry—and stubborn—mother who did not wish to have her daughter in the same room as the fellow with a dissolute lifestyle and unruly ideas.
Once a moral rule is established, it will suffice to have a small, intransigent minority of geographically distributed followers to dictate a norm in society. The sad news is that one person looking at mankind as an aggregate may mistakenly believe that humans are spontaneously becoming more moral, better, and more gentle, with the better breath, when this applies to only a small proportion of mankind.
The overall stock markets currently represent more than thirty trillion dollars, but a single order in 2008, only fifty billion, that is, less than two-tenths of a percent of the total, triggered a drop of close to 10 percent, causing losses of around three trillion dollars. As retold in Antifragile, it was an order activated by the Parisian bank Société Générale, which discovered a hidden acquisition by a rogue trader and wanted to reverse the purchase. Why did the market react so disproportionately? Because the order was one-way—stubborn: they had to sell and there was no way to convince the management otherwise. My personal adage is: The market is like a large movie theater with a small door
Contractors are exceedingly free; as risk-takers, they fear mostly the law. But employees have a reputation to protect. And they can be fired.
People of some means have a country house—which is inefficient compared to hotels or rentals—because they want to make sure it is available if they decide they want to use it on a whim. There is a trader’s expression: Never buy when you can rent the three Fs: what you Float, what you Fly, and what you…(that something else). Yet many people own boats and planes and end up stuck with that something else.
By being employees they signal a certain type of domestication.
Someone who has been employed for a while is giving you strong evidence of submission. An employee is—by design—more valuable inside a firm than outside of it; that is, more valuable to the employer than the marketplace.
What matters isn’t what a person has or doesn’t have; it is what he or she is afraid of losing. The more you have to lose, the more fragile you are.
Clearly, except for Putin, all the others need to be elected, can come under fire by their party, and have to calibrate every single statement with how it could be misinterpreted the least by the press. Watching Putin made me realize that domesticated (and sterilized) animals don’t stand a chance against a wild predator. Not a single one.
People whose survival depends on qualitative job assessments by someone of higher rank in an organization cannot be trusted for critical decisions.
Although employees are reliable by design, it remains the case that they cannot be trusted in making decisions, hard decisions, anything that entails serious tradeoffs. The employee has a very simple objective function: fulfill the tasks that his or her supervisor deems necessary, or satisfy some gameable metric.
We have been witnessing the same problem in the U.S. attitude toward Saudi Arabia. It is clear since the attack on the World Trade Center (in which most of the attackers were Saudi citizens) that someone in that non-partying kingdom had a hand—somehow—in the matter. But no bureaucrat, fearful of oil disruptions, made the right decision—instead, the absurd invasion of Iraq was endorsed because it appeared to be simpler. Since 2001 the policy for fighting Islamic terrorists has been, to put it politely, missing the elephant in the room, sort of like treating symptoms and completely missing the disease. The same thing happened in 2009 with the banks. I said in Prologue 1 that the Obama administration was complicit with the Bob Rubin trade. We have plenty of evidence that they were afraid of rocking the boat and contradicting the cronies.
The Intellectual Yet Idiot (IYI) is a product of modernity, hence has been proliferating since at least the mid-twentieth century, to reach a local supremum today, to the point that we have experienced a takeover by people without skin in the game When plebeians do something that makes sense to themselves, but not to him, the IYI uses the term uneducated. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one vote, with some equivalence for foreign elite schools and PhDs, as these are needed in the club.
They are what Nietzsche called Bildungsphilisters—educated philistines. Beware the slightly erudite who thinks he is an erudite, as well as the barber who decides to perform brain surgery.
Michèle Lamont, the author of The Dignity of Working Men, cited by Williams, did a systematic interview of blue-collar Americans and found a resentment of high-paid professionals but, unexpectedly, not of the rich.
For instance, only 10 percent of the wealthiest five hundred American people or dynasties were so thirty years ago; more than 60 percent on the French list are heirs and a third of the richest Europeans were the richest centuries ago. In Florence, it was just revealed that things are even worse: the same handful of families have kept the wealth for five centuries.
You do not create dynamic equality just by raising the level of those at the bottom, but rather by making the rich rotate—or by forcing people to incur the possibility of creating an opening.
A good rule for society is to oblige those who start in public office to pledge never subsequently to earn from the private sector more than a set amount; the rest should go to the taxpayer. This will ensure sincerity in, literally, service—where employees are supposedly underpaid because of their emotional reward from serving society.
So there is an implicit bribe in civil service: you act as a servant to industry, say, Monsanto, and they take care of you later on. They do not do it out of a sense of honor: simply, it is necessary to keep the system going and encourage the next guy to play by these rules. The IYI-cum-cronyist former Treasury Secretary Tim Geithner—with whom I share the Calabrese barber of the Prologue—was overtly rewarded by the industry he helped bailout. He helped bankers get bailouts, let them pay themselves from the largest bonus pool in history after the crisis, in 2010 (that is, using taxpayer money), and then got a multimillion-dollar job at a financial institution as his reward for good behavior.
The pre-Socratic thinker Periander of Corinth wrote, more than twenty-five hundred years ago: Use laws that are old but food that is fresh. Likewise, Alfonso X of Spain, nicknamed El Sabio, the wise, had as a maxim: Burn old logs. Drink old wine. Read old books. Keep old friends.
The insightful and luckily nonacademic historian Tom Holland once commented: The thing I most admire about the Romans was the utter contempt they were capable of showing the cult of youth. He also wrote: The Romans judged their political system by asking not whether it made sense but whether it worked.
If you hear advice from a grandmother or elders, odds are that it works 90 percent of the time. On the other hand, in part because of scientism and academic prostitution, in part, because the world is hard. Consider that a recent effort to replicate the hundred psychology papers in prestigious journals of 2008 found that, out of a hundred, only thirty-nine replicated. Of these thirty-nine, I believe that fewer than ten are actually robust and transfer outside the narrowness of the experiment. Similar defects have been found in medicine and neuroscience;
One should give more weight to research that, while being rigorous, contradicts other peers, particularly if it entails costs and reputational harm for its author. Someone with a high public presence who is controversial and takes risks for his opinion is less likely to be a bull***t vendor
The madness of crowds: Nietzsche: Madness is rare in individuals, but in groups, parties, nations, it is the rule.
Mediterranean societies are traditional ones in which the highest-ranking person is the one with the most skin in the game. And if anything characterizes today’s America, it is economic risk-taking, thanks to a happy transfer of martial values to business and commerce in Anglo-Saxon society. But history shows that there were—and still are—societies in which the intellectual was at the top. The Hindus held the Brahman to be first in the hierarchy, the Celts had the druids, the Egyptians had their scribes, and the Chinese had for a relatively brief time the scholar.
You can notice a remarkable similarity to the way these intellectuals held power and separated themselves from the rest: through complex, extremely elaborate rituals, mysteries that stay within the caste, and an overriding focus on the cosmetic. Consider the bishop in my parts, the Greek-Orthodox church: it’s a show of dignity. A bishop on rollerblades would no longer be a bishop. There is nothing wrong with the decorative if it remains what it is, decorative, as remains true today. However, science and business must not be decorative.
Alexander the great's THE GORDIAN KNOT incident is an example of Never pay for the complexity of presentation when all you need is results.
People who are bred, selected and compensated to find complicated solutions do not have an incentive to implement simplified ones. This is particularly acute in the meta-problem when the solution is about solving this very problem.
If anything, being rich you need to hide your money if you want to have what I call friends. This may be known; what is less obvious is that you may also need to hide your erudition and learning. People can only be social friends if they don’t try to upstage or outsmart one another. Indeed, the classical art of conversation is to avoid any imbalance, as in Baldassare Castiglione’s Book of the Courtier: people need to be equal, at least for the purpose of the conversation, otherwise, it fails. It has to be hierarchy-free and equal in contribution.
If your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life. If your private actions do not generalize, then you cannot have general ideas.
For most Jews today, religion has become ethnocultural, without the law—and for many, a nation. Same for Armenians, Syriacs, Chaldeans, Copts, and Maronites. For Orthodox and Catholic Christians, religion is largely aesthetics, pomp, and rituals. For Protestants, religion is belief without aesthetics, pomp, or law. Further East, for Buddhists, Shintoists, and Hindus, religion is practical and spiritual philosophy, with a code of ethics (and for some, a cosmogony). So when Hindus talk about the Hindu religion, it doesn’t mean the same thing to a Pakistani, and would certainly mean something different to a Persian.
There are people who are atheists in actions, religious in words (most Orthodox and Catholic Christians), and others who are religious in actions, religious in words (Salafi Islamists and suicide bombers) but I know of nobody who is atheist in both actions and words, completely devoid of rituals, respect for the dead, and superstitions
Per Lindy: When the beard (or hair) is black, heed the reasoning, but ignore the conclusion. When the beard is gray, consider both reasoning and conclusion. When the beard is white, skip the reasoning, but mind the conclusion.
No muscles without strength,
friendship without trust,
opinion without consequence,
change without aesthetics,
age without values,
life without effort,
water without thirst,
food without nourishment,
love without sacrifice,
power without fairness,
facts without rigor,
statistics without logic,
mathematics without proof,
teaching without experience,
politeness without warmth,
values without embodiment,
degrees without erudition,
militarism without fortitude,
progress without civilization,
friendship without investment,
virtue without risk,
probability without ergodicity,
wealth without exposure,
complication without depth,
fluency without content,
decision without asymmetry,
science without skepticism,
religion without tolerance
and, most of all:
nothing without skin in the game.
