Nassim Taleb's new book "Skin in the game" has come out, and I am here to do a book review.
One of the themes that keeps coming back in the works of Nassim Taleb is the use of heuristics.
A heuristic is a rule of thumb that has proven its value over and over again.
One important heuristic is to be skeptical about people wearing a tie while on camera.
So let's take care of that one first!
Aaaaah.
That feels a lot better!
I think I have a lot more oxygen flowing to my brain.
Second point in watching a book review: has the reviewer actually read the book?
Yes, I have, once so far, and I will be sure to reread it several times again.
By contrast to this guy, in the Dutch financial newspaper this morning, that hasn't even read
the book, and heavily criticizes the concept.
Adios amigo!
"Skin in the game" in a way is a sequel to the book "Antifragile", which in turn is a
sequel to the book "The Black Swan", which in turn is a sequel to "Fooled by randomness".
It's much easier to read "Skin in the game" when you have read a book by Taleb before.
If you have never read a book by Taleb before, I highly recommend this one, a very thin one
called "The Bed of Procrustes",
which is a book of aphorisms that summarize much of Taleb's thinking.
One of the aphorisms in "Bed of Procrustes" nicely describes Taleb's approach to writing
a book: "An idea starts to be interesting when you get scared
of taking it to its logical conclusion".
That's exactly what he does in "Skin in the game".
He takes the idea of skin in the game to its logical conclusion.
I think the goal for Taleb in writing the book is to make the world less prone to something
he calls "naive rationalism".
Naive rationalism is the belief that we have access to what makes the world work (which
we don't) and that what we don't understand doesn't exist (which is not true).
How to characterize Nassim Taleb's works?
Nassim Taleb operates at the intersection between philosophy, mathematics, and practical
problems related to probability.
And he knows his stuff in all three of them!
Let me quote you from page 199 in chapter 15: "Two people can be using the same word,
meaning different things, yet continue the conversation, which is fine for coffee, but
not when making decisions, particularly policy decisions affecting others.
But it is easy to trip them, as Socrates did, simply by asking them what they think they
mean by what they said.
Hence philosophy was born as rigor in discourse, and disentanglement of mixed-up notions.
So what's my interest and incentive in reading this book "Skin in the game"?
First of all, I am in the profession of helping people to better understand financial vocabulary,
so they can use it to their benefit in work situations as well as for investing.
Second of all, I was really really impressed by the book "Antifragile", and used many of
its concepts in my own life.
So what I am looking for in "Skin in the game" as well, is useful ideas on how to live well.
Let me give you some examples of how the book met my expectations.
First of all, the area of finance and business.
Page number 4.
"If you give an opinion, and someone follows it, you are morally obliged to be yourself
exposed to its consequences.
In case you are giving economic views, don't tell me what you think, just tell me what's
in your portfolio!".
Second example, in the area of business, finance as well as learning and development: the paragraph
called "I am dumb without skin in the game", page 30, in the introduction.
"People have two brains.
One when there is skin in the game, one when there is none.
Skin in the game can make boring things less boring.
When you have skin in the game, dull things like checking the safety of the aircraft because
you may be forced to be a passenger in it, ceases to be boring.
If you are an investor in a company, doing ultra-boring things like reading the footnotes
of a financial statement (where the real information is to be found), becomes, well, almost not boring."
Third one in the area of business and finance, and let this be a warning to everyone that
is a CFO or finance director.
Page 101, "How to legally own a person".
"Had economists had any interest in the ancients, they would have discovered the risk management strategy
relied upon by Roman families, who customarily had a slave for treasurer, the person responsible
for the finances of the household and the estate.
Why?
Because you can inflict a much higher punishment on a slave than on a free person, or a freedman.
And you do not need to rely on the mechanism of the law for that.
You can be bankrupted by an irresponsible or dishonest steward, who can divert your
estate's funds to Bithynia.
A slave has more downside."
It's all about symmetry!
Much of the book "Skin in the game" is about the agency problem, and how to deal with it
as a consumer, a voter, or in general in interactions with others.
Page number 51.
"Beware of the person who gives advice, telling you that a certain action on your part is
good for you, while it is also good for him, while the harm to you doesn't directly affect him."
Page number 160.
"Never pay for complexity of presentation, when all you need is results."
Page 162.
"People who are bred, selected, and compensated to find complicated solutions, do not have
an incentive to implement simplified ones."
One of the most funny and entertaining parts of the book is chapter 10, where Taleb talks
about his personal experience of a disappointing visit to a Michelin star restaurant, versus
having a pizza with fresh ingredients at an owner-operated restaurant, which would be
his preference.
"When people get rich, they shatter their skin-in-the-game driven experiential mechanism.
They lose control of their preferences, substituting constructed preferences for their own, complicating
their lives unnecessarily, triggering their own misery."
"It is easy to scam people by getting them into complications.
The poor are spared that type of scamming."
So did I enjoy "Skin in the game"?
Yes, I did!
Would I recommend it to you?
Yes, I do!
Did I enjoy each and every page of it?
No, some parts are not applicable to me, and if I don't have skin in the game, my interest
level in reading things is dropping.
I hope that by reading the book "Skin in the game" you become a lot more skeptical about
naive and generalized statements.
An example of such a statement is on page 231 of the book: "All risks are not equal.
We often hear that Ebola is causing fewer deaths than people drowning in their bathtubs,
or something of the sort, based on "evidence".
This is another class of problems that your grandmother can get, but the semi-educated cannot."
So if you are wondering about that statement, "Ebola is causing fewer deaths than people
drowning in their bathtubs", and you don't get it,
you better start reading "Skin in the game" today!
I enjoyed talking to you about Nassim Taleb's latest book "Skin in the game".
Let's transition from talk to action, after reading you one final quote.
Page 144.
"As I am writing these lines, I am checking the brochure of a fancy hotel, where I will
be spending the next two days.
The brochure was put together by some MBA, it is glossy, shows all the machines and the
jars of colour-rich juices to "improve" your health.
They even have a swimming pool, but no barbell!!!
The simple barbell, a metal bar with two weights on both ends, is the only standard piece of
equipment that gets you to recruit your entire body for exercises, and it is the simplest
and cheapest to get."
So let's go deadlifting!
Yeah, baby!!!