Skin In The Game

Skin In The Game is an assessment of asymmetries in human interactions, aimed at helping you understand where and how gaps in uncertainty, risk, knowledge, and fairness emerge, and how to close them.

One of the many asymmetries Taleb has found lies in the consumption behavior of societies. Often, whoever has the most skin in the game can win, even if the odds are against them. This particular concept is called minority rule. It implies that societies will adapt demand for certain goods based on an inflexible minority. The majority does not always decide.

For example, 70% of the lamb meat the UK imports from New Zealand is processed according to halal standards. However, only 4% of the population is Muslim, which is the main group that demands halal meat. How can such a small segment account for such a large share of imports? Well, minority rule is usually a result of the majority being flexible or indifferent. In this case, non-Muslims don’t mind eating halal meat over non-halal meat as there is no difference in taste.

The majority doesn’t care, so the minority gets what it wants. Similarly, firms selling genetically modified food have a hard time advertising. Most people are happy to eat non-genetically modified food because the products don’t have a big advantage. Hence, the small but hardcore group of anti-GMO activists decides what makes it onto the shelves.

If we’re honest, we’ve all used this excuse before, or at least thought of it: We claim someone got somewhere before us because they looked the part and we didn’t. While that may or may not have been true in your situation, Taleb claims the relationship between success and image isn’t the same in all industries. For professions where skin in the game is necessary to succeed, an awkward image can be a sign of someone who’s more prolific, but where it isn’t, subjective factors decide who will win.

For example, a lawyer who is extremely sought after, but dresses very sloppily, is bound to have proven herself in court over and over again. If she didn’t win cases, people wouldn’t hire her. The same is true for surgeons, authors whose book’s sell like crazy, and elite soldiers: without stellar results, they’d never have made it.

On the other end of the spectrum are CEOs, politicians, and bankers. Being good at what you do won’t hurt your chances here, but the main requirement for doing well is being perceived as capable. After all, votes and thus people’s opinions decide who gets the part.