Book Summary: Skin in the Game, by Nassim Taleb

Short summary reading time: 1 min

Long summary reading time: 38 min

Book reading time: 5h46

Score: 10/10

Book published in: 2017

Main Idea of Skin in the Game

It is the people that have the most to lose that usually win.

Never do anything if you don’t have anything to lose…but never take risks that could make you lose it all (don’t gamble the farm).

Taking risks is safer, but it depends on the type of risks.


Skin in the Game is a book written by the mathematician and philosopher Nassim Nicholas Taleb.

It’s the last installment of his series of books called “the Incerto”, which deals with risks in real life.

The Incerto is made out of:

  1. Fooled by Randomness
  2. The Black Swan
  3. The Bed of Procrustes
  4. Antifragile
  5. Skin in the Game

Skin in the Game is the best book I have read in 2021.


In this book, you will learn about the notion of “skin in the game”, and how this principle interacts in different life situations.

This book has completely changed the way I think about life, and am still digesting the lessons as I am writing these lines.

This is not an easy book. It took me 35 hours to summarize.

Unfortunately, the summary is quite long, but I promise you, it is worth it.

But don’t just read it.

Buy the book too.


Get it on Amazon.

Visual Glossary

“=” means “equal”
“<” means “is smaller/worse than”
“>” means “is bigger/better than”

Skin in the game: notion of risk.
This image means “risk”.

Short Summary of Skin in the Game

Those who have the most skin in the game often have a disproportionate impact on a system because they are exposed to consequences. Those who aren’t exposed to the consequences don’t suffer from mistakes, hence, they don’t learn.

Another consequence is that anyone who has no skin in the game, can make catastrophic decisions because they won’t suffer from the consequences. This is the case with centralized systems.

Centralized systems like bureaucracies take the skin of everyone out of the game, hence, they don’t move forward…until they collapse.

This shows how someone taking a risk should always suffer the consequences (good or bad), in order to make life fair. This is why laws exist. If you do X, you will suffer Y. Laws force people’s skin into the game.

When it’s not the case, when risk < reward, rewards will tend to be maximized without taking risk into account, hence increasing the risk until the system explodes, like the crisis of 2008 -> getting people’s skin into the game forces them to do better work.

People consider they have their skins into the game up to a certain point. Eg: you will feel more responsible in a small company than in a big one -> things don’t scale. Small ≠ big.

Having your skin in the game means that you are exposed to winning, or losing. Those who lose disappear. Those who won are still there. Time acts as a filter. This is called the Lindy effect.

Lindy states that the longer something has been existing, the longer it will exist. This is why when you are looking for the best practices, you are likely to find them in the oldest ones.

Table of Content

Book 1

Book 2: A First Look at Agency

Book 3: That Greatest Asymmetry

Book 4: Wolves Among Dogs

Book 5: Being Alive Means Taking Certain Risks

Book 6: Deeper Into Agency

Book 7: Religion, Belief, and Skin in the Game

Book 8: Risk and Rationality

Summary of Skin in the Game, by Nassim Nicholas Taleb

Skin in the Game is an expression that reflects the idea to have stakes in something. Having stakes means that you are taking a certain amount of risk. It means you have something to lose, it means having exposure to the downside.

You can have stakes in a group of people (your family), a project (your company), or a situation (going out with friends).

That risk is exposure to consequences, no matter if the exposure is positive, or negative.

This book examines the effects of skin in the game in life.

Because I do not like this skin in the game expression, I will call it SIG, exposure, or stakes from now on.

Book 1

Prologue Part 1: Antaeus Whacked

Knowledge cannot be separated from the real world -> theory cannot be separated from practice.

The real world is learned through having, SIG, exposure, stakes in something.

Most scientific discoveries were first discovered through practice (SIG) and trial and error (the best scientific method), and were theoretically explained after.

-> SIG is necessary. You can’t discover something new in the world by philosophizing in your bedroom.

The absence of SIG can be dangerous. It leads people to play with stuff they shouldn’t be playing with – simply because they won’t suffer from consequences if things go wrong…but someone else will.

Since they don’t suffer from consequences, they don’t make mistakes -> they don’t learn.

Transferring risks to someone else = transferring lessons.

This explains the wars in Iraq and Afghanistan. Leaders in Washington had no exposure to things happening in the Middle East because they weren’t there -> they didn’t learn.

Risk Transferors

In the past, leaders were risk-takers.

Not anymore. Most of them are risk transferors. Bureaucracy is one example. It is inherently SIG-free.

In fact, centralized systems are traditionally free from any exposure.

-> need for decentralization.

If decentralization doesn’t happen, the system eventually blows up and self-repairs, provided it survives.

Eg: the 2008 banking crisis happened because the system had no exposure to its own actions.

When it collapsed, the people from the system didn’t suffer one bit, because the risks were transferred to the taxpayers through government bailout.

This led people to hate free markets while in fact, they should have hated the government.


Free markets have exposure built-in.

Free markets have exposures built in. In a free market, taxpayers, companies, banks, and the army have SIG.

In a real free economy, banks wouldn’t have been saved -> they would have died -> they would not have taken these risks in the first place knowing the government wouldn’t save them.

When a free market loses its exposure feature, it’s often because of governments.

This is why the people that hate exposure and risks love big governments. It protects them.

Banks, companies, taxpayers, and the army are exposed and create risk, which is redistributed unevenly among these actors by the government.

As we have seen, people don’t learn much from their mistakes, especially in the absence of SIG.

But who does, then?

The system.

Systems learn by removing parts that no longer work, identified after someone made a mistake.

Eg: transportation didn’t get safer because people drive better, but because the system improved after bad drivers made mistakes and created accidents.

The learning of the system is grounded by filtering -> bad drivers are now dead.

SIG keeps human hubris (excessive pride and self-confidence) in check.

Prologue Part 2: A Brief Tour of Symmetry

Exposure symmetry is the idea that one should assume as big of a risk as the reward is (and that the risk cannot be assumed by someone else).

Risk should always equal reward.

Symmetry was the main idea behind the oldest written law, Hammurabi’s law.

Symmetry was imposed in the law so that nobody could transfer tail risk. Tail risk is an extreme event that doesn’t happen often (a Black Swan) but that creates ruin for the one that is a victim of it.

Tail risk represents risk at the tail (meaning unlikely to happen, but deadly if it does).

The most famous example of the symmetry principle within Hammurabi’s law was that if a builder builds a house and the house collapses and kills the owner, the builder should be put to death.

This law made sure that the builder would build a solid house -> it created SIG for the builder.

Symmetry evolved from Hammurabi to the golden rule of “treat others how you want to be treated” which evolved to Kant.

Kant said you could do anything as long as it wouldn’t be a problem if everyone did it in society.


  • Before frauding in the subway, ask yourself if society would work well if everyone did it as well -> the answer is no -> you cannot fraud in the subway.

This rule though, is a problem because it is a universal rule.

And universal rules are great on paper, but disastrous in practice.

Why? Because of one of the most important principles in this book.

Things don’t scale.

Small ≠ large.

In life, we don’t think in planetary, universal terms, but in terms that relate to our direct environment -> we need practical rules.

Symmetry, as we explained, is the idea that risk = reward.

Now, what happens when risk < reward?

2008 is a good example.

Risks are transferred to somebody else -> risks increase -> profits increase -> risks increase -> profits increase -> crash.

When risk < reward, risk will continuously increase to maximize reward, until the system blows up.

This leads to more regulation, which worsens the problem since regulations facilitate risk hiding.

As a result, the pattern becomes as such: risks are transferred to somebody else -> risks increase -> profits increase -> crash -> more regulation -> risks better hidden -> risks are transferred to somebody else -> risks increase -> etc.

Never shield anybody from risks.

The Agency Problem

Which leads to the agency problem. Agency is the capacity of one party to move risks around the equation (eg: the government).

Agency, in red on the picture.

Let’s take an example.

The Silver Rule says: do not do to others what you do not want them to do to you.

The extension of this principle could be: avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.

Taking advice from someone creates uncertainty, and uncertainty is dangerous due to two elements: the fools of randomness and crooks of randomness.

The fool takes risks he doesn’t understand, thinking his past successes were due to skill while it may have been luck.

The crook transfers the risks to other people.

Economists mainly deal with the crook.

Agency, as a result, is playing out with the risk you transmit to other parties.


  • Signing up for insurance when you know you are getting sick. You’re shifting risks (hospital costs, in this case), on the insurance.
  • Buying a car that actually doesn’t work (the seller has agency in transferring the risk to you).

Now, we need to realize that in the case of the fool, the fool does not know its own interest.

Fools are addicts, workaholics, people who support large governments, the press, the bureaucrats, all people who often act against their own interest.

So, when the system evolves and gets filtered, fools of randomness are purged and stop harming others.

Epistemological Dimension of Exposure

Exposure is about the real world and in the real world, you need to win.

You win by doing, not talking.

That’s the difference between a skilled member of society, and a charlatan. The skilled member wins by doing, not by convincing (the doing does the convincing).

Entire fields of studies (economics, social studies) are charlatanic because they have no exposure to what they create (they only talk and don’t do).

They are not connected to the consequences of their actions and mainly try to convince, without exposure.

As a result, we should never focus on what people say, but focus on what they do, since this is tangible.

Forecasting (in words), has no relation to speculation (in deeds).

Understand: there is a difference between predicting the future, and betting on the future (betting implies possible losses -> exposure).

Being wrong when it doesn’t cost anything, does not count, since you have no SIG.

And when you do have SIG in real life, it is difficult to measure. Many are non-linear (rain, which is positive, VS floods, which isn’t).

Simply consider that forecasting “based on science” is charlatanesque, and has always been so.

The Inverse Problem

Let’s talk about the inverse problem.

The inverse problem can only be solved by SIG.

Here’s why. It’s harder for humans to reverse-engineer than engineer.

Eg: we see the results of evolution, but we cannot replicate them.

Time and its irreversibility require filtering that is only possible if you have SIG.

-> you lose the game only if you play in it.

The weak players lose first and the strong players win last -> time acts like a filter.

Time is a filter.

If you don’t play (if you don’t have SIG), you can’t be filtered, because you can’t lose nor win.

-> Without SIG, we fail to get the Intelligence of Time.

What is strong survives -> this is the Lindy effect.

The Lindy effect states that the longer things have existed, the longer they will exist.

The Intelligence of Time combined with SIG (playing the game) helps define rationality, that is, helps distinguish what works from what doesn’t, and what works is what enables one to survive (as the rest has died, hence, didn’t work).

A practice may appear irrational, but if it has worked for a long time, is it really irrational? No.

-> What works, by definition, cannot be irrational.

What is irrational is what threatens the survival of the collective first, and the individual second (and that’s going against nature).

-> what is rational is what enables collectives and individuals to live for a long time.

As a result, overestimation of tail risk (extreme events that threaten survival) is not irrational, as it is required for survival (or at least, to avoid death).

-> there are risks we cannot afford to take, and risks we cannot afford not to take.

SIG is a necessity, but let’s not apply it to everything.

There is a difference between exposure in the context of a war, and exposure in the context of voicing an opinion in a random conversation.

What we want is to focus on the people who take risks without exposure thanks to the structure of the system – and weed them out.

While these people cause a lot of problems, there are ultimately, rare.


Overall, the statements made in this book go against 150 years of modern thinking – which we will call intellectualism.

Intellectualism is the belief that one can split an action from its consequences; theory from practice; and that a complex system can be fixed by a hierarchical approach.

Intellectualism has scientism for siblings. Scientism is the interpretation of science as a complication rather than science as a process.

Today, science has been hijacked by peer-reviewed journals and vendors using it to sell stuff – people that talk, and don’t do.

As we have seen, those who talk should instead, do, and only those who do should talk.


As technology progresses, separation between the user and the maker grows -> The maker has less and less SIG.


  • speakers get uncomfortable on stage because the light is shoved to their face like police does with a suspect -> light engineers have no exposure (they don’t speak on the stage).
  • train designers don’t design trains well because they don’t take the train.
  • architects don’t live in the buildings they make.

One of specialization’s side effects is the separation between labor and the fruits of the labor (or at least, the enjoyment of what has been created. Eg: the baker does not eat all of his bread).

-> exposure (SIG) brings simple solutions to problems (to feel good on stage, change the lights)

In a world with SIG, the speaker would adjust the spotlight. But in the modern world, specialization drives a wedge between people’s work and its results. The person that adjusts the spotlight does not suffer from the consequences of a wrongly adjusted spotlight.

People who see complicated solutions don’t have incentives to implement easy ones because they are rewarded for perception, not results.

A bureaucracy will always increase complexity to solve problems because they don’t have SIG.

Things designed by people without SIG tend to grow in complication before they collapse.

People have two brains. One for things they have exposure to, and one for things they do not.

Eg: Checking plane safety because that’s your job VS checking plane safety if you’re a passenger

The first one is boring, the second isn’t.

-> exposure makes things more fun and less boring!

And we also become more creative.

Eg: drug addicts are dumb, but will create very ingenious processes to get their drugs.

-> when we don’t have exposure, we’re dumb, uninterested.

Now, as we said, exposure arises with risks. And the thing about risk is that the strength you gain when facing the risk stays after the risk leaves.

Eg: you must lift up the barbell not to be crushed by it, and once it is back on the rack, you keep the strength you developed to lift it.

Regulations VS Legal Systems

There are two ways to protect citizens against corporations: regulations, and legal systems.

Regulations, because they are additive, restrict freedom and choke life. It’s a problem. Freedom (the freedom to make mistakes) is what enables one to progress and advance.

Legal systems are different since they add exposure to the equation. If you harm me, I sue you.

This led to a very sophisticated, balanced system created out of trial and error. The UK and the US use this system, while the EU has regulations and fines.

Honor and SIG

Finally, exposure is about honor as an existential commitment, and risk-taking as a separation between man and machine and a ranking of humans (the higher the risk, the higher you go in the hierarchy).

-> If you do not take risks for your opinion, you are nothing.

The author considers that the best life is an honorable one. Honor means never doing x under any type of context, while it also means always doing y in any context.

Modernity has destroyed some of that.

Today, the people with exposure are the artisans, those that do what they do because they have self-interest and other incentives to do it.

These are the people you should learn from. The people that did first, and talked second.

Book 2: A First Look at Agency

Chapter 1: Why Each One Should Eat His Own Turtles: Equality in Uncertainty

You who caught the turtles better eat them. This ancient quote means that you should assume whatever consequences of your actions.

Beware of people that give you advice “for your own good” (especially when unsolicited) as it is often good for them too…except that they won’t pay the price if something goes wrong.

-> selling and giving advice should be separated, since you have SIG when you sell, but not when you give advice.

This leads to an ethical question: should you disclose all of your stakes when selling to a customer?

According to the author, yes.

The ethical is always more robust than the legal. Laws come and go. Ethics stay.

Which brings us to asymmetry.

To what extent can people in a transaction have differences in the amount of information they each hold?

There are different answers.

1. In our world, less and less, as we are moving towards transparency due to the desire to stop cheaters.

2. For Greco-Romans philosophers, one philosopher applied total transparency, while another one advocated for legal transparency -> you had to be transparent as much as the law asked you to.

3. Shariah (Muslim law) forbids gharar, which can be translated by the inequality of uncertainty -> complete transparency is mandatory. If not, it is considered theft.

4. For Jews, you can’t change the price of products according to the net worth or motivation to buy of the consumer.

However, as we have seen, things seldom scale. Do we really have to apply ethics to everyone?


We think local terms, not universal terms.

According to Nietzsche: Sympathy for all would be tyranny for you, my good neighbor.


  • When Athenians treat all opinions equally, it doesn’t apply to slaves.
  • Romans stripped the citizenship to Romans that had married barbarians.
  • Jewish ethics distinguishes between thick and thin blood. We are all brothers, but some are a bit more brothers than others.

We exercise rules in a context, but there is a limitation for scaling -> at some point, the rules cease to apply.

This leads to the following question: can you be both ethical and universalist? In theory, yes. In practice, no.

To quote the author:

For whenever the “we” becomes too large a club, things become abstract, degrade and each one starts fighting for his own interest.

Humans have a hard time seizing the abstract. In a way, the abstract is too abstract for humans -> being tribal (knowing where you apply ethics and where you stop) is not a bad thing.

According to Yaneer Bar-Yam, “better fences make better neighbors”.

-> scaling matters.

You simply cannot put Christians, Shiites, and Sunnis together and ask them to unite “for the country”. It’s been tried, and it has failed.

The globalists of our time blame people for being sectarian. Instead, they should look at what could be done with a sectarian mindset (eg: split people, give them each some land, and let them trade with each other).

The impossibility to scale appears blatant when we compare villages to big cities.

In the former, people know and help their neighbors, and attend each other’s funerals.

In the latter, dealing with other people is based on different rules (mainly, you don’t deal with other people).

-> ethics is inherently local.


Modernity says that there are two units: the individual, and the collective -> it is the idea that you, being you, have exposure only to yourself.

In practice, this isn’t true.

You have exposure (SIG) to your family, friends, neighbors, etc.

But that exposure cannot be universal aka you cannot have SIG to everybody.

This is expressed by Elinor Ostrom, in an idea she called the tragedy of the commons and for which she won the Nobel Prize.

The tragedy of the commons works as follows.

Farmers or fishermen, as collectives, want to avoid overfish or overgraze not to deplete resources.

But the fisherman or farmer, at the individual scale, has everything to gain from overfishing and grazing – as long as others don’t do it.

Ostrom answers the following question: When do individuals stop protecting the commons to serve themselves?

-> when the group becomes too big.

This explains how tribes operate. When part of a tribe, you operate in a larger group than you, but narrower than everyone.

This is why socialism doesn’t work -> everyone loots for themselves.

The same is true for the opposite of socialism – a purely privatized system. People can’t work in such a system either.

Consider the following quote.

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.

-> the left VS right debate is ridiculous. It all depends on scale.

Switzerland and other Germanic countries work well because the risk is shared among everyone in the population -> everyone has SIG.


  • In ancient Greece, when merchandise had to be thrown overboard to lighten a ship in a storm, all merchants had to pay, not only those whose merchandise had been thrown at sea.
  • Same principle applied to caravans of merchants.

-> they had SIG.

So, what happens once you remove SIG?

It gets much worse. Let’s take the example of financial journalists.

Journalists, to avoid market manipulation, must give their opinion on stocks they don’t want to profit from.

This leads them to have impunity when they give bad advice, which comes at an ultimate higher cost than market manipulation.

Exposure often comes with a conflict of interest, which isn’t a problem, since the alternative (no exposure) is far, far worse

Exposure > conflict of interest. It is congruous.

On Medicine

Medicine is like engineering: apprenticeship-based and grounded in experience. There is exposure in medicine (both the doctors and you have SIG), but not fully in the agency effect between customer and provider.

Here’s why.

To “protect the patient”, the system tried to put more doctor’s skin in the game by establishing metrics to judge doctors by.

This shifted risks from doctors to patients because this is the wrong game – these metrics weren’t the right ones.

Eg: You get cancer and have a choice between curing cancer with radiation so you feel better during the next five years (but then worse) VS curing cancer with surgery where you may die the first five years but then live better.

Since these treatments are judged on a five-year scale, the doctor will choose the radiation and shift by doing so, the risk from him to you.

In a way, the objective of the doctor isn’t to cure you. It is to avoid a lawsuit if you die within the first five years.

This is why doctors give you medicine “preventively” (so that they’re not sued).

In the end, the medicine might actually end up killing you but the doctor won’t be condemned since he actually did something to save you.

-> both patients and doctors have exposure, and it is administrators that seem to be the cause for the trouble.

Like often.

Embed from Getty Images

Book 3: That Greatest Asymmetry

Chapter 2: The Most Intolerant Wins: The Dominance of the Stubborn Minority

What characterizes complex systems is that the system behaves in ways not predicted by its components.

Conponents of a system VS components interacting as a system.

Interaction > nature of the unit.

You can’t study an ant by itself, you must de facto study it in the colony, where the parts and the whole differ because of the interactions between the parts (called emergent property of the whole).

The rule we will discuss here is the minority rule, the biggest of all asymmetries.

Here’s the main idea.

Minorities (3% suffice) with enough SIG can submit the entire population to them, which is often not obvious.

All it takes for society to be influenced is a very small minority, intolerant, virtuous, and courageous.


  • In the US, all drinks are kosher to suit both the people that eat kosher, and the rest that doesn’t care.

A kosher will never eat non-kosher, but a non-kosher can (and will) eat kosher.

Let’s call the minority an intransigent group, and the majority, a flexible one.

Their relationship rests on asymmetry in choices.

On top of that:

  1. The geography matters, as there is a big difference whether the intransigent are in their own district, or mixed with everyone else. If they live in a ghetto, then the minority rule does not apply, because they don’t appear as a minority. But if they are mixed with the rest of the population, then it does.
  2. The cost matters. Eg: it doesn’t cost much to make all lemonades kosher, but it costs to make all buildings suitable for handicapped. In the first case, the minority rule applies. In the second, it doesn’t.

Here’s how the dictatorship of minorities appears.

In the UK, 3-4% of the population are practicing Muslims. Yet, 70% of the lamb is halal.

Let’s visualize this principle.

The method we used to analyze this is called renormalization group.

This figure is a fractal self-similarity.
This is the evolution of the fractal.

Four boxes, grouped together, contain each four boxes.

Assume the smaller box is a family of four people. One of them, say, the 16-year-old daughter, is the intransigent minority and only eats non-GMO food.

That person manages to impose non-GMO food on the whole family (the tiny square is now red).

Now, the family goes to a barbecue -> everyone eats non-GMO to adapt to them. Then the local grocery store, learning that some families have become non-GMO, also becomes non-GMO, etc.

For most things, the intolerant will eventually triumph over the tolerant, since they refuse to adapt, while the latter accepts to adapt.

This is what explains the triumph of Islam.

In Islam, if a non-Muslim marries a Muslim, the non-Muslim must convert. Once you’re converted, you cannot go back to not being Muslim.

If a child is born off a Muslim and non-Muslim, it is de facto Muslim.

Islam’s rules were made so that it spreads.

The Jewish rules are the opposite. One can be Jewish only if the mother is Jewish.

Hence, Judaism doesn’t spread.

How intolerant minorities transform systems.

Other examples where intolerant minorities impose their rules concern:

  • The banning of books
  • The formation of moral values in society
  • Civil rights
  • Christianity in the Roman Empire. Christians refused to share Roman gods, while Romans shared everyone’s gods.
  • Political entities: If a 3% minority in a country imposes its rule to the entire country, and if the entire country is around 3% of the EU, then it may impose its rules to the EU.

-> outcomes are more stable under the intransigent minority rule because the rule is often black and white and binary -> low variance in results.

Which leads to the question: should intolerant minorities be tolerated by tolerant people?


If we let the minority rule do its work, it will eventually destroy the world.

So we need to be more than just intolerant with intolerant minorities, and cast them off entirely.

When it comes to the place that the West gave to some intolerant minorities like the Salafists, they are currently committing suicide.

How systems should treat intolerant minorities.


We could say that markets aren’t the sum of market participants, but that the price reflects the activities of the most motivated buyer and seller.

The price can drop sometimes by 10% because of a single seller.

-> markets react in a way that is disproportional to the impetus.


  • If someone screams “fire” in a movie theater, everyone will run out.

Science operates on the same principle.

Science isn’t the sum of what scientists think, but it works like the market: once you disprove something, it is wrong.

Had science been built on a majority consensus, we wouldn’t have evolved.

Revolutions are similarly driven by a small number of stubborn people.

And the economy itself, rests on a small number of hyper-active people – entrepreneurs (Pareto’s law).

Conclusion: society doesn’t move forward by consensus. Only a few people are needed to disproportionately move the needle.

Asymmetric rule + soul in the game = great results.

And since asymmetry is present in pretty much everything…

Appendix to Book 3

The average behavior of the market participant will not allow us to understand the general behavior of the market.

-> markets are not the sums of average individuals.

By the same token, society is not the sum of average individuals, because individuals don’t act like individuals when in a group.

-> The psychology of the individual showing “biases” does not help us understand automatically the collective behavior of these individuals or the behavior of the group.

People don’t live alone, so restricting behavior to one person only cannot apply to reality.

Furthermore, groups are units of their own (things don’t scale, remember?).

A group of 10 ≠ a group of 200k.

The bigger the group, the more possible interactions, the more difficult it is to understand and predict based on information obtained about on one single person by himself.

-> this is called the curse of dimensionality.

Side note: this is the same thing for the brain. Understanding how all parts work independently won’t help you understand how they work together.

Zero Intelligence Markets

The underlying structure of reality matters much more than the participants in the structure (it’s about the system, not its participants).

-> under the right market structure, a collection of idiots produces a well-functioning market.

In fact, it produces a similar market than if the participants were intelligent.

-> the invisible hand theory appears not in sync with reality.

Furthermore, the irrationality itself of some of the market participants may be needed to make a market efficient.

As a result, it’s not individuals that choose where they go, but the market.

-> once you provide a good structure, you can leave people alone and they will behave as they should.

Book 4: Wolves Among Dogs

Chapter 3: How to Legally Own Another Person

In the early days of the Catholic church, a group of begging monks who depended solely on the population to survive, were banned from the church (until they disappeared completely).


Because they were free.

Complete freedom is the last thing you want if you have a religion or a company to run.

-> any organization wants the people part of it to be deprived of a part of their freedom.

How can you own people?

  1. Psychological manipulation and conditioning
  2. Force them to have SIG so that they have something to lose if they disobey

Let’s imagine you run an airline with one plane. You hired your pilot as a contractor. One day, your pilot tells you he can’t fly the plane because an Arab sheik paid him more money for a party in Vegas.

Unfortunately, you can’t find anyone else to pilot the plane. You know you will go bust. Your company is over.

Suddenly you realize that your pilot didn’t do something that employees do.

Contractors are free, but employees aren’t. Had your pilot been an employee, he wouldn’t have behaved in this way.

Employees have exposure -> employees are usually risk-averse -> someone who has been employed for a while is giving strong evidence of submission.

Submission is shown when the employee:

  • Works for someone else for 9h/day every day.
  • Does not choose his own schedule.
  • etc

-> an employee is an obedient housebroken dog.

Furthermore, the longer someone stays an employee, the more they are emotionally invested, the more they will be diligent.

The thing about employees is that they lower your tail risk because you own them. They also think you lower theirs…but do you?

Today, companies go bust faster than ever before -> people get laid off faster too.

In the past, company men would often do their entire careers in the same company. In the 1990s, as Silicon Valley was rising, many companies started laying off their people who could not find work anywhere else.

The company men are now gone. People are no longer owned by companies, but by something worse: the idea they need to be employable.

Meaning: it’s not that they cannot anger their company -> they cannot anger the entire industry, or they will never find work again.

An employee is someone you will never find in history books because they are designed to never leave their mark on any events.

Let’s have a look at the theory of Ronald Coase.

An employee is more valuable inside the company than out -> he is more valuable to the employer than to the marketplace.

A free market is a place where forces determine specialization and information travels via price points. Understand: people fight to get the best, which automatically creates velocity (people buying and selling) in the market.

But within a company, these forces are lifted because they cost more to run than what they bring. Understand: employees have no incentives to work since they get paid anyway.

Reminder: contractors have SIG doing good work as it influences their salary, but they can leave at any time if they find better opportunities.

Employees have SIG doing the bare minimum not to get fired, but you can force them to do stuff they don’t want to do as they could get fired otherwise.

-> hire the right number of employees and the right number of contractors.

The more skin someone has in a game, the more you can count on/control them.

Eg: The Romans had a slave to manage the family money.

Why? Because the slave could be killed if he made a mistake, while the free employee could not -> the slave had more exposure -> the slave would be extra careful not to make mistakes.

An employee is a weird form of slavery.

The best slaves are the ones you overpay, and they know it, and they are terrified of losing their salaries as a result.

This is why companies pay expats lots of money. Expats are far away -> expats are more free -> expats receive more money so they behave.

Freedom is not free

In the tale of the dog and the wolf, the dog brags about his house and unlimited food. The wolf is about to join him, until he notices the dog collar and asks what it is.

When he gets it, he runs away.

Freedom entails risks.

-> would you rather be a dog, or a wolf?

Whatever you do, don’t be a dog claiming to be a wolf.

Furthermore, the dog situation is false stability. If the owner leaves, the dog dies.

The wolf can always survive.

While we have established that employees are dogs, there is nonetheless, a category of employees that aren’t slaves. Those that don’t give a f*ck about their reputation.

Those are the traders and salespeople within companies, that would cause a higher loss to the company than they would suffer from themselves if they were to leave.

Loss Aversion

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.

The opposite of a slave is an autocrat.

Consider the difference between a Western head of state who has to give feedback to the press, political parties, and likely, other nations VS…Vladimir Putin.

One does what he wants and has a f*ck you money attitude, while the other, doesn’t.

-> it’s easier to trust the autocrat than the elected official, simply because the elected official isn’t free.

Let’s speak of another principle.

People whose survival depends on qualitative job assessments by someone of higher rank in an organization cannot be trusted for critical decisions.

The employee has no interests in the company, but has interests in keeping his job, and will make decisions in this direction.

The idea is that while we know when some courses of action are absurd, it is often easier to continue on this path than to stop.

The Vietnam or the Iraq wars fit this case.

In the latter, the people in charge did not want to take the risks to go to the source of terrorism (Saudi Arabia) and potentially miss on oil.

Same thing happened in 2009 with the banks, when no one went to prison, and when almost all of them were in fact, saved.

Chapter 4: The Skin of Others in Your Game

Imagine you work for a company and discover the company poisons thousands of people each year that die as a result.

If you blow the whistle, you may have to wait a long time before being believed, and your friends and family will suffer, and you will lose your job forever.

If you don’t, you lose sleep at night.

What do you do?

People with that volume of exposure (families, mortgages) are much easier to control, which is why corporations prefer people with families.

Most heroes (James Bond, etc) don’t have any families, so they can do “the honorable thing” at their expense only, and not sacrifice the 16-year-old vegan daughter.

-> to make ethical choices, you cannot have dilemmas between the particular (friends and family) and the general.

Intellectual and ethical freedom requires the absence of the skin of others in your game, which is why real free people are rare.

Most of the time, when you make powerful enemies that cannot pressure you because you are independent, they will pressure your closed-ones.

To be free of conflict, you need to have no friends.

Let’s analyze this one, taking as an example a suicide bomber.

How to Put Skin in a Suicider Bombers’ Game

The problem of suicide bombers is that they have no exposure, since the end of their means is their own.

In the case of Hammurabi, if a house collapsed and killed the firstborn of the owner, the firstborn of the architect would be put to death too.

As we can see, the symmetry is specific, but the architect, while being solely responsible, won’t be alone to suffer.

In any way, this principle can be used in the case of terrorists. If we can convince them that their own death isn’t the end of their struggles, they might think twice before blowing themselves up.


  • impose financial penalties on terrorists’ families.

Book 5: Being Alive Means Taking Certain Risks

Chapter 5: Life in the Simulation Machine

One day, the author saw magician David Blaine getting an ice pick through his hand.

Now, the magic trick, in fact, was real.

Blaine did get the ice pick through his hand. He sacrificed himself for his show.

-> real life is risk-taking.

Embed from Getty Images

If you don’t undertake the risk of real harm, it can’t possibly be an adventure.

-> the real requires peril.

Trump won because he was real. Because he took risks, because he had scars.

And scars signal exposure.

-> always do more than you talk.

Chapter 6: The Intellectual Yet Idiot

What has been happening in the world since 2014 (the vote against the establishment) is a rebellion against people who have no exposure and yet, pretend to tell us:

  • What to do
  • What to eat
  • How to speak
  • How to think
  • Who to vote for

The truth is that psychological studies don’t replicate, dietary advice changes every 30 years, economic policies don’t work, etc.

In this context, people better rest on their millennial old instinct, than on these “intellectuals”.

These intellectuals are called IYI – Intellectual Yet Idiot.

Today, they have taken over.

They speak of things they have no SIG in, which makes them ill-placed to judge pretty much anything -> so, they actually judge everything.


  • They defend the lower classes but would never go have a drink with them.
Hillary Monsanto-Malmaison, also known as Hillary Clinton. Source: Wikipedia

Chapter 7: Inequality and Skin in the Game

There are two types of inequality. The one people tolerate, and the one people don’t.

The first one is inequality between stars, singers, entrepreneurs, artists, and the common people. People become fans of them, usually.

The second is inequality people hate because the subject appears to be someone just like them, except that he has been playing the system, and getting himself into rent-seeking, acquiring privileges that are not warranted.

These people are: bankers, bureaucrats, senators, etc.

These people are hated because they benefit from asymmetric results without any exposure -> they have no skin in the game.

Put plainly, people hate the people that make a lot of money…on a salary (when you think about it, this is an oxymoron).

This is why they have respect for entrepreneurs, and look at them as role models. Entrepreneurs have SIG.

Bankers don’t.

Economists Don’t Understand Inequality

-> true equality is equality in probability.

-> skin in the game prevents systems from rotting.

Economists don’t understand the difference between things that move, and things that do not.

What does it mean?

-> Static inequality is a snapshot view of inequality; it does not reflect what will happen to you in the course of your life.

America is said to be unequal, but half of Americans will spend some time in the top 10% of all Americans at some point.

-> the present doesn’t determine the future.

While in Europe, where inequality is “smaller”, people stay within their social strife.

Eg: in Florence, rich families have been rich for five centuries.

Dynamic (ergodic) inequality takes into account the entire future and past life.

As a result, the US isn’t so bad.

To make society more equal, you need to get the rich to rotate and exit the 1%.

Mobility = anyone can become rich. We need more than that.

The no-absorbing-barrier = someone who is rich should never be certain he will stay rich.

A perfectly equal society would never guarantee the rich would stay rich.

-> dynamic equality is what restores ergodicity, making time and ensemble probabilities substitutable.

What is ergodicity?

If a society is made out of:

  • 1% of ultra-rich
  • 10% of rich
  • 50% of white-collar
  • 39% of blue-collar,

Under perfect ergodicity, everyone in society, over the length of a century, would spend

  • 1 year in the 1%
  • 10 years in the 10%
  • 50 years in the 50%
  • 39 years in the 39%

The exact opposite is absorption, which happens when a particle that moves hits an obstacle, and gets absorbed or gets stuck to it.

Ironically, people at the top are more certain to stay there in countries with big “socialist” governments, than the opposite.

Pikettism and the Revolt of the Mandarin Class

Thomas Piketty is a French economist who wrote a Marxist book on inequality called “Capital in the 21st Century“.

According to him, inequality rises as capital tends to command too much return in relation to labor.

However, this isn’t true, since software engineers, for example, can become millionaires off their job.

Furthermore, Piketty makes conclusions out of static measures of inequality, not dynamic.

Real measure of inequality consists in taking the ownership of the 1 or 10%, and measuring its variation. And it is higher in Europe, a place considered to have “less inequality”.

Furthermore, Piketty does not understand inequality.

Inequality happens when the rich have a disproportionate role in society. Any form of control of wealth usually tends to lock people in their class -> the rich stay rich, and the poor stay poor.

-> the solution is to let the system destroy the rich so new people can take their place. And that works best in the US.

Now, the thing about these economists and other academics is that they have no downside in life.

They get paid by the states, and the more wealth control they push to instigate, the more secure they become – since it locks them up in the social ladder.

Piketty is part of the people that engage with the oppressed while consolidating their privileges.

These people tend to view themselves from a hierarchical perspective – and assume others do it too.

They are much more likely to feel envy and resent the rich (“how can a person less intelligent than me be richer”) than the actual blue-collar class, who do not see everything as a hierarchy.

Blue collars don’t even hate the mega-rich. They have respect for them.

They envy the other blue collars with slightly better things than them.

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Chapter 8: An Expert Called Lindy

The Lindy effect is named after a New York restaurant where comedians found out that Broadway’s plays that lasted 100 days would last 100 days more, and that the ones that lasted 200 days would last 200 days more, etc.

The lindy effect

The Lindy effect calls on notions of fragility.

Fragility is defined as sensitivity to disorder. Fragile things want a quiet and regular life. As soon as disorder spreads, they break.

Now, time, in a way, is equivalent to disorder -> survival is the ability to handle disorder.

That which is fragile has an asymmetric response to volatility and other stressors, that is, will experience more harm than benefit from it.

Lindy answers a very important question: in the long term, who will survive? Who will guard the guard, and judge the judge?

Time operates through SIG -> if you don’t have SIG and yet survived, you may collapse at any moment.

Things handle time in two different ways:

  • Aging
  • Hazard of accidents

These cannot be subject to the Lindy effect, since that which is lindy is what ages in reverse: life expectancy increases with time.

Time and survival are the ultimate judges of the validity and quality of an idea.

-> you don’t want a book review in the NYT. You want a book review in 100 years (which will mean someone will still be reading your book, which means it must be good).

As a result, the idea that your work is best when positively assessed by your peers is wrong. Readers judge a book, not authors.

-> contemporary peers are valuable collaborators, not final judges.

Peer assessment taken to the extreme leads to the bureaucratization of the activity, where university administrators are the ones calling the shots on academic knowledge.

This leads to situations where as long as you have 20 academics vouching for your work (even if it’s bs), you can create a new department of study (eg: gender studies).

-> academia has a tendency to evolve into a ritualistic self-referential publishing game, when left unchecked.

Against One’s Interest

The most convincing statements are those in which one stands to lose -> they have maximum skin in the game. The less convincing statements are those where one stands to enhance oneself (virtue signaling).

Karl Popper sees science not as something that holds true, but as something that has not yet been proven false.

The longer an idea has been around without being falsified, the longer its future life expectancy, according to Lindy.

For things to survive, they need to be solid against risk. If an idea has skin in the game, it is not in truth, but in harm.

-> an idea that survives is an idea that doesn’t harm those that have it.

-> ideas from grandmother are likelier to work than ideas from children.

Let’s look at some examples of ideas that have both been known for a long time, and confirmed by today’s science.

  • Cognitive dissonance: when behavior and belief do not align.
  • Loss aversion: a loss is more painful than a gain is pleasant
  • Negative advice: the good is not as good as the absence of bad.
  • Skin in the game
  • Antifragility
  • Time discounting: a bird in the hand is better than ten on the tree
  • Madness of crowds: madness is rare in individualities, but in groups, parties, nations, it is the rule
  • Less is more
  • Overconfidence
  • The paradox of progress: the idea that progress would enable to do…what you can already do.

Book 6: Deeper Into Agency

Chapter 9: Surgeons Should Not Look Like Surgeons

You have two choices between two surgeons.

One looks like he’s from Harvard, the other looks like a butcher.

Which one do you take?

Answer: the butcher, because his lack of being perceived as a surgeon means he had to go over much bigger obstacles than the first one to succeed and as a result, is probably much better too.

-> image matters less when results come from dealing with reality.

-> In any type of activity divorced from real-life results (no SIG), the majority of people look the part, but are clueless about the subject.

Beautiful apples don’t taste better.

What we perceive to be important for the success of an enterprise isn’t necessarily what is important.

In the end, what is really important is revealed by Lindy.

The Bishop Doesn’t Dress for Halloween

The problem today with science is that someone that looks like a scientist is more likely to be taken as, than an actual scientist.

Academics get their stature out of the role they play, not out of the things they do – they have no SIG.

-> true intellect should not appear intellectual. Anything that appears intellectual likely isn’t.

All you need is results -> don’t untie the knot, just cut it.

-> people with no SIG often over-complexify. Often, because they have no incentives to find easy solutions since they get paid to find difficult ones.

Consider the problem of hunger.

80-90% of food price is due to transportation, and we waste 1/3 of produced food due to transportation issues.

The gain to solve logistics issues would far outweigh those of farming techniques.

This is why the tech people saw a great opportunity to solve hunger by creating new types of rice, since they could easily get rich from it.

No SIG -> complex solutions.

On Evaluation

Once someone starts to judge something based on metrics instead of real-life results, it becomes distorted.

Eg: traders had to fill up the number of days they were profitable, and the ones they weren’t -> doesn’t make sense because banks, for example, are profitable most of the time, but that one time they lose, they lose so big that they go bankrupt.

-> what matters isn’t the number of days you are profitable, it is the overall money you make.

Education as Luxury Good

Education doesn’t make society richer. Rather, it’s rich societies that can afford to send people to be educated.

Once again, you want to hire the person that doesn’t look the part at all, because they likely had to get real results to get where they are now. So, don’t hire Ivy league people.

How to tell the degree of BS of a bachelor: if you need to graduate from a good university for it to have value, it’s BS (Malcolm Gladwell and Tyler Cowen talked about this).

-> MBA programs VS degree in mathematics.

Chapter 10: Only the Rich Are Poisoned: The Preferences of Others

When people get rich, they lose their skin in the game and substitute their preferences for the preferences of people that want to sell them something. As a result, they become miserable.

Poison is drunk in golden cups.

If rich or intelligent, you need to hide your IQ or net worth. People can only be real friends if they don’t try to outsmart or outstage one another.

Chapter 11: Facta non Verba (Deeds Before Words)

The sect of the Assassins, in fact, didn’t assassinate much. They understood it was much better to control alive people than to kill them.

The Assassins once put a knife next to the bed of a ruler to tell him that his life was between their hands, and that as long as he behaved, nothing would happen to him.

Doing > talking.

Assassination as Democracy

The advantage of absolutism was that if the leader didn’t deliver, he was assassinated and replaced.

Democracy blocks that.

While democracy, ironically, was supposed to help with the turnover of leaders, it stifled it.

Consider socialist Francois Mitterrand, which stayed president of France for 14 years, many more than most French kings.

Politicians of today, have no SIG. One can argue that in Rome, which could see up to 5 emperors assassinated per YEAR, the leader had much more SIG.

Chapter 12: The Facts Are True, the News Is Fake

Journalism isn’t backed by Lindy, and its biggest flaw is that it doesn’t allow a two-way flow of communication, like social media do.

Journalism will eventually collapse, and when it does, it will merely be a self-correction.

It is evident since journalists don’t write for their audience, but to impress other journalists.

Chapter 13: The Merchandising of Virtue

-> It is immoral to oppose a system and yet, live and profit from it.

-> It is much more immoral to claim virtue without fully living with its direct consequences.

This chapter will be about people exploiting virtue for personal gain and image – or anything that doesn’t share the downside of negative action.


  • Rich students talking about class privilege won’t give up their privilege to the less fortunate.

-> if your opinion and private life conflict, your opinion is canceled, not your private life.

So, what is virtue? Virtue is doing something for the collective when it conflicts with your own interests.

-> courage is the only virtue you cannot fake.

So, what should you do to be virtuous?

  1. Never engage in virtue signaling
  2. Never engage in rent-seeking
  3. Start a business. Put yourself on the line.

-> if you get rich, give all your money.

Courage is the highest virtue.

And it is best emboldened by entrepreneurs.

Chapter 14: Peace, Neither Ink nor Blood

Humans are mainly collaborative – except when institutions get in the way.

The best way to have peace somewhere, is to let the people figure something out without intervening. They are the ones with skin in the game, after all.

History is largely peace with short episodes of war.

The problem is that historians are more interested in telling how countries fought each other, than how they collaborated.

Past wars and conflicts are always inflated in terms of the number of victims.

Furthermore, history is based on past accounts. It’s not because something isn’t narrated that it didn’t happen, so this error should be taken into account.

Finally, the existence of war doesn’t mean that everyone is fighting 24/7.

War, is actually extremely localized, and the world doesn’t stop because people fight.

-> the world wasn’t more violent in the past. Far from it.

Book 7: Religion, Belief, and Skin in the Game

Chapter 15: They Don’t Know What They Are Talking About When They Talk About Religion

Religion often means different things for different people.

For jews and Muslims, religion was law.

For Romans, religion was social events.

For Christians, religion is purely holy.

This heterogeneity of meanings for religions is a problem.

It means that politicians, in general, do not understand Salafism, which isn’t a religion, but a political system rejecting the values and institutions of the West.

Chapter 16: No Worship Without Skin in the Game

In the past, you could not be part of a religion and benefit from its advantages without sacrificing to gods.

The idea was once again, symmetry.

No religion without SIG.

Chapter 17: Is the Pope Atheist?

After all, when the Pope is sick, he behaves exactly like an atheist: he goes to the doctor.

Except that the Pope will surely see the doctor first. Why? Because he made sacrifices to be Pope, so conventional wisdom demands that he benefits from a few advantages.

-> we distinguish an atheist from a religious in deeds, not in beliefs.

There are people who are atheist in actions, but religious in words (most Christians). And others that are religious in both (Islamists and suicide bombers).

Nobody is both atheist in words and actions. We all have some sort of beliefs (not necessarily in a religion per se, but we believe in the Universe, in some superstitions, in certain political systems, etc).

Book 8: Risk and Rationality

Chapter 18: How to Be Rational About Rationality

Religion is not about gods.

It’s about the purpose they serve.

In science, belief is literal, it is whether right, or wrong. But in real life, belief is an instrument, not the end of something.

In this case, it is an instrument that helps humans live better lives and survive.

-> survival comes first. Truth, understanding, and science come later.

-> you do not need science to survive, but you must survive to do science.

Rationality doesn’t look like rationality. Herb Simon explains we cannot look at the world like a computer, objectively, so we take some shortcuts -> our knowledge is fundamentally incomplete.

Kan Binmore further showed that the term “rational” is not well defined, because there is nothing irrational in a belief since it often serves a specific purpose.

All that matters is the rationality of the action, which can be judged only in the context of evolution.

-> the action reveals the “revealed preferences”, which separates what people say from what they do.

What they do is all that matters.

So, what is religion about?

Religion exists to enforce tail risk management (Black Swans) thanks to rules to respect, which are easy to teach.

Religion provides behavioral indications aimed at surviving, that science wouldn’t be able to provide.

The real world is extremely messy, and science itself is bound to “science”, which means it is only valid in certain domains (like math).

As we have seen, psychology replicates very few studies -> it isn’t science.

-> what we call beliefs is “background furniture” for the human mind, which may be more metaphorical than real.

Who cares as long as it leads to rational actions?

Now, there is a difference between decorative beliefs, and beliefs that map action.

One leads to nothing, the other leads to risk-taking.

-> how much you believe in something can be manifested only through what you are willing to risk.

So, why are there decorative beliefs?

The notion of rationality as we understand it today was born in a post-enlightenment period, after Max Weber. It was at a time we thought we understood almost everything about the world – while we did in fact, understand very little.

The only definition of rationality that we can use is the following: what is rational is that which allows for survival -> anything that prevents one’s survival is irrational.

-> what is decorative may not in fact be decorative.

We need to realize that it’s not beliefs that survive but the people that have them.

Eg: kosher laws. Kosher laws had probably another cause than “God told me”. You likely didn’t eat pork because pigs competed with humans in terms of food – while beef didn’t.

These laws also likely brought cohesion to the tribe, which led to trust, which led to commerce, etc.

In any way, Jews have survived, where many have perished -> the beliefs are vested by Lindy.

-> rationality depends only on what allows you to survive. Not everything that happens happens for a reason, but everything that survives, survives for a reason.

-> rationality is risk-management.

Chapter 19: The Logic of Risk Taking

As we said, science requires survival, but survival doesn’t require science.

Imagine 100 people going to a casino. Does the result of John influence whether Peter wins? No.

On average, about 1/100 will go bankrupt at the casino, which does not influence other gamblers. Let’s call it ensemble probability.

Now, when your cousin Jack goes to the casino 100 times, will his bankruptcy on day 29 affect his gambling on day 30? Yes.

Let’s call it time probability.

As a result, when you invest in the stock market, you won’t get returns as high as the market because you are subject to risks that the market isn’t – like selling all of your shares to go on vacations.

-> in order to succeed, you must first survive.

-> in any situation, the presence of ruin (death, Black Swan events) disqualifies cost-benefit analyses.

The problem in social sciences statistics is that they don’t account for the difference between ensemble and time.

-> 1 person x 100 times ≠ 100 people x 1 time!!!

And no one got that – besides for some mathematicians and physicists.

So, why didn’t anyone understand? Lack of skin in the game.

One fears Black Swan events only when one is heavily invested.


Ergodic situations are situations that are “likely going to continue“.

A situation is deemed non-ergodic when observed past probabilities do not apply to future processes.

There is an absorbing barrier somewhere that will prevent people from surviving it.

Let’s call these “ruins”.

Ruin make cost-benefit analyses impossible, as if you play enough time, you will always lose it all.

Psychologists tell us we “overestimate” risks, but we don’t, especially when these risks tend to…kill us.

A plane being safe at 98% would kill pretty much every pilot over time.

As for cigarettes, smoking just one won’t kill you, which is why it’s dumb to refuse to smoke one cigarette with such a little tail risk. It is smoking over the long term that will kill you.

-> 1 x 100 ≠ 100 people x 1

The thing is, every risk you take in life adds up to reduce your life expectancy.

If you climb mountains and run on motorcycles and smoke and etc, the repetition of these activities creates paranoia about events that are technically low in probability, but highly possible because of the repetition.

If medicine is progressively improving your life expectancy, you need to be even more paranoid!

As if there is a tiny risk, and you repeat the behavior, you will eventually suffer from the risk.

-> the flaw in social science papers is to believe that individuals only take the risk which is discussed in the experience, and no other risks in his life.

-> the loss aversion effect was not well measured, and in fact, does not really exists, as risks must be taken from a compounding point of view. There is no such thing as loss aversion.

Who is “you”?

Most people consider that their own death is the worst that could happen to them.

This isn’t true.

The worst-case scenario is your own death + the death of everybody else.

-> individual death is not as bad as collective death.

As a result, one should take care of ensuring the survival of everything else, not only of oneself.

One should strive for both courage and precaution to save the collective.

Courage is when you sacrifice your own well-being for the sake of the survival of a layer higher than yours.

Layers are organized as follow:

  • Ecosystem
  • Humanity
  • Extended tribe
  • Tribe
  • Family and friends
  • You

-> actions derive from beliefs, and if “good” action needs a superstition to be done, let it be.

Buffett made his billions by establishing a certain filter that lowered tailed risk for him, then went all-in on these opportunities.

“The difference between successful people and really successful people is that really successful people say no to almost everything.”

-> say no to tail risks.

To summarize:

  • One may be risk-loving yet completely averse to ruin.
  • In a strategy that entails ruin, benefits never offset risks of ruin.
  • Ruin and other changes in condition are different animals.
  • Every single risk you take adds up to ruin your life expectancy.
  • Rationality is avoidance of systemic ruin.

Book conclusion

No muscles without strength.

No science without skepticism.

No friendship without trust.

And nothing without skin in the game.

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  • Post category:Summaries
  • Post last modified:May 25, 2022