You’re sitting in a plane, cruising at 30,000 feet, and the pilot is sitting right there in the cockpit with you. This is the ultimate example of skin in the game. If the plane goes down, the pilot goes down too. It’s a physical, undeniable alignment of interests. But what happens when the person making the decisions doesn't have to live with the consequences? That’s where things get messy. Honestly, it’s where most of our modern problems—from the 2008 financial crisis to a bad haircut—actually start.
Most people think "skin in the game" is just a catchy phrase for being invested. It’s more than that. It’s about symmetry.
Nassim Nicholas Taleb, who basically turned this concept into a global philosophy with his 2018 book, argues that without a personal stake in the outcome, the decision-maker becomes a predator. They get the upside; you get the downside. It’s a hidden asymmetry that runs through our lives like a jagged wire. We see it in politics, corporate boardrooms, and even in how our doctors prescribe medication.
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The Core Concept of Skin in the Game
Basically, if you give an opinion and someone follows it, you should be exposed to some of the risks. If you aren't, you're an "interventionist." Think of the warmongering politician who has never seen a battlefield and whose children are safely tucked away in Ivy League schools. They have no skin in the game. They can afford to be "wrong" because the cost of their error is paid in someone else’s blood.
This isn't just about being "fair."
It’s about how systems learn. Systems without skin in the game don't have a feedback loop. They don't evolve; they just accumulate errors until they collapse. Evolution works because of skin in the game: if a mutation doesn't work, the organism dies. It doesn't get a government bailout.
Where the Symmetry Breaks Down
We live in a world of "transferable risk." An architect in the ancient world—specifically under the Code of Hammurabi—was held to a pretty brutal standard. If a house collapsed and killed the owner, the builder was put to death. That is a 1:1 symmetry. Today, a structural engineer might sign off on a project, and if it fails ten years later, they might face a fine or a lawsuit covered by professional liability insurance. The skin has been thinned out.
Look at the finance sector. In 2008, bankers took massive bonuses based on "profits" that were actually just high-risk bets. When those bets turned sour, the public picked up the tab. The bankers kept the bonuses. This is "Heads I win, tails you lose." It is the definition of an asymmetrical relationship.
Recognizing Hidden Asymmetries in Your Life
You've probably felt this asymmetry without having a name for it.
Take the "expert" on the news giving stock tips. If you follow his advice and lose your life savings, does he lose his house? Nope. He still gets his paycheck from the network. He might even get more views for being "boldly wrong." This is why Taleb is so skeptical of the "Intellectual Yet Idiot" (IYI) class—people who are high on credentials but low on actual exposure to reality.
- The Bureaucrat: They create rules they don't have to follow.
- The Corporate Executive: They optimize for quarterly earnings to get a bonus, even if it hollows out the company’s long-term health.
- The Consultant: They get paid for a slide deck, not for the success of the implementation.
We’ve moved away from the "Silver Rule." You know the Golden Rule: Treat others how you want to be treated. The Silver Rule is arguably more important for survival: Do not treat others in a way you would not want to be treated. It’s about avoiding harm. If you aren't sharing the risk, you shouldn't be making the rules.
The Ethics of Risk-Sharing
There’s a moral component here that we often ignore because we’re too focused on efficiency. It feels "efficient" to have a centralized government body make decisions for everyone. But it's ethically bankrupt if those decision-makers are insulated from the results.
True honor comes from taking the risk for others.
Historically, captains stayed with the ship. It wasn't just a romantic trope; it was a way to ensure that the person with the most power had the most to lose. Today, we see CEOs getting "golden parachutes" while laying off 10,000 employees. The symmetry is gone. When you remove the penalty for being wrong, you encourage recklessness.
Why Small Businesses Often Outperform Giants
Small business owners are the heroes of the skin in the game world. If the bakery down the street sells bad bread, the owner loses money. If they keep doing it, they lose their livelihood. There is no "too big to fail" for a local baker. This pressure forces a level of quality and honesty that you rarely find in massive conglomerates.
In a small business, the owner is the "soul in the game."
They care about the reputation of their name because their name is on the sign. This is why you often get better service from a plumber who owns his own van than from a technician sent by a massive national home-repair franchise. The technician is protected by a layer of bureaucracy; the owner-operator is exposed to the world.
Knowledge vs. "Skin"
Knowledge is great, but it’s fragile. Experience, however, is robust.
You can read a thousand books on how to ride a bike, but until you fall off and scrape your knee, you don't "know" anything. That scraped knee is skin in the game. It’s the physical feedback that tells your brain, "Don't do that again."
Modern education often removes this feedback loop. We reward people for being good at taking tests, not for being good at navigating reality. This creates a class of people who are "smart" on paper but dangerous in practice because they have never been penalized for being wrong in the real world.
How to Protect Yourself from Asymmetrical Risk
You need to start looking at every interaction through the lens of risk distribution.
When someone gives you advice, ask yourself: "What happens to them if I'm wrong?" If the answer is "nothing," then take their advice with a massive grain of salt. It doesn't mean they're lying, but it means they aren't incentivized to be right.
1. Hire people who have a reputation to lose.
A freelancer who relies on word-of-mouth has more skin in the game than an employee at a giant agency who is just trying to clear their inbox.
2. Look for "Soul in the Game."
This is the step beyond skin. It’s when someone does something because they take pride in it, regardless of the risk. Artisans, craftsmen, and true innovators often have soul in the game. They’d do the work even if the financial incentives were lower because their identity is tied to the output.
3. Avoid "Empty Suits."
If someone looks the part too perfectly, be careful. Often, those who actually have skin in the game are too busy doing the work to look like they’re doing the work. The "Intellectual Yet Idiot" is usually very well-dressed and has a pristine resume, but has never actually built or broken anything.
The Practical Path Forward
We can't change the whole world overnight. We can't force every politician to send their kids to public schools or make every banker liable for their losses. But we can change how we operate in our own circles.
Start by demanding symmetry in your personal and professional relationships. If you’re a manager, share the rewards of a good quarter with your team, but also be the first to take a pay cut if things go south. That’s leadership. Anything else is just management.
Next Steps for Applying Skin in the Game:
- Audit your advisors: Go through your list of "experts"—your financial planner, your doctor, your career coach. Identify who suffers if their advice fails you. If they have zero exposure, consider diversifying your sources of information.
- Evaluate your own output: Are you passing risk onto others? Whether it's in your code, your writing, or your parenting, look for areas where you might be making "safe" decisions for yourself that create "unsafe" outcomes for others.
- Seek out "skin-heavy" environments: Spend your money with local businesses where the owner is behind the counter. Support creators who are independent. These people have the most to lose, which means they are the most likely to give you their best.
By reintroducing symmetry into our daily lives, we don't just protect ourselves—we make the whole system more robust. We stop the accumulation of "hidden" risks that lead to massive blowups. It’s about returning to a world where the people who build the houses actually have to live in them. It’s simpler, it’s more honest, and quite frankly, it’s the only way a society can survive in the long run.