Skin in the Game

Prologue, Part 1: Antaeus Whacked

Overview

This opening section introduces the central concept of "skin in the game" through the ancient myth of Antaeus, using it as a powerful lens to examine modern failures in foreign policy, finance, and governance. It argues that separating decision-makers from the consequences of their actions leads to catastrophic ethical and practical failures, from slave markets in Libya to global financial crises. The narrative establishes that true knowledge, effective systems, and even justice itself depend on this fundamental principle of accountability and direct exposure.

The Myth and Its Modern Lesson

The story of Antaeus, the giant who drew invincible strength from physical contact with his mother Earth, serves as the foundational metaphor. Hercules defeated him by lifting him away from the ground, severing that vital connection. The lesson is that nothing—especially knowledge—can thrive when separated from direct contact with reality. This contact is "skin in the game": the inescapable exposure to the real-world consequences of one's actions, where the "abrasions of your skin guide your learning." True discovery comes from tinkering, trial and error, and paying a price, not from detached reasoning or abstract theory promoted by insulated institutions.

The Fatal Flaws of Interventionism

The principle is immediately applied to modern "interventionistas" who advocate for foreign military interventions and regime change. Having no skin in the game, they do not suffer the results of their policies, which have led to disasters like the rise of slave markets in post-Gaddafi Libya. Their reasoning is profoundly flawed because they think in static, one-dimensional terms and fail to consider secondary effects and complex interactions. They aim to "remove a dictator" but are blind to the chaotic, multi-dimensional realities that follow, akin to a doctor killing a patient while proudly pointing to improved cholesterol numbers. Their insulated lives—in comfortable suburban homes—insulate them from the bloody consequences borne by innocent civilians.

The Historical Rule of Risk-Takers

The text contrasts this modern irresponsibility with historical norms. Throughout history, leaders and warlords personally shared in the risks they imposed. Roman and Byzantine emperors like Julian the Apostate and Constantine XI died on battlefields, and the British Royal Family still observes noblesse oblige by placing its members in harm's way. Leadership legitimacy was traditionally tied to personal risk-taking for the protection of others. The shift away from this model is not progress but a dangerous corruption of the social contract.

The Bob Rubin Trade and Systemic Decay

The absence of skin in the game is institutionalized in modern bureaucracy and finance. Bureaucracy is defined as a tool for separating people from the consequences of their actions. In finance, this allowed the "Bob Rubin trade": figures like former Treasury Secretary Robert Rubin could collect massive bonuses for taking hidden, explosive risks, and then invoke "uncertainty" and secure taxpayer bailouts when those risks blew up in 2008. They transferred their losses to the public while keeping their profits, corrupting the system and discrediting the idea of free markets. The solution, the author suggests, is decentralization, which forces accountability by making it "easier to macrobullt than microbullt."

How Systems Really Learn

The most critical point extends the concept to how systems and knowledge evolve. Individuals, especially those with no skin in the game, rarely learn from their mistakes. Instead, systems learn through selection and elimination—via negativa. Dangerous pilots end up at the bottom of the ocean; bad drivers are removed from the gene pool. Evolution itself requires skin in the game; it is a filter, not a classroom. Therefore, to check human hubris and ensure survival, decision-making must be tied to consequences. The segment concludes by positing that skin in the game is fundamentally about symmetry and is the bedrock of pre-biblical justice, setting the stage for a deeper exploration of these ideas.

Key Takeaways

• Skin in the Game is Indispensable: True knowledge, ethical conduct, and effective learning are impossible without direct exposure to the consequences (both positive and negative) of one's actions.
• Intervention Without Accountability is Catastrophic: Foreign policy crafted by insulated "interventionistas" leads to repeated, predictable disasters because the architects are shielded from the results.
• History Demanded Risk from Leaders: Societal leadership was historically legitimized by personal risk-taking; the modern shift to "risk transferors" is a dangerous anomaly.
• Bureaucracy and Cronyism Remove Skin: Centralized systems and government bailouts actively strip away accountability, creating corrosive asymmetries as seen in the 2008 financial crisis.
• Systems Learn Via Negativa: Progress and safety don't come primarily from individuals learning lessons, but from systems that remove those who make fatal errors. Survival is the ultimate teacher.

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Prologue, Part 2: A Brief Tour of Symmetry

Overview

The principle that parties in a transaction should share in the risks and outcomes is an ancient foundation of organized society, traceable to codes like Hammurabi’s, which aimed to prevent the transfer of hidden catastrophic risks. This idea of symmetry evolved through moral rules, with the robust Silver Rule—do not treat others as you would not want to be treated—proving more practical than abstract universalisms. In modern terms, this translates to a streetwise ethos: don’t give or take unfair advantage, a principle brutally violated when bankers profit but transfer losses to the public.

This framework, called skin in the game, is presented as a crucial filter for truth and stability. It helps distinguish genuine expertise from hollow advice, as fools and crooks are eventually revealed and purged by reality. The Intelligence of Time shows that practices surviving centuries have a demonstrated, often non-academic, rationality geared toward collective survival. The concept argues against top-down intellectualism and scientism, which separate theory from real-world consequences.

When people have personal stakes, they are driven toward simple, effective solutions rather than needless complexity. This risk also activates deeper cognitive engagement and lasting learning, unlike detached theoretical study. For societal protection, the chapter favors a system of legal liability over rigid regulation, as lawsuits inherently enforce accountability better than bureaucracies can.

Beyond financial risk, the highest expression is honor—having soul in the game. This involves unconditional commitments and taboos, as seen in historical honor codes and true artisanship, where pride in craft outweighs mere profit. However, not all modern entrepreneurship embodies this; many seek a quick "cash out," severing the link between creator and long-term outcome. A powerful signal of commitment is eponymy—putting your name on your work—as it stakes your reputation.

The principle applies broadly: to citizenship, which requires sharing a nation’s full fate, not just its benefits, and to learning, where wisdom is best gleaned from practitioners, not just career theorists. It even underpins system design, suggesting decentralization reconnects people to meaningful work and its consequences. A stark historical anecdote—the flayed skin of a corrupt judge—illustrates the ultimate, brutal form of accountability for rulers.

Ultimately, the chapter posits that a form of moral symmetry, or reciprocal fairness, is a universal ethical core. It is the indispensable mechanism that aligns incentives with outcomes, ensures integrity, and allows robust systems and character to endure.

The Ancient Foundation of Symmetry

The principle of symmetry—where parties in a transaction share in the risks and outcomes—has been a foundational rule for organized societies long before formal codification. It's a pre-human necessity; without it, systems blow up from transferred risk. The very concept of law, divine or otherwise, aims to fix these imbalances.

This journey begins with the Code of Hammurabi, inscribed on a basalt stele in Babylon nearly 4,000 years ago. Its 282 laws revolve around a central theme: establishing symmetry between transacting parties to prevent the transfer of hidden "tail risks"—those extreme, low-probability disasters. The most famous injunction deals with a builder: if a house he builds collapses and kills the owner, the builder shall be put to death. The logic is that creators are best positioned to hide vulnerabilities to rare events, hoping to be long gone when failure occurs. This principle, the lex talionis or "an eye for an eye," is meant to be flexible and proportional, not literal, forming the bedrock of tort systems that hold professionals accountable.

Climbing the Ladder of Moral Rules

From Hammurabi, the concept of symmetry evolves through a progression of moral rules. Leviticus offers a softer version, while the Golden Rule instructs us to treat others as we wish to be treated. However, the more robust Silver Rule advises: Do not treat others the way you would not like them to treat you.

This negative formulation is more powerful for several reasons. It demands clarity about what is bad rather than presuming to know what is "good" for others. It operates on a fractal scale, applying to individuals, families, tribes, and nations alike. The First Amendment embodies this Silver Rule symmetry: you can practice your religion freely so long as you allow me to practice mine. Attempts to limit speech, even to protect feelings, undermine this democratic symmetry and often lead to an overactive intellectual monoculture.

Rejecting Abstract Universalism

The progression then reaches Immanuel Kant's categorical imperative, which demands we act only by principles that could be universal law. The text argues we should "fuhgetaboud" this abstract universalism. We are local, practical animals, and universal rules are disastrous in practice because they ignore scale—the small is not the large. Such abstraction often attracts self-righteous interventionists and conflates micro and macro realities, a central danger this book warns against.

Practical Symmetry in Modern Life

Moving to the transactional present, symmetry takes on a practical, streetwise form embodied by the character Fat Tony: don’t give crap, don’t take crap. His approach is to start nice but exercise power over anyone who tries to exercise it over you.

This principle links directly to financial systems. In options or insurance, symmetry means one party gets the upside for a price while the other assumes the downside liability. Disrupting this symmetry—where bankers keep profits but transfer losses to society—creates explosive risk-hiding, a core cause of the 2008 crisis. Regulations often exacerbate this by making risk-hiding easier, deepening the agency problem where interests are misaligned.

Fools, Crooks, and Revealed Truths

The Silver Rule extends to advice: avoid taking it from someone who gives it for a living unless they face a penalty for being wrong. This touches on the twin problems in uncertainty: the fool (who mistakes luck for skill) and the crook (who transfers risk). Skin in the game primarily concerns the crook, but reality also purges fools through evolutionary elimination.

The epistemological dimension is critical: skin in the game is about the real world, not appearances. As Fat Tony says, you want to win, not just win an argument. Entire fields become charlatanic when disconnected from real-world consequences. We understand people's revealed preferences through their actions, not their explanations or forecasts. What matters isn't how often you're "right," but how much you make when you are right.

The Intelligence of Time and Survival

Skin in the game solves the "inverse problem" and helps societies navigate the Black Swan problem. The Intelligence of Time refers to the evolutionary process where time filters out the fragile and preserves the robust. A practice that has survived a long time has demonstrated a rationality that an overeducated observer might miss. True rationality is defined by what allows the collective to survive. Some overestimation of tail risks is rational if it ensures survival, while some academic shunning of risk is irrational.

Contained Consequences and the Modernist Challenge

The application of skin in the game should be proportional. The focus is on professional asymmetric individuals—like the interventionists from Prologue Part 1—who cause large-scale harm without accountability, not on every harmless opinion.

Finally, this entire framework stands against a century and a half of intellectualism and its sibling scientism. Intellectualism foolishly separates action from results and theory from practice, believing complex systems can be fixed top-down. Scientism is the naive use of complication and mathematics as a veneer of science, often to sell products or silence skeptics. True science is a skeptical enterprise, and this book continues that ancient tradition of practical inquiry.

Simplicity Through Skin in the Game

When individuals have personal stakes in the outcome, they are incentivized to find simple, effective solutions. Conversely, systems designed by those without skin in the game—bureaucrats, consultants, or theorists—inevitably grow in unnecessary complication. This happens because they are rewarded for perceived sophistication and intervention, not for practical results. The chapter illustrates this with examples like academic papers, where complexity often increases the chance of acceptance, and bureaucracies that favor intricate solutions. The core idea is that simplicity is a natural byproduct of having responsibility for the consequences.

Cognitive and Learning Benefits

Having skin in the game fundamentally changes how we think and learn. It transforms boring tasks into engaging ones and can unlock remarkable cognitive focus and ingenuity when real risk is involved. The author shares a personal confession: his deep understanding of probability and risk mathematics only became gripping and intuitive when he had money on the line in financial trading. This "second brain" that activates under pressure leads to lasting knowledge, unlike the temporary cleverness of a drug addict seeking a fix. The argument extends to education, suggesting that students would learn more effectively if they had a personal investment in the material.

Regulations vs. Legal Liability

The text presents a critical choice for protecting citizens from powerful entities: top-down regulation or bottom-up legal liability. Regulations are criticized for being additive, rigid, and prone to being gamed by those with good lawyers, leading to "regulatory capture." They also restrict freedom. The preferred alternative is a common law system where harm leads to lawsuits. This approach puts skin in the game for corporations, as the threat of costly legal action deters bad behavior. It’s presented as adaptive and focused on the spirit of justice rather than the letter of bureaucratic law, though some systemic risks may still require targeted regulation.

Honor and Soul in the Game

Beyond mere risk-sharing, the highest form of skin in the game is about honor—an unconditional commitment to certain principles. This involves taking risks for one's beliefs and having taboos so strong that no financial reward could breach them. Historical examples like duels and the Spartan mother’s admonition to her son ("With it or on it") illustrate a worldview where living honorably was more important than living safely. Modernity is critiqued for eroding these values, leading people to justify unethical actions with excuses like "I have children to put through college." True honor means fitting your profession to your ethics, not the other way around.

Artisanship and Authenticity

An artisan embodies "soul in the game." Their primary motive is existential pride in their craft, not purely financial optimization. They combine art and business, refuse to cut corners or sell defective work, and maintain sacred taboos for the integrity of their product. Using writing as an example, the chapter argues that true artisans do not industrialize their craft or compromise it with advertisements, as this destroys authenticity. A practical piece of advice extends this philosophy: avoiding a general-purpose assistant forces you to only engage in activities you truly enjoy and believe in, keeping your soul directly invested in your work.

A Caveat on Modern Entrepreneurship

Not all celebrated entrepreneurs truly have skin in the game. Many in the modern venture capital ecosystem aim to "cash out" by selling their company or taking it public, rather than building something for long-term survival and value. Their skill is in selling a business plan, not in making a lasting product. This is likened to having children just to sell them. Once the founder sells, the connection between labor and its long-term fruits is severed, and the company often begins to "rot" as accountability dissipates.

Eponymy and Commitment

Putting your name on your company or product is a powerful signal. It shows you have something to lose—your reputation—and conveys confidence and commitment. The author defends a friend called an "egomaniac" for putting his name on a journal, arguing that such pride is good for quality. "Arrogant" is presented as an acceptable substitute if "egomaniac" isn't available. This eponymy is a direct, personal form of skin in the game that customers can trust.

Citizenship and Optionality

The chapter criticizes "fair-weather" citizenship, where individuals acquire a passport for convenience (like travel) while avoiding the downsides, such as worldwide taxation. This is seen as offensive and lacking commitment. True citizenship requires an emotional attachment and a willingness to share in the nation's fate, good and bad. The author shares his own choice to become a U.S. citizen despite the tax burden, framing it as taking on skin in the game and fully embracing an identity.

Learning from Practitioners, Not Just Theorists

To understand classical virtues like courage, one should read the original texts by practitioners (like Seneca or Caesar) or commentators who had skin in the game (like Montaigne). Relying solely on career academics is misguided because they often teach how to be a professor, not how to embody the virtue itself. The heroes of history were people of action and risk, and their spirit is best understood through direct engagement or through the writings of those who have lived similarly. The text suggests that academia often attracts risk-averse "voyeurs" who may intellectually dissect courage but cannot produce it.

The discussion turns to the human cost of efficiency, where centralized systems might produce cheaper goods but at the expense of divorcing people from meaningful work. Decentralization, by contrast, is framed not just as a stabilizer but as a vital force that reconnects individuals to their labor, granting them tangible stakes—or "skin in the game"—in the outcomes of their efforts.

Skin in the Ruling

This principle is starkly illustrated through the historical anecdote of the corrupt Persian judge Sisamnes. Upon being caught violating justice, King Cambyses ordered him flayed alive. His son was then made to dispense justice from a chair upholstered with his father's skin, serving as a gruesome, literal reminder that those in power must bear the ultimate consequences for their failures. This story underscores that accountability, or having one's own skin on the line, is a timeless mechanism for ensuring integrity in rule.

The Ubiquity of Moral Symmetry

The text anchors the idea of symmetry in foundational ethical teachings. It references variations of the Golden Rule from Isocrates, Hillel the Elder, and the Mahabharata, all advocating for reciprocal fairness. A New Testament parable (the Unforgiving Servant) is reinterpreted not primarily as a lesson on forgiveness, but as a demonstration of dynamic symmetry—the expectation that one who receives mercy should extend it in turn, maintaining a balanced moral equilibrium.

Key Takeaways

• Meaningful labor and system stability are enhanced when individuals have direct, personal stakes—"skin in the game"—in their work and decisions.
• Historical and judicial accountability can be brutally enforced, as shown in the tale of Sisamnes, emphasizing that rulers must face consequences proportional to their actions.
• The ethical principle of symmetry, or reciprocity, forms a common core across major philosophical and religious traditions, advocating for fairness as a dynamic balance.
• Supplementary notes (marked with asterisks) briefly touch on the informal nature of "rationality" in economics, the nuanced legacy of Ralph Nader, the conflict-limiting potential of duels, the passions of skilled traders, Seneca's focus on asymmetry, and pragmatic Swiss laws protecting local buyers from absentee speculation—all reinforcing the chapter's central theme of aligned incentives and consequences.

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Skin in the Game

Prologue, Part 3: The Ribs of the Incerto

Overview

This section serves as a bridge, explaining how this book fits within the larger Incerto series and revealing the author's personal journey and philosophical stance while writing it. It outlines the connective tissue between the books, critiques the modern intellectual landscape, and provides a roadmap for what is to come, all filtered through the core principle of having skin in the game.

The Evolutionary Ribs of the Incerto

The author describes the Incerto not as a planned series, but as an organic evolution where each book emerged from the unanswered questions or hinted concepts of its predecessor. The Black Swan grew from discussions in Fooled by Randomness; the concept of convexity, central to Antifragile, was outlined in The Black Swan; and Skin in the Game was a segment within Antifragile concerning ethical asymmetry. This progression shows the project’s unifying backbone: the systemic danger of asymmetries in risk-bearing, exemplified by the “Bob Rubin trade,” where agents profit from upside risks while transferring the downside to others.

The Author's Path and Preoccupations

The writing process was guided by the author’s natural interests, avoiding topics he found “insipid,” like tort law, in favor of those that captured his soul. This principle led to a deep, almost obsessive dive into learning Akkadian to properly understand the Code of Hammurabi, ensuring his writing had authentic “skin in the game.” Furthermore, an unplanned, compulsive five-year journey into mathematics following Antifragile radically heightened his “bull***t detector,” making him acutely intolerant of marketed nonsense from verbalistic intellectuals, a sensitivity that profoundly shaped this book’s creation.

A Critique of Book Reviewers and the Publishing Middleman

The author draws a sharp distinction between genuine readers and professional book reviewers, whom he sees as flawed middlemen with a skin-in-the-game problem. He argues that reviewers, often “nondoers” removed from transactional life, chronically fail to understand books by risk-takers and are structurally incapable of judging books designed for deep, repetitive reading (which offers convex learning benefits). He criticizes their unchecked power and lack of accountability, celebrating the modern disintermediation that now allows him to connect directly with readers.

A Roadmap for the Journey Ahead

The section concludes with a detailed organizational guide to the entire book. It previews the journey from examining agency and symmetry (Book 2) and the “minority rule” (Book 3), to modern dependence and slavery (Book 4), the essence of risk in life (Book 5), deeper asymmetries and BS detection (Book 6), the role of belief (Book 7), and finally, a synthesis of risk and rationality (Book 8). This map promises an exploration that moves from commercial conflicts to broad ethical and existential principles, all viewed through the lens of personal accountability.

Key Takeaways

• The Incerto series is an organically connected body of work, with each volume growing from the ribs of the last, unified by the critical theme of risk transfer asymmetry.
• Authentic writing requires the author to have “skin in the game,” a principle the author applies literally, pursuing deep, personal immersion in his subjects.
• Immersion in mathematics can sharpen one’s detection of intellectual nonsense, particularly from the verbally fluent but practically disconnected “intellectual yet idiot.”
• Professional book reviewers are often conflicted middlemen without skin in the game, and their influence is being rightly eroded by direct author-reader connections.
• The book’s structure is designed for progressive depth, moving from practical asymmetries in business and society to fundamental questions of ethics, belief, and rationality.

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

Overview

The chapter begins with an ancient fable about fishermen forced to eat the unappetizing turtles they caught, establishing a powerful archetype for flawed transactions: you must bear the same burdens you impose on others. This principle of transactional asymmetry is everywhere, from unsolicited advice to high-finance sales pitches, where one party profits by offloading risk or undesirable goods onto a counterparty who doesn’t share the downside. The ethical dilemma of how much a seller must disclose is ancient, illustrated by Cicero’s story of a corn merchant in a famine. While some philosophers argued for minimal legal compliance, the chapter advocates for the more robust standard of maximal transparency, where the seller reveals all they know.

Yet, in practice, strict ethical rules often only apply within a defined group—a tribe, a club, or a profession. The rules relax for outsiders, a scaling problem inherent to human social organization. This isn't necessarily a flaw; as Elinor Ostrom’s work showed, successful collective action requires a bounded, skin-in-the-game community where everyone faces shared consequences. This leads to the chapter’s crucial shift from risk transfer to risk sharing. It contrasts the modern practice of dumping your problems on someone else with the ancient principle of synkyndineo, exemplified by maritime laws where all merchants shared the loss if cargo was jettisoned to save a ship.

This framework is then applied to modern professions, revealing how the removal of skin in the game creates systemic harm. In journalism, the drive to avoid conflicts of interest has stripped commentators of any personal stake in their predictions, leading to a dangerous impunity and herd mentality. In medicine, doctors are trapped by short-term metrics and legal fears, incentivizing them to transfer long-term health risks from themselves onto their patients. The chapter argues that the root cause of these dangerous asymmetries is often administrators—those who design the rules and metrics but bear none of the consequences. Ultimately, it posits that true fairness and resilience come not from complex regulation, but from ensuring all parties in a transaction or system are truly in the same boat, sharing both the uncertainties and the sacrifices.

The Turtle Allegory and Transactional Asymmetry

The chapter opens with an ancient proverb: “you who caught the turtles better eat them.” The tale explains its origin—fishermen who caught unpalatable turtles tried to offload them on the god Mercury, who instead forced them all to eat their own catch, establishing a core principle: you must be willing to consume what you serve to others. This becomes an archetype for flawed transactions, where one party unloads an undesirable burden onto another.

This asymmetry is rampant in modern advice and sales. Unsolicited guidance presented as being “good for you” is almost invariably more beneficial to the advisor. The author illustrates this with a personal anecdote about a lecture agent, whose offer to manage the “gritty” details of speaking engagements eventually led to an unforeseen tax problem. The agent’s dismissive reply, “I am not your tax attorney,” highlighted the absence of shared downside. In trading, this translates to a cardinal rule: beware of those selling under the guise of advice, and prefer transparent dealers who openly state their self-interest.

The professionalization of this asymmetry is exemplified by the “white shoe” investment bank. Salesmen, wining and dining clients, would expertly “unload” or “stuff” unwanted securities from the bank’s inventory onto them, using psychological manipulation to make clients feel they were seizing a unique opportunity. The ethos was captured by a top salesman’s motto: “Rip them off, don't tick them off,” with the cynical addendum, “every day a new customer is born.”

Ancient Ethics and the Problem of Disclosure

The ethical question of how much a seller must reveal is ancient. Cicero retails a debate between Stoic philosophers Diogenes of Babylon and Antipater of Tarsus. A merchant brings corn to famine-stricken Rhodes, knowing more supply ships are en route. Must he disclose this? Diogenes argued for minimal disclosure, adhering only to civil law. Antipater insisted on full transparency—the seller should reveal everything he knows. The author sides with Antipater, whose position is more “robust,” meaning it holds universally across time and jurisdiction. The ethical should guide the legal, not the reverse.

In practice, traders observed a stark ethical wall: it was a grave taboo to “stuff” fellow professionals, but often permissible with the anonymous, faceless market—distant “Swiss” suckers. This introduces the critical limitation of ethical rules: they are often confined to a specific group or scale.

Frameworks for Symmetry: Sharia and Talmudic Transparency

The discussion turns to formal systems addressing asymmetry. Sharia law prohibits gharar, a sophisticated concept meaning both uncertainty and deception. It aims for an equality of uncertainty in transactions: neither party should have certainty about the outcome while the other faces randomness. While not as strict as Antipater’s full disclosure (as insider knowledge might still leave both parties with some uncertainty), it bans selling known defective products.

Jewish ethics, illustrated by the story of Rav Safra, push further toward transparency of intention. The trading scholar, while praying, received an initial offer for his goods. The buyer, receiving no reply, raised his bid. Rav Safra, however, felt obligated to honor his initial, unspoken intention and accept the first price. The author, from his trading experience, relates to this, finding shame in taking an unfair, unearned溢价. True, sustainable business aligns with maximal transparency, even of one’s internal state. However, the narrative questions whether this high standard would apply to an outsider, a “Swiss.”

The Limits of Scale: Clubs, Tribes, and the Fractal Application of Ethics

This leads to the chapter’s central scaling problem: ethical rules do not generalize universally. People function within bounded groups—clubs, tribes, fraternities, municipalities. From ancient Spartan citizens versus Helots to modern corporate partnerships, we maintain strict ethical rules within the group, while rules are “relaxed or possibly lifted” for those outside. The author argues this is not a flaw but a reality of human social organization. “The abstract is way too abstract for us.” Universalist ethics break down in practice because cohesion requires a tangible, local “us.”

This is supported by Elinor Ostrom’s work, which countered the “tragedy of the commons.” She found that communities below a certain size can successfully manage shared resources collectively because the unit becomes rational. The commons only works as a “skin-in-the-game space” where the Silver Rule (treat others as you wish to be treated) operates within a defined, scaled group. The author thus advocates for political systems that are fractal and bottom-up (like Swiss federalism or American-style federalism), where governance starts local. Forcing disparate groups into a single, large “pot” destroys natural, scaled harmony.

Risk Sharing, Not Just Transfer

The final concept shifts from asymmetry to symmetry in risk. The chapter contrasts risk transfer (offloading your downside onto another) with the ancient principle of synkyndineo—taking risks together. This is codified in the historical Lex Rhodia (Rhodian Law), which governed maritime ventures. If cargo had to be jettisoned in a storm to save the ship, all merchants shared the loss proportionally, not just the owner of the discarded goods. This embodies true skin in the game: everyone’s fate is literally in the same boat, aligning interests and ensuring collective survival.

Historical Roots of Risk Sharing: Synkyndineo

The concept of shared sacrifice for collective survival isn't new; it has ancient legal codification. The Rhodian Law, later captured in Justinian's code, established the principle that if cargo is jettisoned to save a ship, all who benefit from the lighter vessel must contribute to cover the loss. This rule of equitable risk distribution, called synkyndineo, was also practiced by desert caravans facing theft or loss. The author notes that while the elegant Latin translation compericlitor (making compericlity the ideal English term) isn't in use, the core idea of "risk sharing" stands in direct opposition to the modern "Bob Rubin trade" of risk transfer.

The Journalist's Dilemma: Skin in the Game vs. Conflict of Interest

A personal anecdote about a television roundtable on Microsoft stock reveals a core tension. The author refused to comment because he had no financial position, stating that one's portfolio is more telling than one's opinions. This clashes with the journalistic norm of impartiality, where commentators are expected to judge topics without personal stake—and without facing consequences for being wrong.

The analysis distinguishes two forms of "talking one's book":

1. Genuine Advocacy: Buying a stock you believe in, disclosing it, and promoting it—a reliable signal because the user bears the risk.
2. Market Manipulation: Buying a stock solely to tout it and then selling for a profit—a clear conflict of interest.

The book's argument is that society, in trying to avoid the latter (conflicts of interest), has removed skin in the game from journalists. This has created a more damaging problem: impunity for bad advice. Without personal risk, journalists safely mimic each other, creating a dangerous monoculture of thought. The conclusion is that skin in the game is more important than the avoidance of all conflicts of interest.

Medical Metrics and Perverse Incentives

Medicine, unlike economics, is fundamentally grounded in experience and apprenticeship, giving practitioners more inherent skin in the game. However, the system creates a dangerous asymmetry through the "agency problem" and the use of gameable metrics.

The core issue is that doctors are increasingly judged by narrow, short-term metrics (like five-year survival rates) and are terrified of lawsuits. This incentivizes them to transfer risk from themselves to the patient, and from the immediate future to the long-term future. For example, a doctor might choose radiation therapy over laser surgery because it has a better five-year outcome, even though it carries a higher risk of causing secondary tumors twenty years later.

This risk transfer is crystallized in the treatment of mild conditions. A cardiologist, fearing the legal repercussions of a rare, immediate adverse event, may feel pressured to prescribe a statin to a "prediabetic" patient. The doctor may know the drug has potential long-term harms, but the pharmaceutical-amplified short-term benefits and the immediate legal risk dominate the decision. The system thus encourages treating the large pool of mildly ill people (who will consume drugs for years) rather than focusing resources on those with severe, "tail-event" conditions.

The ultimate problem is identified as administrators—those who design the metric-driven systems but bear none of the consequences. They, not the doctors or patients, are the primary source of the malfunction.

Key Takeaways

• The ethical principle of shared sacrifice for collective survival (synkyndineo/compericlity) has deep historical roots, contrasting with modern risk-transfer practices.
• In journalism, the removal of skin in the game to avoid conflicts of interest has led to a worse outcome: impunity and a herd mentality that produces collective mirages.
• In medicine, skin in the game is distorted by legal and administrative systems that impose short-term, gameable metrics. This pushes doctors to protect themselves by transferring long-term health risks onto their patients.
• Administrators, who design systems without bearing the consequences, are frequently the root cause of such dangerous asymmetries.

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