skin in the game
Nassim Nicholas Taleb (@nntaleb) tweeted at 4:50 AM – 8 Mar 2018 :
“I hope for Goldman Sachs’ bankruptcy”: Nassim Nicholas Taleb on Skin in the Game https://t.co/IlSm6ZJlir (http://twitter.com/nntaleb/status/971714718812508160?s=17)
For the Lebanese-American thinker, their shared sin is that (with some exceptions) they lack “skin in the game”. By this, Taleb means they are insulated from the consequences of their actions: they do not have “a share of the harm” or “pay a penalty if something goes wrong”.
Taleb was raised in Lebanon by a Greek Orthodox family during the 1975-90 civil war (resulting in what he calls “post-traumatic growth”). He charges the West with excessive rather than inadequate support for the Syrian rebels. “Obama is the reason my people – the Orthodox Christians of Syria – are down by half. Assad’s father blew up my house. But Assad’s enemies make him look like Mother Teresa. You’re not dealing with the Swedish parliament versus Assad: you’re dealing with real scum.”
Mindful of the charge of hypocrisy, Taleb seeks to ensure that he has skin in the game. Though he lives mostly in New York, he retains a property in Lebanon and houses six Syrian refugees. He does not employ an assistant (“it moves you one step away from authenticity”), rejects copy editing of his books and refuses to accept honours and prizes (“they give you an award, then they own you”).
Our conversation concludes on an optimistic note: “We’ve survived 200,000 years as humans,” says Taleb. “Don’t you think there’s a reason why we survived? We’re good at risk management. And what’s our risk management? Paranoia. Optimism is not a good thing.” Is the paradox, I ask, that human pessimism offers grounds for optimism? “Exactly,” Taleb replies. “Provided psychologists don’t fuck with it.”
book 1: intro
skin in the game is about four topics in one:
a\ uncertainty & the reliability of knowledge (practical and scientific, assuming there is a diff) – bs detection
b\ symmetry in human affairs.. fairness, justice, responsibility and reciprocity
c\ info sharing in transactions
d\ rationality in complex systems and in the real world..
that these four cannot be disentangled is something that is obvious when one has .. skin in the game..
it is not just that skin in the game in necessary for fairness, commercial efficiency and risk management.. skin in the game is necessary to understand the world..
first it is bs id and filtering that is the diff between theory and practice…. cosmetic and true expertise, and academia (in the bad sense of the word) and the real world. to emit a yogiberrism, in academia there is no diff between academia and the real world; in the real world, there is
to this author, skin in the game is mostly about justice, honor and sacrifice, things that are existential (relating to existence, implying the existence of a thing) for humans
book 1 – prologue
skin in the game: having an exposure to the real world and paying a price for its consequences, good or bad..
i have shown in antifragile that most things that we believe were ‘invented’ by unis were actually discovered by tinkering and later legitimized by some type of formalization
the knowledge we get by tinkering, via trial and error, experience, and the workings of time, in other words, contact w the earth, is vastly superior to that obtained thru reasoning, something self serving institutions have been very busy hiding from us..
don’t give up on logic intellect and education, because tight but higher order logical reasoning would show that, *unless one finds some way to reject all empirical evidence, advocating regime changes implies also advocating slavery or some similar degradation of the country (since these have been typical outcomes)
so we end up populating what we call the intelligentsia w people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth (ie: democracy)..
the very status of a lord has been traditionally derived from protecting others..
some people think that freeing ourselves form having warrior at the top means civilization and progress. it does not.. meanwhile,
bureaucracy is a construction by which a person is conveniently separated from the consequences of his/her actions..t
one may ask.. what can we do since a centralized system will necessarily need people who are not directly exposed to the cost of error?
well, we have no choice but to decentralize, or, more politely to localize; to have fewer of these immune decision makers.
but don’t worry.. if we don’t decentralize and distribute responsibility, it will happen by itself.. the hard way: a system that doesn’t have a mechanism of skin in the game, w a buildup of imbalances, will eventually blow up and self repair that way. if it survives..
govt interference in general tends to remove skin in the game (ie: bailouts)
the curse of modernity is that we are increasingly populated by a class of people who are better at explaining than understanding.. t
or betting at explaining that doing..
in general, the more people worship the sacrosanct state (or, equivalently, large corporation), the more they hate skin in the game.. the more they believe in their ability to forecast, the more they hate skin in the game..
systems learn by removing parts *via negativa
*the principle that we know what is wrong w more clarity tha what is right, and that knowledge grows by subtraction.. also, it is easier to know that something is wrong than to find the fix. actions that remove are more robust that those that add because addition may have unseen , complicated feedback loops.
transportation didn’t get safer just because people learn from errors, but because the system does.. the experience of the system is diff from that of individuals.. it is grounded in filtering..
to summarize so far
skin in the game keeps human hubris in check..
risk transfer blows up systems..
there is no democracy w/o such an unconditional symmetry in the rights to express yourself, and the gravest threat is the slipper slope in the attempts to limit speech on grounds that some of it may hurt some people’s feelings.. such restriction do not necessarily come from the state itself, rather from the forceful establishment of an intellectual monoculture by an overactive thought police in the media and cultural life..
in fact, the deep message of his book is the danger of universalism taken two or three steps too far.. conflating the micro and the macro.. (ie: universal behavior is great on paper, disastrous in practice).. likewise the crux of the idea of the black swan was platonification, missing central but hidden elements of a thing in the process of transforming it into an abstract construct, then causing a blowup
insurance contract – where risk is transferred for a fee
*disincentive is not enough: the fool is a real thing. some people don’t know their own interest – just consider addicts, workaholics, people trapped in a bad relationship, people who support large govt, the press, book reviewers, or respectable bureaucrats, all of whom for some mysterious reason act against their own interest.. so there is this other instance where filtering plays a role: fools of randomness are purged by reality so they stop harming others. recall that it is at the foundation of evolution that systems get smart by elimination.
*disincentive: a factor, especially a financial disadvantage, that tends to discourage people from doing something
perhaps incentive ness in any form is a sign we’re doing it wrong
there is another point: we may not know beforehand if an action is foolish – but reality knows..
skin in the game is about the real world, not appearances..t
people’s ‘explanations’ for what they do are just words, stories they tell themselves, not the business of proper science. what they do, on the other hand, it tangible and measurable and that’s what we should focus on..
ugh.. i agree with the .. just words ness.. but.. not with the measuring.. some tangible ness
revelation of preferences is best understood by betrothed: a diamond, a particularly when it is onerous ( involving an amount of effort and difficulty that is oppressively burdensome) to the buyer, is vastly more convincing a commitment (and much less reversible) than a verbal promise
exposures in real life, outside of games, are always too complicated to reduce to a well defined ‘event’ easy to describe in words. outcomes in real life are not as in a baseball game, reduced to a binary win or lose outcomes..
inverse problem in mathematics.. which is solved by – and ony by – skin in the game. i will simplify for now as follows: it is harder for us to reverse engineer than engineer; we see the result of evolutionary forces but cannot replicate them owing to their causal opacity. we can only run such processes forward..
skin in the game helps to solve the black swan problem and other matters of uncertainty at the level of both the individual and the collective: what has survived has revealed its robustness to black swan events and removing skin in the game disrupts such selection mechs..
intellectualism: the belief that one can separate an action from the results of such actions.. theory from practice.. that one can always fix a complex system by hierarchical approaches..
intellectualism has a sibling: scientism… a naive interpretation of science as complication rather than science as a process and a skeptical enterprise.. using mathematic s when it’s not needed is not science but scientism.. the skeptical enterprise is being used to silence skeptics..
those that talk should do and only those who do should talk.. w some dispensation for self standing activities such as mathematics, rigorous philosophy, poetry, and art, ones that do not make explicit claims of fitting reality.. ariel rubinstein: do your theories or mathematical representations, don’t tell people in the real world how to apply them.. let those w skin in the game select what they need..
school does this.. ugh.. esp involving an amount of effort and difficulty that is oppressively burdensome. et al
a confession . when i don’t have skin in the game, i am usually dumb. my knowledge of technical matters, such as risk and probability did not initially come from books. it did not come from lofty philosophizing and scientific hunger. *it did not even come from curiosity.. it came from the thrill sand hormonal flush one gets while taking risks in the markets.. i never thought math was something interesting to me till friend told me about financial options.. i decided to make a career of them.. it was a combo of financial trading and complicated probability.. the field was new and uncharted. i new in my guts there were mistakes in the theories that used the conventional bell curve… i knew in my guts academics had not the slightest clue about risks…. so.. **to find errors in the estimation of these probabilities securities.. i had to study probability.. which mysteriously and instantly became fun, even gripping..
isn’t **that *curiosity..?
kind of huge.. because otherwise.. sounds like incentive ness
when there was risk on the line, suddenly a second brain in me manifested.. when there is fire, you will run faster than in any competition..
you may lose the sharpness, but nobody can take away what you’ve learned. this is the principal reason i am now fighting the conventional ed system.. many kids would learn to love mathematics if they had some investment in it, and more crucially, they would build an instinct to spot its misapplications..
? not much better.. better to be free in the city..
two ways to make citizens safe from large predators,.. 1\ enact regulations.. 2\ put skin in the game in transactions in the form of legal liability.. and the possibility of an efficient lawsuit.. if you harm me.. i can sue you..
? isn’t that also regulations.. and.. neg incentive .. ..ugh
i thought B separate you from skin in the game ness
if you cannot effectively sue, regulate
now even if regulations had a small net payoff of society, i would still prefer to be as free as possible, but assume my civil responsibility , face my fate, and pay the penalty if i harm others.. this attitude is called deontic libertarianism (deonitic comes from ‘duties’): by regulating you are robbing people of freedom.. some of us believe that freedom is one’s first most essential good. this includes the freedom to make mistakes (those that harm only you); it is sacred to the point that it must never be traded against economic or other benefits..
though shalt not become antifragile at the expense of others
begs we leap
if you can’t put your soul into something, give it up and leave that stuff to someone else..
i exhibited no skills whatsoever in retirement activities.. i once by happenstance, tried to solve a math brain teaser and it lead to five years of compulsive, time invasive math practice.. i didn’t do math to solve a problem, just to satisfy a fixation.. but i never expected the following effect. it made may bs detector so sensitive..
books should be org’d the way the reader reads, or wants to read, and according to how deep the author wants to go into a topic, not to make life easy for the critics to write reviews.. book reviewers are bad middlemen
someone has to have read the book to notice that a reviewer is full of baloney, so in the absence of skin in the game.. reviewers.. can go on forever w/o anyone knowing they are either fabricating or drunk.. book reviews are judged according to how plausible and well written they are, never in how they map to the book..
now, almost two decades after the first installment of the incerto, i have established ways to interact directly w you, the reader.. (then gives a couple pages of overview)
book 2: a first look at agency
it always turns out that what is presented as good for you is not really good for you but certainly good for the other party..t
perhaps not even them..
so giving advice as a sales pitch is fundamentally unethical.. selling cannot be deemed advice..
the more regulations, the easier it was to make money
which brings us to asymmetry.. the core concept behind skin in the game. the question becomes: to what extent can people in a transaction have an informational differential between them?
as the aim for both parties in a transaction to have the same uncertainty facing random outcomes, an asymmetry becomes equivalent to theft.. or more robustly: no person in a transaction should have certainty about the outcomes while the other one has uncertainty..
things don’t ‘scale’ and generalize, which is why i have trouble w intellectuals talking about abstract notions.. a country is not a large city, a city is not a large family, and, sorry, the world is not a large village.. there are scale transformations..
as club members know, the very purpose of a club is exclusion and size limitations..
the question we will reexamine alter, after deeper discussion of complexity theory, is whether it is possible to be both ethical and universalist.. in theory yes.. but sadly not in practice… for *whenever the ‘we’ become too large a club, things degrade, and each one starts fighting for his own interest.. the abstract is way too abstract for us..
i think we’ve manufactured this.. i don’t think this it is truly who we are
being somewhat tribal is not a bad thing – and we have to work in a fractal way in the organized harmonious relationships between tribes.. rather than merge all tribes in one large soup…
yaneer bar yam showing quite convincingly that ‘better fences make better neighbors’
blaming people for being sectarian instead of making the best of a such a natural tendency is one of the stupidities of inerventionistas.. separate tribes for separate admin purposes.. or just put some markers somewhere.. and they suddenly become friendly to one another..
but we don’t have to go very far to get the importance of scaling. .you know instinctively that people get along better as neighbors than roommates
when you think about this.. it is obvious/trite.. from the well known behavior of crowds in the anonymity of big cities compared to groups in small villages.. villages.. where it feels like a family.. people .. help out.. care.. *there is no way you can get the same cohesion in larger city when the ‘other ‘ is a theoretical entity, and our behavior toward him or her is governed by some general ethical rule.. not someone in flesh and blood.. we get it easily when seen that way, but *fail to generalize that ethics is something fundamentally local..
*i don’t know.. i think it’s because we’ve done big city ..& local.. wrong.. i think we can get that attachment fulfillment.. wherever.. if facil’d toward that goal.. ie: local can be.. close to the heart of a nother… w/in the city..
what’s the reason.. modernity put it in our heads that here are two units: the individual and the universal collective.. in that sense, skin in the game for you would be just for you.. as a unit.. in reality, my skin lies in a broader set of people.. one that includes a family, a community, a tribe, a fraternity.. but it cannot possibly be the universal..
? are we sure.. maybe that’s what we’re missing..
let’s get into the gut of ostrom’s idea.. the tragedy of the commons, as exposed by economists, is as follows – the commons being a collective property, say a forest of fishing waters or you local public park.. collectively farmers as a community prefer to avoid overgrazing.. and fishermen overfishing.. but every single individual farmer would personally gain from his overgrazing or overfishing under of course, the condition that others don’t.. and tha tis what plagues socialism: people’s individual interest d on t quite work well under collectivism..
i don’t believe that.. i don’t think we’ve ever given it a go.. with truly free people.. (i’ve seen it in experimenting.. if you let people focus on individual.. once they feel truly free.. first thing they crave is the collective.. )
but it is a critical mistake to think that people can function only under a private property system..
*what ostrom found empirically is that there exists a certain community size below which people act as collectivist.. t.. protecting the commons.. as if the entire unit became rational.. such a commons cannot be too large.. like a club..
groups behave differently at a diff scale.. this explains why the municipal is diff from the national.. it also explains how tribes operate: you are part of a specific group that is larger than the narrow you, but narrower than humanity in general. critically, people share some things but not others w/in a specified group.. and there is a protocol for dealing w the outside..
we don’t know.. we’ve never tried connecting locals w their daily curiosity tribe .. everyday.. as it could be
‘me’ is more likely to be a group than a single person..
the thing that’s diff today though.. we can find daily soul/tribes.. and if everyone is playing.. no intentional .. and less accidental.. threats..
the dr is pressured to treat you to protect himself.. long term med risks are hidden… whereas the legal risk is immediate..
in sum, both dr and patient have skin in the game, though not perfectly, but administrators don’t – and they seem to be the cause of the troubling malfunctioning of he system.. admin everywhere on the planet, in all businesses and pursuits, and at all times in history, have been the plague..
book 3: the greatest asymmetry
the main idea behind complex systems is that the ensemble behaves in ways not predicted by its components.. the interactions matter more than the nature of the units..
studying individual ants will almost never give us a clear indication of how the ant colony operates.. for that, one needs to understand an ant colony as an ant colony, no less, no more, not a collection of ants.. this is called an ’emergent’ property of the whole, by which parts and whole differ because what matters are the interactions between such parts.. and interactions can obey *very simple rules..
yes.. *ie: 2 convos (3 and 30)
the rule we discuss in the chapter is the minority rule.. the mother of all asymmetries.. it suffices for an intransigent (unwilling or refusing to change one’s views or to agree about something) minority – w significant skin (soul) in the game to reach a minutely small level, say 3 or 4% of the total population.. for the entire population to have to submit to their preferences…
further.. an optical illusions comes w the dominance of the minority: a naive observer (who looks at the standard avg) would be under the impression that the choices and preferences are those of the majority.. if it seems absurd, it is because our scientific intuitions aren’t calibrated for this.. (your standard intellectualization fails w complex systems, though your grandmother’s wisdom doesn’t)..t
among other things many other things, the minority rule will show us how all it takes is a small number of intolerant, virtuous people w skin in the game, in the form of courage, for society to function properly..t
perhaps rather.. it takes every single one of us.. operating daily w our minority rulings aka: idio ness
two more things..first.. it makes a big diff whether the intransigents are in their own district or are mixed w rest of population. if people following the minority rule lived in ghettos w a separate small economy, then the minority rule would not apply.. but when a population has an even spatial distribution, say, when the ratio of such a minority in a neighborhood is same as entire village.. village same as in county.. county same as in state.. and state same as nationwide.. then the (flexible) majority will have to submit to the minority rule..
second.. cost structure matters quite a bit.. could weaken or cause minority rule to not apply
genes follow majority rule; language minority rule.. language travel; genes less so..
let us conjecture that the formation of moral values in society doesn’t come from the evolution of the consensus. no, it is the most intolerant person who imposes virtue on others precisely because of that intolerance… morality is more likely to be something enforced by a minority..
once a moral rule is established, it will suffice to have a small, intransigent minority of geographically distributed followers to dictate a norm in society. the sad news is that one person looking at mankind as an aggregate may mistakenly believe that humans are spontaneously becoming more moral, better, and more gentle, with better breath, when this applies to only a small proportion of mankind..
pinker et al… (he ref’d him earlier)
more likely emerge from minority… 1\ minority rule more stable… low variance 2\ minority rule more likely to be b&w.. binary
mead: never doubt that a small group of thoughtful citizens can change the world.. indeed, it is the only thing that ever has
revolutions are unarguably driven by an obsessive minority.. and the entire growth of society , whether economic or moral, comes from a small number of people
society doesn’t evolve by consensus, voting, majority, committees, verbose meetings, academic conferences, tea and cucumber sandwiches, or polling; only a few people suffice to disproportionately move the needle.. all one needs is an asymmetric rule somewhere and someone w soul in the game.. and asymmetry is present in about everything..
appendix to book 3 – a few more counterintuitive things about the collective
antifragile has been about the failure of the average to represent anything in the presence of nonlinearities and asymmetries similar to the minority rule.. so let us go beyond:
the average behavior of the market participant will not allow us to understand the general behavior of the market..
that doesn’t seem fitting.. not an organism as fractal..
you can examine markets as markets and individuals as individuals, but markets are not sums of average individuals ..
the psychological experiments on individuals showing ‘biases’ do not allow us to automatically understand aggregates of collective behavior nor do they enlighten us about the behavior of groups
more so.. about the behavior of human beings.. living organisms.. i don’t see how market ness fits here.. it’s the cancer to us being us..
human nature is not defined outside of transactions involving other humans..
? – wow.. if you’re talking measured transactions.. that’s wack
remember that we do not live alone, but in packs, and almost nothing of relevance concerns a person in isolation – which is what is typically done in lab style works..t
groups are units on their own.. there are qualitative differences between a group of ten and a group of say 395,435.. each is a different animal, in the literal sense, as different as a book is from an office building..
when we focus on commonalities, we get confused, but, at a certain scale, things become different. mathematically different. the higher the dimension, in other words, the higher the number of possible interactions, and the more disproportionality difficult it is to understand the macro from the micro, the general from the simple units.. this disproportionate increase of computational demand is called the curse of dimensionality (i have actually found situation where.. ie: going from 1000 to 1001, may cause complexity to be multiplied by a billion times)
or, in site of the huge excitement about our ability to see into the brain using the so called field of neuroscience:
understanding how the subparts of the brain (say, neurons) work will never allow us to understand how the brain works..t
a group of neuron or genes, like a group of people, differs from the individual components – because the interactions are not necessarily linear..
so far we have no idea how brain of worm works w 300 neurons.. now consider the human brain.. 100 bn neurons.. and that going from 300 to 301 neurons, because of the curse of dimensionality, may double the complexity. so the use of never here is appropriate..
w dna.. largely unable to get info except in small isolated pockets for some diseases.. so same story..
understanding the genetic makeup of a unit will never allow us to understand the behavior of the unit itself
on yaneer and dawkins and pinker.. and the selfish gene.. he shows that local properties fail and the so called math used to prove the selfish gene are woefully naive and misplaced..
the question is: could it be that much of what we have read about the advances in behavioral sciences is nonsense? odds are it is.. many people have been accused of racism, segregationisms, and somethingism w/o merit. using cellular automata, a technique similar to renormalization. the lat thomas schellin showed a few decades ago how a neighborhood can be segregated w/o a single segregationist among its inhabitants..
the underlying structure of reality matters much more than the participants, something policymakers fail to understand.
under the right market structure, a collection of idiots produces a well functioning market
? see i don’t see that as humane.. so i don’t see that as scientifically or whateverly.. studying us.. we’re studying whales at sea world..
it may be that some idiosyncratic behavior on the part of the individual (deemed at first glance ‘irrational’) may be necessary for efficient functioning at the collective level..t
take out the word efficient.. and i totally like/get this.. i believe that’s a major issue we’re missing.. and why.. we should embrace idio-jargon
individual don’t need to know where they are going.. markets do
leave people alone under a good structure and they will take care of things..t
yeah.. but i’d rather go back to your defn of success.. was it.. being honorable..? having a good market is not what our souls crave..
so.. the infra we need.. i believe.. is the 2 convos .. to get at the 2 needs.. and then yes.. leave people alone.. (i’m not sure we even need that structure/infra.. if we were all healthy.. w our shells.. i’m guessing we wouldn’t need it.. and may not in the future..)
book 4: wolves among dogs
ch 3 – how to legally own another person..
in short, every organization wants a certain number of people associated with it to be deprived of a certain share of their freedom.. how do you won these people? first, by conditioning and psychological manipulation; second, by tweaking the to have some skin in the game, forcing them to have something significant to lose if they disobey authority.. something hard tt do w gyrovague beggars who flout their scorn for material possessions..
then ie for skin in the game is paycheck
someone who has been employed for a while is giving you strong evidence of submission
evidence of submission is displayed by the employee’s going thru years depriving himself of his personal freedom for nine hrs every day, his ritualistic and punctual arrival at an office, his denying himself his own schedule,..t.. and his not having beaten up anyone on the way back home after a bad day.. he is an obedient housebroken dog
earn a living ness
even when an employee ceases to be an employee, he will remain diligent. the longer the person stays w a co, the more emotional investment they will have in staying.. and when leaving, are guaranteed in making an honorable exit..
in return.. the firm is bound by a pact to keep the co man on the books as long as feasible.. until mandatory retirement ,after which he would go play golf w a comfortable pension..
by the 1990s.. however, people started to realize that working as a co man was safe.. provided the co stayed around.. but tech revolution .. put traditional co’s under financial threat..
if the co man is, sort of, gone, he has been replaced by the companies person.. for people are no longer owned by a co but by something worse: the idea that they need to be employable.. t
earn a living ness
the best slave is someone you overpay and who knows it, terrified of losing his status.. t
95% of the employee’s mind will be on company politics.. which is exactly what the company wants
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 higher you go in that business.. the more insecure you get.. being higher up in life only works under some conditions..
the exact obverse (the opposite or counterpart of a fact or truth) of the public hotshot as slave is the autocrat (a ruler who has absolute power)
it is much easier to do business w the owner of he business than some employee who is likely to lose his job next year.. likewise it is easier to trust the word of an autocrat than a fragile elected official..
people whose survival depends on qualitative ‘job assessments’ by someone of higher rank in an org cannot be trusted for critical decisions..t
we say the effect w the vietnam war. most people (sort of) believed that certain courses of action were absurd, but it was easier to continue than to stop – particularly since one can alway spin a story explaining why continuing is better than stopping…. ie: the absurd invasion of iraq was endorsed because it appeared to be simpler..
since 2011 – policymakers and slow thinking bureaucrats stupidly let terrorism grow by ignoring its roots – because that was not a course that was optimal for their jobs, even if optimal for the country.. so we lost a generation.. to repeat.. this is not a decision tha can be made by a collection of bureaucrats w a job description..
same thing happened in 2009 w banks.. we have plenty of evidence they were afraid of rocking the boat..
now compare these policies to ones in which decision makers have skin in the game as a substitute for the annual ‘job assessment’ and you will picture a diff world..
redefine decision making..
ch 4 – the skin of others in your game
it’s no secret that large corporations prefer people w families; those w downside risk (vulnerability of heads of households has been remarkably exploited in history..) are easier to own, particularly when they are choking under a large mortgage..
to make ethical choices you cannot have dilemmas between the particular (friends, family) and the general
celibacy has been a way to force men to implement such heroism… the ottomans relied on janissaries, who were extracted as babies from christian families and never married. having no family.. (or no contact w family) they were entirely devoted to the sultan
a celibacy requirement might help w rebellious causes, but it isn’t the greatest way to multiply your sect thru the ages..
financial independent is another way to solve ethical dilemmas.. but such independence is hard to ascertain
but neither celibacy nor financial independence makes one unconditionally immune…
i have f-you money, so i appear to be fully independent ( though i am certain that my independence is unrelated to my finances).. but there are people i care about who can be affected by may actions, and those who want to harm me may want to go after them..
this method of hitting you were they think it hurts implies hitting people around you who are more vulnerable than you..
these methods of going after vulnerable people associated with you are eventually ineffective..
the unusual nuisance w jihadi terrorism is that we are totally defenseless in front of a deluded person willing to kill scores of innocents w/o any true downside.. that is, now skin in the game..
the only way we have left to control suicide terrorists would be precisely to convince them that blowing themselves up is not the worst case scenario for them, not the end scenario at all
book 5: being alive means taking certain risks
ch 6 – life in the simulation machine
the reason a dream (simulation) is not reality is that when you suddenly wake up from falling form a chinese skyscraper, life continues, and there is no absorbing barrier, the mathematical name for that irreversible state that we will discuss in ch 19, along w ergodicity, the most powerful concept i know..
ch 6 – the intellectual idiot
when plebeians do something that makes sense to themselves, but not to him, the iyi uses the term ‘uneducated’
ch 7 – inequality and skin in the game
the way to make society more equal is by forcing (thru skin in the game) the rich to be subjected to the risk of existing from the 1%
the no-absorbing-barrier condition means that someone who is rich should never be certain to stay rich
perfect ergodicity means that each one of us, should he live forever, would spend a proportion of time in the economic conditions of the entire cross section: out of say, a century, an avg of 60 yrs in the lower middle class, 10 yrs in the upper middle class, 20 years in the blue collar, and perhaps one single year in the 1%
the exact opposite of perfect ergodicity is an absorbing state. the term absorption is derived from particles that, when they hit an obstacle, get absorbed or stick to it.. an absorbing barrier is like a trap, once in, you can’t get out, good or bad.. rich/poor
any form of control of the wealth process – typically instigated by bureaucrats – tends to lock people w privileges in their state of entitlement.. so the solution is to allow the system to destroy the strong, something that works best in the us..
the problem is never the problem; it is how people handle it (on piketty being wrong yet worse than that.. how the mandarin class operated because of his ‘evidence’ of the rise in ineq.. that there reactions were like fake news.. actually.. they were fake news
deeper still.. we all are..
now consider the likes of piketty and krugman (saying if you think you’ve found a hole in piketty, you’re very probably wrong.. he’s done his hw) have not downside in their existence – lowering ineq brings them up in the ladder of life. unless the uni system of french state goes bust.. they will continue receiving their paychecks..
discussion in ‘competitive’ unis are all about hierarchy. most people in the real world don’t obsess over it
in the more rural past, envy was rather controlled; wealthy people were not as exposed to other persons of their class.. they didn’t have the pressure to keep up w other wealthy persons and compete with them..
for a rich person isolated from vertical socializing w the poor, the poor become something entirely theoretical.. a textbook reference.. the intelligentsia therefore feels entitled to deal w the poor as a construct; one they created. thus they become convinced that they know what is best for them..t
there is another lesson here (from piketty’s ambitious volume loaded w charts and tables): what we learn from professionals in the real world is that data is not necessarily rigor..t.. it seems to me that people flood their stories w numbers and graphs in the absence of solid or logical arguments..
further people mistake empiricism for a flood of data.. just a little bit of significant data is need when one is right.. particularly when it is disconfirmatory empiricism, or counterexamples..
so.. i’ve discovered.. when you buy a thick book w tons of graphs/tables used to prove a point, you should be suspicious.. it means something didn’t distill right.. but for the general public and those untrained in stats, such tables appear convincing… another way to substitute the true with the complicated.. ie: pinker’s better angles..
there is an implicit bribe in civil service: you at as a servant to an industry, say monsanto, and they take care of you later on.. they do not do it out of a sense of honor: simply, it is necessary to keep the system going and encourage the next guy to play by these rules..
ch 8 – an expert called lindy
fragility: sensitivity to disorder..t
time is equivalent to disorder..t
the idea of fragility helped put some rigor around the notion that the only effective judge of things is time .. t..– by things we mean ideas, people, intellectual productions, car models, scientific theories, books, etc..
w/o skin in the game.. the mechanism of fragility is disrupted: things may survive for no reason for a while, at some scale, then ultimately collapses, causing a lot of collateral harm..
two ways things handle time.. 1\ aging and perishability 2\ hazard.. rate of accidents..
what we witness in physical life is the combo of the two: when you are old and fragile you don’t handle accidents very well..
thanks to lindy, no expert is the final expert anymore.. and we do not need meta experts judging the expertise of experts one rank below them..t we solve the ‘turtles all the way down’ problem.. fragility is the expert, hence time and survival..
i am not fully familiar w the way non risk takers work.. they actually dont’ realize that others are not like them, and can’t get what makes real people tick..
you can define a free person precisely as someone whose fate is not centrally or directly dependent on peer assessment...t
my only real judge being time..
as a risk taker, only time counts..
and maybe we’ll never see.. meaning.. maybe there is no judge at all
in fact there is something worse than peer assessment: the bureaucratization of the activity creates a class of new judges: uni admin, who have no clue what someone is doing except via external signals yet become the actual arbiters..t
these arbiters fail to realize that ‘prestigious’ publication, determined by peer reviewers in a circular manner, are not lindy compatible.. they only mean that a certain set of (currently) powerful people are happy w your work
academia has a tendency, when unchecked (from lack of skin in the game), to evolve into a ritualistic self referential publishing game..t
while academia has turned into an athletic contest.. wittgenstein held the exact opposite viewpoint: if anything, knowledge is the reverse of an athletic contest. in philosophy, the winner is the one who finished last
anything that smacks of competition destroys knowledge..t
courses in unis, for which hardworking parents need to save over decades, easily degenerate into fashion..
one should give more weight to research that, while being rigorous, contradicts other peers, particularly if it entails costs and reputational harm for its author
someone w a high public presence who is controversial and takes risks for his opinion is less likely to be a bs vendor
academics divide research into theoretical and empirical areas.. doing things in the real world, in some professions (such as medicine) bears the name clinical, which is not deemed to be scientific.. many discipline slack this third dimension, the clinical one..
things work 1\ if those who have been doing the doing took some type of risk and 2\ their work manages to cross generations
while our knowledge of physics was not available to the ancients, human nature was.. so everything that holds in social science and psychology has to be lindy proof.. that is, have an antecedent in the classics; otherwise it will not replicate or not generalize beyond the experiment..
book 6: deeper into agency
ch 9 – surgeons should not look like surgeons
in any type of activity or business divorced from the direct filter of skin in the game, the great majority of people know the jargon, play the part, and are intimate w the cosmetic details, but are clueless about the subject..
what can be phrased and expressed in a clear narrative that convinces suckers will be a sucker trap
i also learned, in my early 20s, that the people you understand most easily were necessarily the bs ers..
the class of intellectuals is all about rituals: w/o pomp and ceremony, the intellectual is just a talker, that is, pretty much nothing..
true intellect should not appear to be intellectual
never pay for complexity of presentation when all you need is results..
people who have always operated w/o skin in the game (or w/o skin in the right game) seek the complicated and centralized and avoid the simple like the plague..
people who are bred, selected, and compensated to find complicated solutions do not have an incentive to implement simplified ones
this is particularly acute in the meta problem, when the solution is about solving this very problem..
in other words.. many problems in society come form the interventions of people who sell complicated solutions because that’s what their position and training invite them to do. there is absolutely no gain for someone in such a position to propose something simple: you are rewarded for perceptions, not results..
meanwhile, they pay no price for the side effects that grow nonlinearly w such complications..
there has been a problem of malnutrition and nutrient deficiency in many developing countries, which my collaborators yaneer bar-yam and joe norman attribute to a simple a very straightforward transportation issue.. simply, we waste more than a third of our food supply, and the gains from simple improvement in distribution would far outweigh those from modification of supply.. close to 80-85% of cost of a tomato can be attributed to transportation, storage and waste (unsold inventories) rather than the cost at the farmer level.. so visibly our efforts should be on lowtech distribution..
i realized soon after.. owing to minority rule.. there was no point continuing.. .. because a minority of intelligent and intransigent people stood against them..
simply.. the minute one is judged by others (propaganda et al) rather than by reality, things become warped as follows.. firms that haven’t gone bankrupt yet have something called personnel depts.. so there are metric used and ‘evaluation forms’ to fill.
the minute one has evaluation forms, distortions occur..t
the mere fact that evaluation causes you to be judged not by the end results, but by some intermediary metric that invites you to look sophisticated, brings some distortions..
in the us we have a buildup of student loans that automatically transfer to these rent extractors..it is no diff from racketeering: one needs a decent uni “name” to get ahead in life. but we have evidence that collectively society doesn’t advance w organized education.. rather the reverse: the level of (formal) education in a country is the result of wealth..
while the presence of skin in the game does away w the cosmetic, its absence causes multiplicative nonsense…
next.. let us consider the divergence of interest between you and yourself when you become rich
ch 10 – only the rich are poisoned: the preferences of others
the choices of the rich are dictated by others who have something to gain, and no side effects, from the sale. and given that they are rich, and their exploiters not often so, nobody would shout victim
it is easy to scam people by getting them into complications – the poor are spared that type of scamming.. further .. the rich start using ‘experts’ and ‘consultants’.. and entire industry meant to swindle you will swindle you..: financial consultants, diet advisors, exercise experts, lifestyle engineers, sleeping councilors, breathing specialists.. etc..
same w real estate: most people, i am convinced, are happier in close quarters, in a real barrio style neighborhood.. where they can feel human warmth and company. but when they have big bucks they end up pressured to move into outsized, impersonal, and silent mansions, far away from neighbors..
some things can be, simply, too large for your heart
if anything, being rich you need to hide your money if you want to have what i call friends. this may be know; what is less obvious is that you may also need to hide your erudition and learning.. people can only be social friends if they don’t try to upstage or outsmart one another.. indeed, the classical art of convo is to avoid any imbalance.. baldassare castiglione: people need to be equal, at least for the purpose of the convo, otherwise it fails.. it has to be hierarchy free and equal in contribution..
this idea of competition being lifted w/in a group or a tribe was, once again, preen in the notion of a group as studied by elinor ostrom..
ch 11 – facta non verba (deeds before words)
verbal threats reveal nothing beyond weakness and unreliability
thanks to cameras you no longer need to put horses’ heads in boutique hotels or villas in the hamptons to own people.. you may no longer even need to assassinate anyone.. we used to live in small communities; our reputations were directly determined by what we did – we were watched.. today, anonymity brings out the a-hole in a people.. so i accidentally discovered a way to change the behavior of unethical and abusive persons w/o verbal threat.. take their pictures.. just the act of taking their pictures is similar ot holding their lives in your hands and controlling their future behavior thanks to your silence.. they dont’ know what you can do w it, and will live in a state of uncertainty..
12 – the facts are true, the news is fake..
you never cure structural defects; the system corrects itself by collapsing
journalists are currently in the most insecure profession you can find: the majority live hand to mouth, and ostracism by their friends would be terminal. thus they become easily prone to manipulation by lobbyists..
you can criticize either what a person said or what a person meant. the former is more sensational, hence lends itself more readily to dissemination.. the mark of a charlatan.. say.. sam harris.. is to defend his positions or attack a critic by focusing on some specific statement.. rather than blasting his exact positions.. for the latter requires an extensive grasp of the proposed idea..
voltaire: give me a few lines written by any man and i will find enough to get him hung..
13 – the merchandising of virtue
on meeting susan sontag.. when she discovered i was a trader, she blurted out that she was ‘against the market system’ and turned her back to me as i was in med sentence, just to humiliate me.. while her assistant gave me a look as if i had been convicted of child killing.. i sort of justified her behavior in order to forget the incident, imagining that she lived in some rural commune.. grew her own veges wrote w pencil and paper engage in barter transactions.. that type of stuff..
no.. . squeezed her publisher for what would be several million dollars today for a novel.. shared a mansion in nyc, later sold for 28 mn..
it is immoral to be in opposition to the market system and not live (somewhere in vermont or nw afghanistan) in a hut or cave isolated from it
it is much more immoral to claim virtue w/o fully living w its direct consequences
if you manage to convince yourself that you are right in theory, you don’t really care how your ideas affect others. your ideas give you a virtuous status that makes you impervious to how they affect others..
likewise, if you believe you are ‘helping the poor’ by spending money on powerpoint presentation and international meetings, the type of meetings that lead to more meetings.. you can completely ignore individuals.. the poor become an abstract reified construct that you do not encounter in your real life.. your efforts at conferences give you license to humiliate them in person
if your private life conflicts w your intellectual opinion, it cancels your intellectual ideas, not your private life..
esse quam videri – to be or to be seen as such.. – matthew 6:1-4
so you can scam the world for a billion; all you need to do is spend part of it, say a million or two, to enter the section of paradise reserved for the ‘givers’..
virtue is not an ornament, not something one can buy
virtue is doing something for the collective, particularly when such an action conflicts w your narrowly defined interests.. virtue isn’t in just being nice to people others are prone to care about.. so true virtue lies mostly in also being nice to those who are neglected by others…. those people the grand charity business tends to miss..
further.. the highest form of virtue is unpopular.. not that virtue is inherently unpopular.. only that unpopular acts signal some risk taking and genuine behavior
courage is the only virtue you cannot fake
when young people who ‘want to help mankind’ come to me asking, ‘what should i do.. i want to reduce poverty , save the world’ .. my suggestion ii: 1\ never engage in virtue signaling; 2\ never engage in rent-seeking; 3\ you must start a business. put yourself on the line, start a business..
yes.. take risk, and if you get rich (which is optional) spend your money generously on others.. doing business will always help (because it brings about economic activity w/o large scale risky changes in the economy); institutions (like the aid industry may help, bu they are equally likely to harm… courage (risk taking) is the highest virtue. we need entrepreneurs
14 – peace, neither ink nor blood
no peace proceeds from bureaucratic ink..t
if you want peace, *make people trade, as they have done for millennia. they will be eventually forced to work something out.. we are largely collaborative.. except when institution get in the way..
*make people trade..? let’s just stick with staying out of the way
peace from the top differs from real peace..
absence of skin in the game does wonders in distorting info… but to those of us on the ground.. the objective is to make things work and have a life.. not sacrifice our existence for the sake of geopolitics.. real people are interested in commonalities and peace, not conflicts and wars..
book 7: religion, belief, and skin in the game
ch 15 – they don’t know what they are talking about when they talk about religion
my lifetime motto is that mathematicians think in (well, precisely defined and mapped) objects and relations, jurists and legal thinkers in constructs, logicians in maximally abstract operators, and … fools in words..
two people can be using the same word, meaning diff things, yet continue the convo, which is fine for coffee, but not when making decisions, ..
ch 16 – no worship w/o skin in the game
love w/o sacrifice is theft..
ch 17 – is the pope atheist
book 8: risk and rationality
right now i have a finite shelf life.. my survival is not as important as the survival of things that do not have a limited life expectancy, such as mankind or planet earth. hence the more systemic things are the more important survival becomes
herb simon: bounded rationality: we cannot possible measure and assess everything as if we were a computer.. we therefore produce, under revolutionary pressures, some shortcuts and distortions.. our knowledge of the world is fundamentally incomplete.. so we need to avoid getting into unanticipated trouble..
a fertile research program on ecological rationality came out of the effort to cure simon’s problem.. mostly org’d/led by gerd gigerenzer.. mapping how many things we do that appear, on the surface illogical, but have deeper reasons..
as for ken binmore.. he showed that the concept casually dubbed ‘rational’ is ill defined, in fact so ill defined that many uses of the term are just gibberish..
the only defn of rationality that i’ve found that is practically, empirically, and mathematically rigorous is the following; what is rational is that which allows for survival..
anything that hinder one’s survival at an individual, collective, tribal, or general level is, to me, irrational..
when you consider beliefs in evolutionary terms, do not look at how they compete w each other, but consider the survival of the populations that have them..
rationality does not depend on explicit verbalistic explanatory factors; it is only what aids survival, what avoids ruin..
not everything that happens happens for a reason, but everything that survives survives for a reason..
rationality is risk management, period.
ch 19 – the logic of risk taking
it looks like you need a lot of intelligence to figure probabilistic things out when you don’t have skin in the game..t
so.. let’s quit focusing on intelligencia and rather.. focus on skin in the game.. ie: everyone free and playing/alive
a situation is deemed non ergodic when observed past probabilities do not apply to future processes.. there is a ‘stop’ somewhere, an absorbing barrier that prevents people w skin in the game from emerging from it and to which the system will invariably tend. let us call these situations ‘ruin’ as there is no reversibility away form the condition. the central problem is that if there is a possibility of ruin, cost benefit analysis are no longer possible..
the idea in social science of ‘loss aversion’ has not been thought thru properly – is it not measurable the way it has been measured (if it is at all measurable)
ruin is indivisible and invariant to the source of randomness that may cause it..
why is all this tied to money..?
the throp, kelly and shannon school of info theory requires that, for an investment strategy to be ergodic and eventually capture the return of the market, agents increase their risks as they are winning, but contract after losses, a technique called ‘playing w the house money’
i believe that risk aversion does not exist: what we observe is, simply, a residual of ergodicity. people are, simply, trying to avoid financial suicide and take a certain attitude to tail risks..
In probability theory, an ergodic dynamical system is one that, broadly speaking, has the same behavior averaged over time as averaged over the space of all the system’s states in its phase space. In physics the term implies that a system satisfies the ergodic hypothesis of thermodynamics.
A random process is ergodic if its time average is the same as its average over the probability space, known in the field of thermodynamics as its ensemble average. The state of an ergodic process after a long time is nearly independent of its initial state.
The term “ergodic” was derived from the Greek words έργον (ergon: “work”) and οδός (odos: “path,” “way”).
but we do not need to be overly paranoid about ourselves; we need to shift some of our worries to bigger things..
who is ‘you’?.. let us return to the notion of ‘tribe’.. on e of the defects modern ed and thinking intro’s is the illusion that each one of us is a single unit..
ie: 88/100 said worst case scenario: death.. this can only be the worst case scenario situation for a psychopath.. for those 88.. asked.. is your death plus death of your children, relatives.. pets.. et al.. worse than just your death..? all said yes.. so.. how can your death be worst possible outcome
unless you are perfectly narcissistic and psychopathic – even then – your worse case scenario is never limited to the loss of only your life
individual ruin is not as big a deal as collective ruin.. and of course ecocide, the irreversible destruction of our environment is the big one to worry about..
to use ergodic framework: my death at russian roulette is not ergodic for me but it is ergodic for the system.
i have a finite shelf life, humanity should have an infinite duration
i am renewable, not humanity or the ecosystem
no muscles w/o strength, friendship w/o trust… love w/o sacrifice.. mathematics w/o proof..probability w/o ergodicity.. decision w/o asymmetry.. science w/o skepticism.. religion w/o tolerance.. nothing w/o skin in the game..