Skin in the Game – Nassim Taleb

Skin in the Game is congruent with Tom Ricks’ book The Generals. Almost all generals and high-ranking officers in the U.S. military are now exempt from real risk, as Ricks argues—they are exempt even the risk of being fired or reassigned for simple incompetence (or being ill-suited to a role). Almost all enlisted men and junior officers, however, are heavily exposed to real risk, like being killed. That risk asymmetry should give pause to someone contemplating joining. The risk profile for generals prior to the Korean war, while not as a great as the risk profile for regular soldiers, was more reasonable than it is today. Military contractors are arguably the greatest beneficiary of the military today. If more people knew (and acted like they knew) this, we might see changes.

In Skin in the Game Taleb has many, many unusual examples, many of them good; he reads more like an old-fashioned philosopher (that is: one who wants to be read, heard, and understood, as opposed to one who wants tenure), and I mean that as a compliment. One of his rules is, “No person in a transaction should have certainty about the outcomes while the other one has uncertainty.” I wonder how this rule could be applied to colleges, especially under a student-loan system, in which the college is certain to be paid by the student, the student’s family, or the student’s bank (which is really to say, the bank’s student), while the student may see a variable return on investment—especially if the student is ill-equipped in the first place. Colleges may be selling credentials more than skills. But almost no one thinks about those things in advance.

Skin in the Game will, like Antifragile, frustrate you if you demand that every single sentence be true and useful. Some of Taleb’s micro-examples are bad, like his thing against GMOs:

In my war with the Monsanto machine, the advocates of genetically modified organisms (transgenics) kept countering me with benefit analyses (which were often bogus and doctored up), not tail risk analyses for repeated exposures

This view is incoherent because virtually every food eaten today has been “genetically modified,” inefficiently, through selective breeding. If you wish to learn just how hard this is, see The Wizard and the Prophet by Charles Mann. Transgenics speed the process. See this sad tale, and the links, for one researcher in the field who is giving up due to widespread opposition. He points out that, over and over again, transgenic have been shown to be safe.

Taleb is right that there are tail risks to transgenics… but that’s also theoretically true of traditional cross-breeding, and it’s also true of not engaging in transgenics. The alternative to high-efficiency transgenics is environmental degradation and, in many places, starvation. That’s pretty bad, and there’s a serious, usually unstated, environmental trade-off between signaling environmental caring and opposite transgenics (nuclear energy is the same).

Despite incorrect micro-examples, Skin in the Game is great and you should read it. It is less uneven than Antifragile. It’s also an excellent book to re-read (don’t expect to get everything the first time through) because Taleb gives so many examples and is overflowing with ideas.

Like: “If your private life conflicts with your intellectual opinion, it cancels your intellectual ideas, not your private life.” Something easily and frequently forgotten, or never considered in the first place. Look at what people do, not what they say. One of the many charming parts of Alain de Botton’s The Consolations of Philosophy is the apparently wide gap between what many philosophers wrote and how they appeared to live. Maybe the truest philosophers don’t write but do.

Or consider:

the highest form of virtue is unpopular. This does not mean that virtue is inherently unpopular, or correlates with unpopularity, only that unpopular acts signal some risk taking and genuine behavior.

A very Peter Thiel point: he asks what popular view is wrong and what unpopular views a given person holds.

Or consider:

The only definition 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.

This may be true, but most of us in the West now survive, unless we do something truly stupid, dangerous, or brave. So our wealth and comfort may enable us to be irrational, because we’re much less likely to pay the ultimate penalty than we once were. Darwin Awards aside, we mostly make it. We can worry more about terrorism than the much more immediate and likely specter of death in the form of the car, which kills far more people every year in the United States than terrorism.

To his credit, though, Taleb does write:

The Chernoff bound can be explained as follows. The probability that the number of people who drown in their bathtubs in the United States doubles next year [. . .] is one per several trillions lifetimes of the universe. This cannot be said about the doubling of the number of people killed by terrorism over the same period.

He’s right that the number who could be killed by terrorism is massive, especially given the risk of nuclear and biological weapons. But the disproportionate focus on terrorism takes too much attention from risks that seem mundane, like getting into cars. Everyone expects to get into car crashes. Perhaps we should be thinking more seriously about that. Too bad almost no one is.

Antifragile: Things That Gain From Disorder — Nassim Taleb

The Black Swan is so good that I’ve been running around telling everyone to read it, which naturally led me to its successor, Antifragile. It, by contrast, is an excellent book to get from the library (per this accurate warning) and an excellent book to read skeptically, given its many dubious claims and stories.

Antifragile_coverThe top-level idea of Antifragile is a good one (many random events trade small gains for tremendous losses, and vice-versa; focus on making sure that you can sustain small losses for big gains, which makes you “antifragile,” as opposed to merely “robust”), but rarely have I read a book with such a correct thesis and so many misrepresentations, needless ad-hominem attacks, and dubious stories that may not demonstrate what the author thinks they demonstrate. Many amuse along the way but could have been removed; for a guy who is fond of the term “narrative fallacy,” Taleb is awfully fond of narratives that could be called fallacious.

I meant to write a real review, but I’ve been beaten to it and would direct you instead to the link, where David Runciman does a better job than I’m likely to. If The Black Swan is an unexpectedly fascinating and insightful work with a deceptively simple main idea that is helpfully explained and elaborated on with virtually every page, Antifragile is the sort of book that can be better read through the reviews than the book itself. As noted in the first paragraph, if you feel the need to verify this claim, at least get Antifragile from the library.

Let’s take one small example of a dubious claim: on pages 83 – 84, Taleb tells a parable about two men, one a banker and one a taxi driver. In that parable the taxi driver differs from the banker:

Because of the variability of his income, [the taxi driver]” keeps moaning that he does not have the job security of his brother—but in fact this is an illusion, for he has a bit more. [. . .] Artisans, say, taxi drivers, prostitutes (a very, very old profession), carpenters, plumbers, tailors, and dentists, have some volatility in their income but they are rather robust to a minor professional Black Swan, one that would bring their income to a complete halt.

But taxi drivers are interesting example because we’re approaching the point at which self- driving cars may become common, which would be a major professional Black Swan for taxi drivers. The Industrial Revolution has been hell on “Artisans,” who today still find it very hard to compete with factories. To be sure, the Internet has made it easier for artisans to do their thing by allowing them to sell on their own websites and on aggregators like Etsy, but artisans as a group are never going to be as important as they were in, say, 1700.

There are also paragraphs so stupid that they defy rational explanation:

both governments and universities have done very, very little for innovation and discovery, precisely because, in addition to their blinding rationalism, they look for the complicated, the lurid, the newsworthy, the narrated, the scientistic, and the grandiose, rarely for the wheel on the suitcase. Simplicity, I realized, does not lead to laurels.

Government and universities have been pivotal in everything from computers to nuclear power to medicine, and saying they “have done very, very little for innovation and discovery” is incredibly, stupidly wrong—the sort of wrong that tempts one to disregard the entire rest of the book. It is useful to have outsiders throwing intellectual stones at academic insiders, but only when the outsiders know more than the insiders. In this case, Taleb is just a crank. A few pages later he does qualify the quoted paragraph, but he shouldn’t have written it.

Elsewhere, Taleb writes that “The intellectual today is vastly more powerful and dangerous than before,” which I find flattering but also unlikely; I also suspect many if not most intellectuals would agree with that assessment, given how many of them write lamentations about their lack of influence.

There are moments like this, which is fascinating: “Criticism, for a book, is a truthful, unfaked badge of attention, signaling that it is not boring: and boring is the only very bad thing for a book,” and then Taleb considers books we now admire that were banned or controversial, like Madame Bovary. But he doesn’t consider other highly criticized books that are now shunned for good reason, like Mein Kampf, or The Protocols of the Elders of Zion. He also doesn’t consider books that are wrong and important and should be relegated to the highly of ideas, like Das Kapital, which still gets read and taken seriously in some academic precincts. All three are bad books for reasons that have been much discussed, and there is something else that can be very bad for a book: it inspires people to steal things from others or hurt others. That’s what all three encourage.

That’s four samples. And yet he also produces gems like “men of leisure become slaves to inner feelings of dissatisfaction and interests over which they have little control.” In many ways I am reminded of Camille Paglia, who also has much to say about the ruthlessness of nature, often mentions prostitutes, and often goes further than her evidence or ideas merit. Yet as far as I and Google know, very few others have observed the connection.

Let’s talk some more about the positive; one chapter in Antifragile, “Skin in the Game,” is an especially important way to assess the world and assess risk. Taleb quotes Hammurabi’s code:

If a builder builds a house and the house collapses and causes the death of the owner of the house—the builder shall be put to death. If it causes the death of the son of the owner of the house, a son of the builder shall be put to death. If it causes the death of a slave of the owner of the house—he shall give to the owner of the house a slave of equal value.

Someone who puts people at risk should be at equal risk themselves. CNN just published “Yemen says U.S. drone struck a wedding convoy, killing 14,” in which 14 people were murdered by the United States; they are probably classified internally as “collateral damage” or by some similarly Orwellian euphemism (although “U.S. officials declined to comment on the report,” because why does the truth matter, anyway?). Imagine that those who ordered or authorized the strike would have their own husbands and wives and children killed in proportion to the number of civilians they killed. No one would order such strikes.

Nor would politicians authorize such strikes if the struck could vote, or if CNN and Fox News covered them for weeks or months at a time, as they would if something similar happened in the U.S. As Conor Friedersdorf correctly observed in The Atlantic, “If a Drone Strike Hit an American Wedding, We’d Ground Our Fleet.” But those who are launching the missiles have no skin in the game, to use Taleb’s favored phrase.

If someone does something wrong, what bad thing happens to them? If a doctor screws up too badly, they at least get sued. But if, say, a teacher’s students can’t read or do math, nothing bad happens to them. Long before I read Taleb, I remember explaining to students that, if they emerge from my classes unable to write effectively, nothing bad happens to me—I’ve never heard about a U of Arizona T.A. being fired for incompetence. The only bad things happen to them, in that they won’t be as good at writing or reading as they would be otherwise. That seemed to be a revelation to them: I don’t think they’d considered how they, not their teachers, bear the risks of a lousy education. Those risks are even more pronounced at the high school level, where most public school teachers are unionized and can’t really be fired.

Academia and government share the property of not having much skin in the game. As Taleb says, “An academic is not designed to remember his opinions because he doesn’t have anything at risk from them.” You often don’t get tenure for being right; you get tenure for publishing, regardless of whether what you’ve said is right.

In his books Taleb is weirdly reluctant to address global warming and climate change, which may be the ultimate nonlinear Black Swan system of our age—prone to sudden shocks that may have catastrophic results. There is a brief mention of the issue on page 415 of Antifragile, but he doesn’t discuss the issue in any detail. The collective response of the world to these dangers is to shrug, make minor changes, and hope for the best.

The danger is real and yet almost no one does anything significant to mitigate those challenges—though the risk of catastrophic change is extraordinarily high and the things that could be done to reduce it are relatively easy compared to what may come. Taleb implicitly endorses action when catastrophic risks are high even when probabilities are low in this section:

which is more dangerous, to mistake a bear for a stone, or mistake a stone for a bear? It is hard for humans to make the first mistake; our intuitions make us overreact to the smallest probability of harm and fall for a certain class of false patterns—those who overreact upon seeing what may look like a bear have had a survival advantage, those who made the opposite mistake left the gene pool.

The metaphor is clear, yet he barely addresses, either in The Black Swan or Antifragile, the way we might be making the global climate extremely fragile through our use of fossil fuels. In the U.S., some of the obvious means to mitigate fossil fuel usage, like building denser urban cores or switching towards nuclear power, are barely on the national agenda and, even when they are on the national agenda, they can easily be blocked by short-sighted local NIMBYs. Nuclear power is particularly curious, since coal power emissions kill far more people in the West than any form of nuclear power. But coal kills people slowly, over time, and mostly invisibly; it never ends up in the news, while any problem with nuclear power sears the media’s collective eyes.

Overall, with climate change, we may be mistaking a bear for a stone, and we may collectively pay the price.

Since Taleb has cultivated an outsider’s persona and portrayed himself, often accurately, as a teller of truths no one else wants to hear, or whose logic others attack despite its accuracy, he seems to have decided that attacks on his logic or his perceived truths automatically make his logic or perceived truths correct. But that’s a simple error in itself, since the attacks are not sufficient to show that he is right, and with any much-attacked thinker there is a danger in becoming so impervious to outside criticism that the work suffers. I suspect that Taleb has moved into that latter category, and there may be an interesting psychological meta narrative about how he moved from his initial outsider, but intellectually rigorous position, to a hybrid insider-outsider in which he no longer feels as compelled to write tightly and correctly as he did before fame (justifiably) found him.

Success breeds the danger of surrounding yourself with yes-men, but a good editor should be the opposite and should tell you hard truths that you don’t necessarily want to hear. Taleb, one feels, is not the sort of guy looking for constructive disagreement. Yet despite the mess in the book, some of its ideas are important. If I were a philosopher I’d be more willing to excuse bad writing and a dubious execution. Since I’m not, it’s hard to get past the book’s many moments in which I went, “That’s not right” or “That doesn’t belong.” But Antifragile also can’t be dismissed outright, because some of its ideas are important and rarely discussed. Given the form those ideas take, I doubt they will get the attention they deserve.

Life: The readers edition, and Nassim Taleb’s The Black Swan

Both Huet and Bayle were erudites and spent their lives reading. Huet, who lived into his nineties, had a servant follow him with a book to read aloud to him during meals and breaks and thus avoid lost time. He was deemed the most read person in his day. Let me insist that erudition is important to me. It signals genuine intellectual curiosity. It accompanies an open mind and the desire to probe the ideas of others. Above all, an erudite can be dissatisfied with his own knowledge, and such dissatisfaction is a wonderful shield against Platonicity, the simplifications of the five-minute manager, or the philistinism of the overspecialized scholar. Indeed, scholarship without erudition can lead to disasters.

—Nassim Taleb, The Black Swan, a book that I had erroneously believed I had already “read” through the many references to it made by other books and articles. I turned out to be completely wrong, as the book is still original and almost every page has some unexpected insight; like Jonathan Haidt’s The Righteous Mind I consistently cannot predict the brilliant observations and extensions that come from the unfurling of a basic idea that is simple to understand.

Regarding the quote itself, I would add that it is not only the quantity of reading but the quality that makes erudition; reading a great number of, say, romance novels is unlikely to yield the erudition of reading broadly yet deeply. Reading a few romance novels might be essential to deep thinkers, however, for reasons that I will leave to you, or to commenters, to explain.

I also have defended reading, especially to those who say they somehow do not “have the time,” by pointing out that books often encompass years or decades of a writer’s life and thinking in a volume that can be read in just a few hours; who would not want the wisdom of 20 years distilled into an easily digestible chunk? Yet apparently many people don’t want such a gift, which is widely available for $10 – $15 at bookstores or for less from Amazon or free from many libraries. Satisfaction with your own knowledge is a sign that a mind has become barren without even realizing its own barrenness.

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