Wednesday, April 11, 2018

My Amazon Review of Nassim Nicholas Taleb's "Skin in the Game: Hidden Asymmetries in Daily Life"


Not another “Black Swan”

I was disappointed with Nassim Nicholas Taleb’s “Skin in the Game.” It is more a stream of consciousness than a path breaking work. It would have been much better as a long magazine article. That, at least, would have avoided his ceaseless repetitions as to why he hates academics, economists, Robert Rubin, Goldman Sachs and Monsanto.

That said there are real kernels of the book that are important. First as the title suggests that advice coming from those who have who have no skin in the game is, at best, useless and at worse harmful. Simply put those advisors suffer no consequences if they give bad advice. Simply put this is Taleb’s “BS” detector. He next notes how tiny minorities have the ability to enforce majoritarian preferences. For example making most foods in the West Halal compliant is very important to Moslems but is not material for non-Moslems so non-Moslems have no problem eating Halal compliant foods.

Finally, and this is really important, Taleb notes the difference from what I would characterize as inter-temporal probability with cross sectional probability. His example is Russian roulette. If 100 people played Russian roulette for a million dollars the expected value of the individual payoff would be $833,000 (5 chances in 6 of surviving and thus winning). However if one person played the same game with the same payoff 100 times, he/she would be dead. Thus the risk of ruin is understated in most financial models. In other words you have to stay in the game in order to ultimately win.

Thus if Taleb edited down his book into a much smaller format I would have rated it much higher. However in its current form it is a slog.






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