Monthly Archives: December 2015

Skin In the Game | Nassim Nicholas Taleb


Skin In the Game

The Logic of Risk Taking

Nassim Nicholas Taleb

Skin In the Game is the fifth volume of the Incerto  which, to repeat, can be read in any order.
Below are selected chapters for comments. It is work in progress.

Never take advice from a salesperson The notion of equality in uncertainty

The domination of the stubborn minority How Europe will eat Halal, why GMOs will be history

The logic of risk taking  The two central chapters: why rationality is precaution, how to reconcile prudence and courage, why critics of ebola-worries are idiots but not those of flying vs driving, etc.

The skin of others in your game Why celibacy has been the only way to be ethically uncompromised; how to punish terrorists; how Ketchum runs smear campaigns

How to own a slave An employee is precisely someone who signals skin in the game and fear of losing a job. A revision of Coase’s theory of the firm

The pope is overtly atheist Without skin in the game, worship never reveals preferences

Life is not a pecking order

Silent Risk, Pascal’s Wager, Baal, Skin In the Game, Trump, Clinton-Malmaison, Gary Ruskin, Popper

Friends, I promised to deliver in the next few hours a discussion of the most neglected fragilities and the most overestimated risks. We can tell fragility when we see it… but we first need to look at it.

I won’t say for now what I came up with but would love for you to contribute suggestions. Don’t be shy, don’t be afraid to be out there, but please observe salon rules. And, for Baal’s sake, let’s all be brief.

Friends, we made a page for the precautionary principle (Facbook) with application to GMOs, with a variety of articles.

1) It looks like PR promoters/smear campaigners are so dumb that they don’t know that we know that they are dumb.

2) Calling GMOs “transgenics” (moving genes from one organism to a different one) better reflects their nature as genetic modification is too vague a designation.

What I think is my central piece from *Skin in the Game* (Facebook) explaining risk-loving and precaution can live together, how risk taking has a distinct logic (similar to quantum logic)… Risk management is boring, risk taking is exciting; how the two can be reconciled. How can we reconcile Aristotelian precaution and courage, both considered virtues?

A book isn’t just its contents; it’s a state of mind. (Facebook)

Note: Without a state of mind, a book never survives. Also note that *almost* no book from 15 years ago has survived.

Friends, this is technical. (Facebook) Here is the “Statistical Estimators Under Fat Tails Project” and my small contribution to it during 2015 (7 papers). One can see that very little has been done to understand random events under Extremistan and there is a lot, a lot to do.

Social networks are a great place for convex optionality. (Facebook) In 2015, I met three collaborators, two co-authors (one probabilist, one economist who specializes in inequality) and one business partner on Twitter (a partner with the Real World Risk Institute). I do not think that I would have been able to initially run into these three collaborators in the physical world, no matter how many parties I had attended (I attended a lot, a lot of parties in 2015). You can tell from people’s twitter conversation whether there can be a possible technical collaboration.

Ironically these technical matches revealed themselves through arguments during fights in my antiBS crusades (such as the Pinker-BS problem). Social life (physical, that is) is too harmonious, too devoid of fights and arguments for some skills to be made apparent.

Antifragility | NECSI

The program will include lessons from Taleb’s current research and his New York Times bestseller Antifragile, including:
How to spot fragility
What antifragility is
Why it is better to be antifragile than smart
How not to mistake a cat for a washing machine
Heuristics and rules to simplify life and decision making
These will be paired with insights from Yaneer Bar-Yam’s current research and book Making Things Work, drawing upon case studies from financial markets, healthcare, systems engineering, the military, and other topics. Lessons include:
What complexity is Ways to recognize and use important patterns in a complex world How to harness the power of self-organization to be naturally antifragile
How to assess the metaview
Global risks, cascading crises, and the “new normal”Participants will be part of an open discussion and will leave with tools relevant to their organizations.

Source: Antifragility | NECSI

Convex Optionality, Fat Tails, Antifragile, Math Puzzle, GMOs, Risk Minds, Smear Campaigns, Eggplant

Let me rephrase the point of Antifragile (via Facebook) and put some clarity in the discussions. The idea is to be chance, “risk”, and uncertainty loving where chance, “risk” and uncertainty are beneficial, and risk averse in domains with ruin problems.

The ancients understood how both courage and prudence were virtues, and how there was no incompatibility between the two –simply they didn’t apply to the same domain. (More on that, soon).

The “verbalistic” takes over rather quickly. Many people don’t nuance risk properly, especially when educated: they conflate it with variations and think that *exposure to ruin* and *risk taking* belong to the same category. They are not the same animal. Concave is not convex, fragile is not antifragile; fat tails are not thin tails, etc.

What I just wrote seems trivial, but if you take a look at the not yet dismissed “scholarly” but in fact verbalistic and verbose literature (Cass Susstein-style, particularly about “nudging”), it seems largely resting on ill-defined terms and conflated concepts. We keep seeing bigwigs conflating Ebola with falling from ladders, GMOs with agriculture, etc., leading to misdefinition of rationality.

Just a brief stop for some clarity. Have a nice weekend.


People can only be social friends if (via Facebook) they don’t ty to outsmart one another. Indeed, the classical art of conversation is to avoid any imbalance as in Baldassare Castiglione’s Book of the Courtier: people need to be equal, at least for the purpose of the conversation, otherwise it fails. It has to be hierarchy free and equal in contribution. You’d rather have dinner with your friends than with your professor, unless of course your professor understands “the art” of the conversation.

Indeed, one can generalize and define a community as a space within which many rules of competition and hierarchy are lifted, where the collective prevails over one’s interest. Of course there will be tension with the outside, but that’s another discussion. This idea of competition lifted within a group or a tribe was the idea of the late Elenor Ostrom.

This is brilliant! (via Facebook)
I swallow my reluctance to TED and TEDx to show this wonderful message on how fake grassroots are built on social media and…how easy it is to spot!

In this eye-opening talk, veteran investigative journalist Sharyl Attkisson shows how astroturf, or…



Friends, Ralph Nader called me recently (via Facebook) to warn me that I was going to be subjected to a smear campaign by Monsanto and friends, throwing anything they can to undermine my credibility, “throwing everything except the kitchen sink”. They care so much about their business there is nothing they wouldn’t throw at me. Nothing. He, himself, was subjected to a nasty smear campaign by GM fifty years ago.

Fughedabout the “victim” business. And it is not about enemies building you up, that’s not the point. There a *real thrill* feeling that you are risking something for your ideas. The more risk, the more skin-in-the-game, the more thrill.

The more they attack you, the more skin-in-the-game, the more you feel honorable. I cannot describe the sentiment: all I can say is that it is the exact opposite of shame.


Thanks all for the help, (via Facebook) the persistence, and the unwavering fight against BS vending. Looks like our precautionary principle paper was used as back-up for the decision by the supreme court of the Philippines against GMOs.

People get rigorous arguments; trying to repress truth and logic is like trying to keep a balloon under water, or Fat Tony away from the fridge.

Looks like a combination of persistence and … f*** you money (which I repeat is is not about money but the moral attitude towards bullying authorities) works.…/5495025

The Philippines Supreme Court permanently halted the field testing for genetically modified eggplant, Bt (Bacillus thuringiensis), upholding the decision of the Court…

Precaution, GMOs, Pvalue, Vlad Putin, Bill Easterly, John Grays, Bent Flyvbjerg, MedNexus, Turkey/s

Two young (motivated) friends have started a project to Uberize medicine and medical information, removing noise from medical search. I am running with them a (sort of) symposium here on the idea.

Please comment. Be tough, unrelentlessly inquisitive.
The project is very important *if* it allows the right transparency without interference from the big corporations. As you recall from the New York Times files, we have evidence that Monsanto discussed with a shill (Folta) the manipulation of entries on WebMD. Will access to multiple sources protect us?

So please ask them such questions as 1) how this system ensures independence, 2) whether they have the right filters, 3) what you like or don’t like about it, etc.

Anything that bypasses the middleman is good for us, if done properly.



Recall from Antifragile and earlier discussions here that a doctor’s answer would be different if you put (emotionally speaking) his skin in the game by asking him “what would you do?” instead of “what should I do?”

The opposite works equally well. A trick I did use as a trader: under pressure, to remove the emotional burden and the loss of mental clarity, you imagine that you are someone else in the situation. That someone else should be some precise person, in flesh and blood, say X. What should X do now? buy more? liquidate, etc. It applies to any decision, say “should X buy this house?”

You can use the strategy in a lot of dilemmas. Replace yourself with X, and ask: “should X resign because of ethics?”


Now our examination of GMO problem is taking us in an interesting territory. The initial work was essentially probabilistic — since few people understand both probability and fat tails, it was counterintuitive to many “scientists” (most scientists can’t even get P-values correctly to understand fat tails).

Luckily there is a huge crowd of computer scientists and mathematicians involved or familiar with the so-called P/NP problem and algorithmic complexity in general. They immediately get that:

1) selective breeding is different from insertion of remote genes from a combinatorial standpoint and how nature has to tinker in close, not remote space (genes from vicinity without going very far) to ensure stability

2) understanding the impact on a high dimensional environment of trangenics/GMOs is not possible

also not covered here, that genetics are neat to impress people with science but we will have a hard time understanding how things interact, and so long as P !=NP we will NEVER get things through genetics that we can check via experience and long term testing.