8 ms·

With the company's president as one of the passengers this is a rare example where "skin in the game" didn't offer much insurance (or assurance). edit: Actuall

by ak_111 3y ago

With the company's president as one of the passengers this is a rare example where "skin in the game" didn't offer much insurance (or assurance). edit: Actually it seems the person responsible for saftey wasn't on board (he got fired) and you can claim his skin was much more important to be in the game if you were looking for assurance

hsjqllzlfkf 3y ago
Yeah. Some times the guy at the top puts others in danger because he doesn't care. Other times, because he doesn't know any better.
- BurningFrog 3y ago
  And sometimes taking a calculated risk goes badly the way you knew was possible.
mjb 3y ago
Is it a rare example, though? Taleb and others spread this idea that "skin in the game" is some kind of magical anecdote to faulty thinking, incomplete risk analysis, incorrect application of heuristics, and other things. That just doesn't seem true. Lots of people do risky things every day based on social proof, or familiarity, or commitment, or scarcity, or many of the other risk-perception-altering heuristics that govern our lives. We do it when we drive, when we drink, when we ski, and in all kinds of other occasions. "Skin in the game" seems like an extremely faulty heuristic in its own way, with little evidence to support a strong assurance effect. Conversely, I know lots of people who take risks themselves who'd never recommend the same risks to others (especially outdoor and motor sports enthusiasts). That's the opposite of Taleb's hypothesis.
- ak_111 3y ago
  "Rare" might be a strong word, but I would have order of magnitude more confidence living in an apartment if I know the head engineer who supervised its construction lives in the top floor. Or I would feel 10x more confident in an investment if I know its seller has a significant amount of his net worth invested in it. It is a very natural heuristic and has a long history. Where it mostly fails is incompetence, some might have the best intention of something succeeding but their best effort is still not worth much.
  - escapedmoose 3y ago
    Seemingly, “skin in the game” is only assurance against getting scammed, not incompetence.
    - mrguyorama 3y ago
      And specifically only protective against getting scammed by someone who does not believe their own bullshit, which isn't always the case.
    - BurningFrog 3y ago
      There is also a big "grey zone" where people will do a good job when evaluating security for others, but a really good job with their own security. You could think of this as avoiding "a scam", but there is no conscious intention involved.
    - throw9away6 3y ago
      Madoff had skin in the game it didn’t help
  - bombcar 3y ago
    It fights against one kind of incompetence (direct and deliberate fraud) but it doesn't remove a bunch of other types. Many people will happily live in a deathtrap because they don't really think anything will happen to them.
  - MrJohz 3y ago
    I don't doubt you would have more confidence, but human estimations of risk tend to be very poor. So it would still be useful to see whether that sort of belief holds true: that is, whether people who "have skin in the game" really do take fewer risks. And even if that were the case, it's still quite a complex calculation to make. Let's say there are two architects building a tower block with the knowledge that they will be living in the top floor when it's built. One of them has little appetite for risk and builds their skyscraper very safely, without any real deviation from classic proven standards. Meanwhile, the other architect is much more open to risk and designs their skyscraper using brand new ideas and techniques. Both of them are equally happy to stay in the top floors of their buildings, but are the two buildings equally safe and risk free?
- VoodooJuJu 3y ago
  Skin in the game is neither magical or infallible, and nothing is. It is the greatest display of trust/confidence that we have. We can't have perfect, so this is what we have.
  - ericd 3y ago
    Thanks, you said it better than I could have. I feel like engineers frequently get stuck in this “perfect or worthless” mindset. Putting your life on the line is a hell of an incentive.
- BurningFrog 3y ago
  I doubt anyone serious has claimed is a magical antidote to faulty thinking. It does provide strong incentives, which you should trust a lot more than words. Your point that some people are daredevils who don't care too much about personal risk is interesting though. Hadn't thought about that.
  - mjb 3y ago
    They aren't just daredevils, though. Check out "Heuristic Traps in Recreational Avalanche Accidents" http://www.sunrockice.com/docs/Heuristic%20traps%20IM%202004.pdf http://www.sunrockice.com/docs/Heuristic%20traps%20IM%202004... for one interesting example: a lot of these people would think of themselves as cautious and informed, and still fall prey to heuristic traps (and, many explicitly don't recommend their sport to others, who they believe may not be informed enough to apply the same cautions).
- natdempk 3y ago
  I thought that "skin in the game" just means that you feel the consequences of your actions, and are (maybe) forced to learn as a result. I think that doesn't work well for single catastrophic events as you describe because single mistakes are deadly/ruinous/etc. IIRC Taleb is focused more on the field of managing risk for shared-decision-making and aligning incentives, but none of that rules out total failure etc, it just means that everyone bears the consequences.
- ClumsyPilot 3y ago
  They are different failures, we should not be surprised. After all we are not surprised when a man with a parachute drowns. It’s just that we have better categorisation of physical failures than psychological ones.
- AlbertCory 3y ago
  > Taleb and others spread this idea that "skin in the game" is some kind of magical anecdote "some kind of magical anecdote" [sic. You mean "antidote"] I don't think you've even read the book, or you wouldn't say something so devoid of logic. "I know lots of people who take risks themselves who'd never recommend the same risks to others" is a non sequitur. > "Skin in the game" seems like an extremely faulty heuristic in its own way, with little evidence to support a strong assurance effect. The entire book is full of evidence from history.
  - mjb 3y ago
    I did mean "antidote", thanks for the correction. I did read the book, although that was around the time it came out and my memory may be faulty. I remember not being particularly impressed with the level of evidence presented, and the care taken to present that evidence accurately.
    - inimino 3y ago
      I mean, you completely missed the point of what "skin in the game" is about. It's not a magical antidote to anything, nor is it a guarantee of anything. It just means that if the plane goes down, you're on it. The point of antifragility is that the group benefits by the heroic total loss of the individual. This could be wipe out in business or it could be that your submarine didn't work and you were on it. That's not an antidote for anything, but it is a moral safeguard against total disregard.
- bambax 3y ago
  Didn't know about the Taleb part, but you're obviously right. Just because someone has "skin in the game" doesn't tell us anything. We need to know more about said someone, their risk aversion profile and history, and what part of their area of expertise matches the "game" -- if any.
- alan-crowe 3y ago
  I call this issue "Tower Jumpers" versus "Arm Whirlers". I'm taking the names from Inventing Flight by John D. Anderson, Jr. The book is mostly about the Wright brothers. It starts with a discussion of the early history, with brave men inventing wings, strapping them on, and jumping out of towers. Jumping to their deaths. Others were more cautious and built gadgets to help them understand wings and lift. Wind tunnels were invented late. Before wind tunnels they used the whirling arm apparatus. A theme of the book is that outsiders were taken by surprise by the success of the Wright brothers. Outsiders only got to hear of the passion and tragedy of the Tower Jumpers, who were making no progress. Only insiders knew of the Arm Whirlers with their gradual accumulation of knowledge and slow progress. The distinction helps us understand "skin in the game". If you can distinguish between Tower Jumpers and Arm Whirlers, employ only Arm Whirlers. Insisting that they have "skin in the game" will ensure proper caution. If you cannot tell which is which, insisting on "skin in the game" will have an uneven record, with the Tower Jumpers ruining your safety record and their own skin. The trickiest question is: how much skin in the game? Insist on too much and the Arm Whirlers will stay away; they were the risk averse ones. Then you only have Tower Jumpers and insisting on "skin in the game" will help you not at all.
- bandrami 3y ago
  Guides die on Everest more frequently than the rich tourists they haul up and down the mountain. At least this submarine didn't take a bunch of sherpas with it.
- inimino 3y ago
  That's not Taleb's point at all, not even close. The point isn't about whether people take the risk or don't, the point is who is exposed to the risk. The CEO here had skin in the game. He may have been a cowboy taking needless risk, but if so he paid the price. Morally it's a very different thing from making the same set of decisions but never going down yourself. The point of antifragility is the system benefits, even if the individual loses as happened here. The corruption is when the benefits accrue to one set of people and the risks somewhere else.
  - IAmNotAFix 3y ago
    Taleb literally did say that you should never board a plane on which the pilot isn't onboard (such as a drone plane). Unless this was intended to never make you board an unethical plane, he does believe in some sort of insurance related to "skin in the game".
    - inimino 3y ago
      I would never get on a plane with the pilot anywhere but on the plane either. But, the point of skin in the game isn't that it reduces the risk, it's a moral issue of who bears the risk. Skin in the game means you don't get the upside without the downside risk. That's it. It's not some magical pixie dust that makes people act rational, or follow safety protocols.
    - throw9away6 3y ago
      The pilot is more often than not the cause of the accident. Without a pilot airplane would have to be designed to a much higher standard. Right now the pilot is an unreliable fallback
aqme28 3y ago
It's certainly not a rare example. "Inventors killed by their own inventions" is kind of a running joke or a meme. It even has its own wikpedia page: https://en.wikipedia.org/wiki/List_of_inventors_killed_by_their_own_invention https://en.wikipedia.org/wiki/List_of_inventors_killed_by_th...

by ak_111 3y ago

hsjqllzlfkf 3y ago

Yeah. Some times the guy at the top puts others in danger because he doesn't care. Other times, because he doesn't know any better.

BurningFrog 3y ago
And sometimes taking a calculated risk goes badly the way you knew was possible.

mjb 3y ago

Is it a rare example, though? Taleb and others spread this idea that "skin in the game" is some kind of magical anecdote to faulty thinking, incomplete risk analysis, incorrect application of heuristics, and other things. That just doesn't seem true. Lots of people do risky things every day based on social proof, or familiarity, or commitment, or scarcity, or many of the other risk-perception-altering heuristics that govern our lives. We do it when we drive, when we drink, when we ski, and in all kinds of other occasions. "Skin in the game" seems like an extremely faulty heuristic in its own way, with little evidence to support a strong assurance effect. Conversely, I know lots of people who take risks themselves who'd never recommend the same risks to others (especially outdoor and motor sports enthusiasts). That's the opposite of Taleb's hypothesis.

ak_111 3y ago
"Rare" might be a strong word, but I would have order of magnitude more confidence living in an apartment if I know the head engineer who supervised its construction lives in the top floor. Or I would feel 10x more confident in an investment if I know its seller has a significant amount of his net worth invested in it. It is a very natural heuristic and has a long history. Where it mostly fails is incompetence, some might have the best intention of something succeeding but their best effort is still not worth much.
- escapedmoose 3y ago
  Seemingly, “skin in the game” is only assurance against getting scammed, not incompetence.
  - mrguyorama 3y ago
    And specifically only protective against getting scammed by someone who does not believe their own bullshit, which isn't always the case.
  - BurningFrog 3y ago
    There is also a big "grey zone" where people will do a good job when evaluating security for others, but a really good job with their own security. You could think of this as avoiding "a scam", but there is no conscious intention involved.
  - throw9away6 3y ago
    Madoff had skin in the game it didn’t help
- bombcar 3y ago
  It fights against one kind of incompetence (direct and deliberate fraud) but it doesn't remove a bunch of other types. Many people will happily live in a deathtrap because they don't really think anything will happen to them.
- MrJohz 3y ago
  I don't doubt you would have more confidence, but human estimations of risk tend to be very poor. So it would still be useful to see whether that sort of belief holds true: that is, whether people who "have skin in the game" really do take fewer risks. And even if that were the case, it's still quite a complex calculation to make. Let's say there are two architects building a tower block with the knowledge that they will be living in the top floor when it's built. One of them has little appetite for risk and builds their skyscraper very safely, without any real deviation from classic proven standards. Meanwhile, the other architect is much more open to risk and designs their skyscraper using brand new ideas and techniques. Both of them are equally happy to stay in the top floors of their buildings, but are the two buildings equally safe and risk free?
VoodooJuJu 3y ago
Skin in the game is neither magical or infallible, and nothing is. It is the greatest display of trust/confidence that we have. We can't have perfect, so this is what we have.
- ericd 3y ago
  Thanks, you said it better than I could have. I feel like engineers frequently get stuck in this “perfect or worthless” mindset. Putting your life on the line is a hell of an incentive.
BurningFrog 3y ago
I doubt anyone serious has claimed is a magical antidote to faulty thinking. It does provide strong incentives, which you should trust a lot more than words. Your point that some people are daredevils who don't care too much about personal risk is interesting though. Hadn't thought about that.
- mjb 3y ago
  They aren't just daredevils, though. Check out "Heuristic Traps in Recreational Avalanche Accidents" http://www.sunrockice.com/docs/Heuristic%20traps%20IM%202004.pdf http://www.sunrockice.com/docs/Heuristic%20traps%20IM%202004... for one interesting example: a lot of these people would think of themselves as cautious and informed, and still fall prey to heuristic traps (and, many explicitly don't recommend their sport to others, who they believe may not be informed enough to apply the same cautions).
natdempk 3y ago
I thought that "skin in the game" just means that you feel the consequences of your actions, and are (maybe) forced to learn as a result. I think that doesn't work well for single catastrophic events as you describe because single mistakes are deadly/ruinous/etc. IIRC Taleb is focused more on the field of managing risk for shared-decision-making and aligning incentives, but none of that rules out total failure etc, it just means that everyone bears the consequences.
ClumsyPilot 3y ago
They are different failures, we should not be surprised. After all we are not surprised when a man with a parachute drowns. It’s just that we have better categorisation of physical failures than psychological ones.
AlbertCory 3y ago
> Taleb and others spread this idea that "skin in the game" is some kind of magical anecdote "some kind of magical anecdote" [sic. You mean "antidote"] I don't think you've even read the book, or you wouldn't say something so devoid of logic. "I know lots of people who take risks themselves who'd never recommend the same risks to others" is a non sequitur. > "Skin in the game" seems like an extremely faulty heuristic in its own way, with little evidence to support a strong assurance effect. The entire book is full of evidence from history.
- mjb 3y ago
  I did mean "antidote", thanks for the correction. I did read the book, although that was around the time it came out and my memory may be faulty. I remember not being particularly impressed with the level of evidence presented, and the care taken to present that evidence accurately.
  - inimino 3y ago
    I mean, you completely missed the point of what "skin in the game" is about. It's not a magical antidote to anything, nor is it a guarantee of anything. It just means that if the plane goes down, you're on it. The point of antifragility is that the group benefits by the heroic total loss of the individual. This could be wipe out in business or it could be that your submarine didn't work and you were on it. That's not an antidote for anything, but it is a moral safeguard against total disregard.
bambax 3y ago
Didn't know about the Taleb part, but you're obviously right. Just because someone has "skin in the game" doesn't tell us anything. We need to know more about said someone, their risk aversion profile and history, and what part of their area of expertise matches the "game" -- if any.
alan-crowe 3y ago
I call this issue "Tower Jumpers" versus "Arm Whirlers". I'm taking the names from Inventing Flight by John D. Anderson, Jr. The book is mostly about the Wright brothers. It starts with a discussion of the early history, with brave men inventing wings, strapping them on, and jumping out of towers. Jumping to their deaths. Others were more cautious and built gadgets to help them understand wings and lift. Wind tunnels were invented late. Before wind tunnels they used the whirling arm apparatus. A theme of the book is that outsiders were taken by surprise by the success of the Wright brothers. Outsiders only got to hear of the passion and tragedy of the Tower Jumpers, who were making no progress. Only insiders knew of the Arm Whirlers with their gradual accumulation of knowledge and slow progress. The distinction helps us understand "skin in the game". If you can distinguish between Tower Jumpers and Arm Whirlers, employ only Arm Whirlers. Insisting that they have "skin in the game" will ensure proper caution. If you cannot tell which is which, insisting on "skin in the game" will have an uneven record, with the Tower Jumpers ruining your safety record and their own skin. The trickiest question is: how much skin in the game? Insist on too much and the Arm Whirlers will stay away; they were the risk averse ones. Then you only have Tower Jumpers and insisting on "skin in the game" will help you not at all.
bandrami 3y ago
Guides die on Everest more frequently than the rich tourists they haul up and down the mountain. At least this submarine didn't take a bunch of sherpas with it.
inimino 3y ago
That's not Taleb's point at all, not even close. The point isn't about whether people take the risk or don't, the point is who is exposed to the risk. The CEO here had skin in the game. He may have been a cowboy taking needless risk, but if so he paid the price. Morally it's a very different thing from making the same set of decisions but never going down yourself. The point of antifragility is the system benefits, even if the individual loses as happened here. The corruption is when the benefits accrue to one set of people and the risks somewhere else.
- IAmNotAFix 3y ago
  Taleb literally did say that you should never board a plane on which the pilot isn't onboard (such as a drone plane). Unless this was intended to never make you board an unethical plane, he does believe in some sort of insurance related to "skin in the game".
  - inimino 3y ago
    I would never get on a plane with the pilot anywhere but on the plane either. But, the point of skin in the game isn't that it reduces the risk, it's a moral issue of who bears the risk. Skin in the game means you don't get the upside without the downside risk. That's it. It's not some magical pixie dust that makes people act rational, or follow safety protocols.
  - throw9away6 3y ago
    The pilot is more often than not the cause of the accident. Without a pilot airplane would have to be designed to a much higher standard. Right now the pilot is an unreliable fallback

aqme28 3y ago

It's certainly not a rare example. "Inventors killed by their own inventions" is kind of a running joke or a meme. It even has its own wikpedia page: https://en.wikipedia.org/wiki/List_of_inventors_killed_by_their_own_invention https://en.wikipedia.org/wiki/List_of_inventors_killed_by_th...