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the skin in the game heuristic relates directly to the virtue of being such that the system will not only survive uncertainty, randomness, and volatility but wi
by jdmitch 13y ago
the skin in the game heuristic relates directly to the virtue of being such that the system will not only survive uncertainty, randomness, and volatility but will actually benefit from it.
Doesn't Taleb mean that the 'skin in the game' heuristic will prevent uncertainty, randomness and volatility in the system rather than bring benefit? Within examples such as the 07-08 financial crisis, which he must be referring to indirectly, 'skin in the game' would have meant less risk-taking, therefore reducing volatility. But I can't see how the system would have actually benefited from volatility.
- bdcs 13y agoTaleb defines a system as "anti-fragile" if it benefits from volatility. His previous works build up a mathematical framework for distinguishing between things which are harmed by fragility, things which are neutral to fragility, and things which are benefitted from fragility, which are fragile, robust, and anti-fragile, respectively.
- jfasi 13y agoWhat's so mathematical about it? It has lots of pretty graphs and charts, but as far I could tell, it's just philosophy masquerading as mathematics.
- md224 13y agoI was a bit confused by this too, but perhaps he means that in an ideal system of universal skin-in-the-game, volatility and chaos will serve to optimize the system by triggering failure for those who took risks unwisely and, therefore, providing negative/corrective feedback to the system overall. In other words, if you want a system to evolve robustness, you probably want to expose it to a diverse array of inputs.