Skin in the game

I admire people who put their necks on the line, and share risk. I dislike people who try to push off risk, unfairly, to other people. Or the people who fake having skin in the game. And, I get downright formidable when someone with legitimate skin in the game is exploited by someone with no skin in the game at all.

Most people know what it means to have skin in the game. You have a genuine stake in the outcome. You lose something if a venture goes sideways. If a decision made affects you, your family or business, your community or something that you care about.

What’s it mean to fake having skin in the game? Well, mercenaries—militias in war or for-hire protesters—take some risks.  With their security. With their reputations. Yet they can also walk away. If the war is lost, or the anti-pipeline advocacy fails, they move on to the next gig. It’s the locals who have the real skin in the game.

Recently, there has been a surge in accusations of one country interfering in the politics of another. Manipulating democracy from afar is an age-old tactic. The Greeks and Romans railed against it.  And, it remains, alive and well. Australians, for example, are afraid of Chinese influence on their political actors. There is the drama of Russian interference in the U.S. election of President Trump. In Canada, we’re not so much worried about American influence on our government as we are our neighbour’s fingers  in our regulatory decisions and energy economy.

When this happens, it makes my blood boil. Yours too, I expect. Why? Because these players are exploiting the rights of legitimate citizens who do have skin in the game. Australian businesses. American voters. Canadian regulators and taxpayers.

What does this have to do with beyond polarity? Often, too often, the fakers and especially the exploiters are behind the amplification of polarizing messages. They direct their influence on people with legitimate skin in the game, flood echo chambers with their message, and push citizens in one direction or another on an issue. Vote for Trump. Support unconstrained investment by China. Stop building pipelines. Yet they have no real skin in the game. They exploit legitimate players, driven by self interest and armed with the awareness of what makes people tick.

Don’t get me wrong. There are issues where all of us, arguably, can credibly find some skin in the game. Climate change champions would tell us we all have skin in the ‘game’ of protecting Mother Earth. Hard to deny. Carbon emissions and pollution don’t recognize man-made or economic borders.

So, when is it wise and fair:

  1. To want others to have skin in the game? The risk-sharers.
  2. To challenge those who pretend to have skin in the game? The fakers.
  3. To rail against those who abuse your legitimate skin in the game? The exploiters.
  4. To take risks or sacrifice for others? The soulful.

Noticing who has skin in the game.

As a lawyer, I enjoyed working inside energy companies more than working as an outside advisor. Why? Because I preferred to have skin in the game. I’m a comfortable risk-taker.

If I was influencing a corporate decision from the inside—or even making the decision—I lived with the consequences. If I was an outsider, providing advice, it was never my decision to make. I could influence decision-makers. And cared about building trust. But at the end of the day, my only risks were reputation and compensation.

I was a mercenary. It wasn’t my neck on the line if a decision proved to be unwise.

I prefer having skin in the games I’m playing. And most of the time, I prefer that others around me have skin in the game too.

AAFDCAA7-CB65-411A-B1ED-FF91A50F0E4E-3109970744-1521570075986.jpegNassim Nicholas Taleb, the Black Swan guy, just released a new book, Skin in the Game. Taleb believes forcing people to assume skin in the game corrects the asymmetries between risk and reward better than thousands of laws and regulations.

Sharing skin in the game corrects the asymmetry between people who accept risk and those who get rich without owning the risk. The latter guy, with no skin in the game, is “immune to the possibility of falling off his pedestal, exiting his income or wealth bracket, and waiting in line outside the soup kitchen.” Good example? Those who walked away from the 2008 bank blow-ups without scars.

“Never trust anyone who doesn’t have skin in the game. Without it, fools and crooks will benefit, and their mistakes will never come back to haunt them.”

Skin in the game is the backbone of risk management. And, Taleb argues, skin in the game creates the symmetry needed for fairness and justice.

It’s the “ultimate BS-buster.” Ah, yes, BS-detection, a shared aspiration.

Faking skin in the game.  

There are lots of examples where ‘outsiders’ have intervened to ‘help’ or even ‘save’ locals. Taleb talks of America’s role in Iraq and Libya. For me, Yemen comes to mind. Both Saudi and Iran coming to the rescue of Yemeni citizens. Recently, Saudi officials told The Wall Street Journal they have carried out more than 145,000 missions over Yemen in the last 3 years. Who pays the price for the mistakes of these interventionists? The locals.

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I’ve written lots about how precious the power of decision-making is –not just being the person with the authority to make a decision—but influencing or even blocking a decision. Taleb goes further: “Those who don’t take risks should never be involved in making decisions.”

They are faking it. They don’t have any real skin in the game.

We don’t have to go to the Middle East or North Africa to find examples of people faking having skin in the game.

Truly, I respect the vast majority of the bureaucrats I’ve worked with. Yet there are a few whose clinical attitudes to policy choices, and the human outcomes jar me. The thought bubble sounds like this:

Yes, I’m an employee in this government office. But I’m the bureaucrat, conveniently separated from the consequences of my recommendations and decisions. Whatever happens, I survive. One more pensionable day. 

I could say the same about a few tenured academics, too.

Exploiting those with legitimate skin in the game.

Sometimes, a decision to intervene in someone else’s game is virtuous. We sincerely believe we can rescue others. Sometimes, the decision to intervene is selfish. Someone wants to press a fat finger on the scales of competition. Or worse, someone seeks an illegitimate voice in someone else’s democracy.

Right now, powerful people, organizations and even States are distorting and intensifying points of ideological disagreement. Feeding polarity on critical issues. Why? To take advantage of the very citizens who have actual skin in the game.

FBDE4E3A-F3B3-42DC-AA77-350E56C346D8New media is a powerful amplifier, enabling polarized messages to be disseminated far and wide. Social media was used by Russians to infiltrate the American electorate and pull voters in Trump’s direction.

Well-funded advocacy—paid for by those with no skin in the game, targeted at those with legitimate skin in the game—has encouraged the shutting down of the oilsands, the promotion of foreign ownership of businesses.

What would I like to say to these would-be puppet-masters? Do not treat others the way you would not like them to treat you. It’s a bit of a twist on the Golden Rule. One heartily recommended by Taleb.

It’s advice that’s been around a long time too. In the 5th century B.C., Isocrates, an Athenian orator, said:

Deal with weaker states as you think it appropriate for stronger states to deal with you.

The wisdom still holds. Though it seems mighty difficult right now for superpowers to fathom the notion of dealing with a stronger state.

Put your Soul into the Game.

Taleb isn’t just focused on risk management. Think about times you take risks, or sacrifice something significant, for the sake of others. Taleb calls this putting soul into the game. It’s more than skin deep.

Entrepreneurs are notorious for putting skin and soul into the game. Taleb points to Google, Facebook, Microsoft and Apple. All started by people with skin and soul in the game, and grew organically.

February 2018 234How do you put skin and soul into the game? You may pay more to ‘buy local’ to support local businesses and farmers. Artists and artisans create for the sake of art first, and for commercial and economic reasons as a secondary driver.  This beyond polarity blog site exists because I’m committed to sharing my views on the dangers of either/or thinking. People who feed polarities, especially for their own advantage, would prefer that I shut up. My skin and soul is in this game. I’m willing to be vulnerable because it matters to me. 

Don’t give up on Dialogue and Reason and Good-faith.

And yet, I don’t want any of this skin in the game wisdom to mutate into some kind of virtuous, self-righteous, finger-pointing morass. So, let me conclude with a quote from C.S. Lewis, called “Bulverism”:

You must show that a man is wrong before you start explaining why.

What does Lewis mean? Paying attention to who has skin in the game, and who doesn’t, is vital. Yet Lewis is suggesting that we can’t just look to motives and assume our ‘opponent’ is illegitimate, evil or wrong. That shuts down reasoning and dialogue. Lewis had a tenacious belief in the power of reasoning (and was quite critical of the ‘self-contradictory idiocy’ he saw instead).

So, with Lewis’s message in your ear, I encourage you to think about what skin you have in your game. Consider who else has genuine skin in the game, and who does not. Use reasoning, dialogue and good-faith to figure out how risk can be shared more fairly.

And when you catch someone with no skin in the game exploiting a situation, show that the person is wrong before you start explaining why. It’s a far more effective way to knock them off their pedestal, to level the playing field and give justice a chance.

Donna Kennedy-Glans, March 21, 2019

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4 thoughts on “Skin in the game

  1. Thanks for your insightful Blog Donna. Very clear to me as one with skin in the political game. How do we clarify for “others”
    Wendy Andrews

    1. Thanks Wendy. Yes, you DO have skin in the political game. I wouldn’t suggest holding a mirror up to others. That hasn’t gone down well in Alberta. But when you are at the proverbial table, maybe incorporate this point into the conversation. When people put their name on a ballot, or on a political campaign, or party, there are consequences. We shouldn’t be afraid of the risk. But acknowledge it. Recognize it. And laid it. When people with no skin in the game, or fake skin, claim to speak for others, clarify!

  2. Great piece but Donna who has skin in the game for the 2026 Olympics? Nenshi or the Calgary taxpayer?

    1. Haha. We all do Marcel. Nenshi is unlikely to be Mayor then, which gives him a little less obvious motivation. But, it would be nice, I’m sure, to have your name on the winning bid. As for taxpayers, oh yah, we all have skin in this game. A lot of skin.

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