Submitted by Taps Coogan on the 18th of March 2018 to The Sounding Line.
Legendary trader, risk analyst, and author, Nassim Taleb, recently spoke with Bloomberg to discuss his recent book ‘Skin in the Game’ and the importance of dis-incentives in markets and life. Nassim notes:
“Since the beginning of time, 4,000 years since the beginning of civilization, we have had rules that don’t allow the architect to build a structure and then walk away if it collapses and kills people… ‘Skin in the game’ is a filter. It’s an evolutionary mechanism. If you don’t have very dangerous drivers on the road, it’s because they own their own risk… They’re likely to die in an accident. If you have a bad driver not likely to die in an accident and not likely to be penalized, we’ve got a problem.”
“99% of the people you see are calibrated… They don’t inflict more harm on society than they take. Drivers are calibrated. Butchers are calibrated… most people. Except for policy makers, people in the profession we are rebelling against. In Italy they are rebelling against this. Bureaucrats, they have absolutely no penalty if they encourage the government to attack… regime change in Libya. People are detecting, I know from the mail I am getting, particularly from Italy, people understand that you have a class of people who are not accountable. If you live in a community you have skin in the game in the sense that you live with the consequences of your decisions. If you are sitting in an office with a spreadsheet, no… We have to worry not just about Europe. The United States. There is a whole class. Now people are going after the pseudo-experts… and they are not penalized because they have no contact with reality. They’ve got no P&L of their own and they are not penalized when they make a mistake. Someone else pays the cost.”
There is much more to the interview so enjoy it below.
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