Excerpts from the book Skin in the Game Part 1

The flaws of global interventionistas:

1. The first flaw is that they are incapable of thinking in second steps and unaware of the need for them—and about every peasant in Mongolia, every waiter in Madrid, and every car-service operator in San Francisco knows that real life happens to have second, third, fourth, nth steps.
2. The second flaw is that they are also incapable of distinguishing between multidimensional problems and their single-dimensional representations—like multidimensional health and its stripped, cholesterol-reading reduction. They can’t get the idea that, empirically, complex systems do not have obvious one-dimensional cause-and-effect mechanisms, and that under opacity, you do not mess with such a system.
3. The third flaw is that they can’t forecast the evolution of those one helps by attacking, or the magnification one gets from feedback.

The interventionista case is central to our story because it shows how absence of skin in the game has both ethical and epistemological effects (i.e., related to knowledge). We saw that interventionistas don’t learn because they are not the victims of their mistakes, and, as we hinted at with pathemata mathemata:

The same mechanism of transferring risk also impedes learning.

More practically,

You will never fully convince someone that he is wrong; only reality can.

Actually, to be precise, reality doesn’t care about winning arguments: survival is what matters.

For

The curse of modernity is that we are increasingly populated by a class of people who are better at explaining than understanding,

or better at explaining than doing.

So learning isn’t quite what we teach inmates inside the high-security prisons called schools. In biology, learning is something that, through the filter of intergenerational selection, gets imprinted at the cellular level—skin in the game, I [the author] insist, is more filter than deterrence. Evolution can only happen if risk of extinction is present. Further,

There is no evolution without skin in the game.

This last point is quite obvious, but I keep seeing academics with no skin in the game defend evolution while at the same time rejecting skin in the game and risk sharing. They refuse the notion of design by a creator who knows everything, while, at the same time, want to impose human design as if they knew all the consequences. In general, the more people worship the sacrosanct state (or, equivalently, large corporations), the more they hate skin in the game. The more they believe in their ability to forecast, the more they hate skin in the game. The more they wear suits and ties, the more they hate skin in the game.

Returning to our interventionistas, we saw that people don’t learn so much from their—and other people’s—mistakes; rather it is the system that learns by selecting those less prone to a certain class of mistakes and eliminating others.

……….

To summarize so far,

Skin in the game keeps human hubris in check.

Source: Skin in the Game: Hidden Asymmetries in Daily Life (2018) by Nassim Nicholas Taleb.