Hello reader,
Today’s post is the first in a series about Nassim Nicholas Taleb’s newest book, Skin in the Game. Over the course of the next few weeks, I’ll take a closer look at some of the themes in this work – nth order effects, intolerant minorities, the importance of public perception, and so on.
Like was the case for most of his other books (except, I suppose, his first) Skin in the Game expands on a small portion of his prior book, Antifragile. The main idea Taleb explores in the book is risk asymmetry. This is when a person or persons who stand to benefit from the upside of an outcome do not bear a proportionate level of downside risk. I’ll look more closely at his ideas in those upcoming posts.
For today, I thought I would riff a little bit on some of his more interesting one-off ideas that did not fit neatly into any of the themes I identified.
Thanks for reading.
Tim
Employees are expensive because they must be paid during non-work hours in order to increase their availability during regular work hours.
This ties back to a concept from his prior works – the difference between a contractor and an employee. Though a well-organized system of contracted work tends to produce better results for the organization and the worker, the need of having a certain level of workers available during traditional ‘work hours’ forces the hiring of salaried employees.
To put it another way, employees tend to be grossly underpaid for the work they complete for an employer but significantly overpaid for the time they commit to the employer. This is reflected in how employees-turned-contractors often experience a significant boost in per-hour compensation when compared to their former salaried position. However, a contractor is paid fairly when not working – $0 per hour – whereas an employee’s pay rate while not working – such as during a coffee break – remains exactly the same as it does while working.
Most fail to see how increasing wealth leads to declining utility because constructed preferences emerge as financial means increases.
This was a good point about how increased means allows access to previously inaccessible goods, entertainments, or services that seem like good ideas mostly for their novelty but have very little lasting effect on well-being. It might be fun to go out for an expensive steak dinner, for example, but I’d prefer going to Sapporo Ramen ten times with the same money.
Although my exact example might not hold for all of my readers, I’m sure everyone can think of their own versions of this phenomenon.
Work that encourages you to cut corners, become more efficient, or optimize will eventually become work you dislike.
This is my favorite stand-alone insight from the book. As I think back over my various experiences, I see this pattern emerge time and again. Though there is a degree of skill development involved in optimization and mastery is often required of anyone who can improve process efficiency, work that focuses on these goals is trading quality of output for quantity of output.
My belief is that the work people find most meaningful emphasizes the latter over the former. When a person produces the highest quality work he or she is capable of, the resulting sense of satisfaction runs far deeper than is produced when increased efficiencies allow output of widgets to rise 3% when compared to the prior workday’s total.
