Longtime readers of Nassim Nicholas Taleb’s many bestselling books will know that he has very little patience for those who talk, talk, talk about topics they do not know a great deal about. I suppose this impatience has many possible sources and going through each possible one seems like an endless task I’ll save for another day.
One consistent factor I noticed is how Taleb dismisses talk, talk, talk anytime actions give more insight into thinking than words. For Taleb, good investment advice means telling others what is in your portfolio as opposed to telling others about all the surefire bets that you have mysteriously chosen not to make for yourself (1). Astute readers will make the connection here to the title of the book and recognize the crucial distinction between having an opinion and having a stake in the outcome.
There is a little more to this thought than linking the ‘skin in the game’ concept to some real-life applications. Taleb is also using this example to explore a much deeper observation about the tension between abstract intellectual principles and the realities of daily life. Taleb notes that when private life and intellectual opinion contradict, it is often the opinion and not the life that gets compromised. This insight draws partly from the basic truth that people sometimes provide explanations, thoughts, or beliefs about a hypothetical choice that do not hold up when the actual opportunity to make the choice comes to them.
However, the insight about this tension also recognizes how difficult it is to abide by certain hypothetical principles when these challenge real loyalties to family, friends, or community. In the face of these loyalties, no intellectual, ethical, or moral stance is safe. When Taleb points out how showing someone else your portfolio has much more significance than telling someone else what you think might be a good investment, I don’t think he is just extending the barroom logic of ‘wanna bet?’ to the realm of personal finance. I think he is also aware that people always make sound long-term recommendations in a vacuum that ignores how quickly an opinion will be compromised if a loved one asks them to do otherwise.
Footnotes / self-plugs are no plugs
1. A TOA classic?
Longtime readers may also recall this post, a simple observation I made about a friend who worked at a firm that actively managed investment portfolios.
