in academia there is no difference between academia and the real world; in the real world, there is.

Don’t tell me what you “think,” just tell me what’s in your portfolio.

The knowledge we get by tinkering, via trial and error, experience, and the workings of time, in other words, contact with the earth, is vastly superior to that obtained through reasoning, something self-serving institutions have been very busy hiding from us.

three flaws: 1) they think in statics not dynamics, 2) they think in low, not high, dimensions, 3) they think in terms of actions, never interactions.

So we end up populating what we call the intelligentsia with people who are delusional, literally mentally deranged, simply because they never have to pay for the consequences of their actions, repeating modernist slogans stripped of all depth

The principle of intervention, like that of healers, is first do no harm (primum non nocere); even more, we will argue, those who don’t take risks should never be involved in making decisions.

Prominent people took risks—considerably more risks than ordinary citizens. The Roman emperor Julian the Apostate, about whom much later, died on the battlefield fighting in the never-ending war on the Persian frontier—while emperor.

Even today, monarchs derive their legitimacy from a social contract that requires physical risk-taking. The British Royal family made sure that one of its scions, Prince Andrew, took more risks than “commoners” during the Falkland war of 1982, his helicopter being in the front line. Why? Because noblesse oblige; the very status of a lord has been traditionally derived from protecting others, trading personal risk for prominence—and they happened to still remember that contract. You can’t be a lord if you aren’t a lord.

Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions.

a system that doesn’t have a mechanism of skin in the game, with a buildup of imbalances, will eventually blow up and self-repair that way. If it survives.

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,

Systems learn by removing parts, via negativa.fn4 Many bad pilots, as we mentioned, are currently in the bottom of the Atlantic, many dangerous bad drivers are in the local quiet cemetery with nice walkways bordered by trees. Transportation didn’t get safer just because people learn from errors, but because the system does. The experience of the system is different from that of individuals; it is grounded in filtering. To summarize so far, Skin in the game keeps human hubris in check.

it tells you to mind your own business and not decide what is “good” for others. We know with much more clarity what is bad than what is good.

“Conduct yourself toward your parents as you would have your children conduct themselves toward you.”

in Fat Tony’s terms: don’t give crap, don’t take crap. His more practical approach is Start by being nice to every person you meet. But if someone tries to exercise power over you, exercise power over him.

Avoid taking advice from someone who gives advice for a living, unless there is a penalty for their advice.

You do not want to win an argument. You want to win.

We are much better at doing than understanding.

The doer wins by doing, not convincing.

You may not know in your mind where you are going, but you know it by doing.

What people “think” is not relevant—you want to avoid entering the mushy-soft and self-looping discipline of psychology. People’s “explanations” for what they do are just words, stories they tell themselves, not the business of proper science. What they do, on the other hand, is tangible and measurable and that’s what we should focus on.

Those who talk should do and only those who do should talk

do your theories or mathematical representations, don’t tell people in the real world how to apply them. Let those with skin in the game select what they need.

Things designed by people without skin in the game tend to grow in complication (before their final collapse).

Anything you do to optimize your work, cut some corners, or squeeze more “efficiency” out of it (and out of your life) will eventually make you dislike it.

Compendiaria res improbitas, virtusque tarda—the villainous takes the short road, virtue the longer one. In other words, cutting corners is dishonest.

But I came to the U.S., embraced the place, and took the passport as commitment: it became my identity, good or bad, tax or no tax. Many people made fun of my decision, as most of my income comes from overseas and, if I took official residence in, say, Cyprus or Malta, I would be making many more dollars. If I wanted to lower taxes for myself, and I do, I am obligated to fight for it, for both myself and the collective, other taxpayers, and to not run away. Skin in the game.

It may be cruel to cheat people of their profession. People want to have their soul in the game. In that sense, decentralization and fragmentation, aside from stabilizing the system, improves people’s connection to their labor.

if you can’t put your soul into something, give it up and leave that stuff to someone else.

it always turns out that what is presented as good for you is not really good for you but certainly good for the other party.

The ethical is always more robust than the legal. Over time, it is the legal that should converge to the ethical, never the reverse. Hence: Laws come and go; ethics stay.

It suffices for an intransigent minority—a certain type of intransigent minority—with significant skin in the game (or, better, soul in the game) to reach a minutely small level, say 3 or 4 percent of the total population, for the entire population to have to submit to their preferences. Further, an optical illusion comes with the dominance of the minority: a naive observer (who looks at the standard average) would be under the impression that the choices and preferences are those of the majority.

“Never doubt that a small group of thoughtful citizens can change the world. Indeed, it is the only thing that ever has,”

Society doesn’t evolve by consensus, voting, majority, committees, verbose meetings, academic conferences, tea and cucumber sandwiches, or polling; only a few people suffice to disproportionately move the needle. All one needs is an asymmetric rule somewhere—and someone with soul in the game. And asymmetry is present in about everything.fn6

The average behavior of the market participant will not allow us to understand the general behavior of the market.

Perhaps, by definition, an employable person is the one you will never find in a history book, because these people are designed to never leave their mark on the course of events. They are, by design, uninteresting to historians.

the dog boasts to the wolf all the contraptions of comfort and luxury he has, almost prompting the wolf to enlist. Until the wolf asks the dog about his collar and is terrified when he understands its use. “Of all your meals, I want nothing.” He ran away and is still running.fn3 The question is: what would you like to be, a dog or a wolf? The original Aramaic version had a wild ass, instead of a wolf, showing off his freedom. But the wild ass ends up eaten by the lion. Freedom entails risks—real skin in the game. Freedom is never free. Whatever you do, just don’t be a dog claiming to be a wolf. In Harris’s sparrows, males develop secondary traits that correlate with their fighting ability. Darker color is associated with dominance. However, experimental darkening of lighter males does not raise their status, because their behavior is not altered. In fact these darker birds get killed—as the researcher Terry Burnham once told me: “birds know that you need to walk the walk.” Another aspect of the dog vs. wolf dilemma: the feeling of false stability. A dog’s life may appear smooth and secure, but in the absence of an owner, a dog does not survive. Most people prefer to adopt puppies, not grown-up dogs; in many countries, unwanted dogs are euthanized. A wolf is trained to survive. Employees abandoned by their employers, as we saw in the IBM story, cannot bounce back.

What matters isn’t what a person has or doesn’t have; it is what he or she is afraid of losing.

always do more than you talk.

The IYI pathologizes others for doing things he doesn’t understand without ever realizing it is his understanding that may be limited. He thinks people should act according to their best interests and he knows their interests, particularly if they are “rednecks” or from the English non-crisp-vowel class who voted for Brexit. When plebeians do something that makes sense to themselves, but not to him, the IYI uses the term “uneducated.” What we generally call participation in the political process, he calls by two distinct designations: “democracy” when it fits the IYI, and “populism” when plebeians dare to vote in a way that contradicts IYI preferences. While rich people believe in one tax dollar one vote, more humanistic ones in one man one vote, Monsanto in one lobbyist one vote, the IYI believes in one Ivy League degree one vote, with some equivalence for foreign elite schools and PhDs, as these are needed in the club. They are what Nietzsche called Bildungsphilisters—educated philistines. Beware the slightly erudite who thinks he is an erudite, as well as the barber who decides to perform brain surgery. The IYI also fails to naturally detect sophistry.

So I’ve discovered, with experience, that when you buy a thick book with tons of graphs and tables used to prove a point, you should be suspicious. It means something didn’t distill right! But for the general public and those untrained in statistics, such tables appear convincing—another way to substitute the true with the complicated.

Use laws that are old but food that is fresh. Likewise, Alfonso X of Spain, nicknamed El Sabio, “the wise,” had as a maxim: Burn old logs. Drink old wine. Read old books. Keep old friends. The insightful and luckily nonacademic historian Tom Holland once commented: “The thing I most admire about the Romans was the utter contempt they were capable of showing the cult of youth.” He also wrote: “The Romans judged their political system by asking not whether it made sense but whether it worked,”

You can define a free person precisely as someone whose fate is not centrally or directly dependent on peer assessment.

a free person does not need to win arguments—just win.

Contemporary peers are valuable collaborators, not final judges.

In fact, there is something worse than peer-assessment: the bureaucratization of the activity creates a class of new judges: university administrators, who have no clue what someone is doing except via external signals, yet become the actual arbiters. These arbiters fail to realize that “prestigious” publication, determined by peer-reviewers in a circular manner, are not Lindy-compatible—they only mean that a certain set of (currently) powerful people are happy with your work.

If you say something crazy you will be deemed crazy. But if you create a collection of, say, twenty people who set up an academy and say crazy things accepted by the collective, you now have “peer-reviewing” and can start a department in a university.

Academia has a tendency, when unchecked (from lack of skin in the game), to evolve into a ritualistic self-referential publishing game.

If you hear advice from a grandmother or elders, odds are that it works 90 percent of the time. On the other hand, in part because of scientism and academic prostitution, in part because the world is hard, if you read anything by psychologists and behavioral scientists, odds are that it works at less than 10 percent, unless it has also been covered by the grandmother and the classics, in which case why would you need a psychologist?

Let us now close by sampling a few ideas that exist in both ancient lore and are sort of reconfirmed by modern psychology. These are sampled organically, meaning they are not the result of research but of what spontaneously comes to mind (remember this book is called Skin in the Game), then verified in the texts. Cognitive dissonance (a psychological theory by Leon Festinger about sour grapes, by which people, in order to avoid inconsistent beliefs, rationalize that, say, the grapes they can’t reach got to be sour). It is seen first in Aesop, of course, repackaged by La Fontaine. But its roots look even more ancient, with the Assyrian Ahiqar of Nineveh. Loss aversion (a psychological theory by which a loss is more painful than a gain is pleasant): in Livy’s Annals (XXX, 21) Men feel the good less intensely than the bad.fn6 Nearly all the letters of Seneca have some element of loss aversion. Negative advice (via negativa): We know the wrong better than what’s right; recall the superiority of the Silver over the Golden Rule. The good is not as good as the absence of bad,fn7 Ennius, repeated by Cicero. Skin in the game (literally): We start with the Yiddish proverb: You can’t chew with somebody else’s teeth. “Your fingernail can best scratch your itch,”fn8 picked up by Scaliger circa 1614 in Proverborum Arabicorum. Antifragility: There are tens of ancient sayings. Let us just mention Cicero. When our souls are mollified, a bee can sting. See also Machiavelli and Rousseau for its application to political systems. Time discounting: “A bird in the hand is better than ten on the tree.”fn9 (Levantine proverb) Madness of crowds: Nietzsche: Madness is rare in individuals, but in groups, parties, nations, it is the rule. (This counts as ancient wisdom since Nietzsche was a classicist; I’ve seen many such references in Plato.) Less is more: Truth is lost with too much altercation,fn10 in Publilius Syrus. But of course the expression “less is more” is in an 1855 poem by Robert Browning. Overconfidence: “I lost money because of my excessive confidence,”fn11 Erasmus inspired by Theognis of Megara (Confident, I lost everything; defiant, I saved everything) and Epicharmus of Kos (Remain sober and remember to watch out). The Paradox of progress, and the paradox of choice: There is a familiar story of a New York banker vacationing in Greece, who, from talking to a fisherman and scrutinizing the fisherman’s business, comes up with a scheme to help the fisherman make it a big business. The fisherman asked him what the benefits were; the banker answered that he could make a pile of money in New York and come back to vacation in Greece; something that seemed ludicrous to the fisherman, who was already there doing the kind of things bankers do when they go on vacation in Greece. The story was well known in antiquity, under a more elegant form, as retold by Montaigne (my translation): When King Pyrrhus tried to cross into Italy, Cynéas, his wise adviser, tried to make…

In any type of activity or business divorced from the direct filter of skin in the game, the great majority of people know the jargon, play the part, and are intimate with the cosmetic details, but are clueless about the subject.

Don’t think that beautiful apples taste better,

Never hire an academic unless his function is to partake of the rituals of writing papers or taking exams.

Just as the slick fellow in a Ferrari looks richer than the rumpled centimillionaire, scientism looks more scientific than real science. True intellect should not appear to be intellectual.

It took medicine a long time to realize that when a patient shows up with a headache, it is much better to give him aspirin or recommend a good night’s sleep than do brain surgery, although the latter appears to be more “scientific.” But most “consultants” and others paid by the hour are not there yet.

People who have always operated without skin in the game (or without their skin in the right game) seek the complicated and centralized, and avoid the simple like the plague. Practitioners, on the other hand, have opposite instincts, looking for the simplest heuristics. Some rules: People who are bred, selected, and compensated to find complicated solutions do not have an incentive to implement simplified ones.

In other words, many problems in society come from the interventions of people who sell complicated solutions because that’s what their position and training invite them to do. There is absolutely no gain for someone in such a position to propose something simple: you are rewarded for perception, not results. Meanwhile, they pay no price for the side effects that grow nonlinearly with such complications. This also holds true when it comes to solutions that are profitable to technologists.

In the United States, we have a buildup of student loans that automatically transfer to these rent extractors. In a way it is no different from racketeering: one needs a decent university “name” to get ahead in life. But we have evidence that collectively society doesn’t advance with organized education, rather the reverse: the level of (formal) education in a country is the result of wealth.

It costs a lot of energy to fake that you’re not bored.

If anything, being rich you need to hide your money if you want to have what I call friends. This may be known; what is less obvious is that you may also need to hide your erudition and learning. People can only be social friends if they don’t try to upstage or outsmart one another. Indeed, the classical art of conversation is to avoid any imbalance, as in Baldassare Castiglione’s Book of the Courtier: people need to be equal, at least for the purpose of the conversation, otherwise it fails. It has to be hierarchy-free and equal in contribution. You’d rather have dinner with your friends than with your professor, unless of course your professor understands “the art” of conversation.

Verbal threats reveal nothing beyond weakness and unreliability.

We used to live in small communities; our reputations were directly determined by what we did—we were watched. Today, anonymity brings out the a**hole in people. So I accidentally discovered a way to change the behavior of unethical and abusive persons without verbal threat. Take their pictures. Just the act of taking their pictures is similar to holding their lives in your hands and controlling their future behavior thanks to your silence. They don’t know what you can do with it, and will live in a state of uncertainty.

The Facts Are True, the News Is Fake

Information transmits organically by word of mouth, which circulates in a two-way manner. In Ancient Rome, people got information without a centralized filter. In the ancient Mediterranean marketplaces, people talked; they were the receivers and the purveyors of news. Barbers offered comprehensive services; they doubled as surgeons, dispute-resolution experts, and news reporters. If people were left to filter their own rumors, they were also part of the transmission. Same with pubs and London coffee houses. In the Eastern Mediterranean (currently Greece and the Levant), condolences were the source of gathering and transmission—and represented the bulk of social life. Dissemination of the news took place at these gatherings. My social grandmother would have her “rounds” of visits of condolences some days in Beirut’s then-significant Greek Orthodox community, and knew practically everything down to the most insignificant details. If the child of someone prominent flunked an exam, she knew it. Practically every affair in town was detected.

you never cure structural defects; the system corrects itself by collapsing.

restaurant owners worry about the opinion of their customers, not those of other restaurant owners, which keeps them in check and prevents the business from straying collectively away from its interests.

Have the guts to be unpopular—Meetings

It is immoral to be in opposition to the market system and not live (somewhere in Vermont or Northwestern Afghanistan) in a hut or cave isolated from it. But there is worse: It is much more immoral to claim virtue without fully living with its direct consequences.

In about every hotel chain, from Argentina to Kazakhstan, the bathroom will have a sign meant to get your attention: PROTECT THE ENVIRONMENT. They want you to hold off from sending the towels to the laundry and reuse them for a while, because avoiding excess laundry saves them tens of thousands of dollars a year. This is similar to the salesperson telling you what is good for you when it is mostly (and centrally) good for him. Hotels, of course, love the environment, but you can bet that they wouldn’t advertise it so loudly if it weren’t good for their bottom line.

Virtue is not something you advertise. It is not an investment strategy. It is not a cost-cutting scheme. It is not a bookselling (or, worse, concert-ticket-selling) strategy.

The investor Charlie Munger once said: “Look it. Would you rather be the world’s greatest lover, but have everyone think you’re the world’s worst lover? Or would you rather be the world’s worst lover but have everyone think you’re the world’s greatest lover?” As usual, if it makes sense, it has to be in the classics, where it is found under the name esse quam videri, which I translate as to be or to be seen as such. It can be found in Cicero, Sallust, even Machiavelli, who, characteristically, inverted it to videri quam esse, “show rather than be.”

Further, the highest form of virtue is unpopular. This does not mean that virtue is inherently unpopular, or correlates with unpopularity, only that unpopular acts signal some risk taking and genuine behavior. Courage is the only virtue you cannot fake. If I were to describe the perfect virtuous act, it would be to take an uncomfortable position, one penalized by the common discourse.

Sticking up for truth when it is unpopular is far more of a virtue, because it costs you something—your reputation.

Finally, when young people who “want to help mankind” come to me asking, “What should I do? I want to reduce poverty, save the world,” and similar noble aspirations at the macro-level, my suggestion is: 1) Never engage in virtue signaling; 2) Never engage in rent-seeking; 3) You must start a business. Put yourself on the line, start a business. Yes, take risk, and if you get rich (which is optional), spend your money generously on others. We need people to take (bounded) risks. The entire idea is to move the descendants of Homo sapiens away from the macro, away from abstract universal aims, away from the kind of social engineering that brings tail risks to society. Doing business will always help (because it brings about economic activity without large-scale risky changes in the economy); institutions (like the aid industry) may help, but they are equally likely to harm (I am being optimistic; I am certain that except for a few most do end up harming). Courage (risk taking) is the highest virtue. We need entrepreneurs.

One of the problems of the interventionista—wanting to get involved in other people’s affairs “in order to help”—results in disrupting some of the peace-making mechanisms that are inherent in human affairs, a combination of collaboration and strategic hostility.

I conjecture that when you leave people alone, they tend to settle for practical reasons.

absence of skin in the game does wonders in distorting information.

The problem with the European Union is that naive bureaucrats (those fellows who can’t find a coconut on Coconut island) are fooled by the label. They treat Salafism, say, as just a religion—with its houses of “worship”—when in fact it is just an intolerant political system, which promotes (or allows) violence and rejects the institutions of the West—those very institutions that allow them to operate. We saw with the minority rule that the intolerant will run over the tolerant; cancer must be stopped before it becomes metastatic. Salafism is very similar to atheistic Soviet Communism in its heyday: both have all-embracing control over all of human activity and thought, which makes discussions about whether religion or atheistic regimes are more murderous lacking in pertinence, precision, and realism.

Survival comes first, truth, understanding, and science later.

“to make money you must first survive”—skin

Recall that skin in the game means that you do not pay attention to what people say, only to what they do, and to how much of their necks they are putting on the line. Let survival work its wonders.

How much you truly “believe” in something can be manifested only through what you are willing to risk for it.

The only definition of rationality that I’ve found that is practically, empirically, and mathematically rigorous is the following: what is rational is that which allows for survival. Unlike modern theories by psychosophasters, it maps to the classical way of thinking. Anything that hinders one’s survival at an individual, collective, tribal, or general level is, to me, irrational.

Anyone who has survived in the risk-taking business more than a few years has some version of our by now familiar principle that “in order to succeed, you must first survive.”

But economists, psychologists, and decision theorists have no geniuses among them (unless one counts the polymath Herb Simon, who did some psychology on the side), and odds are they never will. Adding people without fundamental insights does not sum up to insight;

“The difference between successful people and really successful people is that really successful people say no to almost everything,”

Indeed, it doesn’t cost us much to refuse some new shoddy technologies. It doesn’t cost me much to go with my “refined paranoia,” even if wrong. For all it takes is for my paranoia to be right once, and it saves my life.

One may be risk loving yet completely averse to ruin.

In a strategy that entails ruin, benefits never offset risks of ruin.

Rationality is avoidance of systemic ruin.

‍